Friday 31 October 2014
Starvest Plc ("Starvest" or "the Company")
Results for the year ended 30 September 2014
Chairman's statement
I am pleased to present my thirteenth annual statement to Shareholders for the year ended 30 September 2014.
Results for the year
Following the previous tough years of 2011, 2012 and 2013, in the last nine months, we have begun to see the signs of a change for the better. However, this has not been as a result of an upturn in the market generally but as a consequence of our investments in oil and gas, for many of our portfolio companies exploring for gold, iron ore and other such minerals have continued to find it difficult to raise essential cash and so have seen share price falls in what has become a harsh environment for early stage mineral explorers.
At the balance sheet date, more than 70% of the portfolio value was attributed to oil stocks on which we comment in the portfolio review.
Investing policy
The Company's investing policy is reproduced below of this report and made available on our website, www.starvest.co.uk.
Trading portfolio valuation
A detailed review of the portfolio companies follows below. Our commentary focuses on the exploration areas in which our investee companies are involved as well as on other investments; the Company's interests include gold, iron ore, coal and oil and gas.
Shareholder information
The Company's shares are traded on AIM.
Announcements made to the London Stock Exchange are sent to those who register at the Company's website, www.starvest.co.uk where historic reports and announcements are also available.
Annual general meeting
We will hold our annual general meeting at 11.30 am on Thursday 11 December 2014 at the City office of Grant Thornton UK LLP, our Nominated Adviser, at 30 Finsbury Square, London EC2A 1AG, when we look forward to meeting those Shareholders able to attend.
R Bruce Rowan
Chairman & Chief Executive
30 October 2014
Investing policy statement
About us
The Board has managed the Company as an investment company since January 2002. Collectively, the Board has a wealth of experience over many years of investing in small company new issues and pre-IPO opportunities in the natural resources and mineral exploration sectors.
Company objective
The Company is established as a source of early stage finance to fledgling businesses, to maximise the capital value of the Company and to generate benefits for Shareholders in the form of capital growth and modest dividends.
Investing strategy
Natural resources: Whilst the Company has no exclusive commitment to the natural resources sector, the Board sees this as having considerable growth potential in the medium term. Historically, investments were generally made immediately prior to an initial public offering, on AIM or ISDX and in the aftermarket. As the nature of the market has changed since 2008, it is more likely that the future investment portfolio will include a spread of companies that generally have moved beyond the IPO stage but remain in the early stages of identifying a commercial resource and/or moving towards development with the appropriate finance.
Investment size: Initial investments are for varying amounts but usually in the range of £100,000 - £300,000. These companies are invariably not generating cash, rather they have a constant requirement to raise new equity in order to continue exploration and development. Therefore, after appropriate due diligence, the Company may provide further funding support and make later market purchases, so that the total investment may be greater than £300,000.
High risk: The business is inherently high risk and of a cyclical nature dependent upon fluctuations in world economic activity which impacts on the demand for minerals. However, it offers the investor a spread of investments in an exciting sector, which the Board believes will continue to offer the potential of significant returns for the foreseeable future.
Lack of liquidity: The investee companies, being small, almost invariably lack share market liquidity, even if they are quoted on AIM, ISDX, ASX, or TSX-V. Therefore, in the early years it is rarely possible to sell an investment at the quoted market price with the result that extreme patience is required whilst the investee company develops and ultimately attracts market interest. If and when an explorer finds a large exploitable resource, it may become the object of a third party bid, or otherwise become a much larger entity; either way an opportunity to realise cash is expected to follow.
Success rate: Of the 25 to 30 investments held at any one time, it is expected that no more than five will prove to be 'winners'; from half of the remainder we may expect to see modest share price improvements. Overall, the expectation is that in time Shareholder returns will be acceptable if not substantial. Accordingly, the Board is unable to give any estimate of the quantum or timing of returns.
Profit distribution: When profits have been realised and adequate cash is available, it is the intention of the Board to recommend the distribution of up to half the profits realised.
Other matters: The Company currently has investments in the following companies, which themselves are investment companies: Equity Investors plc; Equity Resources plc and Guild Acquisitions plc.
The Company takes no part in the active management of investee companies, although directors of the Company are also non-executive directors on the boards of seven such companies, with one director being the executive chairman of an eighth.
