Strategic Minerals Share News (SML)

LONDON (Alliance News) - Strategic Minerals PLC shares fell on Thursday morning after the company said buying more projects is "imperative" as the Cobre mine in New Mexico is not sufficient to cover its overheads.

In a statement set to be given at its annual general meeting, Managing Director John Peters said that while the Cobre mine remains profitable, this is 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.

As a result, adding further projects to its portfolio will be "imperative", he said.

"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.

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 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.

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.

Shares in the company were down 6.1% to 0.493 pence on Thursday afternoon, after being one of the worst performers in the AIM All-Share in early-trade Thursday.

By Sam Unsted; samunsted@alliancenews.com; @SamUAtAlliance

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