Strategic Minerals PLC Term Sheet for Acquisition of Copper Oxide Project (6107T)

TIDMSML

RNS Number : 6107T

Strategic Minerals PLC

16 October 2017

Market Abuse Regulation (MAR) Disclosure

Certain information contained in this announcement would have been deemed inside information for the purposes of Article 7 of Regulation (EU) No 596/2014 until the release of this announcement.

16 October 2017

Strategic Minerals plc

("Strategic Minerals" or the "Company")

Term Sheet for Acquisition of Copper Oxide Project in South Australia

Strategic Minerals plc (AIM: SML; USOTC: SMCDY), the diversified mineral development and production company, announces that it has entered into a binding term sheet (the "Term Sheet") to acquire, subject to due diligence, the Leigh Creek Copper Mine Pty Ltd ("LCCM"), the owner of the exploration and mining rights and associated copper processing assets at the Leigh Creek Copper Mine in South Australia ('the Project'), from Resilience Mining Australia Pty Ltd ("RMA"). The Board believe the Project represents a near-term low-capex copper production opportunity with early cashflow generation potential.

Leigh Creek Copper Mine Project

The Project is based in the northern Flinders Ranges of South Australia and is accessible from the township of Leigh Creek. It has three approved mining leases that cover a number of copper oxide deposits, including Lorna Doone, Lynda, Mountain of Light (Rosmann East and Paltridge South) and the Mount Coffin deposit. An estimated JORC 2012 compliant Resource of 3.61mt @ 0.69% copper for 24,900 of copper metal forms the base of the project. Additional, non JORC compliant, ore sources of 1.8Mt @ 0.68% copper have also been identified within existing mining leases.

A Feasibility Study ('FS') for the Leigh Creek Copper Mine was completed by Terra Consulting in November 2016 and compiled geology, resources, mining, processing and marketing relating to the Project. The FS focussed on treating oxide copper initially from two open pits (Lorna Doone and Lynda); treating the ore via a heap leach process to recover the copper into a copper sulphate solution; and extracting the copper into a copper cement via two existing Kennecott cones. The processing infrastructure to achieve this is already in place and has been under care and maintenance, although it is proposed to relocate the plant closer to the initial pit.

Key aspects of the Project include the following:

 
 Ore processed         1.1mt @ 0.77% Cu for 8,449 tonnes 
                        of contained copper 
--------------------  ------------------------------------- 
 Mining strip 
  ratio                1.1 
--------------------  ------------------------------------- 
 Initial project       36 months 
  life 
--------------------  ------------------------------------- 
 Recovered             6,400 tonnes (recovery 75%), as a 
  copper                copper cement (70-75% Cu) 
--------------------  ------------------------------------- 
 Off-take agreement    85% of LME price 
--------------------  ------------------------------------- 
 Capital cost          AUD 1.8m (est.), mostly associated 
  to restart            with moving the existing processing 
                        plant 
--------------------  ------------------------------------- 
 Cash surpluses        After 7 months (est.) operating cash 
                        surplus and project cash breakeven 
                        after 11 months (est.) 
--------------------  ------------------------------------- 
 

Further details can be found on the Strategic Minerals website (www.strategicminerals.net).

The Transaction

Under the Term Sheet, Strategic Minerals will have until 14 December 2017 to conduct due diligence on the acquisition of LCCM and The Leigh Creek Project. For the provision of this exclusive due diligence period, SML will pay RMA AUD 5,000 and up to a further AUD 5,000 for any additional costs incurred by RMA in providing information to SML. At any time during the due diligence period, SML can call for the preparation of the Share Purchase Option Agreement ("SPOA"), under which it would acquire all shares in LCCM. Also, as a condition of signing the Term Sheet, SML is to supply, within seven days of signing the Term Sheet, a AUD 50,000, 8-month, nil interest loan to LCCM.

