Results and Notice of AGM

Certain information contained in this announcement would have been deemed inside information for the purposes of Article 7 of Regulation (EU) No 596/2014 until the release of this announcement.

25 June 2019

TRI-STAR RESOURCES PLC

RESULTS FOR THE YEAR ENDED 31 DECEMBER 2018 AND NOTICE OF AGM

Tri-Star Resources plc (“Tri-Star”, “TSTR” or the “Company” and together with its subsidiaries, the “Group”) the independent metal processing and technology company, is pleased to announce its financial results for the year ended 31 December 2018.  The Company’s principal interest is an antimony and gold production facility (the “SPMP Project” or the “Project”) being developed in Sohar, Sultanate of Oman by Strategic & Precious Metals Processing LLC (“SPMP”), an Omani company in which Tri-Star has a 40% equity interest.

Highlights for TSTR from the year include:

·     In January 2018, the Company completed an Open Offer with £4.4m of funds raised through the issue of 44,204,755,697 ordinary shares of 0.005p each at 0.01 pence per share.  This offer was oversubscribed and showed strong shareholder support for not only Tri-Star but also the SPMP Project. Strong shareholder support was further illustrated in June 2018 by a second successful fund raising of £13.0m which was achieved through a placing of 30,232,558 ordinary shares of 5 pence each at 43 pence per share.

·     Using the proceeds from the fund raisings, TSTR was able to provide additional mezzanine loans of $16.7m (£12.7m) to SPMP to assist in further development of the Project. These loans were issued with identical terms to the existing mezzanine loan Tri-Star invested in SPMP in November 2017 at a compound interest rate of 15% per annum. At the same time, Tri-Star was able to reduce its own debt levels from $6m (£4.3m) to $1.5m (£1.1m).

·     In March 2018, Karen O’Mahony, non-executive director at the time, was appointed Acting CEO and CFO of Tri-Star to oversee the restructure and transition of the Company. In parallel, the Board of Tri-Star was streamlined to make it more cost effective and efficient. Lavinia Jessup was appointed as Company Secretary for Tri-Star in October 2018.

·     In March 2018, the Board of Tri-Star helped SPMP negotiate a senior debt facility with Alizz Islamic Bank for the amount of Omani Rials 10m (approx. USD $26m) to be used for a combination of project and trade finance. 

·     In August 2018, Steven Din joined SPMP as CEO to lead the plant through hot commissioning and into commercial production.

·     In November 2018, Tri-Star negotiated changes to SPMP’s shareholders agreement which reduced Tri-Star’s potential liability for capex over-run.

·     In December 2018, Tri-Star negotiated the successful sale of the non-core asset Göynük mine in Turkey for a total cash consideration of USD $0.5m (of which $0.1m is due on first product sales), and this deal completed in early 2019.  The sales agreement neutralised any of Tri-Star’s liabilities associated with the mine whilst also allowing room for SPMP to negotiate an offtake agreement on any future production from the mine. These offtake arrangements are currently being negotiated. 

Highlights post year end include:

·     In March 2019, Tri-Star aided SPMP in securing a shareholder loan of $35m with no dilution to Tri-Star shareholders.  As part of this agreement, the shareholders of SPMP have agreed to explore a full range of liquidity and funding options, and to convert the majority of the existing mezzanine loan to equity or interest free equity debt.

·     In April 2019, Karen O'Mahony resigned and was replaced by David Facey as CEO and CFO of the Company. In addition, Mark Wellesley-Wood resigned as a Director and Non-Executive Chairman, and Adrian Collins replaced him as Non-Executive Chairman of the Company.

David Facey, Chief Executive Officer & Chief Financial Officer, said:

“We are pleased that the remedial works to resolve the technical issues announced on 18 February 2019 largely completed, in particular, the installation of a new gas cooling solution and the modifications to the electric furnace successfully have been tested with a variety of calcine inputs. We look forward to SPMP moving to the production phase of processing antimony and gold doré. Financially, we have achieved a healthy reduction in our ongoing running costs, reduced our debt levels and provided financial support to the SPMP Project.”

