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Stratex International interview transcript with Bob Foster, CEO

Harry Norman: Hello this is Harry Norman: for Proactive Investors, and welcome to another Proactive audio interview. Today is the 22nd of December 2009 and I’m talking with Bob Foster.  CEO of Stratex International.  Listed on the AIM Market, Mining Sector.  Stock ticker STI.  Share price 3.12 pence. Market cap £7.8 Million Sterling. Web address

Harry Norman: Thank you for joining us for this interview Bob. 

Bob Foster:  Harry it’s always a pleasure to talk to Proactive.
Please give investors a brief introduction to Stratex and the company’s business model.
We formed the company in 2004 and listed in 2006.  The major focus has been on Turkey, primarily gold. The major focus in more detail has been gold exploration.  But more recently we’ve recognised the importance of actually taking some of our projects to production.  That became particularly apparent at the beginning of this year when, like so many small companies, our share price really took a serious hammering.  And we had to remind our shareholders and our investors where we were going.

So effectively we have four strategies: 

One is to put key projects into production.

The second is, with some of our better exploration projects, to minimise the exposure and the financial risk by bringing in good joint venture partners.

The third is the early stage exploration projects - to take those forward ourselves and we continually hope that one of these will develop into a major discovery.

And the fourth, and still some way off yet, but clearly it’s something we have an eye on, is the opportunity for some form of merger and acquisition where we can actually move up to the next level and really move things forward much more rapidly and with more substance.

What progress has been made with Stratex’s gold exploration projects at Altintepe and Inlice in Turkey?

Harry, we’ve identified a very appropriate joint venture partner - a Turkish, privately owned company called NTF with major expertise in civil engineering and earth moving and contract mining.  They’re earning into the projects by taking us through feasibility on both - to the tune of $2 Million on Inlice and, subject to a $1/2 Million scoping study, to the tune of $2 ½ Million on Altintepe.  This takes away a considerable amount of the financial and technical risk to us.  We’ve already started scoping studies and pre feasibility studies funded by our partners NTF on the basis of a Memorandum of Understanding.  They’re funding it to the tune of at least $50,000 a month and the work is progressing very well.

We’re close to signing the definitive agreement.  The only delay there has been in relation to tax structures and the capital structure of the joint venture company.  That should be signed early in the New Year.  And they themselves, NTF, are committed to making mining their core business in the future, which gives us a great deal of comfort as well.

What convinced Teck Resources to enter a joint venture with Stratex for the Hasançelebi high-sulphidation gold project in central Turkey and what progress has been made there?

Well Harry you might remember that Teck in fact were a founder shareholder in our company before we even listed - and that was on the basis of a degree of recognition that David Hall the Chairman, and myself had been round the block many times and could contribute something significantly to any future exploration.  Of course we’ve brought on board now Bahri Yildiz in Turkey, our General Manager and Geologist, and we’re moving forward.

Teck invested in the Konya project and put $1½ Million into that.  No major drill intersections were returned and they decided that it probably wasn’t quite for them.  And also of course Teck themselves have been through a pretty difficult time over the last year, but have restructured and are moving forward pretty positively now.

I think having restructured and taken a new look at life, they’ve always had a major focus on Turkey with a strong team there. 

They’ve looked at our Hasançelebi project and they share the view that we have, that it’s a very substantially aerially extensive project and has a lot of gold upside.  800 metres plus of gold-bearing rock.  And they’re committed to spending $1/2 Million by the end of the next year.  This expenditure will include at least 2,000 metres of drilling, which they and we see as key to actually taking this project forward.

They can acquire 51% [50% is as stated in the interview but should have been 51% - up to you if you have to stay with the reported 50%] by expending a total of $2 Million and then taking that to 70% by expending a further $3 Million. 

The work has already started.  It will slow down during the winter months.  But they’re very positive about the project.

What progress has been made with Stratex’s joint venture with Centerra Gold for the oxide high-sulphidation gold project in Central Anatolia in Turkey, Bob?

Excellent progress.  Just like Teck Resources, we regard Centerra as an ideal joint venture partner.  Considerable technical expertise and the appropriate cash to help us all go forward.

At this stage they’ve spent their first committed $1/2 Million to undertake drilling and further exploration of the key Ortacam Zone within the project itself.  The outcome of that most recently has been the press release on the 42 metres returning at 2 grams per ton of gold.  We’ve found them very supportive in all we do.  They take an intelligent and direct interest. - technical interest - in what we’re doing.  There will be a slight downtime now as we review data and allow the snows to disappear and in March/April we will be up and running again and we look forward to taking this forward.

