REG - Xtract Resources plc - Annual Financial Report <Origin Href="QuoteRef">XTR.L</Origin> - Part 2

Xtract ResourcesAnnouncement

30/05/2017 07:07

- Part 2: For the preceding part double click  ID:nRSd4379Ga 

estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount
that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal of an
impairment loss is recognised as income immediately, unless the relevant asset is carried at a revalue amount, in which
case the reversal of the impairment loss is treated as a revaluation increase. 
 
Financial instruments 
 
Financial assets and financial liabilities are recognised in the Group's balance sheet when the Group becomes a party to
the contractual provisions of the instrument. 
 
Financial assets 
 
All financial assets are recognised and derecognised on a trade date where the purchase or sale of a financial asset is
under a contract whose terms require delivery of the financial asset within the timeframe established by the market
concerned, and are initially measured at fair value, plus transaction costs, except for those financial assets classified
as at fair value through profit or loss, which are initially measured at fair value. 
 
Financial assets are classified into the following specified categories: financial assets 'at fair value through profit or
loss' (FVTPL), 'held-to-maturity' investments, 'available-for-sale' (AFS) financial assets and 'loans and receivables'. The
classification depends on the nature and purpose of the financial assets and is determined at the time of initial
recognition. 
 
Available-for-sale financial assets ('AFS') 
 
Listed and unlisted equity instruments held by the Group that are traded in an active market are classified as being AFS
and are stated at fair value. Gains and losses arising from changes in fair value are recognised in other comprehensive
income and accumulated in the investments revaluation reserve with the exception of impairment losses that are recognised
directly in profit or loss. Where the investment is disposed of or is determined to be impaired, the cumulative gain or
loss previously recognised in the investment revaluation reserve is reclassified to profit or loss. The fair value of
investments that are actively traded in organised financial markets is determined by reference to quoted market bid prices
at the closure of business on the statement of financial position date. For investments where there is no active market,
fair value is determined using valuation techniques. Such techniques include using recent arm's length market transactions,
reference to the current market value, discounted cash flow analysis and option pricing models. 
 
Dividends on AFS equity instruments are recognised in profit or loss when the Group's right to receive the dividends is
established. 
 
The fair value of AFS monetary assets denominated in a foreign currency is determined in the foreign currency and
translated at the spot rate at the balance sheet date. Other foreign exchange gains and losses are recognised in other
comprehensive income. 
 
Financial assets at fair value through profit or loss 
 
A financial asset is classified in this category if acquired principally for the purpose of selling in the short term.
Derivatives are also categorised as held for trading unless they are designated as hedges. 
 
Assets in this category are classified as current assets if expected to be settle within 12 months, otherwise, they are
classified as non-current. 
 
Loans and receivables 
 
Trade receivables, loans, and other receivables that have fixed or determinable payments that are not quoted in an active
market are classified as 'loans and receivables'. Loans and receivables are measured at amortised cost using the effective
interest method, less any impairment. Interest income is recognised by applying the effective interest rate, except for
short- term receivables when the recognition of interest would be immaterial. 
 
Impairment of financial assets 
 
Financial assets, other than those at FVTPL, are assessed for indicators of impairment at each balance sheet date.
Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after
the initial recognition of the financial asset, the estimated future cash flows of the investment have been affected. 
 
For listed and unlisted equity instruments classified as AFS, a significant or prolonged decline in the fair value of the
security below its cost is considered to be objective evidence of impairment. 
 
For all other financial assets objective evidence of impairment could include: 
 
●             significant financial difficulty of the issuer or counterparty; or 
 
●             default or delinquency in interest or principal payments; or 
 
●             it becoming probable that the borrower will enter bankruptcy or financial re-organisation. 
 
