TIDMTSTR
TRI-STAR RESOURCES PLC
("Tri-Star" or the "Company")
30 September 2019
Interim Results for the six month period ended 30 June 2019
Tri-Star (AIM: TSTR), the mining and minerals processing company, is pleased to
announce its unaudited results for the six months ended 30 June 2019.
Highlights:
* SPMP antimony and gold production facility in the Sultanate of Oman Plant
commissioned
* First antimony metal produced at 99.11% which is approaching commercial
grades of 99.65%
* First gold doré ingots produced
* Ramp up expected to be completed by Q3 2020
* Targeting in excess of 50,000 oz of gold and 20,000 tonnes in combined
antimony metal and antimony trioxide ("ATO") per annum
* Supply and offtake agreement discussions ongoing with international
entities and companies
* SPMP financing progressing
* Tri-Star financials improving:
* Profit before tax of GBP422k (H1 2018: loss before tax of GBP1,159k)
* On-going administrative expenses down 51% to GBP328k (H1 2018: GBP668k)
* Net assets increased 270% to GBP17.8m (30 June 2018: GBP4.9m) reflecting the
increase in the SPMP loan
Adrian Collins, Chairman commented;
"I am pleased with the progress that SPMP has made during the first half of the
year reaching two milestones: the production of antimony metal, albeit just
below commercial grade, and gold doré at commercial grade although in limited
quantities to date. Following the expected completion of the SPMP funding, I
expect SPMP to move through a gradual ramp up to be completed during Q3 next
year. I am confident that Steven Din and his team have the experience and the
drive to achieve this."
Chairman's Statement:
During the period, Tri-Star's principal activity continued to be its investment
in an antimony and gold production facility in the Sultanate of Oman (the "SPMP
Project" or the "Project") which is being developed by Strategic & Precious
Metals Processing LLC ("SPMP"), an Omani company in which Tri-Star has a 40%
equity interest.
The SPMP Project is the largest antimony roaster outside of China and the
world's first 'Clean Plant', designed to EU environmental standards. It has a
targeted capacity to produce in excess of 50,000 oz. of gold and 20,000 tonnes
in combined antimony metal and antimony trioxide ("ATO") per annum. All joint
venture partners in the SPMP Project, being us, The Oman Investment Fund
("OIF") (40% equity holder) and DNR Industries Limited, part of Dutco Group in
Dubai (20% equity holder), remain supportive and committed to achieving
commercial production.
The SPMP team has made good progress in the first half of 2019 with the
operational problems inherited by the new leadership being largely resolved.
Remedial works were undertaken to resolve technical issues, which included
modifications to the Calcine Furnace and the installation of a new gas handling
system. The Calcine Furnace has been operational since 9 May 2019, leading to
the first on-specification gold doré being produced during August 2019.
Material handling at the roaster has been highlighted as a plant feed
bottleneck. In the short term, this has been overcome by utilising a rented
crushing circuit while a permanent solution is being designed and installed.
The antimony Reduction Furnace has been operating satisfactorily on low power
input since 3 July 2019 after hearth and rectifier modifications. Mechanical
design problems, relating to the downstream Rotary Converter and the associated
ingot casting machine, are receiving priority attention as these are
restricting the production ramp up in this section. As announced on 19 August
2019, antimony metal quality was 99.11% and SPMP is confident in achieving the
99.65% commercial grade shortly.
Following the team's intensive experience with plant rectification over recent
months, the degree of certainty for the remaining period of ramp up is greatly
improved.
With regards to supply and offtake, SPMP has teams dedicated to achieving
agreements. These discussions are going well and are expected to be realised
as ramp up proceeds.
As a result of the delays and the need to resolve processing issues, SPMP
requires further funding, in addition to the current banking facilities, which
are almost fully drawn. Hannam & Partners was appointed in June 2019 to assist
SPMP in raising debt investment and their work is ongoing. A number of
interested parties have been identified and due diligence is currently
ongoing. The primary aim of the fund raising is to ensure that SPMP will be
fully funded through to being cash flow positive. The quantum, timing and
terms of the potential debt are still under discussion, and in parallel with
Hannam & Partners SPMP are pursuing alternative financing options.