Notice of Annual General Meeting

The Company also announces that the Annual General Meeting (“AGM”) will be held at the offices of Fladgate LLP, 16 Great Queen Street, London WC2B on 24 July 2019 at 11.00am.

The Notice of AGM will be despatched to shareholders later today and will be available on the Company’s website at www.tri-starresources.com.

The Company’s Annual Report and Consolidated Financial Statements for the year ended 31 December 2018 will also be available on the website.  

CHAIRMAN’S STATEMENT

We are pleased to report and reflect on another year of restructuring and progress for Tri-Star Resources Plc.

Tri-Star holds a 40% interest in SPMP, which has constructed the world’s first antimony and gold processing plant, designed to the highest European Union environmental standards. With the plant completed and ongoing remedial work largely finished, following some first metal false starts in January and February 2019, a more sustainable ramp up is now underway.

The infrastructure for the SPMP roasting facility in Oman to process mixed antimony and gold ores is now in place. In early 2019, the plant produced unrefined antimony metal from intermediate products (crude antimony trioxide and impure antimony trioxide), proving the process chemistry. The chemical composition had a 97.3% purity in its unrefined form, which was a key milestone for both Tri-Star and SPMP. Gold doré and antimony production is expected in the near future.

Whilst there are a number of challenges ahead, we believe that SPMP’s long term prospects remain good with SPMP management identifying a number of opportunities to drive performance once commercial production has been achieved, now targeted for the end of this year. 

Financial Summary

The Group has substantially strengthened its financial position, reducing debt from £4.3m as of year-end 2017 to £1.1m as of year-end 2018, whilst at the same time investing $16.7m (£13.9m) in the form of a mezzanine loan in SPMP.

Regarding the overall result for the year, I am pleased to report that the Group’s current year total comprehensive loss of £2.0m (2017: £6.6m) was much improved, due to the absence of the prior year £3.6m charge on conversion of the convertible secured loan notes which was a major factor in the Group’s prior year total comprehensive loss. Administrative expenses rose to £0.8m (2017: £0.7m), primarily due to termination expenses in order to reduce ongoing Board costs. The Group’s share of losses in SPMP was £0.3m (2017: £0.0m). A dividend payment is not being recommended at this time.

Outlook and Summary

With the Project in Sohar completed, we now look forward to the finalisation of hot commissioning and ramp up of commercial production. We are encouraged by the progress to date, and are optimistic that commercial operation of the SPMP Project in Oman is now within reach.

We are pleased to welcome David Facey to the Board, and I would like to thank Karen O’Mahony for all her hard work over the last 16 months in getting the Group to the position it now is. As previously announced, Mark Wellesley-Wood stood down as Chairman of the Company in April 2019, and it was with enormous regret that I had to report his untimely death a few weeks later. Mark was a great man and his wisdom and support over the years was of huge help to us all. He will be missed, and our thoughts are with his wife and family.

Partnership and sustainability remain our important priorities. We continue to strengthen our partnership with Oman, and our Omani associates. I would like to thank our partners, the management team, our employees and our shareholders for their dedication, commitment and efforts during the year. The Board and I are looking forward to the coming year with confidence.

Adrian Collins

Non-Executive Chairman

strategic report

Introduction

The Company’s principal activities are in the SPMP Project, an antimony and gold production facility. The SPMP Project is based in Sohar, Sultanate of Oman, and is being developed by SPMP, an Omani company in which Tri-Star has a 40% equity interest. The Project is due to become commercially operational in the second half of 2019.

Tri-Star also has antimony exploration licenses in Canada which are held for their potential contribution of feedstock to the SPMP Project.

SPMP Project

Background

The SPMP Project is a commercial facility which will produce high grade antimony ingots, powdered antimony trioxides (“ATO”), gypsum and gold ore bars. Feedstock is sourced internationally and treated by an environmentally friendly roasting process.

The Project remains an attractive prospect for Tri-Star:       

•     Scale: The Project is the largest antimony roaster outside of China and the world’s first clean plant, designed to EU environmental standards. It is designed to have the capacity to produce more than 50,000 oz. of gold per annum and 20,000 tonnes in combined antimony metal and ATO products which represents 12%-15% of average annual world antimony production and will thus establish Oman as a major global producer of antimony.

