LONDON (Alliance News) - Alecto Minerals PLC Wednesday said it has sold all of its exploration assets in Ethiopia to focus on its strategy of becoming a gold producer sometime in 2016 following a deal on Tuesday to develop its Kossano East project in Mali.
Alecto said it is also looking at several other opportunities which may lead to an acquisition and reported a narrower pretax loss in the first half of 2015 after it slashed its administrative costs.
Alecto shares were down 5.6% to 0.127 pence per share on Wednesday.
Alecto has sold its wholly-owned subsidiaries, Nubian Gold Exploration Ltd and Rift Valley Resources Ltd, to private Ethiopian company Wame Mineral Development. Those subsidiaries hold all of the company's assets in Ethiopia, namely the Wayu Boda and Aysid-Metekel exploration licences.
In return, Alecto has received a nominal GBP1 payment and a further deferred consideration in the form of a royalty of USD3 per JORC resource ounce of gold or gold equivalent discovered up to a maximum of USD1.0 million, in respect of each of the licences, meaning the maximum value of the deal is GBP1 over GBP2.0 million.
In addition, in the event that Wame disposes of Nubian or Rift Valley or the licences within a two year period from completion, Alecto will be entitled to receive a proportion of the net proceed of such sale.
"This disposal forms part of our development plan to focus our efforts on becoming a gold prouder in the near to mid-term and our more advanced gold projects in Mali and Burkina Faso. The properties in Ethiopia are both vast and under-explored and considering the more advanced nature of the rest of our gold asset portfolio, and the opportunities available at each to more readily add value, we believe that this divestment will better enable us to manage our balance sheet whilst still providing us with upside exposure to ounces delineated at either property in the future," said Chief Executive Mark Jones.
The sale comes only one day after Alecto completed an internal scoping study on an enlarged project following on from its joint venture agreement with Desert Gold Ventures Inc back in March. The pair signed a co-operation agreement to jointly develop their neighbouring gold deposits in Mali. The pair have now completed an internal scoping study on the enlarged project, which joined Alecto's Kossano East project and Desert Gold's Farabantourou project.
That deal will see the capital and operating costs significantly fall compared to developing each project independently and the enlarged project has a total estimated resource of around 365,000 ounces of gold with the potential to produce 27,000 ounces of gold per year.
The pair will need around USD14.3 million to get the enlarged project into production and moving forward, the pair have to apply for a mining licence that covers both projects. To do that, they will have to establish a formal joint venture company, making the co-operation between the two companies formal.
However, Alecto Chief Executive told Alliance News Tuesday that the deal was part of a wider strategy, and said the company has "had some very good conversations" about acquiring a project it would wholly-own. He also said the board will have failed if the company is not moving into production in 2016.
It also has its Kossano West project, a larger adjacent project to the East project, which it intends to develop. On Wednesday, it said the grades at the West project had "attracted interest from potential partners" and talks were "being advanced".
"The grades encountered from initial drilling at Kossanto West have attracted interest and negotiations are continuing with regards to entering into a potential joint venture for the advancement of this project," said the company.
"This would then enable us to retain exposure to the project and future ounces but with minimal further cost or operational input from Alecto, thereby enabling us to pursue our primary strategy. We have also started preliminary discussions on a joint venture for Kerboulé," it added.
Kerboule is Alecto's gold project in Burkino Faso.
In a separate statement Wednesday, Alecto reproted a GBP264,320 pretax loss in the first six months of 2015, narrowing from the GBP437,228 loss a year earlier after administrative costs were almost halved.
"In line with our strategy to focus on becoming a gold producer, we have announced the sale of our Ethiopian assets to a local company. This disposal followed the termination of our joint venture with Centamin PLC in February 2015 and reflects the early stage nature of the projects and the vast licence areas, which meant that any future exploration campaign would be prohibitively expensive and high risk," said Alecto.
"The company continues to focus on identifying a similar exit opportunity for our Mauritanian assets, following the renewal of the existing exploration permits in August 2014," it added.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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