Xtract Regulatory News (XTR)

For immediate release

1 June 2020

Xtract Resources Plc

("Xtract" or the "Company")

 Agreement Bushranger Copper/Gold Project Australia ("Bushranger")

The Board of Xtract Resources Plc ("Xtract" or the "Company") is pleased to announce that the Company has today concluded a conditional Sale and Purchase Agreement (the "Acquisition Agreement") to acquire the entire issued share capital of ProsepectOre Ltd ("ProspectOre") for a total consideration of £1.25 million, to be satisfied in new Xtract ordinary shares. ProspectOre currently owns a 100% interest in the Bushranger Copper-Gold Project, located in the Lachlan Fold Belt ("LFB"), New South Wales, Australia's world-class copper-gold province. The Lachlan Fold Belt has recently undergone a resurgence in mineral exploration following the discovery of new, large scale, porphyry systems such as Alkane Resources Limited Boda discovery which add to the existing mineral endowment of the LFB due to mines such as Newcrest's giant Cadia-Ridgeway operation.

The Bushranger Project hosts the Racecourse deposit, where a JORC (2012) compliant Inferred Resource has been estimated at 71Mt @ 0.44% Cu and 0.064g/t Au using a 0.3% Cu cut-off, with copper grades comparable to the major operating mines in the region. The Racecourse Mineral Resource is interpreted to be a Copper-Gold Porphyry-Style deposit and the Directors believe to be one of the largest currently undeveloped porphyry deposits in the LFB.

Highlights

· The Bushranger Project represents a highly prospective copper-gold porphyry project in a world class mining district with excellent infrastructure in a low-cost jurisdiction

· There is renewed interest in The Lachlan Fold Belt following Alkane's recent Boda discovery, including a 1,167m drill interval grading 0.25% Cu, 0.55g/t Au

· The Bushranger Project hosts the Racecourse deposit, a JORC (2012) compliant inferred resource estimated at 71Mt @ 0.44% Cu and 0.064g/t Au using a 0.3% Cu cut-off, which is open down plunge and along strike

· Most recent drilling at Racecourse intersected substantially wider mineralisation - 159m @ 0.37% Cu, 0.21g/t Au (Hole ID BRD001), including 16m @ 0.73g/t Au - and with gold grades increasing with depth

· Western portions of the Bushranger Project are prospective for high-grade gold mineralisation

· Several geophysical and geochemical targets, with characteristics of porphyry style mineralisation, are ready for drill testing

Colin Bird, Executive Chairman said: "This acquisition represents entry into an asset with an inferred resource of over 350,000 tonnes of contained copper. The deposit is open ended in both directions and the propensity for future discovery is good. I am particularly encouraged by the fact that the gold contribution increases with depth. The geological trend has produced a number of historical mines, closed and operating, and of late there have been announcement of new discoveries both porphyry copper and epithermal gold.

The asset significantly enhances our current copper portfolio and provides a solid platform to our emerging copper exploration activities. I look forward actively progressing the Bushranger project together with our Zambian exploration portfolio."

Bushranger Project Summary

The Bushranger copper-gold project comprises four exploration licences totalling 501km2, located in eastern central New South Wales, Australia. The project area is 160km west of Sydney, in an area with excellent road and power infrastructure.

Geologically, the project sits within the mineral-endowed Lachlan Fold Belt ("LFB"), a Middle Palaeozoic orogenic complex extending through central New South Wales southwards into Western Victoria and Western Tasmania. The LFB is Australian's world-class copper-gold mineral province, host to Newcrest's mining operation at Cadia-Ridgeway and CMOC's North Parkes mine. The potential for the further discovery of porphyry (intrusion related) copper-gold deposits and structurally controlled gold deposits, such as occur at Tomingley and McPhillamys, ranks the LFB as one of the most highly prospective precious and base metal provinces internationally. In addition to copper-gold porphyries, a variety of other deposit types occur in the LFB, including shallow-level epithermal gold ("hot spring"), deeper hydrothermal gold (quartz ± carbonate veins), base metal-gold skarn deposits and volcanogenic hosted base metal deposits.

