REG - Xtract Resources plc - Proposed disposal of Manica Gold Project
24/01/2024 11:00
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RNS Number : 7868A Xtract Resources plc 24 January 2024
24 January 2024
Xtract Resources Plc
("Xtract" or the "Company")
Proposed disposal of the Manica Gold Project
Notice of General Meeting
The Board of Xtract Resources Plc ("Xtract" or the "Company") is pleased to
announce that the Company has agreed terms for the disposal of the Manica Gold
Project. Xtract has today entered into the conditional MMP Agreements with its
Mozambique partner, MMP, and parties related to MMP, which comprise:
(i) The Share Purchase Agreement in relation to the sale by
Xtract of its entire interests in the Manica Gold Project pursuant to which,
inter alia, Xtract has agreed to sell Xtract's 23% net profit share interest
in the Manica Gold Project (by way of a sale of the entire issued share
capital of Mistral) to the Buyers for a consideration of up to US$15 million
in cash in regular staged payments by the Buyers over the period to 1 March
2027; and
(ii) The Settlement and Restructuring Agreement in relation to
the termination of Xtract's mining collaboration agreement with MMP dated 28
May 2019 in relation to the Manica Gold Project under which the Xtract Parties
are to be paid US$3.325 million in cash to settle all monies due under the
Mining Collaboration Agreement from MMP to Xtract and Explorator, Xtract's
local Mozambique subsidiary, of which US$2 million has already been paid; and
to terminate the Mining Collaboration Agreement.
The proposed Disposal would constitute a fundamental change of business of the
Company under Rule 15 of the AIM Rules and is therefore conditional on, inter
alia, Shareholder approval which is being sought at a General Meeting of the
Company. On completion of the Disposal, the Company will however, remain an
operating minerals company under the AIM Rules given its remaining material
minerals interests in two large scale early-stage exploration copper
projects in Northeast Zambia and the Bushranger copper Project in Australia.
A Circular setting out further details on the proposed Disposal, and the
Notice convening the General Meeting to be held at the offices of Fladgate LLP
at 16 Great Queen Street, London, WC2B 5DG at 10.00 a.m. on 13 February 2024,
is being sent to shareholders today. The text of the Letter from the Chairman
of Xtract in the Circular is reproduced in full in Appendix I to this
announcement without material adjustment or amendment. Shareholders should
read the whole of this announcement, including Appendix I.
The MMP Agreements are also conditional on Mozambique regulatory approval and
other conditions customary for agreements of this nature.
Colin Bird Executive Chairman said:
"The Manica Project will be transitioning to the complex ore phase which has
not yet been fully scoped or technically and financially modelled. We do not
want to be exposed to this risk, particularly in exciting copper times for our
Company. The President of Zambia is targeting annual production of 3Mt of Cu
per annum and the discovery of Western Foreland - Kamoa style mineralisation
in Zambia will do much to achieve this goal. The predictive rise in copper use
notwithstanding electric vehicles ("EVs") is forecast to be substantial and
whilst EVs are important, developing world emergence and growth is providing
significant additional copper demand. We believe that the resulting copper
supply shortage is becoming more acute and Xtract is determined to be a major
player in the copper discovery arena. Viewing worldwide exploration
activities, the Xtract Board is even more convinced that its southern African
copper focus, and particularly on the Western Foreland, exploration and small
mine opportunities, is the optimum strategy for our shareholders. The two
projects in the Xtract copper portfolio in NW Zambia hold a pivotal position
in the Western Foreland geological architecture and present a significant
potential opportunity for both our shareholders and our copper portfolio in
general."
Copies of the Circular and Notice of General Meeting will be available on the
Company's website www.xtractresources.com (http://www.xtractresources.com)
Unless the context otherwise requires, capitalised terms of this announcement
shall have the same meaning ascribed to them in the Circular, as reproduced in
Appendix II.
The information contained within this announcement is deemed by the Company to
constitute inside information as stipulated under the Market Abuse Regulation
(EU) No. 596/2014 as it forms part of UK Domestic Law by virtue of the
European Union (Withdrawal) Act 2018 ("UK MAR").
The person who arranged for the release of this announcement on behalf of the
Company was Colin Bird, Executive Chairman and Director.
Enquiries:
Xtract Resources Plc Colin Bird, +44 (0)20 3416 6471
Executive Chairman www.xtractresources.com (http://www.xtractresources.com)
Beaumont Cornish Limited Roland Cornish +44 (0)207628 3369
Nominated Adviser and Joint Broker Michael Cornish www.beaumontcornish.co.uk (http://www.beaumontcornish.co.uk)
Felicity Geidt
Novum Securities Limited Jon Bellis +44 (0)207 399 9427
Joint Broker Colin Rowbury www.novumsecurities.com
Beaumont Cornish Limited ("Beaumont Cornish"), which is authorised and
regulated in the United Kingdom by the Financial Conduct Authority, is acting
as nominated adviser to the Company in connection with this announcement and
will not regard any other person as its client and will not be responsible to
anyone else for providing the protections afforded to the clients of Beaumont
Cornish or for providing advice in relation to such proposals. Beaumont
Cornish has not authorised the contents of, or any part of, this announcement
and no liability whatsoever is accepted by Beaumont Cornish for the accuracy
of any information or opinions contained in this announcement or for the
omission of any information. Beaumont Cornish as nominated adviser to the
Company owes certain responsibilities to the London Stock Exchange which are
not owed to the Company, the Directors, Shareholders, or any other person.