•     Earnings: The Project is forecast to generate significant revenues, divided approximately 60:40 between antimony and gold. In terms of developing end products, antimony derivatives offer the potential for further margin growth over and above the normal conversion margin. 

•     Technology: The Project applies a proprietary antimony and gold roasting technology that is flexible and sophisticated enough to be able to process many types of grade and impurities.

•     Logistics: The Project will supply value added antimony products to customers across the globe. The location of the Project in the Gulf region provides an excellent centralised logistics route, and access to relatively inexpensive energy and modern infrastructure.

•     Demand for product: Antimony is a rare metal with a range of industrial applications. Amongst other things it is used as an additive to flame retardant compounds, utilised in printed circuit boards, computers and other electronic products. Antimony has consistently ranked highly in European and US risk lists for supply of chemical elements or element groups required to maintain the current economy and lifestyle.

•     Board: SPMP has an experienced and internationally focused Board of Directors who have helped manage the project from inception through to near completion.

Oman joint venture

SPMP was formed in June 2014 to develop and build the Project. Tri-Star has a 40% equity interest in SPMP, with the other joint venture partners being The Oman Investment Fund (“OIF”) (40% equity holder) and DNR Industries Limited, part of Dutco Group in Dubai (20% equity holder).

Project status

In early 2019, the Plant produced unrefined antimony metal from intermediate products (crude antimony trioxide and impure antimony trioxide), proving the process chemistry. The chemical composition had a 97.3% purity in its unrefined form, this was a key milestone for both Tri-Star and SPMP. Gold doré and antimony production is expected in the near future.

Antimony

Currently, the principal use of antimony is in flame retardants as antimony trioxide (“ATO”). ATO is most commonly used as a synergist to improve the performance of other flame retardants such as aluminium hydroxide, magnesium hydroxide and halogenated compounds. ATO is used in this way in many products including plastics, textiles, rubber, adhesives and plastic covers for aircrafts and cars. The largest applications for metallic antimony (metal ingots) are as alloying material for lead and tin and for lead antimony plates in lead-acid batteries. Alloying lead and tin with antimony improves the properties of the alloys which are used in solders, bullets and plain bearings. This use is in decline as the antimony content of typical automotive battery alloys has declined by weight as calcium, aluminium and tin alloys are expected to replace it over time.

An emerging application is the use of antimony in microelectronics.

Refractory Gold

Refractory gold is gold ‘ore’, where the metal is trapped in sulphide lattice structures that conventional processes are unable to extract. The clean antimony roasting technology developed by Tri-Star and sold to SPMP in 2015 has unlocked the potential of these gold resources, estimated to be 30% – 50% of remaining gold in the ground globally.

Other Tri-Star projects

Canada

The Company owns 100% of Tri-Star Antimony Canada. Through this Canadian subsidiary, the Company owns a license to explore the land of a large undeveloped antimony project in Canada (“Bald Hill deposit”). The Bald Hill deposit could become a potential future supplier of feedstock for the SPMP Project.

Turkey

The Company disposed of its non-core asset Göynük mine in Turkey for a total cash consideration of USD $0.5m (of which $0.1m is due on first product sales), which was completed in March 2019.

Financing

Tri-Star announced an Open Offer on 21 December 2017 to raise up to approximately £4.4 million before expenses through the issue of new ordinary shares in the Company at an issue price of 0.01 pence per share. The Open Offer successfully closed on 10 January 2018 having been oversubscribed.

In June 2018 Tri-Star completed a consolidation of its shares whereby every one thousand ordinary shares of 0.005 pence were consolidated into one share of 5 pence each.

In July 2018 Tri-Star completed a placing of 30,232,558 ordinary shares at 43 pence per share raising £13.0m to repay $4.7m (£3.6m) of the $6.0m (£4.6m) loans from the Odey funds plus interest of $0.65m (£0.5m), and to provide further loans of $16.7m (£12.7m) to SPMP, as well as for general working capital.

Result for the year

The results for 2018 reflect the impact of the extinguishment of the Odey Asset Management (“OAM”) convertible loan liability that took place in June 2017. Administration costs rose by 12% in 2018 to £787,000 from £704,000 in 2017.

