REG - Strategic Minerals - Leigh Creek Copper Mine - Funding and PEPR Update

Strategic MineralsAnnouncement

23/12/2021 08:30

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RNS Number : 6208W  Strategic Minerals PLC  23 December 2021

 

The information contained within this announcement is deemed by the Company to
constitute inside information pursuant to Article 7 of EU Regulation 596/2014
as it forms part of UK domestic law by virtue of the European Union
(Withdrawal) Act 2018 as amended.

 

23 December 2021

Strategic Minerals plc

("Strategic Minerals" or the "Company")

Leigh Creek Copper Mine

Funding and PEPR Update

Strategic Minerals plc (AIM: SML; USOTC: SMCDY), a profitable producing
mineral company, is pleased to provide the following update on the Company's
progress in relation to funding of the Leigh Creek Copper Mine ("LCCM" or the
"Project") and progress on addressing the conditional elements of the
Project's Program for Environmental Protection and Rehabilitation ("PEPR").

 

Highlights

·   Focus of funding sought, while still expected at the LCCM level, has
moved to a convertible note/joint venture basis after debt negotiations with a
top global bank ceased

·   Company seeking US$10m at the LCCM level - approximately US$6m for
resumption of production and US$4m for copper oxide and sulphide exploration

·   LCCM level funding is still expected within the project's critical
development path and is not considered likely to delay expected 2022
resumption of production

·   Negotiations have been based on the Company's internal forecasts of the
Project's expected EBITDA of US$68m, reflecting a US$4-25 lb copper price and
an AUD/USD exchange rate of 0.7500

·   LCCM has applied for a South Australian government grant to assist
planned drilling in 2022

·   Resubmission of PEPR details to the South Australian Department of
Energy and Mines ("DEM") almost complete and is expected to be submitted to
DEM in January 2022

·   Company is confident that, on the basis of work completed for the PEPR
resubmission, the Environmental Bond required is likely to be reduced by a
significant amount, although there can be no assurances of this as the
decision rests solely with DEM

 

Funding Update

As announced on 8 October 2021, the Company had been in negotiations for a
substantial debt facility from a respected global bank. Ultimately, as a
result of the high costs of a large approved undrawn facility and the
Company's current low market capitalisation, these negotiations have now
ceased. The advanced nature of these discussions and a belief, at the time,
that an offer was imminent were announced by the Company to ensure all
potential investors had the same information regarding the LCCM funding
situation ahead of the equity raise in October.

As attempts to raise pure debt-based funding for LCCM have not been successful
thus far, the Company has shifted its emphasis to funding involving an equity
component. Accordingly, marketing has refocused on a proposed US$10m
convertible note facility at the subsidiary level.

Marketing to potential investors is based on current market conditions
utilising a copper price assumption of US$4-25 lb and an AUD/USD exchange rate
of 0.7500. This produces an expected project EBITDA of US$68m according to the
Company's internal forecasts.

Initial marketing feedback has indicated that, in order to ensure broader
appeal, a minimum funding size of US$10m needs to be sought and, with some
investors, a planned liquidity event is preferred. Accordingly, LCCM is
currently seeking US$10m by either a convertible note or equity investment and
plans to apply such funding to recommence production (approximately US$6m) and
for exploration costs (approximately US$4m).

The US$6m earmarked to recommence production, prior to receipt of revenues, is
made up of approximately:

                Capital items including new leach
pads
 
US$1.0m

                Mining prior to revenue commencement including
pre-strip (4 months)                US$2.5m

                Environmental bond
 
US$2.5m

The provision of additional funds will provide LCCM with the ability to bring
forward planned exploration drilling.

Drilling is expected to focus on two areas, namely:

a)    Copper Oxide confirmatory drilling around the Mount Coffin
mineralisation, within LCCM's tenements. While there has been historical
assessment of the mineralisation, such drilling does not qualify the
mineralisation to the JORC (2012) standards. Twinning of existing known holes
will assist with the definition of a JORC (2012) compliant resource which
could extend the life of the oxide operating project. The Directors believe
this additional resource could increase expected project EBITDA by up to
US$40m.

 

b)    Copper Sulphide exploratory drilling around a significant
intersection in a Bridge Minerals Pty Ltd's 1974 historical drill hole PDH38.
The drill hole, close to the Paltridge North ("PN") deposit, was drilled to
183m and showed a high-grade copper sulphide intersection from 137.2m to
144.8m with a 15-20% sulphide component and copper grade of 1.34% (a PDF of
the drill hole results can be viewed at
  https://www.strategicminerals.net/investors/presentations.html
(https://www.strategicminerals.net/investors/presentations.html) ). While
exploration for additional copper resources within the Adelaide Geosyncline in
the northern Flinders Ranges has always been a key strategy for LCCM, the
current expected funding package will provide the opportunity to undertake a
staged exploration programme more quickly.

