REG - Strategic Minerals - Q4 Magnetite Sales and Cash Balances

Strategic MineralsAnnouncement

26/01/2022 09:25

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RNS Number : 6965Z  Strategic Minerals PLC  26 January 2022

The information contained within this announcement is deemed by the Company to
constitute inside information as stipulated under the Market Abuse Regulations
(EU) No. 596/2014 ('MAR') which has been incorporated into UK law by the
European Union (Withdrawal) Act 2018.

26 January 2022

Strategic Minerals plc

("Strategic Minerals" or the "Company")

December Quarter 2021 Magnetite Sales and Cash Balances

Strategic Minerals plc (AIM: SML; USOTC: SMCDY), a profitable producing
mineral company, is pleased to provide the following update on the Company's
cash position and ore sales at the Cobre magnetite operation in New Mexico,
USA ("Cobre") for the quarter ended 31 December 2021.

Highlights

·   The 2021 annual sales revenue from Cobre was US$2.611m (2020:
US$3.025m)

·   CV Investments LLC ("CVI") Receiver has formally requested all trade
creditors and investors to again submit their claims to the Receiver,
indicating an intention to distribute

·   After tax profit expected in 2021, subject to audit

·   Group cash balance of US$0.609m as at 31 December 2021

·   Commencement of operations at Leigh Creek Copper Mine expected first
half of 2022 subject to receipt of required funding

 

Sales update: Cobre magnetite tailings operations

2021 saw a gentle decline in sales over the first three quarters and a
significant fall in the December quarter of 2021. While initial declines had
been thought to reflect increased demand in 2020 associated with the wall
between the USA and Mexico, the last quarter has seen a significant drop in
demand from the Company's largest client.

The major client has indicated that they wish to rundown a significant
magnetite stockpile, established at their plant.  As this point, it is not
clear when previous demand levels will be restored. To some degree, this fall
in demand has been mitigated by the change in the associated sales price mix
and additional demand from existing clients. Overall, sales volumes were in
line with 2019 and changes in pricing mixes have resulted in a higher sales
revenue than the underlying 2019 adjusted performance.

Despite the reduction in sales at Cobre, it is expected that, subject to
audit, the Company will report an after-tax profit in 2021.

Sales comparisons on quarterly and annual periods to 31 December 2021, along
with associated volume details, are shown in the table below:

 

       Tonnage                                       Sales (US$'000)
 Year  3 months to Dec       12 months to Dec        3 months to Dec  12 months to Dec
 2021  7,245                 42,637                  493                2,611
 2020  12,845                51,518                  747                3,025
 2019  12,202                  42,516*               714                  2,488*

* For comparison purposes, the US$0.75m of deposits forfeited by CV
Investments LLC ("CV") has been excluded.

The Company's wholly owned subsidiary, Southern Minerals Group ("SMG") has
received correspondence from CVI's Receiver formally requesting all trade
creditors and investors to submit their claims to the Receiver. Thus, the
Receiver has filed a motion with the court to establish the procedures and the
U.S. Securities and Exchange Commission (SEC) did not object to the motion.
Assuming the Court approves the Receiver's proposed process, from there, the
Receiver may accept or reject those claims, subject to appeal. The Receiver
will then make a recommendation for the distribution of the assets, which is
still being determined.

 

While it still remains uncertain as to how the Receiver intends treating SMG's
valid arbitrated claim on CVI, this development indicates that this matter may
be resolved this year.  Given SMG's US$21.9m claim and its understanding that
other claims total circa US$70m, the Board considers it not unreasonable to
expect that SMG may receive a reasonable portion of the over US$7m in cash the
Receiver is now holding on behalf of CVI.

 

Financials and Operations

At 31 December 2021, the Company's non-restricted cash balance was US$0.609m
(30 September 2021: US$0.564m).

The Company raised a further £400,000 (gross) in October 2021, inclusive of
participation by Directors (Peter Wale and John Peters). While after-tax
profitability from Cobre continues to cover corporate overheads and, as
previously, provided a small surplus, costs associated with developing both
the Leigh Creek Copper Mine ("Leigh Creek") and the Redmoor Tin Tungsten
project, ("Redmoor") result in reducing cash balances. Subject to receipt of
the required project funding the Board believes this pressure on cash balances
will be removed this year through the planned commencement of operations at
Leigh Creek and anticipated involvement of third parties at Redmoor. The SML
Board has reaffirmed its commitment to ensuring that overheads will be kept
below after-tax income derived from operations in 2022 and beyond.

Subject to receipt of required project funding, Leigh Creek is expected to
shift into production, and generate revenue, this year and the Board believes
this will materially impact expected future cash balances. The Company has
lodged an updated Programme for Environmental Protection and Rehabilitation
("PEPR") with the Department of Energy and Mining of South Australia and is
confident that regulatory approvals will allow for commencement of operations,
subject to finance, late in the first quarter/early in the second quarter
2022. Discussions with potential funders continue and site inspection(s) in
February are currently expected, subject to travel being possible.

Additionally, the Company has continued discussions with parties concerning
its Redmoor project. On the basis of these discussions, the Company feels
confident that it will not need to support operational overheads for the full
year and further exploration will be undertaken during the year.

 

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

"While Cobre sales have reduced over 2021, the expectation of revenue from
Leigh Creek in 2022 subject to receipt of project funding, places the Company
in a strong position to realise its promise to develop a second income stream
and significantly improve after-tax operational profits.

"Copper and tin prices continue to favour both the Leigh Creek and Redmoor
operations and the Board believes 2022 will see exploration for both projects,
in conjunction with external partners.

"The Company is looking forward to a positive resolution on the CV Investments
claim this year."

 

 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 2018 drilling programme has now been completed 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. In July 2021, the project
was 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. In early January 2022, an updated PEPR, addressing the
conditions associated with the July 2021 approval, was lodged.

 

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