Strategic Minerals Regulatory News (SML)

30 September 2015

Strategic Minerals Plc

("Strategic Minerals", the "Group" or the "Company")

Interim results for the six months to 30 June 2015

Transformational period - JORC resource for Tatu of 6.7 Mt and successful £1m fundraising

Strong momentum in second half of the year

Strategic Minerals Plc (AIM: SML; USOTC: SMCDY), the diversified mineral development and production company, is pleased to announce its unaudited interim results for the half year ended 30 June 2015.

Highlights

Financial Highlights:

· Cobre operation moves into profitability of US$162,000 for the period (H1 2014: loss US$2,441,000)

· Total comprehensive Group loss reduced for the period to US$473,000 (H1 2014: loss US$2,748,000)

· Raised £1,000,000 (before expenses) in June 2015 at 0.6 pence per share with the issue of 166,666,667 shares in two tranches

· Cash and cash equivalents at 30 June 2015 was US$1,090,000 (31 Dec 2014: US$946,000) with a further US$792,000 received in July 2015 from the second tranche of the capital raising; cash on hand as at 31 August 2015 was US$1,552,000

Corporate Highlights:

· Restructured Board and management in the period to ensure a broad expertise appropriate for the Company's strategy

· Board and management incentivised with the issue of 62,000,000 options with vesting conditions of 1.5p and 3.0p

Cobre Project:

· Operational costs at Cobre substantially reduced with the Company performing all operations in-house rather than using contractors

· Screen equipment purchased at Cobre to substantially reduce lease costs going forward

· Domestic sales of 7,247 short wet tons ("SWT") (H1 2013: 12,850 SWT)

· New sales arrangements instituted at Cobre which has already increased sales substantially in September 2015 with it now likely to exceed 2,000 SWT in the month

Tatu Project:

· Contract to acquire 100% of Tatu Project in New Zealand secured

· 51% interest in the Tatu asset purchased in the period

· Maiden JORC resource of 6.72 Mt of measured and indicated thermal coal estimated at the Tatu Project

· New Zealand government approval for the transfer of the tenement owner

· Bulk sample commenced in September 2015 to test marketability of product

Australian Projects:

· All the Australian projects have been or are in the process of being relinquished

Commenting, John Peters, Managing Director of Strategic Minerals, said:

"The first half of the 2015 year has proven to be a transformational period for the Company, as it changed direction with additional management resources being added, the acquisition of the Tatu coal mine project on the North Island of New Zealand, the raising of £1 million to commence the Tatu project, the establishment of the JORC resource for Tatu at 6.7 Mt and seasoned mining executive Mr Alan Broome AM joining the Board as Chairman.

"This momentum has been carried forward into the second half of the year with the commencement of the extraction of the bulk sample for the Tatu mine, approval from the New Zealand government to the change of control in the Tatu mining licence, continued development of the feasibility study of the Tatu mine covering the sales, costs of production and funding alternatives available, release of the Australian exploration tenements, on-going negotiations with buyers and transport companies to ensure domestic sales at the Cobre mine and the continued development of the potential project at Wanbao, Jilin province, China."

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 Notes to Editors:

Strategic Minerals plc is an AIM-quoted, diversified mineral development and production company, with projects in the United States of America and New Zealand. The Company is focused on acquiring and developing cash-generative, high-quality projects that meet local market demand for commodities. 

In September 2011, Strategic Minerals purchased its first cash generating assets, the Cobre magnetite tailings dam project in New Mexico, USA, which it brought into production in 2014 and which continues to provide a revenue stream for the Company. The portfolio was expanded in March 2015 with the acquisition of the Tatu Coal Mine located in North Island, New Zealand. Strategic Minerals is now developing this project with the expectation that it will make its first thermal coal sales in H1 2016.

In addition, the Company is continuing to review further value adding acquisitions. 

Chairman's Statement

Financial results

The results for the first half of 2015 showed a loss of US$320,000 (H1 2014: loss US$2,610,000). The improvements associated with the results principally reflect the cessation of loss making export activities at the Cobre mine in New Mexico, USA and the significant reduction (over 60%) in annualised overheads. Pleasantly, the results reflect how management and the Board of the Company have worked hard and maintained tight financial control throughout the period to ensure the Company is primed to go forward with new opportunities available in the minerals sector of the global economy.

