The Stratex model is in fine fettle it seems, after the company announced the signing of a new deal on one of its lesser-known Turkish licenses. Under the terms of the deal, the Turkish company Anadolu – a subsidiary of a major electricity generator – will spend up to US$1.5 million on drilling at Stratex’s Karaağac gold project in the west of the country, and if as a result of Anadolu’s work JORC resource of 50,000 ounces or more is discovered will pay US$500,000 in cash to Stratex. Stratex will also be the beneficiary at that stage of a 1.5% net smelter returns royalty on any future production from the Karaağac.
It’s been a long time since Stratex made much of a mention of Karaağac, and it’s probably fair to say that the project has been on hold while the company has had other, bigger fish to fry. It still has those fish, and in particular the Altintep project which is due to go into production within a matter of weeks.
So realising value from a second tier asset like Karaağac makes a lot of sense, providing the right deal is on the table, and this one looks fine on its own terms. Indeed, Stratex’s Bob Foster professed himself “delighted”. The company’s modus operandi remains to find and develop projects, and ultimately to monetise them. Karaağac was a project that the market was ascribing no value to that may in the end bring in some useful cash down the line.
After all, it’s worth remembering that true to form, Stratex will remain in control on the ground. The company plans, as it so often does when it cuts these sorts of deals, to be the operator. That means exploration ought to be done efficiently and effectively and, more to the point, if there is 50,000 ounces on the project to be found Stratex will find it.
And if, in the end, Anadolu decides not to proceed with further work, the license will revert back to Stratex’s Turkish subsidiary. It’s a neat trick if you can pull it off. And Stratex have done this kind of thing more than once.
Not that the market took much notice. On the day the shares slid back slightly as the gold price gave ground. But deals like Karaağac are all about the long-term value, and in any case everyone’s now looking forward to the next big liquidity event – that imminent gold pour from Altintepe.