TIDMXTR
RNS Number : 1114Y
Xtract Resources plc
28 February 2017
For immediate release
28 February 2017
Xtract Resources Plc
Results of completed Definitive Feasibility Study
The Board of Xtract Resources Plc ("Xtract" or the "Company")
are pleased to announce that the Definitive Feasibility Study
("DFS") for the open pit operation of the Company's Manica Fair
Bride Gold Project in Mozambique ("Project" or "Fair Bride") has
been completed by Minxcon (Pty) Ltd ("Minxcon") and the results of
which are summarised below. A copy of the DFS is available from the
Company's website, www.xtractresources.com
Highlights:
-- After-tax Internal Rate of Return ("IRR") of 41.1% at a gold price of US$ 1,262 per ounce
-- Project life of 7 years with average gold grade of 2.62 g/t
producing 215,293 recovered ounces
-- Project payback within 2 years
-- Direct cash cost ("C1") of US$556 per ounce
-- All-in sustainable cost (including royalties and capital)("AISC") of US$862 per ounce
-- Total capital expenditure of US$43.68 million
-- The Net Present Value ("NPV") of US$ 42 million at 8.4% discount rate
-- Significant exploration potential in immediate vicinity
-- A further 992,000 ounces in resource for additional evaluation and future exploitation
-- Considerable exploration potential within the concession and nearby
Colin Bird, Executive Chairman, said: "I am pleased to report
that the DFS has produced a robust Project which is neither complex
nor capital demanding. The Project has major upside potential which
can be exploited later against a fully paid for processing plant.
Opportunity exists for hard rock consolidation which we are
exploring. The alluvial opportunity is extensive and we are
currently discussing and negotiating third party mining contracts.
We are already working on reducing capital numbers and introducing
practical engineering to further reduce risk and enhance project
financial parameters."
Daan van Heerden of Minxcon, said: "The Manica study has
produced a robust project targeted toward simplicity and
predictability. We concur with managements approach to the
concession and agree that the previously announced hybrid approach
might have led to enhanced capital and operating risk."
Further details are available from the Company's website which
details the company's project portfolio as well as a copy of this
announcement: www.xtractresources.com
Valuation Date
The effective date of the DFS financial evaluation is 1 January
2017 ("Valuation Date") and Minxcon has stated that is not aware of
any material changes that occurred between the Valuation Date and
28 February 2017, being the DFS report date ("Report Date").
Resource Estimate
The Company published on 11 May 2016 the Minxcon independent
technical report on the Fair Bride Gold Project issued 15 April
2016 ("Mineral Resource Statement"). The DFS was based on, and the
reported resources are as set out, in the Mineral Resource
Statement. A geological model of the Fair Bride orebody was
constructed. These sections were used to create a wireframe for the
orebody or mineralised portion.
The Mineral Resource was classified into Measured, Indicated and
Inferred Mineral Resource categories as defined in the SAMREC Code
based on the kriging efficiency, number of samples and search
radii. The Mineral Resource estimation for the Fair Bride open pit
is presented in Table 1 below, declared to a depth of 280 m with a
resource cut-off of 0.5 g/t. The open pit contains predominantly
Measured and Indicated Mineral Resources and is
SAMREC-compliant.
Table 1: Open Pit Mineral Resource as at 4 March 2016
Mineral Resource Category Tonnes Au Au Au
--------------------------------------- ------------------- ----------- --------- ------------
Mt g/t kg koz
--------------------------------------- ------------------- ----------- --------- ------------
Measured 9.750 1.86 18,130 582.9
--------------------------------------- ------------------- ----------- --------- ------------
Indicated 3.310 1.62 5,368 172.6
--------------------------------------- ------------------- ----------- --------- ------------
Total M&I 13.060 1.80 23,498 755.5
--------------------------------------- ------------------- ----------- --------- ------------
Inferred 0.894 1.17 1,049 33.7
--------------------------------------- ------------------- ----------- --------- ------------
Total Measured Indicated and Inferred 13.954 1.76 24,547 789.2
--------------------------------------- ------------------- ----------- --------- ------------
Notes:
1. Source: Minxcon independent technical report on the Fair
Bride Gold Deposit, issue date 15 April 2016, and the DFS,
Executive Summary.
