Results for the year ended 30 September 2016

RNS Number : 1293Y

Starvest PLC

01 March 2017

 

Wednesday 1 March 2017

Starvest Plc ("Starvest" or "the Company")

Results for the year ended 30 September 2016

Chairman's statement

I am pleased to present my annual statement to Shareholders for the year ended 30 September 2016 and the sixteenth since the Company was formed in 2000.

Results for the year

The natural resource sector made an encouraging recovery throughout 2016 and many of our investee companies saw significant share price increases during the period. But at the end of 2016 there remained, we believe, many undervalued opportunities.  It is at this time we can benefit by employing our sector knowledge and market experience in sourcing compelling investments.

Since the end of September 2015 (to 31 Jan 2017) our Trading Portfolio Value has improved by more than 25%.  This is as a result of investments in several new companies combined with a better operating environment for mining companies and improvements in share prices of our portfolio companies.

A sustained recovery in the sector is apparent with continued improvements in our portfolio companies such as Oracle Coalfields (ending at 3.01p on 30th Sept 2016 up from 1.33p on 30th Sept 2015), BMR Group (ending at 5.6p on 30th Sept 2016 up from 4.5p on 30th Sept 2015), Greatland Gold (ending at 0.172p on 30th Sept 2016 up from 0.075p on 30th Sept 2015), Ariana Resources (ending at 1.75p on 30th Sept 2016 up from 0.85p on 30th Sept 2015) and Salt Lake Potash (ending at 25.34p on 30th Sept 2016 up from 5.38p on 30th Sept 2015).

Two companies in the portfolio are still edging towards gold production; we wait with anticipation for continued good news from Ariana Resources plc expecting first production in Q1 2017 and KEFI Minerals plc beginning mine construction in H2 2017.

Improvement in our portfolio value has been reflected in our share price over the past 12 months but our share price remains strikingly undervalued due to a relatively low investor appetite for companies involved in mining focussed investments.  However, we believe interest will follow once markets provide a clearer direction for investors.  During this opportune time, we continue to evaluate very good investment opportunities and look to enhance our portfolio.

Investing policy

The Company's investing policy is reproduced on page 3 of this report and made available on our website, www.starvest.co.uk.

Trading portfolio valuation

A brief review of the major portfolio companies follows from page 4; other investee companies are listed with the websites from which further information may be obtained.

Shareholder information

The Company's shares are traded on AIM.

Announcements made to the London Stock Exchange are available from the Company's website, www.starvest.co.uk where historic reports and announcements are also available.

Annual general meeting

We will hold our annual general meeting at 11.00 am on Thursday 30 March 2017 at the City office of Grant Thornton UK LLP, our Nominated Adviser, when we look forward to meeting those Shareholders able to attend.

Callum N Baxter

Chairman & Chief Executive, 28 February 2017

Investing policy statement

About us

The Board, under the leadership of the previous chairman, Bruce Rowan, had managed the Company as an investment company since January 2002.  Collectively, the Board has significant experience over many years of investing in small company new issues and pre-IPO opportunities in the natural resources and mineral exploration sectors.

Following the appointment as chairman of Callum Baxter, the Board continues with a similar investment strategy, that is, with a focus on the natural resources sector.

Company objective

The Company is established as a source of early stage finance to fledgling businesses, to maximise the capital value of the Company and to generate benefits for Shareholders in the form of capital growth and modest dividends.

Investing strategy 

Natural resources:  Whilst the Company has no exclusive commitment to the natural resources sector, the Board sees this as having considerable growth potential in the medium term.  Historically, investments were generally made immediately prior to an initial public offering, on AIM or ISDX/NEX as well as in the aftermarket.  As the nature of the market has changed since 2008, it is more likely that the future investment portfolio will include a spread of companies that generally have moved beyond the IPO stage but remain in the early stages of identifying a commercial resource and/or moving towards development with the appropriate finance.

Investment size:  Initial investments are for varying amounts but usually in the range of up to £100,000. These companies are invariably not generating cash, but rather they have a constant requirement to raise new equity in order to continue exploration and development.  Therefore, after appropriate due diligence, the Company may provide further funding support and make later market purchases, so that the total investment may be greater than £100,000.

High risk:  The business is inherently high risk and of a cyclical nature dependent upon fluctuations in world economic activity which impacts on the demand for minerals.  However, it offers the investor a spread of investments in an exciting sector, which the Board believes will continue to offer the potential of significant returns for the foreseeable future.

Lack of liquidity:  The investee companies, being small, almost invariably lack share market liquidity, even if they are quoted on AIM, NEX, ASX, or TSX-V.  Therefore, in the early years it is rarely possible to sell an investment at the quoted market price with the result that extreme patience is required whilst the investee company develops and ultimately attracts market interest.  If and when an explorer finds a large exploitable resource, it may become the object of a third party bid, or otherwise become a much larger entity; either way an opportunity to realise cash is expected to follow.

Success rate:  Of the 25 to 30 investments held at any one time, it is expected that no more than five will prove to be 'winners'; from half of the remainder we may expect to see modest share price improvements.  Overall, the expectation is that in time Shareholder returns will be acceptable if not substantial.  Accordingly, the Board is unable to give any estimate of the quantum or timing of returns.

Profit distribution:  When profits have been realised and adequate cash is available, it is the intention of the Board to recommend the distribution of up to half the profits realised.

Other matters:  The Company currently has investments in the following companies, which themselves are investment companies: Equity Investors plc and Equity Resources Limited.

The Company takes no part in the active management of investee companies, although directors of the Company are or have been non-executive directors on the boards of several such companies.  Callum Baxter, Chairman, is also an Executive Director of one such company.

Review of trading portfolio

Introduction

During the year to 30 September 2016, the portfolio comprised interests in the companies commented on below.  In addition, several other active companies were included but not commented on in this review. 

The tough trading and fundraising conditions of the past several years have taken a toll on some of the businesses in which Starvest is invested, although there was some relief during the year so that as at 30 September 2016, the net asset value had increased to £1.27m from a low start at September 2015 of £1.14m. The largest element of the value is in coal, where the value has improved significantly; of the remainder, much is in gold exploration.

Transactions

During the year the Company acquired interests in Salt Lake Potash, and Diamond Corp. and raised cash from modest sales of Alba Mineral Resources plc, Ariana Resources plc, BMR Group plc, Red Rock Resources plc and Regency Mines plc. As is to be expected, we suffered failures during the year the largest being our interest in Nordic Energy plc which was de-listed.

During the year, we received modest interest on short-term loans advanced during the previous year to Goldcrest Resources plc; Goldcrest also made a partial repayment of the capital. 

Trading portfolio valuation

When reporting in previous years, attention was drawn to the continuing adverse conditions in our chosen market for early stage mineral exploration stocks. The year to September 2016 has seen a modest reversal of fortunes.  We trust that we are seeing the beginning of a long awaited recovery.

Against this background, we continue to value our portfolio of investments conservatively at the lower of cost or bid price or lower directors' valuation, where we believe those facts of which we are aware cast doubt on the market prices or where the Company's interest is of such a size as to inhibit selling into a depressed market.  With one exception, we attribute no value to those of our investments that do not enjoy a market quote.  The exception is our holding in Kuwait Energy plc where we use a value provided by that company's broker based on actual trades in the company's stock.

The Directors are satisfied that this is the only significant management estimate made within the financial statements.

This cautious approach has proved to be appropriate in these difficult times; net provisions made in previous years totalling £260,967 were released during the year (2015 additional provision after restatement: £3,100,352).

A review of the leading portfolio companies follows.  As last year, we are not commenting on the smaller companies, although they are listed at the end of the review.

Raising new finance, an essential requirement for any mineral exploration business, has continued to be very tough leading to the heavy dilution of existing shareholders and to some failures.

