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Xtract Resources bites the bullet for long-term gain

Xtract Resources PLC (LON:XTR) provided the market with an update on the disposal of its Manica gold project in Mozambique and some critical investment in its Chepica operation in Chile, where the company has bitten the bullet and decided to refurbish the crushing plant and build a new flotation plant.

The investment at Chepica has prompted the company to raise £1mln by issuing shares, which chief executive officer (CEO) Jan Nelson has acknowledged has not gone down well in some quarters.

The fund-raising, however, should help settle the share price down and reduce volatility that had been caused by a number of issues hanging over the company, such as the debt it owed to Auroch Resources.

The message is that the company has to endure some short-term pain for long-term gain.

The CEO said the old equipment at Chepica was not producing a sufficiently rich concentrate that it could sell. “That’s not good business sense, and the only logical thing [to do] to stop it is to fix it properly,” Nelson said.

He likened the remedial action to stopping your car to put some oil and water in the engine to ensure the car runs smoothly for the next ten years.

“It will pay off in the long-term,” Nelson said. “We’ve got to take decisions for the business in the long term.”

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