2. 0.5g/t cut-off.
3. Declared to a depth of 280m.
4. The effective date of the Mineral Resource Statement was 4 March 2016
5. The Inferred Mineral Resources have a large degree of
uncertainty as to their existence and whether they can be mined
economically or legally.
6. Only Mineral Resources lying within the legal boundaries are reported.
7. Mineral Resources are inclusive of Mineral Reserves.
8. No Geological losses are accounted for.
9. The operator of the Project is Explorator Lda., a
wholly-owned subsidiary of Xtract. Gross and Net Attributable
resources are the same.
Reserve Estimate
The Mineral Reserve is based on the Mineral Resources Statement
and the DFS which includes the appropriate application of Modifying
Factors, Minxcon has prepared a SAMREC-compliant estimate of
Mineral Reserves as at 27 February 2017 as set out in Table 2
below:
Table 2: Mineral Reserves as at 27 February 2017
Mineral Reserve Category Tonnes Delivered Delivered Grade Gold Content
-------------------------- ----------------- ---------------- -------------
Mt g/t koz
-------------------------- ----------------- ---------------- -------------
Proven 2.90 2.63 245.2
-------------------------- ----------------- ---------------- -------------
Probable 0.31 2.44 24.3
-------------------------- ----------------- ---------------- -------------
Total Mineral Reserves 3.21 2.62 269.5
-------------------------- ----------------- ---------------- -------------
Notes:
1. Strategic Ore (Low Grade Material) is not included.
2. Au cut-off of 1.0 g/t.
3. Gold Price of USD1,270/oz.
4. The Competent Person is Daan van Heerden, B.Eng.(Min.Eng),
M.Comm.(Bus.Admin.), ECSA, MSAIMM, AMMSA.
5. Tonnes refer to tonnes deliver to the processing plant.
6. The effective date of the Mineral Resource Statement is 27 February 2017
7. The operator of the Project is Explorator Lda., a
wholly-owned subsidiary of Xtract. Gross and Net Attributable
resources are the same.
Project Summary
Mining Method
The mining method that will be implemented at the Manica Project
is Contractor Mining with Conventional Open Pit Mining, using truck
and excavator combinations. The mining method requires the removal
of topsoil which will be stockpiled. The mining of the harder
material is conducted with drilling and blasting activities.
Mining Cut-off Grade
A mining cut-off grade of 0.4 g/t was applied for the open pit
project and all material below 0.4 g/t is classified as waste. The
economic cut-off grade from the pit optimisation was calculated as
1.05 g/t. All material between 0.4 g/t and 1.0 g/t is therefore
classified as low grade material. The Run of Mine ("RoM") ore for
this project is ore material with a grade in excess of 1.0 g/t. The
RoM material is fed to the processing plant at 42 ktpm.
Pit Optimisation
The objective of open pit optimisation is to determine an open
pit shape (shell) that provides the highest value for a deposit.
The final pit design and production scheduling are based on the
selected pit from the pit optimisation.
Diluted Production Schedules
The production schedule prioritises oxide material early in the
Life of Mine to ensure higher initial ore recoveries. The average
stripping ratio is 7.6 (strategic ore considered as waste). The
production scheduling of the final pit resulted in a life of mine
of 7. A smoothed plant feed of 42 ktpm was possible without the
need for pre-stripping. Oxide material will be depleted within two
years and fresh material will gradually be introduced until year
four, thereafter only fresh material will be processed.
Processing Strategy
The material will be crushed in a three stage crushing circuit
prior to processing in a ball milling and classification
circuit.
Engineering and Infrastructure
The Manica Gold Project is located 3.7 km to the north of the
town of Manica. The project can be classified as a greenfield's
project with minimal to low infrastructure being available on the
project area. In order to establish a fully functional gold mining
operation a number of critical infrastructure items are required.
These will include reliable power supply infrastructure that has
sufficient capacity to serve the mining operation and process plant
with the required amenities.
Capital Estimation
A contingency of 10% was added to all the capital. No additional
renewals and replacements costs have been included for the mining
in the model as this is accounted for in the mining contractor
rate. A 6.0% renewals and replacement cost was included for the
plant based on the plant operating costs.
