SIERRA Morena Exploration (SME) intends to spin off its tailings, clinker and slag retreatment projects in Kazakhstan into a new company called NEWCO. It believes the spin-off will enable each company to better target potential investors.
The Australian company, which aims to list on the ASX, has two operating divisions – the Retreatment and Rehabilitation Division (RRD) and Exploration and Mining Division (EMD). The Board believes the nature of exploration is fundamentally different from an industrial activity such as tailings retreatment with different skill-sets, different mind-sets and different strategies required.
It believes that a different risk-reward relationship applies to exploration than to an industrial activity such as tailings retreatment and in recent years, the markets have turned negative towards exploration. It believes NEWCO will not suffer from that stigma.
In a statement Sierra Morena’s Board said: “Different types of investors want to invest in NEWCO from those who want to invest in SME. Keeping both areas in one company compels them to invest into both. The spin-off will enable each category of investors to target their investment better.”
In consideration and as compensation for the time, effort and costs incurred by SME, the spin-off will involve NEWCO paying SME US$500,000 in instalments. For each share in SME, each SME shareholder shall receive one free share in NEWCO. Until either SME or NEWCO is listed on a public exchange, all share placements will be made in tandem. At the moment that is 1 share in SME plus 1 share in NEWCO for a combined Aus$0.25.
The RRD division has formed a joint venture with TOO Technogaz, a Kazakh private company, to develop six mineral extraction projects in southern Kazakhstan. The first two intended to be brought into production are Achisai and Shymkent. Both are reprocessing projects and involve recovery of copper in copper concentrate, lead in lead concentrate, iron concentrate, zinc oxide concentrate, carbon containing concentrates and precious metals, primarily silver but some gold.
SME believes the Shymkent slags project will yield US$111.22 million in EBITDA over almost four years and the Achisai clinker project US$59.1 million over 13.7 years. It believes both could commence within 12 months of securing finance.
When reprocessing and rehabilitating mine dumps, slags, clinker, etc, SME extracts the valuable minerals, and chemically and physically neutralises any residues. In doing so, it reduces and in some cases eliminates lead, cadmium, arsenic, etc, left over by previous mining activities in environmentally less responsible times.