For certain categories of financial assets, such as trade receivables, assets that are assessed not to be impaired
individually are, in addition, assessed for impairment on a collective basis. Objective evidence of impairment for a
portfolio of receivables could include the Group's past experience of collecting payments, an increase in the number of
delayed payments in the portfolio past the average credit period of 60 days, as well as observable changes in the national
or local economic conditions that correlate with default on receivables. 
 
The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the
exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade
receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts
previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account
are recognised in profit or loss. 
 
When an AFS financial asset is considered to be impaired, cumulative gains or losses previously recognised in other
comprehensive income are reclassified to profit or loss in the period. 
 
With the exception of AFS equity instruments, if, in a subsequent period, the amount of the impairment loss decreases and
the decrease can be related objectively to an event occurring after the impairment was recognised, the previously
recognised impairment loss is reversed through the profit or loss to the extent that the carrying amount of the investment
at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been
recognised. 
 
In respect of AFS equity securities, impairment losses previously recognised in profit or loss are not reversed through
profit or loss. Any increase in fair value subsequent to an impairment loss is recognised in other comprehensive income. 
 
De-recognition of financial assets 
 
The Group de-recognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when
it transfers the financial asset and substantially all the risks or rewards of ownership of the asset to another entity. If
the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the
transferred asset, the Group recognises its retained interest in the asset, and an associated liability for amounts it may
have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset,
the Group continues to recognise the financial asset, and also recognises a collateralised borrowing for the proceeds
received. 
 
Financial Liabilities 
 
Initial recognition 
 
Financial liabilities are recognised initially at fair value and in the case of interest-bearing loans and borrowings, net
of direct transactions costs. 
 
Financial liabilities are classified at initial recognition, as financial liabilities at fair value through profit and
loss. The group's financial liabilities include trade and other payables and interest-bearing loans and borrowings. 
 
Financial liabilities at fair value through profit or loss 
 
Financial liabilities at Fair Value through Profit or Loss ("FVTPL") include financial liabilities held for trading and
financial liabilities designated upon initial recognition as at FVTPL. 
 
Financial liabilities are classified as held for trading if they are acquired for the purpose of selling in the near term. 
 
Gains and losses on liabilities held for trading are recognised in the statement of profit or loss and other comprehensive
income. 
 
Loans and borrowings and trade and other payables 
 
Interest-bearing loans and borrowings and trade and other payables are measured at amortised cost using the Effective
Interest Rate ("EIR") method. Gains and losses are recognised in the statement of profit and loss and other comprehensive
income when the liabilities are derecognised, as well as through the EIR amortisation process. 
 
Amortised cost is calculated by taking into account any discount or premium or costs that are integral part of EIR. 
 
Derecognition 
 
A financial liability is derecognised when the associated obligation is discharged or cancelled. 
 
Inventory 
 
Inventories consist of gold concentrate (finished product) and ore stockpiles which represent the ore which has been
extracted and available for further processing. All inventories are valued at the lower of cost and net realisable value.
Costs of concentrate include material, direct mining costs, and cost related to the production processes. Net Realisable
value is the estimated future sales price of the product the Company is expected to realise after the product is processed
and sold less costs to bring the product to sale. Where inventories have been written down to net realisable value, a new
assessment is made in the following period. In instances where there has been change in circumstances which demonstrates an
increase in the net realisable value, the amount written down will be reversed. 
 
Share-based payments 
 
Equity-settled share-based payments to certain Directors, employees and others providing similar services are measured at
the fair value of the equity instruments at the grant date. The fair value excludes the effect of non-market based vesting
conditions. Details regarding the determination of the fair value of equity-settled share-based transactions are set out in
note 27. 
 
The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis
over the vesting period, based on the Group's estimate of shares that will eventually vest and adjusted for the effect of
non-market-based vesting conditions. 
 
Finance Income 
 
Finance income comprises interest income on funds invested (including available-for-sale financial assets). Interest income
is recognised as it accrues in profit or loss, using the effective interest method. 
 
