Battery materials firm Strategic Minerals (LSE:SML) has agreed on an AUD$1.45m (£790,000) share transfer to complete its purchase of the Leigh Creek Copper Mine in Australia. The business will transfer more than 41m of its shares to the mine’s previous owner Resilience Mining Australia, after paying a further AUD$1.5m in cash earlier this year.
Leigh Creek has an indicated JORC compliant copper resource of 24,500t, which works out a cost of less than $100 per copper tonne at the acquisition price. Strategic plans to reactivate production of copper via heap leaching or another appropriate method to produce high-grade copper concentrate.
The firm plans to spend around $1.5m preparing the site and reactivating existing infrastructure and hopes to begin generating cash flow within 12 months. At least some of this cash will be reinvested to optimise three granted mining licences also included with the acquisition.
John Peters, managing director at Strategic Minerals, said Resilience Mining has indicated that it will retain a bulk of its shares until the market acknowledged the ‘true value’ of Leigh Creek. Strategic Minerals’ share rose 1.4pc, or 0.02p, to 1.8p following today’s news.
Peters added: ‘Issuance of the shares to RMA effectively completes our obligations relating to the acquisition of Leigh Creek Copper Mine and the Board is extremely excited by the prospect of re-starting production at the site.
‘The March visit by the full SML Board and key consultants highlights the importance of this project to the company’s future. Considerable investment has been made to understand the requirements to restart operations at Leigh Creek successfully. In particular, the team reviewed the factors, which in its opinion, had resulted in closure of the operations (strategically: poor initial grade and heap management policies; commercially: overstaffing and a lack of goal congruence for the earth moving contractor) and was comforted by the fact that operations appeared to have significantly improved when working capital considerations, associated with previous practices and falling copper prices, led to the closure of the mine.
‘Given the combination of the team’s expertise and the current outlook for copper, the Board is very excited by this project and its potential to become core to the future of the company. Having now completed our initial review the company intends to inform the market on the expected approach to the reactivation of the mine in due course.
Leigh Creek will sit alongside Strategic’s other assets in the USA and the UK. In September 2011, the business bought the Cobre magnetite tailings dam project in New Mexico, which was brought into production in 2012 and continues to provide a revenue stream. This cash is used to cover company overheads and invest in development projects that can supply the growing electric vehicle/battery markets.
In May 2016, Strategic agreed with New Age Exploration to acquire up to 50pc of the Redmoor Tin/Tungsten project in Cornwall, UK. This acquisition completed in February 2017 and a drilling programme in 2017 resulted in a significant upgrade of the resource.
Author: Daniel Flynn
Disclosure: The author does not hold positions in any of the stocks mentioned above