Alecto Minerals plc / EPIC: ALO / Market: AIM / Sector: Exploration & Development

23 November 2015

Alecto Minerals plc ('Alecto' or the 'Company') Acquisition of historic Matala & Dunrobin Gold Mines in Zambia

Placing to raise approximately £0.65 million (gross) Appointment of Non-Executive Chairman

Alecto Minerals plc (AIM: ALO), the Africa-focused gold and base metal exploration and development Company, is delighted to announce that it has made a significant step in pursuit of its strategy of becoming a gold producer in the near to mid-term through the acquisition of the historic Matala and Dunrobin Gold Mines in Zambia (together the 'Project').

Highlights

• The Project has excellent potential to be developed into production in the near to mid-term

  • 25 year renewable mining licence covering 32km2, associated environmental permit and advanced resources

• Matala and Dunrobin Gold Mines, have, in aggregate, a 760,000 oz Au JORC Code compliant resource estimate in the Measured, Indicated and Inferred categories at an average grade of 2.3g/t Au

• US$20 million invested in drilling and test work on the Project to date, culminating in a scoping study on the Matala deposit and a feasibility study on the Dunrobin deposit prepared by Coffey Mining Pty Ltd ('Coffey Mining') in 2013

• Updated internal scoping study by Alecto for Matala indicates the potential to generate strong cash flows and economics at an assumed gold price of US$1,150 through an initial three year open pit operation at Matala

  • Indicative IRR of approximately 65%

  • Indicative NPV (10%) of approximately US$18 million

  • Low initial capital cost of approximately US$18 million

  • Estimated C1 cash cost of approximately US$695/oz (excluding government royalties of 6%)

  • Positive economics reflect in part, the good regional infrastructure with site access, power and water available

  • Resultant surplus cash flow from such an operation could then be used to develop the Dunrobin mine

• Alecto has acquired the Project for an aggregate consideration of £1.54 million, to be satisfied through the issue of 943,750,000 new ordinary shares of 0.01p each in Alecto ('Ordinary Shares'), £100,000 in cash and £307,500 as deferred consideration (the 'Acquisition') from C3W Limited ('C3W') and CNG Trust ('CNG') (together the 'Vendors')

• Placing to raise £0.65 million (before expenses), with the net proceeds being used, inter alia, to fund the cash element of the Acquisition, to advance Matala and the Company's proposed JV project with Desert Gold in Mali and to provide near term working capital

• Issue of US$800,000 convertible loan note by Alecto to C3W in respect of an existing Luiri Limited ('Luiri') loan due to C3W

• On completion, Gerald Chapman will join the Board as Non-Executive Chairman, bringing over 30 years' experience in the mining sector, with specific skills in contract mining and infrastructure build

• Appointment of Country Manager, Clint White, brings excellent in-country relationships and knowledge

• On admission, the Vendors will be interested in, in aggregate, approximately 29.9% of the Company's enlarged issued share capital

• The Project will be Alecto's key operational priority, although it will continue to pursue the development of Kossanto East, its proposed JV project with Desert Gold in Mali, and to seek to secure partnership opportunities for its broader portfolio, which includes ongoing discussions with a major gold producer in respect of a potential JV for Kossanto West in Mali

Mark Jones, CEO of Alecto, commented:

'The Project has excellent potential to deliver production in the near-to-mid-term considering the presence of significant and advanced in-situ resources of 760,000 oz Au (JORC code compliant), a Mining Licence and associated environmental permit. An updated internal scoping study demonstrates the robust economics achievable through production even at today's depressed market prices, with low initial capital cost required to start generating cash flow. The Acquisition is the result of over a year of project assessments, which has seen our attention firmly focused on rationalising and monetising our existing portfolio, whilst pursuing opportunities to become a gold producer in the near to mid-term.

'In acquiring this Project in the stable Southern African democracy of Zambia at low cost we have, once again, taken advantage of market conditions to de-risk our portfolio and deliver significant potential upside for all stakeholders going forward. As well as completing this transaction, our team has been actively concluding the business plan to re-open the Project and begin producing gold profitably at current prices, thereby positioning Alecto positively in any prevailing market conditions. Having successfully raised £0.65 million (before expenses), we are well placed to commence work to advance Matala and I look forward to providing updates on our progress going forward.

