Mr. Jaime Perez Branger reports
STRATEGIC MINERALS REPORTS FULL-YEAR AND FOURTH QUARTER 2022 FINANCIAL RESULTS
Strategic Minerals Europe Corp. has released the results for the three- and 12-month periods ended Dec. 31, 2022. Strategic Minerals' 2022 annual audited financial statements and associated management's discussion and analysis have been filed on SEDAR. Unless otherwise indicated, all currency amounts are in U.S. dollars.
Fiscal year 2022 highlights:
- Strategic Minerals transitioned to open-pit mining at the Penouta property and commenced operating the primary crushing plant, improving primary concentrate production and quality of concentrate.
On May 23, 2022, the company obtained the Concession C grant, which permits the company to fully develop the open-pit mine at the Penouta project for 30 years, renewable for up to 75 years. It also allows Strategic Minerals to exploit cassiterite (tin), tantalum and niobium, as well as industrial minerals in the mine, such as quartz, feldspars and micas.
With only nine months of open-pit operations, total production reached a record 541 tonnes, and the concentrate quality also improved during the year. Cassiterite concentrate production was 455 tonnes with 70.4-per-cent tin content, and tantalite/columbite concentrate production reached 86 tonnes with 23.3-per-cent tantalite content and 24.6-per-cent columbite content.
Sales reached 524 tonnes of concentrates and 351 tonnes of contained minerals, an increase of 52 per cent and 76 per cent, respectively, compared with 2021.
Revenues totalled $11.7-million, an increase of 54 per cent compared with 2021.
Net loss narrowed to $1.4-million compared with a net loss of $3.0-million in 2021.
On Dec. 28, 2022, the company sold a 70-per-cent interest in the Alberta II investigation permit and the Carlota permit application (together, the lithium project) to IberAmerican Lithium Inc. (ILI) for total consideration of $2.0-million (Canadian). The company and ILI have also entered into a joint venture agreement in respect of the lithium project.
On Jan. 24, 2023, after the reporting period, Electric Royalties Ltd. acquired a 0.75-per-cent gross revenue royalty on the production of the Penouta project for a cash payment of $1.0-million (Canadian) and the issuance to the company of 500,000 common shares in the capital of Electric Royalties. Electric Royalties may acquire an additional 0.75-per-cent royalty at the Penouta project in consideration of a further cash payment of $1.25-million (Canadian) until Aug. 24, 2023. The royalty rates will be reduced to 0.5 per cent, respectively, once $1.67-million (Canadian) in royalty revenues have been paid to Electric Royalties.
The company entered into a power purchase agreement for its Penouta project, which provides for the supply to the company of seven gigawatts per year of electricity for five years starting on Jan. 1, 2023. A significant portion of the power will be from renewable energy sources and is expected to generate substantial cost savings.
Fourth quarter highlights:
Production reached 105 tonnes of primary concentrate production or 3.1 times that of the same period in 2021.
Sales reached 121 tonnes of concentrate and 80 tonnes of contained minerals, increasing 89 per cent and 113 per cent, respectively, compared with the same period in 2021.
Revenues were $2.2-million, an increase of 58 per cent from the same period the prior year, primarily due to higher sales volume.
Net loss narrowed to $800,000 compared with $3.6-million in Q4 2021.
"With the successful transition to open-pit mining at our Penouta project along with other operational improvements, we had a record year in terms of the production and quality of concentrates," said Jaime Perez Branger, chief executive officer of Strategic Minerals. "While adverse weather conditions and macroeconomic headwinds made 2022 a challenging year, our strong production and improving margins highlight the successful application of our strategy. Along with our expectation of increased production levels in 2023, we believe the royalty financing in place and the launch of the joint venture development of our lithium resources creates an even stronger company to support the goals of the new green economy."
Operational and financial performance
Total production for 2022 reached 541 tonnes, a record high and an increase of 63.4 per cent compared with 2021. Q4 2022 production of primary concentrate reached 105 tonnes, 3.1 times the production of the same period last year.