Forward Looking Statements
Certain statements in this announcement are or may be deemed to be forward
looking statements. Forward looking statements are identified by their use of
terms and phrases such as ''believe'' ''could'' "should" ''envisage''
''estimate'' ''intend'' ''may'' ''plan'' ''will'' or the negative of those
variations or comparable expressions including references to assumptions.
These forward-looking statements are not based on historical facts but rather
on the Directors' current expectations and assumptions regarding the Company's
future growth results of operations performance future capital and other
expenditures (including the amount. Nature and sources of funding thereof)
competitive advantages business prospects and opportunities. Such forward
looking statements reflect the Directors' current beliefs and assumptions and
are based on information currently available to the Directors. A number of
factors could cause actual results to differ materially from the results
discussed in the forward-looking statements including risks associated with
vulnerability to general economic and business conditions competition
environmental and other regulatory changes actions by governmental authorities
the availability of capital markets reliance on key personnel uninsured and
underinsured losses and other factors many of which are beyond the control of
the Company. Although any forward-looking statements contained in this
announcement are based upon what the Directors believe to be reasonable
assumptions. The Company cannot assure investors that actual results will be
consistent with such forward looking statements.
Qualified Person:
Colin Bird: The technical information contained in this announcement has been
reviewed, verified, and approved by Colin Bird, C.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.
APPENDIX I
A copy of the Chairman's letter in the Circular is set out in full below
without material adjustment or amendment
"Proposed disposal of the Manica Gold Project and Notice of General Meeting
1. Introduction
As announced on 24 January 2024, the Company has entered into the conditional
MMP Agreements with its Mozambique partner, MMP, and parties related to MMP.
The MMP Agreements comprise:
(i) the Share Purchase Agreement in relation to the sale by Xtract of
its entire interests in the Manica Gold Project pursuant to which, inter alia,
Xtract has agreed to sell Xtract's 23% net profit share interest in the Manica
Gold Project (by way of a sale of the entire issued share capital of Mistral)
to the Buyers for a consideration of up to US$15 million in cash in regular
staged payments by the Buyers over the period to 1 March 2027; and
(ii) the Settlement and Restructuring Agreement in relation to the
termination of Xtract's mining collaboration agreement with MMP dated 28 May
2019 in relation to the Manica Gold Project under which the Xtract Parties are
to be paid US$3.325 million in cash to settle all monies due under the Mining
Collaboration Agreement from MMP to Xtract and Explorator, Xtract's local
Mozambique subsidiary, of which US$2 million has already been paid; and to
terminate the Mining Collaboration Agreement.
The proposed Disposal would constitute a fundamental change of business of the
Company under Rule 15 of the AIM Rules and is therefore conditional on, inter
alia, the passing of the Resolution at the General Meeting. The MMP Agreements
are also conditional on Mozambique regulatory approval and other conditions
customary for agreements of this nature. On completion of the Disposal, the
Company will however, remain an operating minerals company under the AIM Rules
given its remaining material minerals interests in the Bushranger copper
Project in Australia, and the Company's interest in two larger scale early-
stage exploration copper projects in Northeast Zambia.
Shareholder approval of the Disposal is being sought at a General Meeting of
the Company to be held at 10.00am on 13 February 2024. The Notice convening
the General Meeting and setting out the Resolution to be considered is set out
at the end of this document. A summary of the action you should take is set
out in paragraph 8 of this letter.
Further details of the Disposal are set out below.
The purpose of this document is to give you the background to and further
details of the proposed Disposal, including why the Directors consider the
Disposal to be in the best interests of the Company and its Shareholders, and
recommend that you vote in favour of the Resolution to be proposed at the
General Meeting of the Company to be held at the offices of Fladgate LLP at 16
Great Queen Street, London, WC2B 5DG at 10.00 a.m. on 13 February 2024.
2. Background to and reasons for the Disposal
The Company's Manica Gold Project in Mozambique is held by the Company's
wholly owned subsidiary, Explorator and comprises gold deposits (both hard
rock and alluvial) which the Company has been progressing towards production
since June 2015.
The Company initially appointed a number of independent contractors in 2017 to
exploit the alluvial deposits and, as recently reported, the gold mined from
these alluvial deposits has now been scaled down as the alluvial mineable
resource has been significantly reduced. Production at the Manica Gold Project
is now dominated by the Fair Bride hard rock deposit.
In May 2019, the Company's wholly owned subsidiary, Explorator, entered into
the Mining Collaboration Agreement with MMP pursuant to which it appointed MMP
as the independent mineral processing contractor to provide a technical
solution to conduct hard rock mining on the Manica Gold Project permitted
area, and to process the mined ore for the recovery of gold for a period of 10
years with an option to extend. MMP agreed to contribute its hard rock
processing plant and committed to the purchase and commission of suitable
Carbon in Leach plant.
Under the terms of the Mining Collaboration Agreement, MMP receive 77% of all
the operating profit produced from the permitted area through the performance
of the contract by MMP when the prevailing price of gold is greater than
US$1,250 per ounce. MMP's entitlement increases to 78.5% at a prevailing gold
price less than US$1,250 and more than US$1,175 per ounce, and to 80% when the
prevailing price of gold is less than US$1,175 per ounce. Profit is defined as
revenue on sale less deductible costs (excluding non- cash items) and
corporation tax. At the current gold price per ounce the Company is due 23% of
operating profit of gold produced.
