UPDATE: Ortac Resources starts survey on Lutila licence in Slovakia

UPDATE: Adds comments from broker Optiva Securities

Ortac Resources (LON:OTC) told investors that it has begun a ground based geophysical survey over the northern section of its Lutila exploration licence area.

The 63 square kilometre licence is one part of the flagship Kremnica gold project in Central Slovakia – it is contiguous to the Kremnica mining licence, which has a 1.1 million ounce gold equivalent JORC resource.

Kremnica is currently being developed for production. Meanwhile, Ortac is aiming to find new drill targets through the Lutila survey.

“This geophysical survey represents our initial phase of work focussed on the exploration of the wider Kremnica Gold Project, which we believe has the potential to house a gold equivalent resource in excess of 2 million ounces,” said chief executive Vassilios Carellas.

“The previous work carried out at Lutila has indicated that the gold mineralisation may be of a similar style as that at the Kremnica deposit.”

The town of Kremnica is around 100 miles north-east of the Slovakian capital Bratislava and it is home to one of Europe’s oldest mints, which dates back to 1328.

In April, Ortac began a 5,000 metre drill programme on the main Kremnica deposit, to expand and improve on the existing JORC resource. An updated resource statement is expected after this programme.

The work on the Lutila licence will be carried out by Quantec Geoscience, who will do a ‘Titan 24’ survey on three survey lines initially.

Each line will total 7.2 kilometres, with direct current, induced polarisation and magnetotelluric resistivity data being acquired. Each survey line will be able to acquire data over a 100 metre wide zone.

Highlighting the project-specific benefits of the Titan system, Carellas said: “Any Kremnica-type vein potential at Lutila is believed to be hosted in the underlying andesitic volcanic sequence, as at Kremnica, rather than in the surface outcropping rhyolites, therefore this Titan 24 ground based geophysical survey will be highly valuable in identifying economic mineralised targets for drill testing.”

Analyst Asa Bridle at broker Seymour Pierce said: “Work conducted by previous groups suggests that the mineralisation on the licence is similar to that on the adjoining Kremnica property (ie, mineralised veins). This is the company’s first exploration on the wider Kremnica play and it is hoped that the survey will be able to identify these features through the overlying volcanic cover.

“With results from this survey and the drilling campaign announced in April to come, we look forward to further newsflow from the company as it fast tracks the Kremnica project towards a production decision and an overall resource target of 2Moz gold equivalent.”

Jason Robertson, analyst at house broker Optiva Securities, repeated a ‘buy’ recommendation for Ortac shares. He believes the stock is due a rebound, after it has drifted for the last few months, because of near-term newsflow including scoping study results, drilling data and a resource upgrade.

“The Group remains cash rich (about £10 million) with a high quality asset that is near to production and yet the market is essentially valuing the stock at only US$23 per ounce, once cash and investments are deducted from the market cap,” Robertson said.

“Against the background of a consistently high gold price that continues to trend upwards, we believe this figure is simply too low.” Optiva currently have a 3.39 pence target price for Ortac shares.