Review of trading portfolio
Introduction
During the year to 30 September 2014, the portfolio comprised interests in the companies commented on below.
The tough trading and fundraising conditions of the past three years have taken a toll on some of the businesses in which Starvest is invested to such an extent that, as at 30 September 2014, the portfolio had been transformed with most of the value now in oil and gas exploration ventures.
Transactions
During the year the Company sold its stake in Centamin plc, an interest that arose from the sale in 2011 of the interest in Sheba Exploration UK plc; otherwise there were no sales.
Additional investments were made in Alba Mineral Resources plc in addition to which loans were advanced to Goldcrest Resources plc. The former investee company, Woburn Energy plc, withdrew from the market. In addition, our interest in Silvermere Energy plc was repeatedly diluted so we no longer have an interest in the successor company.
Trading portfolio valuation
When reporting in previous years, attention was drawn to the continuing adverse conditions in our chosen market for early stage mineral exploration stocks. The year to September 2014 has been no better with a continuing steady decline in market prices.
Against this background, we continue to value our portfolio of investments conservatively at the lower of cost or bid price or lower directors' valuation, where we believe those facts of which we are aware cast doubt on the market prices or where the Company's interest is of such a size as to inhibit selling into a depressed market. We attribute no value to those of our investments that do not enjoy a market quote.
This cautious approach has proved to be appropriate in these difficult times; these provisions total £351,000 (2013: £196,000).
A detailed review of the portfolio companies follows. Whilst the portfolio contains investments in companies that have made real progress during the year, there are many, particularly smaller companies, that have struggled for one or more reasons. Raising new finance, which is essential to progress in any mineral exploration business, has proved to be very tough; two have effectively failed this year.
Our commentary focuses on those companies that have become our core portfolio but also includes others which may well rebound; we remain resolved to allow our investments time to mature; most certainly this proved to be appropriate with the companies for which a takeover offer was received in previous years and when we generated substantial profits.
This year, we have seen a dramatic rise in Nordic Energy plc, but also to our interests in the Horse Hill companies, Alba Mineral Resources plc and Regency Mines plc. Added to this, we have a small interest in CAP Energy plc as well as an interest in Kuwait Energy plc. We give more detail in our investment commentary below. This somewhat dramatic change in our fortunes has led us to change the presentation of our investee companies in the report this year.
Whilst the net asset value has increased substantially during the year by £1.68m to £4.41m, the loss before taxation has decreased from £1.01m to £356k. In addition;
· we have no debt, but a bank overdraft facility only;
· we continue to believe that we are in a strong position to benefit from an upturn in markets which must surely come!
· the fundamentals have not changed: the world is becoming more affluent with an increasing number of people expecting refrigerators, motor cars, air conditioning, laptop computers and all other tools of 21st Century living.
Financial Reporting Standards (FRS102)
To date we have prepared our financial statements under UK Generally Accepted Accounting Standards (UK GAAP). However, with effect from 1 October 2015 we will be required to adopt FRS 102 ("New UK GAAP"). The significant impact of this change will be on the valuation of the Company's investments. To date, we have been able to carry all our investments at the lower of cost or current value. However, under the new accounting standard, we will be required to mark-to-market all our investments. Based on the closing prices at 30 September 2014, the investments (and hence net assets of the group) will rise by £2,298,507.
Company statistics
The Company considers the following statistics to be its Keys Performance Indicators (KPIs) and is satisfied with the results achieved in the year given the uncertain market conditions.
|
|
30 September 2014 at BID values as adjusted |
30 September 2013 at BID values as adjusted |
Change % |
|
· Trading portfolio value |
£4.15m |
£2.52m |
64.68% |
|
· Company asset value net of debt |
£4.41m |
£2.73m |
61.54% |
|
· Net asset value per share |
11.87p |
7.44p |
59.54% |
|
· Closing share price |
5.88p |
5.62p |
4.62% |
|
· Share price discount to net asset value |
50% |
24% |
|
|
· Market capitalisation |
£2.18m |
£2.09m |
4.31% |
These values include unrealised gains on elements of the trading portfolio that are not reflected in the financial statements.
