Strategic Minerals Regulatory News (SML)

26 May 2016

 Strategic Minerals plc

("Strategic Minerals" or the "Company")

Investment in tin/tungsten project in Cornwall

Strategic Minerals Plc (AIM: SML; USOTC: SMCDY), the minerals production and development company, announces that it has today entered into a binding term sheet (the "Term Sheet") to acquire up to a 50% interest in NAE Resources (UK) Limited ("Redmoor"), a subsidiary of the Australian (ASX) listed company New Age Exploration Limited ("NAE"). Redmoor holds an exploration licence and option over 23km2 in the Cornish tin-tungsten-copper mining district in the UK.

About Redmoor

In October 2012, NAE acquired the rights, through an exploration licence and mining lease option arrangement, over a 23km2 area surrounding the Redmoor deposit in the Cornish tin-tungsten-copper mining district in the UK. The exploration licence provides the rights to explore over the entire licence area for a period of 15 years and the mining lease option provides the right for Redmoor to enter into a 25-year mining lease (renewable for a further 25 years) over any part of the licence area. During the exploration licence period, a modest annual licence fee is payable to the vendor which reverts to a 3% net smelter return vendor royalty on mining commencement. The licence area had previously supported a number of historic tin-tungsten-copper mines and there are a number of operating open cut mines (china clay and tungsten) located in the region.

There is excellent local infrastructure for roads and ports and it is less than 40km by road to the recently commissioned Drakelands tungsten mine and processing plant.

In December 2015, NAE undertook, in conjunction with SRK Consulting (UK) Limited ("SRK"), a detailed review of the historical drilling, mining and geological data. This resulted in the:

1) Definition of an updated Mineral Resource, as defined by the JORC code, of 13.3Mt @ 0.37% tungsten equivalent (WO3Eq) (0.56% tin equivalent (SnEq)).

2) Identification of a number of high grade lodes at Redmoor and definition of a high grade sub-set of the above Inferred Mineral Resource of 2.3Mt @ 0.80% WO3Eq (1.19% SnEq).

3) Identification of an additional high grade Exploration Target, also defined by the JORC code, of 4Mt to 6Mt with an estimated grade of between 0.6% and 1.0% WO3Eq (0.9% to 1.5% SnEq) - two to three times the size of the above High Grade Resource noted in 2) above (at a similar expected grade).

It should be noted that the above Exploration Target is conceptual in nature and there has been insufficient exploration to define a Mineral Resource. It is uncertain if further exploration will result in the determination of a Mineral Resource.

In March 2016, NAE completed a preliminary mining study which showed encouraging results for both bulk mining and high grade mining options for mining Redmoor via a bench stoping and backfill underground mining method.

· The bulk mining option was based on the Redmoor Inferred Mineral Resource defined by SRK after the application of a 0.40% SnEq cut-off grade, targeting 8.1Mt at 0.67% SnEq before stope optimisation and application of mining dilution and recovery factors. The bulk option has an average stope width of 6 metres.

· The high-grade mining option was based on the Redmoor Inferred Mineral Resource defined by SRK after the application of a 0.50% SnEq cut-off grade, targeting 3.5Mt at 0.99% SnEq before stope optimisation and application of mining dilution and recovery factors. The high grade option has an average stope width of 3 metres.

In March 2016, NAE also completed a preliminary mineral processing review, which showed that Redmoor is a coarse grained, simple to process ore with expected high recoveries and low processing costs.

An evaluation of the Redmoor project has recently been undertaken by NAE based on the results of the mining and processing studies. The results of both stand-alone Redmoor development and toll processing options have been encouraging.

As NAE is an ASX listed company, further information on NAE and in particular Redmoor can be found on its website, http://nae.net.au.

In the year ended 30 June 2015, Redmoor generated revenue of £2,100 and a loss before tax of £4,506. Redmoor had net liabilities of £69,256 as at 30 June 2015.

An initial drilling programme has been planned, aiming primarily at converting the significant Exploration Target to an Inferred Resource and also at upgrading a portion of the resource from Inferred to Indicated Mineral Resource status. The initial drilling plan is being reviewed by both NAE and the Company to ensure that the maximum benefit can be obtained for Redmoor in utilising the funds provided from the Company's investment into Redmoor, as detailed below.

The Transaction

Under the Term Sheet, Strategic Minerals will make an initial investment in Redmoor (the "Initial Subscription") and has been granted an option to acquire additional shares (the "Option"), which would result in the Company holding a 50% interest in Redmoor's enlarged share capital.

Under the Initial Subscription, the Company will acquire 30,973 new ordinary shares in Redmoor at a price of £3.39 per share, representing approximately 9% of the issued capital of Redmoor (as enlarged by the issue of these new shares), for a total consideration of £104,998.47 in cash, split into two tranches. The Company today acquired a first tranche of 22,124 shares in Redmoor for a consideration of £75,000.36 (the "First Tranche Consideration"). The Company will subscribe for the second tranche of 8,849 shares in Redmoor for £29,998.11 (the "Second Tranche Consideration") on the earlier of 30 days from today's date or the entering into of a shareholders agreement between the Company and NAE (the "Shareholders' Agreement"), further details of which are set out below.

