Manica Gold Hard Rock Mining Contractor Agreement
The Board of Xtract Resources Plc (“Xtract” or the “Company”) is pleased to announce that the Company’s wholly-owned Mozambican subsidiary, Explorator Limitada (“Explorator”) has concluded a mining contractor agreement (“Guy Fawkes Agreement”) with Longhau Tianci Mining Co Ltd (“Longhau” or”Contract Miner”) for the exploitation of the Guy Fawkes hard rock gold deposit at its Manica mining concession in Mozambique.
Highlights
· Longhau appointed to mine the Guy Fawkes hard rock gold deposit for 6 years or until the ore body is depleted or no longer viable
· Guy Fawkes Agreement provides for Explorator to receive 20% of gold production (after settlement by Explorator of the Mining Production Tax)
· Explorator will remit 35% of its share of Guy Fawkes gold production (after applicable expenses and tax) to Mutapa Mining and Processing LDA, Explorator’s existing hard rock collaboration partner
· Longhau to commence adit mining and initial underground development during the processing build phase
· The processing plant is currently within Mozambique and therefore lead times to be minimised
· Previously reported SAMREC-compliant Indicated and Inferred Resource of 1.13Mt @ 1.91g/t Au with potential for additional upside in several dimensions
Colin Bird, Executive Chairman said: “We are pleased to report the signing of this agreement, which should provide the opportunity for incremental cash flow during MMP’s Fair Bride construction and building phase. The Guy Fawkes deposit shows considerable variation both in mining width and grade, demonstrating propensity for selective higher-grade mining. Longhau intends to work a portion of the deposit by open cast methods where drilling indicates that suitable grades locally can run close to surface. Underground mining will be selective.
We are currently in discussions in respect of the Boa Esperanza deposit and look forward to updating shareholders shortly.”
Background
On 29 May 2019, the Company announced that it had entered into a collaboration agreement (“MutapaAgreement”) with Mutapa Mining and Processing LDA (“MMP”) for the mining and mineral processing of the Company’s Manica hard rock gold deposits (“Manica Project”) at Xtract’s Manica mining concession licence 3990C in Mozambique.
Under the Mutapa Agreement, the Company had appointed MMP as an independent mineral processing contractor to conduct hard rock mining on the Manica Project permitted area comprising the main deposit at Fairbride, and the three ancillary deposits at Guy Fawkes, Dots Luck and Boa Esperanza. Construction has yet to commence on site.
The Company and MMP have subsequently agreed to release the three ancillary deposits at Guy Fawkes, Dots Luck and Boa Esperanza from the Mutapa Agreement in order to enable Xtract to appoint third party mining contractors who might be able to provide early cash flow pending construction by MMP at Fairbride.
Guy Fawkes Contract Mining Agreement
The Company’s wholly-owned Mozambican subsidiary, Explorator, has therefore today appointed Longhau Tianci Mining Co Ltd (“Contract Miner”) who will have the exclusive right to mine the Guy Fawkes hard rock deposit on the Permitted Area of the Mining Concession area. The Guy Fawkes Agreement will endure for a period of 6 years, with rights of early termination either by Explorator or the Contract Miner.
The Guy Fawkes Agreement is subject to a number of pre-conditions including the Contract Miner obtaining a gold trading licence and Explorator securing a mining licence and environmental licence. The Guy Fawkes Agreement includes performance targets whereby the Contract Miner will be required to commission a plant with a minimum throughput of 60 tonnes per day within 2 months from the date of signing. The throughput tonnage will be increased to 120 tonnes per day within 3 months of commencing operations.
Explorator will be responsible for recording the gold concentrate produced from the permitted area on a daily basis. The Contract Miner will be responsible for the smelting of the gold concentrate and delivery of gold dore bars.
Explorator will be responsible for all statutory and legal requirements regarding the licence and for payment of the Mining Production Tax of 6%.
Consideration and Payments
In consideration for the appointment, the Contract Miner will retain 74% in gold for services provided, and Explorator will retain 26% of all gold production, amounting to 20% after payment by Explorator of the applicable Mining Production Tax of 6%.
After deduction of applicable expenses and costs and tax incurred by Explorator, Xtract has agreed with MMP to split the net cash flow 65% in Explorator’s favour (with 35% due to MMP).
Other
The Contract Miner will be responsible and liable for any rehabilitation of the mining concession to the extent mined by the Contract Miner as required under the relevant mining laws. The Agreement contains an indemnity from the Mining Contractor to Explorator and further customary terms and conditions (including termination).
