TIDMSML
RNS Number : 4871E
Strategic Minerals PLC
02 March 2020
Market Abuse Regulation (MAR) Disclosure
Certain information contained in this announcement would have
been deemed inside information for the purposes of Article 7 of
Regulation (EU) No 596/2014 until the release of this
announcement.
2 March 2020
Strategic Minerals plc
("Strategic Minerals" or the "Company")
Cobre Access Rollover Confirmed Update on Projects
Strategic Minerals plc (AIM: SML; USOTC: SMCDY), a producing
mineral company actively developing projects prospective for
battery materials , is pleased to provide the following update on
the Company's activities.
Highlights
-- Continuity of revenue stream confirmed through 8(th) yearly
roll over of access to Cobre stockpile
-- US Arbitrator agrees to providing a decision on claim against
Cobre major client by 30 May 2020
-- Leigh Creek Copper Mine (LCCM) PEPR (approved program for
environment protection and rehabilitation) to be submitted end
March 2020
-- Timing of LCCM commencement of operations dependent on both
funding progress and copper prices, but remains an attractive
project at current prices
-- Board reiterates it, currently, considers LCCM unlikely to be
funded by a (dilutive) parent level raise
-- Operations at CRL (Redmoor project) likely to be largely self-funded by CRL during 2020
-- Repayments on NAE loan continue to be made in line with existing arrangements
-- Corporate overheads reduced in last quarter 2019 by circa 20-25%
-- Board confirms its desire for strategic, medium term,
exposure to copper production and longer term tin and tungsten
development and acknowledges the bullish nature of long-term
forecasts for these commodities
Cobre operations: Access maintained, valuable cashflow
continues, arbitration progressing
As no notification has been received by the end of February
2020, access to the magnetite stockpile at Cobre in New Mexico,
USA, by Southern Minerals Group (SMG) has been rolled over until 31
March 2021. The initial access was in 2010 for three years with
annual extensions thereafter. Accordingly, the 2020 roll over
represents the 8(th) roll over of access and, as relationships with
the owner remain strong, the Board expects roll overs to continue
on an annual basis in the future. With circa 700,000 tons of
inventory and current consumption levels of 40,000+ tons per annum,
the Board considers that Cobre will continue to provide, at least,
the Company's fixed corporate overheads and minimum commitments
made by it for the foreseeable future. Active marketing continues
to seek organic growth in sales.
In relation to the arbitration action with its major client, a
single Arbitrator has been appointed and he has agreed to undertake
the process by written submissions which should result in the cost
of pursuing the action being lower. In light of adopting a written
submissions approach, the arbitrator has set a series of action
milestone dates as follows:
1) 20 February 2020 - Service of written discovery requests. No
depositions may be taken and there shall be no more than 7 document
requests by each party (each party has completed this part of the
process).
2) 5 March 2020 - Responses to written discovery requests.
3) 10 March 2020 - Discovery deadline.
4) 20 March 2020 - SMG shall submit in writing its affirmative
case which may include a statement of facts, affidavit or verified
statements, memorandum of law, exhibits and other relevant
material.
5) 15 April 2020 - The Cobre client shall submit its written
reply which may include a statement of facts, affidavit or verified
statements, memorandum of law, exhibits and other relevant
material.
6) 20 April 2020 -SMG may submit a brief written rebuttal of the
other party's case which may not merely reiterate points previously
made or argued.
7) 25 April 2020-The Cobre client may submit its final written
submission which may not merely reiterate points previously made or
argued.
8) Not later than 30 May 2020 - A reasoned decision of
Arbitrator shall be issued.
SMG will be submitting a claim for in excess of US$ 21
million.
Once an arbitration decision has been made in favour of SMG, the
Company will still have to apply to the courts for enforcement of
payment, and the Board expects such court decision would be in
favour of the Company. Payment would then be subject to the Cobre
client's financial capacity to meet the claim.
Leigh Creek Copper Mine: Advancing towards production
As previously reported, an internal feasibility study on
developing the Paltridge North deposit was completed Q4 2019. This
feasibility study and the restart of operations, conducted last
year, identified that profitability of the project revolved around
taking production quickly to in excess of 200 tons of contained
copper per month. While a mining license currently exists for this
area, new mining activity in South Australia requires an approved
program for environment protection and rehabilitation (PEPR) to be
in place prior to the commencement. Progress on the application has
been impacted by the requirement to increase initial anticipated
levels of production and the concomitant impacts on a range of
associated supporting reports required. However, SML is preparing a
draft PEPR application to be submitted by the end of March 2020.
The usual procedure is for the draft to be circulated to relevant
government departments for feedback prior to formal submission.
Accordingly, approval is expected late June quarter/early September
quarter.
Upon receipt of a PEPR approval, the project requires
approximately two months to establish suitable leach pads, source
processing plant equipment and a mining mobile fleet, followed by
up to a further three months until revenue commences. A PEPR
approval is valid for the life of the approved activity, subject to
routine annual review, and commencement of operations will be
dependent on two major factors.
Firstly, our feasibility study was been based on a copper price
of US $3/lb and, while it was thought this would be a likely level
prior to the PEPR approval, recent weakness in the copper price,
may delay the commencement of operations. However, we note that,
while the project is still attractive at current market prices,
market forecasts continue to predict a much higher copper price,
especially given that China is likely to restock as their economy
heals from the economic shock caused by the Covid 19 virus.
