Last checked at 1 Jun 2020 07:00
Market Abuse Regulation (MAR) Disclosure
Certain information contained in this announcement would have been deemed inside information for the purposes of Article 7 of Regulation (EU) No 596/2014 until the release of this announcement.
1 June 2020
Strategic Minerals plc
("Strategic Minerals" or the "Company")
$21.9m Arbitration Decision Granted
Strategic Minerals plc (AIM: SML; USOTC: SMCDY), a producing mineral company actively developing projects prospective for battery materials, is pleased to announce that, further to its announcement of 2 March 2020, the appointed arbitrator has awarded its wholly owned subsidiary, Southern Minerals Group ("SMG"), US$21,929,259 in damages and costs, exclusive of additional interest to be calculated as latterly described.
Highlights
· Comprehensive decision addressing both procedural and factual issues of the arbitration and finding in SMG's favour
· Total Arbitration award of US$21,929,259 plus additional interest (comprising liquidated damages of US$4,215,000, loss of profits of US$14,090,599, punitive damages of US$3,600,000 and arbitration costs of US$23,660)
· Interest at 15%pa awarded on liquidated damages (both pre and post judgement) and on loss of profits (post judgement only)
· SMG proceeding to confirm decision in the United States District Court in the client's local jurisdiction (where the arbitration technically took place)
· Client's assets seized as part of a US Securities and Exchange Commission's investigation with the Court likely to appoint a receiver to manage the assets of the client mid-June 2020
· Successful arbitration outcome puts SMG in the best possible case to seek recovery of this award, however visibility of the extent of this, if any, remains unclear pending further developments and the Company remains cautious on the ultimate outcome
The arbitrator, a retired judge, has provided a reasoned decision which is comprehensive, and evidences careful consideration of the specifics of this case, the risks that SMG took in committing its resources to the client and the callous disregard that the client showed in respect of the purchase and sale agreement and SMG. The thoroughness of the decision also aids SMG as it moves forward. Typically, arbitration awards are confirmed by courts as a pro-forma matter, but in the event the losing party challenges the award or the confirmation, the more well-reasoned the decision is, the easier it is for the prevailing party to have the decision confirmed and judgment entered.
The arbitrator's decision considers the procedural elements of the case - namely the client's lack of participation in the arbitration proceedings with SMG, the factual findings, consideration of liquidated damages and lost profits, the applicability of punitive damages, pre and post-judgment interest, arbitration costs and attorney's fees.
Specifically,
1. Procedural elements. |
The decision addresses the implications of the client's lack of participation in this proceeding. Essentially, the arbitrator determined that the client had a reasonable opportunity to participate fully in the proceeding, and it did not. He concludes that "all required due process was afforded to both sides through the impartial application of the Arbitration Rules agreed to by the parties in their agreement." The arbitrator's decision effectively forecloses any arguments that the client might raise with respect to due process.
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2. Factual findings.
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The arbitrator decision's recounts, in detail, the uncontested facts that SMG alleged in its complaint and its affirmative case. The arbitrator also cites specific requests for admissions that the client never contested, which confirmed the lack of payments from the client, the breach of the Agreement, and the liquidated damages through March 1, 2020. In addition, the arbitrator adopted SMG's facts with respect to the terms of the sale and purchase agreement, the amendment thereto, and the client's pattern of non-payment and false promises.
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3. Damages. |
The arbitrator gave careful consideration to SMG's damages analysis - specifically noting the three scenarios SMG posited. He concluded that SMG was conservative in its estimates and, most importantly, awarded $4,215,000 in liquidated damages and $14,090,599 in lost profits. Ultimately, he concludes that SMG's analysis is "reasonable, conservative, and accurate."
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4. Punitive Damages/Bad Faith.
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Again, the arbitrator adopted SMG's extensive recitation of the client's acts of bad faith. He examined the client's behavior and strongly concludes that "there can be no question that the continual bogus reassurances and purportedly detailed explanations of the imminent receipt of funds to pay the debt owed, were both malicious and 'committed recklessly with a wanton disregard for the plaintiff's rights.'" He then awarded $3,600,000 in punitive damages.
