Strategic Minerals PLC

Strategic Minerals - Interim Results - Half Year to 30 June 2019

RNS Number : 1693O
Strategic Minerals PLC
30 September 2019
 

Market Abuse Regulation (MAR) Disclosure

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.

 

30 September 2019

 

Strategic Minerals plc

("Strategic Minerals", "SML", the "Group" or the "Company")

Interim Results - Half Year to 30 June 2019

 

Strategic Minerals plc (AIM: SML; USOTC: SMCDY),  a producing mineral company actively developing projects prospective for battery materials, is pleased to announce its unaudited interim results for the half year ended 30 June 2018.

 

Financial Highlights:

·     Accounting after tax loss of US$1,182,000 (H1 2018 profit of US$2,406,000). Cash after tax loss of US$256,000 (H1 2018 profit of US$35,000).

·     Pre-tax profit of US$675,000 (H1 2018: US$1,246,000) from the Company's Cobre operation, prior to intercompany management charges, continues to underpin corporate cash flow. The contracted profit level reflects the impact of the major Cobre client suspending shipments and maintenance works conducted at other client operations.  While sales from other clients have begun to rebound, it is not anticipated that the major client will resume taking shipments and the Company has initiated legal proceedings against the major client. In line with anticipated lower sales levels, cost reduction measures have been implemented in the second half of 2019.

·      Directors exercised 17.5m options (John Peters, 16m and Alan Broome, 1.5m) and acquired further stock in the company.

·     Investment of US$39,784 into Cornwall Resources Limited ("CRL"), the owner of the Redmoor Tin-Tungsten project.

·     Issue of 2,866,730 SML shares, in March 2019, at a deemed price of 1.9067 pence per share as part payment for the acquisition of Leigh Creek Copper Mine Pty Ltd ("Leigh Creek" or "LCCM").

·     In September 2019, the Board of SML undertook a review of the CARE tenements and those at Hanns Camp.  In light of this review, the Company is considering exiting its involvement and, in anticipation of this, an impairment of US$760,000 has been included in the six month period to 30 June 2019.

·     In June 2019, the Company undertook an equity fundraising that saw it issue 63,571,425 shares at 1.40 pence per share and netting US$1,059,000. Only US$91,000 of this amount was received prior to 30 June 2019 with the balance, US$968,000, received post 30 June 2019.

·     Unrestricted cash and cash equivalents at 30 June 2019 were US$319,000 (31 Dec 2018: US$1,988,000).  The reduction in cash balances reflects the lower than expected cash flows from Cobre and the cost of re-commencing operations at Leigh Creek.

 

 

 

Corporate Highlights:

·     Leigh Creek successfully brought back into production, involving:

retreatment of leach pads;

US$1,834,000 spent on refurbishment of plant, testing and preparing the site for full time operations; and

activation of the off-take agreement.

·     Entering into contracts for the acquisition of the balance of the Redmoor Tin-Tungsten project.  This was subsequently settled on 25 July 2019.

·     Access to the Cobre magnetite stockpile was rolled over in mid-January ahead of the normal roll over at the end of February.

·     Redmoor scoping study update completed indicating NPV (@8%) of US $94m, IRR 19.4% Life of Mine Operating Margin 46% and payback in less than 4 years.

 

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

"The first half of 2019 has offered some challenges, with the major client at Cobre suspending payments, affecting cash reserves.  However, the Company has shown resilience and remains on track to deliver the Board's strategy.

"During the period, significant investment has been made in restarting treatment of leach pads at Leigh Creek Copper Mine.  This was critical in demonstrating the Company's ability to resurrect operations ahead of expected government approval to mine the larger Paltridge North deposit.  Additionally, funding which was originally allocated for exploration of the Hanns Camp site, that has not proved as prospective for nickel sulphide as expected, has now been redirected towards the development of Leigh Creek.

"Also during the period, the Company entered into arrangements to acquire the balance of the Redmoor Tin-Tungsten project.  Full ownership of Redmoor will allow SML to gain control on project timing and investment in this potentially world class mining opportunity.

"The Board has been mindful of the change in expected cash flow and has been putting into place strategies to provide for continuity of progress on the Company's key projects.  It is expected that the working capital position will be addressed in 2020 once regular sales commence at Leigh Creek.  In the meanwhile, the Board continues to exercise strict financial and technical discipline.  Furthermore, the Company now believes that it has consolidated three excellent operating/near-operating/brownfields projects, all likely to significantly add to the Companies perceived net value."