Cash on hand as at 30 June 2015 was US$1,090,000 with a further US$798,000 received in July 2015 from the second tranche of the capital raising, which has improved the Company's cash position as at 31 August 2015 to US$1,552,000.

Cobre operations

Despite the challenging sales environment at Cobre, the operation achieved a profit for the six months. The Company has substantially reduced operating costs at Cobre and has now brought in-house nearly all activities that were previously completed by contractors. Most recently the Company purchased screening equipment, which will ensure that the Company can continue to maintain a low cash cost going forward.

Local sales at Cobre dropped in the half-year to US$488,000 (7,247 SWT) compared to US$866,000 (12,925 SWT) for the same period in 2014 mainly due to transport logistics problems. Since this time, the management at Cobre have worked closely with customers and logistics contractors to improve sales volumes, resulting in increased sales in September to well above the average monthly sales achieved in the first half of the year, with it now likely to exceed 2,000 SWT in the month.

Tatu project

The Tatu Project is a permitted mine situated in the North Island of New Zealand, which is a net importer of thermal coal. On 31 March 2015 the Company secured a contract to purchase 100% of the Tatu Project in New Zealand (see announcement of 31 March 2015). The Company settled the first 51% of the acquisition in the period, with the acquisition of the remaining 49% being subject to Strategic Minerals securing or demonstrating before the end of January 2016 that it has the funding to develop the project.

The Company is currently extracting a bulk sample from the Tatu mine site in order to establish likely demand for production prior to beginning the construction of the mine. Concurrently, we have been investigating funding alternatives for the mine development and have substantially progressed a detailed mine plan and feasibility study to support this activity.

During the period the Company completed an independent estimated JORC resource for the Tatu Project. The independent estimate conducted by Gordon Geotechniques Pty Ltd showed the following key findings:

· 6.72 Mt of measured and indicated thermal coal estimated at the Tatu Project

· High certainty of estimate with 75% of JORC resource classified as measured

· Resource accessible at surface with a 2 to 5 degree seam dip

· Coal quality demonstrates an average energy value of 24.36 MJ/kg (GAR)

· Coal seam thickness of at least two metres

* The Company currently has an interest of 51% in the resource through its 51% ownership of King Country Mining Ltd ("KCM") and anticipates acquiring the balance of KCM prior to the end of January 2016.

Australian projects

In order to focus the Company's attentions to projects that can be more immediately commercialised, the Company relinquished its licences to the Jotanooka Project in Western Australia and is in the process of relinquishing its licence for the Iron Glen project. These projects had been written off in previous periods, hence there is no further impact on the Company's results in the period.

Other Projects

While the process for the development of the Tatu mine has commenced, the Company has also continued to investigate additional project opportunities, including the Wanbao project in Jilin province, China. The Company has undertaken a site visit to the Wanbao Project in the period and is continuing discussions with the vendor and potential financiers of the project.

Safety

The Company continues to maintain a high level of safety performance with no reportable environmental or personnel incidents being recorded in the period.

Board Changes

During the half-year a number of Board changes occurred to assist with accelerating the Company's growth ambitions and to ensure a balanced Board composition of non-executive and independent directors with a broad range of technical and corporate backgrounds. While we now believe we have a Board and management structure suitable for the Company's current needs, with broad expertise appropriate for the Company's strategy, we continue to consider the addition of a UK based non-executive Director.

Capital Raising

During the half year, the Company raised £1,000,000 (US$1,570,000) before costs at 0.6 pence per share through the placing of 166,666,667 ordinary shares, taking the total ordinary shares in issue to 890,492,227. The raising was completed in two Tranches as follows:

· the first tranche was completed on 8 June 2015 raising £492,000 (US$772,000) before costs with the issue of 82,000,000 ordinary shares; and

· the second tranche was completed on 14 July 2015 following approval to issue the shares at the Annual General Meeting held on 2 July 2015, raising a further £508,000 (US$798,000) before expenses with the issue of 84,666,667 ordinary shares.

