Strategic Minerals* (SML LN) 1.625p, Mkt Cap £22.8m - Initial copper production from Leigh Creek and Cobre quarterly sales
• Strategic Minerals reports that it has completed the refurbishment of the Mountain of Light processing plant and produced the first tonne of cement copper product (approximately 70% copper content) from its Leigh Creek Copper Mine which last produced, under the management of a previous owner in 2012.
• The company also announces that recent drilling work at the Paltridge North deposit at Leigh Creek has led to an increased mineral resource estimate of approximately 1.42mt at an average grade of 0.76% copper. Around 64% (909,000t) of the new tonnage estimate is classified as "Indicated" in terms of the JORC (2012) Code and that "Almost all of the increase is in the Inferred category … is a result of improved geological understanding of the mineralisation and judicious use of older (1970’s) drilling data to refine and extend the resource boundaries into areas not tested by more recent drilling."
• In addition, recently completed diamond drill-holes at Leigh Creek's Rosmann East deposit are expected to be incorporated in a " new, JORC 2012 compatible, resource estimation". The Rosmann East drilling comprised a total of 675.2m in 7 drill holes designed to test "extensions to existing copper oxide and chalcocite mineralisation zones beneath the existing open pit" and the company reports that all the holes "intersected broad zones of low-grade chalcocite mineralisation (with pyrite, chalcopyrite and bornite) to 30m below the previously defined mineralisation at Rosmann East and 60m below the existing pit floor".
• Among the results reported from the Rosmann East drilling programme are:
o An intersection of 69m at an average grade of 0.37% copper from a depth of 11m in hole RED18-01 which included a number of shorter, higher grade, sections ranging up to 17.2m width averaging 0.42% copper from 53m depth; and
o Intersections of 11m averaging 0.39% copper from 8m depth and 52.95m averaging 0.18% copper from 25m depth in hole RED18-02; and
o An intersection of 35.6m averaging 0.23% copper from a depth of 37.5m in hole RED19-03; and
o Intersections of 24.8m averaging 0.30% copper from 39.2m depth and 16m averaging 0.23% copper from 71m depth in hole RED19-04; and
o An intersection of 38.8m averaging 0.36% copper from a depth of 49.2m in hole RED19-05 which included higher grade section averaging 0.44% copper between 55-63m depth and 0.47% copper between 69-88m; and
o An intersection of 50m averaging 0.16% copper from 64m depth in hole RED19-06 and including an 8m wide zone averaging 0.26% from a depth of 104m
o The seventh hole of the programme is "being retained intact to provide reference material for mining and geotechnical studies."
• The company confirms that "The feasibility study for the commencement of full-scale production from Paltridge North and Rosmann East, and submissions associated with government approvals for mining these areas, are well advanced and scheduled to be completed in Q3 2019."
• Commenting on the milestone production of initial copper cement at Leigh Creek, Managing Director, John Peters, said that " The restart of production in 13 months from acquisition has reinforced the Board’s confidence that the acquisition of LCCM will prove to be a major value added asset for the Company and will provide significant on-going after tax cash flows from 2020."
• In addition to the news from Leigh Creek, Strategic Minerals has also published the quarterly results from its Cobre magnetite operations in New Mexico. During the quarter ended March 2019, the company sold 9,472 tons generating revenue of US$554,000 and cash of US$206,000.
• This compares with sales of 10,931 tons in the previous quarter and 21,636 (US$1.42m) in the equivalent period last year. Strategic Minerals attributes the lower sales levels during the quarter to "clients undertaking plant maintenance during the US winter and continue to reflect the suspension of minimum monthly sales associated with a major client’s contract, as announced on 7 June 2018."
• "During the quarter, a drone survey of the existing stockpile was undertaken and indicated that 711,000 short wet tons of material remains. This ensures that, subject to the mine owner’s expected continuation of arrangements, operations at Cobre will continue for a minimum of 7 years".
• The company reports a 31st March 2019 cash balance of US$1.24m and that it invested US$535,000 in its projects during the quarter. Mr. Peters commented that "it is anticipated that … the June quarter will se a resumption of normal sales volumes to these clients".
• The June quarter is expected to be another pivotal time for the Company, with the expected resumption of copper production from the existing heaps at Leigh Creek and the acquisition of the other half of the Redmoor Tin/Tungsten project.
Conclusion: The production of first product at the Mountain of Light plant, the upgraded mineral resource at Paltridge North and the positive drilling results from Rosmann East show the progress being achieved at Leigh Creek. The confirmation of an expected resumption of normal sales levels and a seven years resource life at Cobre suggests that performance will strengthen during the current quarter.
*SP Angel act as Nomad and broker to Strategic Minerals