Final Results for the year ended 31 December 2012

RNS Number : 4359H

Tri-Star Resources PLC

20 June 2013

 



20 June 2013

TRI-STAR RESOURCES PLC

Final Results for the year ended 31 December 2012

Tri-Star Resources Plc ("Tri-Star" or the "Company") (AIM: TSTR), the integrated antimony development company, is pleased to announce its final results for the year ended 31 December 2012.

During the year the Company made significant progress in further developing both its antimony deposit in Goynuk in Turkey and its antimony roaster facility in the Gulf (the "Roaster Project"). Since the year end, the Company also announced a number of additional strategic, financial and operational advancements.

Set out below are highlights for the year to 31 December 2012 and post the year end.

·    Emin Eyi appointed as Managing Director in January 2012, bringing significant additional expertise and drive to the Company's development.

·    GBM Mineral Engineering Consultants Limited ("GBM") published an independent preliminary engineering report and cost benefit analysis of the 20,000 tonne per annum Gulf Based Roaster Project, which concluded that the project was financially viable with a net present value of over US$240 million and an internal rate of return over 40% under GBM's base case assumptions.

·    Subsequent to the year end, Ras Al-Khaimah Holding ("RAK Holding"), a 100% owned subsidiary of Union International Holding Group ("Union"), informed the Company that it had completed and obtained the preliminary land lease agreements, industrial zoning, essential permits for operating export & import licenses, preliminary environmental no objection certificate and secure gas allocation.  Accordingly, in May 2013, the Company issued 300 million new ordinary shares to RAK Holding under the terms of the shareholders' agreement. 

·    In addition, RAK Holding has indicated its intention to exercise its option to increase its interest in the Roaster Project company, Tri-Star Union FZ LLC ("Tri-Star LLC"), to 49.99%, which is expected to occur during July 2013. The Environmental Impact Assessment for the Roaster Project has also been filed with the environmental authorities in Ras Al-Khaimah. 

·    In June 2012, the Company published a geological report on its Goynuk deposit prepared by Behre Dolbear. Based on a new geological model, this identified mineralisation, categorised as an exploration target, of 350,000 tonnes with a grade averaging between 1% and 3% antimony metal.

·    During the year the Company received an environmental permit to commence small scale processing at Goynuk and, subject to concluding ongoing financing discussions, intends to commence small scale mining and processing of the former mine dumps in the first quarter of 2014.

·    Since the year end, the Company has entered into a non-binding letter of intent ("LOI") for the acquisition of Portage Minerals Inc. ("Portage") for an all-share consideration of 1,086 million ordinary shares (valued at approximately £3.04 million based on the Company's current share price) ("Acquisition"), which will bring additional Canadian antimony and gold deposits into the Company. Due diligence on Portage is progressing well.

·    The Company completed a placing during the year to raise gross proceeds of £1.26 million and a further placing completed on 10 May 2013 to raise gross proceeds of £0.5 million.

·    The Company has today completed a private placing of £4.0 million secured convertible bonds due June 2018 ("Convertible Bonds") with Odey European, Inc. ("Odey"). The funds will be used to help provide finance for the Acquisition, a proportion of the Company's share of the Roaster Project and for other working capital purposes.

Enquiries:

Tri-Star Resources Plc Emin Eyi, Managing Director Brian Spratley, Technical Director	Tel: [phone] Tel:[phone]
Strand Hanson Limited (Nomad) James Harris / Richard Tulloch	Tel: [phone]
SP Angel Corporate Finance LLP (Joint Broker) Robert Wooldridge	Tel: [phone]
Keith, Bayley, Rogers & Co Limited (Joint Broker) Simon Frost / Brinsley Holman	Tel: [phone]

Chairman's Statement

I am pleased to present this report outlining the achievements of the Company during 2012 and the further progress made since the year end towards achieving the Company's strategy to be an environmentally compliant, vertically integrated antimony producer.

