Strategic Minerals (LON:SML) announced this morning it earned its first revenue from the Cobre stockpile project in New Mexico.
Shipments totalling 1,200 tonnes of magnetite iron ore were made to an agricultural business and concrete manufacturer, both in the US.
The ore can be used to improve the speed and efficiency of ammonia in the fertilizer process and is added to produce heavy or strengthened concrete.
Output will be trucked off site until the end of next month, when a rail spur comes into operation, allowing the group to transport 40-60,000 tonnes a month.
SML chairman Steven Sanders said: "We are delighted to now be freighting from the Cobre site.
“We view these as important proof of concept shipments as they illustrate how revenues from production ready assets such as Cobre can be used to underpin the wider development of the business.
“We look forward to scaling the revenues rapidly at Cobre particularly when the rail-spur is completed."
The Cobre stockpile is on the Freeport McMoRan property of the same name. There are 1.5 million tonnes of magnetite ore with an average grade of 61.7 per cent iron ore, with 800,000 tonnes grading 64 per cent.
Analysts say SML could generate as much as US$30 million in cashflow over the 22 months of the project’s life.
Is spending around US$3.5 million to rehabilitate a rail spur to allow material to be transported the 900 kilometres to the Port of Guaymas in Mexico, where it will be loaded for export to China.
SML’s interests span two continents – North America and Australasia – and its strategy ought, if successful, catapult the group up a division into the mid-caps.
The company’s acquisition in August of Ebony Iron for an initial £10 million was transformational.
Ebony’s rights to explore on six exploration tenements in the Northern Territory and Western Australia made for a snug fit with SML’s Iron Glen magnetite project in Queensland.
Based on the site of an existing mine which operated in the 1950s, Iron Glen covers 9,100 hectares, with applications in for a further 30 sub-blocks.
The beauty of the project is its proximity to the nearest rail line, less than two kilometres away, which links to the deepwater port of Townsville, 40 kilometres to the north.
With all important infrastructure so close to the site, capital costs of the project are likely to be a fraction of those of other similar scale mines.
The Mount Moss Project in Queensland potentially provides the blue print for Iron Glen. It started with 600,000 tonnes magnetite proved up and now has 50 million.
The plan for Iron Glen is more detailed exploration next year before application of mining permits for the site, necessary feasibility and capital construction.
So the immediate focus is bridging the gap between Cobre and Iron Glen.
To do this the group is looking to acquire stakes in existing magnetite projects in emerging regions in Australia and North America.
The strategy is a savvy one. Valuations are low, so it will allow SML to pick and choose the projects it invests in.
The cash generated by Cobre will give the company some acquisition currency, and there are a number of institutions and “family houses” prepared to back SML’s consolidation plans.