Since the year end, values have fluctuated; as at the close of business on 24 October 2014, the asset value net of debt was £3.61m
Review of the current market
We and our investee companies have endured yet another tough year; extreme short termism leading to lower prices and/or greater volatility has become the norm. It is clear that many private investors upon whom we and our investee companies have relied have withdrawn their support or, at best, are awaiting a recognisable upturn in world-wide economic fortunes; this is compounded in that few institutional investors have an appetite for small early stage projects.
World markets continue to be volatile. For instance, in the past two years the gold price has been as high as $1,795 per oz but has also been as low as $1,192; at the present time it is approximately $1,200, down $100 from a year ago. Only those with a sound business plan and cost control will succeed in such volatile markets.
Then there is iron ore which is in plentiful supply but with Australia the dominant exporter. Prices have fallen from $130/t to as low as $79/t.
However, demand for raw materials continues to fall. Although there may be timing issues, we expect demand to recover to be followed by prices. Meanwhile, opportunities for junior explorers to realise value and generate cash are few.
In spite of all the gloom and doom, the strengthening of the US$ has been and will be a factor in determining world commodity prices.
Patience is the key as we continue to await a recovery.
Interests in Gold exploration
We have endured another tough year! The Company has investments in six gold explorers. With one exception only, the closing share prices have declined during the past year by as much as 80%. During this time, the gold price has mostly been approximately $1,300 per oz but has recently traded nearer to $1,200 and we have probably not yet seen the bottom of the cycle.
Our interests are in the following six companies:
Ariana Resources plc
Comment: Despite the continuing gold price fluctuations, Ariana offers interesting potential once planned cash flow materialises from its Red Rabbit operations as is expected during the fourth quarter 2014. Importantly, the cash generated will enable Ariana to pursue its wider interests.
Against this background, surely a share price re-rating is due, if not overdue!
What they are doing:
· With earn-in contributions from Turkish construction company Proccea towards its eventual 50% stake on production start-up, Ariana's interest in Red Rabbit, where it has a resource of 450,000 oz Au, has been reduced. However, production is expected to be at the rate of approximately 21,000 oz Au per annum for the first five years with a mine life of eight years. The capital required having been raised, an estimated cash cost of up to $611 with a payback of 2.4 years is expected.
· In addition to Red Rabbit, Ariana has a JORC (Joint Ore Reserves Committee) resource of 1,162,000 oz Au in the Artvin province in north-east Turkey. This project is now being advanced through a Joint Venture agreement with Eldorado Gold Corporation (TSX:ELD, NYSE: EGO); Ariana has a 49% interest in the project.
· Ariana also has a 3.7% interest in Tigris Resources with exploration interests in the south-east of Turkey.
Goldcrest Resources plc
Goldcrest has had a challenging year. A year ago, all the indications were that Goldcrest was expecting to be admitted to AIM by the end of 2013 and to raise sufficient cash to commence exploration at its two properties in north-east Ghana over which it held purchase options. We continue to await a news announcement with a full explanation.
The Company website indicates that it is intending to take advantage of its early-mover position to explore a highly prospective portfolio of gold projects covering over 700km² on the under-explored Bole-Nangodi gold belt of Ghana, Africa's 2nd largest gold producer. Goldcrest's aim is to build a focused gold exploration company based around its two existing projects, Zamsa and Fumbisi.
Greatland Gold plc
Comment: In common with many other such companies, the share price continues to be at little more than 1/8th of the AIM admission price. Some progress towards realising value would doubtless help a re-rating.
Background information: Greatland has been conducting early stage exploration for gold since 2006 having been admitted to AIM that year. Having made progress on two properties, Warrentinna and Lisle, Greatland has entered into farm-in agreements with larger entities which will earn an increasing percentage share of the projects in exchange for expenditure incurred.
Recent developments:
· Several new targets identified at its Western Australian projects including an exciting new 'Nova' style nickel sulphide licence;
· Ernest Giles airborne magnetics outlines multiple additional gold targets;Work on the Firetower project, the subject of a farm-in agreement with Unity Mining, continues apace; Following a review of licences, reductions have been made to the licence areas at Bromus, and Warrentinna. The Lackman Rock licence has been disposed of.
