JOHANNESBURG (miningweekly.com) – ASX-listed Auroch Minerals will sell its Manica mining concession, in Mozambique, to Aim-listed gold and copper exploration company Xtract Resources for $12.5-million.
The purchase price included $6.5-million in Xtract shares and $4.5-million in cash. Xtract would also provide funding to settle project-related creditors up to $1.5-million.
Xtract Resources, led by chairperson Colin Bird and CEO Jan Nelson, had a portfolio of projects in Chile and South Africa and was aiming to become a midtier gold and copper producer with a focus on low-cost, high-margin shallow or surface deposits.
The company on Tuesday raised £4.4-million through the placement of 1.47-million shares at 0.3p a share to part fund the Manica acquisition.
The concession includes a number of gold prospects, including the Fair Bride openpit gold deposit, on which a bankable feasibility study (BFS) would be completed within the next six months.
A preliminary economic assessment (PEA) completed by Auroch and South African mining consultancy JPMC, had shown that the project, which had a Joint Ore Reserves Committee-compliant resource of 900 000 oz, was capable of generating revenues of $55-million a year at steady-state production with the payback on the project being less than three years.
The PEA had further determined that production at Fair Bride could start within 18 months, delivering about 50 000 oz/y of gold at a cash cost of $650/oz.
The orebody would be mined from surface as an openpit operation for five years and then from underground for a further three years.
A mining licence had been granted for the project, which would be Mozambique’s first gold mine.
Start-up capital costs were estimated at $28.4-million and underground development costs at $14.8-million.
“The Fair Bride project will allow the company to generate significant revenues. With payback on the project of less than three years, the fundamentals are attractive for various forms of project financing. The project is less than a year from a completed BFS and we firmly believe that there are significant areas for further optimisation, which will lead to improved project economics,” commented Nelson.
Bird added that the project was one of only a few high-grade, low-cost, low-risk, openpitable gold opportunities in Africa.
“Infrastructure around the project is excellent and the project is 18 months from production. This acquisition will progress Xtract towards becoming a midtier gold producer with all the benefits that will bring to the company and, ultimately, growth for shareholders,” he said.
Auroch chairperson Glenn Whiddon commented that Xtract had an excellent technical and operating team and had the ability, in the near future, to bring the project into production.
“From Auroch’s perspective, we are pleased to be a shareholder of Xtract and participate in the growth of the project going forward,” he said.