	2018	2017
Summary Profit and Loss Account	£’000	£’000
Share based payments	(580)	(135)
Administrative expenses	(787)	(704)
Loss from operations	(1,367)	(839)
Share of loss in associate	(306)	(41)
Movement in the fair value of financial asset	293	(705)
Finance expense net	(624)	(1,364)
Loss before extinguishment of debt	(2,004)	(2,949)
Loss on extinguishment of debt	-	(3,637)
Loss before taxation	(2,004)	(6,586)

Share of loss in associate represents Tri-Star’s share of SPMP’s post-tax result for the year. SPMP has not been profitable to date as the SPMP Project is only due to commence commercial operations in H2 2019, with full production forecast for 2020.

In accordance with IFRS 9, the fair value of the mezzanine loan from TSTR to SPMP (the “SPMP Mezzanine Loan”) has been derived using a net present value calculation in which an effective discount rate of 20% has been applied.  The discount rate, being the assumed market rate, has been derived by reference to Tri-Star’s estimated cost of the funding required in order to provide the SPMP Mezzanine Loan. The Mezzanine Loan is assumed to be repaid on the due date (December 2022). It is assumed that there will be no default on these loans and that the conversion discount has no value.

Financial position

At 31 December 2018 the Group had £312,000 (2017: £485,000) in cash, total assets of £18,303,000 (2017: £5,803,000), and total liabilities of £1,336,000 (2017: £4,555,000). As at 30 April 2019, the Group had £220,000 in cash.

Key Performance Indicators (“KPIs”)

At this stage in the Group’s development, the key performance indicator is the loss after tax, given the nature of the Group’s assets and the current development of its operations. This will be reviewed in the forthcoming year.

Safety, health and environmental policies

Tri-Star is committed to meeting international best industrial practice in each jurisdiction in which it operates with respect to human rights, safety, health and environmental (“SHE”) policies. Management, employees and contractors are governed by, and required to comply with, Tri-Star’s SHE policies as well as all applicable international, national federal, provincial and municipal legislations and regulations. It is the primary responsibility of the supervisors and other senior field staff of Tri-Star and its subsidiaries to oversee safe work practices and ensure that rules, regulations, policies and procedures are being followed.

Principal risks and uncertainties

The Board continually reviews the risks facing the Group and Company. The Group is not yet revenue generating. The principal risks and uncertainties facing the Group and Company involve delays to the commissioning and ramp up of the SPMP Project which may lead to higher funding requirements from the SPMP shareholders. Delays can be caused by construction issues, design failures or technological problems. At the same time, as a processing plant, SPMP requires successful partnerships with suppliers of metal ores and with Offtake providers or distributors to buy the plant’s output. The availability of such partners and the terms of engagement may impact plant operations and profitability. The SPMP Project has had recent setbacks and the timing and progress is not under the direct control of the Tri-Star Group. In terms of other more significant but lower probability risks, there is the matter of political risk within Oman, and internationally.

Financial risk management objectives and policies

The Group’s principal financial instruments comprise of cash, loan notes and other financial liabilities. The Group has various other financial instruments such as loans and trade payables, which arise directly from its operations.

It is, and has been throughout the year under review, the Group’s policy that no trading in financial instruments shall be undertaken. The main risks arising from the Group’s financial instruments are liquidity risk, price risk and foreign exchange risk.

Going concern

The Group and Company are not yet revenue generating and are reliant upon funds raised from issuing loans and shares. The holders of the secured loan notes have agreed to extend the term of the notes to 30 June 2020. However, an additional cash requirement of approximately £350,000 in unavoidable running costs was identified based on cash flow forecasts for the period ending 30 June 2020, as prepared by the Directors. The Directors consider that there are a number of options to cover this deficit:

1)   SPMP makes the $2 million (approximately £1.5 million) payment in respect of its acquisition from Tri-Star of the intellectual property (“IP”) of the Project, due on successful commissioning of the plant.

2)   Tri-Star raises further funds by way of an equity or debt placing or a further loan from the OAM Funds.

3)   Tri-Star is due to receive the deferred payment of USD $100,000 from the sale of its Turkish subsidiary on sale of first product, which would reduce the amount required to be raised by a placing or loan.