Throughout 2012, the Company continued to progress the Roaster Project. The GBM report published in February 2012 has confirmed its technical and financial viability and the majority of the engineering design work has now been completed. Negotiations continue with a number of interested parties in relation to the funding of the Gulf Based Roaster Project and discussions have commenced with contractors in relation to the construction of the roaster. The target is to commence site preparation and construction of the facility during 2014 with the aim of commissioning the Roaster Project by 2016.

We welcome the continued support and commitment of RAK Holding, as evidenced by their notice to exercise an option to increase its holding in Tri-Star LLC from 10% to 49.99%, which is expected to occur during July 2013.  In addition, under the Tri-Star LLC shareholders agreement, the Company issued 300 million ordinary shares in the Company to RAK Holding in May 2013 in consideration for it having secured various operating licences and permits relating to the Roaster Project and the full Environmental and Social Impact Assessment has recently been submitted to the Ras Al-Khaimah Environmental Protection and Development Authority.

We have also taken an important step to secure feed-stock for the Roaster Project through the proposed acquisition of Portage, which is subject to, inter alia, completion of due diligence and formal documentation and the requisite shareholder approvals being obtained.  Together with the Company's existing antimony deposit in Goynuk, Turkey, and its Canadian exploration permits, the Acquisition creates a strong nexus of production for the future to feed the Roaster Project with high quality antimony concentrates.

Having secured a small scale operating permit in the year, the Company has taken the decision to commence dump material treatment at its Goynuk mine in Turkey ahead of the roaster completion. Subject to financing, it is intended that operations will commence in the first quarter of 2014.

I am also pleased to confirm that the Company has secured additional funding through a private placing of Convertible Bonds with Odey. The Convertible Bonds will be drawn down in two tranches, with the first £1.33 million being drawn down immediately and the balance to be drawn down by 31 January 2014.  Further details of the terms of the Convertible Bonds are set out in the Managing Director's Report. The Convertible Bonds issue provides the Company with significant additional financial stability and strength and the proceeds will be used to complete the Acquisition and meet other working capital requirements, and in conjunction with other funding sources, to finance the Company's share of the Roaster Project.

In the year to 31 December 2012, the Company recorded a loss before and after tax of £2,351,000 (year ended 31 December 2011 loss after tax £2,538,000).

Share based payments (non cash item) amounted to £846,000, compared with £572,000 in the previous year and the exploration expenditure and other administrative expenses were £1,487,000 in the period compared with £1,925,000 the previous year.  The board of directors of the Company (the "Board") does not recommend that a dividend is paid at this time.

I would like to thank the management team and other employees for their efforts and successes over the last year. The Company has made very substantial progress, both in developing the Roaster Project and in its upstream development, and is now poised to take advantage of this by securing the roaster funding, completing the Portage acquisition and commencing small scale mining in Turkey. It promises to be a busy next 12 months.

Adrian Collins

Chairman

19 June 2013

Managing Director's Statement

Our strategy is to become an environmentally compliant, vertically integrated antimony production company. I am pleased to report on the Company's achievements towards this strategy since my appointment as Managing Director in January 2012.

Turkey

In January 2012, the Company reported the results of drilling conducted at its Goynuk mine in Turkey over the prior winter months, with emphasis on extensions to the east and the known mine workings. These were reported in February and included some impressive intercepts, including hole GOY 11065 that encountered 7.1% antimony ("Sb") over 4.7 metres.

Metallurgical testwork was conducted by independent consultants on the Goynuk mineralisation and overall processing recoveries of 93% were reported, producing a concentrate grade of 61% Sb using both gravity and froth flotation.

In June 2012, the Independent Geological Report from Behre Dolbear was published. The report described a new geological model for the Goynuk deposit. This was a VMS Kuroko style deposition model. It identified mineralisation classified as an exploration target of 350,000 tonnes with grades from 1% Sb to 3% Sb. The model opened up areas of interest around the mine not previously tested as areas for future exploration activity.

The Company has also acquired freehold land of 0.8 hectares adjacent to its Goynuk mine and plans to construct a small scale processing facility to treat the existing surface dump material. The Company has a permit to treat 14,400 tonnes per annum of ore from dumps which contain approximately 75,000 tonnes of material grading on average 2.25% Sb. The Company is negotiating a pre export production loan facility from an industrial trader in order to fund the start up of this small scale production. Subject to funding, the plant is expected to be in operation by the end of the first quarter of 2014.

