Contract mining agreement
The contract miners will have the exclusive right to mine unconsolidated alluvial deposits on the permitted area of the mining concession area.
The agreement will endure for a period of 10 years or the depletion of alluvials, with the option to extend for a further period of five years, if the alluvials have not depleted, by the contract miners as well as rights of early termination either by Explorator Limitada or the contract miners.
The mining agreement includes performance targets whereby the contract miners, from 1 September 2017 until 31 October 2017, will be required to have in place a fully operational plant with a mining capacity of 100 tph.
The minimum target mining capacity increases from 1 November 2017 to 400 tph subject to obtaining the environmental impact assessment (EIA).
All target dates in the agreement will be advanced by the number of days, if any, that mining has not been able to take place due to the absence of an EIA.
Explorator Limitada may direct the contract miners to suspend carrying out of services for such time as Explorator Limitada considers necessary and may terminate the mining agreement, inter alia, if the contract miners fail to achieve and maintain any production target by more than 20% for more than two years in a row.
The contract miners may terminate the mining agreement in the event that for a period of three months of continuous work the grade of gold recovered falls to a level that would make the continuance of the operation inappropriate.
Explorator Limitada will receive a base net price per ton of ore processed by the contract miners and additional incremental payments based on a proportion of any increase in the gold price above a reference price of US$1,250/oz and / or any failure by the mining contractors to achieve the agreed production targets.
Assuming a base gold price of $1,250, from November 2017, Explorator Limitada would expect to receive monthly revenue of $165 000.
All costs associated with transport and refining of the gold will be shared equally between the mining contractors and Explorator Limitada. The contract miners will be responsible and liable for any rehabilitation of the mining concession to the extent mined by the contract miners as required under the relevant mining laws.
“The alluvial agreement is a very positive move for Xtract Resources, providing potential significant cash flows with upside based on contractual minimums,” states Xtract Resources 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,” he adds.
“The agreement for our Manica operation will begin early next week and we fully expect to receive some income during the build-up to September.
“In the meantime, we have further evaluated the Manica concession and see much potential to value add to our hard rock as well as possible further alluvial mining. We are also reviewing financing alternatives for the open pit mine and will keep the market informed with our progress,” concludes Bird.