Xtract Resources PLC Tuesday said it has secured all the required approvals to complete its acquisition of the Manica gold project in Mozambique, and said it has revised the terms of the deal for a second time to give itself more flexibility.
Xtract Resources has now secured final approval under the Mozambique Mining Act from the Mozambican mining authorities to complete its acquisition of Manica under a deal with Auroch Minerals NL, which was originally agreed last year.
Xtract and Auroch had already revised the terms of the deal back in September, but Xtract said on Tuesday that the terms have been revised again to provide the company with “additional flexibility in terms of cash flow, with minimal additional dilution,” it said.
“We have revised the terms of the agreement to issue slightly more shares to Auroch, which we believe does not represent material further dilution in order to optimise cash flow and capital flexibility following completion. We are pleased that Auroch will become a significant shareholder in Xtract through this transaction, as we seek to progress towards gold production at Manica and the creation of value for all shareholders,” said Xtract Chief Executive Jan Nelson.
The latest terms state Xtract will pay Auroch USD3.0 million in cash and issue the company with 1.13 billion new shares in Xtract with a market value of around USD4.4 million.
Those 1.13 billion shares represent 11.6% of Xtract’s enlarged issued share capital, with the potential for this to increase dependent on how the deal progresses.
Xtract will then pay Auroch a further USD2.5 million in cash three months after the deal has been completed. Of that USD2.5 million, USD1.3 million will be paid in cash and the remaining USD1.2 million will be paid in cash or in shares, at Auroch’s discretion, potentially pushing that 11.6% stake in Xtract higher.
If Auroch decides to take the USD1.2 million through shares, it will acquire each share at a 20% discount to the 10-day average before the transaction.
Lastly, Xtract has also agreed to settle the USD1.0 million debt owed to the Manica gold project’s creditors.
The pair will have until the end of March to complete the transaction, extending the deadline from Tuesday, and Xtract said it aims to pay the initial USD3.0 million cash consideration immediately.
To put those revised terms into context, the previous terms required Xtract to pay USD3.5 million in cash on completion and to issue Auroch with 1.03 billion new shares with a market value of USD4.0 million. Xtract would then have paid USD2.0 million in cash three months after the deal was completed, and settled the USD1.0 million worth of debt against the project.
Overall, the revised terms mean Xtract will be paying a total cash consideration of USD4.3 million, with the potential to issue shares worth around USD5.6 million, plus the USD1.0 million payment towards debt, compared to the previous terms which would have seen a cash payment of USD5.5 million, a USD1.0 million debt payment, and the issuance of shares worth USD4.0 million.
Xtract shares were up 4.7% to 0.199 pence per share on Tuesday morning.
Source: London South East