MMP commenced mining operations in May 2022, and the plant was commissioned
and produced the first gold from Fair Bride during July 2022. Production
increased steadily through commissioning, with just over 110kg of gold
produced by December 2022. Production increased at the beginning of 2023
(further details are set out in paragraph 3 below). Known oxide and weathered
transitional ore within the Fair Bride concession were expected to provide up
to approximately two years of mine life for the current processing plant
configuration and, as previously reported, the Company intended to work with
MMP to decide on the strategy around extending oxide mine life and how and
when best to exploit the deeper underlying sulphide resource.
The Board of Xtract has assessed the potential transition of the Manica Gold
Project to the more complex sulphide ore phase, which has not yet been fully
scoped or technically and financially modelled, and has concluded that it does
not want to be exposed to this risk. Whilst Xtract is confident in the Manica
Gold Project, Xtract is in effect a minority participant (with a net 23 per
cent. operating profit share as described above) and has limited influence
over decision making where there is short to medium-term uncertainty.
Management control of the Manica operation is vested in MMP, a private
unlisted Mozambique company and associated management, while Xtract, as the
holder of the Manica Licence, indirectly assumes responsibility and potential
liability without sufficient measure of control or influence over operating
plans and procedures.
Given continuing difficult market conditions for junior exploration companies,
the Disposal consideration of up to US$15 million would provide a significant
boost to the Company's treasury over the next 3 years, and the current
intention is to allocate additional funding to accelerate the Company's highly
prospective existing copper projects in Zambia, and provide additional funding
to take advantage of new opportunities in Southern Africa where they offer
considerable upside in those metals in which Xtract is focused. The Company
will also continue to support Xtract's development of its Bushranger project
in Australia in a way that optimises value for shareholders.
3. Manica Gold Project
The Fair Bride gold deposit is within the Manica Gold Project situated 270km
NW of the city of Beira within Licence 3990C in the Odzi-Mutare-Manica
Greenstone Belt of Mozambique.
The registered owner of Licence 3990C, which was issued in March 2011, is
Explorator, which is 98 per cent. owned by Xtract's wholly owned subsidiary
Mistral, with the balance of 2 per cent. held directly by Xtract. The
registered owner of Licence 7569L, an alluvial licence which is effectively
mined out and which was issued in June 2018, is Chinhamapere, which is also 98
per cent. owned by Mistral with the balance held directly by Xtract.
In February 2017, Xtract announced the results of a definitive Feasibility
Study for the open pit operation of the Fair Bride deposit of the Manica Gold
Project which had been completed by Minxcon (Pty) Ltd and which was based on a
SAMREC-compliant open pit resource of 13.95Mt at 1.76g/t Au for 789Koz Au and
an underground resource of 5.66Mt at 2.6g/t Au for 473Koz Au. The Mineral
Resource was classified into Measured, Indicated and Inferred Mineral Resource
categories as defined in the SAMREC Code. The Mineral Resource estimation for
the Fair Bride open pit was declared to a depth of 280m with a resource
cut-off of
0.5 g/t. The open pit contains predominantly Measured and Indicated Mineral
Resources.
Gold mined from the alluvial deposits has now been significantly scaled down
as the alluvial mineable resource has been significantly reduced, grades have
declined and production at the Manica Gold Project is now dominated by the
Fair Bride hard rock deposit. As set out above, in May 2019, the Company's
wholly owned subsidiary, Explorator, entered into the Mining Collaboration
Agreement with MMP pursuant to which it appointed MMP as the independent
mineral processing contractor and the plant was commissioned and produced its
first gold during July 2022. Table 1 below sets out shows the quarterly gold
production and sales prices for the three-month periods ended 30 September
2023 for the Fair Bride project and year to date figures for 2023.
Table 1: Operator's Report - Total Gold production and sales prices - Fair
Bride (Xtract 23% share of net profit)
Q3 ended 30 September Q2 ended 30 June Q1 ended 31 March Aggregate amounts for the 9 months to
2023 2023 2023 30 September
2023
Tonnes Mined & Processed (tons) 129,876 124,523 107,023 361,422
Average grade (g/t) 2.01 1.74 1.51 -
Au Production (ounces) 7,511 6,456 4,522 18,489
Au recovery (%) 90.41 89.05 87.70 -
Average sales price per ounce in US$ 1,926 1,989 1,859 -
Cost per oz of Au (US$) 1,070 1,215 1,185 -
Note: Source - The production statistics for Fair Bride are provided by
contract miner, MMP
Gross monthly mine production from Fair Bride has increased month-on-month as
the operation has bedded down and post-commissioning issues have been
resolved, with an increase reported in fine gold poured, as set out in table 2
below while ore processed reduced in September 2023 as set out in Table 3
below:
Table 2: Fine Gold Poured Q3 2022 to Q3 2023
Quarter end Fine Gold Poured
(kg)
September 2022 28.70
December 2022 36.20
March 2023 50.99
June 2023 62.60
September 2023 86.99
Note: Source - The fine gold statistics for Fair Bride are provided
by contract miner, MMP
Table 3: Ore Tonnes Processed Q4 2022 to Q3 2023
Quarter end Ore Processed
(tpm)
December 2022 28,200
March 2023 40,800
June 2023 42,000
September 2023 37,700
Note: Source - The ore processed statistics for Fair Bride are provided
by contract miner, MMP
4. MMP Agreements
On 24 January 2024, the Company entered into the conditional MMP Agreements
with MMP, and parties related to MMP. The MMP Agreements comprise:
i) the Share Purchase Agreement in relation to the sale by Xtract
of its entire interests in the Manica Gold Project pursuant to which, inter
alia, Xtract has agreed to sell Xtract's 23% net profit share interest in the
Manica Gold Project (by way of a sale of the entire issued share capital of
Mistral) to the Buyers for a consideration of up to US$15 million in cash in
regular staged payments by the Buyer over the period to 1 March 2027; and
ii) the Settlement and Restructuring Agreement in relation to the
termination of Xtract's mining collaboration agreement with MMP dated 28 May
2019 in relation to the Manica Gold Project under which the Xtract Parties are
to be paid US$3.325 million in cash: to settle all monies due under the Mining
Collaboration Agreement from MMP to Xtract and Explorator, Xtract's local
Mozambique subsidiary, of which US$2 million has already been paid; and to
terminate the Mining Collaboration Agreement
The MMP Agreements are both subject to the laws of England and Wales and a
summary of the agreements is set out below.
