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Released 07:00 22-Mar-2013
Number 6092A07 

Stratex International plc (‘Stratex' or ‘the Company')

Final Results

Strong cash position and focused strategies for success

 Stratex International plc, the AIM-quoted gold exploration and development company focused on Turkey, East Africa and West Africa, is pleased to announce its results for the year ended 31 December 2012, a transformational period for the Company.

The results below are extracted from the Company's audited accounts which are available in full at the Company's web site www.stratexinternational.com . Copies of the Company's Annual Report and Notice of AGM will be sent to shareholders in early April.

Operational highlights:

• Öksüt gold project sold for US$20 million cash with up to a further US$20 million payable through a 1% net smelter royalty.

• Turkish JV partner Bahar Mining ("Bahar") has made good progress on technical studies at Altıntepe and is targeting late 2013 / early 2014 for initial production at a minimum 30,000 oz per annum.

• 51% of the Muratdere porphyry copper-gold-molybdenum project sold to Lodos Maden Yatırım Sanayii ve Ticaret A.Ş. ("Lodos"), a Turkish mining investment company, for US$1.7 million cash.

• Substantial new epithermal gold vein system identified at Oklila licence in Djibouti as part of the collaboration project with strategic partner Thani Ashanti.

• Results of initial drill programme at Blackrock in Ethiopia confirmed extensive gold mineralization in four veins at the Black Water zone.

• Extensive sampling at the 51%-owned Dalafin gold project in Senegal has identified good drill targets in five areas of the licence.

Financial Overview:

• Profit for the year before tax of £9,696,795, including profits of £11,693,918 from the sale of Öksüt and £1,057,488 from the sale of 51% of Muratdere.

• Cash balances at the end of the year were £4,718,448, excluding cash of US$20million from the sale of Öksüt, which was received shortly after the year end.

Commenting on the results, Non-Executive Chairman, Christopher Hall, said: "2012 has proved to be a truly successful year for Stratex, the culmination of which also marks a turning point in the Company's philosophy and strategies. We have been and will continue to be first-class explorers, identifying new grassroots opportunities and turning them to good account by the systematic application of leading-edge science and sound technical and professional practise. Our discovery of yet more low-sulphidation gold deposits in the Rift Valley in Ethiopia and Djibouti during the past year is a particularly sound endorsement of our exploration capabilities. We also took steps to monetise a number of projects during the year, and the sale of our 30% holding in the Öksüt project for an immediate return of $20 million has provided us with the capital and capability to consider acquiring advanced gold projects over the next 1-2 years. With our expanded financial resources, such acquisitions can then be progressed rapidly along the value-addition curve by resource drilling, scoping studies, and related technical evaluation, possibly even going to production. In summary, the Company is now very well placed to move from being simply a successful explorer to being a strategic player and being substantially re-rated by the marketplace sooner rather than later."

Chairman's Statement

Once again I am pleased to report to shareholders on a successful year in which your Company passed several important milestones. Last year I noted that your Directors had set more challenges in the year ahead, including progress towards production and growth in resources in Turkey; drilling in the Rift Valley in Ethiopia; commencement of work on our acquisition in West Africa and securing the financial position of the Company. All of these corporate goals have been achieved, the most significant undoubtedly in relation to finance where, after a highly successful equity placement in Q2 and the sale of a minority interest in Turkey, Stratex begins this year with a strong cash balance in excess of £17 million after the receipt of the Öksüt sale proceeds.

Turkey

Drilling at Öksüt continued throughout the year with up to 5 drill rigs in action, funded by our partner Centerra Gold Inc. This resulted in the confirmation of Stratex's first million ounce gold discovery, which was announced in February, and Centerra's interest increasing to 70% after they had spent a total of US$6.0 million on the project. This presented an interesting challenge - whether to attempt to finance the ever-increasing cash requirements of a minority interest in Öksüt through resource definition, scoping, pre-feasibility and feasibility study and ultimately construction, or to turn this success to account. In light of the wider economy and the opportunities that may now be open to any company with a strong balance sheet, the Board decided that monetisation was the preferred option and a successful sale was agreed. We were pleased to receive a cash payment of US$20 million (equivalent to $64/oz of mostly inferred resources) to be followed by a further payment of up to US$20 million by means of a 1% NSR royalty on production, when this is achieved.

