Bob thank you very much for joining us for this interview.
Bob Foster: Always a pleasure Harry.
Please tell investors about Stratex International and its business strategy.
Harry - essentially we are an exploration company focussed primarily on gold but with interests in base metals - copper, lead and zinc, but our exploration focus over the last five years has been gold. We are an exploration company but we see the clear need to monetise discoveries and so we’re taking our various discoveries forward in that respect - into production with joint venture partners and there’s always the option of royalties or sales. But monetisation of the discovered product is critical.
Do you believe that million ounce plus gold discoveries are still possible in Turkey and that Turkey is a serious mining destination?
Oh absolutely. As you’re aware Turkey sits along a major metallogenic ancient mountain belt called the Tethyan Belt. It’s very complex geology and for that reason alone there’s a lot more to be discovered but of course Eldorado Gold’s Kisladag Project, a 16 to 17 million ounce discovery, is now in production; Efemcukuru, a million ounces plus project is going into production; and Koza Altyn, a Turkish company listed on the Istanbul stock exchange recently for 1.4 billion dollars, has a new gold discovery of one million ounces in western Turkey.
On a much smaller scale our projects, Inlice, Öksüt and Hasançelebi, also demonstrate the potential for new discoveries. Over the last five years we have found those exclusively ourselves and Öksüt and Hasançelebi in particular have considerable upside.
What are the terms of and your hopes for your joint ventures with Teckrasources for Hasançelebi and Centerra Gold for Öksüt in Turkey?
The Hasançelebi Project - Teck has the right to earn to 51% by spending 2 million dollars and that includes half a million dollars including 2,000 metres of drilling this year and that’s underway. It’s a big system; drilling has commenced together with infill exploration on the wider area. And they have the right after that to continue to 70% by expending a further 3 million dollars.
Öksüt - our joint venture partner there is Centerra as you rightly say. They have the right to earn to 50% within 3 years by spending 3 million dollars. They’ve already met an initial 0.5 million dollar commitment late last year and we’ve now moved to the next phase of exploration with them this year. Drilling is underway - further drilling on the Ortaçam Zone, which was the first discovery within the Öksüt system. This will shortly be completed and we’ll then step out to start drilling the four other zones within this large mineralised system.
We already have of course from the early drilling almost 150,000 ounces of oxide gold; so at this very early start we have an oxide resource in the ground. Ultimately Centerra have the right to go to 70% by expending a further 3 million dollars, that’s a total of 6 million dollars. But, of course, if they get to that level then we will have a major discovery on our hands and we will still hold 30% of it.
What are your expectations of Stratex’s joint venture at Inlice and Altintepe with the Turkish company NTF?
Well firstly Harry I must just emphasise how pleased we are to have NTF as a partner. They have strong in-house mining capabilities and a track record of earth moving for dam construction and contract coal mining. They are earning into the Inlice and Altintepe projects by paying for the Feasibility Studies, which takes a great deal of the technical and financial risk out of our hands.
The Inlice Project is relatively small, plus or minus 100,000 ounces. But Kappes, Cassiday & Associates of Reno, Nevada, have been appointed to manage the Feasibility, nobody better in the world. Bulk samples have already been sent to the States for the metallurgical testing. The Feasibility should be completed by October this year. Assuming a positive outcome, and we have little doubt about that, construction should start in early 2011 and we all share a clear target of production commencing in late 2011.
The production levels are difficult to assess and it really depends on the outcome of the Feasibility Study and we await advice. But we’d anticipate perhaps 20,000 ounces a year for say 3 to 4 years.
Altintepe is a much larger and more complicated project. It’s nearly half a million ounces of gold - oxide gold that is easily to extract and process. We’re undertaking a Scoping Study at the moment which involves infill drilling just to assess what is the best way forward to tackle the Feasibility. The outcome of that Scoping Study will be known late this year and all being well a decision to move to full Feasibility will be taken at the beginning of next year.
We would anticipate being in production - allowing perhaps a year’s Feasibility Study and a year for construction – at the end of 2012, early 2013. Anticipated production level anywhere between 20,000 and 50,000 ounces a year but again it clearly depends on the outcome of the Feasibility Study and the successful outcome of the Feasibility Study.