Discussions with potential LCCM convertible note/equity investors, to date,
has made Management confident that funding is likely to be achieved prior to
final clearance of the PEPR for PN. However, timing of the commencement of
production and exploration will be dependent on both regulatory approvals and
sourcing funding.

In anticipation of proposed drilling programmes at Mount Coffin and around PN,
LCCM has lodged applications with the South Australian government for grant
payments under its Accelerated Development Initiative ("ADI") programme. If
approved, LCCM could receive grant payments of up to 50% of the drilling
costs.

 

PEPR Update

Since July 2021, when LCCM received conditional approval for the PEPR
associated with LCCM's PN deposit and its treatment of material at the
adjacent Mountain of Light ("MoL") processing facility, considerable work has
been undertaken to satisfy the conditions that DEM applied and LCCM
anticipates that it will resubmit the requested information in January 2022.

The work undertaken for this resubmission, through updating the pit design,
has seen the Project's expected profitability increase through higher copper
prices making more of the PN deposit economically viable. Further, from both
work undertaken and consultation with members of DEM, it is the Company's
strong belief that the amount of the Environmental Bond, currently A$3.5m, can
be significantly reduced.

 

Commenting, John Peters, Managing Director of Strategic Minerals, said:

"The Company is confident that 2022 will see the recommencement of production
at Leigh Creek.

"Whilst it was felt that funding on a pure debt basis would have produced the
best result for our shareholders, the market was not prepared to debt fund the
Project at this time. Accordingly, discussions involving equity linked
funding, at the LCCM level, have now commenced and considerable interest has
been received to date. It is for this reason that we feel that these funding
arrangements will be completed before the Project is "shovel ready".

"Given that the response to the conditions of the July PEPR is being lodged
shortly with the DEM, it is considered that the earliest LCCM will be in a
position to recommence production is March 2022 and this would be subject to
all regulatory clearances and funding being secured.

"Strategic Minerals is excited by the prospect of undertaking drilling in
2022. Planned drilling at Mount Coffin is expected to lead to an increase in
LCCM's reported copper oxide JORC resource and commence its long-term strategy
to use cash flows from copper oxide production to locate a substantial copper
sulphide deposit in this copper rich province."

Competent Person's Statement

The expected exploration results in this announcement are based on information
compiled by Mr. David Larsen, who is a Member of the Australian Institute of
Geoscientists.  Mr Larsen is the Principal of D&J Larsen Consulting Pty
Ltd and is a consultant to the Company. He has sufficient experience relevant
to the style of mineralisation and type of deposit under consideration and to
the activity he is undertaking to qualify as a Competent Person, as defined in
the 2012 Edition of the Australasian Code for Reporting of Exploration
Results, Mineral Resources and Ore Reserves and a qualified person as defined
in the AIM Note for Mining and Oil & Gas Companies dated June 2009.  Mr
Larsen has over 35 years' Australia and international experience in
exploration, mining geology and resource estimation for gold, base metals and
iron ore deposits.

 

 For further information, please contact:

 Strategic Minerals plc                                   +61 (0) 414 727 965
 John Peters
 Managing Director
 Website:               www.strategicminerals.net (http://www.strategicminerals.net)
 Email:                 info@strategicminerals.net (mailto:info@strategicminerals.net)

 Follow Strategic Minerals on:
 Vox Markets:           https://www.voxmarkets.co.uk/company/SML/
                        (https://www.voxmarkets.co.uk/company/SML/)
 Twitter:               @SML_Minerals (https://twitter.com/SML_Minerals)
 LinkedIn:              https://www.linkedin.com/company/strategic-minerals-plc
                        (https://www.linkedin.com/company/strategic-minerals-plc)

 SP Angel Corporate Finance LLP                           +44 (0) 20 3470 0470
 Nominated Adviser and Broker
 Matthew Johnson
 Ewan Leggat
 Charlie Bouverat

 

 

Notes to Editors

Strategic Minerals plc is an AIM-quoted, profitable operating minerals company
actively developing projects tailored to materials expected to benefit from
strong demand in the future. It has an operation in the United States of
America 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
likely to be highly demanded in the future.

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 aimed
at supplying the metals and minerals likely to be highly demanded in the
future.

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 12-hole drilling programme and the resource update that
resulted was announced in February 2019. In March 2019, the Company entered
into arrangements to acquire the balance of the Redmoor Tin/Tungsten project
which was settled on 24 July 2019 by way of a vendor loan which was fully
repaid on 26 June 2020.

In March 2018, the Company completed the acquisition of the Leigh Creek Copper
Mine situated in the copper rich belt of South Australia and brought the
project temporarily into production in April 2019. The project has been
granted a conditional approval by the South Australian Government for a
Program for Environmental Protection and Rehabilitation (PEPR) in relation to
mining of its Paltridge North deposit and processing at the Mountain of Light
installation.

 

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