Strategic Minerals wins new magnetite supply contract

AIM-listed explorer Strategic Minerals is to supply over 400,000 tons of magnetite at its US mine over several years to an unnamed company.

Its subsidiary Southern Minerals Group, the operator of the Cobre magnetite stockpile in New Mexico, won a new contract on Friday with a private company to the supply magnetite at a market based price over several years, subject to availability.

The deal was made after a previous agreement was terminated in March for not having met prerequisites in nominated timeframes.

A $10,000 deposit has been paid to Southern Minerals and a security deposit of $250,000 will be made to its solicitor's trust accounts by 14 April.

The contract calls for a minimum purchase of 4,000 tons per month starting from 1 June and it will terminate if, at any time, Southern Minerals loses access to the magnetite stockpile.

The company said that with the logistics at its mine it would result in a maximum supply, above existing client demand, of 6,000 tons per month and the contract is likely to more than double annual sales from Cobre, which is likely to be achieved without affecting its net profit margin of between 40% to 45% of sales revenue.

Strategic Minerals managing director John Peters said: "Management have a high confidence that this Contract will progress and note that it is, compared to the Agreement we have just terminated, for a greater total quantity and has doubled minimum monthly purchases.

“The impact of the contract on the company is not to be underestimated as it is likely to materially boost the expected profitability of the Cobre operation in 2017."

Shares in Strategic Minerals rose 15.64% to 1.53p at 0837 BST.