Operating Leases 
 
Operating lease payments are recognised as an operating expense in the income statement on a straight-line basis over the
lease term. 
 
Finance Leases 
 
Leases of property, plant and equipment where the group has substantially all the risks and rewards of ownership are
classified as finance leases. Finance leases are capitalised at the lease's commencement at the lower of the fair value of
the leased property and the present value of the minimum lease payments. 
 
Each lease payment is allocated between the liability and finance charges. The corresponding rental obligations, net of
finance charges, are included in the finance lease obligation. The interest element of the finance cost is charged to the
income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of
the liability for each period. Non-current assets under finance leases are depreciated over the useful life of the asset,
under the reasonable expectation that the group will obtain ownership of the leased asset at the end of the lease term. 
 
Reclamation cost and mine closure provision 
 
The Group records a liability and corresponding asset for the present value of the estimated costs of legal and
constructive obligations for future site reclamation and closure where the liability is probable and reasonable estimate
can be made of the obligation. The estimated present value of the obligation is reassessed on an annual basis or where new
material information becomes available. Increases or decreases to the obligation usually arise due to change in legal or
regulatory requirements, the extent of environmental remediation required, methods of reclamation, cost estimates, or
discount rates. The present value is determined based on current market assessments of the time value of money using
discount rates specific to the country in which the reclamation site is located and is determined as the risk- free rate of
borrowing approximated by the yield on sovereign debt for that country, with a maturity approximating the end of mine
life. 
 
Revenue recognition 
 
Revenue is recognised to the extent it is probable that the economic benefits will flow to the Group and the revenue can be
reliably measured. Revenue is measured at the fair value of the consideration received or receivable, excluding discounts,
rebates and sales tax or duty. Revenue from sales of concentrate, is recognised when the significant risks and rewards of
ownership have been transferred, which is considered to occur when title passes to the customer. This occurs when the
concentrate is physically transferred on the date of shipment. Interest is recognised in profit and loss, using the
effective interest rate method. 
 
Segment reporting 
 
Operating segments are reported in a manner consistent with the internal reporting provided to the Executive Chairman who
is responsible for allocating resources and assessing performance of the operating segments. 
 
Fair value estimation 
 
The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been
defined as follows: 
 
●        Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1); 
 
●         Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either
directly (that is, as prices) or indirectly (that is, derived from prices) (Level 2); and 
 
●         Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs)
(Level 3). 
 
The following table presents the Group's assets that are measured at fair value. The Group does not have any liabilities
measured at fair value. 
 
                                                  2016                     2015      
 Level 2                                 Level 3  Total  Level 2  Level 3  Total  
 £000                                    £000     £000   £000     £000     £000   
 Available-for-sale financial assets     -        -      -        -        -      -  
 Financial assets at fair value through                                              
 profit or loss                          -        -      -        -        -      -  
 - Derivative financial instruments      352      -      352      -        -      -  
 Total assets                            352      -      352      -        -      -  
 
 
The Group does not hold any financial instruments in Level 1. 
 
(i)      Financial instruments in Level 2 
 
The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives)
is determined by using valuation techniques. These valuation techniques maximise the use of observable market data where it
is available, and rely as little possible on entity-specific estimates. If all significant inputs required to fair value an
instrument are observable, the instrument is included in Level 2. Specific valuation techniques used to value financial
instruments include: 
 
●        quoted market prices or dealer quotes for similar instruments; and 
 
●         the fair value of derivative financial instrument is calculated based on the Company's quoted market price and a
prescribed formula in accordance with the respective equity swap 
 
If one or more of the significant inputs is not based on observable market data, the instrument is included in Level 3. 
 
(ii)     Financial instruments in Level 3 Specific criteria used to estimate the value financial instruments include: 
 
●       management's assessment of the applicable market and sector; 
 
●       financial reports and other information supplied the investee's management; and 
 
●       transactions in the investee's shares 
 
4.   Critical accounting judgements and key sources of estimation uncertainty 
 
In the application of the Group's accounting policies, which are described in note 3, the Directors are required to make
judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent
from other sources. The estimates and associated assumptions are based on historical experience and other factors that are
considered to be relevant. Actual results may differ from these estimates. 
 
