Stratex International Plc Interim Results

Stratex International Plc Interim Results

Stratex International Plc, the AIM-quoted exploration and development company focused on gold and base metals with targets in Turkey, Ethiopia and Djibouti, announces its results for the six month period ended 30 June 2011.


  • Solid portfolio of gold and base metal exploration and development projects across Turkey and East Africa
  • Feasibility Study for Inlice completed in April 2011, with first gold production targeted for end Q2 2012
  • Updated JORC resource calculation of 317,256 oz gold at Öksüt - a 115% increase
  • Maiden JORC Inferred resource for Muratdere project in Turkey with total metal contents of 186,000 tonnes copper, 204,296 oz gold, 3.9 million oz silver, 6,390 tonnes molybdenum, and 17,594 kg rhenium
  • Strategic Alliance Agreement signed with Antofagasta plc to undertake exploration for copper in Turkey outside of existing licence areas
  • Option agreement signed with Centerra Gold Inc. to advance the Altunhisar gold project under which they can initially earn 51% for a US$1.5 million of funding within three years
  • Ethiopia - significant new low-sulphidation epithermal gold mineralisation system discovered within the Blackrock project with bonanza gold grades of up to 60.4 g/t gold
  • Healthy cash position of £3.4 million, bolstered by £3 million private placement by AngloGold Ashanti in the Company for a 11.5% shareholding

The Chairman released the following statement
The last six months have seen strong and steady progress on all fronts at Stratex as we advance our portfolio of gold and base metal assets in Turkey and East Africa.  Our Turkish interests, which are largely joint ventured, have returned additional resources which now total in excess of 1.51 M oz of gold ('Au') on a JV-inclusive basis, received further funding commitments from our partners to fast-track project developments, and we finalised the feasibility study at the Inlice gold project, which illustrated that it is economically viable and can be put into production rapidly.  In tandem, we have expanded our land position in the East African Rift with encouraging preliminary sampling in Ethiopia and Djibouti and have secured Thani-Ashanti, part of the AngloGold Ashanti group, as a partner in this newly discovered gold province.  This was followed up in June 2011 with the subscription by AngloGold Ashanti for an 11.5% holding in Stratex, which has left us with a strong cash position at the end of the half year.

Stratex is first and foremost an exploration company.  We are focused on the discovery of large scale deposits, primarily gold or base metals, which would be of interest to major mining companies.  This is a high-risk business and in line with this we approach exploration in a disciplined way, seeking to minimise risk whilst retaining exposure to the large potential rewards.  This is achieved through a balanced portfolio approach rather than concentrating all our resources on one project.  We now have a diverse spread of interests, many of which are developing at no cost to our shareholders.

Our interests in Turkey are maturing. In April 2011 we reported the initial results of a feasibility study on the Inlice gold project, which is now 55% owned by our partner NTF Insaat Ticaret Ltd Sti ('NTF').  We continue to work with them to optimise the approach to the development of the shallow, open pit, oxide reserve of approximately 60,000 oz.  With a low stripping ratio, semi-mobile plant and the probable use of NTF's mining fleet, we are confident that a low-cost, short-life project will generate an attractive return.  Subject to permitting, we anticipate production towards the end of the first half of 2012.
Infill drilling at the Kayatepe and Extension Ridge zones of the Altintepe gold project has been completed and the resource estimate is presently being updated and will be the subject of a separate announcement.

At our Öksüt gold project, also in Turkey, which is being funded by our partners Centerra Gold Inc. ('Centerra'), we declared an upgraded resource in March 2011 with an increase of 115% to 317,256 oz. The JORC-compliant resource estimate, which was independently prepared by Wardell Armstrong International ('Wardell Armstrong'), contains in excess of 75% oxide gold which is generally more amenable to low-cost heap-leach treatment.  Centerra has now earned a 50% interest in the project and is continuing with its US$1.3 million work commitment for 2011.  Centerra has also optioned our Altunhisar gold project in central Turkey with the right to earn into 51% for US$1.5 million and a further US$2 million for a 75% interest.

Our Turkish joint venture partner Aydeniz Group ('Aydeniz') has been working aggressively at our Muratdere copper-gold-molybdenum porphyry project. Drilling commenced in December 2010 with encouraging results reported in January 2011, including some interesting rhenium values.  A maiden resource, independently estimated to JORC standards by Wardell Armstrong, was announced in June 2011.  At a 0.2% copper cut-off, the Inferred resource is 51Mt containing 186,000 tonnes of copper, 204,296 oz gold, 3.9 million oz silver, 6,390 tonnes molybdenum, and 17,594 kg rhenium.  Aydeniz is expected to complete the earn-in of a 75% interest at the completion of the current drill programme and commissioned metallurgical test work.  The resource contains significant amounts of shallower, high-grade copper mineralisation, which could form the basis of a short lead-time, open-pit operation.