Stratex has recently acquired interests in the Tigray region of Ethiopia and the East African Rift Valley in Ethiopia and Djibouti. What has the geology got going for it there Bob?
Well firstly and foremost the country is grossly under-explored. It’s had its problems in the past, its dispute with Eritrea, but.moved on considerably from there, a very stable country. The long and the short of it is we have “old geology” and “young geology”. The old geology forms the elevated areas in the central and western part of the country and then dropping down into the Rift Valley and the Red Sea where we see the very young geology - young volcanic rocks generated in the last 30 million years.
Very many analogies there to the geological setting of the southern part of South America where some very significant gold deposits have been found and really that’s why we’ve moved in there. We believe it’s grossly under-explored - very exciting geology.
What can you tell investors about your prospect and plans in the Tigray province of Northern Ethiopia Bob?
We’ve established a presence in the Tigray province through our joint venture partnership with Sheba Exploration. They’d already made a small but significant gold discovery in that part of the country which gave us the confidence to step in there. We’ve also taken adjacent ground, a larger licence with Sheba to the east. The potential here is for gold discoveries and base metal discoveries. It’s early stage exploration at the moment. Our work has confirmed the discovery of Sheba and we’re taking that forward and we wait for the results of the most recent exploration.
And our early step into the area immediately to the east has identified a number of stream sediment anomalies of gold and base metals that need to be followed up very rapidly.
Where is the Megenta Prospect and what can you tell investors about your activities and plans for Megenta Bob?
Well Megenta is our first discovery in the Rift Valley Harry. As mentioned we draw our analogy with some of the discoveries of very high grade gold deposits in the southern part of South America. It was a conceptual play but the first visit by David Hall and Daniel James, our Chairman and Country Manager, led to discoveries confirming that we have gold in veins occurring at the surface. We’ve established a considerable ground position there and our ongoing exploration, which will be in reporting recently, has led to identification on a number of zones containing gold at surface.
This is a relatively easy area to explore from the point of view that satellite imagery quickly targets the specific areas of interest. We sample them and our teams have been on the ground already - results released over the last few weeks are very very encouraging. And we would anticipate being in a position to decide where and when to drill by the end of this year. And of course in the same region we have the Rift Valley extending into Djibouti where we’ve established a very strong ground position there - multiple targets and our exploration work will begin to ramp up there very quickly in the Autumn.
What sort of destinations are Ethiopia and Djibouti in terms of the business side of mineral exploration and development and mining Bob?
Both of them are without a well established mining industry of course but we found in Ethiopia a sound mining code with appropriate exploration licensing which is comfortable and easy to put in place. Royalties and Corporation Tax and general fiscus very appropriate and by no means dissuasive and exactly the same with Djibouti, a clearly defined investment code. The Government has the right in Djibouti to earn up to 35% of a project but that’s clearly stipulated on an earn-in situation and we are very comfortable in both countries.
What is Stratex’s financial situation going forward Bob?
Currently 2.1 million pounds in cash. Of course, put into context, our burn rate in Turkey is very low now, our two major exploration projects being financed by joint venture partners. We’re expecting a significant VAT repayment this year (in Turkey), probably two tranches amounting to about a million dollars; so very very comfortable from that point of view. And we’re in a position now to be flexible about how we direct our money and our efforts between Turkey and Ethiopia. And of course now Djibouti.
What can investors expect from Stratex over the next 12 to 18 months?
Basically considerable news flow. Over the next two to three months we should be seeing drill results begin to flood in from Öksüt and Hasançelebi. And also the surface exploration results from Ethiopia and later in the year Djibouti. We should be completing the Feasibility on the Inlice Projects in October; so soon after that a decision, all being well, to go to production through establishing the construction phase. And looking further ahead first major production towards the end of next year and drilling decision for Shehagne which is the project in Northern Ethiopia towards the end of this year, depending on the results. And probably drilling in Megenta, the first drilling late this year or early next year.
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