Stratex International’s (LON:STI) modest yet potentially valuable Inlice project is now awaiting sign-off from the group’s Turkish development partner.
This morning Stratex revealed the positive findings of an independent review of the Turkish project’s feasibility study. This was done to look at an alternative approach to proposed mining operation.
The plan is to double the amount of mining, to 2,000 tonnes from 1,000 tonnes per day, and halve the four year mine life.
The original study was based on a single 8-hour daily shift operation and as such was way below the mine’s potential capacity.
The relatively small 60,000 ounce mining reserve and the four year mine life meant that the project’s economics were not ideal, according to chairman Christopher Hall.
“Quite clearly stretching out a 60,000 ounce reserve over four years isn’t the best way of making money, and the original rate of return reflected that,” Hall told Proactive Investors.
“We felt that something better could be done. So right from the beginning we wanted to see a more appropriate throughput.”
The changes have led to a substantially improved return of 178% (IRR) and increased the project’s net present value to US$17.5 mln, according to British consultant GBM Minerals Engineering.
According to Stratex there is still potential for the life of the Inlice mine to be extended beyond the initial two years, by switching to un-oxidised ores (which have comparatively low sulphide content).
This would require additional processing and recoveries would be lower.
But Hall explains that any extension to the initial mining life would be comparatively lucrative because it would come after the initial capital ‘pay-off’ and as such it will add to the mine’s profit making potential.
First though, Stratex must wait for the reviewed and revised feasibility to be considered by the operating Turkish partner.
He explains that the Turkish partner is pleased that the economics have now improved but some issues, such as the higher initial capital investment, have still to be considered before the project is signed off into the development phase.
Part of this consideration comes down to the preferred avenue for raising the project financing.
Hall adds that the respective teams are meeting fairly regularly to discuss the possible development and it is hoped that there will soon be more concrete thoughts of where the project is going.
“This is one of the disadvantages of offloading (the major proportion of) a project, even though it was an intentional move for us.
“We don’t want to have to build a team of mining engineers, metallurgists and operating people. So (waiting like) this is the price you have to pay to outsource those responsibilities. Our partners are very much in control, but we are consulted at every stage.”
At the moment the timetable for the potential development has yet to be set, Hall explained.
However, once agreed the project could potential move quite quickly and with an initial construction period of just six months Inlice could soon be generating cash-flows for Stratex.
Inlice, which is quite modest in size, is one of two near term projects that are poised to bring cash into the Stratex business.
Hall says Altintepe is still on track for production in 2013. The next step will be the application for the environmental permit, which is expected to happen shortly.
Unlike with Inlice, the Stratex share of Altintepe’s development costs are being carried by the Turkish partner.
“Inlice is not really going to set the world alight, but it will be very useful to have cash coming in. But I think Altintepe will be more significant as I believe it will be larger scale production, it will be a minimum of 30,000 ounces per year and it may be better than that.”
Meanwhile, the Oksut project is the company’s only 1 million ounce plus project in Turkey. Currently four rigs are working Oksut, and a fifth is being sourced.
Centerra, the JV partner, is advancing the project and like at Altintepe, Stratex doesn’t have to contribute financially on the project.
The focus of Stratex’ spending is on its exciting and potentially high impact projects in Africa, where it has a series of joint ventures – in both east and west.
In the east of Africa it is planning three drill programmes focused on the wholly owned Blackrock, the Megenta prospects in Ethiopia as well as the Pandora discovery in Djibouti.
Meanwhile Hall says the upcoming exploration campaign may also include drilling in West Africa, with drill perhaps starting before the end of this year.