Strategic Minerals (SML ) says it was able to stay profitable during the year to end December 2021 despite experiencing a reduction in sales at the firm’s Cobre tailings operation in the US.
The mining producer and explorer reported profit in the period of A$0.26m compared to A$0.45m reported in FY20, while net cash generated was $0.61m compared to A$0.93m.
While sales at Cobre were maintained during the first three quarters of the year, sales dipped in 4Q as demand from its largest client dropped to around 25% of previous levels, it reported.
“Despite this drop in demand, Cobre still produced respectable annual sales of $2.611m (2020: $3.025m),” the Company informed investors, further highlighting that post-period, in February 2022, the company’s largest client had increased their demand to previous levels.
The Company also outlined that its stated strategy to focus on metals likely to benefit from expected supply and demand imbalances had also been validated by metals prices in both 2021 and early 2022. It added that commodity prices, particularly for copper and tin, have also shown strong growth, with several analysts forecasting even higher prices to come.
Goldman Sachs’ metals strategist Nicholas Snowdon recently called for a US$15,000 a ton copper price in 2025. Addressing the forecast, he wrote in his recent report that: “We are in a supercharged, synchronised global demand surge. Chinese demand remains very strong, growing at 4% this year, underpinned by strength in infrastructure investment, strong completion phase in the property sector, and also strong recovery in consumer led sectors.”
Meanwhile, in regard to the Leigh Creek Copper Mine in South Australia, the Company noted that it had submitted its responses to queries over its environmental permit application in January 2022. If approval is granted, copper operations will be able to resume this year.
In Cornwall, work has started on the Deep Digital Cornwall project, which is being led by the University of Exeter’s Camborne School of Mines and in which the Company’s subsidiary CRL and Cornish Lithium are delivery partners. Funding for the bulk of the work is being provided by the European Regional Development Fund, through HM Ministry of Housing, Communities and Local Government, though payments are taking longer to come through than expected.
Commenting on its outlook going forward, Alan Broome, Chairman of Strategic Minerals told investors: “The Company believes that, subject to finance, it is in a position to move forward with operations at LCCM and, subsequently, further exploration and development of Redmoor.
As confidence returns to the commodity markets, the underlying valuation of the Company’s assets continue to build and remain strong. The continued cash flow from our Cobre asset, extension of Cobre access until 2027 and the developed nature of our projects, places the Company in a solid position to benefit from improved international commodity prices.”
The unrestricted cash position of the company as at 31 December 2021 was A$0.611m. Going forward, the Company said it considers that the commencement of a second income stream will see “a significant improvement” in the market’s perception of the firm’s value.
With sales from Cobre’s largest client returning to normal levels, the company now expects to see improved prospects for future sales due to the recent extension of access to the stockpile.
Despite a long time in coming to fruition, the extension of access at Cobre to 31 March 2027 is expected to provide long term cash flow while establishing a framework in which SMG can seek additional sales through the group’s ability to provide long term certainty of supply.
The firm believes the extension should underpin future profitability while providing scope to broaden the company’s clientele, which is expected to lead to higher sales in the future.
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