As the net asset value has increased marginally during the year to 30 September 2016 £1.27m, the Company has achieved a profit of £81,113 as compared with an adjusted loss of £3.315m in the previous year (before restatement: £964,136).  In addition, the Company:

·      has no debt other than a convertible loan from a shareholder and a bank overdraft facility only;

·      continues to believe that it is in a strong position to benefit from an upturn in markets which will come in time;

·      believes that the fundamentals have not changed: the world is becoming more affluent with an increasing number of people expecting refrigerators, motor cars, air conditioning, laptop computers and all other tools of 21st Century living which all require natural resources in order to both produce and power.

Financial Reporting Standards (FRS102)

With effect from 1 October 2015, the Company was required to adopt FRS 102 ("New UK GAAP"). The significant impact of this change concerns the valuation of the Company's investments.  Previously, investments were carried at the lower of cost or current value. However, under the new accounting standard, all investments are marked-to-market. The new standard seeks to replace the previous standards applying in the UK and align reporting towards the international accounting standards that have been evolving over recent years. The alignment is intended to be appropriate and not unduly onerous for the mainly medium sized companies that will be affected.

Company statistics

The Company considers the following statistics to be its Key Performance Indicators (KPIs) and is satisfied with the results achieved in the year given the uncertain market conditions.

		30 September 2016 at BID values as adjusted		30 September 2015 at BID values as adjusted		Change %
·      Trading portfolio value		£1.37m		£1.04m	32%
·      Company asset value net of debt		£1.27m		£1.14m	11%
·      Net asset value per share		3.21p		3.09p	4%
·      Closing share price		2.25p		2.75p	-18%
·      Share price discount to net asset value		30%		11%
·      Market capitalisation		£0.89m		£1.02m	-13%

Since the year end, values have slightly improved; as at the close of business on 20 January 2017, the asset value net of debt was £1.3m.

Review of the current market

We and our investee companies have endured yet another difficult year; extreme short termism leading to lower prices and/or greater volatility has become the norm.  It is clear that many private investors upon whom we and our investee companies have relied for new capital have withdrawn their support or, at best, are awaiting a recognisable upturn in world-wide economic fortunes; this is compounded in that few institutional investors have an appetite for early stage projects.

World markets continue to be volatile. For instance, in the past six years the gold price has been as high as $1,883 per oz. but has also been as low as $1,093; at the present time it is approximately $1,200, not far from where it was two years ago.

Demand for raw materials continues to fluctuate.  Although there may be timing issues, we expect demand to recover to be followed by prices.  Meanwhile, opportunities for junior explorers to realise value and generate cash are few.

In spite of the challenging environment, the strengthening of the US$ has been and will be a factor in determining world commodity prices.

Patience continues to be the key as we await a sustained recovery. 

It is worth reminding ourselves of what we have consistently stated: we are investing in a high risk sector where positive returns are not guaranteed and that we never expect more than five

Interests in Gold exploration

Our interests in gold exploration have improved during the period!

Following a gold price of below $1,100 per ounce in late 2015, we have seen an increase to current levels of $1,200.

Amongst the Starvest investments, there are six with interests in gold exploration. Of these, we comment on three:

Ariana Resources plc (www.arianaresources.com)

Ariana is a United Kingdom-based company engaged in the exploration and development of epithermal gold-silver and porphyry copper-gold deposits in Turkey.

Ariana has a 52-week low of 0.67p and a 52 week high of 2.09p. The firm's market cap is £14.82 million.

Ariana is now in the final stage of its transformation from exploration to production with its SW Turkey project, Kiziltepe mine due to come on line by in Q1 2017 with an initial rate of 150ktpa producing 20koz Au and 100koz Ag a year for the first 8 years of mine life and at $600/oz cash cost.

As well as a first gold pour imminent for the company, it holds advanced exploration areas around the mine site, including a recent purchase of the 1Moz Salinbas Gold Project from Eldorado Gold Corp; it is expected that this will add extra ounces to the mine reserves and extend the life-of-mine beyond 10 years.  In NE Turkey it holds Tavsan with historic PEA reports outlining an open-pittable operation with over 1M indicated and inferred gold equivalent ounces.