The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are
recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the
revision and future periods, if the revision affects both current and future periods. 
 
The following are the critical judgements that the Directors have made in the process of applying the Group's accounting
policies and that have the most significant effect on the amounts recognised in the financial statements. 
 
Available for sale investments 
 
The Group reviews the fair value of its unquoted equity instruments at each statement of financial position date. This
requires management to make an estimate of the fair value of the unquoted securities in the absence of an active market,
which has mainly been established by use of recent arm's length transactions, as adjusted by a discount, where required.
Uncertainty also exists due to the early stage of development of certain of the investments. The fair value of available
for sale investments at 31 December 2016 is determined to be £Nil (2015: £Nil). Further details are given in note 17. 
 
Impairment of intangible assets and investments 
 
The assessment of intangible assets for any indications involves judgement. If an indication of impairment, as defined in
IFRS 6 or IAS 36 as appropriate, exists, a formal estimate of recoverable amount is performed and an impairment loss
recognised to the extent that carrying amount exceeds recoverable amount. Recoverable amount is determined as the higher of
fair value less costs to sell and value in use. The calculation of recoverable amount requires an estimation of the value
in use of the cash-generating units to which the intangible assets are allocated. In assessing value in use, the estimated
future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows
have not been adjusted. 
 
Estimates in determining the life of the mines (LOM) 
 
The LOM is determined from development plans based on mine management's estimates and includes total mineral reserve and a
portion of the mineral resource. These plans are updated from time to time and take into consideration the actual current
cost of extraction, as well as certain forward projections. These projections are reviewed by the board. 
 
Estimates in determining inventory value 
 
Net realisable value tests are performed at the reporting date and represent the estimated future sales price of the
product the entity expects to realise when the product is sold less costs to bring the product to sale. Ore stockpiles are
measured by estimating the number of tonnes added and removed from the stockpile and are assessed primarily through surveys
and assays. 
 
Share-based payments 
 
The estimation of share-based payment costs requires the selection of an appropriate valuation model and consideration as
to the inputs necessary for the valuation model chosen. The Group has made estimates as to the volatility of its own
shares, the probable life of options granted and the time of exercise of those options. The model used by the Group is the
Black-Scholes model. 
 
Fair value of derivative financial instruments 
 
The fair value of financial instruments that are not traded in an active market is determined by using valuation
techniques. The fair value of the equity swaps is calculated using the prescribed formula in the equity swap agreement and
the Company's prevailing market price at the year end. 
 
Equity swaps have a carrying value of £352K (2015: £Nil). The loss on re-measuring to fair value is recognised under
finance costs in the Income Statement. 
 
8.    Loss before taxation 
 
Profit / (loss) from continuing operations and discontinued operations for the year has been arrived at after charging the
following under administrative and operating expenses: 
 
                                                      Year ended 31 December 2016  Year ended 31 December 2015  
                                                Note  £'000                        £'000                        
 Depreciation of property, plant and equipment  15    100                          138                          
 Amortisation of intangible fixed assets        14    180                          185                          
 Auditors remuneration                          9     21                           44                           
 Directors remuneration                         10    346                          323                          
 Share-based payments expense                   27    99                           127                          
 
 
13. (Loss) per share 
 
The calculation of the basic and diluted earnings per share is based on the following data: 
 
                                                                                                    Year ended 31 December 2016 £'000  Year ended 31 December 2015 £'000  
 (Loss) for the purposes of basic and diluted earnings per share (EPS) being:                                                                                             
 Net (loss) for the year from continuing operation attributable to equityholders of the parent      (3,891)                            (3,289)                            
 Net (loss) for the year from discontinuing operation attributable to equity holders of the parent  (5,048)                            (1,286)                            
                                                                                                    (8,939)                            (4,575)                            
                                                                                                    Number of shares                   Number of shares                   
                                                                                                                                                                          