Share Purchase Agreement
The Share Pruchase Agreement was entered into between the (i) the Buyers and
the Guarantors; and (ii) Xtract on 24 January 2024, pursuant to which Xtract
has agreed to sell all the share capital of Mistral, together with any shares
in the subsidiaries of Mistral owned directly by Xtract, and to assign the
Xtract Loans, to the Buyers.
The Buyers have agreed to pay the Price of US$12 million, of which US$9
million is to be paid in 12 quarterly instalments of US$0.75 million
commencing on 1 March 2024, with the last payment due on 1 December 2026, and
a further US$3 million to be paid on or before 1 March 2027. In addition, the
Buyers have also agreed to pay the Deferred Consideration of up to a further
US$3 million on the following basis:
(i) If by 28 February 2025 MMP has not notified Xtract in
writing that it has made a decision to build a Sulphide Plant, then Deferred
Consideration is payable as follows;
- US$1 million by 7 March 2025;
- US$1 million by 31 August 2025; and
- US$1 million by 31 December 2025.
(ii) If by 28 February 2025 MMP has notified the Seller in writing
that it has made a decision to build a Sulphide Plant then Deferred
Consideration is payable as follows:
- US$1 million within 14 days of the decision to build
Sulphide Plant;
- US$1 million within the earlier of: (a) 14 days of
commencement of dry commissioning of the Sulphide Plant; and (b) 1 December
2025; and
- US$1 million within the earlier of: (a) 14 days of the
Sulphide Plant achieving commercial production defined as processing 30,000
tonnes in any 30-day period; and (b) 1 February 2026.
(iii) If MMP or any of the Buyers or any of their associates enters
into an agreement to sell the rights to any of the Sulphides at the Manica
Project or give any other party the right to build or finance a Sulphide Plant
or use any other party's sulphide plant to process ore from the Manica
Project, then the Deferred Consideration automatically becomes immediately
payable in full with no further action or notice required to be given by
Xtract.
Up until 31 October 2024, the Buyers have the option to avoid paying the
Deferred Consideration by electing to pay the Increased Price Election by
increasing the Price by US$1 million to US$13 million provided that all
amounts due beforehand pursuant to the MMP Agreements have been paid by their
due date and the Buyers pay in full any unpaid amount of the increased Price
of US$13M and any unpaid amounts still due under the Settlement and
Restructuring Agreement within 14 days.
In aggregate, the Price and the Deferred Consideration amount to between US$13
million (the minimum) and US$15 million (the maximum).
The Guarantors have jointly and severally guaranteed all amounts due to Xtract
under the Share Purchase Agreement and the Settlement and Restructuring
Agreement.
The Buyers are responsible for obtaining any approvals required from the
Mozambique Ministry of Mineral Resources and Energy, registering the change of
control with the Mozambique National Directorate of Mines and for paying any
transfer costs payable in relation to this approval and registration. The
Share Purchase Agreement is conditional on completion on or before the Long
Stop Date or such other date agreed to in writing and, inter alia, (i)
Shareholder approval; and on completion (ii) proof that the Mozambique
Ministry of Mineral Resources and Energy consent has been obtained or a legal
opinion that it is not required; and (iii) proof that the Mozambique National
Directorate of Mines has approved the registering of the sale of the Mining
Licence has been obtained or a legal opinion that it is not required and or
can be obtained after the completion date.
The Buyers have warranted and undertaken that until the Price and the Deferred
Consideration are fully paid in accordance with this agreement they will,
amongst other undertakings:
a) not sell or assign or enter into any agreement to sell or
assign any of the Sale Shares; or
b) not create any Security Interest over or enter into any
agreement to create a Security Interest over any of the Sale Shares; or
c) will not sell or enter into any agreement to sell any direct
or indirect interest in the Manica Project; or
d) will not make any distributions or payments to their
shareholders unless:
i) the Guarantees are in place and valid and the Seller has
not made any claim against a Guarantor under any of the Guarantees; and
ii) all monies due to be paid by the MMP Parties under the
Settlement and Restructuring Agreement have been paid to the Xtract Parties
e) will ensure Explorator does not sell or assign or relinquish
the Mining Licence or enter into any agreement to sell, assign, or relinquish
the Mining Licence.