Gulf Based Roaster Project in UAE

In February 2012 the Company received the GBM independent preliminary Engineering Report and Cost Benefit Analysis on the proposed 20,000 tonne per annum name plate capacity antimony Gulf Based Roaster Project. The report estimated a capital cost of US$60 million for the facility and, under the base case assumptions, indicated an internal rate of return of 41%, a net present value of US$241.5 million and full year earnings before interest depreciation and tax of US$59.6 million. Since then, the technical team has been advancing the engineering and design of the project in order to bring it to the stage of engaging with qualified engineering, procurement and construction contractors to build and commission the plant.

In May 2013, the Company completed and submitted the Roaster Project's Environmental and Social Impact Assessment to the Environmental Protection and Development Authority in Ras Al-Khaimah in the UAE. The Company prepared the report based on the base line data collected from the site in the Al Ghail Industrial park.

Subsequent to the year end, RAK Holding, the Company's partner on the Roaster Project, informed the Company that it had completed and obtained the preliminary land lease agreements, industrial zoning, essential permits for operating export & import licenses, preliminary environmental no objection certificate and secure gas allocation. Accordingly, in May 2013, the Company issued 300 million new ordinary shares to RAK Holding under the terms of the shareholders' agreement in consideration for these services.

RAK Holding also notified the Company that it wished to exercise its option to increase its holding in the capital of the Roaster Project company, Tri-Star LLC, from 10% to 49.99%.  In addition, RAK Holding has the right to appoint a representative to the Tri-Star Board.

The Company has held progressive discussions with potential investors in the Gulf to secure funding for the Roaster Project. These discussions are on-going.

Proposed Acquisition of Portage

In May 2013, the Company announced that it had entered into a LOI for the Acquisition of Portage, which is to be effected through the issue of 1,086 million ordinary shares upon completion of the Acquisition. At the current share price for the Company, this implies an acquisition consideration of approximately £3.04 million. The Acquisition is, inter alia, conditional upon the completion of due diligence, which is progressing well, and formal documentation and the requisite shareholder approvals being obtained.

Portage is a mineral exploration corporation which explores for antimony and gold in Eastern Canada. The common shares of Portage currently trade on the Canadian National Stock Exchange ("CNSX") under the trading symbol "RKX".

Portage owns the Bald Hill deposit, which is one of the largest undeveloped antimony projects in Canada. It is estimated to contain 30,000 to 40,000 tonnes of contained antimony. In addition, Portage has interests in two gold deposits, both of which are NI 43-101 compliant. The first of these, Golden Pike, which is 100% owned by Portage, has 66,300 ounces of gold at an average grade of 9.6 grams per tonne ("g/t") and the second, Golden Ridge, in which Portage has a 60% interest, has 520,200 ounces of gold at an average grade of 0.91 g/t. Both of these gold projects are viewed as non-core by the Company.

Pursuant to the LOI, the Company has agreed to pay an exclusivity fee of CDN$50,000 (£32,000) immediately and then from 1 June 2013, to make monthly exclusivity payments of CDN$25,000 (£16,000) to Portage. A further payment of CDN$85,000 (£54,000), which will be satisfied by the issue of 14 million ordinary shares to Portage, will be made upon completion of the Acquisition. Exclusivity has been extended to 31 July 2013 to allow the Company to complete the required due diligence and enter into a binding agreement. Should Portage complete an equivalent transaction to the Acquisition with another party, Portage has agreed to pay Tri-Star a break fee of CDN$500,000 (£318,000).

Upon completion, Tri-Star will assume the liabilities of Portage, which are currently expected to consist of short term liabilities of CDN$400,000 (£255,000) and long-term liabilities of CDN$660,000 (£420,000). Under the terms of the LOI, on completion of the Acquisition, the Company is required to make a cash contribution of US$300,000 (£192,000) to satisfy short term liabilities together with issuing a further 20 million ordinary shares to Portage to satisfy additional short term liabilities of CDN$100,000 (£64,000).