The initial (year 0) capital costs and peak-funding requirement
amounting to USD44 million. The funding requirement is for
contractor mining and excludes the initial fleet cost as the fleet
cost is included in the contractor rate. The engineering,
procurement, and construction management ("EPCM") cost is included
in the capital costs. After the first year the only capital is for
Tailings Storage Facility wall expansions.
Power supply to the project area constitutes a risk due to
misalignment with the project timeline and the construction
timeline of Electricidade de Mozambique ("EDM"). Xtract needs to
set up a contact session with the EDM to align timelines for the
required installations and upgrades to the power supply network.
Capital allowances have been made for these upgrades and
installations.
Macro-Economic Forecasts
Macro-economic forecasts and commodity prices in the DFS as set
out below in Tables 3 and 4 were used by Minxcon in the DCF. The
gold price was sourced from a number of different bank and broker
forecasts by Minxcon and reviewed with the Company. The gold price
was kept in constant money terms throughout life of mine
("LoM").
Table 3: Gold Price Used in Financial Model (Real Terms)
Commodity Unit 2017 2018 2019 2020 Long-term
------------ -------- ------- ------- ------- ------- ----------
Gold Price USD/oz 1,283 1,285 1,291 1,257 1,242
------------ -------- ------- ------- ------- ------- ----------
Gold Price USD/kg 41,239 41,302 41,497 40,428 39,945
------------ -------- ------- ------- ------- ------- ----------
Source: DFS Executive Summary
To produce an ounce of gold, mining companies incur not only
operating costs, but also spend sustaining capital at the sites and
capital on exploration, in order to sustain their long-term future.
The cost components described below are broken down into fixed and
variable costs. The fixed costs are based on a fixed amount
throughout the year, which is independent of production and are
shown as a USD input. The variable cost is directly dependant on
the Milled tonnes (USD/gold tonne milled) for the plant and the
waste or ore tonnes (USD/waste tonne or USD/ore tonne) for the
mining.
The operating costs in the financial model and DCF were broken
down into different categories:
(C1) - Direct Cash Cost;
(C2) - Production Cost; and
(C3) - All-in Sustainable Cost ("AISC").
Detail about the operating cost and the breakdown of the mining,
loading arrangement and other costs are described in the Operating
Expenditure Report. The financial cost indicators are displayed per
milled tonne as well as per recovered gold ounces. The saleable
gold ounces over the LoM amounts to 215,293 ounces. A 10%
contingency was included on the mining and plant capital cost. Fair
Bride Mine has a direct cash cost of USD37/Milled t and an all-in
sustainable cost of USD58/Milled t which equates to C1 costs of
USD556/oz and AISC of USD862/oz.
Table 4: Financial Cost Indicators
Item Unit Amount
-------------------------------- ----------------------- ---------------------------------------
Net Turnover USD/Milled tonne 85
-------------------------------- ----------------------- ---------------------------------------
Mine Cost USD/Milled tonne 20
-------------------------------- ----------------------- ---------------------------------------
Plant Costs USD/Milled tonne 14
-------------------------------- ----------------------- ---------------------------------------
Other Costs USD/Milled tonne 3
-------------------------------- ----------------------- ---------------------------------------
Direct Cash Cost (C1) USD/Milled tonne 37
-------------------------------- ----------------------- ---------------------------------------
Capex USD/Milled tonne 15
-------------------------------- ----------------------- ---------------------------------------
Production Cost (C2) USD/Milled tonne 53
-------------------------------- ----------------------- ---------------------------------------
Royalties USD/Milled tonne 5
-------------------------------- ----------------------- ---------------------------------------
All-in Sustainable Cost (C3) USD/Milled tonne 58
-------------------------------- ----------------------- ---------------------------------------
All-in Sustainable Cost Margin % 31.7%
-------------------------------- ----------------------- ---------------------------------------
EBITDA* USD/Milled tonne 42
-------------------------------- ----------------------- ---------------------------------------
EBITDA Margin % 50%
-------------------------------- ----------------------- ---------------------------------------
Gold Recovered oz 215,293
-------------------------------- ----------------------- ---------------------------------------
Net Turnover USD/Recovered Gold oz 1,262
-------------------------------- ----------------------- ---------------------------------------
Mine Cost USD/Recovered Gold oz 295
-------------------------------- ----------------------- ---------------------------------------
Plant Costs USD/Recovered Gold oz 210
-------------------------------- ----------------------- ---------------------------------------
Other Costs USD/Recovered Gold oz 51
-------------------------------- ----------------------- ---------------------------------------
Direct Cash Cost (C1) USD/Recovered Gold oz 556
-------------------------------- ----------------------- ---------------------------------------
Capex USD/Recovered Gold oz 229
-------------------------------- ----------------------- ---------------------------------------
Production Cost (C2) USD/Recovered Gold oz 786
-------------------------------- ----------------------- ---------------------------------------
Royalties USD/Recovered Gold oz 76
-------------------------------- ----------------------- ---------------------------------------
All-in Sustainable Cost (C3) USD/Recovered Gold oz 862
-------------------------------- ----------------------- ---------------------------------------
EBITDA* USD/Recovered Gold oz 630
-------------------------------- ----------------------- ---------------------------------------
Notes:
1. Source: DFS Executive Summary
2. * EBITDA - Earnings before Interest Tax Depreciation and
Amortisation and excludes capital expenditure.
3. Numbers may not add up due to rounding.
4. All-in Sustainable Cost Margin = (Net Turnover - All-in Sustainable Cost)/Net Turnover.
Summary of Discounted Analysis
The higher the IRR on a project and the greater the amount by
which it exceeds the cost of capital, the higher the net cash flows
to the investor. Table 5 below illustrates the value of the Fair
Bride Mine based on the real time model for the orebody. The DFS
has a best estimated value of USD42 million at a real discount rate
of 8.40% and an IRR of 41.1%.
Table 5: Project Valuation Summary
Real Discount Rate Unit Value
------------------------------- ------ ------
Undiscounted Real Cash flow USDm 69
------------------------------- ------ ------
NPV @ 5.0% USDm 51
------------------------------- ------ ------
NPV @ 8.4% USDm 42
------------------------------- ------ ------
NPV @ 10.0% USDm 38
------------------------------- ------ ------
NPV @ 15.0% USDm 28
------------------------------- ------ ------
NPV @ 20.0% USDm 20
------------------------------- ------ ------
Internal Rate of Return (IRR) % 41.1%
------------------------------- ------ ------
Notes:
1. Source: DFS Executive Summary
Based on the real cash flow calculated in the financial model,
Minxcon performed single-parameter sensitivity analyses to
ascertain the impact on the NPV. For the DCF, the gold price and
grade have the most significant impact on the sensitivity of the
Project. The Project is not capital sensitive.
Enquiries:
Xtract Resources Colin Bird, Executive +44 (0)20 3416
Plc Chairman 6471
Michael Cornish +44 (0)207628
Beaumont Cornish Felicity Geidt 3369
Email: corpfin@b-cornish.co.uk
+44 (0)207 382
Beaufort Securities Jon Belliss 8300
Qualified Person
In accordance with AIM Note for Mining and Oil & Gas
Companies, June 2009 ("Guidance Note"), Colin Bird, CC.ENG, FIMMM,
South African and UK Certified Mine Manager and Director of Xtract
Resources plc, with more than 40 years experience mainly in hard
rock mining, is the qualified person as defined in the Guidance
Note of the London Stock Exchange, who has reviewed the technical
information contained in this press release.
Competent Person
Daan Van Heerden B Eng (Min.), MCom (Bus. Admin.), Pr.Eng.,
FSAIMM, AMMSA and Director of Minxcon is the competent person as
defined in the Guidance Note of the London Stock Exchange, who has
reviewed the technical information contained in this press release
and has confirmed that the information which has been extracted
from the DFS is accurate, balanced and complete and not
inconsistent with the DFS.
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.
Inside Information
This announcement contains inside information for the purposes
of Article 7 of EU Regulation 596/2014.
