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UPDATE - Stratex International looks forward to first gold pour at Altintepe in Q1 2015



Stratex International (LON:STI) said construction of its 45-owned Altıntepe gold mine in Turkey is nearing completion.

Construction is expected to be completed before the end of 2014, and first gold pour is anticipated in the first quarter of 2015, the company revealed.

“Altıntepe Madencilik, our 45%-owned operating company, has made excellent progress in clearing the site and advancing the construction programme. Procurement of all of the necessary plant equipment has been completed and Stratex looks forward to being completely free-carried to production,” said Bob Foster. Stratex’s chief executive officer.

"The project's in-house financials, with an all-in sustaining cash cost of US$530/oz and an initial indicated taxable operating income of US$74.7 million, are robust, especially so given that this is based on first-phase production from only the Çamlik East zone, whereas we anticipate an extended mine life as the additional zones are exploited," Foster added.

Stratex will not have to pay a penny towards the construction of the project, as this is being covered by its partner, Bahar.

Bahar will receive 80% of net cash flow from the asset once production starts until it has recovered its investment, with the remainder going to Stratex. Subsequently, net cash will be disbursed on the basis of 55% to Bahar and 45% to Stratex.

Prior to Bahar earning-in to the project, Stratex had only spent US$1.5 million on exploration and hasn't had to commit any subsequent funding towards its development, so, the return on the company's initial investment, based solely on Stage 1 production at the project, already stands at over 300%, Stratex said.

Northland Capital Partners said Stratex is now on the cusp of transforming from a developer to a producer.

“We expect the mine to generate net profits due to Stratex of £2.7mln in FY15 [full –year 2015], £3.1mln in FY16 and £4.3mln in FY17, during stage 1,” said Northland analyst Dr Ryan Long.

“While the accelerated capex repayment is being made to its JV [joint venture] partner and the mine is ramping up, the funds generated from the production lead us to forecast that Stratex will make a profit of £0.1mln in FY15, rising to £0.3mln in FY16,” he added.

“Once the accelerated capex repayment is complete this will increase to and £1.6mln in FY17,” he predicted.

The broker has updated its forecasts based on recent developments and consequently has trimmed its price target from 9.3p to 7.7p, but as this still represents 270% upside to the current share price, not surprisingly the ‘buy’ rating is retained.

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Price: 0.3325 GBX

Market: LSE
Market Cap: £2.57 m

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