RNS Number : 4280V

Xtract Resources plc

12 December 2013

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12 December 2013

Xtract Resources Plc

("Xtract" or the "Company" or the "Group")

Sale and Purchase Agreement Signed for Chepica Gold and Copper Mine in Chile

Agreement of Finance Package

Proposed Waiver of Rule 9 of the Takeover Code

Xtract Resources Plc (AIM:XTR) has signed a sale and purchase agreement (the "Acquisition Agreement") to purchase a 15% direct interest and earn in option to acquire the remaining 85% interest in the Chépica gold and copper mine together with 100% of the Mejillones Phosphate project in Chile. The Acquisition Agreement is subject to certain conditions precedent, including shareholder approval of the proposed waiver of Rule 9 of the City Code on Takeovers and Mergers (the "Takeover Code").

Highlights

· After satisfactory due diligence, Xtract has signed the Acquisition Agreement with Polar Star Mining Corporation ("Polar Star") to acquire the entire issued share capital of its wholly owned subsidiary, Polar Mining (Barbados) Limited (the "Acquisition"), which is the parent company of a Chilean incorporated entity with a 15% direct interest and earn in option to acquire the remaining 85% interest in the Chépica gold and copper mine near Talca, Chile

· The consideration for the Acquisition will be £1,250,000, which shall be satisfied by the allotment and issue of 500,000,000 ordinary shares of 0.01 pence each ("Ordinary Shares") credited as fully paid at a price of 0.25 pence per Ordinary Share (the "Consideration Shares")

· The Acquisition Agreement is subject to certain conditions precedent including shareholder approval of a proposed waiver of Rule 9 of the Takeover Code ("Proposed Waiver") in connection with the allotment and issue to Polar Star of the Consideration Shares

· The mine target mill capability is 10,500 oz gold equivalent per annum at a production cost of US$700/oz. The mine is in operation and is currently breaking even with positive cash flow targeted from April 2014

· The Acquisition Agreement takes to 100% the ownership of the Group in the Mejillones Phosphate property in Chile, replacing the staged earn-in as announced on 10 July 2013

· A financing package has been agreed with YA Global Master SPV, Ltd, which is advised by Yorkville Advisors LLC and consists of debt and equity. $300,000 in cash (gross of fees) is immediately available to the Company and approximately £1,000,000 will be available to the Company upon, and subject to, shareholder approval of the proposed waiver of Rule 9 of the Takeover Code

· The debt facility provides the Company up to further US$4,700,000, as may be required

· An advisory committee comprising Professor Jim Porter and Mr. Graeme Farr has been appointed to guide management to extract maximum value from Chépica and other group assets

· Due diligence on the Namakwa Uranium deposit in South Africa is progressing well

Jan Nelson, CEO said: "This is a significant step in our stated mission to acquire early cash flow. The forecast cash flow from Chépica will greatly assist the Group to consolidate and advance other asset acquisitions announced or currently under discussion and to execute on our stated growth strategy.

"Operational success is not just about assets, but people who have the ability to bring the assets to account. To this end we are in the process of appointing a Chief Operating Officer and Executive for Mining, and have structured an advisory committee comprising Professor Jim Porter and Mr. Graeme Farr who will report directly to me. We continue to aggressively pursue our mission to acquire near production assets with a low cost profile in commodities whose future demand is clear.

"We have also agreed a financing package of equity and debt to fully capitalize the development of the Mine and the Group. The finance package will also enable us to fund any further acquisitions such as Namakwa Uranium, if the due diligence proves successful, as well as other mines in the vicinity of Chepica."

Chépica Mine

The Chépica mine ("the Mine") is a gold/copper epithermal project located some 300 km south of Santiago, Chile. The nearest town is Talca which is 15 km from the mine and is the center of a prolific wine growing region. The gold and copper occurs in epithermal veins located in a breccia system. Grades of both copper and gold are variable between 2 and 5 grams gold equivalent with vein thicknesses varying between 2 and 7 metres.

The veins are accessed via adits, with ore being extracted by the use of handheld jack hammers with conventional blasting in the more narrow vein areas. A single boom mobile drill unit drills thicker veins and primary waste development. The plant consists of crushers and a two-ball mill grinding circuit feeding floatation circuit. The concentrate produced is transported to Enami (Government Refinery) by truck, some 50 km north of Santiago. Payment is based upon contained copper and gold. The Mine currently receives US$150 per ton of concentrate with the cost to produce a ton of concentrate being approximately US$60 a ton. This gives a margin in excess of US$85 a ton of concentrate.

The information in the above paragraph is taken from an Exploration Technical Report on Chepica Au-Ag_Cu Project in Chile prepared by SRK for Polar Star Mining Corporation on 11 November 2011 and information from mine management obtained during the due diligence.. The Company has commissioned an independent technical report that will include an independent SAMREC compliant Mineral Resource statement and the results of the technical report and Mineral Resource Statement are expected to be made available to shareholders in January 2014.

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