If there is any breach of these security provisions or the late payment of any
of the amounts due to be paid by the Buyers under the MMP Agreements that is
not rectified within 14 days, then: (i) all outstanding amounts will become
due and payable; (ii) interest will from the date of the breach accrue on all
unpaid amounts at the rate of 2% per cent per month compounded monthly on the
last day of each calendar month; and (iii) the Buyers irrevocably grant to the
Seller (or its nominated representative) an option to acquire the Mining
Licence and / or all the issued shares of Explorator for US$1 such option to
remain valid until all amounts including accrued interest due under the MMP
Agreements have been paid in full.
Xtract has provided customary warranties and undertakings in respect of
Mistral and its subsidiaries, subject to a de minimis of US$50,000 per claim
and overall cap on Xtract's liability under all warranty claims of US$1.5
million.
Settlement and Restructuring Agreement
The Settlement & Restructuring Agreement, entered into between (i) MMP and
its related parties, Meteor and Horizon ("MMP Parties"); and (ii) Xtract and
Explorator ("Xtract Parties") on 24 January 2024, settles all monies due and
conditionally terminates the Mining Collaboration Agreement.
Under the terms of the Settlement and Restructuring Agreement, Explorator's
agreed net profit share due in respect of the nine-month period ended 30
September 2023 under the Mining Collaboration Agreement, amounts to US$3
million, of which US$2 million has been paid since 30 September 2023, and the
balance of US$1 million is payable to Xtract as to US$0.5 million by 30
January 2024 and the balance by 28 February 2024. The MMP Parties have
provided warranties and indemnities to the Xtract Parties, in consideration
for which the Xtract Parties have agreed to forgo any net profit share due for
the three-month period ended 31 December 2023.
The Settlement and Restructuring Agreement is conditional inter alia on
completion of the Share Purchase Agreement on or before the Long Stop Date or
such other date agreed to in writing between the MMP Parties and the Xtract
Parties. If the Long Stop Date is extended beyond 15 February 2024 and at the
date of the extension of the Long Stop Date either: (i) the MMP Parties are in
default of their obligations under the Settlement and Restructuring Agreement;
and / or (ii) the Buyers under the Share Purchase Agreement have not met all
their obligations due to be met on or by the completion date of the Share
Purchase Agreement, then for every month or part thereof that the Long Stop
Date is later than 15 February 2024, a payment will be due from the MMP
Parties of US$0.5 million (if the average LME spot gold price is less than
US$1,950 per oz) or US$0.65 million (if the average LME spot gold price is
equal to or greater than US$1,950 per oz). The parties have agreed that
US$0.325 million is now due to Xtract in respect of the Long Stop Date of 15
February 2024.
With effect from execution of the Settlement and Restructuring Agreement, the
MMP Parties have assumed full liability for ongoing compliance with all
applicable Mozambique mining environmental, tax and other applicable laws and
regulations relating to mining activities at the Mining Licence area and have
jointly and severally indemnified Xtract and Explorator for any liabilities
which they directly or indirectly become liable for as a result of (i) any of
the mining or other activities performed or due to be performed by the MMP
Parties; and/or (ii) the MMP Parties not meeting any of their obligations
under the Settlement & Restructuring Agreement.
5. Use of proceeds & strategy
On completion of the Disposal, Xtract will continue to retain its advanced
exploration and development projects in both Zambia and Australia - the
capitalised exploration value of these projects amounted to £8.7 million as
at 30 June 2023, the date of the last published balance sheet.
The Board intends to use the Disposal consideration of up to US$15 million to
fund the exploration programmes on the Company's existing copper projects in
Zambia, and to take advantage of new opportunities in Southern Africa offering
considerable upside in those metals in which Xtract is focused. The
consideration will also continue to support Xtract's development of its
Bushranger project in Australia.
Zambia
The Board believes that the demand for copper will continue to grow with in
the medium-term, a potential shortfall in supply. Consequently, the Company
will continue to seek additional small to larger scale copper mining projects
in Zambia and Southern Africa consistent with its current policy.
As announced in August 2023, Xtract entered into a joint venture agreement
with Cooperlemon Consultancy Limited in relation to the exploration for copper
at large scale exploration licenses 29123-HQ-LEL and 30459- HQ-LEL in
Northwest Zambia. The two exploration licences are located within the Western
Foreland geological district that hosts the Kamoa - Kakula deposit and the
Central Fold and Thrust Belt in Northwest Zambia and in aggregate cover
107,000 hectares in a highly prospective part of Northwest Zambia where
competition for exploration licences is acute.
The Company believes that the two licences are well situated within the
Western Foreland geological district that hosts potential Kamoa style
mineralisation as confirmed by recent exploration and drilling on nearby
licences. As previously notified, Xtract intends to spend an initial US$2
million over a two-year exploration period, starting with surface exploration
works with a view to defining potential drill targets for 2024.
Australia
The Bushranger copper gold exploration project has been the Company's
principal focus over the last three years. Xtract completed an extensive
drilling campaign of over 32,000 meters at the Bushranger project and
published in November 2022 a JORC compliant Mineral Resource for the
Racecourse Prospect of 512Mt @ 0.22% CuEq, at a cut-off grade of 0.1% CuEq,
containing 1.1Mt of copper equivalent metal and classified as Inferred and
Indicated in accordance with JORC (2012).
In November 2023, Xtract published the results of the Pit Optimisation &
Financial Modelling Study to examine the economics of open pit extraction.