The conversion of the mezzanine debt, owned by Tri-Star, which was initially
announced on 20 March 2019, has been agreed but not yet formally approved by
the SPMP shareholders. It is expected to be finalised prior to, or at the same
time as, the completion of the current funding round. The amount owing to
Tri-Star of $22,800,000 plus accrued interest at 1 January 2019 of $2,014,322,
will be converted to a non-interest bearing equity loan, along with
proportional conversions by our co-shareholders. The remaining mezzanine debt
owned by Tri-Star of $2,000,000 plus accrued interest will remain payable on
the original terms.
Group Costs
The Board of Tri-Star has continued to concentrate on aligning its costs with
current levels of activity and, following several initiatives, it believes that
its cost base is now running at an optimal level. Following the management
changes in April 2019, the Group is now operating with a greatly reduced team
comprising its three directors and two consultants, all of whom are operating
on a part time basis. As a result, administrative costs in H1 2019 were half
that of the same period in 2018 and stood at GBP328,000 compared with GBP668,000 in
H1 2018. In H2 2019 admin costs should fall further as H1 2019 benefitted from
three months only of the reduced cost base.
In addition to the board changes announced in April 2019, Wally Channon was
appointed an adviser to the board in July 2019. Wally is a highly experienced
and qualified metallurgist and we are already seeing the benefits of his
experience in assisting the SPMP team.
Sale of Turkish operations
The successful sale of the non-core asset Göynük mine in Turkey completed in
early 2019, for a total cash consideration of USD $0.5m (of which USD$0.1m is
due on first product sales from the mine). 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.
Outlook:
Progress has been made on all fronts since my last report and we remain upbeat
about the future.
For the ramp up, SPMP is developing a works schedule together with its
consulting engineers. The first major goal of this schedule is to achieve 50%
of capacity for the production of antimony metal and gold. The SPMP team
envisages that barring unforeseen circumstances and, subject to achieving the
financing discussed above, this initial target will be reached during Q1 2020.
Full capacity is planned for Q3 2020.
The market outlook for both gold and antimony remain positive, despite the
currently depressed price of antimony, and with the optimisation of the SPMP
project continuing, progress on supply and offtake agreements and financing, we
are confident that our investment will generate significant future value for
shareholders.
I'd like to thank the SPMP team for their efforts and shareholders for their
support and I look forward to the future with confidence particularly as SPMP
hits its targets.
ADRIAN COLLINS
Non-Executive Chairman
TRI-STAR RESOURCES PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTHSED 30 JUNE 2019
Notes Unaudited Unaudited Audited
Period Period Year ended
ended 30 ended 30 31 December
June 2019 June 2018 2018
(restated)
GBP'000 GBP'000 GBP'000
Share based payment charge (211) (558) (580)
Administrative expenses (328) (668) (787)
Total administrative expenses and (539) (1,226) (1,367)
loss from operations
Movement in the fair value of 1,657 427 293
financial asset
Share of loss in associated (612) (56) (306)
companies
Finance income 1 2 43
Finance cost (85) (306) (667)
Profit/(loss) before taxation 422 (1,159) (2,004)
Taxation 4 - 29 48
Profit/(loss) after taxation, and 422 (1,130) (1,956)
profit/(loss) attributable to the
equity holders of the Company from
continuing operations
Loss from discontinued operations - (37) (70)
Profit on disposal of discontinued 227 - -
operations
Profit/(loss) after taxation, and 649 (1,167) (2,026)
loss attributable to the equity
holders of the Company
Other comprehensive (expenditure)/
income
Items that will be reclassified
subsequently to profit and loss
Exchange differences on - (8) (14)
translating foreign operations
Other comprehensive (expenditure)/ - (8) (14)
income for the period, net of tax
Total comprehensive profit/(loss) 649 (1,175) (2,040)
for the year, attributable to
owners of the company
Total comprehensive profit/(loss)
attributable to
Non-controlling interest - - -
Equity holders of the parent 649 (1,175) (2,040)
Loss per share
Basic profit/(loss) per share 5 0.69 (1.92) (2.64)
(pence) (restated)
Diluted profit/(loss) per share 5 0.67 (1.89) (2.59)
(pence) (restated)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AT 30 JUNE 2019
Unaudited Unaudited Audited
30 June 2019 30 June 2018 31 December
(restated) 2018
Assets Notes GBP'000 GBP'000 GBP'000
Non-current
Intangible assets - 10 -