 Weighted average number of ordinary shares for purposes of basic EPS                               11,864,152,652                     6,474,957,673                      
 Effect of dilutive potential ordinary shares-options and warrants                                  -                                  -                                  
 Weighted average number of ordinary shares for purposes of diluted EPS                             11,864,152,652                     6,474,957,673                      
                                                                                                                                                                          
 
 
In accordance with IAS 33, the share options and warrants do not have a dilutive impact on earnings per share, which are
set out in the consolidated income statement. Details of shares issued since the year end are shown in note 31 to the
financial statements. 
 
22. Trade and other payables 
 
                               Group             Company           
                               As at             As at             As at             As at             
                               31 December 2016  31 December 2015  31 December 2016  31 December 2015  
                               £'000             £'000             £'000             £'000             
 Trade creditors and accruals  1,427             1,107             1,250             536               
 Land option instalments       -                 2,448             -                 -                 
 Amounts due to subsidiaries   -                 -                 3,962             8,491             
 Other payables                1,417             -                 1,417             -                 
 SEDA backed loan              1,473             -                 1,473             -                 
                               4,317             3,555             8,102             9,027             
 
 
Standby Equity Distribution (SEDA) 
 
On 20 May 2015 the Company announced it had drawn down £0.47 million from its existing SEDA with YAGM and had primarily
deployed these funds to repay the full outstanding balance of the Loan Agreement. In accordance with the terms of the SEDA,
this was extended on 18 November 2014 to 30 November 2016. The Company issued YAGM with 149,253,731 new Ordinary Shares at
a price of 0.312p per share. 
 
On 20 July 2016 the Company announced it had drawn £0.67 million from its existing SEDA with YAGM and had primarily
deployed these funds to settle a payment to Auroch. The Company issued 1,032,811,415 new Ordinary Shares at a price of
0.065p per share. 
 
On 21 September 2016 Company announced it had drawn £0.75 million from its existing SEDA with YAGM and had primarily
deployed these funds for ongoing working capital requirements and repay £200K of the outstanding amounts on the loan note
agreement. The Company issued 1,875,000,000 new Ordinary Shares at a price of 0.04p per share. 
 
SEDA Backed Loan 
 
On 12 December 2013, the Company and YAGM entered into a loan note agreement pursuant to which YAGM agreed to issue an
unsecured loan of a principal amount of up to US$5 million to the Company. The note carries an interest of 12% per annum
and each tranche is repayable in 12 monthly instalments. The Company pays 8% of each drawn tranche as an implementation
fee. An initial tranche of US$0.30 million was drawn down by the Company on 12 December 2013 and further tranches of
US$0.25 million and US$0.50 million on the 18 November 2014 and 21 November 2014 respectively. 
 
On 10 May 2016 and 23 May 2016 respectively, the Company drew further tranches of US$0.85 million. On 19 July 2016, the
Company drew a further tranche of US$0.4 million and the parties agreed to reschedule the monthly instalments with the
final repayment due on 1 August 2017. As 31 December 2016 a total of £1,473k (US$1,774k) remained outstanding on the SEDA
Backed Loan. 
 
The Company and YAGM may mutually agree to draw down additional tranches and may redeem the loan note plus all interest at
any time over the life of the note. 
 
Auroch Minerals 
 
On 1 March 2016, the Company acquired 100% of the shares of Mistral Resource Development Corporation from Auroch Minerals
NL. A total of US$2,500k of purchase consideration was deferred and on the 20 July 2016, the parties agreed to schedule of
repayments which included payments of $750k and $150k which were paid during August 2016. As at 31 December 2016, a total
of £1,417k (US$1,748k) (including interest) remains outstanding. The loan carries an interest of 8% per annum. 
 
