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Ortac Resources looking to leave lasting impression

Not many mining companies make you wonder whether they should categorised in the stock market's Leisure category but Ortac Resources is doing things differently.


Vassilios Carellas is attempting to create a blueprint for developing natural resources - one designed to bring the local stakeholders with him.

His vision, put forward on behalf of his firm, the Slovakia-focused Ortac Resources (LON:OTC), is about creating a lasting legacy from the area's natural resources, rather than simply using its existing benefits. The concept's working title is ‘Sturecland’.

The comments of the Mayor of Kremnica, the mediaeval town near the company's 1.36mln-ounce Sturec gold and silver deposit, reveal her opposition towards exploitation.

"I personally don't intend to participate in any of the planning, or balancing of the economic, social and technical realities," she said in reply to a request to dialogue from the AIM-listed group.

Not all the area’s inhabitants share those views, and opposition is giving way to curiosity.

So, Ortac's response has been to go the local stakeholders and ask them what they want and how they envisage their natural resources being developed.

What has come back from this period of consultation is a proposal that combines winter pursuits, adventure sports, health spas, a theatre and a biodiversity trail.

All are ideas garnered from that interaction with the people who live and work in the area.

The ultimate plan is to leave a tangible, useful and profitable social legacy that will create and sustain jobs, re-invigorate the economy and perhaps even create a new cottage industry.

According to Carellas this is not merely mining rehabilitation, but a process where mining is an interim step towards transforming the natural resources at Sturec into something that will continue to generate revenue and interest long after the gold and silver has been extracted.

"Around the world, natural resource companies big and small are encountering resistance to developing their projects,” explains Carellas.

“To counter this, companies have traditionally gone down the road of extensive PR campaigns, which although generally quite effective with local and regional governments, risks raising suspicions amongst local communities that do not share the companies' vision in the development of these natural resources.

"Ortac is fortunate to be well financed at a time when other natural resource companies are struggling to raise finance and we need to maximise this situation to get the best shareholder return.

“The approach we are taking is bottom up and we have concluded that our local stakeholders are in effect our PR and only if we can get them onside, will it be easy for a government to put their hand up and say this is a good idea.”

April's pre-feasibility study (PFS) of the Sturec gold and silver deposit revealed it has “good economic viability” with an independent review by consultant SRK giving it a net present value of US$195mln. It also recommended moving on to a bankable feasibility study (BFS).

However, prior to completing the BFS (or the environmental impact assessment which precedes it) the Sturecland concept will have to be first ‘ratified’ by the local stakeholders. This requires Ortac to begin co-creating the partnerships on the ground, with commercial enterprises willing to take the leap of faith.

Then, like any other project, economic, social and environmental costs and benefits will be weighed up and the project designed.

The local stakeholders will get the final sign-off, Carellas reveals.

"We are breaking new ground. This is not the normal way a natural resource company would develop their projects,” he explains.

“Traditionally governments and companies would agree on a project and then advise the community.

“Today, Ortac is open to working with the authorities and local stakeholders to co-design a project that will ultimately result in creating that win-win situation. We are not merely informing, but actually involving the stakeholders in the project itself." he adds.

Should the ‘ducks line up in a row’ as envisaged, the interim mining phase to the Sturecland concept could begin producing gold and silver from Sturec in two to three years' time; however, there are still many hurdles to be overcome.

Although the anti-lobby locally is still active, Carellas says those in favour of hearing more about the Sturecland concept are more willing to speak up.

The fact this isn’t simply a black and white ‘anti-issue’ was recognised recently at regional government level, Ortac’s chief executive adds.

In the meantime, as Sturecland goes through the realisation process, it would make sense to add on cash-generative production.

RFC Ambrian, in a recent research note, said it understood Ortac had assessed a number of potential projects, though understandably, Carellas is unwilling make comment on the broker’s assertion.

Ortac's cash position of £4.2mln at the start of August gives it the financial firepower to deliver a deal.

The share price, which is off 32% in the year to date, leaves Ortac on an enterprise value (the market cap minus cash) of just £3mln.

Brokers reckon it is worth significantly more than 0.315p a share. Ambrian has a target of 2.05p, while Cantor Fitzgerald has set its sights much higher at 5.5p. So, plenty to go for.

Cantor reckons Sturec remains an attractive prospect based on its robust economics, but has clearly become a much longer term play given the additional work required to satisfy local stakeholder concerns.

The final word goes to Carellas: “We know there is value in the ground. We believe we have a concept creates that win-win for everyone concerned.”

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Price: 2 GBX

Market: AIM
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