Stratex International (AIM:STI) is an exploration company, pure and simple. They are not mining engineers - they are exploration geologists. And you only have to listen to the passion with which chairman David Hall and CEO Bob Foster talk about the importance of exploration and development to realise that they are dedicated to their task. Without explorers there will be no discoveries. Without discoveries there will be no new mines. And without new mines there will be no resource replacement and insufficient new supply to meet the continued demand, right across the board, for both base and precious metals.
That's the context into which Stratex firmly placed themselves when they moved into Turkey some four years ago. Working in a strategic alliance with Teck Cominco, they had jointly identified a number of volcanic provinces throughout Turkey which - after initial reconnaissance by their team of experienced consulting geologists - they believed had the potential to host multi-million ounce gold deposits and significant base metals. The concept was simple: find it, prove it up, and move it on to a developer, either selling outright or retaining an interest in project upside in the form of joint venture or royalty. If the project was big enough, it would be offered to Teck Cominco or another major developer - and for a while, Teck Cominco and Stratex did work in partnership, with Teck's local subsidiary funding exploration of the Konya volcanic province, where Stratex had made their maiden discovery at Inlice. Teck have now relinquished their Konya earn-in option, due to a change in their corporate focus, and 100% ownership has reverted to Stratex.
At the recent AGM, Stratex outlined a formalisation of their very specific exploration and development strategy, whereby a joint venture vehicle would be formed - initially wholly owned - into which Stratex would vend its projects at Inlice and Altintepe, where 576,000 ounces of gold oxide resource is now ready for further development. The chosen development partner would be well-funded and technically capable and would earn into the JV by committing development finance.
That partner has now been found. Last month, Stratex announced a Memorandum of Understanding with a major Turkish construction and mining company, NTF Insaat Ticaret Ltd Sti (NTF), which is expected to complete within 90 days. The joint venture company will be established in a 45/55 ownership ratio between Stratex and NTF, with NTF providing development funding and Stratex vending in Inlice and Altintepe, plus future sub-1 million ounce (or equivalent) discoveries, thus creating a significant jointly owned gold production company. Both Inlice and Altintepe will now be put on the fast track, with the aim of bringing Inlice into production within 18 months, with Altintepe following within three years from now. Subject to satisfactory feasibility studies, combined gold output could be as high as 50,000 ounces in the 1-2-year-overlap period before Inlice closes down and the focus turns entirely to Altintepe, where a mine life of as much as 8-9 years at between 30,000 and 50,000 oz is a real possibility.
So - two down and several to go! Stratex's pipeline of exploration targets is under continual development, and the company have been very busy over the last six months. Next off the blocks after Inlice and Altintepe - and now at the top of the pipeline - is Öksüt. Situated in the middle of a string of volcanic prospects, running almost east west through the Turkish mainland, Öksüt contains several discrete - but possibly linked - silica zones. The initial focus has been on the Ortaçam Zone, an area of 200 metres x 300 metres, where mineralisation is hosted in steeply-dipping breccia zones many of which appear at the surface as silica outcrops. The deposit is open-pittable, and drilling so far shows that complete oxidation extends to a depth of at least 100 metres, implying good potential for low cost mining and processing. The zone has turned up some excellent drilling results, including intersections of 270.20 m grading 1.22 g/t Au; 15.70 m at 1.82 g/t Au; and, most recently, an exceptional from-surface intersection in ODD-12 of 93.60 m at 5.61 g/t Au. The upper part of this core included grades of 30.2 g/t and 26.9 g/t in a near-surface high-grade zone that yielded an intersection some 12 metres long in which the lowest assay was 8.83 g/t. Even more exciting is the recognition that one major intersection (38.20 m @ 2.94 g/t Au – in ODD-8) actually has no surface expression at all!
Following completion of a soil geochemistry survey some 2,000 metres to the west of the Ortaçam Zone, a new area of mineralisation has been defined, running for approximately 1,300 metres north-south, and underlain by a previously unrecognised zone of quartz-alunite alteration and pockets of vuggy silica. Stratex now believe that the intervening low-lying ground has become a high priority, to establish whether the two zones are linked, and permitting is presently being sought for trenching and drilling in the area.
