Cabinet agrees to invest £1 million in South Crofty tin mine share offer
At its meeting in December 2018, Cabinet agreed to invest £1 million in shares in the South Crofty tin mine operation.
South Crofty mine, located in Pool, closed in 1998 marking the end of commercial metalliferous mining in Cornwall. The closure of the mine was precipitated by the prevailing low price of tin at the time not because the tin had been mined out. Indeed, the geology and metallurgy of South Crofty is well known and the resource is considered to be very extensive and of high grade.
South Crofty mine is owned by Strongbow Exploration Inc. which is listed on the Toronto Stock Exchange (TSX). Strongbow acquired Western United Mines Ltd which owned the surface land on which the new processing plant will be constructed as well as the mineral rights. Strongbow’s main shareholder is Osisko Gold Royalties.
Strongbow are seeking investment to de-water the mine as a necessary step to undertaking the feasibility work to accurately measure, test and confirm the reserves to the modern standards required to secure the investment necessary to re-commence mining at South Crofty. Strongbow estimate that the costs of de-watering will be £15m, the costs of undertaking the feasibility work will be in the region of £10m and an additional investment of £100m will be required to commence production. Strongbow will shortly seek investment for the de-watering and subsequent work to prove the reserves through the London Alternative Investment Market (AIM). The AIM process only goes unconditional when a minimum of £15m in shares is subscribed for by investors to complete the dewatering phase of development. The Council funding of £1m would only be committed if the minimum threshold is met.
The economic impacts from the recommencement of mining on the scale proposed by Strongbow would be significant, providing well paid employment in an area with high levels of deprivation. Additional data is now available which could potentially result in an increase to the resources, extending the mine life to 10 years and beyond. The average wage level is estimated to be £49,300, comfortably exceeding the Cornwall average of £24,000.
Mining is inherently risky and the viability of the project is sensitive to changes in the price of tin and to a lesser extent the operating and capital costs. It is acknowledged that, having undertaken the de-watering, the project may not progress to full production, for any number of reasons. The Council commissioned Wardell Armstrong to undertake technical due diligence on Strongbow’s plans and to assess the risks. Prior to the acquisition of the shares further specialist advice and due diligence will be undertaken.
UPDATE: 22 January 2019
At its meeting on 22 January. Full Council overwhelmingly supported the proposal for the Council to invest £1 million into the share offering by Stronghow Exploration. The investment is conditional upon other investors supporting the share offer. See Council press release.