Has an iron ore project that's just what a miner needs for these troubled times - a 'plain vanilla' operation that will quickly generate revenues and won't be greedy for hard-to-find capital. And share price performance could soon be kick-started by the recent rebound of the iron ore market.
[SML]'s plan is mining waste rock - rock previously deemed uneconomic to sell or process because of lower commodity prices. In Strategic's case, the company has secured exclusive rights to a stockpile of high-grade, fully processed magnetite iron ore accumulated as a by product of copper mining at Freeport-McMoRan's Cobre mine in New Mexico. The iron ore stockpile comes with an internationally compliant resource statement - 1.57m tonnes grading 62 per cent iron - and is "delivery-ready", meaning all Strategic has to do is transport the ore into shipping containers and bring it to port. To that end, the company finished refurbishing a short rail link in the summer and has signed up commodity trader Glencore (GLEN) as an 'offtake' partner.
Extract from Interim Report inter alia "....Strategic Minerals PLC has also been buffeted by iron ore price volatility but we believe it has the potential to generate healthy cash flows in the current market environment, and that 2013 will be a positive year for the company..."
Extracted from: http://www.londonstockexchange.com/exchange/news/market-news/market-news-detail.html?announcementId=11473666
The company's share price is languishing after a heavy sell-off last summer when the market for iron ore entered meltdown mode. But iron ore prices have since rebounded to 12-month highs while shares of Strategic continue to wallow - despite the company recently entering production - suggesting plenty of scope for recovery and growth.
Strategic's shares currently trade at a 56 per cent discount to house broker Daniel Stewart's 12p estimate of fair value, which is based on a discounted cash flow model. That said, the discount is partially warranted given how the Cobre stockpile is only expected to last about three years. But with management on the hunt for similar acquisitions, and the market much more focused on near-term results, we don't see this as a significant problem. Besides, we're only recommending this as a short-term buy - as little as three to 12 months. We expect the discount to NAV to shrink as iron ore producers rebound and cash from the Cobre operation really starts to flood in.
The recent resurgence in the iron ore market has created an opportunity for nimble investors willing to take a risk on an unproven miner. Not only can emerging producers drive earnings growth without relying on higher commodity prices, but in Strategic's case, the company stands to benefit from mining a high-grade, low-cost deposit in a safe jurisdiction. We feel the current share price represents a good entry level given how the shares trade on just 3.5 times forecast forward earnings - roughly the same level as when we first tipped shares of Central Asia Metals.
£4.2 million Institutional fundraising to fund working capital for full scale production in New Mexico
· £4.2 million, net of expenses, raised through a placing of new shares
· Funds raised through the issue of 102,666,667 new ordinary shares at a price of 4.5p per share
· The 60-day moving average price of the Company's shares at the market close on 4 February 2013 ( last practicable date before pricing) was 4.86p per share
· This Institutional placement leaves the Company fully financed for its current operations
· Funds raised to be primarily used to provide working capital for the Company's magnetite tailings deposit at the Cobre Mine in New Mexico which is now in full scale production and well positioned to achieve shipments in the export market of approximately 50,000 DMT per month
· Next shipment of 53,000 DMT currently being loaded at the port of Guaymas
Strategic Minerals Plc (AIM: SML; USOTC: SMCDY), the magnetite iron ore producer and exploration company, is delighted to announce that it has raised £4,200,000, net of expenses from institutional and other investors through the placing of 102,666,667 new ordinary shares of 0.1p each (the "Placing Shares") at a price of 4.5p per Placing Share (the "Placing"). The Placing was conducted for the Company by WH Ireland Limited.
Paul Harrison, CEO of Strategic Minerals, said:
"We are delighted to announce this successful placing and in particular the interest shown by new institutional investors participating in this financing. The funding will be used primarily to meet the working capital needs of our operations at the Cobre mine in New Mexico including inside mine gate costs, rail freight to port and all port costs at Guaymas. This funding will ensure that monthly export shipments can proceed uninterrupted and leaves the Company fully financed for all of its current operations."
The Company announced in June 2012 that it had completed the rehabilitation and upgrade of the rail link to the Cobre Mine in New Mexico to enable rail shipments of its magnetite iron ore to begin. In August it announced the successful completion of a test shipment by rail to the port of Guaymas in Mexico and in September the Company announced its state of readiness to commence exports shortly. In November it announced that export sales had commenced with the first export market shipment of over 47,000 dry metric tonnes ("DMT") to Glencore AG. In addition, the Company continues to service the USA domestic market at increasing levels through truck sales at mine gate.
During 2013 the Company intends to complete monthly shipments of approximately 50,000 DMT. The funds raised in the Placing will be used primarily to provide working capital for the monthly shipments, as well as to strengthen the balance sheet. The first of these shipments, approximately 53,000 DMT, is currently being loaded, at the port of Guaymas in Mexico.
The Placing Shares have been conditionally placed by W H Ireland Limited ("WHI"). Under the terms of a placing agreement dated 7 February 2013 and entered into between the Company and WHI, WHI has agreed to use its reasonable endeavours to procure placees for the Placing Shares at the Placing Price. The Placing is not underwritten.
Application has been made for the Placing Shares to be admitted to trading on AIM ("Admission") and it is anticipated that Admission will occur on 8 February 2013. On Admission the Placing Shares, will rank pari passu with the Company's existing ordinary shares of 0.1p each ("Ordinary Shares").
Total Voting Rights
Following Admission the total number of Ordinary Shares in issue will be 550,825,560. This figure may be used by shareholders as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in, the share capital of the Company under the Financial Services Authority's Disclosure and Transparency Rules.
[DRG] has a significant investment here.