Despite recently announcing a landmark deal and major operational developments, gold miner Stratex (LSE:STI) continues to trade at 0.44p. This is surprising when you consider that most of the company’s current £3m market cap is covered by its cash balance. Stratex has made a significant effort to reposition itself this year by boosting cash, hiring a new chief executive and pursuing a new strategy, but its shares have so far failed to recover from a messy boardroom battle in 2017. Here, Stratex’s CEO Tim Livesey tell us his plans for the business’s assets in Cameroon and Senegal and how these could translate into shareholder value moving forward.
Entry into Cameroon
Stratex entered a two-stage conditional option agreement with Cameroonian firm BEIG3 last month that will allow it to earn up to 90pc in two exploration sites in North Cameroon called Bibemi and Wapouzé. Although the sites are at their early stages, they have already shown promise. Indeed, at Bibemi, a number of sub-parallel and parallel, mineralising gold-bearing structures were found by previous operator Reservoir Minerals. These form a corridor of anomalous gold mineralisation stretching over 15km – thought to be indicative of a new potential gold belt. Meanwhile, a significant gold anomaly is located at Wapouzé containing numerous signs of mineralisation.
Livesey told us the projects have been on his radar since his time at Reservoir Minerals, where he was chief operating officer. At Stratex, he saw an opportunity to finally give the projects the attention they needed:
‘Bibemi and Wapouzé’s original operator was unable to dedicate its full attention and resources due to identifying a flagship asset in Cameroon. A couple of months ago I heard that the licences had once again been released back to BEIG3 and I sought out Stratex’s approval to approach BEIG3 for an earn-in arrangement, because I was already aware of the potential on offer.’
Under the deal, Stratex will earn an initial 51pc in the sites by funding $1.56m worth of exploration over two years. It can then earn up to a further 39pc. BEIG3 will retain a 10pc free carried interest in the projects up to completion of the second option and a JV will be formed to oversee their development, with Stratex managing exploration and BEIG3 providing support.
The two companies have already agreed a work programme to meet the requirements of the first stage of the option. At Bibemi, Stratex will undertake infill trenching on Bakassi to better define old anomalies and identify drill targets. Meanwhile, at Wapouzé it plans to conduct detailed mapping and reconnaissance soil and rock sampling. Stratex hopes to define areas of more concentrated gold anomalies for subsequent drilling on both licences.
To fund the work, Stratex completed a £1.15m placing last month immediately after announcing the deal, placing share representing c.33pc of its issued share capital at 0.5p each. Livesey, Stratex’s VP exploration and business development, Claire Bay, and its CFO Bob Smeeton all took part in the raise.
Livesey says the work programme is due to begin in the next few days: ‘The team is mobilising to site as we speak to start a one month programme of rock-chip sampling and follow-up mapping before the seasonal rains make access to the sites too difficult. Following a planning phase, we will resume field work in October and do some trenching, and sampling to lead us towards some early RC drilling towards the end of this year. Then we will look at completing some diamond drilling, assuming we have success.’
Stratex enters Cameroon at a pivotal point in the development of the country’s mining industry. Its government has commissioned a major survey to determine its country-wide geological and geochemical climate. The work is being carried out by BRGM-France, GTK-Finland and Stratex’s partner BEIG3 who hope that the results, due later this year, will demonstrate enough potential to attract widespread foreign investment. Livesey says the work proves Cameroon’s desire to develop the sector and displays the national importance of its partner:
‘Cameroon is a relatively under-explored area. The government recognises this and wants to do something about it. It is trying to build up data and a picture for Cameroon to attract external investment. As a result of the work, we expect Cameroon to become a much bigger focus for gold exploration companies over the next three-to-five years, and it is great that BEIG3 is in the thick of it.’
‘We essentially have a brand-new discovery in an under-explored belt, and there is currently very little competitive activity in Cameroon – and we are already talking to the only other people that have significant licence holdings about how we can work together. We now have a dedicated budget for Cameroon that will take us through to the middle of next year.’
IAMGOLD Joint Venture in Senegal
Stratex’s other big project is Dalafin in Senegal, where it has a number of gold targets, most notably in the Faré and Madina Bafé prospects. It made a big step forward here in March this year by entering an option agreement with major Canadian miner IAMGOLD. It has the right to acquire 51pc in Dalafin by spending $4m over four years, diluting Stratex to 41.65pc, and can then increase its stake by a further 19pc to 70pc by investing another $4m.