The Directors are confident that the Group and Company will secure the funds required from one of the above sources, or from a combination of the above sources. Accordingly, the Directors believe that it is appropriate to prepare the financial statements on a going concern basis. However, there is no certainty that they will be able to do so. These matters along with the matter set forth above mean that there is a material uncertainty which may cast significant doubt on the Group’s and the Company’s ability to continue as a going concern and, therefore, that the Group and Company may not be able to realise its assets or discharge its liabilities as they fall due.

Future prospects

We expect the remainder of 2019 to be positive, and Tri-Star will remain focussed on the active management of its 40% interest in SPMP as the Project moves forward into production. We will also remain focused on cutting costs at the Group level in order to maintain a lean operation.

Approval by and signature on behalf of the board

David Facey

Chief Executive Officer & Chief Financial Officer

Enquiries:

Tri-Star Resources plc                                                       

David Facey, Chief Executive Officer             [e-mail] 

Tavistock                                                       Tel: [phone]

(Financial PR)

Charles Vivian                                                 Mobile: [phone]

Gareth Tredway                                              Mobile: [phone]

SP Angel Corporate Finance

(Nomad and Broker)  

Robert Wooldridge / Jeff Keating / Caroline Rowe
Tel: [phone]

finnCap

(Broker)

Christopher Raggett/Scott Mathieson/Camille Gochez
Tel: [phone]

Tri-Star Resources plc

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2018	Notes	2018		2017 (restated)
		£’000		£’000
Share based payments		(580)		(135)
Exploration expenditure and other administrative expenses		(787)		(704)
Total administrative expenses		(1,367)		(839)
Loss from operations		(1,367)		(839)
Share of loss in associate company		(306)		(41)
Movement in the fair value of financial asset		293		(705)
Finance income	2	43		-
Loss on extinguishment of debt		-		(3,637)
Finance cost	2	(667)		(1,364)
Loss before taxation		(2,004)		(6,586)
Taxation	3	48		80
Loss after taxation, and loss attributable to the equity holders of the Company from continuing operations		(1,956)		(6,506)
Loss from discontinued operations		(70)		(104)
Loss after taxation, and loss attributable to the equity holders of the Company		(2,026)		(6,610)
Loss after taxation attributable to:
Non-controlling interest		-		(1)
Equity holders of the parent		(2,026)		(6,609)
Other comprehensive expenditure
Items that will be reclassified subsequently to profit and loss
Exchange loss on translating foreign operations		(14)		(19)
Other comprehensive income for the period, net of tax		(14)		(19)
Total comprehensive loss for the year, attributable to owners of the company		(2,040)		(6,629)
Total comprehensive loss attributable to:
Non-controlling interest		-		(1)
Equity holders of the parent		(2,040)		(6,628)
Loss per share
Basic and diluted loss per share (pence)	4	(2.64)		(45.97)

The 2017 Statement of Comprehensive Income has been restated for the impact of IFRS 9.

Tri-Star Resources plc

Consolidated Statement of Financial Position

At 31 December 2018		2018		2017 (restated)
ASSETS	Notes	£'000		£'000
Non-current
Intangible assets		-		12
Investment in associates		1,136		1,442
Loan to associate held at fair value through profit or loss	5	16,727		3,737
Property, plant and equipment		-		21
		17,863		5,212
Current
Trade and other receivables		105		106
Cash and cash equivalents		312		485
Asset classified as held for sale		23		-
Total current assets		440		591
Total assets		18,303		5,803
LIABILITIES
Current
Trade and other payables		94		77
Short term loans		1,129		4,348
Liabilities classified as held for sale		2		-
Total current liabilities		1,225		4,425
Non-current
Deferred tax liability		111		130
Total liabilities		1,336		4,555
EQUITY
Issued share capital		6,884		3,160
Share premium		44,816		31,347
Share based payment reserve		1,671		1,105
Other reserves		(6,967)		(6,953)
Retained earnings		(29,433)		(27,407)
		16,971		1,252
Non-controlling interest		(4)		(4)
Total equity		16,967		1,248
Total equity and liabilities		18,303		5,803

The 2017 Statement of Financial Position has been restated for the impact of IFRS 9.

