Strandline’s HMC Output Drops 20% as Debt Restructure Talks Continue

Operational Challenges at Coburn

Strandline Resources Limited (ASX: STA) disclosed a notable decline in Heavy Mineral Concentrate (HMC) production for the December 2024 quarter, producing 36,781 tonnes compared to 46,115 tonnes in the previous quarter. The reduction was primarily attributed to forecasted lower ore grades and unexpected mechanical downtime, including failures in tailings pump seals and high voltage trailing cables. These operational hiccups curtailed the company’s ability to ramp up production despite increased ore mined.

Mining activity itself saw an increase, with 4.75 million tonnes mined in the quarter, up from 4.43 million tonnes previously, reflecting improved mining unit availability and throughput. However, the lower grade of ore and processing setbacks meant that the output of valuable mineral concentrate did not keep pace. Strandline anticipates ore grades to improve in the March 2025 quarter, potentially reversing the production dip.

Financial Position and Debt Restructuring

On the financial front, Strandline reported consolidated cash reserves of just A$1.33 million at quarter-end, down from A$3.02 million three months prior. The company continues to operate under a standstill and deferral agreement with its lenders, extended until 28 February 2025, as it negotiates a broader debt restructuring. These negotiations are critical given the company’s significant loan facilities, including a US$60 million bond facility and a A$150 million Northern Australia Infrastructure Facility (NAIF) loan.

Despite these pressures, Strandline secured a further A$10 million funding tranche from NAIF during the quarter to support ongoing financial commitments and the construction of the Coburn airstrip. The company’s shares remain suspended pending resolution of the debt restructuring discussions, underscoring the market’s cautious stance.

Infrastructure and Market Outlook

Progress continues on the Coburn airstrip, a key infrastructure project expected to be completed by the end of the March 2025 quarter. This development is poised to enhance operational logistics and potentially reduce costs over time. Meanwhile, Strandline maintains strong customer relationships, with three shipments secured for the upcoming quarter and a shipment of 10,593 tonnes completed in early January 2025.

The company also reported a realized HMC sale price increase to A$866 per tonne, up from A$847 in the previous quarter, reflecting resilient market demand despite production challenges. However, cash costs per tonne rose significantly to A$1,123 from A$746, driven by higher mining costs and maintenance expenses related to mechanical failures.

Looking Ahead

Strandline’s immediate focus remains on stabilizing production and successfully navigating its debt restructuring. The company’s ability to improve ore grades and operational reliability will be critical to restoring production volumes and cash flow. Meanwhile, the resolution of financing arrangements will determine its capacity to fund ongoing operations and infrastructure projects.