They have the option to expending a total of 3 Million to get to 50% - that’s US dollars - and a further 3 Million to get to 70%.

Bob do you still believe there are some significant gold deposits undiscovered in Turkey?

Without doubt - the country is still very under-explored.  It’s a huge country with all the right geology, as geologists will tell you.  It’s probably a case that we’ve found the most obvious gold deposits sticking out at the surface.  And perhaps an element of maturity here now - we have to start looking for signs for what might be beneath the surface.  At this stage it only has to be a few tens of metres.   Subtle geochemical signatures, geophysical signatures.  We believe the upside is still very high and, although we have begun to look elsewhere outside Turkey, it is still our major focus of exploration, and will remain so for some years to come.

Stratex recently acquired 5.6% of Ethiopia-focussed Sheba Exploration plus an earn into Sheba’s Shehagne project and a joint venture with Sheba for other projects in Ethiopia.  What’s so compelling about Ethiopia and Sheba Exploration?

Well Ethiopia geology-wise is just as exciting, for slightly different reasons, as Turkey and without doubt it’s more under-explored than Turkey.

It has two different kinds of geological terrains.  One that is very old, that’s 700 to 1,000 million years old, and one that’s very young.  Sheba has been focussing its exploration on the northern parts of Ethiopia and some of the oldest rocks there, with some early discoveries or indications of gold.  We liked what they were doing.  We’d read their press releases.  We’d done a diligence on their projects, obviously with their approval.  And we saw this as an excellent opportunity to establish a firm footprint in the country based on underlying assets, which we would then develop in conjunction with our new joint venture partners, while also looking elsewhere.

I think a key point to make here Harry is that some of the ground held by Sheba in the northern part of the country is just across the border from discoveries in Eritrea, which are of very major significance.  Sunridge’s, base metal and gold discoveries and also of course Nevsun’s major Bisha copper-zinc-gold deposit as well.  So all the indications are very positive.

Stratex recently announced the first discovery of epithermal gold mineralisation in Ethiopia.  What is the significance of this discovery and is this prospect part of your joint venture with Sheba Exploration, Bob?

This is outside our current relationship with Sheba.  It actually represents the combination of two years of conceptual thinking, modelling and wondering where to explore for this kind of gold mineralisation.  Our analogy really was some of the gold mineralisation of southern parts of South America, particularly the Cerro Vanguardia gold deposit, a major multi-million-ounce vein-type deposit formed when the Atlantic Ocean began to open. 

If you can imagine in Eastern Ethiopia and through Kenya of course we have the East African Rift.  That is a very young ocean attempting to be formed.  It was an obvious place to go and in fact our first visits there by David Hall and our exploration team came up with some strong indications.  And so on that basis we are very very excited about it.

What is Stratex’s financial situation going forward Bob?

Comfortable.  Way back in 2007 we were fortunate enough to raise £7 Million at a time when the markets just began to tremble - and long before the major convulsions of mid late 2008.  Since then of course we’ve been putting the money primarily into exploration in Turkey - in some good exploration projects which we’re now funding by joint ventures, so that minimises our financial risk.  Taking our two gold projects forward in Turkey of course has minimised our financial and technical exposure.

We’re virtually cash neutral in terms of expenditure in Turkey.  This gives us the opportunity to look elsewhere.  Add to this the fact that signing the definitive agreement with our partners NTF will put another $1 Million in the bank. And exploring in Turkey and given a discovery we actually can claim back a significant amount of VAT, so we’re due back the best part of another $1 Million over the next year or so. 

So we don’t have to turn to the markets now.  We will turn to the markets when we feel it’s appropriate.  We’ve been given to understand that the markets rather like what we’re doing and we could raise money.  But we’re in a happy position to be able to pick and choose the appropriate time - and perhaps the appropriate events around which to raise money.

What news flow can investors expect over the next twelve to eighteen months from Stratex Bob?

I think it’s a very positive view to take here Harry.  Of course the joint venture with our partners NTF with Inlice and Altintepe going through feasibility and, all being well, into production.  There’s going to be a long strand of news flow as we undertake the infill drilling, update resources on both projects, and metallurgical test work etc.

The remainder of the exploration projects in Turkey - things will be a little quiet over the next two to three months.  But come March-April we’ll be seeing a complete ramp-up of the exploration there and, with our two joint venture partners funding projects and our own exploration, there will be a lot to report.

And of course Ethiopia climate-wise at the very least allows us to explore all the year round and, with our two major projects there with our partners Sheba and with our new project in the Rift Valley, there will be a continuous news flow from that region as well - so a lot of news.

Remember Proactive Investors is not an investment advice service.

Disclosure: The author holds no position in the company