PROJECT FOCUS
John Chadwick looks at junior Alecto Minerals’ innovative financing for gold mining in Zambia, its rapid progress there and its coup in attracting Randgold to a project in Mali
Fast gold from Zambia
Alecto Minerals is focussed on African gold and base metals. In mid April it announced positive results from a feasibility study on its wholly-owned Matala gold project in Zambia. The innovation is that it has signed an agreement pursuant to work with Yantai Xinhai Machinery Co and PenMin( Pty) Ltd, the latter based in South Africa, on the proposed construction and financing of mining operations at Matala.
Alecto has moved very swiftly at Matala, only acquiring the project in November 2015 and less than six months later a feasibility study has been accomplished. It is an oxide opportunity,“ simple mining down to a depth of 70 m,” explains Mark Jones, CEO of Alecto.
The company’ s strategy is to deliver gold production from the project as quickly as practicable. PenMin has delivered the Matala feasibility study demonstrating positive economics for a 400,000 t / y oxide and transitional open pit operation with a mine life of approximately four years eight months at $ 1,200 / oz Au with exploration upside and underground potential: n Estimated capital cost for plant and infrastructure of $ 14.4 million n Project NPV of $ 28.6 million at an 8 % discount rate
n Unlevered project IRR of 52 % n Agreement of all parties to enter into a proposed Design, Build and Operate( DBO) contract under International Federation of Consulting Engineers( FIDIC) Gold Book, 2008, standards for the process plant and associated infrastructure. FIDIC contracts have been developed over 50 years as the international standard and they are recognised and used globally in many jurisdictions, on all types of projects( www. fidic. org) n Xinhai has agreed to arrange vendor financing for the DBO contract having confirmed that it is satisfied with the technical and financial outcomes of the FS n PenMin shall be appointed Employer’ s Representative under a FIDIC‘ White Book’ Client / Consultant Agreement n During the operational phase, Xinhai and PenMin will jointly manage the plant’ s operations, the control of which will be transferred to Alecto on conclusion of the term of the contract n Proposed vendor financing will be by way of a loan- Alecto will therefore remain the sole owner of the project n Financing, asset procurement and operating agreements remain subject to agreement on pricing and detailed contractual terms.
Jones states:“ The signing of this agreement and, more importantly, the commitment from Xinhai to arrange Vendor Financing, de-risks the Matala project significantly and is testament to the excellent opportunity that the project represents for stakeholders. 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. There remains a lot of hard work to be done before we can commence development on the ground, but considering how far we have come since the acquisition was completed just five months ago, I am confident that we will deliver further progress in the months ahead.”
Potent partners
Considering the mining, Alecto’ s biggest shareholder is Gerald Chapman( 26 %) who is Chairman of the Digmin Group and has a wealth of experience from over 30 years in the mining industry. He brings contract mining, infrastructure development and project management expertise within Africa. The Digmin Group was launched in January 2012 by Chapman to incorporate a number of associated mining and construction companies currently operating in Africa servicing the mining, private and public sectors.
8 International Mining | JUNE 2016