Xtract had engaged independent consultants, Optimal Mining Solutions (Pty) Ltd
of Australia to investigate the economics of a 5Mtpa, 20Mtpa or 25Mtpa open
pit mining operation, focussed on the extraction of shallow higher-grade
mineralisation from the Bushranger Project.
As previously reported, the Company believes that the final results from the
Bushranger Pit Optimisation & Financial Modelling Study show that the
currently defined Mineral Resources on the Bushranger Project have the
potential to be the basis of a large scale, economic mining operation.
The Board identified key further work that may benefit shareholder value being
metallurgical studies that could in turn lead to improvements in both capital
and operating cost. The Company is continuing with these studies working
towards the ultimate mine and operating plan to identify the best scenario for
development of the Bushranger resource.
6. Financial effects of the Disposal
The Company's interest in the Manica project is recognised as an intangible
asset in the Group's accounts and at 31 December 2022 had a carrying value of
£11.439 million compared to the aggregate proceeds under the Share Purchase
Agreement of up to US$15 million (approximately £11.8 million at the current
exchange rate of £1: US$1.266).
In the year ended 31 December 2022, the Company recognised a net loss of
£0.235 million attributable to the Manica Gold Project (comprising a mine
development loss of £0.357 million and gold mining profit of £0.122
million).
The Manica Gold Project will be treated in the Company's 2023 accounts as an
asset held for sale provided Shareholders approve the Resolution at the
General Meeting. Xtract anticipates that the disposal of its interest in the
Manica Gold Project will record a profit on disposal in Xtract's accounts for
the relevant reporting period, which will be determined at that time.
Unaudited proforma financial information
The unaudited pro forma statement of net assets of the Group has been prepared
based on the unaudited balance sheet of the Group as at 30 June 2023 to
illustrate the effect on the net assets of the Group as if the Disposal had
taken place on 30 June 2023.
The unaudited pro forma statement of net assets has been prepared for
illustrative purposes only and, because of its nature, addresses a
hypothetical situation and does not, therefore, represent the Group's actual
financial position or results. The unaudited pro forma statement of net assets
has been prepared in a manner consistent with the accounting policies and
presentation adopted by the Group in preparing its unaudited interim financial
statements for the six-month period ended 30 June 2023 and on the basis of the
notes set out below. The unaudited pro forma statement of net assets set out
below does not constitute statutory accounts within the meaning of section 434
of the Companies Act 2006.
Unaudited pro forma net assets of the Group as at 30 June 2023
Unaudited Group as at 30 June 2023 Manica Gold Project as at 30 June 2023 Consideration for the Manica Gold Project Pro forma net assets of the Group as at 30 June 2023
Note 1 Note 2 Note 3
£'000 £'000 £'000 £'000
Non-current assets
Intangible Assets 18,608 10,491 - 8,117
Property, plant & equipment 75 30 - 45
Other financial assets - - - -
Other receivables - - 9,471 9,471
18,683 10,521 9,471 17,633
Current assets
Trade and other receivables 2,556 391 2,368 4,533
Inventories 119 119 - -
Cash and cash equivalents 375 220 - 155
3,050 730 2,368 4,688
Total assets 21,733 11,251 11,839 22,321
Current liabilities
Trade and other payables 1,473 1,009 - 464
Other loans 50 - - 50
Current tax payable 297 297 758 758
1,820 1,306 758 1,272
Non-current liabilities
Environmental rehabilitation provision 326 326 - -
326 326 - -
Total liabilities 2,146 1,632 758 1,272
Net current assets/(liabilities) 1,230 - 576 1,610 3,416
Net assets 19,587 9,619 11,081 21,049
Notes to the unaudited net assets statement:
1. The net assets of Xtract as at 30 June 2023 have been
extracted, without adjustment, from the consolidated unaudited interim
financial statements of Xtract for the six-month period ended 30 June 2023.
2. The net assets of the Manica Gold Project as at 30 June 2023
have been extracted, without adjustment, from the consolidated unaudited
interim financial statements of Xtract for the six-month period ended 30 June
2023.
3. The maximum consideration of US$15 million has been converted
to pounds sterling at the period end exchange rate at 30 June 2023 of
$1.267:£1.00.
4. No account has been taken of costs relating to the Disposal.
5. No account has been taken of the financial performance of
Xtract or the Manica Gold Project since 30 June 2023, nor the monies due under
the Settlement and Restructuring Agreement or any other events save as
disclosed above.
7. General Meeting
A notice convening a General Meeting of the Company, to be held at the offices
of Fladgate LLP at 16 Great Queen Street, London, WC2B 5DG at 10.00 a.m. on 13
February 2024 is set out at the end of this Circular. At the General Meeting,
the following Resolution will be proposed as an ordinary resolution:
That the Disposal and the Company entering into the MMP Agreements (all as
defined in the circular to the Company's shareholders dated 24 January 2024 of
which this notice forms part) be and is hereby approved, confirmed and
ratified and that the directors of the Company are hereby authorised for and
on behalf of the Company to approve the signature of any document and/or
taking of any action they deem necessary or appropriate in relation to
affecting or facilitating the transactions contemplated by the MMP agreements.
8. Action to be taken by Shareholders
Whether or not you intend to be present at the General Meeting, you are
requested to complete the Form of Proxy in accordance with the instructions
printed on it and to return it as soon as possible and, in any case, so as to
be received by the Company's registrars, Link Group at 65 Gresham Street,
London EC2V 7NQ no later than 10 a.m. on 9 February 2024.
