Strategic Minerals (SML ) said sales at the Cobre magnetite operation have now returned to normal levels inFebruary and March following a previous fall in sales from its largest client.
The producing mineral company has noted the reversal of “the significant fall” in Cobre sales that were sustained during the December quarter of 2021, which extended into January 2022. This reduction was due to a significant drop in demand from the company’s largest client.
It said the subsequent rebound in sales appears consistent with the client’s indication that they wished to rundown a significant magnetite stockpile that was established at their plant.
In a trading update, the company highlighted that the client’s demand had resumed during February and March 2022 with purchases in line with previous years’ demand for this period.
The company acknowledged that its March quarter sales of US$0.7m and annual sales of US$2.5m had been impacted by weaker January sales sustained from the previous quarter.
In recent weeks, the company received an extension of its access to the magnetite stockpile in New Mexico from the recently announced rollover to 31 March 2023 until 31 March 2027.
The Company considers that this recently announced 5-year extension of access to the Cobre magnetite stockpile will provide a platform from which the Company’s wholly owned subsidiary, Southern Minerals Group (“SMG”) hopes to use to increase sales revenues.
Both companies said they believe the certainty of access from an exclusive extension will provide long term cash flow for both while establishing a framework in which SMG can more aggressively seek additional sales, through its ability to provide long term certainty of supply.
Strategic said the extension clearly establishes SMG’s footprint in the Cornish mineralisation region, which it acknowledged has recently been the focus of increasing investor interest.
Until now, the stockpile owner had been reluctant to provide longer term access to allow for the possibility of reorganising its mining activities, conducted nearby the magnetite stockpile.
Ten years of operations combined with the work undertaken to ensure contactless and safe operations throughout the pandemic has now resulted in this milestone extension, it stated.
Given that, historically, March and early April are the busiest times for operations at Cobre, a concerted marketing program is being planned for May of this year, the Group told investors.
The combination of the extension of access to the Cobre magnetite operation and the company’s planned marketing programme is expected to reflect in sales growth in 2H.
The company also informed investors that, subject to receipt of required project funding and DEM approval, the
Leigh Creek Copper Mine is expected to move into production this year. It said discussions with potential funders are currently ongoing and include a recent site visit.
John Peters, Managing Director of Strategic Minerals, said: “The resumption of demand from the largest Cobre client combined with the long-awaited formal extension of access for five years, has placed the Company on a solid cash flow footing for the years ahead.”
He added: “With an expectation of recommencement of operations at Leigh Creek this year and ever greater focus on mining in Cornwall combining with our licence extension, the Board and Management are looking forward to a promising future for the Company in 2022.”
At 31 March 2022, Strategic Minerals non-restricted cash balance was US$0.615m.
View from Vox
As sales from Cobre’s largest client return to normal levels, the Group 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.
Peters 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.
Follow News & Updates from Strategic Minerals:
