Xtract Resources on Monday said its Mozambique subsidiary Explorator has agreed a mining contractor deal with Omnia Mining and Moz Gold Group Limitida for its Manica mining concession in the company.

The two mining contractors, who are already operating in the area, have been appointed to mine the western half of the alluvials in the Manica concession. Initial mining is to take place no later than the beginning of September.

A minimum capacity of 220 000 tonnes per month is targeted to be achieved by the beginning of November.

An annual production target has been set at 2.6 million tonnes of alluvial materials. Assuming a base gold price of US$ 1 250 from November onwards, this is expected to produce monthly revenue of US$ 165 000 attributable to Explorator.

“The alluvial agreement is a very positive move for Xtract, providing potential significant cash flows with upside based on contractual minimums. We are currently negotiating the eastern half of the concession with other contractors and expect to make an announcement by the end of July 2017,” said Chairman Colin Bird in a statement.

“This agreement will begin early next week and we fully expect to receive some income during the build-up to September. In the meantime, we have further evaluated the Manica concession and see much potential to value add to our hard rock as well as possible further alluvial mining. We are also reviewing financing alternatives for the open pit mine and will keep the market informed with our progress,” Bird said.

Shares in Xtract were up 21% at 0.0169 pence Monday, one of the best performers on AIM.

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