The North Parkes and Cadia-Ridgeway deposits are world-class porphyry copper-gold mines hosted within the Lachlan Transfer Zone, a key structure which controlled the emplacement of the major copper-gold deposits within the LFB. The Bushranger project is also located within the Lachlan Transfer Zone.

On the Bushranger property, previous exploration has identified several porphyry intrusions, some already known to be associated with copper and gold mineralisation, as well as multiple geochemical and IP geophysical anomalies over a strike length of 10km. The most advanced prospect is the Racecourse deposit, where a JORC (2012) compliant Inferred Resource has been estimated at 71Mt @ 0.44% Cu and 0.064g/t Au using a 0.3% Cu cut-off, with copper grades comparable to the major operating mines in the region. The deposit remains open down-plunge and along strike, and recent deeper drilling in holes BRD001 and BRD009 has shown that it becomes significantly wider at depth, along with increasing gold grades - see table below.

Note: Source ProspectOre Limited. These drill results have not been independently tested or verified by Xtract.

The drilling results detailed in the above table have not yet been followed up with additional drilling and hence the full extent of the Racecourse deposit is yet to be determined.

Globally, porphyry-related copper-gold deposits commonly occur in clusters. The Bushranger licence package remains under-explored, with several further adjacent porphyry targets, most of which have not yet been drill tested. Geophysical surveying, which originally identified the Racecourse deposit, has highlighted another target southeast of Racecourse, as well as the nearby Footrot and White Springs prospects.

The western portions of the Bushranger Project, on Exploration Licences EL's 8305 and 8585, are prospective for structurally controlled high-grade gold mineralisation. Immediately to the south of EL8585 occur the Mt David and Lucky Draw historical gold mines. In the mid 1980's 190,000 Oz @ 4.2g/t Au was mined at Lucky Draw and in the late 19th century and early 20th century an estimated 27,000 Oz @ 12.4g/t Au was mined at Mt David. Soil geochemical surveys have previously been completed on EL8305 and gold-in-soil geochemical anomalies require follow up.

Planned follow-up exploration by Xtract at Bushranger aims to target the potential to deliver a world-class copper-gold project, by increasing the initial inferred resource at the Racecourse deposit and follow-on discovery of additional mineralised porphyry systems in close proximity to existing mineralisation through a combination of geophysical surveying and drilling.

Bushranger Project background

Bushranger's principal asset is the Racecourse Prospect, a significant copper - gold mineralised zone of 1,000 metres strike length located in the Macquarie Arc within the LFB, a subduction complex that formed rapidly in the Late Ordovician, resulting in multiple phases of intrusions and associated mineralising episodes, establishing it as Australia's leading porphyry copper-gold region. The tabular mineralised zone at Racecourse varies from 30 to 130m in width and has been intersected to a depth of 350m.

Mineralisation at Racecourse occurs as fine-grained disseminations, fracture coatings, veinlets and stringer veins of pyrite and chalcopyrite within and adjacent to the margins of a monzonite intrusive. Potential exists for porphyry style subvolcanic intrusive copper-gold and pyrite systems as well as for epithermal gold. Bushranger has been covered by geophysics in the form of airborne magnetics and radiometrics, ground Induced Polarisation (IP) and Electromagnetics (EM). This has successfully located the Racecourse deposit and several further targets, including one close to the southeast of Racecourse, as well as the Footrot and White Springs Prospects to the south.

The Bushranger project area has a history of mining at the nearby Burraga Copper mine 10km southwest and more recently at the Lucky Draw Gold Mine 10km west of the Racecourse deposit. Among the major deposits currently or previously mined on the Lachlan Transfer Zone are Newcrest Mining Ltd.'s massive Cadia Valley operations, located about 80km northwest of Bushranger, which consist of two gold-copper mines, Ridgeway and Cadia East, making this one of Australia's largest gold mines. Further northwest again, the Northparkes mine is a large underground block caving. Elsewhere within the LFB, recent discoveries include Alkane Resources major new Boda deposit.

Acquisition Agreement

Background

The Acquisition Agreement has been entered into today by the Company and ProspectOre, an Australian public unlisted company.

ProspectOre acquired the Bushranger Copper-Gold Project from Anglo American Exploration (Australia) Pty Ltd ("Anglo") in December 2017 ("Bushranger Acquisition Agreement"). Under this agreement, Anglo has a "buy-back" option, as described further below. ProspectOre also entered into an Exploration Farm-in and Joint Venture Agreement ("JV") with Anglo at the same time to farm-in to the surrounding exploration tenure covering 3 additional exploration licences: EL8305, EL8306 and EL8585 ("Anglo Exploration Tenements"). Subsequently, ProspectOre has agreed with Anglo ("Anglo Acquisition Agreement") to acquire outright the Anglo Exploration Tenements, which supersedes the JV agreement, for a cash consideration of A$50,000.

Key terms of the Agreement

Xtract has agreed to conditionally purchase all of the issued share capital of ProspectOre ("Sale Shares") for a total consideration of £1.25 million, which will be satisfied by the allotment and issue of 100,000,000 new Ordinary Shares of 0.02p each ("Consideration Shares") at an issue price of 1.25p per Ordinary Share, to be settled upon completion. The Consideration Shares will rank pari passu with the existing ordinary shares and application will be made in due course for the Consideration Shares to be admitted to trading on AIM and a further announcement will be made in due course.

The total consideration is apportioned as to £10,000 in value for licence EL8305; £10,000 in value for licence EL8306; £10,000 in value for licence EL8585; and £1,220,000 in value for licence EL5574 (the Racecourse resources lies entirely within EL5574).

In addition to the Consideration Shares, Xtract has agreed that on notification by the Seller, prior to Completion, to settle from existing cash resources, a maximum amount of A$200,000 (£108,000) in cash relating to outstanding liabilities of ProspectOre, primarily being the cost to acquire the Anglo Tenements as described above, and Director loans of A$25,000 (£13,500).

ProspectOre's assets principally comprise its rights, title and interest in the Bushranger Project and the Anglo Tenements.

In the event that ProspectOre is unable to complete the share transfer pursuant to the Acquisition Agreement, the Acquisition will proceed by way of an Asset sale and ProspectOre has agreed to sell the Assets on Completion.

Conditions precedent

Completion of the acquisition is subject to, and conditional upon, the satisfaction or waiver of a number of conditions precedent including:

(i) From the date of signing the agreement, a 30 day due diligence period enabling Xtract, to verify that ProspectOre is the legal and beneficial owner of the Tenements or, in respect of the Anglo Exploration Tenements, has a legally binding right to acquire such. In the event that the above condition is not satisfied, Xtract will have the right to terminate the agreement.

(ii) In the event of an Asset sale, New South Wales Minister for Energy and the Environment approval of the sale and written consent from Anglo to the assignment of the ProspectOre's interest in the Anglo Acquisition Agreement by no later than the cut-off date, being 31 October 2020, or such later date agreed by Xtract and ProspectOre. In the event that the above condition is not satisfied by such date, both parties will have the right to terminate.

(iii) In the event of a Share sale, New South Wales Minister for Energy and the Environment consent to the change in control of the seller no later than the cut-off date of 31 October 2020 or such later date agreed by Xtract and ProspectOre.

(iv) Written approval no later the cut-off date of 31 October 2020, or such later date agreed by Xtract and ProspectOre, from the Foreign Investment Review Board that there is no objection under the Foreign Acquisitions and Takeovers Act 1975. In the event that the above condition is not satisfied, both parties will have the right to terminate.

Exploration Programme

Xtract has agreed to spend at least A$350,000 (£189,000) on exploration drilling and resource definition drilling on the Tenements within twelve months of the date of Completion. The exploration costs will be funded from existing cash resources and future cash flows.

Director appointment

Under the Acquisition Agreement, Xtract has agreed to appoint a person nominated by ProspectOre as a director of Xtract with effect from completion (subject to satisfactory completion of any regulatory procedures and approvals required by the AIM Rules).

Completion

Completion will have deemed to have taken place on the pre-conditions set out above being met, by no later than 31 October 2020 (unless otherwise agreed between the parties), together with:

(i) Receipt of share transfer forms in favour of Xtract in respect of Sale Shares;

(ii) Settlement of loan accounts for an aggregate amount of A$25,000 (£13,500); and

(iii) Allotment and admission to trading on AIM of the Consideration Shares.