We also closed the sale of an interest in our Muratdere copper porphyry project to Lodos, the mining investment subsidiary of Pragma Finansal Danışmanlık Ticaret A.Ş., a Turkish investment company. We received US$1.7 million for 51% of this non-core asset, significantly more than our initial investment, and expect two further cash payments of US$0.25 million as Lodos earns up to 70%. Stratex will retain a 30% carried interest to completion of a feasibility study. At Altıntepe, our partner Bahar is earning a 55% interest in the gold project by financing it to production. Bahar is a private Turkish company with experience in the evaluation, development, construction and operation of gold mines. Mine planning and plant design are approaching completion, permit applications have been made and long lead-time items have been purchased. Subject to permitting, Bahar indicates that construction and commissioning should be completed by the end of the year and we expect to see operating cash flow in 2014. The Board plans to release more details in due course.

Progress with the Inlice gold project has been slower. Our partner NTF inşaat Ticaret Limited Şirketi ("NTF") had completed its obligations to earn a 55% interest including a feasibility study, which was reviewed during the year by UK engineering firm GBM Minerals Engineering Consultants Limited. A doubling of throughput by operating on two shifts made a significant improvement to the projected economic outcome with a modest increase in the expected capital cost. However, NTF indicated that it no longer had the ambition to become a gold producer and we agreed to assist them with the sale of the project. After inviting a range of local and overseas companies to evaluate the project, a number of bids were received and terms have been agreed for the sale of the licence to a major Turkish industrial company for US$10 million, of which Stratex's share will be US$4.5 million.

West Africa

The acquisition of Silvrex Limited, subsequently re-named Stratex West Africa Ltd, with a portfolio of gold properties in Senegal and Mauritania, was completed in January and we welcomed John Cole-Baker, the Chairman and CEO of Silvrex, on to the Stratex Board. The main focus has been the Dalafin licence in south-east Senegal, where there have been a number of significant gold discoveries by other companies. Rapid geological evaluation of the property, including airborne geophysics, geochemistry, mapping and surface sampling, has identified attractive drill targets and a 30,000 metre programme of rotary air blast ("RAB") drilling is underway.

East Africa

Currently, Stratex's position in the Rift Valley of Ethiopia and Djibouti holds the most significant opportunity for a major discovery as we have identified a number of prospective properties in what could become a new gold province. We recognised the similarity between gold mineralisation in East Africa and that observed in Patagonia, and to date have accumulated exclusive exploration licences over some 3,000 km2. Being the first mover has both advantages and higher risks, hence the decision to bring in a major joint-venture partner, Thani-Ashanti, on the south-eastern Afar licences to fund the maiden drilling programme at Megenta. The results of this and drilling of our 95% owned Blackrock project in the north, were encouraging and proved the concept and continuity of gold-bearing epithermal systems over tens of kilometres of strike. We have continued to discover new gold-bearing structures at Blackrock and in the Afar joint venture, where systematic sampling at Pandora has returned high grades and widths over several hundred metres of strike.

Stratex and its partners concluded, however, that the drilling had not penetrated deep enough to intercept the zones of intense boiling where bonanza gold grades may occur. We look forward to the results of a second round of deeper drilling at Blackrock and Megenta and the initial programme at Pandora. The potential of the older rocks of the Arabian-Nubian Shield has not been neglected and we have received some encouraging results from soil and rock sampling on the Tigray licence in the north. At Shehagne, where we had earned a 60% interest from Sheba Exploration (now Centamin Egypt Ltd), we have agreed to let our partner earn back to 80% by carrying out a 1,000 metre drill programme.

