Alecto Minerals agrees financing deal and DBO for Zambia gold mine

AIM-listed Alecto has agreed partnerships with Chinese mining engineer Yantai Xinhai Machinery and South Africa's PenMin to cover the development and operations of the project.

PenMin has delivered a feasibility study on Matala that indicates what Alecto said was "positive economics" for a 400,000 tonnes per annum oxide and transitional open pit operation, with a mine life of roughly four years and eight months at a cost of $1,200/oz of gold, plus potential for exploration upside underground.

As part of an agreement by all three parties to enter into a proposed design-build-operate (DBO) contract, Xinhai, a well established Chinese provider of engineering, procurement, construction (EPC) services, has agreed to arrange vendor financing in the form of a loan for the DBO contract, meaning Alecto remains sole owner.

This means, while Xinhai and PenMin will jointly manage the plant's operations, Alecto will take control on conclusion of the term of the contract.

Alecto, whose management have visited Xinhai's operations, said financing, asset procurement and operating agreements all still remain subject to agreement on pricing and detailed contractual terms.

Chief executive Mark Jones said the signing of this agreement and, more importantly, the commitment from Xinhai to arrange vendor financing, "de-risks the Matala gold project significantly and is testament to the excellent opportunity that the project represents for stake holders".

"In recent months, we have developed a strong relationship with both PenMin and Xinhai that has provided Alecto with the confidence we need to partner with them in both the development and operational phases of the project."

Alecto, in which London-listed Paternoster Resources is an investor, acquired Matala and nearby Dunrobin gold mines in November for £1.54m, alongside a £650,000 placing.

It said at the time that two mines have, in aggregate, 760,000 ounces of gold at an average grade of 2.3 grams per tonne.

Shares in Alecto, which also in February agreed a new joint venture with FTSE 100 gold giant Randgold for exploration and development of its Kossanto West Gold Project, were up 49% to 0.15p, a six-month high.