Strategic Minerals shifts funding focus for Leigh Creek mine

The AIM-traded firm said the focus of its funding, while still expected at the Leigh Creek Copper Mine (LCCM) level, had moved to a convertible note or joint venture basis, after debt negotiations with a “top global bank” ceased.

It said it was seeking $10m at the LCCM level, consisting of about $6m for the resumption of production, and $4m for copper oxide and sulphide exploration.

LCCM level funding was still expected within the project's “critical development path”, and was not considered likely to delay the expected 2022 resumption of production.

Strategic Minerals said the negotiations had been based on its internal forecasts of the project's expected EBITDA of $68m, reflecting a $4 to $25 copper price per pound, and an AUD-USD exchange rate of $0.75.

LCCM had applied for a South Australia state government grant to assist with planned drilling in 2022, while the resubmission of PEPR details to the state’s Department of Energy and Mines (DEM) was “almost complete”, and was expected to be submitted in January.

Strategic Minerals said it was “confident” that, on the basis of work completed for the PEPR resubmission, the environmental bond required was likely to be reduced by a “significant amount”, although there could be no assurances as the decision rested solely with the DEM.

“The company is confident that 2022 will see the recommencement of production at Leigh Creek,” said managing director John Peters.

“Whilst it was felt that funding on a pure debt basis would have produced the best result for our shareholders, the market was not prepared to debt fund the project at this time.

“Accordingly, discussions involving equity linked funding, at the LCCM level, have now commenced and considerable interest has been received to date.”

Peters said it was for that reason the company felt the funding arrangements would be completed before the project was ‘shovel-ready’.

“Given that the response to the conditions of the July PEPR is being lodged shortly with the DEM, it is considered that the earliest LCCM will be in a position to recommence production is March 2022 and this would be subject to all regulatory clearances and funding being secured.

“Strategic Minerals is excited by the prospect of undertaking drilling in 2022,” John Peters said.

“Planned drilling at Mount Coffin is expected to lead to an increase in LCCM's reported copper oxide JORC resource and commence its long-term strategy to use cash flows from copper oxide production to locate a substantial copper sulphide deposit in this copper rich province.”

At 1157 GMT, shares in Strategic Minerals were down 6.57% at 0.33p.