Land Option Instalments 
 
The Land Option Instalments represents the staged payments amounts due. On 22 September 2016, the Company advised the
Option Holder that it would no longer be making any further option payments. As a result, the Company in a net impairment
charge which included a write back £2,763k in relation to the Land Option Instalments. 
 
31. Events after the balance sheet date 
 
Issue of Equity 
 
On 6 January 2017, the Company announced that it had issued 335,484,611 new Ordinary Shares 0.01p shares at 0.018p per
Ordinary Share in settlement of outstanding invoices for services. 
 
Settlement with Auroch Exploration Pty Ltd 
 
On 9 February 2017, the Company announced that it had reached an agreement with Auroch Exploration Pty Ltd ("Auroch")
regarding the outstanding amounts owed by the Company to Auroch in relation to the acquisition of the Manica Gold Project. 
 
The Company and Auroch agreed the terms for the settlement of this debt which, including further accrued but unpaid
interest amounted to US$1.75 million (the "Manica Debt"). The settlement of the Manica Debt had been structured as a
convertible note agreement for US$0.75 million ("Convertible Loan Note"), a royalty agreement over production at Manica in
Auroch's favour, a loan agreement for the balance of the Manica Debt equal to US$1 million ("Loan Agreement") and a warrant
over 500,000,000 new Xtract ordinary shares. Further details are set out below: 
 
1.    Convertible Loan Note 
 
The Company agreed to issue unsecured Convertible Loan Notes to the total value of US$0.75 million to Auroch (the
"Noteholder"). Interest of 10% per annum is payable quarterly in advance. 
 
Any outstanding amount due under the Convertible Loan Note, together with accrued but unpaid interest thereon, is to be
repaid on or before 31 December 2017 or, if earlier, a change of control of the Company, sale of the Manica Gold Project or
completion of a joint venture. Amounts owed under the Convertible Loan Notes will reduce "pound-for-pound" by the amount of
any royalty paid to Auroch under the Royalty Agreement described further below. 
 
In the event of a fundraising by the Company, the Noteholder may require that 15% of the net proceeds of the fundraising
may be applied to redeem part of the Convertible Loan Notes. 
 
The Noteholder may, at any time, from the date of execution of the Convertible Loan Note Agreement until 31 December 2017,
convert all or any of the Convertible Loan Notes into new fully paid Xtract ordinary shares ("Conversion Shares") at a
conversion price equal to a 15% discount ("Conversion Discount") to the average volume weighted average price of Xtract
ordinary shares ("VWAP") during the 10 business days prior to the conversion date subject to a floor price of 0.012p per
Ordinary Share. In the event of a material breach of the terms of Convertible Loan Note Agreement by the Company which has
not been remedied by the Company to the Noteholder's satisfaction, acting reasonably, the Conversion Discount will increase
to 30%. 
 
Following execution of the Convertible Loan Note agreement, a fee of US$0.05 million was payable to Auroch, to be satisfied
by the issue of new Xtract ordinary shares (the "Fee Shares") at an issue price equal to a 15% discount to the VWAP during
the 10 business days prior to the issue of the Convertible Loan Notes. 
 
Conversion of Auroch Convertible Loan Notes 
 
On 16 February 2017, the Company announced that it had issued 1,589,623,629 new ordinary shares to Auroch at an issue price
of 0.013282p (equal to a 15 per cent. discount to the VWAP during the 10 business days prior to the issue of the
Convertible Loan Notes) following receipt of notice from Auroch to convert US$0.2 million of the outstanding Convertible
Loan Notes, and in settlement of the Convertible Loan Note arrangement fee due of US$0.05 million and interest payable in
advance of US$0.01 million. 
 
On 10 March 2017, the Company announced that it had received a notice from Auroch to convert a further US$0.2 million of
the outstanding Convertible Loan Notes. The Company issued 796,812,502 new ordinary shares to Auroch at an issue price of
0.020485p (equal to a 15% discount to the VWAP during the 10 business days prior to the issue of this Conversion Notice). 
 