Teck Resources Limited, which was a founder investor in Stratex and still holds a 10.6% interest in the Company, is funding exploration of the Hasançelebi gold project in Turkey through its Turkish subsidiary Teck Madencilik Sanayi Ticaret A.S.  The 2011 budget is US$860,000 out of the US$2 million required to earn a 51% interest.  A further US$3 million of investment would lift Teck's interest to 70%.  Drilling in 2010 indicated significant potential for near-surface, low-grade gold mineralisation.

Lastly in Turkey, a strategic alliance was formed with copper major Antofagasta Minerals S.A. ('Antofagasta') to seek copper-porphyry targets.  The project will be funded by Antofagasta and managed by Stratex, using staff freed up from other projects and supported by Antofagasta geologists.  An initial commitment of US$1 million gives Stratex a 49% interest in any defined projects, which can be diluted to 30% on the expenditure by Antofagasta of a further US$3 million per project.

Stratex identified the Rift region of Ethiopia and Djibouti as being prospective for an epithermal gold discovery in 2009 and we have since accumulated a 3,853 sq km land package where mapping and surface sampling have proved the concept.  We believe the geological model is similar to that in Patagonia in Argentina where gold resources rocketed from zero to over 40 million oz in less than two decades.

In January 2011, with a US$500,000 private placement into Stratex, Thani-Ashanti signed a joint venture option on 2,709 sq km in the Afar Depression in Ethiopia and Djibouti and conditionally acquired a 5% interest in our local operating subsidiary Stratex East Africa Limited.  Thani-Ashanti has committed to US$1 million of expenditure including 3,000 metres of drilling at the Megenta discovery.  Expenditure of US$3 million is required for a 51% interest and a further US$4 million per project for a 70% interest.  In February 2011, we discovered epithermal gold mineralisation at our 35 sq km Asal, licence located on the south-west side of Lake Asal in the Republic of Djibouti which confirmed the extension of the Afar gold district across the border, and since then drilling has commenced at Megenta and initial results, which were published in July 2011, are very encouraging.

As a result of its stronger financial position, Stratex has not sought joint-venture partners for the remaining 1,144 sq km of exploration licences in the Rift, which includes land further to the north where surface work has resulted in a number of additional discoveries, notably at our Blackrock project.  Once the results at Megenta have been fully reviewed, plans will be made to undertake drilling on these targets.

Stratex was the first company to commit to gold exploration in the Afar region of Ethiopia and now has a large land package and a significant first-mover advantage, having built up excellent relationships with the central and local authorities.  Surface work has demonstrated the existence of gold-bearing epithermal systems some of which are overlain by remnants of the original surface hot-spring sinter deposits.  Little erosion has taken place and the expected depth of the 'boiling zone', where deposition of potential bonanza grades occurs, is unknown.  It is unlikely that the first round of drilling will deliver an economic discovery but the number and quality of the auriferous targets is high, so we are determined to retain control of a substantial part of the developing portfolio in Ethiopia at least until significant value has been demonstrated.

Stratex land package outside of the Rift region totals 3,164 sq km, and includes our joint venture with Sheba Exploration (UK) Plc ('Sheba') over the Shehagne gold project in northern Ethiopia. We plan to commence a drill programme in August to complete our commitment to Sheba and earn a 60% interest in the project.

AngloGold Ashanti, we believe, recognises the potential in the region and following the transaction outlined above in October last year, invested £3 million via a share placement into Stratex. This was priced at a premium to the market and did not involve any commission payments, maximising the value to shareholders.  Consequently, your Board has determined that, subject to exploration results and market conditions, it will consider spinning off the East African assets into a separate company.  Clearly the future results have to underpin a substantial valuation upon which to base the necessary fundraising and to justify the expenses of a stock exchange listing.  However we believe that a spin off may simplify the Stratex message, allow investors to capitalise on both of the East African and Turkish regional plays if they wish, and result in a higher overall valuation for the combined portfolio.

After the period end in July 2011, we noted an intended bid for the entire issued shares of Sheba by major gold producer Centamin Egypt Ltd ('Centamin'). Stratex holds a 9.4% interest in Sheba having recently exercised its warrants in the company. We view this as an endorsement of the quality of Sheba's assets and again of the wider exploration potential of Ethiopia.  Assuming the bid is successful, we look forward to discussing the future of this project with Centamin, and to receiving the bid proceeds, which will amount to approximately £600,000 in cash and shares, further strengthening our financial position.
The results themselves show a reduced loss of 0.35p per share compared with 0.75p in the first half of last year.  This largely reflects the loss on sale booked in the previous year due to the accounting treatment of the Inlice joint venture.  The underlying operating costs show 3% increase over the corresponding period last year reflecting the increased activity in Ethiopia.  We finished the period with a healthy cash balance of £3.4 million compared with £2.1 million last year.
I would like to thank my fellow directors and all our team for the efforts they have made over the last, very active six months.  In particular, the geologists on the ground in Ethiopia have worked tirelessly under very challenging conditions.  I look forward with great enthusiasm to the coming months as we see the results of the Ethiopian drilling and the approach of cash flow from the first of what we hope will be a series of Turkish gold mines.  Both have the potential to transform the Company and deliver value for shareholders.

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