Friday 26 October 2012
Starvest Plc
Results for the year ended 30 September 2012
Chairman's statement
I am pleased to present my eleventh annual statement to Shareholders for the
year ended 30 September 2012.
Results for the year
In spite of the dreadful state of the market for small cap mineral exploration
stocks, your Company portfolio has held up as well as might have been expected:
* investment values, determined using adjusted bid values, declined by 36%;
* we closed the year with a loss before tax of £1.03m, £0.75m after tax.
On a brighter note:
* we declared a dividend of 0.5 pence per share which, when added to the
interim dividend paid earlier, made a total of 0.75 pence per share for
2011;
* we continue to value the investments on a conservative basis as fully
described later in the report;
* we have no debt, but a bank overdraft facility only;
* we have made no sales during the year but have added to our investment in
four holdings and made a new investment in Nordic Energy plc, expected to be
admitted to PLUS-SX shortly; and
* we believe we are in a strong position to benefit from the upturn in markets
which must surely come.
Trading portfolio valuation
When reporting on previous years, I drew attention to the continuing adverse
conditions in our chosen market for early stage mineral exploration stocks. The
year to September 2012 has been particularly tough with a steady decline in
market prices. However, we remain supportive of our investee companies, nine of
which now constitute our key portfolio to which we have recently added a tenth
with a combined value in excess of £3m.
Following these challenges, we continue to value our portfolio 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. This cautious approach has proved to be appropriate in
these difficult times; these discounts total £353,684 (2011: £782,706).
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 undoubtedly been a challenge for most; it has
had the effect of driving market prices lower, hence the decline in values.
Our commentary focuses on the ten companies that constitute 85% by value of the
portfolio, including the newly acquired Nordic Energy, but does not exclude
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.
The key performance indicators are set out below.
Company statistics
30 September 2012 30 September 2011 Change
at BID at BID
values as adjusted values as adjusted %
* Trading portfolio value £3.51m £5.47m -36%
* Company asset value net of £3.66m £6.62m -45%
debt
* Net asset value per share 9.86p 17.57p -44%
* Closing share price 6.5p 13.0p -50%
* Share price discount to net 34% 26%
asset value
* Market capitalisation £2.41m £4.77m -50%
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 increased by 10%; as at the close of business on
19 October 2012, the net asset value was £4.04m, with an increased share price
discount to net asset value of 40%.
Review of the current market
There can be no doubt that the last year has been tough for most of our investee
companies. All have early stage development projects so need to raise new funds
to continue with their exploration programmes, inevitably they have to accept a
discount to the then current market price if they wish to issue new equity with
the consequence that the lower issue price has become the base price; the more
issues that a company has made, the lower the price.
Against such a background, most will struggle until they achieve an eye-catching
breakthrough of some description. However, that has not always been enough to
demand the much sought after re-rating. It is clear that those private
investors who had been so supportive in earlier years have taken fright, or at
best are sitting on their hands awaiting a recognisable upturn in World-wide
economic fortunes and many institutional investors have no appetite for small
early stage projects.
Of our major holdings, five are focused on gold. The expectation is that in the
current climate the gold price will continue to rise thus increasing the values
of these investments, one of which is expected to commence dividend payments
soon.
Another two have a strong focus on iron ore, the demand for which is likely to
increase as the economies of third world countries expand; another two are
developing new sources of other basic commodities essential if the standard of
living of the populations in developing countries is to improve as we wish and
expect. The tenth and latest is searching for oil.
Patience is the key as we await a recovery.
Dividends
The Board wishes to share the benefits of any substantial profit with all
Shareholders and so last year recommended the payment of a final dividend of
0.5 pence per share making a total of 0.75 pence for the full year. This was
equivalent to a yield of 7% on the closing price on 21 October 2011.
The Board will not be recommending the payment of a dividend for the current
year but will keep the matter under review.
Investment policy
The Company investment policy is reproduced below and made available on its
website, www.starvest.co.uk. In the past investments were predominantly in
early stage ventures; now where funds are available your Company may be looking
either to support existing investee companies or take positions in selected
later stage ventures where mineral resources have been confirmed and where
shorter term returns might be expected.
