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.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

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