Next in the pipeline is the further development of the Konya volcanic province, which is currently focused on three proven gold-bearing porphyry targets, at Karacaören, Doğanbey and Gölcük, and a fourth target at Kozlu, which shows evidence of also being a porphyry structure. Drilling has been carried out at all of the first three targets, and long intersections of anomalous gold were encountered, the most interesting of which was at Karacaoren, which returned 170 metres grading 0.12 g/t gold from surface, including 66 metres at 0.18 g/t. Grades encountered in the handful of exploration holes so far drilled are not economic, but the limited drilling has revealed the existence of potentially large tonnages in all three mineralised systems, as well as the prevalence of porphyry structures in the district. Following the relinquishing by Teck Cominco of their option over the Konya project, Stratex are now seeking exploration partners to assist in the further development and exploration of this important region.
Hasançelebi, which lies about 250 km east of Oksut, features the outcropping silica ledges now familiar from Inlice. These run in two - or perhaps three - almost parallel lines or zones, over a strike length of at least 7 km east-west, and. The individual zones range from 5 m to 20 m in width, with volcanic rocks lying between them, and the mineralisation dips to the north, with the dip varying between 20 and 50 degrees. Continuous chip sampling along one of the zones has revealed 0.69 g/t Au over an average width of 7.4 m along a strike distance of 858 m, with a higher grade section averaging 0.99 g/t. The next step is channel sampling, trenching and - finally - drilling to test the extension of the mineralisation to depth and to determine whether the three individual zones are actually discontinuous surface outcrops of a zone that might be as much as 100 m in true thickness.
Stratex will also drill- test the potential for continuation of the gold-bearing silica at a prominent break along the strike of the multi-zone prospect. As was found in the Inlice Gap Zone, the easily weathered silica outcrops can erode away above surface, leaving a "blind" deposit only discoverable by drilling. The geological evidence so far at Hasançelebi points to the silica and contained gold being stratigraphically controlled, i.e. confined to discrete volcanic beds, which signifies potential for high tonnages. Giant examples of such bed-replacement deposits include the multi-millon tonne Yanacocha and Pierina mines in Peru.
Work has also continued at Altunhisar, where surface work has shown potential for a porphyry system underlying a typical "lithocap" at Karanlikdere, and the now familiar outcropping silica at Balci which has shown elevated values of gold and molybdenum. At Murat Dagi, which includes the Karaagac gold deposit with an inferred resource of approximately 157,000 oz Au, Stratex have transferred those areas which offer no prospectivity for economic gold to Kucuk-Kral-Antimon Kursun Maden, a private Turkish mining company focused on the production of antimony, in return for a 2.5 % Net Smelter Return royalty on all future mineral production from the licences. Partners are being sought to take on the further development of the retained Karaagac gold deposit to extend the existing resource.
And as Inlice - the maiden discovery - and Altintepe leave the pipeline, in at the bottom comes a clutch of new licences at Sehitler. Situated in north west Turkey, close to the Greek border, Sehitler lies on an extension of the known mineralised belt which hosts Eldorado Gold's Perama Hill and the Sappes high-sulphidation gold deposit. The area is underlain by volcanic rocks that have been extensively altered to silica and quartz-kaolinite and also contain hydrothermal breccias. Gold pathfinder minerals have been discovered in initial prospecting, and a programme of mapping and sampling will now be undertaken to establish potential.
Find it, prove it up, and move it on. It's a concept that the market finds hard to grasp. The market likes to see ever-growing resources and progress towards production. The market likes to see high in-situ values and good potential revenue. The market likes to see gold being poured and profits rolling in. Operating outside the risk-fraught, high cost production space, Stratex's virtually risk-free future profits from outright sales, production JVs with the right partner, and retained royalties don't seem to cut the mustard with the market.
Perhaps the market should look again.
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