You can submit your proxy electronically through the website of our registrar,
Link Group, at www.signalshares.com. (http://www.signalshares.com/) The
electronic submission of proxy must be received by no later than 10.00 a.m. on
9 February 2024. To vote online you will need to log in to your share portal
account or register for the share portal if you have not already done so and
you will require your investor code. Once registered, you will be able to vote
immediately. Voting by proxy prior to the General Meeting does not affect your
right to attend the General Meeting and vote in person should you so wish.
Further information regarding the appointment of proxies and online voting can
be found in the notes to the Notice of General Meeting.
Instructions for voting by proxy through CREST are set out in paragraph 9 of
the notes to the Notice of General Meeting.
In the case of the beneficial owners of Ordinary Shares who receive these
materials through their broker or other intermediary, the beneficial owner
should complete and send a letter of direction in accordance with the
instructions provided by their broker or other intermediary.
The return of the form of proxy or transmission of a CREST Proxy Instruction
will not prevent you from attending the meeting and voting in person if you
wish.
9. Directors' Recommendation
The Board of Xtract considers the Disposal and the entering into the MMP
Agreements to be in the best interests of the Company and its Shareholders as
a whole and therefore the Directors will be unanimously recommending at the
General Meeting that Shareholders vote in favour of the Resolution as they
intend to do in respect of their own shareholdings of, in aggregate,
17,472,415 Ordinary Shares (representing approximately 2.05 per cent. of the
Existing Ordinary Shares).
Yours faithfully,
Colin Bird
Executive Chairman"
APPENDIX II
DEFINITIONS AND GLOSSARY
"Act" the Companies Act 2006 (as amended);
"Share Purchase Agreement" the conditional share purchase agreement entered into between Xtract and among
others the Buyers dated 24 January 2024;
"AIM Rules" the AIM Rules for Companies, as published and amended from time to time by
the London Stock Exchange;
"Board" or "Directors" the directors of the Company as at the date of this announcement;
"Beaumont Cornish" Beaumont Cornish Limited, the Company's nominated adviser and joint broker
pursuant to the AIM Rules;
"Business Day" any day (other than a Saturday or Sunday) upon which commercial banks are open
for business in London, UK;
"Buyers" MMP and Tatooine;
"Chinhamapere Licence" the Mozambique mining concession known as 7569L and issued to Chinhamapere
Mining on 18 June 2018 for which a renewal application has been submitted;
"Chinhamapere Mining" Chinhamapere Mining Services Limitada, a company incorporated in Mozambique
(company No. 101329399) whose registered office is at Manica Province, Manica
District, Josina Machel Neighborhood, Road Josina Machel, House number 41,
Mozambique;
"Circular" or "Document" the circular setting out details on the proposed Disposal, and the Notice
convening the General Meeting being sent to shareholders today.
"Company", "Group" or "Xtract" Xtract Resources plc or (as the case may be) Xtract Resources plc and its
subsidiaries;
"Consideration" all amounts due under the Share Purchase Agreement of up to US$15 million
comprising: (i) the base consideration of US$12 million, of which US$9 million
is to be paid in quarterly instalments of US$0.75 million commencing on 1
March 2024, with the last payment due on 1 December 2026; (ii) a further US$3
million to be paid on or before 1 March 2027; and (iii) deferred consideration
of up to a further US$3 million.
"CREST" the relevant system for the paperless settlement of trades and the holding of
uncertificated securities operated by Euroclear in accordance with the CREST
Regulations;
"CREST member" a person who has been admitted by Euroclear as a system-member (as defined in
the CREST Regulations);
"Deferred Consideration" US$3 million, further details of which are set out in paragraph 4 of Part I of
the Circular
"Disposal" the sale by Xtract of the Manica Gold Project (by way of a sale of the entire
issued share capital of Mistral) pursuant to the Share Purchase Agreement;
"Existing Ordinary Shares" the 856,375,115 Ordinary Shares in issue as at the date of this announcement;
"Euroclear" Euroclear UK & International Limited, the operator of CREST;
"Explorator" Explorator Limitada, a company incorporated and registered in Mozambique
(company No. 101512657) whose registered office is at Manica Province, Manica
District, Josina Machel Neighbourhood, Block Sixty-Seven "U", House Number
165, Mozambique;
"FCA" the Financial Conduct Authority;
"FSMA" the Financial Services and Markets Act 2000 (as amended);
"General Meeting" or "GM" the general meeting of Shareholders to be held notice of which is set out in
the Circular (or any adjournment thereof);
"Guarantees" the guarantees to be given by the Guarantors pursuant to the Share Purchase
Agreement;
"Guarantors" Horizon, Hussein Zeineddine and Meteor, being shareholders of the Buyers;
"Horizon" Horizon Corporation Limited, a company incorporated and registered in Guernsey
(registered number 12505) whose registered office is at Level 5 Mill Court, La
Charroterie, St. Peter Port, GY1 1EJ, Guernsey;
"Increased Price Election" up until 31 October 2024, the Buyers' option to elect to increase the Price by
US$1 million to US$13 million, further details of which are set out in
paragraph 4 of Part I of the Circular;
"Long Stop Date" 15 February 2024 or such later date agreed to by the parties to the MMP
Agreements;
"Link" or "Link Group" a trading name of Link Asset Services Limited, registrar to the Company;
"London Stock Exchange" London Stock Exchange plc;
