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(Alliance News) - Strategic Minerals PLC on Thursday said negotiations for a debt facility have collapsed and it is now looking at alternate ways to raise funding for its Leigh Creek Copper Mine.
Shares in Strategic Minerals were down 5.7% at 0.33 pence on Thursday morning in London, following the announcement.
The London-based mining and exploration company said it has been in negotiations for a substantial debt facility since October, but these negotiations have now ceased.
Strategic Minerals cited the high costs of a large approved undrawn facility and the company's current low market capitalisation for breaking off the debt talks.
The company added that it has now shifted its emphasis to funding involving an equity component. Strategic Minerals is looking at a USD10 million convertible note facility at the subsidiary level.
Strategic Minerals said marketing to potential investors is based on current market conditions utilising a copper price assumption of USD4.25 per pound, which produces an expected project earnings before interest, tax, depreciation and amortisation of USD68 million, according to the company's internal forecasts.
Leigh Creek Copper Mine plans to apply the funding to recommence production and for exploration costs. Drilling is expected to focus on two areas: Mount Coffin and Paltridge North.
In anticipation of proposed drilling programmes, Leigh Creek Copper Mine has lodged applications with the South Australia state government for grant payments under its accelerated development initiative programme. If approved, the mine could receive grant payments of up to half of the drilling costs.
Managing Director John Peters said: "The company is confident that 2022 will see the recommencement of production at Leigh Creek. Whilst it was felt that funding on a pure debt basis would have produced the best result for our shareholders, the market was not prepared to debt fund the project at this time.
"Accordingly, discussions involving equity linked funding, at the Leigh Creek Copper Mine level, have now commenced and considerable interest has been received to date. It is for this reason that we feel that these funding arrangements will be completed before the project is 'shovel ready'."
By Heather Rydings; heatherrydings@alliancenews.com
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