· Robust nickel sulphide target defined at Bromus in southern Western Australia, a project covering approximately 112 square kilometres where a review of detailed airborne geophysics has defined a 4.5km long nickel sulphide prospective ultramafic unit in the central parts of the project area with coherent elevated surface geochemistry to 2,690ppm Ni. Recent field work has confirmed flow textured ultramafic lithologies are present and no previous exploration activities for nickel sulphides are apparent despite proximity to other deposits. This represents a sizeable nickel sulphide target at surface which can be explored with common geochemical, electromagnetic and drilling techniques.
Future plans:
· Drilling at Ernest Giles scheduled for Q4;
· A ground EM survey has been outlined for Bromus which is scheduled to be carried out during Q4.
KEFI Minerals plc
Comment: KEFI has all the appearance of a company on the move. The share price is beginning to respond to recent news, especially from Tula Kapi in Ethiopia.
Background information: In Saudi Arabia it has a 40% interest with a local construction company, ARTAR, in a JV partnership which has enabled KEFI to gain accelerated attention from the notoriously slow Saudi licensing authorities in granting exploration licences; 30 have been applied for of which four have been granted. A resource of 495,000 oz Au has been confirmed.
Meanwhile, KEFI seized the opportunity to acquire the Tulu Kapi project in Ethiopia formerly held by Nyota Minerals Limited. This 100%-owned project has recently announced a reserve of 1.0m oz Au and a JORC compliant reserve totalling 1.9m oz Au. The mining licence has been re-activated.
Future plans: Plans for a mine at Tula Kapi are taking shape to include the assembly of a bank syndicate and agreement of plans for project finance for as much as $130m with a view to commencement of mine construction in early 2015. In Saudi Arabia, application for a mining licence at Jibal Qutman is to be made.
Minera IRL Limited
Minera's activities are now focused on the flagship Ollachea gold project, the company having announced the sale of its interest in the Argentinian Don Nicholas for $11.5m.
Minera, listed on the AIM, Lima and Toronto TSX markets, now focuses its activities entirely on Peru where it operates the 100%-owned Corihuarmi gold mine, and is developing the Ollachea underground mine while also exploring a number of other gold prospects. Expected lower production, grades and revenues from Corihuarmi have recently impacted on Minera's significant financing requirement for the Ollachea development. The total capital cost of Ollachea is estimated at $220m, but the scheduled production over an initial mine life of nine years is 930,000 oz leading to an operating cost of $507 per oz. Minera has an offer of finance from Macquarie Bank for $70m towards construction of the mine and discussions with other providers continue.
Red Rock Resources plc
Background information: Red Rock was launched on to AIM in mid-July 2005 by Regency Mines, see below, with a portfolio of exploration licences of properties in Western Australia.
What they are doing:
Red Rock is an early stage exploration company with a diverse range of projects in Colombia, Greenland, Kenya and Ivory Coast, as well as interests in Australia. These include:
· a 50% interest in a producing gold mine in Colombia, although this is in the process of being sold;
· a direct interest of 15% in tenements in Kenya prospective for gold, with the prospect of a further 45% on completion of a bankable feasibility study, plus a 33% interest in the holder of the remaining interest; a JORC estimate shows a 1.193m oz resource;
· newly acquired during 2014, an interest in tenements in the Ivory Coast prospective for gold.
In addition to its interests in gold, Red Rock has other interests as follows:
· a 60% interest in an iron ore project in Greenland with a JORC resource; an offer for a partial sale has been received but did not complete;
· an interest Jupiter Mines Limited which has a major interest in a South African manganese producer as well as other assets in Western Australia; www.jupitermines.com
· an interest in ASX quoted Resource Star Limited which, whilst retaining its mineral exploration interests in Australia and Malawi, has announced an option to acquire an Australian based cloud services provider, www.resourcestar.com.au
· a small interest in Regency Mines plc, see below.
Interests in Iron Ore
Beowulf Mining plc
Beowulf is the developer of natural resources projects in Sweden, and is dual-listed on the AIM and the Stockholm AktieTorget markets. During the past year, Beowulf has been progressing its major fully-owned Kallak iron ore project whilst also undertaking exploration drilling on its Ballek copper-gold project in a joint venture partnership with Australian Energy Ventures.
The Kallak North and South deposits were designated as an area of National Interest by the Swedish Geological Society. This was followed by an application for an Economic Concession mining licence for Kallak North still under review. Meanwhile, an exploration permit for Agasjiegge2, adjacent to Kallak, has been granted.