 

For further information, please contact:

 

 

 

Strategic Minerals plc

+61 (0) 414 727 965

John Peters

 

Managing Director

 

Website:

www.strategicminerals.net

Email:

info@strategicminerals.net

 

 

Follow Strategic Minerals on:

 

Vox Markets:

https://www.voxmarkets.co.uk/company/SML/

Twitter:

@SML_Minerals

LinkedIn:

https://www.linkedin.com/company/strategic-minerals-plc

Facebook:

https://www.facebook.com/search/top/?q=strategic%20minerals%20plc

     
 

 

 

 

SP Angel Corporate Finance LLP

+44 (0) 20 3470 0470

Nominated Adviser and Broker

 

Ewan Leggat

 

Lindsay Mair

 

Stephen Wong

 

 

Notes to Editors

Strategic Minerals plc is an AIM-quoted, operating minerals company actively developing projects prospective for battery materials. It has an operation in the United States of America and Australia 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 being sought in the burgeoning electric vehicle/battery market.

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 orientated to supplying the burgeoning electric vehicle/battery market.

In January 2016, the portfolio was expanded with the acquisition of shares in Central Australian Rare Earths Pty Ltd, which holds tenements in Western Australia prospective for cobalt, nickel sulphides and rare earth elements. The Company has since acquired all shares in Central Australian Rare Earths Pty Ltd. In September 2018, the Company entered contracts for the sale of certain CARE tenements identified as gold targets.

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 in Cornwall. This was completed on 24 July 2019

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 into limited production in April 2019, with full production expected in 2020.

 

 

Chairman's Statement

I am satisfied with the Company's achievements, in what has been a particularly challenging period.

Financial results

The results for the first half of 2019 reflect a tougher stage of development for the Company, as difficulties with our major client at Cobre emerged and projects took longer to develop.  It is not expected that these conditions will change dramatically over the remainder of 2019.  However, despite these obstacles, I am confident in the ability of the Board and management team to deliver the Company's strategy.  In 2020, the Company expects cash flow and profitability to improve dramatically, as full scale production commences at Leigh Creek Copper Mine.

As at 30 June 2019, unrestricted cash on hand was US$319,000, prior to the receipt of a further US$968,000 from the late June equity raise.  In the interests of preserving cash and ensuring that each of our projects are appropriately funded, the Board has been actively developing a capital plan and allocation policy to move the Company forward.

Operating profit of US$675,000 from the Cobre magnetite stockpile, prior to intercompany management fees, marked a significant decrease from the first half of 2018 (US$1,246,000) and reflected the drop in sales volumes associated with Cobre's major client not purchasing product in accordance with its contract.

Corporate overheads of US$1,211,000 were down on the same period last year (H1 2018 US$1,386,000) and the Board has implemented a series of cost-reduction initiatives in light of reduced sales at Cobre.

 

Strategic Focus

The continued profitability of the Cobre operations, even without the sales associated with the major client, provides comfort in relation to coverage of operating costs and allowed the Company to continue its three-pronged approach to diversified materials concentrating on:

1.         Coal and Bulk Materials- potential projects in this sector that are tied to current contracts and further offtake arrangements at attractive prices.

2.         Advanced Materials- considering project opportunities in materials where it expects demand to increase over the coming years (such as Rare Earths, Lithium and Graphite).

3.         Metals- identifying those projects exposed to metals that it expects to have price improvements over the next three to five years such as Cobalt, Nickel, Gold, Copper and Tin/Tungsten.

On the back of this strategy, the Company continues to invest in development programmes, particularly those associated with Leigh Creek Copper Mine (copper) and Redmoor (tin/tungsten/copper focused).

 

Cobre Operations

During 2018, the major client at Cobre ceased taking material and entered into arrangements that compensated the Company in lieu of delivery.  However, in 2019, the Company has received no payment from the client and is currently undertaking legal recourse.

The first half of the year's sales at Cobre were also impacted by plant maintenance works by a further two clients, although this now appears to have been cleared and non-major client sales now appear to have been restored to previous levels.

 

Leigh Creek Copper Mine

Significant resources have been funnelled into testing and preparing the site for full scale operation.  The restarting of the heaps, while not providing the flow of copper hoped for, was a strategically important occurrence. It demonstrated the ability of the existing plant to treat the planned production from the Paltridge North Deposit with the Company seeking to develop this project in 2020.

In preparing to fund this production, the Company has entered discussions with various funding sources and is confident that 2020 will see full scale production commence at Leigh Creek.

 

 

 

Redmoor Tin-Tungsten Project

2018 saw a full drilling program and a substantial increase in the inferred resource base.  In this half year, a scoping/mining plan study was completed which highlighted how potentially lucrative the project could be.

With this in mind, the Company negotiated to acquire the other half of the project, with completion taking place in July 2019.  Control of the full project places the Company in an ideal position to direct the timing and funding of the Redmoor Tin-Tungsten project.