IAMGOLD’s major Boto gold project, which contains defined indicated and inferred resources of 2.52Moz grading 1.61 g/t gold, sits just a few kilometres from Dalafin’s Madina Bafé prospect. As a result, the business team has been keen to start work at Madina Bafé as soon as possible, with the opportunity to perhaps turn it into a satellite body. Exploration began in May, and Livesey tells us things are going to plan with plenty of news flow due soon:
‘IAMGOLD is very interested in this licence, and they are progressing it very aggressively. We have confirmed the workplans and reporting structure for the project, so we know we will be getting good newsflow over the summer. It is progressing exactly as we expected, and we will be able to say more when we get the assay results from the first phase of air core drilling, which has already been completed.’
Beyond Dalafin, Stratex has an extensive portfolio of early-stage exploration interests. It owns a 30.4pc stake in Thani Stratex Resources for its projects in Egypt and Djibouti and an 11.6pc holding in Tembo Gold for its project located next to Acacia Mining’s 20Moz Au Bulyanhulu mine. It also has a 7.84pc stake in private Australian company Aforo Resources for projects in Burkina Faso and stakes in several licences in Turkey, some of which have outstanding payments due to Stratex, in addition to ongoing NSR agreements.
Livesey tells us that these assets will remain important to the firm going forward. However, with a significant presence now established in both Senegal and Cameroon, West Africa will be its cornerstone focus going forward:
‘Stratex has some good assets, and many of these are almost at the stage where they look after themselves. We have primarily divested a lot of our holdings in Turkey but kept royalties, and we have investments in other companies like Thani Stratex. But we want these West African assets to be our cornerstone.
‘We would like to consolidate our focus into as small an area of West Africa as possible. For example, if we were to find additional assets in Cameroon that were available for JV or earn-ins, or open ground that we thought was prospective, then naturally it would be a sensible place for us to continue investing. Staying in one time zone also keeps operational costs low.’
However, he adds that Stratex is by no means limiting itself exclusively to West Africa and is keeping a so-called ‘open-book’ on the rest of the continent:
‘We are still looking for investment across the whole of Africa, and we are talking to various companies who have assets in other countries. There is no point just getting ground for the sake of it. We only want ground we have the time and financial resource to do something with it, regardless of where it is- within certain parameters.’
Make or break
Despite a raft of significant news this year, Stratex’s share price has continued to languish. Indeed, since the start of the year, it has fallen from c.1p to its current 0.44p, which gives it a market cap of just £3m. The firm had £1.3m of cash at the beginning of June and recently raised a further £1.15m, and with that in mind, the market appears to ascribing very little value to Stratex’s asset base.
The reason for this, says Livesey, is a hangover from problems experienced last year, before he joined in March. To quickly recap, Stratex proposed the acquisition of Australian miner Crusader Resources last May. In September, a group of shareholders called a general meeting to terminate the purchase. They also called for Stratex founders and former directors David Hall and Paul Foord to replace then-CEO Marcus Engelbrecht and chairman Peter Addison. Despite Stratex’s management and the Institutional Shareholder Service advising against the resolutions, investors ultimately voted to remove Engelbrecht and terminate the Crusader acquisition.
Stratex’s operational progress appears to suggest it has well and truly moved on from this turbulence. However, its shares have yet to recover. So, when will this change? For his part, Livesey continues to believe that the market will move on in time:
‘If any other company were able to secure the Dalafin licence and deal with IAMGOLD as well as the assets we now have in Cameroon, they would see their shares rise sharply, but ours have fallen. This is unfortunate for the majority of shareholders who believe in us, as we have all seen the value of our holdings drop. As we move through 2018, we will have continued to deliver on our strategy of getting back to the basics of the business, reducing our overhead costs and will have delivered over six months of consistent newsflow from West Africa. We hope to have restored investors’ confidence in our ability to deliver on projects, putting the problems in 2017 well and truly behind us.’
He tells us that the bulk of these updates will initially come from Senegal, as the Dalafin project is more advanced and IAMGOLD will likely be keen to pursue a quick path to production. Cameroon, meanwhile, is expected to begin delivering significant newsflow towards the end of the year.
All to play for
Thanks to last month’s deal, Stratex now has its foot in the door in both Cameroon and Senegal, giving it a sturdy base with which to move forward in West Africa. It is also bolstered by strong legacy assets and investments, considerable management experience, and high-profile partners in its different jurisdictions. The firm appears to have moved on from the issues that hampered its progress last year, and it could be well worth taking advantage of the market’s continuing scepticism. Indeed, with Stratex’s cash balance nearly covering its total current market cap, it is all to play for.