Investment in associates 6 524 1,386 1,136
Loan to associate 7 18,462 6,071 16,727
Property, plant and - 11 -
equipment
18,986 7,478 17,863
Current
Cash and cash equivalents 160 280 312
Asset classified as held for - - 23
sale
Trade and other receivables 108 117 105
Total current assets 268 397 440
Total assets 19,254 7,875 18,303
Liabilities
Current
Trade and other payables 105 88 94
Liabilities classified as - - 2
held for sale
Short term loans 7 1,223 2,730 1,129
Total current liabilities 1,328 2,818 1,225
Liabilities due after one
year
Deferred tax liability 111 130 111
Total liabilities 1,439 2,948 1,336
Equity
Issued share capital 6,884 5,371 6,884
Share premium 44,819 33,432 44,816
Share based payment reserve 1,867 1,663 1,671
Other reserves (6,156) (6,156) (6,156)
Translation reserve (811) (805) (811)
Retained earnings (28,784) (28,574) (29,433)
17,819 4,931 16,971
Non-controlling interest (4) (4) (4)
Total equity 17,815 4,927 16,967
Total equity and liabilities 19,254 7,875 18,303
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHSED 30 JUNE 2019
Unaudited Unaudited Audited Year
Period ended Period ended ended
Notes 30 June 2019 30 June 2018 31 December
(restated) 2018
GBP'000 GBP'000 GBP'000
Cash flows from operating
activities
Profit/(loss) after tax 649 (1,167) (2,026)
Depreciation - 7 12
Finance income (1) (2) (43)
Finance cost 85 306 667
Loss from associates 612 56 306
Fees paid by shares 3 5 15
Profit on disposal of (227) - -
subsidiary
Movement in the fair value of (1,657) (427) (293)
financial asset
Equity settled share-based 196 558 565
payments
Increase in trade and other (3) (13) (14)
receivables
Increase/(decrease) in trade 13 8 (1)
and other payables
Net cash outflow from operating (330) (669) (812)
activities
Cash flows from investing
activities
Loans made to associate 7 (77) (2,016) (12,698)
Proceeds from sale of 247 - -
subsidiary
Finance income 1 2 43
Net cash inflow/(outflow) from 171 (2,014) (12,655)
investing activities
Cash flows from financing
activities
Proceeds from issue of share - 4,420 17,420
capital
Share issue costs - (129) (242)
Finance costs - (161) (491)
Repayment of loans 7 - (1,805) (3,560)
Net cash inflow from financing - 2,325 13,127
activities
Net increase/(decrease) in cash (159) (358) (340)
and cash equivalents
Cash and cash equivalents at 312 485 485
beginning of period
Exchange differences on cash 7 153 167
and cash equivalents
Cash and cash equivalents at 160 280 312
end of period
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHSED 30 JUNE 2019
Share Share premium Other reserves Share-based Translation reserve Retained Total Non-controlling Total equity
capital account payment reserve earnings attributable to interest
owners of parent
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1 3,160 31,347 (6,156) 1,105 (797) (27,407) 1,252 (4) 1,248
January 2018
(audited)
(restated)
Issue of share 2,211 2,214 - - - - 4,425 - 4,425
capital
Share issue - (129) - - - - (129) - (129)
costs
Share based - - - 558 - - 558 - 558
payments
Transactions 2,211 2,085 558
with owners - - - 4,854 - 4,854
Loss for the - - - - - (1,167) (1,167) - (1,167)
period
Exchange - - - - (8) - (8) - (8)
difference on
translation of
foreign
operations
Total - - - - (8) (1,167) (1,175) - (1,175)
comprehensive
loss for the
period
Balance at 30 5,371 33,432 (6,156) 1,663 (805) (28,574) 4,931 (4) 4,927
June 2018
(unaudited)
(restated)
Issue of share 1,513 11,497 - - - - 13,010 - 13,010
capital
Share issue - (113) - - - - (113) - (113)
costs
Share based - - - 8 - - 8 - 8
payments
Transactions 1,513 11,384 12,905 - 12,905
with owners - 8 - -
Loss for the - - - - - (859) (859) - (859)
period
Exchange - - - - (6) - (6) - (6)
difference on
translation of
foreign
operations
Total - - - - (6) (859) (865) - (865)
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
(audited)
Issue of share 3 - - - - 3 - 3
capital
Share based - - - 196 - - 196 - 196
payments
Transactions - 196 - - -
with owners - 3 199 199
Loss for the - - - - - 649 649 - 649
period
Total - - - 649 649 - 649
comprehensive - -
loss for the
period
Balance at 30 6,884 44,819 (6,156) 1,867 (811) (28,784) 17,819 (4) 17,815
June 2019
(unaudited)
NOTES TO THE INTERIM REPORT
FOR THE SIX MONTHSED 30 JUNE 2019
1. GENERAL INFORMATION
The financial information set out in this interim report for the Company, its
subsidiaries and associates (the "Group") does not constitute statutory
accounts as defined in Section 434 of the Companies Act 2006. The Group's
statutory financial statements for the year ended 31 December 2018 have been
completed and filed at Companies House. The auditor's report on the annual
financial statements was unqualified and did not contain statements under
section 498(2) or section 498(3) of the Companies Act 2006.
