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Ortac Resources looks to develop "golden value" through new opportunities

The Slovak focused developer is assessing a number of investment opportunities which, as a result of the current distressed junior equity markets, have a historically low entry cost


In a bid to make the most of its money during these challenging economic times, natural resource-focused Ortac Resources (LON:OTC) is not only looking for other high value projects to add to its portfolio.

It also says it is "facing up to the challenge laid down to the mining industry in Europe and elsewhere", and creating value through contributing to sustainable development.

The currently Slovak focused developer is assessing a number of investment opportunities which, as a result of the current distressed junior equity markets, have a historically low entry cost.

These opportunities are at an advanced stage, or near production within Europe and its fringes, it told Proactive Investors.

Chief executive Vassilios Carellas said it was central to Ortac’s strategy that it be alert to all opportunities where it can add real value.

"We are on the lookout for other opportunities. We think the market at the moment is perfect for that. 

"Like us, there are companies that have had a rough time in the markets of late, but where we have the advantage is that we are in a strong cash position and have the ability to access more should it be required," he said.

"I don't think the market is valuing exploration at the moment," added the company's boss.

“London at the moment wants to see near term production.”

Therefore, he reckons it makes more sense for Ortac to go out and acquire ounces, rather than risk money it has trying to prove up ounces in the ground.

Its business model concentrates on developing existing reserves rather than looking for new ones.

Such a street-smart approach from Ortac should be no surprise to investors. It has a management team steeped in natural resource investment and development  experience, coupled with an advanced, low risk project brimming with potential.

Ortac says its "fundamental acknowledgement of the need to embrace the full potential of where its assets are located reflects the attitude adopted by countries and communities in the world today".

The company is "taking the initiative to be at the forefront and acknowledge that natural resource development without a focus on regional post-development sustainability is a thing of the past", it says.

Meanwhile, its savvy hunt for acquisitions is bolstered by the recently announced £20 million equity financing facility agreement with Darwin Strategic, which means it has ample funds to snap up any deal. The facility allows the firm to draw down at any time over the next three years.

Along with the access to additional funds, the company has more than £7.4 million in the bank, while its £3.5 million development budget for its Šturec project in central Slovakia is safe and set aside.

At Šturec, for the reasons outlined above, Ortac is focusing on furthering the technical and environmental studies under community guidance rather than exploring for potential upside (although, that scope exists to find further ounces at the project is in little doubt).

The current work will lead to a pre-feasibility study, which the firm plans to have completed by the end of the year or first quarter next year.

Progress at the company’s Šturec project has also recently been marked.

Only last month, following 2011's infill drilling, the JORC compliant number of gold equivalent ounces at the project was upped to 1.36 million from 1.1 million, along with a 75 per cent increase in ounces to the higher confidence measured and indicated ounces to over 1 million ounces.

That came on the back of a scoping study, which described the Sturec project as "robust" and "profitable" and said it would provide an excellent leverage to the gold price.

Indeed, the resource upgrade prompted broker Optiva Securities to say that a 2 Mtpa (million tonnes per annum) operation was now technically and economically achievable for Šturec, a key reason why it added that the market was undervaluing Ortac.

A 2 Mtpa operation would produce 947,000 ounces of gold equivalent, working out at an estimated net present value of $119 million, analyst Jason Robertson had said.

On its models, Optiva gave a valuation of £81.5 million for the company, or 3.5 pence a share. Significantly, that ignored any exploration upside as well as its investment in Vatukoula Gold Mines (LON:VGM).

All of the above, which significantly de-risks the Šturec project, also enables Ortac to be a strong regional player. 

The share price performance of late following the resource update and the £20 million financing facility had analysts at Seymour Pierce scratching their heads. 

Two other major factors set Šturec aside from other projects and they are both down to its location, Carellas was keen to point out.

One is the low infrastructure requirements on site and the other is the local skilled workforce available.

The licence area has overhead power lines, water and is easily accessible from Vienna and Bratislava, said Carellas, who added that "all the services and infrastructure required to run and operate a mine were more or less in place".

The skilled and educated local workforce, meanwhile, allows advanced technology and equipment to be used in operations, which would not be possible in less developed mining addresses in the world.

As well as newsflow sure to come from Šturec over the coming months, investors can expect more news from the firm's other advanced area - ZlatáBaňa, said Carellas.

Here, following confirmation drilling last year, the company is looking to convert some of the historic Slovak classified ounces into new JORC ounces.

So there is plenty for investors to mull over when it comes to Ortac Resources - a firm working to co-develop “golden-value” with its key local stakeholders in a way that its shareholders can earn decent return on their investment, and be proud of how this is achieved.

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Price: 4 GBX

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