On Completion of the Acquisition, it is intended that Ken Hight, Chairman and CEO of Portage, will join the Board of the Company as an Executive Director.

Funding

The Company has today completed a private placing of £4.0 million Convertible Bonds with Odey. The Convertible Bonds will be drawn down in two tranches, with the first £1.33 million being drawn down immediately and the balance to be drawn down by 31 January 2014. The Convertible Bonds carry a non-cash coupon of 15% per annum which compounds half yearly and are secured by way of a guarantee and debenture granted by Tri-Star Antimony Canada, Inc., the Company's wholly owned subsidiary which holds all of the Company's Canadian assets which, subject to completion of the Acquisition, will also include the assets of Portage.

The Convertible Bonds will be issued and redeemable at 100% of their principal amount plus accrued interest and, unless previously redeemed, converted or cancelled, will mature on the fifth anniversary of the issue of the Convertible Bonds in June 2018.

The Convertible Bonds are convertible at 100% of their principal amount plus accrued interest at the holder's option into ordinary shares at a conversion price which is fixed at the time of conversion at a 10% discount to the lower of:

(i)         the latest equity funding round completed prior to the issue of the conversion notice; and

(ii)        any equity funding round completed within 10 business days following the issue of the conversion notice.

The Company also completed two equity placings. In July 2012 it raised £1.26 million by way of the issue of 223,532,743 ordinary shares at a price of 0.565 pence and in May 2013 it raised a further £0.5 million through a placing of 166,666,670 ordinary shares at a price of 0.30 pence.

These fundings place the Company in a strong financial position and will assist it in completing the funding for the Roaster Project, closing the Portage Acquisition and providing general working capital.

Other

In July 2012, the Company signed a technical agreement with RDP Singapore with respect to certain antimony projects in Myanmar (Burma), initially providing technical expertise to RDP Singapore which is performing geological and metallurgical work for these antimony projects.

Myanmar has a very rich mineral record but is relatively under explored.  The geology of the region has the potential to host world class metal deposits and there are over 30 known antimony occurrences recorded in the country. This technical collaboration and discussions with other antimony deposit owners around the world are on-going.

The Company has launched an antimony project portal www.antimonyworld.com which currently has recorded over 300 antimony occurrences and includes detailed property name, commodity type and location of over 125 antimony deposits worldwide.

Future prospects

Going forward, we expect the remainder of 2013 and 2014 to be a period of significant advancement for the Company in its ambitions of becoming an integrated producer of antimony.

Emin Eyi

Managing Director

19 June 2013

CONSOLIDATED statement of comprehensive income

For the year ended 31 December 2012

		2012		2011
		£'000		£'000
Share based payments		(846)		(572)
Amortisation of intangible assets		(19)		(44)
Exploration expenditure and other administrative expenses		(1,487)		(1,925)
Total administrative expenses and loss from operations		(2,352)		(2,541)
Finance income		1		4
Finance cost		-		(1)
Loss before and after taxation, and loss attributable to the equity holders of the Company		(2,351)		(2,538)
Other comprehensive income
Exchange differences on translating foreign operations		(6)		113
Other comprehensive (loss)/income for the period, net of tax
		(6)		113
Total comprehensive loss for the year, attributable to owners of the company		(2,357)		(2,425)
Loss per share
Basic and diluted loss per share (pence)		(0.05)		(0.05)

