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LONDON (Alliance News) - Strategic Minerals PLC on Monday said it is continuing to progress the Tatu coal project and is considering getting involved in a coal project in China, but said it must secure funding to be able to do either and stressed that although its portfolio is coal-heavy, it is not a coal-centric company.
The miner also said sales from its Cobre iron ore mine in the US rebounded in September and October following two months of faltering sales.
The miner said revenue from the Cobre mine rebounded in September and October after it experienced falling sales in May and June due to "transport and logistical issues", with "some recovery" experienced in July and August.
Strategic Minerals added that whilst iron ore prices have plummeted, mine gate prices have held. Mine gate prices refer to the company selling its iron ore to the local market rather than exporting it.
In the quarter to September-end, Strategic Minerals sold 3,696 tonnes of iron ore, compared to 2,765 tonnes a year earlier to generate USD250,000 in revenue compared to USD193,000 a year ago. In the 12 months to September-end, it sold 13,960 tonnes compared to 18,182 tonnes to see revenue fall to USD950,000 from USD1.2 million.
At its other project, the Tatu coal mine in New Zealand, the company said it plans to complete the bulk sample by the end of 2015. Currently, the miner holds a 49% stake in the mine, but said it is progressing talks about acquiring the other 51% stake to take full control of the mine.
Strategic Minerals has until the end of January 2016 to exercise its option to take full control of the mine. It is almost certain it will do everything it can to exercise that option because if it does not, the other owner of the mine can acquire Strategic Minerals' stake for only NZD1.0. However, Strategic Minerals needs to raise funding before it can exercise that option, leaving it with under four months to find some financing.
"The three months to September involved considerable work being undertaken [at Tatu] in formulating the appropriate development plan and marshalling appropriate physical and human resources to complete this stage of the mine development. Weather conditions during the latter part of the quarter, and into October, have caused some delays," said the company.
"The board is progressing discussions with various parties to secure funding to develop the mine in order for the company's option to be exercised," it added.
Strategic Minerals added that some iron ore miners in Australia have recently entered administration whilst some companies have begun to sell off their operations or close down mines, which in turn should boost the Tatu coal mine by reducing supply.
Specifically, it highlighted that the Huntly East mine will be closed and sold off by its owner, Solid Energy, which will boost sales from Tatu as the coal it will produce is of a similar quality.
In addition, Strategic Minerals is progressing talks about potentially getting involved in the Wanbao coal mine in China, but said this is subject to raising "specific funding" for the project, which it concedes will be difficult to secure.
"While the directors of Strategic Minerals believe the dynamics of the project, both operationally and financially, are strong, the company has observed a reticence in the market to fund both coal and projects in China," said the miner.
"Accordingly, the company has been following private equity sources to assist in funding any interest in the project. The board of Strategic Minerals recently confirmed that funding of this nature would need to be secured before any firm commitment could be made to the project," it added.
The company has also continued to focus on its costs and overheads, with overheads remaining under USD1.0 million a year.
As at the end of September, Strategic Minerals reported a cash balance of USD1.3 million compared to USD1.1 million at the end of June, reflecting an equity fundraising conducted back in June.
"On balance, the directors believe that expected cash flows from Cobre's operations and the reduction in corporate overheads should ensure that adequate reserves exist to progress existing operations (excluding acquisitions and the completion of the Tatu development)," said the company.
Strategic Minerals also stressed that although investors are beginning to categorise the company as a coal company, its strategy is not "coal centric" and that the acquisition of the Tatu coal project "should not imply" that it is coal focused.
"At a recent board meeting, the board voted to consider a number of development projects that were neither magnetite nor coal based. While these are more development orientated, their size and scope would add a significant diversification and potential upside for value generation if pursued successfully," said the company.
Strategic Minerals shares were down 14% to 0.280 pence per share on Monday morning.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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