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5. Interest
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The arbitrator awarded pre and post-judgment interest on the $4,215,000 in liquidated damages. Likewise, the arbitrator awarded post-judgment interest on the $14,090,599 in lost profit damages. However, as requested the Company, the arbitrator set the applicable interest at 15% as permitted under New Mexico law if the losing side acted in bad faith. The usual interest rate would have been 8.75%.
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6. Arbitration Costs
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The arbitrator also awarded SMG all arbitration costs, which total $23,660. |
From here, SMG will need to move to confirm this decision in the United States District Court in the client's local jurisdiction and where the arbitration technically took place. The confirmation process is generally pro forma and only requires a short filing.
The Company has been advised by its lawyers to continue to withhold the name of the client until such time as it has filed in US federal court to confirm the arbitration. However, the Company has become aware that the client's assets have been seized as part of a US Securities and Exchange Commission's investigation, along with the assets of a number of related party entities, and that the court is likely to appoint a receiver to manage the assets of the client while the matter remains pending. A decision from the judge is scheduled for mid-June on this point. The memorandum in support of the motion to appoint the receiver suggests that the client may still have some real assets that warrant the appointment of a receiver to protect the status quo. SMG will advise the court and receiver in the SEC matter of the amounts owed once judgment is entered by the court.
Commenting, John Peters, Managing Director of Strategic Minerals, said:
"Whilst heartened by the arbitrator's decision, the Board continues to advise a precautionary view be adopted in relation to the amount, if any, Southern Minerals Group may receive. However, the Board is pleased with the manner in which it has been able to crystalize the amount of the claim and to have put the Company in the best position to maximise any payment it may be able to realise over the coming year."
For further information, please contact: |
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Strategic Minerals plc | +61 (0) 414 727 965 | |||
John Peters |
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Managing Director |
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Website: | www.strategicminerals.net | |||
Email: | info@strategicminerals.net | |||
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Follow Strategic Minerals on: |
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Vox Markets: | https://www.voxmarkets.co.uk/company/SML/ | |||
Twitter: | @SML_Minerals | |||
LinkedIn: | https://www.linkedin.com/company/strategic-minerals-plc | |||
Facebook: | https://www.facebook.com/search/top/?q=strategic%20minerals%20plc | |||
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SP Angel Corporate Finance LLP | +44 (0) 20 3470 0470 | |||
Nominated Adviser and Broker |
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Ewan Leggat |
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Notes to Editors
Strategic Minerals plc is an AIM-quoted, operating minerals company actively developing projects prospective for battery materials. It has an operation in the United States of America and Australia along with development projects in the UK and Australia. The Company is focused on utilising its operating cash flows, along with capital raisings, to develop high quality projects aimed at supplying the metals and minerals being sought in the burgeoning electric vehicle/battery market.
In September 2011, Strategic Minerals acquired the distribution rights to the Cobre magnetite tailings dam project in New Mexico, USA, a cash-generating asset, which it brought into production in 2012 and which continues to provide a revenue stream for the Company. This operating revenue stream is utilised to cover company overheads and invest in development projects orientated to supplying the burgeoning electric vehicle/battery market.
In January 2016, the portfolio was expanded with the acquisition of shares in Central Australian Rare Earths Pty Ltd, which holds tenements in Western Australia prospective for cobalt, nickel sulphides and rare earth elements. The Company has since acquired all shares in Central Australian Rare Earths Pty Ltd. In September 2018, the Company entered contracts for the sale of certain CARE tenements identified as gold targets.
In May 2016, the Company entered into an agreement with New Age Exploration Limited and, in February 2017, acquired 50% of the Redmoor Tin/Tungsten project in Cornwall, UK. The bulk of the funds from the Company's investment were utilised to complete a drilling programme that year. The drilling programme resulted in a significant upgrade of the resource. This was followed in 2018 with a 12-hole 2018 drilling programme has now been completed and the resource update that resulted was announced in February 2019. In March 2019, the Company entered into arrangements to acquire the balance of the Redmoor Tin/Tungsten project. This was completed on 24 July 2019.
In March 2018, the Company completed the acquisition of the Leigh Creek Copper Mine situated in the copper rich belt of South Australia and brought the project into production in April 2019.