AMN - MOZAMBIQUE: Xtract to acquire 100% of Manica

Xtract Resources has received approval from the Mozambique Government to acquire 100% of the Manica gold project. Xtract has completed an in-house update on the economic metrics of the project as part of a Definitive Feasibility Study currently being undertaken.

In June 2015 the company reported on certain economic metrics for the Manica Project, which had been completed by Auroch Mineralsas part of the Preliminary Economic Assessment. Following the development work undertaken by Xtract since this time, based on the company's in-house estimates, the Board now has the following expectations regarding the project:

-          Project NPV (discounted at 10%) increased to $70 million (Preliminary Economic Assessment NPV: $50 million) with an IRR of 50% (PEA IRR: 58%) assuming a gold price of $1250/oz

-          Life of Mine (LOM) increased to 12 years (Preliminary Economic Assessment LOM: 8 years)

-          Production expected to start in the 4^th Quarter 2017

-          Annual LOM production of 6.3 million tonnes at a head grade of 2.93 grams/tonne recovering 477,000 oz (Preliminary Economic Assessment Annual LOM production: 3.4 million tonnes at a head grade of 3.49 grams/tonne recovering 316,000 oz of gold)

-          Recoveries for oxide ore is 96%, 82% for transitional ore and 80% for sulphide ore

-          Start-up capital cost of $35 million compared to Preliminary Economic Assessment estimate of $28.4 million for open pit and plant. Additional capital of $14 million, from cashflow, will be expended in years three and four of the project as part of underground access development compared to $8.7 million capital for underground development planned in Preliminary Economic Assessment (eight years of underground mining projected versus three years under the Preliminary Economic Assessment)

-          Cash cost of 549/oz compared to cash cost in Preliminary Economic Assessment of $650/oz

-          EBITDA of $245 million (assuming LOM of 12 years) compared to Preliminary Economic Assessment EBITDA of $130 million (LOM 8 years).

Xtract Resources CEO Jan Nelson says: "The economic metrics of the Manica gold project remain robust and the company's in-house estimates of EBITDA have significantly increased relative to the increased capital requirement compared to the Preliminary Economic Assessment. Manica remains at the low end of the cost scale and we are now focusing on completing the Definitive Feasibility Study and starting mine construction.

"We are completing a new resource calculation and expect to provide an update to the market as soon as possible. We will also report on the alluvial mining plan for the project within Q2 2016."

The Manica project can be divided into two stages. The first stage involves surface mining operations and is scheduled to start in Q4 of 2017 with target production of 477,000 tonnes at a head grade of 2.62 grams/tonne. This would recover some 32,000 oz of gold over a Life of Mine of four years.

Underground Mining Operations will be the second stage of mining and with target production of 555,000 tonnes at a head grade of 3.06 grams/tonne would recover approximately 43,000 oz of gold per annum. The Life of Mine of Underground Mining Operations is eight years but the orebody is still open to depth and it is anticipated that with further drilling from underground once mining starts the Life of Mine could potentially be increased.

The Definitive Feasibility Study is still on schedule to be completed by the end of Q2 2016. Most technical studies will be complete by the end of Q1 2016 and the environmental studies are expected to be finished in the first half of Q2 of 2016. Completion of the re-settlement study is expected to occur by the end of Q2 2016, however, this process has been influenced by a recent change in legislation and will be subject to certain approvals being granted by a government committee, which may require additional time and, in a worst case scenario, could prolong completion of the Definitive Feasibility Study by three months.

The company is currently engaged in discussions with several banks and institutions regarding finance for the Manica project.

http://xtractresources.com

News courtesy of International Mining