"Macequece" Macequece Mining Services Limitada, a company incorporated in Mozambique
(company No. 101329380) whose registered office is at Manica Province, Manica
District, Josina Machel Neighborhood, Road Josina Machel, House number 41,
Mozambique;
"Manica Gold Project" the development, construction, operation, and maintenance of gold mining
operations at the Manica Mining Licence;
"Meteor" Meteor Global Investment (FZE), a company incorporated and registered at
Sharjah Airport Int'l Free Zone, United Arab Emirates (licence/approval number
20533) whose registered office is at Saif Desk Q1-07-145/B, P.O.Box 124778
Shariah - U.A.E;
"Mining Collaboration Agreement" the mining collaboration agreement entered into between MMP, Meteor, Horizon,
Xtract and Explorator on or around 28 May 2019 and varied by a first addendum
dated on or around 16 March 2020;
"Manica Mining Licence" the Mozambique mining concession known as 3990C and issued to Explorator on 3
March 2011 and the Chinhamapere Licence;
"Mistral" Mistral Resource Development Corporation Limited, a company incorporated in
the British Virgin Islands (company No. 552594) whose registered office is at
Jayla Place, Wickhams Cat 1, Road Town, Tortola, British Virgin Islands;
"MMP" Mutapa Mining and Processing LDA, a company incorporated and registered in
Maputo, Mozambique (company No. 101144364) whose registered office address is
at Bairro Djuba, Parcela 13485, Matola, Mozambique;
"MMP Agreements" the Share Purchase Agreement and the Settlement and Restructuring Agreement;
"MMP Parties" MMP, Meteor and Horizon;
"MMP Plant" the existing ore processing plant owned by MMP and used by MMP for processing
the ore mined by MMP under the Mining Collaboration Agreement;
"Notice of General Meeting" the notice of General Meeting to set out in the Circular;
"Ordinary Shares" the ordinary shares of 0.02p each in the capital of the Company;
"Price" US$12 million, further details of which are set out in paragraph 4 of Part I
of the Circular;
"Registrars" Link Group;
"Resolution" the resolution set out in the Notice of General Meeting to be proposed at
the General Meeting;
"Restricted Jurisdiction" each and any of the United States of America, Australia, Canada, Japan, New
Zealand, Russia, and the Republic of South Africa and any other jurisdiction
where distribution of the Circular would breach any applicable law or
regulations;
"Sale Shares" all of the issued share capital of Mistral and the shares held directly by
Xtract in Explorator, Chinhamapere Mining and Macequece, being the shares
being bought and sold pursuant to the Share Purchase Agreement;
"Settlement and Restructuring Agreement" the Settlement & Restructuring Agreement in relation to the Mining
Collaboration Agreement entered into between MMP, Meteor, Horizon, Xtract and
Explorator dated 24 January 2024;
"Shareholder(s)" holder(s) of Existing Ordinary Shares;
"sterling", "pounds sterling", and "£", "pence" or "p" the lawful currency of the United Kingdom;
"Sulphide Plant" means a sulphide plant which could have the capability to process Sulphides
from the Manica Project;
"Sulphides" means ore from the Manica Project which when, or if, tested demonstrates that
there would likely be a less than 85% recovery of contained gold from the ore
if it were processed by the existing MMP Plant;
"Tatooine" Tatooine Limited, a company incorporated and registered in Mauritius (company
No. 155805) whose registered office address is at Workshop 17 Les Fascines
Building Vivéa Business Park Rue des Fascines Moka Mauritius;
"US Securities Act" the United States Securities Act of 1933 (as amended);
"Xtract Loan" the loan(s) made by Xtract to Mistral, Explorator, Chinhamapere and Macequece
as at completion, if any, which are to be assigned to the Buyers at face value
at completion of the Share Purchase Agreement;
"Xtract Parties" Xtract and Explorator.
TECHNICAL GLOSSARY
The following is a summary of technical terms:
"Ag" Silver;
"Au" Gold;
"Cu" Copper;
"CuEq" Copper equivalent grade, calculated using assumed metal prices for copper,
gold, and other metals;
"Indicated Mineral Resource" That part of a Mineral Resource for which quantity, grade (or quality),
densities, shape and physical characteristics are estimated with sufficient
confidence to allow the application of Modifying Factors in sufficient detail
to support mine planning and evaluation of the economic viability of the
deposit. Geological evidence is derived from adequately detailed and reliable
exploration, sampling and testing gathered through appropriate techniques from
locations such as outcrops, trenches, pits, workings, and drill holes, and is
sufficient to assume geological and grade (or quality) continuity between
points of observation where data and samples are gathered. (JORC 2012);
"Inferred Mineral Resource" That part of a Mineral Resource for which quantity and grade (or quality) are
estimated on the basis of limited geological evidence and sampling. Geological
evidence is sufficient to imply but not verify geological and grade (or
quality) continuity. It is based on exploration, sampling and testing
information gathered through appropriate techniques from locations such as
outcrops, trenches, pits, workings, and drill holes. (JORC 2012);
"mineralisation" Process of formation and concentration of elements and their chemical
compounds within a mass or body of rock;
"NPV" Post-tax net present value;
"porphyry" A deposit of disseminated copper minerals in or around a large body of
intrusive rock;
"Pseudoflow" The Pseudoflow algorithm is used to outline the ultimate pit limit by finding
the maximum net value of the blocks extracted;
"Mt" Million tonnes;
"Mtpa" Million tonnes per annum.
ENDS
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