On completion of the due diligence, to SML's sole satisfaction, RMA and SML will enter the SPOA for the purchase of all shares in LCCM. Under the first phase, SML is required to provide LCCM a AUD 500,000, six-month, nil interest loan. This loan will not be repaid should SML fail to proceed to phase 2 of the SPOA. Funds from this loan will be applied to completing a detailed plan and budget for larger reactivation of the mine, re-commissioning of one existing ore heap and necessary supporting infrastructure, complete water testing; auger drilling of the existing heaps to identify high grade material in the existing heaps; obtaining regulatory approvals to retreat existing heaps; commencing processes to obtain all necessary government approvals for larger starter pit and completing internal drainage into pit.

After the completion of the works contemplated in phase 1, expected to be between 3 and 5 months, phase 2, the exercise of the option, will commence. This requires RMA to provide all shares in LCCM to SML in exchange for SML arranging to:

1. pay RMA AUD 1,000,000 consisting of cash of AUD 250,000 and SML shares for AUD 750,000 to be determined with reference to the SML volume weighted average share price ("VWAP") for the 10 days prior to the exercise of the SPOA. SML will undertake to provide said shares as quickly as possible after the exercise

   2.    have LCCM enter a royalty agreement with RMA for 20% of sales, capped at AUD 3,650,000 
   3.    subscribe AUD 1,000,000 into LCCM shares for Project funding 

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

"The proposed acquisition of Leigh Creek Copper Mine is a consistent step in the Company's growth strategy of acquiring and developing projects in minerals/metals that we expect to have demand/price upside over the next 3 to 5 years. The Project has near term production and cash flow potential, local product demand and excellent growth prospects, through further exploration or surrounding tenements.

"While SML will have 100% ownership of the Leigh Creek Copper Mine, the royalty payment will ensure that the previous owners will actively encourage the Project's success. In line with this approach, SML is to secure, through LCCM, the services of key RMA executives, notably Jonathon Trewartha, to ensure that the progress of the project is optimised.

"Overall, the size of the transaction, the metal and the rapid payback of the project made this an ideal value accretive acquisition opportunity for the Company as part of our aim to deliver and enhance shareholder value and reach GBP100m market capitalisation in the near-term."

COMPETENT PERSON'S STATEMENT

The information in this report that relates to Mineral Resource estimation for the Leigh Creek Copper Mine was prepared and reviewed by Dr David Franz Larsen, who is a fully financial member of the Australian Institute of Geoscientists and who has who is a Competent Person as defined by the JORC Code, 2012 Edition, having five years' experience that is relevant to the style of mineralisation and type of deposit described in this note. Dr. Larsen is also a Competent Person "as defined in the Note for Mining and Oil & Gas Companies which form part of the AIM Rules for Companies".

For further information, please contact:

 
                                      +61 (0) 414 
Strategic Minerals plc                 727 965 
John Peters 
Managing Director 
www.strategicminerals.net 
 
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Notes to Editors

Strategic Minerals Plc is an AIM-quoted, diversified mineral development and production company with projects in the United States of America, the UK and Australia. The Company is focused on acquiring and developing cash generative, high quality projects which meet local market demand for commodities and utilising this cash flow to undertake value added exploration.

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 which continues to provide a revenue stream for the Company. The portfolio was expanded in January 2016 with the acquisition of shares in Central Australian Rare Earths Pty Ltd, which holds tenements in Western Australia and the Northern Territory that are prospective for cobalt, gold, nickel sulphides and rare earth elements. The Company has since acquired all shares in Central Australian Rare Earths Pty Ltd. In May 2016, an additional exploration asset was acquired when the Company entered into an agreement with New Age Exploration Limited to acquire up to 50% of the Redmoor Tin/Tungsten project in Cornwall, UK. This 50% acquisition has now been completed and drilling at the project has commenced.

This information is provided by RNS

The company news service from the London Stock Exchange

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October 16, 2017 02:00 ET (06:00 GMT)