Shareholder information
The Company's shares are traded on AIM and PLUS-SX.
Announcements made to the London Stock Exchange are sent to those who register
at the Company website, www.starvest.co.uk where historic reports and
announcements are also available.
Annual general meeting
We will hold our annual general meeting at 3.00 pm on Monday 10 December 2012 at
St Stephen's Club, Queen Anne Gate, London SW1 when we look forward to meeting
those Shareholders able to attend.
R Bruce Rowan
Chairman & Chief Executive
25 October 2012
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
Whilst the Company has no exclusive commitment to the natural resources sector,
the Board sees this as having considerable growth potential for the foreseeable
future. Historically, investments were generally made immediately prior to an
initial public offering, at IPO on the AIM or PLUS markets 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 up to forty
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.
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 cash 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.
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.
The investee companies, being small, almost invariably lack share market
liquidity, even if they are quoted on AIM, PLUS, ASX, TSX 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.
Of the thirty to forty investments held at any one time, it is expected that
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. That stated, 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.
The Company currently has investments in the following companies which
themselves are investment companies: Equity Resources plc, Guild Acquisitions
plc; Addworth plc and International Mining & Infrastructure Corporation 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 2012, the portfolio comprised interests in the
companies commented on below.
The tough trading and fundraising conditions of the past two years have taken a
toll on some of the businesses in which Starvest is invested to such an extent
that as at 30 September 2012:
* ten portfolio companies accounted for 85% of the portfolio value; all of
these companies are mineral exploration ventures on which we comment first;
in four cases, the year-end valuation exceeds original cost;
* the next five investments account for a further 10% of the portfolio value;
* the remainder, amounting to 5%, include both mineral exploration ventures as
well as other businesses which are all valued below cost, together with the
investment in Nordic Energy plc made immediately before the year end.
Transactions
During the year there were no sales.
Additional investments were made in the following mineral exploration ventures:
Alba Mineral Resources plc, Ariana Resources plc, Greatland Gold plc and Equity
Resources plc. A new investment was made in support of Nordic Energy plc.
Mineral exploration ventures accounting for 85% of portfolio value:
Ariana Resources plc - AIM ticker: AAU
Website: www.arianaresources.com
Ariana Resources is a gold exploration and development company focused on
epithermal gold-silver and porphyry copper-gold deposits in Turkey, which has
now become Europe's largest gold producing country and is highly prospective for
multi-million oz discoveries. Ariana's primary interest is the Red Rabbit Gold-
Silver Project in the Sindirgi Gold Corridor in western Turkey, with a compliant
resource estimate of 448,000 oz of gold equivalent, operated under a joint
venture with local firm Proccea Construction, becoming 50:50 on production
start-up expected by late 2013. Ariana's further exploration drilling
operations in the Kiziltepe sector have led to intercept findings raising
greater output expectations.
Meanwhile Ariana has also focused exploration effort on north-east Turkey under
a joint venture with Canadian Eldorado Gold, and in the south-east with a
12.5% equity stake in Tigris Resources. Eldorado's intentions regarding the
Salinhas project have been confirmed with the announced start-up of a 4,000m
drilling programme to complete in-fill drilling of the known gold mineralisation
and to test down-dip extensions; Eldorado will fund $1.77 million for the joint
venture in the current operating year. Ariana has also won a ten year
operational licence for its exploration-stage Kizilcukur project to the west of
the Red Rabbit field, and where it plans to commence a 1,500m drilling programme
in the second quarter of 2013.
These new campaigns are seen as to Ariana's strategy to expand its resource
inventory to one million oz of gold equivalent. While first gold production
from Red Rabbit has been deferred to 2013 due to changes in Turkish
environmental regulations, this project remains economically robust and, coupled
with the potential of further exploration successes against a background of
early production and the strong Turkish growth economy favouring mining
developments, Ariana's progress can be soon expected to belie its present lowly
market rating.