Secondly, while the project produces an excellent return on
investment, the bulk of which is received within the first two
years of production, it does require both start up and working
capital and this will need to be sourced prior to any commencement.
Currently, the Board believes that this is best sourced at the
project level by either debt, trade related financing, joint
venture with suitable parties or a combination of these. The
Company is in discussions with various parties and all funding
options will continue to be investigated. To further clarify, the
Board's intention is not to fund the route to production at LCCM by
a capital raise at the parent level, given this would likely result
in significant dilution were it to occur given the Company's
current low valuation. Fundraising at the parent company level is
not an attractive option for the Company or its shareholders at
this time.
Cornwall Resources Limited - Redmoor Project Development
continues
SML continues to meet its financial arrangements for the
outright purchase of New Age Exploration's 50% share in Cornwall
Resources Limited (CRL), the holder of the Redmoor mine project.
Financing of payments has been assisted by R & D tax credit
refunds received to date, which have also funded ongoing
operations.
The CRL team continues to develop the world class resource at
Redmoor, by building awareness of the project, building/maintaining
relationships with stakeholders (including landowners) and
generating strategies to obtain the greatest value for the
Company's investment. An option to complete a limited exploration
drilling program aimed at testing the potential to expand the
significant resource already developed is being assessed.
CARE
In light of cash requirements associated with both the Leigh
Creek and Redmoor projects, the Company has curtailed expenditure
on the projects of Central Australian Rare Earths Pty Ltd ("CARE")
and this is expected to be the case throughout 2020.
Options to increase shareholder value are currently being
assessed.
Strategy and Corporate Activities
The Board has reviewed the Company's strategy and remains
satisfied that its current portfolio of development projects,
especially those focused on copper, tin and tungsten, are placing
the Company in an excellent strategic position for the future. The
Board considers having full control over both a near term copper
production asset, with substantial upside, and a world-class
developing tin and tungsten resource, along with the flexibility to
maintain these without dilutive raisings, encapsulates the unique
and highly attractive value proposition of the Company.
Internally, the Company has undertaken a full review of its
operations and has, during the December quarter 2019, reduced
corporate overheads by 20 to 25%. Accordingly, after tax
operational cash flow from Cobre is now materially higher than
corporate overheads.
Commenting, John Peters, Managing Director of Strategic
Minerals, said:
"Progress continues across all the Company's projects and,
although this has necessarily slowed, this reflects both changes in
market conditions and a cautious approach by the Board.
We are encouraged to see the Arbitration process move forward at
minimal cost, and remain of the opinion that we have a strong claim
in respect of the contract value in excess of US$21 million,
although we remain cautious on the ultimate outcome.
SML has full control over three exceptional projects, one of
which provides sufficient cashflow to cover the Company's fixed
corporate overheads and minimum commitments . This provides the
Company considerable optionality to monetise each at the most
appropriate time in commodity price cycles. The Board considers
this sustainable flexibility an enviable position to be in with a
solid platform for future growth "
For further information, please contact:
+61 (0) 414 727
Strategic Minerals plc 965
John Peters
Managing Director
Website: www.strategicminerals.net
Email: info@strategicminerals.net
Follow Strategic Minerals on:
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Twitter: @SML_Minerals
LinkedIn: https://www.linkedin.com/company/strategic-minerals-plc
Facebook: https://www.facebook.com/search/top/?q=strategic%20minerals%20plc
+44 (0) 20 3470
SP Angel Corporate Finance LLP 0470
Nominated Adviser and Broker
Ewan Leggat
Stephen Wong
Notes to Editors
Strategic Minerals plc is an AIM-quoted, operating minerals
company actively developing projects prospective for battery
materials. It has an operation in the United States of America and
Australia along with development projects in the UK and Australia.
The Company is focused on utilising its operating cash flows, along
with capital raisings, to develop high quality projects aimed at
supplying the metals and minerals being sought in the burgeoning
electric vehicle/battery market.
In September 2011, Strategic Minerals acquired the distribution
rights to the Cobre magnetite tailings dam project in New Mexico,
USA, a cash-generating asset, which it brought into production in
2012 and which continues to provide a revenue stream for the
Company. This operating revenue stream is utilised to cover company
overheads and invest in development projects orientated to
supplying the burgeoning electric vehicle/battery market.
In January 2016, the portfolio was expanded with the acquisition
of shares in Central Australian Rare Earths Pty Ltd, which holds
tenements in Western Australia prospective for cobalt, nickel
sulphides and rare earth elements. The Company has since acquired
all shares in Central Australian Rare Earths Pty Ltd. In September
2018, the Company entered contracts for the sale of certain CARE
tenements identified as gold targets.
In May 2016, the Company entered into an agreement with New Age
Exploration Limited and, in February 2017, acquired 50% of the
Redmoor Tin/Tungsten project in Cornwall, UK. The bulk of the funds
from the Company's investment were utilised to complete a drilling
programme that year. The drilling programme resulted in a
significant upgrade of the resource. This was followed in 2018 with
a successfully completed 12-hole 2018 drilling programme, and which
resulted in a resource update, that was announced in February 2019.
In March 2019, the Company entered into arrangements to acquire the
balance of the Redmoor Tin/Tungsten project. This was completed on
24 July 2019.
In March 2018, the Company completed the acquisition of the
Leigh Creek Copper Mine situated in the copper rich belt of South
Austra lia and brought the project into production in April
2019.
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END
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