In addition to Ariana's main focus on gold exploration and production in Turkey, it also owns an Australian subsidiary, Asgard Metals, which focuses on technology-commodities used in renewable energy sources such as lithium; it holds interests in a hard-rock/pegmatite lithium resource project in the Pilbara region of Western Australia.

Panmure Gordon and Co recommended a conservative 2.71p target price for the company in September 2016.  With an average price of 1.13p over the last year this shows a healthy growth potential for the company and once a first gold pour is achieved will see Ariana well-funded to carry out additional exploration work on both near mine and portfolio projects further afield.

Kefi Minerals plc (www.kefi-minerals.com)

Kefi Minerals is an exploration and development company focused on gold and copper deposits in the Arabian-Nubian Shield. Its main projects are Tulu Kapi in Ethiopia (100% ownership) and the Jibal Qutman project in Saudi Arabia (40% ownership).

The Tulu Kapi project has an ore reserve of 1Moz Au open-pittable at 115,000oz Au per annum over a nine year mine life and has an opex of US$742/oz. Construction of the open pit is scheduled to begin in H2 2017 with production then scheduled for 2018 and a mining licence valid until 2035 with a renewable option for a further 10 year period.

The resource is open at depth, along strike and down plunge. During 2016 Kefi carried out a Preliminary Economic Assessment (PEA) on underground operations with a JORC compliant resource of 1.65Mt Au with an average grade of 6.26g/t.  The PEA calculated a 50,000oz per annum production rate at a 93% recovery rate.  Resources combined, open pit and underground would produce over 150,000oz/year.

The PEA returned an NPV of US$44m based in a gold price of US$1,250 per ounce and when added to the open pit resources this totals an NPV of US$190m with the open pit alone giving an IRR of 33% at US$1,300/oz Au.  Even at a lower gold price of US$1,050/oz IRR is calculated at 15%.

Kefi intends to start underground mining only after the open pit has begun to generate positive cash flow and is repaying development financing.  This will bring the time line of first production from the underground operation to 2020, after a 2 year construction period.

The company also continued development of its Jibal Qutman project (0.73Moz Au resource) in Saudi Arabia with studies into a low-cost heap leach treatment of oxide ore. The next step is to start the Mining Licence application process, whereby they have begun discussions with the regulator for the planned heap leach operation and to complete a full feasibility study.

With the company on track for mine construction and production as well as development of their exploration projects there is plenty of upside over the next two-three years.

Greatland Gold plc (www.greatlandgold.com)

The AIM listed exploration company with licences in Australia has undergone numerous changes to the board during 2016.  Alex Borrelli, who chairs BMR Group, now also chairs Greatland Gold and Callum Baxter has remained on board heading up the technical side of the company.

The Company has five main projects; three situated in Western Australia and two in Tasmania.  All projects are 100% owned by Greatland or Greatland has the right to take 100% ownership.

Greatland is seeking to identify large mineral deposits in areas that have not been subject to extensive exploration previously.  It is widely recognised that the next generation of large deposits will come from such under-explored areas and Greatland is applying advanced exploration techniques to investigate a number of carefully selected targets within its focused licence portfolio.

During the year four of the company's licence areas in Western Australia and Tasmania were redefined in order to concentrate exploration efforts on areas of high priority targets with the most potential for gold and/or nickel resources. Drilling was carried out on 3 of the 4 licences with encouraging results.

A 5th licence area, Havieron, was acquired in Western Australia during Q3 for a small cash sum of just $25,000 plus an issue of shares.  This licence covers 135 sq km of the under-explored Paterson Region just 40km east of Newcrest's Telfer Gold mine (27M oz gold production to date).  With historical data reporting grades of up to 15.45g/t Au and 2.5% Cu this is a welcome addition to the Greatland pipeline of projects and sits in an area attracting increasing interest from major mining companies such as Rio Tinto.

With share placements during 2016, Greatland Gold holds a good cash position to further exploration and development of its existing licences and is also actively investigating a range of new opportunities in precious and strategic metals.

