JOHANNESBURG (miningweekly.com) – Aim-listed Xtract Resources has signed a collaboration agreement with private Hong Kong-registered Nexus Capital for the exploitation of alluvial gold deposits at the Manica gold project, in Mozambique.

The agreement is the result of an internal review by Xtract of its alluvial contract, and “extinguishes” financing risk and provides for potential near-term income.

“There are many alluvial mining operations in the Manica area and significant expertise has been gained in the art as well as the science of working such deposits. I am pleased with the outcome of the last six months’ discussions with Nexus and the prospects of short-term income, which has the propensity to increase considerably,” said Xtract chairperson Colin Bird.

The parties have determined that the best option for Manica is to contract surrounding mining operators to mine the alluvial gold deposits at Manica, in return for a royalty, while minimising the financing, execution and operating risk to Xtract and Nexus.

Discussions are under way to conclude several subagreements with a number of identified third-party mining contractors within the Manica concession, which will result in potential revenues for Xtract's wholly-owned Mozambican subsidiary Explorator.

Nexus and Explorator will establish and operate a smelter operation that will collect gold concentrate from the contract miners and produce 1 kg doré bars. Explorator will then transport to and sell the gold doré bars to an agreed refinery.

Accelerating income-generation from the mining of the alluvial deposits is the last hurdle in Xtract’s strategic review, with first income under the new agreement expected during the second quarter of 2017.

Nexus will receive a payment equal to 11% of gross total monthly gold sales and the balance will be retained by Explorator.

“As recognition for Nexus's investment to date in respect of plant and equipment at the mining concession, Nexus will be entitled to receive the first $1-million of any front-end payment paid by the contract miners.

“After the first $1-million, any further front-end payments will be split as 60% to Nexus and 40% to Explorator,” the company said in a statement on Monday.