Capital Metals PLC (AIM:CMET) shares tumbled as the company announced that the two industrial mining licences recently issued to its subsidiary Damsila have been temporarily suspended.
The share structure of Damsila needs to be approved by the Board of Investment of Sri Lanka (BOI) according to Sri Lanka’s Geological Survey and Mines Bureau (GSMB), which has now launched an investigation into the business.
Capital Metals was only awarded the licences in August after years of technical assessments and two public hearings.
The junior said it has been working with the GSMB to clarify any concerns around the share structure, which it said was set up in 2016.
Uncertainty around the application of the Foreign Exchange Act of Sri Lanka that governs investment in shares in companies incorporated in Sri Lanka by non-residents seems to be behind the issue, it added.
Damsila, is a subsidiary company of a Sri Lanka resident company, Redgate Lanka (Pvt) Limited. The ultimate parent of Redgate is Capital Metals.
Capital Metals said it had made several submissions to the GSMB and relevant authorities based on legal counsel advice, which is that BOI approval is not required by Damsila.
It also noted that as of 8 December 2022, the chairman of the GSMB was removed and the Director General was sent on compulsory leave, which might delay any resolution of the matter.