The company has recently entered into an MoU with Metal Tiger Australia Pty Ltd to explore and co-operate on new precious and strategic base metal ventures, primarily focusing on Australia and Asia, either through JV or co-investments, furthering its ability to expand its portfolio of projects in the sector.

The remaining companies are:  Goldcrest Resources plc (www.goldcrestresourcesplc.com), West Africa and Minera IRL Limited (www.minera-irl.com), Peru. 

Interests in energy

We have three companies in the energy sector on which we comment as follows:

Alba Mineral Resources plc (www.albamineralresources.com)

Alba is a UK-based explorer focused on oil and gas, graphite, uranium and base metals with holdings in Greenland (graphite), Mauritania (uranium), UK (oil and gas) and Ireland (base metals).

The Company's UK oil and gas focus is on Horse Hill-1 project where Alba holds the second largest stake in the HHDL consortium developing the project.  The project has been drilled and was granted flow testing to be undertaken which was completed in March 2016, with flow rates close to 1,700bpd. Alba has also now acquired a 5% interest in the Brockham oil and gas project just 5 miles from Horse Hill-1.  Brockham was, until earlier in 2016, a producing oil field but with production halted in order to upgrade the site with the intension of increasing the flow rates and to prepare for drilling of additional target areas.

Their graphite project encompasses a former graphite mine with additional exploration ground around it in Greenland and they have recently acquired the rights to earn up to 70% of this lease and to date have earned a 49% stake.  An EM survey was carried out targeting the extent of graphite resources in the area and also to investigate a possible gold resource in the south, neighbouring the Nalunaq gold mine (340,000oz produced to date).

The base metal project in Ireland has had drilling carried out and a gravity survey and soil sampling were completed in 2016 with the exploration licence extended for a further 2 year period.  The Mauritania uranium project is still in early stage exploration phase and awaiting renewal of the licence.

The company raised £900,000 at 0.2p/share in a placing completed in September 2016.  The share price is up from 0.24p a year ago to 0.34p in mid-November.

Kuwait Energy plc (www.kuwaitenergy.co)

Kuwait Energy, the independent oil and gas company involved in exploration appraisal and development and production of hydrocarbons was established in 2005 and maintains a diverse portfolio of projects in Iraq, Egypt, Yemen and Oman. Of the 10 exploration, development and production assets they hold, Kuwait Energy directly operates seven.

The company has continued with production of Block-9 Faihaa-1 well in Iraq with 3,321 bopd, carried out extensive testing of Block-9 Faihaa-2 well earlier in the year and began production in October at a rate of 5,600 bopd.  Kuwait also signed an Export Oil Sales Agreement with the State Oil Marketing Company (SOMO) putting in place the means by which Kuwait Energy will be paid for services in Block-9.  Kuwait received a payment of US$13.9M for production from Block 9 between Oct 2015 and March 2016 and, under the agreement is set to receive a further US$10M for Q2 2016 production.

The company also successfully obtained a Development Licence from the Egyptian General Petroleum Corporation to develop its Al Jahraa SE-1X well.  Production began in August 2016 with an average rate of 410 bopd.

And while Kuwait has increased its Proven and Probable reserves to 818 mmboe (up 22% on 2015), unfortunately, production at the Yemen licence which was shut down in April of 2015 has not yet been restarted.  Kuwait maintains they are 'operationally-ready when the situation permits'.

With a forward sale agreement recently signed with VITOL for up to US$100M, the company looks well placed to expand its production in both Iraq and Egypt and has a long-term buyer for its Iraq crude oil.

Oracle Coalfields plc (www.oraclecoalfields.com)

As reported last year, Oracle Coalfields holds a JORC compliant resource of 529m tonnes of lignite coal in SE Pakistan and is concentrating on development of the mine for first production by end 2018 with the intension of supplying a new 600MW mine-mouth power plant to supply much needed power to Pakistan.

Work over the last 12 months has concentrated on formalising agreements and contracts for both mine and plant development and securing terms for coal and power prices.

In June the company announced a set coal price at feasibility stage of the Thar Block VI Project, averaging US$60.23/tonne over a 30 year period with an average production of 4M tonnes per annum. This provides a stable price structure for the producing mine, isolated from fluctuation in internationally traded coal and provides a certainty for investors.