Beowulf Mining plc - AIM ticker: BEM
Website: www.beowulfmining.com
Dual-listed on the AIM and the Swedish Aktietorget markets, Beowulf Mining is a
mineral exploration company which owns a wide portfolio of resources in Northern
Sweden operated under 18 exploration licences. Its interests range from early-
stage projects to those that have had considerable work already done on them.
Beowulf aims to increase the quantity and quality of its resource portfolio and
thereby the value of these assets and of the company. Its focus in the past
year has been on increasing and accelerating its exploration activities with
particular emphasis on establishing the further potential of its significant
Kallak iron ore resource. A maiden independent JORC compliant inferred resource
estimate of 131.6 Mt of iron ore grading at 28% Fe was established for Kallak
North earlier in the year, thereby doubling Beowulf's past inferred estimate of
140 Mt grading at 39.1% Fe for its Ruoutevare deposit. Further drilling this
year for Kallak North was delayed by extreme weather conditions and then
by disputes with local Saami reindeer herders, but has now been completed and
an increased inferred resource figure can be expected before the year-end.
Meanwhile, a test mining application has been approved. Further drilling is now
planned for Kallak South to continue into late 2013 as well as a resumption of
drilling on the Ballek copper/gold project, all of which costs will be covered
by Beowulf's existing cash resources.
Despite the promise of its high grade iron mineralisation proven at great depths
(one hole mineralised over a 330m intercept at 31% Fe with a highest intercept
over 54% Fe) Beowulf's market valuation has fluctuated with the vagaries of the
short-term iron ore price and of the temporarily reducing demand for supplies of
the commodity from industrialised nations, with the market failing to recognise
the inherent strength and diversity of Beowulf's resource portfolio, with its
copper, gold, uranium and molybdenum interests, apart from its significant iron
ore resource.
Centamin plc - LSE ticker: CEY; TSX ticker: CEE
Website: www.centamin.com.au
The interest in Centamin was acquired as a result of its successful take-over in
July 2011 of Sheba Exploration, the gold exploration company operating in
Ethiopia. This was seen as a move by Centamin to diversify away from its role
of sole major gold producer in Egypt at a time when civilian unrest was on the
increase. With the political uncertainties this created, Centamin faced labour
problems at its flagship Sukari mine situated near the Red Sea and though these
were swiftly resolved, the market took fright on the announcement of a below
forecast first quarter production figure of 49,000 oz due to strike action.
This was later corrected with a record 67,000 oz second quarter output, but
labour problems resurfaced to reduce the third quarter result to 61,000 oz.
Management believes the 250,000 oz target for the full year remains achievable
with a record fourth quarter outcome expected, thus giving an increase of some
25% on 2011.
Ambitious plans see 350,000 oz as a 2013 target and 450,000 oz for 2014, while
hopes of a first dividend pay-out for end 2012 have caused the shares to rally.
This boost in future production follows a major US$280 million expansion plan
in progress at Sukari, due for completion in early 2013; with US$140 million of
cash internally generated over 9 months of trading, the expansion project should
be entirely self-financed. Sukari contains an estimated 15 million oz of gold,
mostly open-pittable, giving an average grade of 1.1 grammes of gold per tonne
of ore.
While production costs are rising to over US$700 an ounce, the promising outlook
for a rising gold price makes Centamin an interesting hedge prospect, albeit
dependent on general civil disturbances in Egypt and Sukari labour unrest being
resolved, and a favourable fiscal regime remaining unchanged from a present 3%
royalty and a 50:50 profits split with Government, and that only after recovery
of full capital expenditure.
Greatland Gold plc - AIM ticker: GGP
Website: www.greatlandgold.com
Greatland Gold is focused on gold exploration and development with projects in
Western Australia and Tasmania which have seen increasing levels of exploration
activity in the past year. Encouragingly, it continues to receive third party
enquiries for possible joint ventures across its licences, leading management to
believe that further value remains to be unlocked therefrom.