The costs associated with the fundraising were £81,000 (US$127,000)

Share Options

Upon completion of the second tranche funds on 14 July 2015 the Company issued 8,333,333 options over new ordinary shares to the broker of the capital raising, at an exercise price of 0.6 pence per share. These options expire on 14 July 2018.

The following share options were issued on 10 April 2015 under the EMI Scheme to certain directors, executives and employees of the Company. The options will vest upon a volume weighted average price ("VWAP") over five consecutive trading days on AIM of either 1.5 pence or 3 pence as provided below:

Each option is exercisable into one ordinary share in the Company. Once vested, the options may be exercised at any time up until their expiry date. 10,000,000 options previously issued to employees were cancelled during the half-year.

Appreciation

Finally, I would like to take this opportunity to thank my fellow Directors, our management and staff in New Mexico, and our advisers for their support and hard work on your behalf during the period. Additionally, I would like to thank our contractors, suppliers and partners for their on-going support, as well as our valued shareholders.

Alan Broome

Chairman

30 September 2015

STRATEGIC MINERALS PLC

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

STRATEGIC MINERALS PLC

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2015

CONSOLIDATED STATEMENT OF CASH FLOW

FOR THE PERIOD ENDED 30 JUNE 2015

STRATEGIC MINERALS PLC

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE PERIOD ENDED 30 JUNE 2015

All comprehensive income is attributable to the owners of the parent.

The accompanying accounting policies and notes form an integral part of these financial statements 

NOTES FORMING PART OF THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE PERIOD ENDED 30 JUNE 2015

1. General information

Strategic Minerals Plc ("the Company") is a public company incorporated in England and Wales. The consolidated interim financial statements of the Company for the six months ended 30 June 2015 comprise the Company and its subsidiaries (together referred to as the "Group").

2. Accounting policies

Basis of preparation

These consolidated financial statements have been prepared using policies based on International Financial Reporting Standards (IFRS and IFRIC interpretations) issued by the International Accounting Standards Board ("IASB") as adopted for use in the EU. IAS 34 is not required to be adopted by the Company and has not been applied in the preparation of this interim information. The consolidated financial statements do not include all disclosures that would otherwise be required in a complete set of financial statements and should be read in conjunction with the 2014 Annual Report. The financial information for the half years ended 30 June 2015 and 30 June 2014 does not constitute statutory accounts within the meaning of Section 434(3) of the Companies Act 2006 and is unaudited.

The annual financial statements of Strategic Minerals Plc are prepared in accordance with IFRSs as adopted by the European Union. The comparative financial information for the year ended 31 December 2014 included within this report does not constitute the full statutory accounts for that period. The statutory Annual Report and Financial Statements for 2014 have been filed with the Registrar of Companies. The Independent Auditors' Report on that Annual Report and Financial Statement for 2014 was unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006.

The Company has amended its reporting currency since 30 June 2013 to US dollars as the Company's revenues, expenses, assets and liabilities are predominately in US currency.

After making enquiries, the directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the half-yearly consolidated financial statements.

The same accounting policies, presentation and methods of computation are followed in these condensed consolidated financial statements as were applied in the Group's latest annual audited financial statements except for policies stated below.

Joint arrangements

Under IFRS 11 Joint Arrangements, investments in joint arrangements are classified as either joint operations or joint ventures. The classification depends on the contractual rights and obligations of each investor, rather than the legal structure of the joint arrangement. Strategic Minerals Limited has only one joint operation as at 30 June 2015 and no joint ventures.

Joint operations

A joint operation is a joint arrangement whereby the parties have joint control of the arrangement have rights to the assets and obligations for the liabilities, relating to the arrangement. Strategic Minerals Plc recognises its direct right to the assets, liabilities, revenues and expenses of the joint operations and its share of any jointly held or incurred assets, liabilities, revenues and expenses. Details of the joint operation are set out in note 9.

Joint Ventures

A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have the rights to the net assets of the joint arrangement. Interests in joint ventures are accounted for using the equity method, after initially being recognised at cost in the consolidated statement of financial position.

IASB has issued a number of IFRS and IFRIC amendments or interpretations since the last annual report was published. It is not expected that any of these will have a material impact on the Group.