It also announced a capex reduction of over US$200M, bringing costs from US$879M down to US$673M with a 70:30 debt equity financing in place for the coal mine.

It was also announced that a key shareholder agreement was signed with new and existing Chinese partners.  Under the plan the Chinese will take 70% equity in the project and act as engineering, procurement and construction contractors for the mine and plant.  They are also leading discussions with Sinosure over financing.

Plans remain in place for the mine to start coal production alongside construction of the power plant with first electricity delivered by late 2018.

With the extension of the guarantee of 20% IRR on power production from the plant and the appointment of experienced board members in international capital markets and asset management in the natural resource sector, the company is well placed to deliver on financial and construction targets over the coming year.

BMR Group plc (www.bmrplc.com)

BMR Group is a new acquisition during the year which has undergone some recent management changes.

A forensic audit under the new management team determined a company holding at the historic Kabwe lead-zinc mine as a priority target for future development and the company's ability to generate revenue.

The mine closed in mid 1990s and tailings tests showed combined grades of approx. 18% lead-zinc JORC compliant resource from a 2004 report: 160,000 tonnes Zn and 260,000 tonnes lead JORC compliant with additional 190,000 tonnes zinc and 79,000 tonnes lead non-JORC compliant calculated.

BMR raised £414,000 at 3p in February 2016, a further £395,000 at 4.25p in April and £620,000 at 6.7p per share in October.  It has approximately $1M in cash.  A $3.5M loan facility was signed in November 2016 for plant construction with the plant commissioning expected in H1 2017 and first sales by H2 2017.  It is expecting an 8-9 year equipment lifespan.  The local work force is experienced in mining and a stable power supply is already in place.

Work has concentrated on developing an acid/brine leach involving zinc cathode technology to extract lead and zinc in the tailings.  Recovery rates are between 80-90% and they are expecting to process 5 tonnes/hour 24/7, with just over 37,000 tonnes per annum running at 80% capacity.  The processing plant equipment is currently being sourced with a total CapEx of $2.7M.  It is expected to be fully operational by early 2017.  ZEMA (environmental licencing) approval is already in place. Production cost is roughly $150/tonne of tailings.  The expectation is that this will reduce in future. 

Interests in Base Metals and Agricultural Products

BMR Group plc (www.bmrplc.com)

In October 2016 the company reported that laboratory scale testing was completed and recoveries of circa 85% zinc and 91% lead were achieved.  It also reported that the sulphate brine leach process recovered approximately 90% of the contained vanadium, currently calculated at 9,000 tonnes and that current market prices for the resulting vanadium pentoxide product stand in excess of US$15,000 per tonne.

In September 2016 the company entered into a finance deal with Africa Compass International Limited for US$5.2M to aid construction and plant processing facilities.  The deal is interest free and repayable 12 months after the final milestone has been reached.

With a new board and management team in place engaged in establishing the processing plant over the next 12 months, BMR looks set to continue to add value to its share price during 2017.

Salt Lake Potash Limited (www.saltlakepotash.com.au)          

The Australia based AIM and ASX listed Salt Lake Potash is a recent addition to the Starvest Portfolio.

Over the past year the company has raised US$12.1M through placements.

The company's main project is Lake Wells targeting Sulphate of Potash (SOP), a fertilizer product rich in potassium.  The capital raising allowed for the development of the Lake Wells project including further drilling, field evaporation trials on bulk brine samples and a scoping study.  The company intends to develop another of its recently acquired projects, Lake Irwin.

Results of the scoping study on Lake Wells were released August 2016 and proved highly encouraging, highlighting the projects potential to produce low cost SOP by solar evaporation of lake brines for domestic (Australia) and international markets.  The Lake Wells Project has the potential to be one of only five large scale salt lake SOP producers globally and with initial cash costs of production estimated at A$185 per tonne this would make the project amongst the lowest cost in the world.

