Strategic Minerals Plc (LON:SML) (USOTC:SMCDY) said it has agreed amended the contract with the major client of its Southern Minerals Group (SMG) subsidiary at the Cobre magnetite stockpile in New Mexico, USA.
The AIM-listed a producing mineral company said the amended contract will provide the client with sufficient time to put in place necessary environmental approvals and operating procedures to resume the offtake of magnetite material, while at the same time ensuring that SMG is in a similar after-tax cash position as per the previous contract.
It added that the client is to pay SMG, quarterly in advance, a non-refundable prepayment of US$375,000 against future deliveries, with payments due in June, September and December 2018.
The group said the minimum 4,000 tons per month sales requirement, currently stipulated in the Contract, will be suspended until 1 March 2019, offset by the US $375,000 quarterly prepayment
It added that a maximum of US$125,000 can be applied to sales in any month provided a minimum of 4,000 tons is taken during that month
Should the material not be collected by the client within 12 months from the prepayment invoice date any prepayment amount, relating to this invoice, will be forfeited, Strategic Minerals added.
John Peters, managing director of Strategic Minerals, commented: "We consider this arrangement to be mutually beneficial for both the Company and our Client.
“The amendments to the Contract have been agreed to support our Client whilst it seeks the necessary approvals. This will reduce the impact on their cash flow, and ensure that, from a cash perspective, the SML group will be unaffected.”
He added: “The underwriting of these cash flows reinforces our expectations that we will be in a position to internally fund current exploration and development programmes across SML's portfolio of projects."