Strategic Minerals - Company Update
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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.
("Strategic Minerals" or the "Company")
Cobre Access Rollover Confirmed Update on Projects
· Continuity of revenue stream confirmed through 8th yearly roll over of access to Cobre stockpile
· US Arbitrator agrees to providing a decision on claim against Cobre major client by
· 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
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:
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
SMG will be submitting a claim for in excess of
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.
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
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
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.
SML continues to meet its financial arrangements for the outright purchase of New Age Exploration's 50% share in
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.
In light of cash requirements associated with both the
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.
"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
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:
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+61 (0) 414 727 965
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Follow Strategic Minerals on:
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+44 (0) 20 3470 0470
Nominated Adviser and Broker
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Notes to Editors
This information is provided by RNS, the news service of the
Quick facts: Strategic Minerals PLC
Market Cap: £7.28 m
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