Xtract Resources plc Strategic Review at Chepica Mine (5053K)
22 September 2016 - 4:01PM
UK Regulatory
TIDMXTR
RNS Number : 5053K
Xtract Resources plc
22 September 2016
22 September 2016
This announcement contains inside information
Strategic Review at Chepica Mine
The Board of Xtract Resources Plc ("Xtract" or the "Company")
announces that after undertaking a review of the Chepica
Gold/Copper Mine in southern Chile (the "Mine"), it has determined
that the underlying fundamentals and the risk associated with the
project are no longer supportive of continuing investment by the
Company. On this basis, the Company has advised the option holder
that it will not make future option payments. The next option
payment is due on 15 October 2016 following which the Company will
relinquish its option and mining rights at Chepica.
The reasons for this decision are:
-- The Board does not consider that the Mine can consistently
produce 10,000 tonnes of ore month by month at the required gold
ore grade;
-- Previous studies have suggested that the Mine performance has
improved and the weakness was a less than optimal processing plant.
In addition to the plant improvements, it has been established that
the Mine requires new transport and mining equipment, the lease or
purchase cost of which has not been included in future operating
cost estimates; and
-- The timeline to achieving revenues in excess of cost is
expected to be longer than previously determined. In order to
achieve positive cash generation and profitability, significant and
more than previously forecast funding would be required. The Board
now believes that taking into consideration the historical Mine
performance, it is extremely unlikely that an acceptable return on
new investment could be made.
Accordingly, the Board has advised the option holder of its
decision to relinquish its option and mining rights at the Mine and
will cease any further funding of the Company's local subsidiary,
Minera Polar Limitada ("Minera") through which it has operated the
Mine, with immediate effect.
Xtract, via Minera, will seek an orderly disposal of this
investment in due course and in the interim will do all things
necessary to introduce new interested parties whose mission is
small scale underground mining and whose operations include either
a presence or an intention to operate in Latin America.
Further to the Company's notification on 17 August 2016, the
Company will provide an update on its Manica asset during the early
part of next week.
Colin Bird, Executive Chairman, said: "The Chepica mine has been
challenged technically and commercially for an extended period.
The technical challenges received a further set back in late
2015 when the region experienced a major earthquake and,
separately, a tragic dual fatality at the surface plant. Our
internal review concludes that a new operator, with a separate
input capital structure and operating experience in Latin America,
may be able to achieve the operating returns required for new
investment.
Shareholders will be advised on progress and exit discussions
and identification of the new direction for the Mine as soon as
possible."
Enquiries:
Colin Bird, Executive
Xtract Resources Plc Chairman +44 (0)20 3416 6471
Derrick Lee
Cenkos Securities plc Beth McKiernan +44 (0)131 220 6939
Beaufort Securities Jon Belliss +44 (0)207 382 8300
This information is provided by RNS
The company news service from the London Stock Exchange
END
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