Alecto Minerals has agreed to a financing arrangement for the construction of its Matala gold project in Zambia.

The Africa-focused gold and base metal exploration and development company Alecto has also agreed partnerships with Chinese company Yantai Xinhai Machinery and South Africa’s PenMin to cover the development and operations of the gold mining project.

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PenMin has conducted a feasibility study on Matala project. This study demonstrates positive economics for a 400,000 tonnes per annum oxide and transitional open pit operation, with a mine life of roughly four years and eight months at a cost of $1,200/oz of gold, with potential for exploration upside as well as underground.

Xinhai will arrange vendor financing in the way of a loan for the design build operate (DBO) contract following satisfaction with the technical and financial outcomes of the study.

"The signing of this agreement and, more importantly, the commitment from Xinhai to arrange Vendor Financing, de-risks the Matala Gold Project significantly."

While Alecto remains the only owner of the project, Xinhai and PenMin will jointly manage the plant’s operations.

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Following the conclusion of the contract, Alecto will take control of the plant.

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Alecto stated that the financing, asset procurement and operating agreements remain subject to agreement on pricing and detailed contractual terms.

Alecto chief executive Mark Jones said: "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 stakeholders."

"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."

Last November, Alecto had acquired Matala and adjacent Dunrobin gold mines.