Strategic Minerals Regulatory News (SML)

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10 August 2017

Strategic Minerals plc

("Strategic Minerals" or the "Company")

Q2 Update and Record July Monthly Sales at Cobre

Strategic Minerals plc (AIM: SML; USOTC: SMCDY), the diversified mineral development and production company, is pleased to provide the following update on the Company's operations for the three months to June 2017 and to inform the market of record July domestic sales at its Cobre magnetite stockpile in New Mexico, USA.

Operational Highlights:

Cobre

· Transport issues in June see Cobre quarter sales dip before posting record sales in July

· New customer contract commenced June 2017 bolstering cash balances 

· Profit margin at Cobre for half year to June quarter maintained around 50%

· Final rail settlement payment (US $175,000) received

Redmoor

· Drilling programme progressed at Redmoor

CARE

· Acquisition of balance of Central Australian Rare Earths Pty Ltd (CARE) completed

Financial Highlights:

· Cash of US$1.359m as at 30 June 2017 (US$0.695m at 31 March 2017)

· All Directors' and Management's options now fully vested

· Board targets a market capitalisation of £100m over the next five years

Commenting, Alan Broome, Non-Executive-Chairman of Strategic Minerals, said:

"Strategic Minerals continues to establish itself as a viable, long term, global minerals company with a diversified portfolio. With further strong performance at Cobre and sales ensuring that the Company is cash generative, the Company took the opportunity to acquire the balance of CARE and to push ahead with self-funded exploration at both Redmoor and Hanns Camp, as well as actively considering new projects.

"The cash balance at the end of June highlights the commencement of the new customer contract at Cobre. This reinforces our view that 2017 is likely to be materially profitable and we are excited about SML's potential for increasing earnings and profitability. The Board and Management continue to review both internal and external opportunities to ensure that cash resources are utilised most effectively in order to provide maximum value to shareholders."

Cobre magnetite tailings operations

In June 2017, delays relating to both major clients' road transport slowed movements out of Cobre. As Cobre's newest customer has a minimum monthly sales requirement, the customer made a prepayment for sales not transported which helped to bolster cash balances but was not reflected in the June quarter sales. Currently, it is expected that the tonnage associated with this prepayment will be fully absorbed within the September quarter.

As a result of the resolution of these transport problems, the July 2017 sales reached a record for domestic sales in any month - $486,560 (7,206 tons). Sales and volumes details for the June quarter are as follows:

Tonnage Sales (US $'000)

Year 3 months to June 12 months to June 3 months to June 12 months to June

2017 10,446 41,828 $602 $2,430

2016 4,839 19,474 $329 $1,320

2015 2,540 13,101 $170 $888

The management at Cobre has not only been able to increase sales but also maintain profit margins at around 50% for the six months to June 2017. This, combined with expected further improvements in sales over the remainder of the year, bodes well for profitability in 2017.

The quarter also saw receipt of the final payment (US $175,000) under the rail settlement agreement.

Management at Cobre continues to negotiate with the mine owners for extended guaranteed access to the magnetite stockpile. At present, the lack of progress indicates that the mine owners are reluctant to commit to a "locked in" longer term (3-5 years) contract. However, the mine owners have asked us to join them in relocating our offices at Cobre, which indicates that they are anticipating our involvement for an extended period.

During the quarter, the SML Board visited the Cobre operations, were introduced to all staff, visited its largest client and conducted the first SML Board Meeting to be held in New Mexico. Additionally, the Managing Director met with the newest client in New York to discuss and help implement their contract.

Cornwall Resources Limited ("CRL") Operations

The June quarter saw the drilling programme begin in earnest. As reported in the Company's RNS dated 31 July 2017, a number of drill holes were completed and laboratory testing is being undertaken on the cores obtained. On the basis of the holes drilled to date, the joint venture has concluded that a further two holes would be added to Phase 1 of the drilling programme to better define the existing resource and provide further insight to the appropriate design and positioning of Phase 2 holes.

In line with comments made during the June quarter, interim drill results are to be released in the September quarter, which should also see completion of Phase 1 of the drilling programme. Full results from Phase 1 are expected to be released in the December quarter during which Phase 2 drilling may be undertaken.

Local council and the community in general continue to be supportive of CRL's operations. The SML Board visited the CRL operations during the June quarter and SML's Chairman Alan Broome presented the Callington Council with a painting of local landmark Kit Hill in appreciation of their support.

Central Australian Rare Earths ("CARE") Operations

During the quarter, SML completed the acquisition of the remainder of the ownership of CARE. This was considered desirable from both a value perspective and from SML's desire to control the pace at which development is progressed.

As reported in the Company's RNS of 26 June 2017, the Company formulated, during the June quarter, its development plans for the remainder of 2017. In relation to Hanns Camp, the Company outlined and is currently making good progress with plans to undertake a substantial number of air core holes, drilling some 2,000 metres. This programme is aimed at outlining the tenements' potential for producing Cobalt and to a lesser extent Nickel from a laterite source. It is considered that this first stage will provide insight into a second stage drilling programme to drill deeper in search of Nickel Sulphide.

While air core drilling should be completed at Hanns Camp during the September quarter, results are not likely to be released until the December quarter.

Recent historical information sourced on the Mount Weld tenement have caused a re-appraisal of the plans to undertake soil sampling and to review the best use of SML's funds in relation to exploration of this tenement.

Financials and Operations

Over the period, the parent entity continued to maintain a tight control on overheads which remain, on an annualised basis, under US$1 million (excluding variable project review costs, foreign currency movements and non-cash adjustments).

With sizeable cash flows and receipt of the final rail settlement payment, the Company has a healthy cash balance, which at 30 June 2017 was USD 1.359m (31 March 2017: USD 0.695m). Given the level of profitability being currently generated from the Cobre project, these balances are expected to build throughout the year despite committing funds to development projects.

During the June quarter, the remainder of Directors and Management options became vested as the share price had a sustained period above the final vesting requirement of 3p per share.

As SML's market value was circa £25m to £30m, the Board met in June to consider SML's likely potential value, over the next five years. It concluded that SML is well positioned with a range of assets;

· Operating - revenue producing (Cobre - magnetite):

· Brownfields - advanced exploration (Redmoor - tin/tungsten); and

· Greenfields - early stage exploration (Hanns Camp - featuring a variety of highly sought-after commodities, including: nickel, cobalt, rare earths and gold).

This diversity provides SML a high degree of flexibility and opportunity for growth and is likely to be coupled with further acquisitions. 

In light of these factors, the Board adopted a target of achieving a £100m market capitalisation within this five-year timeframe. In line with this target, the Board is reviewing the potential to issue further options as a profit sharing incentive.

The Company looks forward to providing further updates in due course.

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, the UK 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 cobalt, gold, nickel sulphides and rare earth elements. The Company has since acquired all shares in Central Australian Rare Earths Pty Ltd. In May 2016, an additional exploration asset was acquired when the Company entered into an agreement with New Age Exploration Limited to acquire up to 50% of the Redmoor Tin/Tungsten project in Cornwall, UK. This 50% acquisition has now been completed and drilling at the project has commenced.