3. Critical accounting estimates and judgements

The Group makes certain estimates and assumptions regarding the future. Estimates and judgements are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience may differ from these estimates and assumptions. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

Judgements

(a) Joint arrangement and joint operation

On 31 March, 2015 the Company acquired a 51% interest in King Country Mining Limited (KCM) with the balance of KCM owned by another party (see note 9). The contractual nature of this joint arrangement entitles both shareholders of KCM to the representation of one director each on the two director board of KCM. Furthermore, all decisions at the board of directors must be unanimously agreed upon. Hence, this joint arrangement has been included in the financial statements as a joint operation which recognises Strategic Minerals Plc's 51% share of any jointly held or incurred assets, liabilities, revenues and expenses.

Participation in this joint operation is considered to be a distinct segment with respect to disclosing segment information (see note 4).

Estimates and assumptions

(a) Fair value of assets and liabilities of joint operations

The Company has valued the exploration assets of KCM being the joint operation at acquisition, at their fair value being the consideration paid by Strategic Minerals Plc plus the expected discounted value of future royalties to be paid by KCM. In addition, the fair value of the royalties has been recognised as a non-current provision at the expected discounted value of the future royalties.

(b) Carrying value of intangible assets

In assessing the continuing carrying value of the exploration and evaluation costs carried the Company has made an estimation of the value of the underlying tenements and exploration licenses held.

(c) Share based payments, warrants and options

The fair value of warrants and options recognised in the income statement is measured by use of the Black Scholes model, which takes into account conditions attached to the vesting and exercise of the equity instruments. The expected life used in the model is adjusted; based on management's best estimate, for the effects of non-transferability, exercise restrictions and behavioural considerations. The share price volatility percentage factor used in the calculation is based on management's best estimate of future share price behaviour based on past experience.

STRATEGIC MINERALS PLC

NOTES FORMING PART OF THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE PERIOD ENDED 30 JUNE 2015

In prior years the Group had three main segments:

· Southern Minerals Group LLC (SMG) - This segment is involved in the sale of magnetite to the US domestic market. In prior years this segment also shipped magnetite to port for onward export sale.

· Head Office - This segment incurs all the administrative costs of central operations and finances the Group's operations.

· Australia - This segment holds the tenements in Australia and incurs all related operating costs.

With the acquisition of the 51% in interest in the King Country Mining Limited (KCM) joint operation being a coal mine development in the north island of New Zealand (see note 9), the board of directors consider it appropriate to show KCM as a separate segment in these financial statements.

Factors that management used to identify the Group's reportable segments

The Group's reportable segments are strategic business units that carry out different functions and operations and operate in different jurisdictions.

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision maker has been identified as the management team including the Executive Chairman and Executive Directors.

Measurement of operating segment profit or loss, assets and liabilities

The Group evaluates segmental performance on the basis of profit or loss from operations calculated in accordance with EU Adopted IFRS but excluding non-cash losses, such as the amortisation of intangible assets, and the effects of share-based payments.

Segment assets exclude tax assets and assets used primarily for corporate purposes. Segment liabilities exclude tax liabilities. Loans and borrowings are allocated to the segments in which the borrowings are held. Details are provided in the reconciliation from segment assets and liabilities to the Group's statement of financial position.

STRATEGIC MINERALS PLC

NOTES FORMING PART OF THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE PERIOD ENDED 30 JUNE 2015

STRATEGIC MINERALS PLC

NOTES FORMING PART OF THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE PERIOD ENDED 30 JUNE 2015

STRATEGIC MINERALS PLC

NOTES FORMING PART OF THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE PERIOD ENDED 30 JUNE 2015

STRATEGIC MINERALS PLC

NOTES FORMING PART OF THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE PERIOD ENDED 30 JUNE 2015

Administration costs by nature

STRATEGIC MINERALS PLC

NOTES FORMING PART OF THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE PERIOD ENDED 30 JUNE 2015

No dividend is proposed for the period.

Losses per ordinary share have been calculated using the weighted average number of shares in issue during the relevant financial year as provided below.

As the Group has made a loss for the period, diluted earnings per share is deemed to be the same as the basic earnings per share.