TIDMTSTR
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 YEARED 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 GBP4.4m 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 GBP13.0m 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 (GBP12.7m) 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 (GBP4.3m) to $1.5m (GBP1.1m).
· 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 GBP4.3m as of year-end 2017 to GBP1.1m as of year-end 2018, whilst at the same
time investing $16.7m (GBP13.9m) 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 GBP2.0m (2017: GBP6.6m) was much
improved, due to the absence of the prior year GBP3.6m 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 GBP0.8m
(2017: GBP0.7m), primarily due to termination expenses in order to reduce ongoing
Board costs. The Group's share of losses in SPMP was GBP0.3m (2017: GBP0.0m). 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 GBP4.4 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 GBP13.0m to repay $4.7m (GBP3.6m) of the $6.0m (GBP4.6m)
loans from the Odey funds plus interest of $0.65m (GBP0.5m), and to provide
further loans of $16.7m (GBP12.7m) 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 GBP787,000 from GBP704,000 in 2017.
2018 2017
Summary Profit and Loss Account GBP'000 GBP'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 GBP312,000 (2017: GBP485,000) in cash, total
assets of GBP18,303,000 (2017: GBP5,803,000), and total liabilities of GBP1,336,000
(2017: GBP4,555,000). As at 30 April 2019, the Group had GBP220,000 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 GBP350,000 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 GBP1.5 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 ceo@tri-starresources.com
Tavistock Tel: +44 (0) 20
7920 3150
(Financial PR)
Charles Vivian Mobile: +44 (0)
7977 297 903
Gareth Tredway Mobile: +44 (0)
7785 974 264
SP Angel Corporate Finance
(Nomad and Broker)
Robert Wooldridge / Jeff Keating / Caroline Rowe
Tel: +44 (0) 20 3470 0470
finnCap
(Broker)
Christopher Raggett/Scott Mathieson/Camille Gochez
Tel: +44 (0)20 7220 0500
Tri-Star Resources plc
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2018 Notes 2018 2017
(restated)
GBP'000 GBP'000
Share based payments (580) (135)
Exploration expenditure and other (787) (704)
administrative expenses
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 293 (705)
asset
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 (1,956) (6,506)
to the equity holders of the Company from
continuing operations
Loss from discontinued operations (70) (104)
Loss after taxation, and loss attributable (2,026) (6,610)
to the equity holders of the Company
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 (14) (19)
operations
Other comprehensive income for the period, (14) (19)
net of tax
Total comprehensive loss for the year, (2,040) (6,629)
attributable to owners of the company
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 GBP'000 GBP'000
Non-current
Intangible assets - 12
Investment in associates 1,136 1,442
Loan to associate held at fair 5 16,727 3,737
value through profit or loss
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 2 -
sale
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 Share Other Share Trans-lation Retained Total Non-control-ling Total
capital premium reserves based reserve earnings attributable interest equity
payment to owners of
reserves parent
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1 2,601 14,525 (6,156) 1,130 (778) (20,823) (9,501) (3) (9,504)
January 2017
(restated)
Issue of share 559 13,062 - - - - 13,621 - 13,621
capital
Share issue - (54) - - - - (54) - (54)
costs
Transfer on - - - (25) - 25 - - -
lapse of
options
Fair value on - 3,814 - - - - 3,814 - 3,814
extinguishment
of loan
Transactions 559 16,822 - 17,381 -
with owners - (25) 25 17,381
Exchange - - - - (19) - (19) - (19)
difference on
translating
foreign
operations
Loss for the - - - - - (6,609) (6,609) (1) (6,610)
year
Total (19) (6,609) (6,628) (1) (6,629)
comprehensive - - - -
loss for the
period
Balance at 31 3,160 31,347 (6,156) 1,105 (797) (27,407) 1,252 (4) 1,248
December 2017
(restated)
Issue of share 3,724 13,711 - - - - 17,435 - 17,435
capital
Share issue - (242) - - - - (242) - (242)
costs
Share based - - - 566 - - 566 - 566
payments
Transactions 3,724 13,469 566 - 17,759 -
with owners - - 17,759
Exchange - - - - (14) - (14) - (14)
difference on
translating
foreign
operations
Loss for the - - - - - (2,026) (2,026) - (2,026)
period
Total (14) (2,026) (2,040) - (2,040)
comprehensive - - - -
loss for the
period
Balance at 31 6,884 44,816 (6,156) 1,671 (811) (29,433) 16,971 (4) 16,967
December 2018
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)
GBP'000 GBP'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 (293) 705
asset
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 - 96
held at fair value through profit or loss
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 485 447
period
Exchange differences on cash and cash 167 (75)
equivalents
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 GBP681,000, an increase in investment of associates
of GBP21,000 and a decrease in the carrying value of the loan to associate of GBP
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 GBP47,000 and a debit to other reserves of GBP
47,000. The impact in 2017 was a reduction in the profit on the sale of GBP
47,000, and an increase in other comprehensive income of GBP47,000.
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 GBP350,000 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 GBP1.5 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, GBPNil (2017: GBP12,000) arise in the UK, and
GBP17,863,000 (2017: GBP5,200,000) arise in the rest of the world.
2 FINANCE INCOME AND COSTS
2018 2017
GBP'000 GBP'000
Finance income
Bank interest 43 -
43 -
2018 2017
GBP'000 GBP'000
Finance costs
Interest and fees payable on short term 667 136
loans
Movement in derivative - 52
Interest payable on convertible loan -
1,176
667 1,364
3 TAXATION
Unrelieved tax losses of approximately GBP6.04 million (2017 restated: GBP5.74
million) are available to offset against future taxable trading profits. The
related deferred tax asset arising at 31 December 2018 is GBP1,147,000 (2017: GBP
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
GBP'000 GBP'000
Research and development taxation relief
29 62
Deferred tax relief in respect of 19 18
transition to IFRS
48 80
The tax assessed for the period differs from the standard rate of corporation
tax in the UK as follows:
2018 2017
(restated)
GBP'000 GBP'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)
GBP'000 GBP'000
Loss attributable to owners of the Company (2,026) (6,610)
after tax
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 (GBP4.4) million mezzanine loan which the
Company advanced to SPMP as announced on 29 November 2017 and the further
amounts of USD $16,700,000 (GBP12,700,000) 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.
END
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