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    SML - Strategic Minerals, Nov 22, 2019
  1. Groucho

    Strategic Minerals* (SML LN) 0.575p, Mkt Cap £8.4m –Leigh Creek feasibility progress Strategic Minerals reports details of its updated mineral resource estimation and feasibility analysis for its Leigh Creek copper operation in South Australia where the company is working to restart production of a copper cement product containing a minimum 70% copper.

    The plan envisages a three-phased development with an initial production of around 300tpm of copper in approximately 500 tonnes of product from the Mountain of Light plant fed, initially, with ore from the nearby Paltridge North and Rosmann East deposits before advancing to the second stage expansion of resources within the company’s 1,250km2 leases and moving to the phase 3 regional scale exploration and commercialisation of “copper in the wider North Flinders Ranges, including projects that are not currently owned by LCCM”.

    The company reports that “Stage 3 is designed to extend the mine life to more than 15 years”.

    As a result of recent drilling at 10m intervals along 30, spaced section lines the Paltridge North (9,223m) and Rosmann East (1,887m) deposits are relatively well understood despite a waste:eek:re ratio of 2.8:1, have been identified for the initial development because of their location close to the Mountain of Light plant.

    The drilling shows an indicated resource totalling 1.22mt at an average grade of 0.77% copper plus an additional inferred resource of 0.6mt at an average grade of 0.66% copper. Approximately 75% (0.91mt at a grade of 0.8% copper) of the indicated resource is located at Paltridge North with the balance at Rosmann East (0.31mt at 0.67% copper).

    Geological interpretation shows that at Paltridge North, the mineralisation “occurs as a broadly flat lying body of oxide copper mineralisation (malachite and azurite) from approximately 10-15m below the surface” extending over an area “of over 700m x 140m and an average thickness of around 15m”. At Rosmann East, mineralisation “occurs from a surface abutting a steeply dipping diapiric breccia. … Remnant oxide mineralisation (malachite and azurite) occurs below the existing pit floor and continues along strike, with a total strike continuity of almost 400m”. Both deposits are reported to grade into supergene sulphide mineralisation at depth.

    The company’s mine development plan is based around owner operated mining, using a fleet of second-hand mining equipment to help contain costs. Based on start-up capital expenditure of US$1.75m, average production costs of US$1.50/lb of copper and a copper price of US$6,614/t (US$3/lb) and a mine life of almost 5 years, the company expects the development of the Paltridge North and Rosmann East deposits to generate an IRR of 105% from the sale of approximately 5,600t of copper product.

    A similar analysis for the Lynda and Lorna Doone deposits which have a lower waste:eek:re ratio of 1.1:1 and more straightforward metallurgical characteristics and will be developed as part of Phase 2, suggests a lower production cost of US$1.23/lb and start-up capital of US$1.77m generating an IRR of 117% from the production of 13,549t of copper over a life of approximately 8 years. The second phase projects are still subject to permitting.

    Sales of an initial 5 tonnes of copper cement product were announced in May this year and this, allied to the detailed resource planning and metallurgical testing and frugal approach to capital expenditure helps to de-risk the initial development of the Rosmann East and Paltridge North deposits. Experience gained during Phase 1 should also feed through to optimising the Phase 2 stages of the project and help to establish Strategic Minerals’ operating credentials as it advances to the Phase 3 of its plan to expand its presence in the North Flinders Ranges.

    Conclusion: Strategic Minerals has evolved a detailed plan for its staged development of Leigh Creek at low capital cost to generate returns of more than 100% IRR for the first two phases. The decision to use second hand mining equipment is, we suspect, a significant contributor to the low capital cost and its success will hinge on the day-today operating expertise of the on-site and corporate management team.

    *SP Angel acts as Nomad and Broker to Strategic Minerals

    SP Angel posted on #SML https://www.voxmarkets.co.uk/activity/160134
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    #SML #THR
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