Strategic Minerals (SML ) updated markets this morning on its operations and performance in the first half of 2022.
Against a backdrop of soaring inflation and rising interest rates, Strategic Minerals maintained profitability and reduced overheads in H1.
Pretax profit was US$248K for the 6 months after $450K was invested in the company's key development projects Leigh Creek Copper Mine (LCCM) and the Redmoor Tin and Tungsten Mine.
Strategic said the timing of claims on the Deep Digital Cornwall (DCC) project saw an increase in debtors at the end of June amounting to US$435K. Strategic recently updated markets on DDC after new areas of mineral prospectivity were found for tin and tungsten, now classified as critical metals in the UK.
In June, Strategic's wholly-owned US subsidiary Southern Minerals Group (SMG) began increasing sales prices, expected to reflect in higher revenues in H2. Strategic had unrestricted cash of US$430K on 30 June 2022.
Corporate highlights
Strategic reported that access to its Cobre magnetite stockpile in New Mexico rolled over for the 10th time, with a subsequent agreement to extend it 5 years until 31 March 2027. In an update from July, Strategic confirmed that Cobre's largest client would maintain expected and historical levels of demand for the rest of the year and beyond.
At LCCM in South Australia, unconditional approval for a Program for Environmental Protection and Rehabilitation (PEPR) for the planned mining of copper oxide at Paltridge North was granted. Strategic expects cash flow and profitability to improve "dramatically" after operations restart at LCCM in late 2022, subject to funding.
At Redmoor, Strategic's exploration license was extended by 25 years until 2037.
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While macroeconomic conditions forced Strategic to cut costs and raise prices in H1 2022, the company maintained its focus on running its profitable Cobre operation and steadily pushed forward on its development projects, which recent news have substantially derisked.
At LCCM in South Australia, unconditional approval was granted for Paltridge North, followed by intensified discussions with interested parties. The company expects that operations will restart before year end, at which point the project's inherent value should begin to be reflected in Strategic's share price.
At Deep Digital Cornwall, now entering its second phase, CRL recently identified new areas of mineral prospectivity for tin and tungsten. The new datasets indicate high potential for new mineralised systems to the west of Redmoor, still within Strategic's license.
Redmoor will also benefit from the Government's "Levelling Up" initiative, especially as tin and tungsten have now been classified as "critical minerals", further underlining the potential value of DDC. Strategic's license at Redmoor has been extended by 25 years until 2037.
In terms of financial performance, Strategic's quarterly and annual sales to June were US$0.7m and US$2.4m respectively, slightly weaker than in previous years. While recession concerns and increased transportation costs have moderated expectations slightly, the company remains optimistic about maintaining future demand.
Strategic Minerals had US$0.43m in cash on 30 June 2022, down some from US$0.615m a year ago. The fall was due to consultant costs associated with receiving a final PEPR approval for LCCM, as well as slightly lower seasonal Cobre revenues, which have recovered post-period.
Overall, today's update was a positive reaffirmation of the company's growth strategy. The potential second income stream from LCCM, and renewed focus on tin and tungsten as critical minerals, represent near-term value inflection points for investors.
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