TIDMSML
RNS Number : 6107T
Strategic Minerals PLC
16 October 2017
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.
16 October 2017
Strategic Minerals plc
("Strategic Minerals" or the "Company")
Term Sheet for Acquisition of Copper Oxide Project in South
Australia
Strategic Minerals plc (AIM: SML; USOTC: SMCDY), the diversified
mineral development and production company, announces that it has
entered into a binding term sheet (the "Term Sheet") to acquire,
subject to due diligence, the Leigh Creek Copper Mine Pty Ltd
("LCCM"), the owner of the exploration and mining rights and
associated copper processing assets at the Leigh Creek Copper Mine
in South Australia ('the Project'), from Resilience Mining
Australia Pty Ltd ("RMA"). The Board believe the Project represents
a near-term low-capex copper production opportunity with early
cashflow generation potential.
Leigh Creek Copper Mine Project
The Project is based in the northern Flinders Ranges of South
Australia and is accessible from the township of Leigh Creek. It
has three approved mining leases that cover a number of copper
oxide deposits, including Lorna Doone, Lynda, Mountain of Light
(Rosmann East and Paltridge South) and the Mount Coffin deposit. An
estimated JORC 2012 compliant Resource of 3.61mt @ 0.69% copper for
24,900 of copper metal forms the base of the project. Additional,
non JORC compliant, ore sources of 1.8Mt @ 0.68% copper have also
been identified within existing mining leases.
A Feasibility Study ('FS') for the Leigh Creek Copper Mine was
completed by Terra Consulting in November 2016 and compiled
geology, resources, mining, processing and marketing relating to
the Project. The FS focussed on treating oxide copper initially
from two open pits (Lorna Doone and Lynda); treating the ore via a
heap leach process to recover the copper into a copper sulphate
solution; and extracting the copper into a copper cement via two
existing Kennecott cones. The processing infrastructure to achieve
this is already in place and has been under care and maintenance,
although it is proposed to relocate the plant closer to the initial
pit.
Key aspects of the Project include the following:
Ore processed 1.1mt @ 0.77% Cu for 8,449 tonnes
of contained copper
-------------------- -------------------------------------
Mining strip
ratio 1.1
-------------------- -------------------------------------
Initial project 36 months
life
-------------------- -------------------------------------
Recovered 6,400 tonnes (recovery 75%), as a
copper copper cement (70-75% Cu)
-------------------- -------------------------------------
Off-take agreement 85% of LME price
-------------------- -------------------------------------
Capital cost AUD 1.8m (est.), mostly associated
to restart with moving the existing processing
plant
-------------------- -------------------------------------
Cash surpluses After 7 months (est.) operating cash
surplus and project cash breakeven
after 11 months (est.)
-------------------- -------------------------------------
Further details can be found on the Strategic Minerals website
(www.strategicminerals.net).
The Transaction
Under the Term Sheet, Strategic Minerals will have until 14
December 2017 to conduct due diligence on the acquisition of LCCM
and The Leigh Creek Project. For the provision of this exclusive
due diligence period, SML will pay RMA AUD 5,000 and up to a
further AUD 5,000 for any additional costs incurred by RMA in
providing information to SML. At any time during the due diligence
period, SML can call for the preparation of the Share Purchase
Option Agreement ("SPOA"), under which it would acquire all shares
in LCCM. Also, as a condition of signing the Term Sheet, SML is to
supply, within seven days of signing the Term Sheet, a AUD 50,000,
8-month, nil interest loan to LCCM.
On completion of the due diligence, to SML's sole satisfaction,
RMA and SML will enter the SPOA for the purchase of all shares in
LCCM. Under the first phase, SML is required to provide LCCM a AUD
500,000, six-month, nil interest loan. This loan will not be repaid
should SML fail to proceed to phase 2 of the SPOA. Funds from this
loan will be applied to completing a detailed plan and budget for
larger reactivation of the mine, re-commissioning of one existing
ore heap and necessary supporting infrastructure, complete water
testing; auger drilling of the existing heaps to identify high
grade material in the existing heaps; obtaining regulatory
approvals to retreat existing heaps; commencing processes to obtain
all necessary government approvals for larger starter pit and
completing internal drainage into pit.
After the completion of the works contemplated in phase 1,
expected to be between 3 and 5 months, phase 2, the exercise of the
option, will commence. This requires RMA to provide all shares in
LCCM to SML in exchange for SML arranging to:
1. pay RMA AUD 1,000,000 consisting of cash of AUD 250,000 and
SML shares for AUD 750,000 to be determined with reference to the
SML volume weighted average share price ("VWAP") for the 10 days
prior to the exercise of the SPOA. SML will undertake to provide
said shares as quickly as possible after the exercise
2. have LCCM enter a royalty agreement with RMA for 20% of sales, capped at AUD 3,650,000
3. subscribe AUD 1,000,000 into LCCM shares for Project funding
Commenting, John Peters, Managing Director of Strategic
Minerals, said:
"The proposed acquisition of Leigh Creek Copper Mine is a
consistent step in the Company's growth strategy of acquiring and
developing projects in minerals/metals that we expect to have
demand/price upside over the next 3 to 5 years. The Project has
near term production and cash flow potential, local product demand
and excellent growth prospects, through further exploration or
surrounding tenements.
"While SML will have 100% ownership of the Leigh Creek Copper
Mine, the royalty payment will ensure that the previous owners will
actively encourage the Project's success. In line with this
approach, SML is to secure, through LCCM, the services of key RMA
executives, notably Jonathon Trewartha, to ensure that the progress
of the project is optimised.
"Overall, the size of the transaction, the metal and the rapid
payback of the project made this an ideal value accretive
acquisition opportunity for the Company as part of our aim to
deliver and enhance shareholder value and reach GBP100m market
capitalisation in the near-term."
COMPETENT PERSON'S STATEMENT
The information in this report that relates to Mineral Resource
estimation for the Leigh Creek Copper Mine was prepared and
reviewed by Dr David Franz Larsen, who is a fully financial member
of the Australian Institute of Geoscientists and who has who is a
Competent Person as defined by the JORC Code, 2012 Edition, having
five years' experience that is relevant to the style of
mineralisation and type of deposit described in this note. Dr.
Larsen is also a Competent Person "as defined in the Note for
Mining and Oil & Gas Companies which form part of the AIM Rules
for Companies".
For further information, please contact:
+61 (0) 414
Strategic Minerals plc 727 965
John Peters
Managing Director
www.strategicminerals.net
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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, 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.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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