TIDMXTR
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
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
Beaumont Cornish Limited Roland Cornish +44 (0)207628 3369
Nominated Adviser Michael Cornish www.beaumontcornish.co.uk
and Joint Broker 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
identi ed 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 re ect
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.
APPIX 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 Q2 ended Q1 ended Aggregate
September 30 June 31 March amounts for
2023 2023 2023 the 9 months
to
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 GBP8.7 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 GBP11.439 million compared to the aggregate
proceeds under the Share Purchase Agreement of up to US$15 million
(approximately GBP11.8 million at the current exchange rate of
GBP1: US$1.266).
In the year ended 31 December 2022, the Company recognised a net
loss of GBP0.235 million attributable to the Manica Gold Project
(comprising a mine development loss of GBP0.357 million and gold
mining profit of GBP0.122 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 Manica Consideration Pro forma
Group as Gold Project for the net assets
at 30 June as at 30 Manica Gold of the Group
2023 June 2023 Project as at 30
June 2023
Note 1 Note 2 Note 3
GBP'000 GBP'000 GBP'000 GBP'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:GBP1.00.
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. 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"
APPIX II
DEFINITIONS AND GLOSSARY
"Act " the Companies Act 2006 (as amended);
"Share Purchase the conditional share purchase agreement entered
Agreement" 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" Xtract Resources plc or (as the case may be)
or "Xtract" 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 the 856,375,115 Ordinary Shares in issue as
Shares" 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 the general meeting of Shareholders to be
" or "GM" 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 up until 31 October 2024, the Buyers' option
Election" 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 the mining collaboration agreement entered
Agreement" 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 the notice of General Meeting to set out in
Meeting " 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 the Settlement & Restructuring Agreement in
Restructuring Agreement" 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 the lawful currency of the United Kingdom;
sterling", and "GBP",
"pence" or "p"
"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 That part of a Mineral Resource for which
Resource" 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 That part of a Mineral Resource for which
Resource" 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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END
MSCBIMMTMTITBBI
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