The Western Australia Ernest Giles project, consisting of three contiguous
tenements covering 948 sq km, saw drilling carried out on targets across the
licensed areas, with initial results from early stage drilling. In the southern
licence, drilling showed mineralisation occurring at shallower depths than
expected. The rocks intersected included typical greenstone sequence of basalt
and banded iron formation with quartz veining and sulphide mineralisation at
10%. Rocks showed visible alteration and structural deformation. The highest
mineralised intercept was 1m at 1.28 g/t gold from 149m. Repeat samples confirm
the tenor of the 1m samples to be correct. While this result is modest, the
Company's exploration model has now been confirmed over a potential strike
length of at least 500m, and management is confident that Ernest Giles will
deliver.
The Firetower project, consisting of four contiguous tenements covering an area
of 265sq km located in northern Tasmania, has an initial JORC inferred resource
of 90,000 oz of gold. Following last year's farm-in agreement with Unity
Mining, by which they can earn up to 75% of the project for an expenditure of up
to A$7 million over a five and a half year period, diamond drilling commenced in
September. Meanwhile the Warrentina project, which consists of several historic
goldfields over 30km of strike, has recorded single metre mineralised intercepts
up to 103 g/t gold at the Derby North area at the centre of the site, with
additional drilling planned by the year-end.
With cash in hand of £717,000 at end June, the successes of the past year and
anticipated further progress in its projects to come, management is confident
that real value is there to be unlocked from the portfolio.
KEFI Minerals plc - AIM ticker: KEFI
Website: www.kefi-minerals.com
KEFI Minerals is a dynamic gold and copper exploration company focused on
exploring for world-class mineral deposits in the well-endowed and under-
explored Tethyan Mineral Belt of Turkey and in the prolifically mineralised and
incredibly diverse geological structure of the Arabian Shield which makes up
almost half of the Kingdom of Saudi Arabia.
In Turkey KEFI has six exploration projects with its drilling having returned
intercepts of up to 2.85 m at 16.05g/t gold and 54.8 g/t silver at Derinin Tepe
and up to 2m at 20.9g/t gold and 47.4 g/t silver at Artvin.
In Saudi Arabia where KEFI is operator in a 40:60 joint venture (G & M) with a
leading Saudi construction and investment group, ARTAR, G & M has been granted
so far 4 exploration licences with a further 19 currently under application. At
the Selim North prospect gold-bearing dykes have been defined at Camel Hill with
trench results at 17mat 3.4 g/t gold: while at the Jibal Qutman prospect rock
chip channel samples of up to 4m at 9.36g/t g/t gold and 93 g/t silver were
returned and trench sampling gave best results of 3.2m at 27.7 g/t gold and
262g/t silver. Diamond drilling is now proceeding at both prospects.
The Arabian Shield is still under-explored and offers excellent potential for
discovery of major gold and copper mines. Kefi is well placed to progress
further effective exploration programmes that aim to fast-track gold discovery
and eventual development of new mines.
Nordic Energy plc - to be admitted to PLUS-SX
Website: www.nordicenergyplc.com
Nordic, Starvest's most recent start-up investment, is set up as an investment
vehicle seeking opportunities in the oil and gas exploration and production
sector in the North Sea and Northern Europe with an initial focus on low cost
entry situations in the Danish, Norwegian and Dutch offshore sectors, a region
in which its directors have significant experience. For Starvest this was seen
as a good opportunity in which to use its scarce financial resources to expand
on its interests in a sector which it sees as likely to deliver returns in the
short to medium term.
Nordic is expecting to be admitted to PLUS-SX during October 2012 having raised
£444,000 in addition to the founders' subscriptions; Starvest was one such
founder shareholder.
Oracle Coalfields plc - PLUS ticker: ORCP
Website: www.oraclecoalfields.com
Oracle Coalfield's, as the first developer of coal mining in Pakistan, switch
from PLUS Markets to AIM in April 2011 has since met with a disappointing
reluctance on the part of UK investors to recognise the significant progress it
has subsequently achieved in fulfilling the commitments made and expectations
raised in support of its AIM admission. As a result of current restrictive
capital markets, its share price has seriously faltered, making it difficult for
Oracle to raise additional modest funding from UK sources to cover minor final
exploration and site infrastructure projects required to be undertaken before
commencement of its major mine development work. Recourse to non-UK sources of
finance is therefore under consideration as a precursor to raising the main
development financing in early 2013.