Future Strategy

The sale of Öksüt provided an opportunity to review our strategy and plan for the future. Since listing in 2006 the Company has demonstrably succeeded in:

• Establishing and managing operations, sequentially, in three regions - Turkey, East Africa and West Africa;
• Using innovative geological reasoning in areas with no previous history of gold exploration (Turkish Miocene volcanics, Ethiopian Afar Rift);
• Finding and acquiring exploration properties with strong potential, mainly for gold, and exploring them economically and professionally;
• Bringing in high-quality joint venture partners as required (Teck, Thani Ashanti, Centerra, Antofagasta);

• Discovering over 2.2 million oz of gold and 7.9 million oz of silver resources;
• Advancing two projects to the production decision stage (Inlice, Altıntepe);
• Monetising other non-core projects (sale of 51% of Muratdere for US$1.7 million);

• Closing the sale of 30% of our first >1.0 million oz discovery (Öksüt) for US$20 million cash plus up to a further US$20 million as 1% royalty;
• Securing an experienced Turkish partner to finance 100% of the development cost of Altıntepe with first production expected in Q1 2014;
• Maintaining adequate working capital, most recently raising £8.0 million of equity in Q2 2012;
• Cementing relationships with equity positions (AngloGoldAshanti 11.5%, Teck 7.7%, Antofagasta 2.2%); and
• Developing greater institutional awareness.

The Board considers that its approach to exploration as a business, balancing the risks of exploration expenditure against the returns that can be made from discovery, without the need to manage projects into production, has been vindicated.

We remain focussed on exploration and the ultimate discovery of a major gold deposit. The strategy has been redefined in two principal areas. Firstly, our financial strength will now allow us the flexibility to retain control of our exploration projects further down the pathway to development via resource definition, preliminary economic evaluation and even feasibility studies. We can then choose the time to develop, take a partner, or realise an interest on our own terms. The second area relates to acquiring new opportunities, which are arising in the current market where exploration funding is increasingly tight.  We will be systematically evaluating opportunities in our three geographical areas of activity. This will focus on more advanced projects of merit, where a modest investment may have a radical impact on perceived value. Examples may include limited drilling to turn a discovery into a resource or financing a scoping study to determine real tangible value rather than an arbitrary "in the ground" number. We believe that this will generate value, as well as projects that will ultimately contribute to our operating cash flow.

Looking at the global situation today, political unrest worldwide and economic uncertainty look set to continue in the coming year. There are also continuing upward cost pressures on gold producers. Exploration budgets will be trimmed, discovery rates will fall and available reserves and resources will be depleted. Stratex, however, relishes the opportunities that these wider challenges provide for the Company: to do justice to our key projects, to review non-core assets and to seek new challenges in our three operating regions. Gaining acceptance of our unconventional approach to the exploration business over the last few years has not been easy. We are now beginning to deliver value from exploration success with sales of Muratdere and Öksüt and ultimately production at Altıntepe. The Board, management and exploration team, to whom I pay tribute for their hard work, often in very difficult conditions, remain dedicated to creating shareholder value, and are confident of further progress in the current year.

Christopher Hall

Non-Executive Chairman

22nd March 2013

Notes to editors:

Stratex International is a well-funded AIM-quoted exploration and development company focussed on gold and high-value base metals in Turkey, East Africa and West Africa.  Since listing on AIM in 2006, Stratex has had an impressive track record of successful exploration supported by joint-venture partnerships, both with major international mining companies and local companies to maximise the potential of its discoveries.

It currently has a substantial portfolio of projects, with Altıntepe in Turkey scheduled for gold production in late 2013 or Q1 2014. To date Stratex has discovered more than 2.2 million ounces of gold and 7.9 million ounces of silver, as well as 186,000 tonnes of copper.

Financial Statements

Statement of consolidated comprehensive income

Statement of consolidated financial position

Statement of consolidated changes in equity

Statement of consolidated cash flows

The major non-cash transaction during the year was the issue of 10,619,456 ordinary shares to the shareholders of Silvrex Limited, as part of the acquisition of the company in December 2011.