The latest assay results obtained from the current year's drilling campaign have returned the highest grades over the longest intersections seen since Beowulf started exploration on the Kallak ore-body.
Beowulf's determination to achieve a full JORC assessment of its Kallak resource by this year-end with the aim of establishing its options for mine development, has advanced against a background of weakening world iron ore prices, the market's unease caused by the collapse of the larger Swedish peer group Northland Resources, its own drilling cost budget overruns and of Sami reindeer herder and activist protests delaying licensing applications.
Despite these frustrations, Beowulf continues to enjoy vital local and governmental support in its aim to create new employment opportunities and economic activity for Northern Sweden, as well as being secure in the knowledge that the superior quality of its resource and its proximity to its eventual European steel-making clientele, must remain strongly to its advantage. Sweden is the largest iron ore producer in the EU with over 26 million tonnes produced in 2012 but Kallak's resource potential has been estimated at more than ten times this level, and with a likely 30 years of production.
Meanwhile Beowulf has an attractive range of other assets including the Grundtrask gold project, the Majves iron oxide copper gold (IOCG) project and the Munka licence area in northern Sweden, which covers approximately 800 hectares and hosts Sweden's largest drill-confirmed deposit of molybdenum.
International Mining & Infrastructure Corporation plc
The African continent is known to be rich in iron ore resources with the largest untapped iron ore bodies found in West and Central Africa. Of three major iron ore clusters, one includes Cameroon, Gabon and the Republic of Congo. It is in Cameroon that IMIC has its interest having successfully bid £120 million for Afferro Mining with its Nkout and Ntem projects being the most advanced. This acquisition represents a significant multiple of IMIC's own capitalisation and met with initial scepticism in the market.
The Nkout resource is seen to be a world class asset with 2.5 billion tonnes of indicated and inferred resource with a high grade product of up to 70% Fe, while Cameroon is seen as one of the West African countries with a more stable environment for development.
IMIC'ssuccess marks a significant extension of its original objectives which were focused on providing infrastructure solutions for West African iron ore development projects.
Comment: IMIC enjoys support from its strategic partner, the privately held African and Iron Ore Group (AIOG), as well as from Chinese interests in assuring access to supply sources for its future iron ore requirements. With its Cameroon mining and infrastructure project and with first production planned for three years hence now added to its Guinea infrastructure work, IMIC has become a major player in West Africa.
Interests in Oil and Gas
What a change has come about in one year! It was two years ago that we became one of the founding shareholders in Nordic Energy plc which has since become a major constituent in the Company portfolio. Our interests in the sector comprise stakes in the following five companies:
Alba Mineral Resources plc
Alba is a UK-based exploration company with an overall strategy to develop a portfolio of well-researched, promising and prospective exploration interests but it has recently changed its focus having taken a 5% stake in Horse Hill Developments Limited, a company with a 65% interest in drilling for oil and gas in Surrey at Horse Hill, just to the north of Gatwick Airport www.horsehilldev.co.uk.
Horse Hill Developments has received full planning approvals and landowner agreements to construct an exploratory well site, to include plant, buildings and equipment, for the drilling of one borehole and the subsequent short-term conventional testing for hydrocarbons.
Drilling is currently being carried out with the first of three expected signs of oil having been found.
Otherwise, Alba has projects prospective for:
· uranium in Mauretania;
· gold, nickel and base metals in western Ireland; work on its JV agreement with Teck Resources has been financed by Teck towards its ultimate 75% interest by mid-2015.
CAP Energy plc
CAP Energy plc is an independent upstream oil and gas company focused on the exploration, production, and development of conventional hydrocarbons in sub-Saharan Africa.
· The company has 30% interests in Blocks 1 and Block 5B offshore Guinea-Bissau and a 44.1% interest in Block Djiffere offshore Senegal;
· The company's strategy is to acquire under-explored, but highly prospective, exploration acreage in the sub-Saharan region;
· During the 6 months to June 2014, CAP Energy has invested over $3 million (£1.9 million) in exploration;
· 3700 Km 2D survey of Senegal Block Djiffere were completed with the interpretation due H2 2014;
· Adjacent blocks operated by Cairn Energy currently being drilled: first results due imminently;
· Guinea Bissau 2D survey with Virtual Drilling analysis reveals significant leads in Block 5B;
· 3D survey of Guinea Bissau Block 5B: preparations being finalised;
· A move to AIM is planned.