On 28 March 2017, the Company announced that it had received a notice from Auroch to convert a further US$0.03 million of
the outstanding Convertible Loan Notes. The Company issued 134,835,331 new ordinary shares to Auroch at an issue price of
0.016492p (equal to a 15% discount to the VWAP during the 10 business days prior to the issue of this Conversion Notice). 
 
The Company had also repaid the outstanding balance of Convertible Loan Notes amounting to US$0.3 million. 
 
Accordingly, following the conversion and above repayments, there was no further outstanding amount on the Convertible Loan
Notes. 
 
2.    Royalty Agreement relating to the Manica Gold Project 
 
To provide security to Auroch, the Company further agreed to enter into the Royalty Agreement over the Manica Gold Project
pursuant to which Auroch would be entitled to receive a royalty equal to 3% of gross revenue from commercial operations
(including any alluvial gold production), payable by the Company to Auroch. The maximum royalty payment in aggregate is
US$1,75 million (the "Maximum Royalty Payment"), being an amount equal to the Manica Debt. Any payments made under the
Royalty Agreement shall reduce the amounts due to Auroch under the Convertible Loan Note (described above) and the Loan
Agreement (described below). The Royalty Agreement will terminate upon full settlement by the Company of the Manica Debt.
The Company agreed not to create any security over or dispose of interest in the Manica Gold Project and, on or following
any change of control of the Company, at Auroch's request the Company will buyout the balance of any payments due under the
Royalty Agreement at the then market value (subject always to the Maximum Royalty Payment and any payments made by Xtract
to Auroch under the Convertible Loan Note and the Loan Agreement). 
 
3.    Loan Agreement 
 
The Company entered into the unsecured Loan Agreement with Auroch for the balance of the Manica Debt amounting to US$1
million. Under the terms of the Loan Agreement, the Company will repay the Loan Agreement together with interest, which
will accrue at a rate of 10% per annum, on or before 31 December 2017. In addition, it was agreed that the Company will
endeavour to obtain relevant shareholder authorities on or before 30 June 2017 to authorise the Company to replace the Loan
Agreement with a convertible loan note on substantially the same terms as the Convertible Loan Notes. In the event that the
Company does not obtain the necessary approvals by 31 December 2017, an accelerated interest rate of 30% per annum will
accrue going forward on any outstanding balance of the Loan Agreement. The Company provided customary representations and
warranties to Auroch and the Loan Agreement includes standard events of default. 
 
4.    Warrants 
 
The Company agreed to issue 500,000,000 warrants to Auroch at an exercise price of 0.02p per new Xtract ordinary share. The
warrants will, unless otherwise exercised, expire on 21 December 2017. 
 
Issue of Equity 
 
On 16 February 2017 the Company announced that it had raised up to £1,878,933 (before expenses) following the conditional
placement of 10,156,398,001 new Ordinary Shares of 0.01p each at 0.0185p ("Placing Price") per new Ordinary Share (the
"Placing"). 
 
Under the Placing, the Company conditionally agreed to issue a total of 3,496,940,001 new Ordinary Shares at the Placing
price to raise gross proceeds of £646,934, subject to the terms of a placing agreement and Admission of the new Ordinary
Shares to trading on AIM ("Tranche 1 Placing Shares"). The Tranche 1 Placing Shares were issued under the Company's
existing share authorities. 
 
A further 6,659,458,000 new Ordinary Shares with gross proceeds of £1,232,000 were to be issued on the same terms ("Tranche
2 Placing Shares") but conditional on shareholder approval of the necessary increase in authority to issue the Tranche 2
Placing Shares. A General Meeting was convened on 13 March 2017 and the Company received the necessary approval to issue
the Trance 2 Placing Shares. 
 
