Keras Resources plc (AIM: KRS) announces an update at the high-grade Diamond Creek organic phosphate mine, (Diamond Creek) in Utah, USA, owned by the Company’s 51% subsidiary, Falcon Isle Holdings LLC (‘Falcon Isle’).
From an operational perspective, the 2021 mining campaign has now been completed with 8,520 tons mined and delivered to the laydown area at Diamond Creek. This total was under the previously announced forecast annual tonnage of 10,000 tons, as there was previous inventory available from the 2020 marketing campaign, which preserved both cash flow and storage requirements. Sales since commencement of the project in June 2020 total 3,061 tons.
From a financial perspective, the delay in commissioning the Spanish Fork plant and the increased costs associated with those delays, combined with a lack of additional sales to cover those costs and the need to complete the 2021 mining campaign before the winter, has resulted in a need for additional capital to fund Falcon Isle’s operations.
Since investing in Falcon Isle in July 2020, Keras has complied with all its obligations, as per the transaction announced on 30 July 2020 (the “Transaction”). To date Keras has provided approximately US$625,000 in additional working capital to Falcon Isle, which has been funded from Keras’s cash reserves. For the past 9 months, Keras has been in discussions with our partner about the capital shortfall, has offered non-dilutionary funding solutions and Keras has offered to acquire additional equity in Falcon Isle. To date we have not found a resolution and this is having a negative impact on the business itself and on Falcon Isle’s relationships with key contractors.
Under the circumstances, operations at the Spanish Fork processing plant have been temporarily halted until this funding issue is resolved. Having exhausted all efforts to negotiate an amicable solution, Keras has now engaged local US legal representatives to enforce its rights under the terms of the Transaction.
To date, the marketing of Falcon Isle’s phosphate has fallen short of agreed budgets. Keras is now looking to remedy this underperforming part of the business, which could involve an outsourced marketing solution. We expect to have this marketing solution in place prior to commencing next year’s sales season in the first quarter of 2022, however, the inventory in warehouse will be continued to be marketed.
Russell Lamming, CEO of Keras Resources, commented, “We continue to believe that the Diamond Creek project is uniquely placed to tap into the growing organic and carbon-conscious world in which we live. With our milling plant now installed, c.8,500t of ore in the laydown area and COVID restrictions lessening, we still see significant value for Keras within this business and are committed to its future.
“It is unfortunate that, despite our best efforts, we have been unable to amicably resolve the funding shortfall and now seek to enforce our rights under the terms of the Transaction. It is also disappointing that this has resulted in operations being temporarily halted. As a part of this process, we are also looking at possible restructuring options as the major creditor to Falcon Isle. This will enable us to steer Falcon Isle in a direction we believe will increase sales and associated revenues. We will keep shareholders updated on our progress in resolving this issue and look forward to reporting positive progress in the near future.”
The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 (‘MAR’) which has been incorporated into UK law by the European Union (Withdrawal) Act 2018.
For further information please visit www.kerasplc.com, follow us on Twitter @kerasplc or contact the following:
Keras Resources plc
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