Kuwait Energy plc
The Company's interest in Kuwait Energy arises from it having been a major founding shareholder in Concorde Oil and Gas plc in 2006, which was subsequently taken over by Kuwait Energy. After much delay, Kuwait Energy has announced an intention of seeking a listing on the London Stock Exchange which, we are advised, may come as soon as fourth quarter 2014.
Kuwait Energy operates in the Middle East and North Africa (MENA) region where it has significant participation interests ranging from 15% to 100% across its 55 exploration, development and producing leases, providing a balance of risk diversification with significant upside exploration potential. Kuwait Energy currently operates 30 of these 55 leases.
Kuwait Energy recently announced a 12.6% year on year revenue increase.
Until Kuwait Energy obtains a quotation, the cost remains fully provided for and so is carried in the Company's books at Zero.
Nordic Energy plc
Comment: A year ago, we wrote: "The Directors of the Company all have significant experience in the oil and gas sector, specifically in the Nordic region and believe that significant opportunities exist and that their expertise and extensive contacts will assist them in the identification, evaluation and funding of appropriate investment opportunities." And so it has proved to be if the share price is anything to go by!
Nordic was formed in 2012 and admitted to trading on ISDX in November of that year; Starvest contributed core funding for an initial 42% stake.
What they are doing:
Nordic isfocussed on oil and gas opportunities in Denmark, Norway, and the North Sea sectors of the Netherlands and the UK where it holds licence 1/13 in the Danish sector, the largest exploration and production licence in the Danish North Sea, covering an area of 3,600 sq. km; the licence is located approximately 50 km from the edge of the Central Graben, where existing production and multiple discoveries are located, and 100 km from the Siri Area which has a number of tertiary fields.
A CPR which was delivered in June 2014 identified multiple drilling targets to be followed by farm-out discussions with major players.
Future plans: Nordic plans to apply for new licences, is in the process of strengthening its Board and technical team as well as making a move to AIM which is in prospect for Q4 2014.
Regency Mines plc
Regency has varied interests in mineral exploration ventures but we include a comment here in view of its stakes in the following oil and gas exploration ventures:
· A direct stake in the Horse Hill oil and gas project; www.horsehilldev.co.uk, see the comment under Alba above;
· An indirect stake in Horse Hill by virtue of its interest in Alba Mineral Resources plc, see above;
· A newly acquired 25% interest in a West Virginia shallow oil project located in Ritchie WV, with drilling due to commence Q4 2014.
Background information: Regency came to AIM in 2005 with a portfolio of exploration properties in Australia since when it transferred some to Red Rock Resources plc, see above, and continued to deal with others as well as take stakes in other mineral exploration ventures, hence these oil ventures. We provide further comment on Regency in the other investments section below.
Interests in Coal Mining and Power Generation
Oracle Coalfields plc
Background information: Six years ago the Company was attracted by the exciting opportunity of entering a fledgling market seeking to develop a newly discovered major coal resource and which offered the potential of resolving a critical shortage of indigenous energy that was seriously restricting the economic development of the host country, Pakistan. This led to the creation of, and our investment in Oracle Coalfields. However Pakistan's inherent political and economic risks tended to undermine investor confidence in supporting the longer-term major development needs of the project which were having to be met by periodic recourse to the equity market.
Meanwhile, Management's determination to realise its Block VI 1.4 billion tonne Thar Coalfields lignite mine project had been noticed and appreciated by the Chinese who were embarking on a major investment exercise in wide areas of Pakistan's national infrastructure. The 4.2 million tonnes per annum coal mine project was soon enhanced by adding a planned integrated 600MW power plant adjacent to the mine, resulting in a likely total realisation cost of some US$1.3 billion: Engineering Procurement and Construction (EPC) Framework Agreements have been signed with SEPCO, a leading Chinese power and construction group, for the combined projects. SEPCO has proposed a financing structure to potentially securitise up to 85% of these contracts which would be financed by State-owned Sinosure, the China Export & Credit Insurance Corporation, and certain Chinese banks.
