13 April 2016

Alecto Minerals plc / EPIC: ALO / Market: AIM / Sector: Mining

Alecto Minerals plc ('Alecto' or the 'Company')

Results of Matala Feasibility Study and

Agreement to Arrange Vendor Financing for the Matala Gold Project

Alecto Minerals plc (AIM: ALO), the Africa-focussed gold and base metal exploration and development company, is delighted to announce that, following positive results from a feasibility study ('FS') on its wholly-owned Matala gold project in Zambia ('Matala' or the 'Matala Gold Project'), it has signed an agreement pursuant to which the Company is working with Yantai Xinhai Machinery Co. Ltd ('Xinhai') and PenMin (Pty) Ltd ('PenMin') with respect to the proposed construction and financing of mining operations at Matala. This latest milestone is in line with the Company's stated strategy to deliver gold production from the project as quickly as practicable.

Highlights:

• PenMin has delivered a FS on Matala demonstrating positive economics for a 400,000 tonnes per annum ('tpa') oxide and transitional open pit operation with a mine life of approximately 4 years 8 months at $1,200/oz Au with exploration upside and underground potential:

  • Estimated capital cost for plant and infrastructure of US$14.4 million

  • Project NPV of US$28.6 million at an 8% discount rate

  • Unlevered project IRR of 52%

    
    

• 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 for the Consulting Industry. They are recognised and used globally in many jurisdictions, on all types of projects (www.fidic.org)

    
    

• 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

  
  

• PenMin shall be appointed Employer's Representative under a FIDIC 'White Book' Client / Consultant Agreement

• 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

  
  

• Proposed Vendor Financing will be by way of a loan - Alecto will therefore remain the sole owner of the project

  
  

• Financing, asset procurement and operating agreements remain subject to agreement on pricing and detailed contractual terms

  
  

  Mark Jones, CEO of Alecto, commented:

  "The signing of this agreement and, more importantly, the commitment from Xinhai to arrange Vendor Financing, de-risks the Matala Gold Project significantly and is testament to the excellent opportunity that the project represents for stake holders. 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 5 months ago, I am confident that we will deliver further progress in the months ahead."

  
  

  Additional Information

  
  

  The historic Matala Gold Project is located in a licence area of south-central Zambia dominated by the Mwembeshi Shear Zone, which incorporates the geologically complex Matala Dome, an elongated east-northeast Dome parallel, or sub-parallel, to the trend of the shear. The single 32km2 25 year renewable mining licence (licence 8074-HQ-LML) was granted by the Ministry of Mines in Zambia in 2003 and reinstated in December 2014 (the 'Licence'). It also covers the Company's wholly owned Dunrobin Mine.

  
  

  Gold mineralisation has been identified at multiple locations across the Matala Dome, and specifically within the licence area. At Matala, gold mineralisation is characterised by strong stratigraphic deformation, shearing and the presence of quartz-dolomite-pyrite-tourmaline- albite-sericite alteration and vein stockworks. The mineralised assemblages occur in steep south-dipping stockwork.

  
  

  Matala contains an estimated 568,000 oz Au JORC Code compliant resource estimate in the Indicated and Inferred categories and was subject to limited historical underground mining during the pre-independence years in Zambia. In addition, on 2 March 2016 the Company announced that a confirmatory sampling programme conducted at Matala had validated an historic report produced in 1984, which was issued by the Zambian Industrial and Mining Corporation and estimated that an additional 75,000 tonnes of measured non-code compliant

  mineral resources exist in recently identified historic dumps and tailings adjacent to the Matala deposit.

  
  

  Alecto has identified the potential to develop a low-cost, profitable, small-scale 400,000 tonnes per annum open-pit mining operation at Matala and its satellite deposits, targeting the oxide and transitional ore and using a simple crushing, milling and gravity circuit with subsequent direct cyanidation.

  
  

  With this in mind, Alecto appointed PenMin in December 2015 to provide consultancy services on Alecto's 100% owned Matala Gold Project in Zambia. Pursuant to that arrangement the Company and PenMin have successfully completed:

  
  

• Technical and commercial evaluation of potential EPC suppliers and operational contractors, with specific reference to their ability to provide vendor financing

• Preparation of the FS on the Matala Gold Project, targeting the oxide resources defined in Coffey Mining's JORC compliant resource estimate

• A detailed development route and associated planning for the Matala Gold Project

At the end of January 2016, Alecto and PenMin jointly completed an audit visit to Xinhai in China, to establish the potential for partnering with Xinhai on the development of Matala. Xinhai is a privately owned, global leader and pioneer of EPC services in China. A specialist in mineral processing plants, its expertise extends to mineral testing, engineering design, equipment manufacture, installation, training and commissioning. Xinhai have completed more than 400 global EPC mining projects for both foreign and Chinese companies (see www.xinhaimining.com for further details).

Alecto has satisfied itself that Xinhai has the necessary technical and commercial capability to perform the design, build and operational services that are required to bring Matala into future production.

PenMin completed and submitted an initial FS at the end of January 2016 to meet the needs of Xinhai and Chinese finance houses. Following its own detailed technical and commercial review, Xinhai is now satisfied as to the technical and financial outcomes of the FS.

The key outputs from the FS for the assumed life of mine are summarised below:

Key Financial Measures:

Project NPV (8% discount rate) $28,592,203

Project IRR (unlevered) 52%

Payback Duration 31 months

**ENDS**