The Company accelerated the settlement of all outstanding payments due to the Company under the existing equity swap
agreement previously entered into with YA II EQ Ltd and received gross proceeds of approximately £0.24 million ("the "Swap
Proceeds") which were used to repay an equal amount outstanding to YA under the existing Loan Note Facility. Following this
acceleration, the Company terminated the equity swap agreement entered into with. 
 
Definitive Feasibility Study 
 
On 28 February 2017, the Company announced the Definitive Feasibility Study ("DFS") for the open pit operation of the
Company's Manica Fair Bride Project in Manica in Mozambique and which the results are summarised as follows: 
 
●        After-tax Internal Rate of Return of 41.1% at a gold price of US$ 1,262 per ounce 
 
●        Project life of 7 years with average gold grade of 2.62 g/t producing 215,293 recovered ounces 
 
●        Project payback within 2 years 
 
●         Direct cash cost ("C1") of US$556 per ounce 
 
●         All-in sustainable cost (including royalties and capital) of US$862 per ounce 
 
●        Total capital expenditure of US$43.68 million 
 
●        The Net Present Value of US$42 million at 8.4% discount rate 
 
●        Significant exploration potential in immediate vicinity 
 
●        A further 992,000 ounces in resource for additional evaluation and future exploitation 
 
●        Considerable exploration potential within the concession and nearby 
 
Reorganisation of Loan Agreement 
 
On 4 April 2017, the Company announced that it had entered into an agreement (the "Supplemental Agreement") with YA II EQ,
Ltd. (the "Investor") which is supplemental to the SEDA-backed loan note agreement dated 12 December 2013 ("Loan
Agreement"). 
 
The Company and the Investor agreed to modify the Loan Agreement and the repayment schedules in respect of the amounts
outstanding. 
 
Following the execution of the Supplemental Agreement, the Company made a cash payment to the Investor in the amount of
US$0.12 million. The Company was discharged of its obligation to repay US$0.35 million of the amount outstanding under the
Loan Agreement by the issuance and allotment to the Investor of 1,513,513,514 new ordinary shares (the "Repayment Shares")
as determined by converting US$0.35 million into GBP at the relevant exchange rate at a share price of 0.0185p per ordinary
share, being the same share price to the last placing as announced in February 2017. 
 
The outstanding balance owed under the Loan Agreement, after taking the above repayments into account, amounted to US$1.04
million (the "Balance"). 
 
In respect of US$0.52 million of the Balance, the Company shall make 9 monthly cash payments of principal and interest in
accordance with new repayment schedule beginning on 1 July 2017 at a rate US$0.06 million per month for 2017, and on
average US$0.06 million per month for 2018, and ending on 1 March 2018. 
 
In respect of the remaining US$0.52 million of the Balance, the Company shall pay such amount on 1 April 2018, plus any
accrued and unpaid interest thereon, to the extent that any such amount has not been previously discharged through
conversion into new ordinary shares of the Company as described further below. 
 
The Investor may at any time from the date of execution of the Supplemental Agreement until 1 April 2018, convert all or
any of the amount then outstanding under the Loan Agreement into new fully paid Xtract ordinary shares ("Conversion
Shares") at a conversion price equal to a 15% discount to the average volume weighted average price of Xtract ordinary
shares ("VWAP") during the 10 business days prior to the conversion date subject to a floor price of 0.012p per ordinary
share. 
 
Qualified Person 
 
In accordance with AIM Note for Mining and Oil & Gas Companies, June 2009 ("Guidance Note"), Colin Bird, CC.ENG, FIMMM,
South African and UK Certified Mine Manager and Director of Xtract Resources plc, with more than 40 years experience mainly
in hard rock mining, is the qualified person as defined in the Guidance Note of the London Stock Exchange, who has reviewed
the technical information contained in this press release. 
 
ENDS 
 
This information is provided by RNS
The company news service from the London Stock Exchange