Thursday, December 27, 2012

Strata Minerals And Australian Phosphate

Strata Minerals (SMP.V) wants to mine phosphate in Australia.  I have concerns about the management team's experience.  The CEO and other key team members are primarily from the finance and beverage sectors; some of them have mining sector "experience" but that appears to be confined to corporate development work and not actual mine operations.  The company either needs to specifically articulate the relevant mining operations experience of these people or get some new people who have that experience.  Mining company managers absolutely must know how to pull rocks out of the ground.

Their Cardabia, Australia project probably has a transportation cost advantage over phosphate from Morocco, but this is less compelling than a production cost advantage.  I'm even less confident about their Savory Basin project, which has no modern exploration history.  SEDAR has their NI 43-101 report dated July 4, 2012; it identifies no resources but recommends a Phase 1 exploration budget of AUD$500-650k and Phase 2 exploration of AUD$2-3M.

A quick check of their SEDAR financial statements reveals whether they can fund such exploration programs.  Their quarterly statement dated September 30, 2012 shows C$138k cash on hand with a burn rate of about C$154/month (averaging the two different quarters presented.  They opened a private placement solicitation in October that can cover the proposed Phase 1 budget, and they successfully closed the offer 15 days later for the full amount.  Strata's exploration program is clearly on track but their financial position leaves little room for unexpected delays.

It is too early to tell whether Strata Minerals will succeed in finding economically viable phosphate deposits.  They deserve another look in a year or so when their exploration program has quantifiable results.

Full disclosure:  No position in Strata Minerals at this time.