16th Jul 2015 09:10
LONDON (Alliance News) - Strategic Minerals PLC shares rose on Thursday after it said the government of New Zealand has confirmed the ownership of the mining licence for the Tatu coal project has been transferred following the company's recent acquisition of King Country Mining Ltd.
Strategic Mineral shares were up 11% to 0.444 pence per share on Thursday morning.
At the end of March, Strategic Minerals reached a deal to acquire a 51% stake in King County, which could eventually rise to 100% if the company exercises an option.
Following the completion of the first step of the acquisition, the company has secured the ownership of the Tatu mine. Strategic Minerals now has until January 2016 to demonstrate financial capacity to complete the Tatu mine before it can exercise its option to acquire the remaining 49% of King Country.
"The New Zealand government's approval to the change in ownership of King Country is an important and crucial stepping stone in our plans to develop the Tatu mine," said Managing Director John Peters.
Should Strategic Minerals not proceed with exercising its option, King Country has the right to acquire the 51% interest held by Strategic Minerals for NZD1. The total acquisition cost for 100% of King Country will be NZD255,000 if completed.
"We are currently well developed in our mine plan and are in discussions with suppliers which we believe, in conjunction with our recent capital raising, will provide the vendor of King Country sufficient comfort on Strategic Minerals' financial capacity to complete the project," added Peters.
Strategic Minerals is targeting commencement of the mine construction by the year end and targeting completion of the mine in mid-2016. Strategic Minerals plans to achieve some coal sales during the construction period with greater sales volumes expected after completion of the mine.
In June, the Tatu project received its maiden JORC resource estimate of 6.7 million tonnes of measured and indicated thermal coal in place and Strategic Minerals said the estimate is of "high certainty" because 75% of the resource is classified as measured.
Of that total resource, over 5.0 million tonnes is in the measured category with the remaining 1.7 million tonnes being classed as indicated.
Peters caused concern and confusion among shareholders only three days after the company appointed its new Chairman Alan Brookes after releasing a statement that said it was "imperative" to acquire more assets because the Cobre mine in New Mexico was not sufficient to cover its overheads.
Peters said at the time that while the Cobre mine remained profitable, it was not sufficient to meet its corporate overheads, but then released another statement that said the release had been "misinterpreted".
Peters attempted to clarify the company's position and said the future looked "highly encouraging and positive". He also said the board had to review the Cobre operations after it was hit by the falling iron ore price but reiterated it was still a cash generative business.
Peters also added that the shift away from iron ore and the prospect of new acquisitions gave him more confidence, as he said the company was "confident it now has low overheads, an existing cash flow stream from Cobre and the potential near term cash flow opportunity from Tatu", alongside further growth opportunities.
By Joshua Warner; [email protected]; @JoshAlliance
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