Tri-Star Resources plc

Consolidated Statement of Changes in Equity

		Share capital	Share premium	Other reserves	Share based payment reserves	Trans-lation reserve	Retained earnings	Total attributable to owners of parent	Non-control-ling interest	Total equity
		£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 1 January 2017 (restated)		2,601	14,525	(6,156)	1,130	(778)	(20,823)	(9,501)	(3)	(9,504)
Issue of share capital		559	13,062	-	-	-	-	13,621	-	13,621
Share issue costs		-	(54)	-	-	-	-	(54)	-	(54)
Transfer on lapse of options		-	-	-	(25)	-	25	-	-	-
Fair value on extinguishment of loan		-	3,814	-	-	-	-	3,814	-	3,814
Transactions with owners		559	16,822	-	(25)	-	25	17,381	-	17,381
Exchange difference on translating foreign operations		-	-	-	-	(19)	-	(19)	-	(19)
Loss for the year		-	-	-	-	-	(6,609)	(6,609)	(1)	(6,610)
Total comprehensive loss for the period		-	-	-	-	(19)	(6,609)	(6,628)	(1)	(6,629)
Balance at 31 December 2017 (restated)		3,160	31,347	(6,156)	1,105	(797)	(27,407)	1,252	(4)	1,248
Issue of share capital		3,724	13,711	-	-	-	-	17,435	-	17,435
Share issue costs		-	(242)	-	-	-	-	(242)	-	(242)
Share based payments		-	-	-	566	-	-	566	-	566
Transactions with owners		3,724	13,469	-	566	-	-	17,759	-	17,759
Exchange difference on translating foreign operations		-	-	-	-	(14)	-	(14)	-	(14)
Loss for the period		-	-	-	-	-	(2,026)	(2,026)	-	(2,026)
Total comprehensive loss for the period		-	-	-	-	(14)	(2,026)	(2,040)	-	(2,040)
Balance at 31 December 2018		6,884	44,816	(6,156)	1,671	(811)	(29,433)	16,971	(4)	16,967

The 2016 and 2017 Statement of Changes in Equity have been restated for the impact of IFRS 9.

Tri-Star Resources plc

Consolidated Statement of Cashflows

For the year ended 31 December 2018	2018		2017 (restated)
	£'000		£'000
Cash flow from operating activities
Loss after taxation	(2,026)		(6,610)
Amortisation	-		2
Depreciation	12		20
Finance income	(43)		-
Finance cost	667		1,312
Loss from associates	306		41
Movement in the fair value of financial asset	(293)		705
Fees paid by shares	15		135
Loss on extinguishment of loans	-		3,637
Share based payments	565		-
Movement on fair value of derivatives	-		52
Increase in trade and other receivables	(14)		(10)
Decrease in trade and other payables	(1)		(15)
Net cash outflow from operating activities	(812)		(731)
Cash flows from investing activities
Finance income	43		-
Loans made to associate	(12,698)		(4,511)
Net receipts on sale of financial asset held at fair value through profit or loss	-		96
Net cash outflow from investing activities	(12,655)		(4,415)
Cash flows from financing activities
Proceeds from issue of share capital	17,420		1,300
Share issue costs	(242)		(54)
Finance costs	(491)		(498)
Loans repaid	(3,560)		-
New loans	-		4,511
Net cash inflow from financing activities	13,127		5,259
Net change in cash and cash equivalents	(340)		113
Cash and cash equivalents at beginning of period	485		447
Exchange differences on cash and cash equivalents	167		(75)
Cash and cash equivalents at end of period	312		485

The 2017 Statement of Cash Flows has been restated for the impact of IFRS 9.

BASIS OF PREPARATION

The Group financial statements have been prepared under the historical cost convention except for the loan to associate and derivative financial instrument which is at fair value and in accordance with International Financial Reporting Standards as adopted by the European Union (“IFRS”).

The Company’s ordinary shares are quoted on AIM, a market operated by the London Stock Exchange. The Company applies the Companies Act 2006 when preparing its annual financial statements.