2. ACCOUNTING POLICIES
BASIS OF PREPARATION
The Company's ordinary shares are quoted on the AIM market of the London Stock
Exchange and the Company applies the Companies Act 2006 when preparing its
annual financial statements.
The annual financial statements for the year ended 31 December 2019 will be
prepared under International Financial Reporting Standards as adopted by the
European Union (IFRS) and the principal accounting policies adopted remain
unchanged from those adopted in preparing its financial statements for the year
ended 31 December 2018.
The accounting policies have been applied consistently throughout the Group for
the purposes of preparation of these condensed consolidated interim financial
statements. IFRS 16 - Leases has been applied. This had no impact on the parent
company or companies' subsidiaries accounts, as there are no leases, but has
impacted on the associate's financial statements. In the financial statements
of the associate, SPMP, the impact of IFRS 16 at 31 December 2018, has been to
recognise the land lease as a right-of-use asset of $10,843,000, with a lease
liability of $10,843,000. At 30 June 2019 the liability was of $10,784,000 of
which $9,963,000 is due after one year. The lease costs were previously
capitalised as Property, Plant and equipment, so there was no impact on
retained earnings at 31 December 2018 and therefore no transitional adjustments
to the Group financial statements. The land in Sohar is leased for 25 years
from 25 June 2014. Other equipment leases in SPMP were recognised as finance
leases in 2018 and therefore not impacted by IFRS 16. IFRS 16 has been applied
from 1 January 2019 and the modified retrospective transitional provision has
been adopted. As a result of this the comparatives for 2018 have not been
restated.
The financial statements for the period ended 30 June 2018 have been restated
in respect of the application of IFRS 9 - Financial Instruments. 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 GBP702,000.
The adjustment recognised at 30 June 2018 resulted in a total comprehensive
loss of GBP165,000, an increase in investment of associates of GBP198,000 and a
decrease in the carrying value of the loan to associate of GBP1,044,000.
GOING CONCERN
The Group and Company are not yet revenue generating and are reliant upon funds
raised from issuing loans and shares. A cash requirement for unavoidable
running costs was identified based on cash flow forecasts for the period ending
30 September 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.
3. 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 reportable operating segment during the period is mining.
In respect of the non-current assets as at 30 June 2019 of GBP18,986,000, GBPNil
arise in the UK (30 June 2018: GBP5,000, 31 December 2018: GBPNil), and GBP18,986,000
arise in the rest of the world (30 June 2018 restated: GBP7,473,000, 31 December
2018: GBP17,863,000).
4. TAXATION
As at 31 December 2018 Tri-Star Resources plc had unrelieved Schedule D Case 1
corporation tax losses of GBP5.35m. The Directors expect these losses to be
available to offset against future taxable trading profits.
The Group has not recognised a deferred tax asset at 30 June 2019 (30 June and
31 December 2018: GBPnil) in respect of these losses on the grounds that it is
uncertain when taxable profits will be generated by the Group to utilise any
such losses.
5. PROFIT/(LOSS) PER SHARE
The calculation of the basic profit/(loss) per share is based on the profit/
(loss) attributable to ordinary shareholders divided by the weighted average
number of shares in issue during the period.
Unaudited Unaudited Audited
period ended period ended year ended
30 June 2019 30 June 2018 31 December 2018
(restated)
GBP'000 GBP'000 GBP'000
Profit/(loss) on ordinary 649 (1,167) (2,026)
activities after tax (GBP'000)
Weighted average number of shares
for calculating basic loss per 94,122,723 60,921,020 76,820,518
share
Basic profit/(loss) per share 0.69 (1.92) (2.64)
(pence)
Weighted average number of shares
for calculating diluted loss per 96,682,764 61,648,326 78,286,457
share
Diluted profit/(loss) per share 0.67 (1.89) (2.59)
(pence)
The weighted average number of ordinary shares excludes deferred shares which
have no voting rights and no entitlement to a dividend.