The company is engaging in a pre-feasibility study during which it intends to undertake more detailed hydrological modelling, brine extraction optimisation and further assessment aimed at identifying opportunities to enhance the project economics through capital and operating cost reductions.

With the Lake Wells projects progressing to a pre-feasibility study, further projects in their exploration pipeline and a decent cash reserve this company is poised to continue its share price increase over the coming year.

Sunrise Resources plc (www.sunriseresourcesplc.com)

Sunrise Resources' objectives are to generate cash flow from more advanced projects and to add value through mineral discovery by drill testing more speculative exploration targets.

They are invested in industrial minerals as they believe these to have the greatest potential to achieve an early cash flow as they typically have fewer permitting issues allowing projects to advance to production more quickly than base or precious metals.

The company holds ground in Nevada (USA), Ireland and Australia with commodities ranging from gold, silver and diamonds through to copper, barite and diatomite.

Sunrise has entered into an agreement with EP Minerals (the world's leading diatomite producer) in Nevada in which it retains a significant revenue based royalty payable 6 months from the start of production on its diatomite licence with an initial payment of US$450,000 in June 2017 and 3 years thereafter a payment of US$75,000 and payments of US$150,000 every year thereafter.

Its Baystate Silver project, also in Nevada, produced encouraging results in underground drilling at an historic mine in 2015 as did their Garfield Gold-Copper-Silver Project and Junction Gold project.  During 2016 they formed a dedicated vehicle 'Westgold Inc' specifically to acquire gold and silver projects in Nevada and have so far staked 3 projects in the state targeting Carlin-style mineralisation and has added substantial new ground with 15 new stakes claimed on its pozzolan project.

In Australia; the Cue Diamond project, previously held by De Beers, has recovered encouraging numbers of diamonds from test drilling the kimberlite dykes and the float material, the source of which has yet to be traced.  Its Bakers Gold Project is in an historically well-known gold producing belt and is ready to be drill tested. With a pipeline of projects at drill ready stage and an agreement in place to generate cash flow from its diatomite project.  Sunrise has a good spread of projects which are likely to add value through further exploration. 

Other investments

The remaining non-core investments are available for sale when the conditions are deemed to be right.  These include: Marechale Capital plc (www.marechalecapital.com), and Regency Mines plc (www.regency-mines.com). In addition, there are a number of failed or almost failed ventures to which we attribute no value, although we always hope and seek to crystallise value where possible.

Financial Reporting Standards (FRS102)

To date we have prepared our financial statements under UK Generally Accepted Accounting Standards (UK GAAP).  However, with effect from 1 October 2015 we will be required to adopt FRS 102 ("New UK GAAP"). The significant impact of this change will be on the valuation of the Company's investments.  To date, we have been able to carry all our investments at the lower of cost or current value.  However, under the new accounting standard, we will be required to mark-to-market all our investments. Based on the closing prices at 30 September 2015, the investments (and hence net assets of the group) will not be affected as all investments are carried at a loss to cost price.

Strategic report

Principal activities and business review

Since Bruce Rowan was appointed Chief Executive on 31 January 2002, the Company's principal trading activity was the use of his expertise to identify and, where appropriate, support small company new issues, pre-IPO and on-going fundraising opportunities with a view to realising profit from disposals as the businesses mature in the medium term. The directors expect this to continue in the future under the leadership of Callum Baxter, appointed Chief Executive in September 2015.

The Company's investing policy is stated on page 3.

The Company's key performance indicators and developments during the year are given in the Chairman's statement and in the trading portfolio review, all of which form part of the Directors' report.

Finance Review

As explained in Note 22, the Company has adopted a new financial standard, FRS 102, for the year ended 30 September 2016.  This has required the Company to revalue its trade investments at 1 October 2014 and 30 September 2015 with the effect that the loss on ordinary activities for the year to 30 September 2015 is restated at £3,314,817.

The greater part of this adjustment relates to the investment in Nordic Energy plc which had a book value of £265,000 at 1 October 2014 but which had a market value of £2,800,000.

