Strategic Minerals PLC (LON:SML; USOTC:SMCDY) has made an arbitration claim for at least US$21mln plus damages against the main customer of the company’s Cobre magnetite operation in the USA.
As recently as July, the client, whose name cannot yet be disclosed, was expressing its intention to make payment.
But the claim has now been filed following a breakdown in negotiations, said John Peters, Strategic’s managing director.
At least US$19mln is being claimed in relation to lost profits for the balance of the contract, with more than US$2.3mln sought in relation to payments still outstanding, while there is also a claim for punitive damages as permitted by law.
Strategic Minerals, which topped up its balance sheet with a £820,000 fundraising in June and US$203,000 from magnetite sales in the second quarter, said it was adopting a “low-cost approach” due to the protracted nature of arbitration claims and the uncertainty of the final outcome.
Peters said the board believe that the company “should not rely on any future payments due under this contract until received” and so is continuing to review the best method of funding further developments.
“The company remains in the fortunate position wherein the profits from the Cobre operation continue to fund overheads and contribute, albeit at a lower level, to project development,” he added.
As 100% owners, he added that the company was able to dictate the pace of each project, as holding costs on each are relatively minor.