TIDMSML
RNS Number : 4505O
Strategic Minerals PLC
01 June 2020
Market Abuse Regulation (MAR) Disclosure
Certain information contained in this announcement would have
been deemed inside information for the purposes of Article 7 of
Regulation (EU) No 596/2014 until the release of this
announcement.
1 June 2020
Strategic Minerals plc
("Strategic Minerals" or the "Company")
$21.9m Arbitration Decision Granted
Strategic Minerals plc (AIM: SML; USOTC: SMCDY), a producing
mineral company actively developing projects prospective for
battery materials , is pleased to announce that, further to its
announcement of 2 March 2020, the appointed arbitrator has awarded
its wholly owned subsidiary, Southern Minerals Group (" SMG"),
US$21,929,259 in damages and costs, exclusive of additional
interest to be calculated as latterly described.
Highlights
-- Comprehensive decision addressing both procedural and factual
issues of the arbitration and finding in SMG's favour
-- Total Arbitration award of US$21,929,259 plus additional
interest (comprising liquidated damages of US$4,215,000, loss of
profits of US$14,090,599, punitive damages of US$3,600,000 and
arbitration costs of US$23,660)
-- Interest at 15%pa awarded on liquidated damages (both pre and
post judgement) and on loss of profits (post judgement only)
-- SMG proceeding to confirm decision in the United States
District Court in the client's local jurisdiction (where the
arbitration technically took place)
-- Client's assets seized as part of a US Securities and
Exchange Commission's investigation with the Court likely to
appoint a receiver to manage the assets of the client mid-June
2020
-- Successful arbitration outcome puts SMG in the best possible
case to seek recovery of this award, however visibility of the
extent of this, if any, remains unclear pending further
developments and the Company remains cautious on the ultimate
outcome
The arbitrator, a retired judge, has provided a reasoned
decision which is comprehensive, and evidences careful
consideration of the specifics of this case, the risks that SMG
took in committing its resources to the client and the callous
disregard that the client showed in respect of the purchase and
sale agreement and SMG. The thoroughness of the decision also aids
SMG as it moves forward. Typically, arbitration awards are
confirmed by courts as a pro-forma matter, but in the event the
losing party challenges the award or the confirmation, the more
well-reasoned the decision is, the easier it is for the prevailing
party to have the decision confirmed and judgment entered.
The arbitrator's decision considers the procedural elements of
the case - namely the client's lack of participation in the
arbitration proceedings with SMG, the factual findings,
consideration of liquidated damages and lost profits, the
applicability of punitive damages, pre and post-judgment interest,
arbitration costs and attorney's fees.
Specifically,
1. Procedural elements.
The decision addresses the implications of the client's lack
of participation in this proceeding. Essentially, the arbitrator
determined that the client had a reasonable opportunity to
participate fully in the proceeding, and it did not. He concludes
that "all required due process was afforded to both sides through
the impartial application of the Arbitration Rules agreed to
by the parties in their agreement." The arbitrator's decision
effectively forecloses any arguments that the client might
raise with respect to due process.
2. Factual findings.
The arbitrator decision's recounts, in detail, the uncontested
facts that SMG alleged in its complaint and its affirmative
case. The arbitrator also cites specific requests for admissions
that the client never contested, which confirmed the lack of
payments from the client, the breach of the Agreement, and
the liquidated damages through March 1, 2020. In addition,
the arbitrator adopted SMG's facts with respect to the terms
of the sale and purchase agreement, the amendment thereto,
and the client's pattern of non-payment and false promises.
3. Damages.
The arbitrator gave careful consideration to SMG's damages
analysis - specifically noting the three scenarios SMG posited.
He concluded that SMG was conservative in its estimates and,
most importantly, awarded $4,215,000 in liquidated damages
and $14,090,599 in lost profits. Ultimately, he concludes that
SMG's analysis is "reasonable, conservative, and accurate."
4. Punitive Damages/Bad Faith.
Again, the arbitrator adopted SMG's extensive recitation of
the client's acts of bad faith. He examined the client's behavior
and strongly concludes that "there can be no question that
the continual bogus reassurances and purportedly detailed explanations
of the imminent receipt of funds to pay the debt owed, were
both malicious and 'committed recklessly with a wanton disregard
for the plaintiff's rights.'" He then awarded $3,600,000 in
punitive damages.
