Capital Metals optimistic despite Sri Lanka licence scandal as FY losses shrink

(Sharecast News) - Shares in Capital Metals (CMET) rose on Friday after the mineral sands group managed to reduce full-year losses despite an "extremely challenging" period for the company as it continues to battle ongoing licence issues in Sri Lanka. The pre-tax loss for the 12 months to 31 March was $1.14m, down from $1.91m the year before.

In August 2022, CMET was granted two Industrial Mining Licences (IMLs) for the Eastern Minerals heavy mineral sands project by the Geological Survey and Mines Bureau of the Government of Sri Lanka (GSMB). However, the IMLs were later suspended by the GSMB, who raised concerns about the foreign ownership structure of the holding company. CMET said it had been working on a restructuring to satisfy the GSMB, but the IMLs were eventually cancelled.

Following a number of complaints and lobbying actions surrounding the alleged malfeasance of the GSMB, as well as the illegal conduct of its chairman and environment minister, the responsibilities for mining licence applications and appraisals are now being transferred to the Board of Investment, "which we believe would be a very positive step", CMET explained.

The company is now looking to have its IMLs reinstated, and remains confident that this will be the case.

"In conclusion, while there can be no certainty as to the outcome, I believe the process to reinstate the IMLs is moving in our favour," said CMET chairman Gregory Martyr.

"Given the exceptional project economics demonstrated in the PEA [Preliminary Economic Assessment], even on conservative price assumptions, and before considering further upside from other areas of the project, the future looks bright for the company upon overcoming the interference of a small number of individuals."

Shares were up 5% at 1.10p just before midday on Friday, but have fallen 77% over the past year on the back of the licence issues.