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UPDATE: Stratex International to target cash-strapped projects in strategy shift

Last updated: 11:10 31 Jan 2013 GMT, First published: 12:10 31 Jan 2013 GMT

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Junior gold explorer Stratex (LON:STI) is to use its burgeoning cash pile to buy into advanced projects where funding is becoming a problem.

The new approach will be part of a two-pronged strategy which will also focus on developing the company's current key projects in Turkey, East and West Africa.

Stratex has a cash balance of US$26mln (£16.5mln) following the sale of its stake in the Oksut project in Turkey with the potential for the same amount again in royalty payments.

It will use this money to buy into advanced projects undertaken by juniors where access to funding is becoming increasingly difficult.

In particular, it will look for opportunities where a minimal financial investment coupled with the application of management expertise would have a disproportionate impact on value generation.

Examples of this are drilling to convert a discovery to a resource or carrying out a scoping study on a resource to generate a more tangible value, it said, adding the approach will achieve faster and more economical results than generating and exploring new grass roots projects.

Stratex said it remains committed to its majority-owned projects such as  Blackrock (Ethiopia) and Dalafin (Senegal), and will move these further towards development while the Altintepe gold project in Turkey is being financed through to production by its joint venture partner.

In East Africa, this year will see three drill programmes at Blackrock, Megenta, and Pandora, all within the company's Afar epithermal gold province.

Two of these, Megenta and Pandora, are funded by joint-venture partner Thani Ashanti.

In West Africa, and following the identification of five priority areas, there will be a RAB drill programme on the Dalafin licence.

In Turkey, Stratex aims to use future cash flow from Altintepe to develop a sustainable funding platform for the company's exploration programmes.

Overall, expenditure across the firm's portfolio in 2013 will be maintained at a similar level to 2012, the company said.

"Stratex is now in a strong position to advance projects to beyond the resource definition stage to the scoping and feasibility study stages, allowing the company to optimise the point of disposal or joint venture," said analyst Dr Ryan Long at broker Northland, who rates the stock a 'buy' targeting a price of 12.8p.

"This should enable it to maximise its discovery leverage and return greater value to shareholders."

The analyst also noted that with cash of £16.5mln, the firm's enterprise value is under £7.5mln, which leaves Stratex "very undervalued".

Shares were unchanged today at 5.13 pence.

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