consolidated statement of changes in equity

For the year ended 31 December 2012

		Share capital	Share premium	Other reserves	Share based payment reserves	Translation reserve	Retained earnings	Total equity
		£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 1 January 2011		2,415	5,299	(6,156)	241	(10)	(1,655)	134
Share based payments		-	-	-	572	-	-	572
Issue of share capital		14	2,694	-	-	-	-	2,708
Share placing costs		-	(80)	-	-	-	-	(80)
Transactions with owners		14	2,614	-	572	-	-	3,200
Exchange difference on translating foreign operations		-	-	-	-	113	-	113
Loss for the year		-	-	-	-	-	(2,538)	(2,538)
Total comprehensive loss for the period		-	-	-	-	113	(2,538)	(2,425)
Balance at 31 December 2011		2,429	7,913	(6,156)	813	103	(4,193)	909
Share based payments		-	-	-	846	-	-
Issue of share capital		12	1,252	-	-	-	-	1,264
Share placing costs		-	(47)	-	-	-	-	(47)
Transactions with owners		12	1,205	-	846	-	-	1,217
Exchange difference on translating foreign operations		-	-	-	-	(6)	-	(6)
Loss for the period		-	-	-	-		(2,351)	(2,351)
Total comprehensive loss for the period		-	-	-	-	(6)	(2,351)	(2,357)
Balance at 31 December 2012		2,441	9,118	(6,156)	1,659	97	(6,544)	615

consolidated statement of FINANCIAL POSITION

At 31 December 2012

		31 December 2012		31 December 2011
ASSETS		£'000		£'000
Non-current
Intangible assets		23		41
Property, plant and equipment		42		59
		65		100
Current
Cash and cash equivalents		601		812
Trade and other receivables		120		146
Total current assets		721		958
Total assets		786		1,058
LIABILITIES
Current
Trade and other payables		171		149
Total liabilities		171		149
EQUITY
Issued share capital		2,441		2,429
Share premium		9,118		7,913
Share based payment reserve		1,659		813
Other reserves		(6,059)		(6,053)
Retained earnings		(6,544)		(4,193)
Equity attributable
to equity holders of the Company		615		909
Total equity and liabilities		786		1,058

consolidated statement of cash flows

For the year ended 31 December 2012

		Year ended		Year ended
		31 December 2012		31 December 2011
		£'000		£'000
Cash flow from operating activities
Continuing operations
Loss after taxation		(2,351)		(2,538)
Amortisation of intangibles		19		44
Depreciation		23		19
Finance income		(1)		(4)
Finance cost		-		1
Share based payments		846		572
Decrease/(increase) in trade and other receivables		26		(87)
Increase/(decrease) in trade and other payables		22		(69)
Net cash outflow from operating activities		(1,416)		(2,062)
Cash flows from investing activities
Finance income		1		4
Purchase of intangibles		-		(56)
Sale of property, plant and equipment		-		1
Purchase of property, plant and equipment		(3)		(28)
Net cash outflow from investing activities		(2)		(79)
Cash flows from financing activities
Proceeds from issue of share capital		1,264		2,708
Share issue costs		(47)		(80)
Finance cost		-		(1)
Amounts paid to former shareholders		-		(150)
Repayment of loans		-		(15)
Net cash inflow from financing activities		1,217		2,462
Net change in cash and cash equivalents		(201)		321
Cash and cash equivalents at beginning of period		812		363
Exchange differences on cash and cash equivalents		(10)		128
Cash and cash equivalents at end of period		601		812

1        ACCOUNTING POLICIES

Basis of Preparation

The group financial statements have been prepared under the historical cost convention 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 principal accounting policies of the Group, which have been applied consistently, are set out in the annual report and financial statements.

Going concern and funding

The Group has not earned revenue during 2012 as it is still in the exploration and development phases of its business. Therefore, the operations of the Group are currently being financed from funds which the Company raises from private and public placings of its shares, convertible bonds and other finance sources.

The Company has today completed a private placing of £4.0 million Convertible Bonds with Odey. The Convertible Bonds will be drawn down in two tranches, with the first £1.33 million being drawn down immediately and the balance to be drawn down by 31 January 2014. The Convertible Bonds carry a non-cash coupon of 15% per annum which compounds half yearly and are secured by way of a guarantee and debenture granted by Tri-Star Antimony Canada, Inc., the Company's wholly owned subsidiary which holds all of the Company's Canadian assets which, subject to completion of the Acquisition, will also include the assets of Portage.

The Convertible Bonds will be issued and redeemable at 100% of their principal amount plus accrued interest and, unless previously redeemed, converted or cancelled, will mature on the fifth anniversary of the issue of the Convertible Bonds in June 2018.

