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LONDON (Alliance News) - Strategic Minerals PLC shares fell on Thursday afternoon despite management stating an announcement made earlier in the day had been "misinterpreted" and stressed the company is "progressing well" and "well balanced".
Strategic Mineral shares were down 18% to 0.431 pence per share late Thursday afternoon, the second worst performer on the AIM market.
On Thursday morning, the company said it planned on buying more projects, describing it as "imperative" as the Cobre mine in New Mexico was not sufficient to cover its overheads. Managing Director John Peters said that while the Cobre mine remained profitable, it was not sufficient to meet its corporate overheads.
"2014 proved a trying year for Strategic Minerals. The collapse in the export price for iron ore hit the Cobre operation hard, making international sales uneconomic. Mine gate sales continued to be profitable but on much lower volumes. This resulted in the whole structure of the company having to be downsized," said Peters on Thursday morning.
"In reviewing possible acquisitions, the board consider that there is potential to acquire small-sized projects, with near-term cash flows, servicing local markets, and to bring a number of these together with the vision of positioning Strategic Minerals in two to three years as a profitable operating mining company," said Peters in the earlier statement.
In a later statement Thursday afternoon, Peters said: "Unfortunately we believe the statement made earlier today has been misinterpreted, and I would like to reaffirm to all shareholders the current position of the company, which the board and I feel is highly encouraging and positive."
"As stated in our very recent final results, the board had to review the Cobre operations after it was hit by the falling iron ore price. As a result, Cobre completed its final export of product in February 2014 and is now focused on the domestic market. We were delighted to announce in our results that domestic sales were up by 25%, and it is still a cash producing project for the company," he added.
Peters highlighted the journey the company has gone through and said the company is "progressing well" and is "well balanced".
"We have some exciting projects on the horizon and believe that 2015 will be a positive year for the
company," said Peters.
On Monday, Strategic Minerals appointed Alan Broome as its new non-executive chairman with the role of executing the growth strategy Strategic Minerals has undertaken, with the acquisition of the Tatu coal mine in the north island of New Zealand and other projects which are "under review".
Strategic Minerals reached a deal to acquire the Tatu project in late March for a total of around GBP128,000, with the majority of the consideration to be paid in future royalties.
Earlier in June the company secured a maiden JORC resource for the Tatu coal mine, which came in at 6.72 million tonnes of measured and indicated thermal coal. Of that resource, 5.0 million tonnes is classified as measured, representing around 75% of the total resource.
The company is targeting production of around 200,000 tonnes of thermal coal per year from Tatu with around a 20 year mine life. First thermal coal sales are expected in the first half of 2016.
The company had previously said the fall in iron ore prices had caused the company to halt exports from Cobre after it reported a gross loss of USD629,000 in 2014, compared with a profit of USD2.0 million in 2013, as revenue fell to USD6.1 million from USD37.2 million.
Those financials were caused by the halt of exports from Cobre as export sales fell to 64,000 dry metric tonnes in 2014, from 423,000 tonnes a year earlier.
Early in 2015, Strategic Minerals shifted its operations in an attempt to offset the drop in iron ore prices and drive more meaningful cash flow. It relinquished some iron ore tenements in Australia and then purchased Tatu.
It also said at the time it was assessing the underlying resource at the Wanbao metallurgical coal mine in China with the aim of buying up to 49% of the mine. In its second statement Thursday the company said talks are continuing.
That shift away from iron ore and the prospect of new acquisitions gave Peters more confidence, as he said the company was "confident it now has low overheads, an existing cash flow stream from Cobre and the potential near term cash flow opportunity from Tatu", alongside further growth opportunities.
By Sam Unsted; samunsted@alliancenews.com; @SamUAtAlliance
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