'I look forward to welcoming from the Zambian operations, both Gerald Chapman as Chairman, and Clint White, as Country Manager, to the Alecto team. Having worked closely with each of them for several months, and seen first hand the respect they command on the ground, I know that we are acquiring significant intellectual and technical capability.

'We will continue to pursue our plans across the rest of the portfolio and seek to advance our strategy to deliver production from our 100% owned Kossanto East Gold Project in Mali through co-operation with Desert Gold. With this in mind, we hope to deliver production from two projects in the near to mid-term.'

Overview of Acquisition

Alecto has entered into an agreement with the Vendors, for the acquisition of Luiri, that owns the historic Matala and Dunrobin Gold Mines in Zambia, for an aggregate consideration of £1.54 million, to be satisfied through the issue of 943,750,000 new Ordinary Shares (the 'Consideration Shares') (which have an aggregate value of £1,132,500, based on the Company's closing mid-market share price on 20 November 2015 of 0.12 pence ('Closing Share Price')), £100,000 in cash and £307,500 in deferred consideration (to be satisfied via cash or, at either parties election, through the issue of new Ordinary Shares, such number of shares to be calculated based on the Closing Share Price).

Luiri is a private holding company incorporated in the Republic of Mauritius which, via its wholly owned Zambian subsidiary, Luiri Gold Mines Ltd, owns a 25 year renewable mining licence, covering two historic open pit and underground mines, Matala and Dunrobin, and satellite deposits in south-central Zambia, which contain, in aggregate, an estimated total JORC Code compliant resource of 760,000 oz Au in the Measured, Indicated and Inferred categories at an average grade of 2.3g/t Au. Luiri also holds additional rights to further gold exploration opportunities on a nearby licence covering 245km2. For the seven month period to 31 July 2015, Luiri recorded an unaudited consolidated loss before tax of US$778,975 (approximately £509,767) and as at 31 July 2015 had unaudited gross assets of US$52,288 (approximately £33,507).

As part of the Acquisition, Alecto is pleased to announce that Gerald Chapman will join the Board of Alecto as the representative of the Vendors, as Non-Executive Chairman, with effect from completion. Mr. Chapman is a qualified engineer with over 30 years' experience in the mining sector. As Chairman of Digmin Group Pty Ltd ('Digmin'), a contract-mining group, Mr. Chapman has been involved in the process of reinstating the Project's mining licence and conducting ground work. He will bring invaluable mine services experience to the Company as Alecto moves into production and in this regard, the Company has entered into a non-exclusive contract with Digmin, for the provision of mining and exploration services and infrastructure development, in respect of the Project.

The Company also announces that it has conditionally raised £0.65 million (before expenses) by way of a placing, via Beaufort Securities Limited ('Beaufort Securities'), as agent of the Company, of 812,500,000 new Ordinary Shares ('Placing Shares') at a price of 0.08 pence per Placing Share (the 'Placing Price'), with certain new and existing investors (the 'Placing'). The net proceeds of the Placing will be used, inter alia, to fund the cash element of the Acquisition, to advance Matala and the Company's proposed JV project with Desert Gold in Mali, as detailed in the Company's announcement of 29 September 2015, and to provide near term working capital.

The Company also announces that, pursuant to the terms of the Acquisition, Alecto has agreed to issue convertible loan notes amounting to US$800,000 to C3W, in respect of an existing loan in Luiri due to C3W.

The Acquisition and Placing are conditional on admission of the Consideration Shares and Placing Shares to trading on AIM.

The Project

Figure 1: Licence 8074-HQ-LML and adjacent exploration rights on licence 14948-HQ-LML

The Project consists of two historic gold mines, Matala and Dunrobin, and a number of exploration targets, Chosa and Shadreck, within a single 32km2 large scale 25 year renewable mining licence (licence 8074-HQ- LML) initially granted by the Ministry of Mines in Zambia in 2003 and reinstated in December 2014 (the 'Licence'). The Licence is located 120km west of Lusaka and 25km east of Mumbwa, with a main tar road to Lusaka located 4km from the site, abundant water and main gridpower available locally. In addition, Luiri holds rights to further gold exploration opportunities on a nearby licence (licence 14948-HQ-LML) covering 245km2.

The Licence is located in an area of south-central Zambia dominated by the Mwembeshi Shear Zone. The regionally significant structural zone defines the boundary between the late Proterozoic Katanga Supergroup basinal sediments to the north and the more intensely deformed Zambezi Metamorphic Belt terrain to the south.