Exploring in Cornwall
Gary Peters sits down with John Peters and Peter Wale* from Strategic Minerals to find out more about the company’s Redmoor tin/tungsten project, in Cornwall, UK.
Tell me about your careers to date.
PW I’ve got a funds management background. I’ve been involved with Strategic Minerals, on and off, for about seven years – but my role is more strategy and making sure the resources are there. Together, as a company, we have complementary skills.
JP I’ve always been on the investment management side. Most recently, I was a partner at a hedge fund for 12 years. I have a good understanding from the broker and fund manager side of things.
It’s important we have our strategy right, now that we’re a larger company and we are trying to appeal to large investors.
Any particular career highlights?
PW In the 1980s and ‘90s, I was involved in a private infrastructure market study in Australia. Right now, the resurgence of Strategic Minerals from where it was two and half years ago – when I started, it was down near about £3m as a market cap, and now it’s about £33m. To see a vision start to come through is fantastic.
JP I’ve been on the board since July 2016, which has coincided with a transformational time for the company. I think the highlights are very much yet to come. We’ve got some interesting projects coming up, including Redmoor, and a copper project in southern Australia, which could be worth a lot to the company.
How has the company changed over the years?
JP Strategic Minerals listed on AIM in 2011. The whole company needed to be refocused. I came in at the beginning of 2015 as part of that, and we tried to concentrate on producing cash flow for the business, looking for projects to add value.
We found a coal mine in New Zealand, and then the largest coal mine producer went into bankruptcy, which of course caused us problems, so we cut the project. We didn’t want to waste money.
Then we had a chance to get into the joint venture (JV) with Redmoor. We see this as a longer-term proposition – I call it the juggernaut – you feed and feed it, and before you know it you won’t be able to stop it.
We don’t have to raise any money to keep the lights on – we’ve got cash to put into more drilling.
PW We entered into the Redmoor JV in May 2016. Tin is not really classed as sexy, but we’re not looking for quick gains – we’re looking at the long term.
Can you update me on the progress with the Redmoor project?
PW We started the drill programme in March 2017. The last of the 20 holes are being drilled. Phase one was 15 holes, and phase two is another five.
We had the assays about a month ago and that was all fairly constructive in terms of the grades and the resource. It all leads us to believe there is the potential for an economic project.
We want to build a mine – we’re not looking to just prove something and sell it. We want to have a significant interest moving forward, but don’t forget the JV is a 50/50 deal at this stage.
JP This is a 20-25 year project.
The Redmoor site is close to residential homes, what noise problems has that produced?
PW The closest drill holes are about 50m from residential homes. Noise was a prerequisite we had
to solve. When we were choosing drilling contractors they needed to show innovation to solve it. After all, it’s not like drilling in the desert. You do have to make sure the process works well. We have various suppression elements on the drill equipment and we have the giant hay bales.
When we’ve finished with them, they go to local people. When we had the first community meetings in late 2016, people thought we might be drilling in their gardens. There was so much relief when we showed them the first map of the drill sites. You could have problems with what we’re doing because of the proximity to houses, but we haven’t had one complaint yet.JP We’re using hay bales. We drill the hole, but we put those hay bales up. I went down to Redmoor in May 2017 and stayed in the local B&B and the owners asked me, ‘when are you starting the drilling?’ We had been drilling for three months at that time. We’ve interwoven ourselves into the fabric of the area. The hay bales, for example, are provided by a local farm.
So, the local community is behind you?
PW There’s not really much precedence for it [drilling that close to housing], especially in the UK. It was a challenge to get heads around it. It’s a mining area
by heritage, but some people obviously moved there more recently and didn’t know that.
There’s a little bit of scepticism, which is understandable. There was some drilling back in the 1980s, before the tin market collapsed and the company walked away.
People have seen companies come and go, but times have changed. They have asked if we are concerned about the difficulty of extracting, but we’re confident we can make it work. There is a long way to go, of course, and then you’re designing a mine. You don’t do it overnight.
The restrictions have also changed, in terms of what you can and can’t do, whether that be noise limits, how it affects the water and so on. One of our mandates is to improve what’s there. Some of our drilling is in virgin territory, where no mining has ever occurred, so you are going into the unknown.
JP We have invested a lot of resources in getting this right. In this area, it has to be an underground mine. The mining methods now are so much more advanced, there will be less environmental impact.
What about your workforce?
JP We’ve done this first lot of drilling and then it will be about developing a mine plan. We’ve had lots of people tell us that once we get to that level, they want to be a part of it.
We believe we’re going to have a mine, and there’s also a completely new demand for the type of workers we will require, so that means you need to give yourself a two-year lead time to start training the workforce. You might end up with one of the most advanced workforces in Cornwall. That’s an interesting challenge.
And do you hope to hire local people?
PW Most definitely. The drilling contractor has already taken on some from the area.
One of the main queries we had from residents related to house prices. It’s easy for me to say, as I don’t live there, but it’s pretty clear if we bring prosperity to the area, prices will not go down. How much they go up by is a different matter.
JP We are integrated into the area. We want to be part of the community.
They are all good words on integrating into the community…
PW Yes, talk is one thing. However, I think we have demonstrated our commitment. We haven’t caused disruption. We also need to think about our reputation as a company – we don’t want to be seen as bandits raiding the area.
The Cornish people are extremely patriotic. We know how important it is to communicate with the local community, and the meetings will continue as the project progresses.
How strong is the resource sector in the UK?
PW There’s doubt, but there has been some revival. There’s been underlying strength in global economies, which leads to demand and therefore we are seeing shortages of some materials, like tin and copper.
You also have the whole electric vehicle space – it is actually a trend now.
JP People miss what resources sectors are like. It’s not the same as building a block of flats. When you’ve got a resource you’re not sure if you have something that is worth money, that’s why returns on them are so high – higher risk, higher return.
People tend to look at the sector in the UK and say ‘this one failed, therefore resources aren’t doing any good’. However, the truth is naturally some will fail, while others will succeed.
We think Redmoor will succeed, but you can’t be 100% convinced – that’s the nature of the sector.
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*John Peters is Managing Director at Strategic Minerals. He has over 30 years’ corporate finance experience across a number of industries, including natural resources.
*Peter Wale is currently Non-Executive Director, and previously worked in equities trading for both Japanese and American investment firms.