29th Feb 2016 10:34
LONDON (Alliance News) - Stratex International PLC Monday said it has decided not to contribute its share of financing at the Muratdere copper and gold project in Turkey following the fall in copper prices.
Due to the ongoing investment at the project, Stratex was required to invest just under USD1.3 million in the project to maintain its 30% stake until the next financing round in 2017. However, Stratex has decided not to contribute its share, and therefore its stake in the project has fallen by more than half to 14.87%.
"The decision not to invest further funds in the project and to accept dilution is the right decision for this market, when capital needs to be used efficiently," said Chairman Christopher Hall.
When the feasibility study covering the project was released back in March 2015, Stratex believed the price of gold and copper was high enough to warrant the progression of the project, but both commodities have seen prices fall dramatically since then.
Stratex said the initial internal rate of return when that feasibility study was published was at 29%, but due to the falls in prices since then, the internal rate of return now stands at only 14%.
"In contrast to the reduction in overall project risk achieved over the last couple of years, the rising level of future uncertainty now makes further investment hard to justify," said Hall.
"There is no point in Stratex contributing anything, however small, unless we can be confident of seeing the project through either to completion or at least to the point where it can be monetised at a profit. Failure to carry it through would still lead to dilution, ultimately to a royalty, and the loss of that additional investment," he added.
Stratex has informed its partner, Lodos Maden Yatirim Sanayii ve Ticaret AS, of its decision but said it will continue to monitor commodity prices and has not ruled out investing further in the project in the future.
Stratex shares were down 3.5% to 1.76 pence per share on Monday morning.
By Joshua Warner; [email protected]; @JoshAlliance
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