Notes to the financial statements

1.          Basis of preparation

The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU), IFRIC interpretations and those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The financial statements have been prepared under the historical cost convention as modified by the measurement of certain investments at fair value and have been prepared on a going concern basis.

The financial information set out in this announcement does not constitute the Group's statutory accounts for the year ended 31 December 2012 or the year ended 31 December 2011 under the meaning of Section 434 the Companies Act 2006. The statutory accounts for the year ended 31 December 2011 have been filed with the Registrar of Companies. The auditor's report on those accounts was unqualified and did not contain a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and did not contain a statement under section 498(2) or 498(3) of the Companies Act 2006.

It is the prime responsibility of the Board to ensure the Company and the Group remains a going concern. At 31 December 2012 the Group had cash and cash equivalents of £4,718,448 and no borrowings. The proceeds of US$20 million from the sale of Öksüt outstanding at 31 December 2012 were received in January 2013. The major area of spend in 2013 is in Ethiopia and Senegal where large drilling programmes will be undertaken at the Blackrock project and at the Dalafin project respectively. Other major items of exploration costs in Ethiopia will be borne by our exploration partners. The Company and Group have minimal contractual expenditure commitments and the Board considers the present funds sufficient to maintain the working capital of the Company and Group for a period of at least 12 months from the date of signing the annual report and financial statements. For these reasons the Directors continue to adopt the going concern basis in the preparation of the financial statements.

2.          Accounting Policies

Except as described below the accounting policies applied in preparing these financial statements are consistent with those that have been adopted in the Group's 2011 audited financial statements.

Changes in accounting policy and disclosures:

(a)            New and amended standards adopted by the Group.

There are no IFRSs or IFRIC interpretations that are effective for the first time for the financial year beginning 1 January 2012 that would be expected to have a material impact on the Group.

(b)           New and amended standards, and interpretations mandatory for the first time for the financial year beginning 1 January 2012, but not currently relevant to the Group

A number of new standards and amendments to standards and interpretations are effective for annual periods beginning after 1 January 2012, and have not been applied in preparing these financial statements. None of these is expected to have a significant effect on the financial statements of the Company or Group.

Amendments to IFRS 1, ‘First time adoption' on fixed dates and hyperinflation. The first amendment replaces references to a fixed date of 1 January 2004 with "the date of transition to IFRSs", thus eliminating the need for companies adopting IFRSs for the first time to restate derecognition transactions that occurred before the date of transition to IFRSs. The second amendment provides guidance on how an entity should resume presenting financial statements in accordance with IFRSs after a period when the entity was unable to comply with IFRSs because its functional currency was subject to severe hyperinflation.

IFRS 7, ‘Financial instruments: Disclosures' was amended in October 2012 for the transfer of financial assets. These amendments are as part of the IASB's comprehensive review of off Statement of Financial Position activities. The amendments promote transparency in the reporting of transfer transactions and improve users' understanding of the risk exposures relating to transfers of financial assets and the effect of those risks on an entity's financial position, particularly those involving securitisation of financial asset. Amendments to IAS 12, ‘Income Taxes' on deferred tax. Currently IAS 12 requires an entity to measure the deferred tax relating to an asset depending on whether the entity expects to recover the carrying amount of the asset through use or sale. It can be difficult and subjective to assess whether recovery will be through use or through sale when the asset is measured using the fair value model in IAS 40 Investment Property. Hence this amendment introduces an exception to the existing principle for the measurement of deferred tax assets or liabilities arising on investment property measured at fair value. As a result of the amendments, SIC 21, ‘income taxes - recovery of revalued non-depreciable assets', would no longer apply to investment properties carried at fair value. The amendments also incorporate into IAS 12 the remaining guidance previously contained in SIC 21, which is accordingly withdrawn.

ENDS

For further information please visit www.stratexinternational.com, email [email protected], or contact: