Xtract Resources PLC (LON:XTR) has signed an agreement with two contract miners in Mozambique for the extraction of alluvial gold from the western half of its Manica mining concession near the border with Zimbabwe.
The agreement allows for monthly payments against the monthly run-of-mine performance, with initial mining to take place no later than 1 September 2017, subject to environmental controls.
The stipulation is that a minimum capacity of 220,000 tonnes per month will be achieved by 1 November 2017, with the price per tonne to vary according to installed capacity and the run-of-mine payment to have a floor price of US$1,250 per ounce and a cap of US$1,600 per ounce.
The annual production target has been set at of 2,640,000 tonnes of alluvial materials, with penalties and termination clauses against non-performance.
It all means, assuming a base gold price of US$1,250, that from November onwards Xtract’s expected attributable monthly revenue from the contractors will be US$165,000.
"The alluvial agreement is a very positive move for Xtract, providing potential significant cash flows with upside based on contractual minimums,” said Xtract chairman Colin Bird.
“We are currently negotiating the eastern half of the concession with other contractors and expect to make an announcement by the end of July 2017. We are also reviewing financing alternatives for the open pit mine and will keep the market informed with our progress "