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Strategic Minerals Plc: THE INVESTMENT CASE

Market warms to Strategic Minerals' diversification

Strategic Minerals has a diversity of assets, including the Cobre magnetite operation in New Mexico and the Redmoor tin and tungsten project in Cornwall
Nickel
INVESTMENT OVERVIEW: SML The Big Picture
Magnetite in New Mexico; nickel sulphide in Australia; tin and tungsten in Cornwall

It is good to have more than one string to one’s bow, and Strategic Minerals PLC (LON:SML) has several.

During the first half of the year, the company diversified from iron ore into nickel, rare earths, precious metals, tin and tungsten.

It acquired 50% of Central Australian Rare Earths, an explorer prospecting for nickel sulphide, rare earths and gold, and has taken a stake in the Redmoor tin and tungsten project in Cornwall.

Addition of major new customer makes big difference at the Cobre magnetite operation

Its only producing asset at present is the Cobre magnetite operation in New Mexico, which generated sales of US$1.55mln from 25,385 tons of magnetite in 2016.

The addition of a new major client at Cobre means the firm should post a maiden profit when results for 2016 are unveiled.

Shipments to the new client began in mid-August and provided a notable boost to fourth quarter performance

Sales in the three months came in at US$462,000 on the back of 7,686 tonnes produced. That compares to sales of US$250,000 in the same three months of 2015 on the back of  3,684 tonnes generated.

Due to a bulk discount for the customer, average sales prices reduced, but overall net profitability is expected to be maintained at the historical average level of 45% of sales, Strategic said.

In April 2017, it agreed a new contract for 400,000 tons of magnetite from the Cobre facility.

Strategic said the new customer had paid a US$10,000 deposit and will lodge a further US$250,000.

This contract should double annual sales from Cobre without affecting the effective net profit margin of between 40% to 45% of revenue, it added.

A tin mine in Cornwall? Now there's a thing ...

Strategic sold 150mln new shares at 0.4p a pop to new and existing investors. The shares ended 2016 at much the same level but this year have started motoring, as things looks to be accelerating at Redmoor.

Redmoor is being developed by Cornwall Resources Limited, Strategic’s joint venture with New Age Exploration Limited. Strategic holds a 50% stake in Redmoor.

Redmoor holds an exploration licence and option over 23 sq km in the Cornish tin-tungsten-copper mining district with rights to explore over the entire area for 15 years and to enter into a 25-year mining lease (renewable for a further 25 years) over any part of the licence area.

A review of historical data has indicated a JORC-compliant mineral resource of 13.3mln tonnes at 0.37% tungsten equivalent, or WO3Eq, which is 0.56% in tin equivalent (SnEq) terms.

Energold Drilling has started the first phase of drilling at Redmore, which is expected to be completed in the third quarter of 2017. A total of 23 holes will be drilled, including 13 in the first phase and 10 in the second phase. Phase 2 is planned to be completed this year.

Men* at work down under

Meanwhile, on the other side of the world … the company has another joint venture, Central Australia Rare Earths Pty (CARE), operating in Australia.

CARE is drilling for gold at its Mount Weld gold and rare earth prospect and for nickel sulphide at its Hanns Camp prospect in Western Australia.

In November, the company agreed a deal to pump A$250,000 into

A$75,000 of that money will be provided as an interest-free loan which matures on 31 March 2017.

On this date, unless CARE has at least A$150,000 available, Strategic and Rarus – its joint venture partner – will subscribe for A$75,000 worth of shares each and commit to a further subscription of shares of A$50,000 at 30 September 2017.

A minimum equity carry of 10% is to be maintained throughout the joint venture and, in the event that either Rarus or Strategic having less than a 10% equity, any additional funds required to progress the project will be supplied through a loan at a rate of 10% per annum, to be charged monthly.

“The agreement on an appropriate approach for the continued exploration of the CARE tenements opens up an exciting new phase in the rejuvenation of the company, especially in light of the recent escalation in Nickel prices, which have risen by approximately 40% since early June,” said managing director John Peters.

“This establishes a blueprint for the further development of the CARE tenements on a fair and equitable basis while ensuring that progress does occur.”

* and women

--adds new Cobre contract--

John-H.jpg


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