 

CARE

During the first half of 2019, development at Hanns Camp was minimised to ensure availability of cash for the Leigh Creek Copper Mine project.

After further desktop review, the suspected nickel sulphide anomalies do not appear as strong as thought and the Company has taken a conservative approach in these financials and written down the value of the Hanns Camp tenements.

 

Issue of Capital

During the half year, the Company issued a total of 63,571,425 shares at 1.40 pence per share and netting US$1,059,000.
 

Safety

The Company continues to maintain a high level of safety performance with SML and its subsidiaries having no reportable environmental or personnel incidents recorded in the period.

 

This year marks a pace change for the organisation. I would like to take this opportunity to thank my fellow Directors, our management and staff in New Mexico, South Australia, Cornwall and Western Australia, along with our advisers, for their support and hard work on our behalf during the period. Additionally, I would like to thank our clients, contractors, suppliers and partners for their continued backing. I look forward to further progressing our key strategic goals in 2020.

 

Alan Broome AM

Non-Executive Chairman

30 September 2019

 

 

STRATEGIC MINERALS PLC

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE PERIOD ENDED 30 JUNE 2019

 

 

 

 

 

 

6 months to

6 months to

Year to

 

30 June

30 June

31 December

 

2019

2018

2018

 

(Unaudited)

(Unaudited)

(Audited)

 

$'000

$'000

$'000

Continuing operations

 

 

 

 

 

 

 

Revenue

1,395

2,120

3,355

Cost of sales

(229)

(391)

(650)

 

_________

_________

_________

 

 

 

 

Gross profit

1,166

1,729

2,705

 

 

 

 

Bargain purchase gain on LCCM Acquisition

-

2,464

2,162

 

 

 

 

Administrative expenses

(1,211)

(1,386)

(2,569)

Depreciation

(19)

(36)

(64)

Share based payment

(163)

(92)

(268)

Share of net losses of associates and joint ventures

(38)

1

(27)

Profit on financial assets held at fair value through profit or loss

1

-

-

Impairment charge

(760)

-

-

Foreign exchange gain/(loss)

(2)

7

(6)

 

_________

_________

_________

 

 

 

 

(Loss)/ profit from operations

(1,026)

2,687

1,933

 

 

 

 

 

_________

_________

_________

 

 

 

 

(Loss)/ profit before taxation

(1,026)

2,687

1,933

 

 

 

 

Income tax (expense)/credit

(156)

(281)

(460)

 

_________

_________

_________

 

 

 

 

Profit/(loss) for the period

(1,182)

2,406

1,473

 

 

 

 

Other comprehensive income

 

 

 

Exchange gains/(losses) arising on translation

of foreign operations

(62)

(93)

(685)

 

_________

_________

_________

 

 

 

 

Total comprehensive (loss)/ Income

(1,244)

2,313

788

 

_________

_________

_________

 

 

 

 

(Loss)/ profit  for the period attributable to:

 

 

 

Owners of the parent

(1,244)

2,313

788

 

_________

_________

_________

 

 

 

 

Total comprehensive (loss)/income attributable to:

 

 

 

Owners of the parent

(1,244)

2,313

788

 

_________

_________

_________

 

 

 

 

(Loss)/ profit  per share attributable to the ordinary equity holders of the parent:

$

$

$

Continuing activities - Basic

(0.08)

0.19

0.11

                                    -- Diluted

(0.08)

0.17

0.11

 

STRATEGIC MINERALS PLC

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2019

 

 

 

30 June

30 June

31 December

 

 

 

2019

2018

2018

 

 

 

(Unaudited)

(Unaudited)

(Audited)

 

 

 

$'000

$'000

$'000

 

 

Assets

 

 

 

 

 

Non-current assets

 

 

 

 

 

Intangible Asset

562

-

564

 

 

Deferred Exploration and evaluation costs

342

6,174

1,037

 

 

Other Receivables

140

111

141

 

 

Property, plant and equipment

7,026

295

5,170

 

 

Investments in joint ventures- equity accounted

2,264

1,755

2,248

 

 

Restricted cash

-

100

100

 

 

 

_________

_________

_________

 

 

 

10,334

8,435

9,260

 

 

 

_________

_________

_________

 

 

Current assets

 

 

 

 

 

Inventories

7

3

4

 

 

Financial Assets held at fair value through profit and loss

21

-

20

 

 

Trade and other receivables

1,302

1,204

285

 

 

Cash and cash equivalents

319

1,988

1,840

 

 

Prepayments

119

81

32

 

 

 

_________

_________

_________

 

 

 

1,768

3,276

2,181

 

 

 

_________

_________

_________

 

 

 

