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Gold pour assures Stratex’s future, says Bob Foster

Published: 10:20 06 Nov 2015 GMT

Altintepe-construction
The Altintepe project

There’s no doubt that pouring first gold at Altintepe in Turkey represents a major milestone for Stratex International (LON:STI).

It’s not just that the company now has the very real prospect of substantial and imminent cashflow in a market where cash is hard to come by.

No, there’s more to it than that.

It’s more like a proof of concept.

Stratex, as many readers will know, has been wheeling and dealing in the small cap mining space for some years now, and with a significant degree of success.

The company has made money through asset sales and partnership deals, ploughing on doggedly through the darkest times after the boom when few other companies were able to achieve anything at all.

But having said all that, this gold pour marks the culmination of a new phase: the first time Stratex has participated in a project all the way to production.

“We’ve turned a corner,” says chief executive Bob Foster.

“We’ve demonstrated in the past that we can find gold projects, bring in partners and sell them. Now we’ve demonstrated that we can build them too.”

Investors certainly liked the demonstration, marking the shares up by nearly 8% on the news to 2.08p, around double the 12-month low of 1.07p hit in May.

There aren’t too many gold mining companies around whose shares have doubled over the past couple of months, which just goes to show that the old adage about a production re-rating still holds true, in good markets and in bad.

But there’s still much more to do.

Indeed, Foster sees the gold pour at Altintepe as just the start.

“It’s the first step on a long road to get us back to where we should be,” he says.

Initially, all eyes will be on how Altintepe actually performs over its first few months of production.

“First production is targeted at about 30,000 ounces,” says Foster. “After a few months we should have a clear handle on costs and how things are going.”

Officially, Altintepe is running on just a three year mine life. But previous work done by Stratex on the ground suggests that joint venture partners Bahar Madencilik won’t have much trouble pushing that out to at least six.

“The resources are there,” says Foster. “It’s just a matter of phasing them in.”

It all adds up to a pretty reassuring picture for shareholders in a sector that has grown used to storms and gloom in equal measure.

First tick in the box is the cashflow that will roll in for several years from Altintepe, and which substantially reduces the risk of equity dilution.

Second tick is the upcoming commencement of the US$20mln royalty on another Turkish asset Oksüt, possibly in 2017. That also reduces the risk of dilution.

But on the upside, there’s the West African exploration programme and the potential to cut a further deal on Muratdere, yet another potential money spinner in the Turkish portfolio.

“Our future is assured,” says Foster. “I don’t think there’s any doubt about that.”

Which will make what happens next all the more interesting.

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