Glossary of technical terms
Unit Definition
-------------------------- ------------------------------------------------------------------------------------------
% Percentage
-------------------------- ------------------------------------------------------------------------------------------
Au Gold
-------------------------- ------------------------------------------------------------------------------------------
g/t Gram per tonne
-------------------------- ------------------------------------------------------------------------------------------
km Kilometre
-------------------------- ------------------------------------------------------------------------------------------
ktpm Kilotonnes per month
-------------------------- ------------------------------------------------------------------------------------------
m Meter
-------------------------- ------------------------------------------------------------------------------------------
m(3) Cubic meters
-------------------------- ------------------------------------------------------------------------------------------
Mt Million tonnes
-------------------------- ------------------------------------------------------------------------------------------
t Tonne
-------------------------- ------------------------------------------------------------------------------------------
CIL Carbon in Leach
-------------------------- ------------------------------------------------------------------------------------------
DFS Definitive Feasibility Study
-------------------------- ------------------------------------------------------------------------------------------
LoM Life of Mine
-------------------------- ------------------------------------------------------------------------------------------
RoM Run of Mine
-------------------------- ------------------------------------------------------------------------------------------
Indicated Resource That part of a Mineral Resource for which tonnage, densities, shape, physical
characteristics,
grade and mineral content can be estimated with a reasonable level of confidence. It is
based
on exploration, sampling and testing information gathered through appropriate techniques
from
locations such as outcrops, trenches, pits, workings and drill holes. The locations are
too
widely or inappropriately spaced to confirm geological and/or grade continuity but are
spaced
closely enough for continuity to be assumed
-------------------------- ------------------------------------------------------------------------------------------
Inferred Resource That part of a Mineral Resource for which tonnage, grade and mineral content can be
estimated
with a low level of confidence. It is inferred from geological evidence and sampling and
assumed
but not verified geological and/or grade continuity. It is based on information gathered
through
appropriate techniques from locations such as outcrops, trenches, pits, workings and
drill
holes that may be limited or of uncertain quality and reliability
-------------------------- ------------------------------------------------------------------------------------------
Measured mineral resource That part of a mineral resource for which quantity, grade or quality, densities, shape,
and
physical characteristics are so well established that they can be estimated with
confidence
sufficient to allow the appropriate application of technical and economic parameters, to
support
production planning and evaluation of the economic viability of the deposit. The estimate
is based on detailed and reliable exploration, sampling and testing information gathered
through
appropriate techniques from locations such as outcrops, trenches, pits, workings and
drill
holes that are spaced closely enough to confirm both geological and grade continuity
-------------------------- ------------------------------------------------------------------------------------------
Mineral resource Concentration or occurrence of diamonds, natural solid inorganic material or natural
fossilized
organic material including base and precious metals, coal, and industrial minerals in or
on
the Earth's crust in such form and quantity and of such a grade or quality that it has
reasonable
prospects for economic extraction. The location, quantity, grade, geological
characteristics
and continuity of a mineral resource are known, estimated or interpreted from specific
geological
evidence and knowledge
-------------------------- ------------------------------------------------------------------------------------------
Mineral Reserve A Mineral Reserve is the economically mineable part of a Measured and/or Indicated
Mineral
Resource. It includes diluting materials and allowances for losses, which may occur when
the
material is mined or extracted and is defined by studies at Pre-Feasibility or
Feasibility
level as appropriate that include application of Modifying Factors. Such studies
demonstrate
that, at the time of reporting, extraction could reasonably be justified.
-------------------------- ------------------------------------------------------------------------------------------
Probable Mineral Reserve A Probable Mineral Reserve is the economically mineable part of an Indicated, and in some
circumstances, a Measured Mineral Resource.
-------------------------- ------------------------------------------------------------------------------------------
Proved Mineral Reserve A Proved Mineral Reserve is the economically mineable part of a Measured Mineral
Resource.
A Proved Mineral Reserve implies a high degree of confidence in the Modifying Factors.
-------------------------- ------------------------------------------------------------------------------------------
"SAMREC" South African Code for Reporting of Mineral Resources and Mineral Reserves
-------------------------- ------------------------------------------------------------------------------------------
ENDS
This information is provided by RNS
The company news service from the London Stock Exchange
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