Meanwhile in Pakistan, Oracle's project is enthusiastically supported by the
Government who are anxious to appease mounting civil unrest caused by severe
shortages of electricity which is also crippling industry at large. With
indigenous oil and gas production in decline and hydro power at its limit it is
easy to see why as a matter of urgent economic necessity, the earliest
production of local coal has become vital, with ultimate replacement of all coal
imports.
Against this background Oracle's role of being first producer of Thar coal with
a lead of some 2 years over any potential rival is clearly beneficial but also
carries a heavy onus of responsibility. Granted a renewable mining licence of
30 years duration, Oracle's Block VI covering 66 sq km of the Thar Coalfield has
an assessed total resource of 1.4 billion tonnes; the initial development phase
will cover 20 sq km with a JORC assessed resource of 529 million wet tonnes and
a proven reserve of 113 mt. Initial development plans envisage production
starting by late 2014 with 1 mt projected for 2015, reaching 2.5 mt by 2016.
Oracle's current market capitalisation is therefore infinitesimal when compared
with the enormity of its project. The management requires ingenuity to raise
its profile to gain the financial support necessary for the mine development
programme.
Regency Mines plc - AIM ticker: RGM
Website: www.regency-mines.com
Regency Mines is focused on investing in the mining and minerals sector,
directly and indirectly, and to explore for nickel, base metals and gold in
Western Australia, and copper and gold in Queensland. Its deal-making and
investment arm has assisted other companies in listing on AIM, including Red
Rock Resources plc which was established by Regency with a portfolio of iron and
manganese properties. Regency also holds strategic stakes in AIM-listed Oracle
Coalfields plc and Alba Mineral Resources plc, and has recently taken up an
option to buy Sudanese agrochemical assets.
Regency's exploration arm continues to explore assets in Western Australia and
Queensland where additional ground has been acquired and mineral prospects have
been extended to include titanium, graphite, rare earths and uranium. But its
principal asset is the 50:50 joint venture with Direct Nickel Ltd (DNI) in its
emerging world-class Mambare nickel-cobalt project in Papua New Guinea; it is
also a significant shareholder in DNI which owns a laterite nickel treatment
technology at pilot plant stage.
Regency's recent announcement of its Mambare resource, 162.6 mt nickel grading
0.94% with 1.53mt of contained nickel, has failed undeservedly to arouse
appropriate interest in the stock market, especially with the prospect of
further results to come from future drilling. While present financial
constraints may prevent accelerated advancement of its key projects, Regency
will fund itself through the equity markets and opportune sales of assets.
Once investor buying interest returns to rally the market, Mambare's potential
as a low-cost nickel producer with a deposit capable of supporting long-term
production should trigger an early re-rating of the shares.
Red Rock Resources plc - AIM ticker: RRR
Website: www.rrrplc.com
Red Rock is a mineral exploration and development company focusing on iron ore,
gold and manganese operations in Colombia, Kenya and Greenland. It creates
shareholder value by de-risking early stage mineral exploration projects and by
spinning them off to crystallise the added value created. This strategy was
successfully applied to its iron ore and manganese interests in Western
Australia that now form part of ASX-listed Jupiter Mines Ltd (JML) developed
with Pallinghurst Resources as a steel feed platform; JML has recently announced
the first manganese mined from its Tshipi Borwa mine in South Africa. The
development of JML has created the solid financial base for Red Rock taking on
its exploration investments elsewhere; these are:
* In Colombia, Red Rock's activities concern gold and centre on a 50.002%
interest in Four Points Mining which owns the re-opened El Limon mine,
currently under offer.
* In Kenya, the Migori Project has seen the conclusion of 15,000 metres of
infill resource drilling over its four resource prospects with upgrades
expected of resource estimates; an earlier JORC compliant indicated and
inferred estimate exceeded 1m ozs, while a scoping study has given a
positive conclusion to a tailings plant proposal.
