LONDON (Alliance News) - Alecto Minerals PLC Wednesday said it has hired South-Africa based PenMin Ltd to assist the company develop the two Zambian gold mines it acquired back in November.
Alecto struck a deal to acquire the Matala and Dunrobin gold mines in Zambia last month and has now hired PenMin so it can tap into its "extensive knowledge" of the mines and local area to help Alecto take the projects to the next stage.
In return for the two mines, Alecto paid a total of GBP1.5 million, covered by GBP100,000 in cash, a substantial amount of shares and a deferred consideration of GBP307,500 in the future. Alecto conducted a placing to raise GBP650,000 at the same time it struck the deal to help fund the cash element and to support the work programme on the mines.
The two mines have an aggregate 760,000 ounces of gold in place, according to resource estimates, at an average grade of 2.3 grams per tonne. Alecto will develop the two mines as one project named after the Matala mine.
PenMin will help Alecto update the existing definitive feasibility study for the Matala gold project which had been previously completed by previous owners. PenMin will also assist in drawing up a work programme that will allow Alecto to award the two main contracts needed to bring the project into production.
PenMin will help prepare the build design and operate contract, covering where the process plant will be supplied from and the infrastructure at the project. PenMin will not be involved in assisting with the mining element of the project, said Alecto.
Alecto said PenMin will also be helping with the mining contract which will be awarded to a contractor. Alecto is hiring a third party to mine the operation to bring down the initial capita expenditure for the project as the contractor will be responsible for providing the mining fleet and operating equipment - stripping out some hefty costs for Alecto.
Alecto currently anticipates the Matala project will need around USD18.0 million in capital expenditure to develop the project, based on an internal scoping study completed by Coffey Mining for Alecto. That is under a gold price assumption of USD1,150 per ounce, yielding an internal rate or return of 65% over an initial three-year mine life and will give an initial net present value of USD18.0 million.
In addition, PenMin will assist Alecto in securing vendor financing for the process plant, meaning the company that provides the process plant will provide Alecto with a loan in order for Alecto to purchase the plant from the loan provider. That again is an attempt to bring down the initial capital expenditure for the project.
Lastly, the two parties will work together to secure all the necessary permits and approvals needed to get the project off the ground.
"Subject to successfully completing the above workstreams and on the commencement of operations, PenMin will then adopt a client representative project management role, which will include oversight of all aspects of the project except for the company's responsibilities of geology/resource management and mine planning, government interaction, environmental and social management, security management and financial controls," said Alecto.
Alecto shares were trading down 9.1% to 0.0625 pence per share on Wednesday morning.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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