(Alliance News) - Xtract Resources PLC on Wednesday said it has signed a mining contractor agreement with Longhau Tianci Mining Co Ltd to exploit the Guy Fawkes deposit at its Manica mining concession in Mozambique.
Shares in Xtract were up 8.2% at 1.65 pence in London at midday.
The agreement was signed between Longhau and Xtract's wholly-owned Mozambican subsidiary, Explorator Ltd, with Longhau to mine the Guy Fawkes hard-rock gold deposit for a period of six years, or until the ore body is depleted or no longer visible.
Under the agreement, Explorator would receive 20% of gold production, after a 6% mining production tax settlement by Explorator. Explorator will remit 35% of its share of Guy Fawkes production to Mutapa Mining & Processing LDA, Explorator's existing hard rock collaboration partner.
The other 75% of gold will be retained by Longhau for services provided.
Guy Fawkes has a SAMREC-compliant indicated and inferred resource of 1.13 million tonnes at 1.91 grams of gold per tonne of ore. There is also potential for additional upside in several dimensions.
The agreement includes performance targets whereby Longhau is required to commission a plant with a throughput of at least 60 tonnes per day within two months of the signing date, with throughput tonnage to rise to 120 tonnes per day within three months of beginning operations.
Explorator will be responsible for recording gold concentrate produced, while Longhau will be responsible for smelting the gold concentrate and delivery of gold dore bars.
Explorator will also take on responsibility for all statutory and legal requirement for the licence along with the 6% tax payment.
Executive Chair Colin Bird said: "We are pleased to report the signing of this agreement, which should provide the opportunity for incremental cash flow during MMP's Fair Bride construction and building phase. The Guy Fawkes deposit shows considerable variation both in mining width and grade, demonstrating propensity for selective higher-grade mining. Longhau intends to work a portion of the deposit by open cast methods where drilling indicates that suitable grades locally can run close to surface. Underground mining will be selective.
"We are currently in discussions in respect of the Boa Esperanza deposit and look forward to updating shareholders shortly."
By Anna Farley; annafarley@alliancenews.com
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