Comment: While the Chinese involvement has materially de-risked the project, this has undoubtedly also ensured and accelerated its realisation, a fact well recognised by the Pakistani authorities who have been facing increasing unrest among the population over the lengthy disruptions caused by regular electricity power cuts. Oracle's local standing has meanwhile reached levels far beyond those normally attributed to a junior AIM stock.
Future plans: The path to project completion remains long and complex with the initial production not expected before 2017.
Other Investments
The first two companies in this section are best described as 'diversified mineral exploration and development specialists'.
Regency Mines plc
"We add value to our assets by joint venture, acquisition and disposal of mineral resource interests in addition to being an active investor in the mineral resources corporate market.", a quote from the Regency website.
Comment: The significance of the Mambare nickel project in Papua New Guinea with the associated technological breakthrough by Direct Nickel should not be overlooked. But in the short term, the striking of oil at Horse Hill (www.horsehilldev.co.uk) is expected to provide some immediate relief to the share price which has suffered over the past year so that Regency has had no option but to raise the cash required, at very low prices, to pursue its operations. We hope that Regency has turned the corner!
Regency has a variety of interests including:
· 10.29% of Red Rock Resources plc: www.rrrplc.com, see Gold Exploration above, which it floated on AIM in 2005;
· Having put its Fraser Range tenements in Western Australia into an Australian listed company, RAM Resources Limited, (ASX:RMR), Regency now holds 7.28%; in addition Regency has a 13.5% carried interest in the Fraser West project as a whole: www.ramresources.co.au;
· 6.78% interest in Direct Nickel Limited, an Australian developer of a game changing nickel processing technology, www.directnickel.com;
· 9.39% interest in Alba Mineral Resources plc, see Oil & Gas above: www.albamineralresources.com;
· with the support of the Sudanese government, a 51% interest in IMRAS exploring for agro-minerals in Sudan;
· 5% interest in Horse Hill Developments Limited: www.horsehilldev.co.uk, more fully described in the Oil and Gas section of this report;
· 50% of Oro Nickel Vanuatu, which itself holds the Mambare property in Papua New Guinea with a JORC resource of 162.6 mt nickel grading 0.94% with 1.53 mt of contained nickel plus cobalt, from 3% only of the tenement; there is also potential for base metals, gold and geothermal resources. Work on the project was first begun in 1960 since when Anaconda Nickel Inc held the licence until acquired by Regency in 2006. The potential is massive given that only 3% of the target plateau has been drill tested to date; it could be the world's largest nickel laterite deposit.
Sunrise Resources plc
Background information: Sunrise was admitted to AIM in 2005 initially with a portfolio of diamond exploration assets from Tertiary Minerals plc. Tertiary remains a major shareholder.
The company's strategy is to acquire, explore and develop mineral projects in stable, democratic and mining friendly jurisdictions - targeting advanced projects which have the potential to generate a sustaining cash flow as well as near-drill stage projects where there is potential for significant mineral discovery. The barite project and the diamond project are respectively examples of this two-pronged strategy with a focus on countries that have low levels of corruption and political risk.
The company's objective is to develop profitable mining operations to sustain the Company's wider exploration efforts and create value for shareholders through the discovery of world-class deposits.
Sunrise is exploring for:
· diamonds in Western Australia;
· barites in South West Ireland; there is no major mine supplier outside of China;
· gold in Western Australia where it has two projects, and has an active project programme to generate new exploration projects in Australia and Nevada, USA, where it has recently staked claims over the Strike Copper Project, the County Line Diatomite Project and the Garfield Gold-Silver-Copper Project and has now acquired an interest in the Bay State Silver Project.
Through the cost sharing arrangement with Tertiary, Sunrise has the services of their five full time employees who also oversee a range of carefully selected and experienced consultants and contractors as and when work requires.
Guild Acquisitions plc
Guild has a mixture of assets including stakes in Starvest investee companies Goldcrest Resources plc and Equity Resources plc. Guild does not maintain a website. ISDX ticker: GACQ
Marechale Capital plc
Unlike the Company's other investments, Marechale is not involved in the mineral exploration business but an interest was acquired some years ago when it was an adviser to companies quoted on what became PLUS Markets and more recently, ISDX. Today it describes itself as an investment banking and corporate finance business, using its established relationships and sector specialisation to raise capital and refinance high growth companies and funds in the retail, leisure, renewable energy and infrastructure sectors.
