Strategic Minerals Regulatory News (SML)

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21 April 2017

Strategic Minerals plc

("Strategic Minerals" or the "Company")

Update for the quarter to 31 March 2017

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 March 2017.

Highlights:

· Record domestic sales of 14,264 tons for March quarter at Cobre magnetite tailings operation ('Cobre'), New Mexico, USA;

· Profit margin for March quarter at Cobre exceeded 50% of sales;

· Significant new client secured - looking to at least double future Cobre sales;

· Major component of rail settlement payment (US $400,000) received;

· Option exercised (£843,649) and interest in Cornwall Resources Limited, Redmoor tin-tungsten project, UK ('Redmoor') taken up to 50%;

· 13 hole Phase 1 drilling programme commenced at Redmoor to confirm and extend the high grade tin-tungsten resource at Redmoor;

· Significant Cobalt findings in re-examined Hanns Camp core drilling samples at CARE Nickel Sulphide project in Australia;

· First research note on Company by broker SP Angel issued;

· Share options issued to Directors and Management vesting at 1.5p and 3.0p in line with existing Board and Management options;

· Corporate overheads continue to be tightly controlled; and

· Cash of US$0.695m as at 31 March 2017.

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

"The Company has made great strides in the second half of 2016 in obtaining a rail settlement and the acquisition of a substantial client for the Cobre operations. It has now settled the consideration due for its share of the Redmoor joint venture and is in a cash generative phase, utilising its cash reserves for self-funded exploration at both Redmoor and Hanns Camp, as well as actively considering new projects.

"In the March quarter, the addition and subsequent replacement of a new client for our Cobre operations points towards a profitable 2017. The Board and Management consider the Company is in a strong position and are constantly reviewing both internal and external opportunities to ensure that cash resources are utilised most effectively in order to deliver value to our shareholders. With these positive developments in mind, we look forward to continuing to update the market on our progress, in a year we believe Strategic Minerals is set to perform strongly."

Cobre magnetite tailings operations

The addition of a significant new client in the second half of 2016 set the scene for the March 2017 quarter to record the highest level of domestic sales (14,264 tons) since the Company took over operations. Despite a bulk discount being provided to the new client, profit margins have improved and the pre-tax profit margin for the March quarter 2017 exceeded 50%. At the same time, annual sales revenues have almost doubled compared with the corresponding period in the previous year. Sales and volumes details are as follows:

Tonnage Sales (US $'000)

Year 3 months to March 12 months to March 3 months to March 12 months to March

2017 14,264 36,221 $834 $2,158

2016 3,427 17,175 $227 $1,160

2015 4,706 16,284 $318 $1,099

While sales to date in 2017 have been impressive, the signing of a major new client with a minimum 4,000 tonnes per month from 1 June 2017 indicates that the remainder of 2017 may provide further strong sales figures which would positively impact Strategic Minerals' bottom line. In relation to this contract, Management informed the market of the initial contract and arranged a replacement, improved contract to commence on the termination of the previous contract.

During the quarter, Management actively followed up on the second payment under the rail settlement agreement at Cobre to ensure that the Company would be in a position to exercise its option to secure 50% of the Redmoor tin-tungsten project in the UK. In January, the second payment (US $400,000) was received by the Company and only a final payment to the Company of US $175,000, due in June 2017, is outstanding.

Management at Cobre continues to negotiate with the mine owners for extended guaranteed access to the magnetite stockpile. So far, this has not been forthcoming. However, this is not necessarily a sign that access will be denied in the foreseeable future but reflects a large organisation wanting to keep its flexibility in case this impacts on their larger scale operations in the region.

Cornwall Resources Limited's (CRL) operations

In the December quarter 2016, the Company exercised options and subscribed for £101,700 of shares in the vehicle, subsequently renamed Cornwall Resources Limited, which holds the Redmoor tin-tungsten project. Subsequently, the Company raised funds to assist in exercising the balance of the options relating to the Redmoor project in Cornwall. At the time, the Board and Management took the view that, despite the placement being oversubscribed by greater than 300%, it would only raise sufficient funds (£600,000) to ensure the remaining options could be exercised (at a cash cost of £843,649), believing that the market was undervaluing the Company.

With the share price now trading at almost four times the last placement level, the Board and Management feel vindicated by their restraint. The existence of management options vesting at 1.5p and 3.0p indicates that the Board and Management believe there is still significant upside potential in the Company's share price over the next 18 months.

The provision of £101,700, in the December 2016 quarter, provided the base for work to commence in the March quarter 2017 at Redmoor This allowed the Community Liaison Officer, Jeff Harrison, to engage with the Callington/Kelly Bray constituents early. In true Cornish spirit, there was a supportive attitude with local councils being very co-operative. Preparations were further enhanced when Brett Grist was appointed Exploration Manager, reviewing the planned drilling contract and putting together a team, including locals, that would help execute the programme.

SML's January 2017 exercise of its remaining options (at a cost of £834,649) provided CRL with the certainty to undertake the drilling programme. This was awarded to Energold Drilling and consists of a two phase approach. The first phase, which is now underway, involves drilling 13 holes and the second phase involves a further 10 holes. The drilling programme's objective it to confirm and extend the high grade tin-tungsten resource at Redmoor. With drilling commencing before the end of the quarter, it is now anticipated that phase one will be completed in the September quarter 2017.

Central Australian Rare Earths Pty Ltd ("CARE") operations

During the quarter, CARE received the re-assay of the 2016 drilling programme at Hanns Camp. This analysis identified the potential for a significant Cobalt deposit at Hanns Camp. While plans for drilling at Mount Weld for Gold and Rare Earths were formulated, given the Cobalt results, it was decided by the Board of CARE to concentrate the next exploration phase on the potential Cobalt deposit and to defer the Mount Weld exploration to later in the year.

At present, the Company is due to convert its existing AUD 75,000 interest free loan to CARE into equity of CARE, along with a further equity subscription of AUD 75,000 and a subsequent AUD 100,000 equity subscription to be provided by 30 September 2017. In consideration for these subscriptions, Strategic Minerals is to acquire 25% of the share capital of CARE (as enlarged by the subscriptions), taking the Company's total interest in the share capital of CARE to 75%. Management is in advanced discussions with its joint venture partner, Rarus Limited, to consider acquiring a larger interest in CARE.

Financials

In the March quarter 2017, the Company benefited from increased turnover, a comfortable cash position and the production of the first research note on the Company by SP Angel, who provided a clear framework for valuing the company. While the Company's share price was 0.525p, Management and the Board were granted options (see RNS dated 6 January 2017) which were in line with existing Board and Management Options that do not vest until the share price trades consistently at 1.5p and 3.0p.

Over the period, the Company continued to maintain a tight control on overheads which continue to remain under US$1 million (excluding variable project review costs and foreign currency movement) on an annualised basis.

In March 2017, Cornhill Capital, who had warrants over 8,333,333 ordinary shares of SML exercisable at 0.6p per share (from the Company's capital raise through them in June 2015), exercised the warrants at a cost of £50,000.

With sizeable cash flows and receipt of the rail settlement progress payment, the Company is in one of the most comfortable positions it has been for a considerable time. At 31 March 2017, cash at bank stood at USD 695,014. 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.

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 earths. 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.