Xtract Resources PLC Finds Gold, But Should You Buy Into Its Rally?

Xtract Resources PLC (LON:XTR) is on its way up and is attractive — but it does carry risks, argues Alessandro Pasetti.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Xtract Resources (LSE: XTR) up as it finds gold deposit it can mine straight away,” was the catchy headline from Alliance News on Wednesday.

With a tiny market cap of almost £17m, its stock has risen 128% so far this year on the back of higher volumes, but the rally may not be over yet.

However, I’d argue you must be a risk taker to bet on it (and even then, my advice would be to include this stock in a diversified portfolio). 


Xtract has defined a “significant concentration of gold on the intersection of two major geological structures at the Salvadori prospect at the Chepica Gold and Copper Mine in Chile,” the explorer said on Tuesday, adding that the discovery is the result of the exploration work targeting prospects outside the current mining area at Chepica. 

Jan Nelson, its chief executive, added: “We are delighted with the results of our exploration work in an area where we are able to commence mining within two weeks.

As a result, the stock rose to almost 0.4p from 0.32p, and trades at 0.35p for a daily performance of +9% at the time of writing.

Main Features 

  • The ore zone has been exposed by underground development (on level 2, i.e. 25m below the surface) and has an average grade of 17g/t of gold along 17m of drive intersection.
  • About 1,000oz of gold is expected to be available for production, within two weeks of mining being commenced, in the upper 25m, according to internal estimates. 
  • The area carries a value of $1m at an assumed price of $1,200/oz.

Xtract added that in order to define the ore zone to depth, a drill rig has been purchased and will be shipped to the mine, where it will also be used to define additional ore zones and increase the resource on the mine.

In Other News

Today’s news has contributed to a rise in the share price, but Xtract has been on a roll even before it announced it would raise £3m of new equity to finance its expansion plans. 

On 8 May, Xtract announced the completion of a placing of 1.2 billion shares at 0.25p per share, or about 20% of its total shares outstanding following the new cash injection, which would help it finance “two significant acquisition opportunities” that management believes they could transform Xtract into a “mid-tier producer“.

On 30 March, Xtract announced that it had raised £1.75m that would be used to fund further underground development at the Chepica gold and copper mine in Chile as well as to carry out drilling and metallurgical test work on two copper tailings dumps in South Africa.

The stock has risen 82% since late March as investors have been willing to bet on its aggressive expansion plans. Once caveat is that aggressive production policies are being implemented by large commodity houses, however, while the commodity cycle is unlikely to help smaller players for some time. 

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Alessandro Pasetti has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

Time to sell this FTSE 100 underperformer, says Goldman Sachs

Analysts at one investment bank have a ‘sell’ rating on FTSE 100 stock Diageo. But could a short-term weakness in…

Read more »

Arrow symbol glowing amid black arrow symbols on black background.
Investing Articles

Down 5%, Glencore’s share price looks a serious bargain to me now

Glencore’s share price looks undervalued to me, supported by strong earnings growth prospects and the potential resumption of extra shareholder…

Read more »

Young brown woman delighted with what she sees on her screen
Investing Articles

I’d invest £6,580 in this FTSE 250 REIT for £500 passive income

This FTSE 250 renewable energy enterprise is on track to become a Dividend Aristocrat! Here’s how I’d invest to earn…

Read more »

Investing Articles

Buying 1,000 of some dividend shares today unlocks £45 in weekly passive income!

These shares are among the biggest dividend payers in the FTSE 100. Should investors be buying them now to earn…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

If I’d put £5k in index funds 5 years ago, here’s what I’d have now

Investing in index funds is an excellent way to grow wealth with minimal effort. But how much money can investors…

Read more »

Investing Articles

10.2% yield! 1 of the top income stocks to buy in July?

A 10% yield's pretty rare, but this firm's been growing shareholder payouts for nine years! Does that make it one…

Read more »

Investing Articles

‘FTSE 100 to skyrocket to 10,000’! 1 cheap stock I’d buy before the surge

Analyst forecasts predict a massive surge for the FTSE 100 may be coming by April 2025! Should investors snap up…

Read more »

Investing Articles

My Taylor Wimpey share price prediction for the second half of 2024

Having underperformed the FTSE 100 from January to June, our writer reckons the Taylor Wimpey share price might enjoy a…

Read more »