The Convertible Bonds are convertible at 100% of their principal amount plus accrued interest at the holder's option into ordinary shares at a conversion price which is fixed at the time of conversion at a 10% discount to the lower of:

(i)         the latest equity funding round completed prior to the issue of the conversion notice; and

(ii)        any equity funding round completed within 10 days of the conversion notice.

The Company also completed two equity placings. In July 2012 it raised £1.26 million by way of the issue of 223,532,743 ordinary shares at a price of 0.565 pence and in May 2013 it raised a further £0.5 million through a placing of 166,666,670 ordinary shares at a price of 0.30 pence.

The Directors have prepared cash flow forecasts incorporating the Convertible Bond and share issue detailed above, for the period ending 30 June 2014. The forecasts identify unavoidable third party running costs of the Group as well as planned development expenditures and demonstrate that the Group has sufficient finance facilities available to allow it to continue in business for a period of at least twelve months from the date of approval of these financial statements. Accordingly, the accounts have been prepared on a going concern basis.

2        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 assessment of performance and about which discrete financial information is available.

The chief operating decision maker has defined that the Group's only operating segment during the period is mining.

The Group has not generated any revenues from external customers during the period.

In respect of the non-current assets, £14,000 (2011: £21,000) arise in the UK, and £51,000 (2011: £79,000) arise in the rest of the world.

3        Taxation

Unrelieved tax losses of approximately £3.38 million (2011: £2.05 million) remain available to offset against future taxable trading profits.  The unprovided deferred tax asset at 31 December 2012 is £838,000 (2011: £513,000) which 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 assessed for the period differs from the standard rate of corporation tax in the UK as follows:

	2012		2011
	£'000		£'000
Loss before taxation	(2,351)		(2,538)
Loss multiplied by standard rate	(576)		(673)
of corporation tax in the UK of 24.5% (2011: 26.5%)
Effect of:
Expenses not deductible for tax purposes	1		177
Capital allowances in excess of depreciation	-		(5)
Overseas loss not recognised	250		394
Unrelieved tax losses	325		107
Total tax charge for year	-		-

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 shares in issue during the period.

	2012		2011
	£'000		£'000
(Loss) attributable to owners of the Company after tax	(2,351)		(2,538)
	2012		2011
	Number		Number
Weighted average number of ordinary shares for calculating basic loss per share	5,133,509,488		4,962,123,165
	2012		2011
	Pence		Pence
Basic and diluted loss per share	(0.05)		(0.05)

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 decrease the basic loss per share, thus being anti-dilutive.

The weighted average number of ordinary shares excludes deferred shares which have no voting rights and no entitlement to a dividend.

5        share capital

	31 December 2012		31 December 2011
	£'000		£'000
Allotted, issued and fully paid
1,363,925,475 deferred shares of 0.1p (2011: 1,363,925,475)	1,364		1,364
856,547,275 deferred shares of 0.095p (2011: 856,547,275)	814		814
5,256,880,018 ordinary shares of 0.005p (2011: 5,033,347,275)	263		251
	2,441		2,429

Following the issue of the 223,532,743 ordinary shares of 0.005 pence each ("Ordinary Shares") announced on 17 July 2012 there were 5,256,880,018 Ordinary Shares in issue (each of which are voting shares) as at 31 December 2012.

Each Ordinary Share issued on 29 March 2011 had a three-year half warrant attached to it which is exercisable at 2 pence, and a three year half warrant attached to it which is exercisable at 3 pence.  The warrants will not be admitted to trading on AIM.

The deferred shares have no voting rights and are not eligible for dividends.

6        publication of non-statutory accounts

The financial information set out in this preliminary 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 2012, 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 2012 financial statements upon which the auditor's opinion is unqualified and does not include any statement under Section 498 of the Companies Act 2006.

The accounts for the year ended 31 December 2012 will be posted to shareholders shortly and laid before the Company at the Annual General Meeting, which will be held on 23 July 2013 at 11.00 a.m. at the offices of Fladgate LLP, 16 Great Queen Street, London, WC2B 5DG.  Copies will also be available on the Company's website (www.tri-starresources.com) in accordance with AIM Rule 26.

 

END

 

 

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