5. Interest
The arbitrator awarded pre and post-judgment interest on the
$4,215,000 in liquidated damages. Likewise, the arbitrator
awarded post-judgment interest on the $14,090,599 in lost profit
damages. However, as requested the Company, the arbitrator
set the applicable interest at 15% as permitted under New Mexico
law if the losing side acted in bad faith. The usual interest
rate would have been 8.75%.
6. Arbitration Costs
The arbitrator also awarded SMG all arbitration costs, which
total $23,660.
From here, SMG will need to move to confirm this decision in the
United States District Court in the client's local jurisdiction and
where the arbitration technically took place. The confirmation
process is generally pro forma and only requires a short
filing.
The Company has been advised by its lawyers to continue to
withhold the name of the client until such time as it has filed in
US federal court to confirm the arbitration. However, the Company
has become aware that the client's assets have been seized as part
of a US Securities and Exchange Commission's investigation, along
with the assets of a number of related party entities, and that the
court is likely to appoint a receiver to manage the assets of the
client while the matter remains pending. A decision from the judge
is scheduled for mid-June on this point. The memorandum in support
of the motion to appoint the receiver suggests that the client may
still have some real assets that warrant the appointment of a
receiver to protect the status quo. SMG will advise the court and
receiver in the SEC matter of the amounts owed once judgment is
entered by the court.
Commenting, John Peters, Managing Director of Strategic
Minerals, said:
"Whilst heartened by the arbitrator's decision, the Board
continues to advise a precautionary view be adopted in relation to
the amount, if any, Southern Minerals Group may receive. However,
the Board is pleased with the manner in which it has been able to
crystalize the amount of the claim and to have put the Company in
the best position to maximise any payment it may be able to realise
over the coming year. "
For further information, please contact:
+61 (0) 414 727
Strategic Minerals plc 965
John Peters
Managing Director
Website: www.strategicminerals.net
Email: info@strategicminerals.net
Follow Strategic Minerals on:
Vox Markets: https://www.voxmarkets.co.uk/company/SML/
Twitter: @SML_Minerals
LinkedIn: https://www.linkedin.com/company/strategic-minerals-plc
Facebook: https://www.facebook.com/search/top/?q=strategic%20minerals%20plc
+44 (0) 20 3470
SP Angel Corporate Finance LLP 0470
Nominated Adviser and Broker
Ewan Leggat
Charlie Bouverat
Notes to Editors
Strategic Minerals plc is an AIM-quoted, operating minerals
company actively developing projects prospective for battery
materials. It has an operation in the United States of America and
Australia along with development projects in the UK and Australia.
The Company is focused on utilising its operating cash flows, along
with capital raisings, to develop high quality projects aimed at
supplying the metals and minerals being sought in the burgeoning
electric vehicle/battery market.
In September 2011, Strategic Minerals acquired the distribution
rights to the Cobre magnetite tailings dam project in New Mexico,
USA, a cash-generating asset, which it brought into production in
2012 and which continues to provide a revenue stream for the
Company. This operating revenue stream is utilised to cover company
overheads and invest in development projects orientated to
supplying the burgeoning electric vehicle/battery market.
In January 2016, the portfolio was expanded with the acquisition
of shares in Central Australian Rare Earths Pty Ltd, which holds
tenements in Western Australia prospective for cobalt, nickel
sulphides and rare earth elements. The Company has since acquired
all shares in Central Australian Rare Earths Pty Ltd. In September
2018, the Company entered contracts for the sale of certain CARE
tenements identified as gold targets.
In May 2016, the Company entered into an agreement with New Age
Exploration Limited and, in February 2017, acquired 50% of the
Redmoor Tin/Tungsten project in Cornwall, UK. The bulk of the funds
from the Company's investment were utilised to complete a drilling
programme that year. The drilling programme resulted in a
significant upgrade of the resource. This was followed in 2018 with
a 12-hole 2018 drilling programme has now been completed and the
resource update that resulted was announced in February 2019. In
March 2019, the Company entered into arrangements to acquire the
balance of the Redmoor Tin/Tungsten project. This was completed on
24 July 2019.
In March 2018, the Company completed the acquisition of the
Leigh Creek Copper Mine situated in the copper rich belt of South
Austra lia and brought the project into production in April
2019.
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END
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