Cobre Magnetite Stockpile Contract Renewal

RNS Number : 4166B

Strategic Minerals PLC

04 March 2014

 



4 March 2014

Strategic Minerals plc (the "Company")

Cobre Magnetite Stockpile in New Mexico - Contract Renewal

Strategic Minerals plc (AIM: SML; USOTC: SMCDY) announces that Southern Minerals Group LLC ("SMC"), a wholly owned subsidiary of the Company, has entered into a new agreement with Freeport-McMoRan Sales Company, Inc. (the "Seller") extending its rights at the Cobre magnetite stockpile near Hanover in New Mexico, initially for up to two years (the "Agreement"). The new agreement replaces the existing agreement which was due to expire in April 2014.

The Agreement provides for the Company to remove 11,000 short wet tons ("SWT") of magnetite per month by truck at a price of US$9 per SWT (a 50% reduction on that payable under the prior agreement) for the US domestic market.  Additional magnetite may be made available to the Company for the export market at the sole discretion of the Seller.  The Company currently plans to focus on the United States domestic market going forward due to the recent sharp decline in the Platts IODEX 62% Fe market price (down $16.50 per dry metric tonne ("DMT") since 1 January 2014) and the lower market prices forecast by Platts for the rest of 2014 (per DMT: Q2 $114, Q3 $112.50 and Q4 $111.25 and an average of $109 per DMT for calendar 2015). The last magnetite exports from Cobre took place in February 2014.  

The Board of the Company believes that sales to the US domestic market at mine-gate offer potential for strong gross margins as the sale price is not linked to the Platts IODEX 62% Fe bench mark price. Despite its focus on the export market in 2013, the Company generated US domestic revenues of $1.032 million (2012: $1.634m) through domestic sales of 14,996 SWTs (2012: 20,123 SWTs) at a gross profit of approximately 48.6% (2012: 49.2%). 

The Agreement covers the period from 1 March 2014 to 28 February 2015 and shall automatically renew for an additional 12-month period unless terminated by either party 30 days prior to the expiration date. The Company must provide a minimum $100,000 bank guarantee to the Seller for the duration of the Agreement, previously $500,000.

The Agreement is for the purchase of magnetite only and does not include any waste materials, removal of infrastructure or remediation of the site, although the Company is responsible for removal of waste materials.

James Fyfe, Executive Chairman of Strategic Minerals plc, said:

"Whilst the sharp decline in the Platts iron ore price is very disappointing, I am pleased that we have been able to continue our relationship with Freeport McMoRan. The new agreement will provide the Company with valuable operating cash flow whilst the Board continues to evaluate and secure additional mineral stockpiles." 

Corporate Strategy

The Company's strategy is to find and exploit mineral stockpiles which are outside high risk and volatile regions. Whilst the Company's focus to date has been iron ore tailings, the Company intends to identify and acquire high quality stockpiles across a broad spectrum of resource tailings.  A number of stockpiles have been assessed and are still being investigated. At the same time, the Company continues to seek to release the embedded value in its exploration assets in Australia.

The overriding ambition is to achieve superior returns and generate shareholder value. In the short term our focus is to secure additional stockpiles to increase our resource base and life of operations. We will assess each project against stringent criteria, including anticipated return on investment, revenues, operational and logistics costs, inherent risks and risk mitigation measures.

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Contact details:

Company
Strategic Minerals plc
James Fyfe, Chairman	[phone]
Nominated Adviser/Joint Broker
Allenby Capital Limited
Jeremy Porter / James Reeve	[phone]
Joint Broker
Daniel Stewart & Company Plc
Martin Lampshire / David Hart	[phone]
Financial PR
Tavistock Communications
Jos Simson	[phone]

 

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