Xtract Resources - Initiation of Coverage

Compelling combination of strong cash flow generating gold projects and quality blue-sky exploration copper-gold plays

Xtract Resources is the old Xtract Energy that Executive Chairman Colin Bird rescued back in 2013 and set on a new course. The early acquisition of a Chilean gold mine failed to meet expectations but the Manica Gold mining licence in Mozambique looks to be coming good. The company has been benefiting from a growing profit share from the alluvial gold on its licence area in a neat deal where other parties fund the necessary capex.

  • Growing profit share from Manica alluvials and hard rock gold mining

    Profit share from Manica has been growing steadily for a couple of years now but it is about to step up a gear. The same sort of model is being employed at the Fair Bride hard rock deposit where a 35,000oz pa gold operation is set to begin before the year-end. Here, Omnia is providing the $6-8 million necessary capex and Xtract will get 23% of revenue after costs.

  • On course for £12.5m share of annual mining profits within 12 months

    More similar profit-sharing deals are about to come to fruition at Eureka (copper & gold) and Kalenga (copper), dramatically transforming Xtract’s fortunes. The board has worked hard on these deals for a while, but it does seem that all the trains are about to arrive at the station at the same time.

  • Blue-sky projects include Bushranger in the hot Lachland Fold Belt

    This area in New South Wales is Australia’s world-class copper-gold province and elephant country. Here, Xtract has just acquired an open ended JORC resource of 350,000t of contained copper in quite a coup. ASX listed explorers with interests here have recently seen big re-ratings.

  • Big disconnect in the share price as our valuation shows 480%+ upside

    We believe our valuation is conservative and initiate coverage of Xtract with a target price of 6.56p and a Conviction Buy stance.

  • RISK WARNING & DISCLAIMER

    Xtract Resources (XTR) is a research client of Align Research. Align Research holds an interest in the shares of XTR. Full details of our Company & Personal Account Dealing Policy can be found on our website http://www.alignresearch.co.uk/legal/ 

    For full disclaimer information please refer to the last page of the full document. This investment may not be suitable for your personal circumstances. If you are in any doubt as to its suitability you should seek professional advice. This note does not constitute advice and your capital is at risk. This is a marketing communication and cannot be considered independent research.

Table: financial overview
Year to Dec 2018A 2019A 2020E 2021E
Revenue (£’000) 892 1,351 1,400 8,300
PTP (£’000) (736) (1,090) (720) 5,300
EPS (p) (0.20) (0.30) (0.15) 0.86
Source: Company accounts & Align Research

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