Strategic Minerals* (#SML LN) 0.43p, Mkt Cap £7.8m – 2019 financial results
Strategic Minerals reports that it recorded a loss of $0.845m for the year to 31st December 2019 (2018 – loss of $1.933m).
The result includes an impairment charge of $1.122m relating to Central Australian Rare Earths (CARE) and the company points out that ʺExclusion of this non-cash write off would result in a 2019 pre-tax operating profit of $0.277m (2018: pre-tax loss of $0.229m after excluding the non-cash recognition of the bargain LCCM purchase).ʺ
The company reports a year end cash balance amounting to $0.519m and also reports on the progress of its operations during 2019.
The Cobre magnetite operation in New Mexico continued to operate profitably with sales of approximately 42,500 tons of material realising revenues of approximately $2.5m.
The operator at Cobre, wholly owned Southern Minerals Group, ʺhas now absorbed its previous tax losses and has become a tax paying entityʺ incurring a tax expense of $0.385m.
Subsequent to the year end, as previously reported, arbitrators awarded Southern Minerals approximately US$21.9m in costs and damages in its long running dispute with a major customer, now in receivership and Strategic Minerals has previously cautioned that the outcome remains uncertain.
At the Leigh Creek Copper project in South Australia, where in early May 2019 the company was able to announce its first sale of copper product ʺHowever, due to the high cost of production and the poor yield from previously utilised heaps, production only continued for a few months. Since that time the Company has focussed on obtaining the approvals and funding required to take the project into production by the end of 2020 … which should, subject to finance, see full operations at Leigh Creek before the end of 2020ʺ.
Strategic Minerals moved to full ownership of the Redmoor tin/tungsten project in Cornwall via the acquisition of New Age Exploration’s share of the joint venture vehicle, Cornwall Resources.
During 2020, Cornwall Resources’ team has maintained and developed local relationships and awareness of the project’s merits and is assessing ʺa limited exploration drilling programme aimed at testing the potential to expand the significant resource already developedʺ which currently amount to an inferred estimate of 11.7mt at an average grade of 0.56% tungsten, 0.16% tin and 0.50% copper.
In order to conserve resources and focus on its other projects, Strategic Minerals has minimised expenditure on the CARE project and fully impaired the balance sheet value of the project. The company ʺconsiders that there may still be substantial value in these tenements but acknowledges that it may take time to realise this value.ʺ
Conclusion: Strategic Minerals weathered a ʺchallengingʺ year in 2019 which saw impairment of the CARE tenements but is moving ahead with the Leigh Creek copper project where it expects to see the resumption of operations by the end of 2020. Plans are under consideration for additional resource expansion drilling at Redmoor and profitable operations at Cobre continue to provide cashflow to underpin group operations.