Auroch plays hardball with Xtract Resources over debt
Auroch Minerals have played hardball with AIM listed Xtract Resources over an unpaid debt owing to Auroch for the sale of the Manica Gold Project in Mozambique in March last year.
Under the terms of the original AUD$12m sale, Xtract were able to defer USD $2.5m until three months after the sale but only managed to pay down about USD$850,000 of the final USD$2.5m.
This week Auroch struck what looks like a fiercely negotiated deal with Xtract to secure their final USD$1.75m for the Manica Gold project which now includes outstanding interest.
The parties have agreed to structure a USD$750, 000 convertible note and USD$1m loan agreement from Auroch to Xtract, secured by royalties over the Manica Gold project when it gets into production.
Both agreements will attract a 10% interest rate that will be paid to Auroch by Xtract quarterly in advance and Xtract will seek shareholder approval to convert the $1m loan to a convertible note on similar terms by June 2017.
The convertible note can be converted into Xtract shares at a 15% discount to market at Auroch’s election subject to a 15% floor price and failing that, Xtract have agreed to repay it and the USD$1m loan by the 31st of December 2017.
Under the terms of the settlement agreement Auroch have locked Xtract up in a number of ways in order to secure their position.
If Xtract commit a material breach of the terms then Auroch will have the right to convert their shares at a discount of 30% rather than the agreed 15%.
Auroch will pick up 500,000,000 warrants over Xtract shares exercisable at 0.02p per share with an expiry date of the 21st of December 2017 if not exercised.
Xtract will also pay Auroch a USD$50,000 fee that will be fully satisfied by Xtract script issued to Auroch at a 15% discount to market.
If Xtract raise capital between now and December 2017 they will have to pay Auroch 15% of any funds raised in partial satisfaction of the debt owed.
Auroch will receive a 3% royalty on gross sales from the Manica Gold project capped at the maximum level of the outstanding debt.
Auroch Chairman Glenn Whiddon who was responsible for thrashing out the deal with Xtract said “Auroch is pleased to have reached a resolution with Xtract on the outstanding payment. This will give Xtract the opportunity to complete a definitive study while at the same time provide Auroch with a regular cash flow to fund ongoing exploration and business development activities, while maintaining its cash balance of A$6 million.”
Auroch Minerals have now moved into Tanzania after picking up a number of seriously prospective leases boasting large Lithium bearing Pegmatites that look like they warrant further investigation.
Unlike many other junior lithium hopefuls however, Auroch already have an enviable bank balance and the recent settlement with Xtract will just provide the cream on top required to fully explore the Tanzania play.