ProspectOre has agreed that the Consideration Shares will be subject to a partial lock-in as follows:

(i) 25% of the Consideration Shares shall be freely tradeable on and from Completion;

(ii) 50% of the Consideration Shares shall be freely tradeable on the date that is six (6) months on and from Completion; and

(iii) all of the Consideration Shares shall be freely tradeable on and from the date that is twelve months on and from Completion.

Anglo Buy-back option

Under the terms the Bushranger Acquisition agreement, if a deposit of greater than 2 million tons of contained Cu equivalent (e.g. 450Mt @ 0.45% Cu equivalent) is ultimately identified, Anglo may buy-back 80% of the Racecourse deposit at fair market value as determined by an Independent Expert in accordance with the JORC and Valmin Code. Anglo and ProspectOre would then provide funding pro-rata to their interests, save that ProspectOre may decide not to provide its share of funding and be diluted, ultimately retaining a 0.75% net smelter royalty (NSR). If a "Decision to Mine" is taken by ProspectOre prior to the identification of 2 million tons of contained Cu equivalent, Anglo also have an opportunity to exercise the buy-back. Anglo have a once-only opportunity to exercise the 80% buy-back whether the opportunity comes through the discovery of 2 million tons of contained Cu equivalent or a decision to mine.

If Anglo does not exercise the buy-back and ProspectOre ultimately develops a mine, ProspectOre would hold a 100% project interest, less 3.5% in NSR royalties and a A$7.5 million development payment to historic holders (which includes Anglo).

Future Sale of Anglo Tenements

In the event that within three years of completion of the acquisition of the Anglo Exploration Tenements, ProspectOre sells the Anglo Tenements, ProspectOre must notify Anglo of the sale and if the sale value is more than A$100,000, an additional payment is due to Anglo equal to 50% of the sale value in excess of A$100,000. If the sale value is less than or equal to A$100,000 no further payment is due to Anglo.

Further AIM Disclosures

ProspectOre is an Australian public unlisted company that was incorporated on 31 May 2017 for the purposes of acquiring an interest in the Bushranger Copper-Gold Project, located in the Lachlan Fold Belt, New South Wales. As at 30 June 2019, total audited assets amounted to A$37,000 (£19,980) and total liabilities A$7,000 (£3,780). For the year ended 30 June 2019, audited loss before tax amounted to A$30,692 (£16,573).

Xtract has agreed to pay an introduction fee of 1,000,000 new ordinary shares ("Fee Shares") at an issue price of 1.25p per ordinary share (equivalent to a fee of £12,500) and 2,000,000 options to subscribe for new ordinary shares ("Fee Options") at an exercise price of 1.25p per new ordinary share at any time on or before 2 June 2023. The Fee Shares and Fee Options have been issued to The Tonehill Trust, an Australian-based entity.

Further details are available from the Company's website which details the company's project portfolio as well as a copy of this announcement: www.xtractresources.com 

This announcement contains inside information for the purposes of Article 7 of EU Regulation No. 596/2014 on market abuse. The person who arranged for the release of this announcement on behalf of the Company was Colin Bird, Director.

Enquiries:

Qualified Person:

Information in this announcement relating to the Licence has been reviewed by Edward (Ed) Slowey, BSc, PGeo, a consultant to Xtract. Mr Slowey is a graduate geologist with more than 40 years' relevant experience in mineral exploration and mining, a founder member of the Institute of Geologists of Ireland and is a Qualified Person under the AIM rules. Mr Slowey has reviewed and approved the geological content of this announcement.

Qualified Person:

In accordance with AIM Note for Mining and Oil & Gas Companies, June 2009 ("Guidance Note"), Colin Bird, CC.ENG, FIMMM, South African and UK Certified Mine Manager and Director of Xtract Resources plc, with more than 40 years' experience mainly in hard rock mining, is the qualified person as defined in the Guidance Note of the London Stock Exchange, who has reviewed the technical information contained in this press release.

TECHNICAL GLOSSARY

The following is a summary of technical terms:

ENDS