The Group financial statements have been prepared under IFRS and the principal accounting policies adopted remain unchanged from those adopted by the Group in preparing its financial statements for the prior year, other than financial assets measured in accordance with IFRS 9. The impact of adopting IFRS 9 has resulted in the loan to associate being measured at fair value through P&L.

In accordance with IFRS 9, the fair value of the mezzanine loan from TSTR to SPMP (the “SPMP Mezzanine Loan”) has been derived using a net present value calculation in which an effective discount rate of 20% has been applied.  The discount rate, being the assumed market rate, has been derived by reference to Tri-Star’s estimated cost of the funding required in order to provide the SPMP Mezzanine Loan.  The Mezzanine Loan is assumed to be repaid on the due date. It is assumed that there will be no default on these loans and that the conversion discount has no value. The adjustment recognised at 1 January 2018 resulted in a total comprehensive loss of £681,000, an increase in investment of associates of £21,000 and a decrease in the carrying value of the loan to associate of £702,000. Additionally, the asset previously held as available-for-sale, which was disposed of in 2017, has been reclassified as a financial asset measured at fair value through profit and loss. The impact of this at 1 January 2017 is a credit to retained earnings of £47,000 and a debit to other reserves of £47,000. The impact in 2017 was a reduction in the profit on the sale of £47,000, and an increase in other comprehensive income of £47,000.

GOING CONCERN

The Group and Company are not yet revenue generating and are reliant upon funds raised from issuing loans and shares. The holders of the secured loan notes have agreed to extend the term of the notes to 30 June 2020. However, an additional cash requirement of approximately £350,000 in unavoidable running costs was identified based on cash flow forecasts for the period ending 30 June 2020, as prepared by the Directors. The Directors consider that there are a number of options to cover this deficit:

1)   SPMP makes the $2 million (approximately £1.5 million) payment in respect of its acquisition from Tri-Star of the intellectual property (“IP”) of the Project due on successful commissioning of the plant.

2)   Tri-Star raises further funds by way of an equity or debt placing or a further loan from the OAM Funds.

3)   Tri-Star is due to receive the deferred payment of USD $100,000 from the sale of its Turkish subsidiary on sale of first product, which would reduce the amount required to be raised by a placing or loan.

The Directors are confident that the Group and Company will secure the funds required from one of the above sources, or from a combination of the above sources. Accordingly, the Directors believe that it is appropriate to prepare the financial statements on a going concern basis. However, there is no certainty that they will be able to do so. These matters along with the matter set forth above mean that there is a material uncertainty which may cast significant doubt on the Group’s and the Company’s ability to continue as a going concern and, therefore, that the Group and Company may not be able to realise its assets or discharge its liabilities as they fall due.

BASIS OF CONSOLIDATION

The Group financial statements consolidate those of the Company and all of its subsidiary undertakings drawn up to the statement of financial position date. Subsidiaries are entities which are controlled by the Group. Control is achieved when the Group has power over the investee, has the right to variable returns from the investee and has the power to affect its returns. The Group obtains and exercises control through voting rights and control is reassessed if there are indications that the status of any of the three elements have changed.

Unrealised gains on transactions between the Company and its subsidiaries are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Amounts reported in the financial statements of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group.

The Group's investment in associated undertakings is accounted for using the equity method. The consolidated income statement includes the Group's share of the associated profits and losses while the Group's share of net assets of associates is shown in the consolidated statement of financial position.

NOTES TO THE FINANCIAL STATEMENTS

1          SEGMENTAL REPORTING

An operating segment is a distinguishable component of the Group that engages in business activities from which it may earn revenues and incur expenses, whose operating results are regularly reviewed by the Group’s chief operating decision maker to make decisions about the allocation of resources and an assessment of performance and about which discrete financial information is available.

The Board considers that the Group comprises only one operating segment, that of mining, development and operations.

In respect of the non-current assets, £Nil (2017: £12,000) arise in the UK, and £17,863,000 (2017: £5,200,000) arise in the rest of the world.