Quality of concentrate improved during 2022. Production comprised 455 tonnes of cassiterite concentrate with 70.4-per-cent tin content compared with 247 tonnes with 66.5-per-cent tin content in 2021. Tantalite/columbite concentrate production reached 86 tonnes with 23.3-per-cent tantalite content and 24.6-per-cent columbite content, up from 84 tonnes with 16.8-per-cent tantalite content and 17.6-per-cent columbite content in 2021.
Revenue improved on a yearly and quarterly basis. Revenues for 2022 totalled $11.7-million, 54 per cent higher than the revenues in 2021. Revenue for Q4 2022 was $2.2-million, an increase of 58 per cent from the same period in 2021, primarily due to the higher volume of year-over-year sales.
Despite adverse weather conditions such as the severe electric storms during July and August and the drought throughout October and November that interrupted the operation of the mine from time to time, the company consolidated and improved operations. Net loss was $1.4-million in 2022, an improvement from a net loss of $3.0-million in 2021. Profit before expenses and other reached $7.6-million, or 65.3 per cent of sales in 2022, improving from $6.1-million or 80.6 per cent of sales in 2021. EBITDA (earnings before interest, taxes, depreciation and amortization) also improved to $400,000 in 2022 from ($1.0-million) in 2021. Adjusted EBITDA was ($600,000) in 2022 compared with $1.2-million in 2021, primarily due to the low production while waiting for permits and adverse weather conditions throughout the year, further aggravated by the decrease of international prices of minerals.
At the end of the period, cash and cash equivalents were $900,000 compared with $2.2-million on Dec. 31, 2021, reflecting the increase in cash used in operations, debt repayment and the commissioning of new equipment.
At the end of Q4 2022, the company had a deficiency in working capital of $2.0-million compared with a working capital surplus of $640,000 at the end of 2021. This was primarily attributable to the transition to open-pit mining, commissioning the new primary crushing plant and fulfilling financial commitments. Management is confident that working capital requirements will be covered during the continuing course of business.
Strategic Minerals focuses on increasing production, reducing unitary costs, reinvesting profits to achieve organic and sustainable growth, and looking for new external financing opportunities to expand production, improve recovery levels and initiate downstream projects.
The company intends to set up a pilot plant to identify and separate industrial minerals such as feldspars, micas and quartz. The company is constantly having discussions with large distributors of industrial minerals to seek an agreement that, if successful, would allow these products to be distributed, thereby helping to reduce costs and increase cash flow. Additionally, the company intends to undertake further exploration work in the permitted areas of the Penouta project.
Following the stoppages of the company's mining operations due to the malfunctioning of the primary mill at the Penouta project in Q4 2022, the company completed a significant overhaul of the primary ball mill in March, 2023. The company believes this upgrade will renew the equipment's useful lifetime and increase production by reducing maintenance downtime. The company is also negotiating offtake agreements and actively considering alternative sources of financing, the proceeds of which will be used toward continuing mine development and improvements in machinery and equipment that will improve operational efficiencies in the future.
Given the strong market demand for lithium and in an effort to maximize the value of the company's assets, Strategic Minerals entered into the joint venture agreement on Dec. 28, 2022, to accelerate the exploration of the lithium project while retaining a 30-per-cent interest in the project. The JV agreement has provided the company with capital and allows Strategic Minerals to retain an important equity position in the lithium project.
About Strategic Minerals Europe Corp.
Strategic Minerals' wholly owned subsidiary, Strategic Minerals Spain SL (SMS), produces, identifies, explores and develops mineral resource properties critical to the green economy, predominantly in Spain. SMS holds permits and a licence for the Penouta project, which allows the company to produce and conduct exploration. SMS is the largest producer of tin and tantalum in the European Union, and has been recognized within the EU as an exemplary company of good practices in the circular economy. The company holds a 30-per-cent carried joint venture interest in the Alberta II investigation permit and the Carlota application permit, located in the Galicia region of northwestern Spain. The company is well positioned as a major producer of sustainable and conflict-free tin, tantalum and niobium, and is exploring for lithium. Strategic Minerals is a reporting issuer under applicable securities legislation in the provinces of British Columbia, Alberta and Ontario.
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