 

 

 

 

 

Total Assets

12,102

11,711

11,441

 

 

 

_________

_________

_________

 

 

 

 

 

 

 

 

Equity and liabilities

 

 

 

 

 

Share capital

2,202

2,087

2,095

 

 

Share premium reserve

48,454

47,118

47,205

 

 

Merger reserve

20,240

20,240

20,240

 

 

Foreign exchange reserve

(956)

(302)

(894)

 

 

Share options reserve

431

(29)

330

 

 

Other reserves

(23,023)

(23,023)

(23,023)

 

 

Accumulated loss

(37,752)

(35,515)

(36,632)

 

 

 

_________

_________

_________

 

 

Total Equity

9,596

10,576

9,321

 

 

 

_________

_________

_________

 

 

Liabilities

 

 

 

 

 

Non-Current Liabilities

 

 

 

 

 

Provision for Mining Royalties

435

-

435

 

 

Environmental Liability

361

-

361

 

 

 

 

________

 

        ________

 

 

 

 

796

-

796

 

 

Current liabilities

 

 

 

 

 

Deferred Consideration

-

74

70

 

 

Trade and other payables

1,029

356

354

 

 

Environmental Liability

-

111

-

 

 

Deferred revenue

525

594

900

 

 

Income Tax Payable

156

-

-

 

 

 

_________

_________

_________

 

 

 

1,710

1,135

1,324

 

 

 

_________

_________

_________

 

 

Total Liabilities

2,506

1,135

2,120

 

 

 

_________

_________

_________

 

 

 

 

 

 

 

 

Total Equity and Liabilities

12,102

11,711

11,441

 

          ________ ________ ________  

 

 

STRATEGIC MINERALS PLC

 

CONSOLIDATED STATEMENT OF CASH FLOW

FOR THE PERIOD ENDED 30 JUNE 19

 

 

 

 

 

6 months to

6 months to

Year to

 

30 June

30 June

31 December

 

2019

2018

2018

 

(Unaudited)

(Unaudited)

(Audited)

 

$'000

$'000

$'000

 

 

 

 

Cash flows from operating activities

 

 

 

 

 

 

 

(Loss)/profit after tax

(1,182)

2,406

1,473

Adjustments for:

 

 

 

 

 

 

 

Bargain purchase of Leigh Creek Copper Mine Pty Ltd

-

(2,464)

(2,162)

Loss on sale of tenements

-

-

245

Gain on financial assets held at fair value through profit and loss

(1)

-

12

Impairment charge

760

-

-

Depreciation of property, plant and equipment

19

36

64

Share of net loss / (profit) losses from associates

38

(1)

27

Non Cash Director Remuneration

-

213

-

(Increase) / decrease in inventory

(3)

4

3

(Increase) / decrease in trade and other receivables

(50)

(193)

690

Increase / (decrease) in trade and other payables

251

(91)

119

(Increase) / decrease in prepayments

(87)

(69)

(20)

Increase /(decrease) in deferred revenue

(375)

594

900

(Decrease)/ Increase in income tax payable

156

(648)

(648)

Share based payment expense

163

92

268

 

_________

_________

_________

Net cash flows from operating activities

(311)

(121)

971

 

_________

_________

_________

 

 

 

 

Investing activities

 

 

 

Acquisition of PPE Development Asset

-

-

(1,214)

Increase in PPE Development Asset

(1,212)

-

(797)

Increase in deferred exploration and evaluation

(91)

(1,443)

(237)

Sale of tenements

-

-

70

Investment in joint arrangements

(40)

(107)

(639)

Acquisition of PPE

(57)

(26)

-

 

_________

_________

_________

Net cash used in investing activities

(1,400)

(1,576)

(2,817)

 

_________

_________

_________

 

 

 

 

Financing activities

 

 

 

Net proceeds from issue of equity share capital

91

-

-

 

_________

_________

_________

 

 

 

 

Net cash from financing activities

91

-

-

 

_________

_________

_________

 

 

 

 

Net increase / (decrease) in cash and cash equivalents

(1,620)

(1,697)

(1,846)

 

 

 

 

Cash and cash equivalents at beginning of period

1,840

3,706

3,706

Release of restricted cash

100

-

-

Exchange gains / (losses) on cash and cash equivalents

(1)

(21)

(20)

 

_________

_________

_________

 

 

 

 

Cash and cash equivalents at end of period

319

1,988

1,840

 

_________

_________

_________

 

 

STRATEGIC MINERALS PLC

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE PERIOD ENDED 30 JUNE 2019

 

</

 

 

$'000

$'000

$'000

$'000

$'000

$'000

$'000

     $'000

 

________

________

________

________

________

________

________

________