2          FINANCE INCOME AND COSTS

	2018		2017
	£'000		£'000
Finance income
Bank interest	43		-
	43		-

	2018		2017
	£'000		£'000
Finance costs
Interest and fees payable on short term loans	667		136
Movement in derivative	-		52
Interest payable on convertible loan	-		1,176
	667		1,364

3          TAXATION

Unrelieved tax losses of approximately £6.04 million (2017 restated: £5.74 million) are available to offset against future taxable trading profits. The related deferred tax asset arising at 31 December 2018 is £1,147,000 (2017: £1,105,000) and has not been provided on the grounds that it is uncertain when taxable profits will be generated by the Group to utilise those losses. 

The tax credit for the Group for the year comprises:

	2018		2017
	£'000		£'000
Research and development taxation relief	29		62
Deferred tax relief in respect of transition to IFRS	19		18
	48		80

The tax assessed for the period differs from the standard rate of corporation tax in the UK as follows:

	2018		2017 (restated)
	£'000		£'000
Loss before taxation	(2,004)		(6,586)
Loss multiplied by standard rate	(381)		(1,268)
of corporation tax in the UK of 19% (2017: 19.25%)
Effect of:
Expenses not deductible for tax purposes	117		31
Overseas loss not recognised	60		34
R&D tax rebate	(29)		(62)
Interest disallowed	127		952
Unrelieved tax losses	58		233
Total tax credit for year	(48)		(80)

4          LOSS PER SHARE

The calculation of the basic loss per share is based on the loss attributable to ordinary shareholders divided by the weighted average number of ordinary shares in issue during the period.

	2018		2017 (restated)
	£’000		£’000
Loss attributable to owners of the Company after tax	(2,026)		(6,610)
	2018		2017
			(restated)
	Number		Number
Weighted average number of ordinary shares for calculating basic loss per share	76,820,518		14,378,619
	2018		2017 (restated)
	Pence		Pence
Basic and diluted loss per share	(2.64)		(45.97)

Dilutive earnings per share is the same as basic loss per share in each year because the potential shares arising under the share option scheme and share warrants are anti-dilutive. The weighted average number of ordinary shares excludes deferred shares which have no voting rights and no entitlement to a dividend. The prior year number of shares and loss per share have been restated for the share consolidation in line with IAS 33.

5          LOANS RECEIVABLE HELD AT FAIR VALUE THROUGH PROFIT OR LOSS

Loans receivable represent the USD $6 (£4.4) million mezzanine loan which the Company advanced to SPMP as announced on 29 November 2017 and the further amounts of USD $16,700,000 (£12,700,000) advanced during 2018. The principal terms of the loan are as follows:

•           An interest rate of 15% per annum compounded, payable in full on redemption of the loan;

•           Ranks pari passu with the existing mezzanine loans already in place at SPMP;

•           Loan term of five years from December 2017, with SPMP having the option to redeem (with accrued interest to date) from the third anniversary of drawdown.

•           There is an option to convert the loan into shares if it remains outstanding for 12 months after the due date at 80% of the fair value of the shares.

The loan has been measured at fair value. In accordance with IFRS 9, the fair value of the mezzanine loan from TSTR to SPMP (the “SPMP Mezzanine Loan”) has been derived using a net present value calculation in which an effective discount rate of 20% has been applied.  The discount rate, being the assumed market rate, has been derived by reference to Tri-Star’s estimated cost of the funding required in order to provide the SPMP Mezzanine Loan. The Mezzanine Loan is assumed to be repaid on the due date. It is assumed that there will be no default on these loans and that the conversion discount has no value.

6        ANNUAL REPORT AND ACCOUNTS

The financial information set out in this announcement does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006.

The Consolidated Statement of Financial position at 31 December 2018, the Consolidated Statement of Comprehensive Income, Consolidated Statement of Changes in Equity, Consolidated Statement of Cash Flows and associated notes for the year then ended have been extracted from the Group's 2018 financial statements upon which the auditor's opinion is unqualified and does not include any statement under Section 498(2) or (3) of the Companies Act 2006. Whilst the auditor’s opinion is unqualified, their report does contain a material uncertainty relating to going concern, as set out in the going concern paragraph in this announcement.

The accounts for the year ended 31 December 2018 will be posted to shareholders shortly and laid before the Company at the Annual General Meeting. Following publication, a copy of the accounts will also be available on the Company's website (www.tri-starresources.com) in accordance with AIM Rule 26, and will be delivered to the Registrar of Companies in due course.