The Company also holds investments in the following companies to which little value is attributed: Agricola Resources plc; Alpha Universal Management plc; Carpathian Resources Limited; Equity Investors plc; Equity Resources plc; Fundy Minerals Limited; Gippsland Limited; Goliath Resources Inc.; Kincora Copper Limited; Treslow Limited. Equity Resources plc, a small investment company, holds investments in Regency Mines plc and Red Rock Resources plc, see above.
Profit and loss account
for the year ended 30 September 2014
|
|
Year ended £ |
Year ended £ |
|
Turnover |
262,940 |
- |
|
Cost of sales |
(194,801) |
- |
|
Gross profit |
68,139 |
- |
|
Administrative expenses |
(206,837) |
(206,702) |
|
Amounts written off trade investments |
(220,101) |
(802,394) |
|
Operating loss |
(358,799) |
(1,009,096) |
|
Interest receivable |
2,475 |
1,835 |
|
Loss on ordinary activities before taxation |
(356,324) |
(1,007,261) |
|
Tax on loss on ordinary activities |
- |
127 |
|
Loss on ordinary activities after taxation |
(356,324) |
(1,007,134) |
|
Loss per share - basic and diluted |
(0.96) pence |
(2.7) pence |
There are no recognised gains and losses in either year other than the result for the year.
All operations are continuing.
Balance sheet
As at 30 September 2014
|
|
30 September 2014 £ |
30 September 2013 £ |
|
Current assets |
|
|
|
Debtors |
100,184 |
37,200 |
|
Trade investments |
1,855,061 |
2,258,662 |
|
Cash at bank and in hand |
239,540 |
257,556 |
|
|
2,194,785 |
2,553,418 |
|
Creditors - amounts falling due within one year |
(44,350) |
(46,659) |
|
Net current assets |
2,150,435 |
2,506,759 |
|
Share capital and reserves |
|
|
|
Called-up share capital |
394,173 |
394,173 |
|
Share premium account |
2,118,396 |
2,118,396 |
|
Profit and loss account |
(362,134) |
(5,810) |
|
Equity shareholders' funds |
2,150,435 |
2,506,759 |
Cash flow statement
for the year ended 30 September 2014
|
|
Year ended 30 September 2014 £ |
Year ended 30 September 2013 £ |
|
Net cash outflow from operating activities |
(20,491) |
(227,360) |
|
Returns on investment and servicing of finance: |
|
|
|
Interest received |
2,475 |
1,835 |
|
|
2,475 |
1,835 |
|
Taxation recovered/(paid) |
- |
284,045 |
|
(Decrease)/increase in cash in the year |
(18,016) |
58,520 |
Loss per share
The basic loss per share is derived by dividing the loss for the year attributable to ordinary shareholders by the weighted average number of shares in issue.
|
|
Year ended £ |
Year ended £ |
|
Loss for the year |
(356,324) |
(1,007,134) |
|
Weighted average number of Ordinary shares of £0.01 in issue |
37,117,259 |
37,117,259 |
|
Loss per share - basic and diluted |
(0.96) pence |
(2.7) pence |
The weighted average number of shares in issue excludes outstanding options exercisable at 15 pence per share as they are out of the money.
In view of the loss for the year, the options have no dilutive effect.
The financial information set out above does not constitute statutory accounts as defined in the Companies Act 2006.
The balance sheet at 30 September 2014, the profit and loss account and the cash flow statement for the year then ended have been extracted from the Company's statutory financial statements upon which the auditor's opinion is unqualified and does not include any statement under Section 498 of the Companies Act 2006. These statements were approved and signed on 30 October 2014.
Copies of the report and financial statements will be posted to Shareholders on 13 November 2014 and will be available for a period of one month thereafter from the Company Secretary at the following address: 67 Park Road, Woking, Surrey GU22 7DH or by email at emali@starvest.co.uk
Alternatively, the report may be downloaded from the Company's website, www.starvest.co.uk
Enquiries to:
Bruce Rowan, Chairman 020 7486 3997 or John Watkins, Finance Director 07768 512404; john@starvest.co.uk
Colin Aaronson or Ed Thomas - Grant Thornton UK LLP 020 7383 5100.
END