Under the Term Sheet, the proceeds of the Initial Subscription will be used by Redmoor to repay certain loans to NAE, which will be applied as follows:

· First Tranche Consideration will be applied by NAE to subscribe for 25,000,000 new ordinary shares of 0.1 pence each in the Company ("Ordinary Shares"), at a price of 0.3 pence per Ordinary Share, for a total consideration of £75,000.

· The Second Tranche Consideration will be applied by NAE to subscribe for 10,000,000 new Ordinary Shares in the Company at a price of 0.3 pence per share, for a total consideration of £30,000.

Upon payment of the Second Tranche Consideration, Redmoor will be debt free with the exception of a loan from NAE equal to the cash held by Redmoor at that time.

Following the issue of these 35,000,000 Ordinary Shares in the Company, NAE will have a total beneficial interest in 3.8% of the Company's issued share capital (as enlarged by the issue of these new shares). These new Ordinary Shares will be issued and allotted by the Company on receipt of the relevant funds. These shares will be subject to a trading restriction that a maximum of 8,000,000 shares may only be sold in any one week within six months from subscription.

The Option, provided to the Company under the Term Sheet, entitles Strategic Minerals (or a party nominated by Strategic Minerals) to acquire an additional 278,864 new ordinary shares in Redmoor for a total consideration of £945,348.96 in cash. The Company has from the payment of the Second Tranche Consideration until 31 December 2016 to exercise the Option and, should it be exercised, Strategic Minerals will have a 50% interest in the enlarged share capital of Redmoor. The exercise of the Option will be subject to the Company securing additional funding, either through debt, the issue of new Ordinary Shares or otherwise. The proceeds of the exercise of the Option will principally be applied by Redmoor to a drilling programme to be agreed between the Company and NAE. Should the Company not take up the Option in full by 31 December 2016, NAE will have the right to purchase any interest in Redmoor held by the Company, or its nominee, for a total consideration of £1 and also have the right to remove any Board representation the Company, or its nominee, may have in Redmoor.

The Shareholders' Agreement will set out the terms by which Redmoor will be operated as a 50:50 joint venture, between NAE and the Company, should the Company exercise the Option. It is expected that the Shareholders' Agreement will include rights for Board representation, standard dilution clauses and rights of first refusal. A further announcement will be made on entering into the Shareholder Agreement.

Shareholders are advised that Strategic Minerals' Chairman, Alan Broome, is also the Chairman of NAE and that, after making the Board of Strategic Minerals aware of the Redmoor opportunity, he excused himself from any further dealings with the acquisition including any voting at Board level in both the Company and NAE.

Strategic Mineral's Managing Director, John Peters, said:

"As part of our strategy to add value through exploration in metals expected to have good price upside potential in the next three to five years, the Company has identified the Redmoor tin/tungsten project as fitting our strategy and has been able to negotiate a structured farm in approach that satisfies all parties. Our partner in this endeavour, NAE, has undertaken considerable research on the licence areas and has progressed to the point where a proposed drilling programme, to demonstrate additional underlying resource potential, has been planned and awaits the Company's review. The Company's involvement lies principally with injecting funds to undertake the drilling exercise which would be, in all likelihood, conducted over the year after exercise of our option.

"The Cornwall area is an established tin/tungsten mining area and the Company welcomes the opportunity to undertake a UK based project, which could potentially result in a significant increase in Strategic Minerals' value if exploration success is achieved."

For further information, please contact:

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 Australia. The Company is focused on acquiring and developing cash generative, high quality projects which meet local market demand for commodities and utilising this cash flow to undertake value added exploration. 

In September 2011, Strategic Minerals purchased its first cash generating asset; the Cobre magnetite tailings dam project in New Mexico, USA which it brought into production in 2012 and which continues to provide a revenue stream for the Company. The portfolio was expanded in January 2016 with the acquisition of shares in Central Australian Rare Earths Pty Ltd, which holds tenements in Western Australia and the Northern Territory that are prospective for nickel sulphides and rare earths. Strategic Minerals has commenced drill-testing of the highest priority nickel sulphide targets within the tenements.

Qualified Person's Statement

This announcement has been reviewed by and the information in it that relates to Exploration Results and also the Exploration Target and Inferred Mineral Resource is based on information compiled and reviewed by Dr Mike Armitage, who is the Chairman of SRK Global and a Corporate Geologist with SRK Consulting (UK) Ltd and is a Member of the Institute of Materials, Minerals and Mining (MIMMM), a Fellow of the Geological Society of London (FGS), a Chartered Geologist of the Geological Society of London (CGeol) and a Chartered Engineer, UK (CEng). Dr Armitage has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of the 'Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves'. Dr Armitage has consented to the inclusion in this announcement of the matters based on his information in the form and context in which it appears.

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