Key risks and uncertainties

This business carries with it a high level of risk and uncertainty, although the rewards can be outstanding.  The risk arises from the very nature of early stage mineral exploration where there can be no certainty of outcome.  In addition, often there is a lack of liquidity in the Company's trading portfolio, most of which is, or in the case of pre-IPO commitments is expected to be, quoted on AIM or NEX, formerly ISDX, such that the Company may have difficulty in realising the full value in a forced sale.  Accordingly, a commitment is only made after thorough research into both the management and the business of the target, both of which are closely monitored thereafter.  Furthermore, the Company limits the amount of each commitment, both as to the absolute amount and percentage of the target company.

INCOME STATEMENT

FOR THE YEAR ENDED 30 SEPTEMBER 2016

	Year ended 30 September 2016	Year ended 30 September 2015
		(restated)
	£	£
Revenue	117,920	123,891
Cost of sales	(72,670)	(112,916)
Gross profit	45,250	10,975
Administrative expenses	(231,499)	(234,766)
Amounts off against trade investments	(382,594)	(3,178,773)
Amounts written back against trade investments	643,561	78,421
Operating profit/(loss)	74,718	(3,324,143)
Interest receivable	6,395	9,326
Profit/(loss) on ordinary activities before tax	81,113	(3,314,817)
Tax on profit on ordinary activities	-	-
Profit/(loss) for the financial year attributable to Equity holders of the Company	81,113	(3,314,817)
Earnings per ordinary share
Basic & diluted	0.21 pence	(8.93) pence

There are no other recognised gains and losses in either year other than the result for the year.

All operations are continuing.

 

STATEMENT OF FINANCIAL POSITION

30 SEPTEMBER 2016

	30 September	30 September
	2016	2015 (restated)
	£	£
Current assets
Trade and other receivables	71,667	55,040
Trade investments	1,372,616	1,033,096
Cash and cash equivalents	9,856	228,318
Total current assets	1,454,139	1,316,454
Current liabilities
Trade and other payables	(132,227)	(125,155)
Total current liabilities	(132,227)	(125,155)
Net current assets	1,321,912	1,191,299
Capital and reserves
Called up share capital	396,185	394,173
Share premium account	1,514,673	2,118,396
Profit and loss account	(593,946)	(1,326,270)
Equity reserve	5,000	5,000
Total equity shareholders' funds	1,321,912	1,191,299

These financial statements were approved and authorised for issue by the Board of Directors on 28 February 2017.

STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 30 SEPTEMBER 2016

	Share capital	Share premium		Profit and loss account	Total Equity attributable to shareholders
			Equity reserve
	£	£	£	£	£
At 1 October 2014 (restated)	394,173	2,118,396	-	1,988,547	4,501,116
(Loss) for the period	-	-	-	(3,314,817)	(3,314,817)
Total recognised income and expenses for the period	-	-	-	(3,314,817)	(3,314,817)
Equity component of convertible loan		-	5,000	-	5,000
Total contributions by and distributions to owners	-	-	5,000	-	5,000
At 30 September 2015 (restated)	394,173	2,118,396	5,000	(1,326,270)	1,191,299
Profit for the period	-	-	-	81,113	81,113
Total recognised income and expenses for the period	-	-	-	81,113	81,113
Shares issued	25,012	24,488	-	-	49,500
Cancellation of treasury shares	(23,000)	(628,211)	-	651,211	-
Total contributions by and distributions to owners	2,012	(603,723)	-	651,211	49,500
At 30 September 2016	396,185	1,514,673	5,000	(593,946)	1,321,912

Copies of the report and financial statements will be posted to Shareholders on 6 March 2017 and will be available for a period of one month thereafter from the Company at the following address:  67 Park Road, Woking, Surrey GU22 7DH or by email at [e-mail]

Alternatively, from 6 March 2017 the report may be downloaded from the Company's website, www.starvest.co.uk

Enquiries to:

Callum Baxter, Chairman; [e-mail] or John Watkins, Finance Director 07768 512404; [e-mail]

Colin Aaronson or Harrison Clarke - Grant Thornton UK LLP 020 7383 5100.

END

 

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