8th Mar 2016 10:35
LONDON (Alliance News) - Stratex International PLC on Tuesday said commercial production from the Altinepe gold project in Turkey will begin before the end of this month, but the company is still facing some headwinds at the operation.
Stratex owns a 45% stake in the project and is working with the majority owner Bahar Madencilik to move the gold project into the commercial operation stage after pouring first gold from Altinepe back in early November last year.
Although Stratex is on the cusp of commercial operations, its partner will recover its pre-production costs spent on the project from 80% of the net free cashflow once that production begins, with Stratex not set to receive its full 45% share of net proceeds until that is completed.
Stratex did not state the entire amount that Bahar needs to recover, but said it includes USD39.0 million of construction costs - suggesting it is a substantial sum.
The pair are also waiting for a court in Turkey to make a final decision regarding challenges made against the environmental impact assessment for the project, providing an unwanted uncertainty just as the project is taking off.
The claimants' requests for a stay order and annulment of the assessment has already been rejected by a court, but they have subsequently raised their objections to the final awards by appealing them. Stratex and Bahar are now awaiting for the court's final decision on the matter, but did not provide any form of guidance about when that could be taken.
Additional legal disputes concerning the boundary of the project and a " a city planning complaint" also continue, but Stratex said the initial development of the mine will be unaffected regardless of the outcome of those disputes.
On a more positive note, Stratex said a total of 608 ounces of gold were produced and then sold from Altinepe between early November and the end of December, and commercial production is expected to begin before the end of March.
Those initial ounces generated revenue of USD653,716.
"Altintepe Madencilik has made solid progress since the first gold pour in November last year and production is gearing up to the annualised level of at least 30,000 ounces, although heavy snow and resulting muddy conditions have slowed the ramp-up to full production," said Bob Foster, chief executive of Stratex. "First cash flow to Stratex can be anticipated once the targeted production level has been achieved."
"In the meantime the various legal challenges are being managed in a very professional manner and to date the courts' decisions have weighed in favour of Altintepe, although resulting appeals by the various bodies mean that final decisions are still awaited," he added.
Stratex shares were down 8.9% to 1.73 pence per share on Tuesday morning.
By Joshua Warner; [email protected]; @JoshAlliance
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