Update on Tatu Coal Mine Project

RNS Number : 5740N

Strategic Minerals PLC

01 February 2016

 

1 February 2016

Strategic Minerals PLC

("Strategic Minerals" or the "Company")

Update on Tatu Coal Mine Project

The Board of Strategic Minerals PLC (AIM: SML; USOTC: SMCDY) today provides an update on the Tatu Coal Mine Project on the North Island of New Zealand ("Tatu Project").

As announced on 31 March 2015, Strategic Minerals entered into an agreement to acquire 100% of King Country Mining Limited ("KCM"), the owner of the Tatu Project, in stages (the "Agreement").  Strategic Minerals completed the acquisition of 51% of KCM and had the option to acquire the remaining 49% by 31 January 2016 (the "Option"), subject to regulatory approvals by the New Zealand authorities for change of control of the mining permits, which was received in July 2015, and Strategic Minerals providing to the vendors of KCM proof of financial capacity to commence the mine.  Further, mine production is to commence within 12 months of exercise of the Option. 

For the reasons set out below, the Board of Strategic Minerals decided not to exercise the Option by the 31 January 2016 deadline.  Under the terms of the Agreement, SML is now required to transfer to KCM's other shareholder (the former 100% shareholder of KCM) the KCM shares owned by Strategic Minerals for NZ$1.

The Company, through KCM, conducted a bulk sample survey on the Tatu Project which, whilst producing results largely consistent with previous assessments, requires further testing to prove that deposits situated further from the planned mine entrance have lower sulphur concentrates in line with that associated with previous underground mining.  At the same time, the Company has been reviewing the local domestic coal market and had identified a number of potential customers in order to garner support for the project via a pre-order book.

Any further testing on the project would involve considerable additional expenditure and therefore the Board considered it prudent to seek, without additional cost, a timing extension on the Option and to more vigorously test the sales market before committing further funds to the project.  In this regard, the Board found:

1)    that despite attempts to reach a mutually agreeable basis for extending the Option to complete on the Tatu acquisition, Strategic Minerals and the vendor of KCM were unable to reach agreement on an extension to the Option exercise deadline;

2)    local New Zealand coal prices likely to be depressed for two to three years, which in the Board's opinion, will primarily arise from deteriorating business conditions combined with Genesis Energy Limited running down its coal stockpile in the North Island of New Zealand; and

3)    customers being reluctant to commit to future orders due to market uncertainty arising from the likely demerger of Solid Energy's coal assets and the impact this will have on current and future coal contracts.

In light of the above, and as the Company was unable to gain a meaningful extension to the Option exercise deadline, the Company has ceased activity on the Tatu Project and will focus its resources on its newly acquired nickel sulphide project in Western Australia in the heart of a known nickel sulphide belt, as announced today, as well as its Cobre project and other potential acquisitions and investments.

Commenting, John Peters, Managing Director of Strategic Minerals, said:

"With the uncertainty of demand arising from the deteriorating coal market conditions in New Zealand, we have been prudently reviewing the project to ensure its economic viability prior to committing large scale capital expenditure.  We believe that the project can be a viable one but may require additional time before the economics and the markets will support the provision of the additional capital required to make the mine operational.

The Company's recent acquisition of shares in Central Australian Rare Earths Pty Ltd and the planned funding of its nickel sulphide drilling project have provided an avenue for investment that the Board considers is more likely to result in short term value growth."

For further information, please contact:

Strategic Minerals plc John Peters Managing Director	[phone]
Allenby Capital Limited Nominated Adviser and Joint Broker Jeremy Porter James Reeve	[phone]
Cornhill Capital Limited Joint Broker James Sheehan Colin Rowbury	[phone]
Yellow Jersey PR Financial PR Dominic Barretto Alistair de Kare-Silver	[phone]

Notes to Editors

Strategic Minerals PLC is an AIM-quoted, diversified mineral development and production company with projects in the United States of America, New Zealand and Australia. The Company is focused on acquiring and developing cash generative, high quality projects which meet local market demand for commodities. 

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 continues to provide a revenue stream for the Company. The portfolio was expanded in March 2015 with the acquisition of the Tatu coal mine in New Zealand followed by the January 2016 acquisition of up to a 50% interest in Central Australian Rare Earths which holds tenements in Western Australia and the Northern Territory that are prospective for nickel sulphides and rare earths. SML is preparing to drill-test the highest priority nickel sulphide targets within its Australian JV tenements during Q2 2016.

 

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