6. INVESTMENT IN ASSOCIATES
SPMP was incorporated in the Sultanate of Oman in 2014. Tri-Star has a 40%
interest in the company and accounts for its investment in SPMP as an associate
undertaking.
SPMP made a loss of GBP1,531,000 in the period to 30 June 2019 (30 June 2018: GBP
140,000, 31 December 2018: GBP765,000) of which Tri-Star's share in the Group
accounts was GBP612,000 (30 June 2018: GBP56,000, 31 December 2018: GBP306,000).
Tri-Star had a net investment of GBP524,000 on consolidation as at 30 June 2019
(30 June 2018 (restated): GBP1,386,000, 31 December 2018: GBP1,136,000).
Additionally, Tri-Star has issued loans to SPMP as detailed in Note 7.
7. LOAN NOTES
SPMP Mezzanine loan notes
Loans receivable represent the US$6m mezzanine loan which the Company advanced
to SPMP as announced on 29 November 2017, the further US$2.8m advanced as
announced on 24 January 2018, and the $12m advanced between July 2018 and
January 2019.
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 with SPMP having the option to redeem (with accrued
interest to date) from the third anniversary of drawdown.
* All repayments made by SPMP to each of its three shareholders will be pari
passu in proportion to the respective total loan amounts outstanding.
There is an option to convert the loan into shares if it remains outstanding
for 12 months after the due date.
On 20 March 2019, Tri-Star announced that it had been agreed that $52m of the
mezzanine loan made to SPMP by its shareholders, plus accrued interest, will be
converted into either an interest free loan or equity. This includes $20.8m of
the principal loan made by Tri-Star to SPMP which, once completed, will leave
$2m of the principal owed to Tri-Star as mezzanine loan. This conversion has
yet to be completed.
Odey Loan Notes
Loan Notes payable comprise short-dated secured loan notes issued to Odey
European Inc ("OEI") and OEI MAC Inc ("OMI"), two of the three OAM Funds that
were equity shareholding funds as of 30 June 2018. The Loan Notes are secured
on a debenture comprising a fixed and floating charge over all the assets of
Tri-Star Resources plc.
The Loan Notes carry an annual interest rate of 25% and had an original
repayment date of 30 June 2018 or equity placement whichever is earlier. As an
equity placement took place in January 2018, the loans technically fell due,
but OEI and OMI have now agreed to extend repayment to 30 June 2020 or earlier
at the Company's discretion.
The US$6,000,000 Loan Notes were issued in November 2017. On 19 January 2018,
US$2,681,000 of the principal and interest was repaid and a further
US$2,639,000 was repaid on 10 July 2018. As at the period end, the outstanding
balance of the Loan Notes was US$1,340,000 including accrued interest.
8. CONTINGENT ASSET
Under the agreement to sell the Roaster intellectual property to SPMP, there is
a balance of US$2m due to be paid to Tri-Star. This payment is contingent upon
the successful commissioning of the plant in its pilot phase. The Directors
have determined not to accrue this deferred income. Therefore, there is a
contingent asset of US$2m as at 30 June 2019 (30 June and 31 December 2018:
US$2m).
**ENDS**
Enquiries:
Tri-Star Resources plc
David Facey, CEO/ CFO ceo@tri-starresources.com
St Brides Partners Ltd
Hugo de Salis/Juliet Earl Tel +44 (0)20 7236 1177
SP Angel Corporate Finance (Nominated Adviser)
Robert Wooldridge/Jeff Keating/Caroline Rowe Tel: +44 (0)20 3470 0470
FinnCap Ltd (Broker)
Christopher Raggett/Camille Gochez Tel: +44 (0)20 7220 0500
Notes to the Editor
Tri-Star's principal interest is in an antimony and gold production facility
which is based in Sohar, Sultanate of Oman (the "SPMP Project"), and is being
developed by Strategic & Precious Metals Processing LLC, an Omani company in
which Tri-Star has a 40% equity interest.
Tri-Star also has antimony exploration licenses in Canada which are held for
their potential contribution of feedstock to the SPMP Project.
END
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