* In north-west Greenland, initial results from a maiden drill season in the
Melville Bugt high grade shipping iron ore project, close to deep water, had
twenty-seven holes completed with 40% of all metres drilled intersecting
significant magnetite BIF intersections. A mineral resource estimate is
awaited which is expected to result in the company increasing its stake from
25% to 60%.
Red Rock has consistently created value for its shareholders by acting as a
successful explorer and asset trader, a fact not currently recognised in its
present lowly share rating, and in similar ratings given to its principal
investee companies.
Sunrise Resources plc - AIM ticker: SRES
Website: www.sunriseresourcesplc.com
Sunrise Resources is a diversified mineral exploration and development
specialist seeking to develop profitable mining operations to sustain its wider
exploration efforts and to create value for its shareholders through discovery
of world-class deposits. Whereas in the past its former name of Sunrise
Diamonds reflected a strong concentration on diamond exploration, a marked
change in its interests and their geographical spread around the World readily
explains the name change. Its diamond projects in Finland have been put on
hold. With long government delays in processing Canadian licence applications,
and with disappointing results from a second follow-up drill programme led
management to surrender its option to purchase the Canadian Long Lake gold
project and its adjacent copper platinum group project which would have required
significant further exploration expenditure in the run-in to the option expiry
date.
The diversification of Sunrise's commodity interests into gold, base metals and
industrial minerals based primarily on Canada, Ireland and Australia has come
about through the company's new focus on a 100% owned barite project at
Derryginagh near Bantry in south west Ireland. Sunrise sees potential for a
modest scale mining operation producing high value white barite for use as
industrial filler. Results of its first drilling have established high grade
extensions to the local barite system and existing well below levels exploited
by previous developers; the project has clear attractions. Add to this the new
Cue diamond project in Western Australia where five holes have been drilled to
sample the Cue 1 kimberlite and five more to test geological and geochemical
targets; petrological and diamond evaluation results are awaited.
Investors have seen the Sunrise share price react positively to the prospect of
a more cash-generative news-flow.
Mineral exploration ventures accounting for 10% of portfolio value:
Alba Mineral Resources plc - AIM ticker: ALBA
Website: www.albamineralresources.com
Alba is a committed, technically driven explorer with a commodity focus on
uranium and base metals, with a portfolio of mineral properties and interests in
Mauritania and Ireland. Projects are at different stages of development ranging
from early exploration targets to more advanced drill-ready projects. Alba's
overall corporate and exploration strategy is one of developing a portfolio of
well-researched, promising and prospective exploration properties that will be
pursued further, either in the Company's own right or in conjunction with other
parties. To create and realise value, projects may be disposed of in whole or
in part, spun off into a separate company, joint ventured to include a cash
consideration and/or maintaining a "net smelter return" or developed into
operating mines.
Activities in the past year have been focused on securing additional funding
with on-going costs having been met out of loans from directors and other
related parties. Nonetheless, work has continued on the Company's 100% owned
Limerick zinc-lead-silver licence as a result of the joint venture agreement
with the Canadian Teck Group which undertook a complete reappraisal of all
previous exploration work. Results of new drilling revealed an encouraging
presence of pyrite, often indicating the presence of base metals, so drilling is
continuing. Under the terms of the JV agreement, Teck has the option to earn a
75% interest in the Limerick project before forming a JV company on
making payments totalling US$1m up to end June 2015.
In Mauritania, the uranium exploration permit lost almost a year previously, was
reinstated by the authorities. Subject to successful fund-raising, fieldwork
will recommence shortly. Alba will continue to seek new partners under joint
venture arrangements.
Equity Resources plc - PLUS ticker: EQRP
Equity Resources is invested entirely in Regency Mines plc and Red Rock
Resources plc, both of which are discussed above, and consequently has had a
tough year. The company's recently announced results reflect the current
malaise, although each of the three directors has recently exercised options in
lieu of fees so as to conserve cash.
Gippsland Limited - Sydney ASX ticker: GIP
Website: www.gippslandltd.com.au
Gippsland, the Perth-based Australian international resource company, formerly
AIM-listed, has suffered a disappointing share price performance over the past
year as investors viewed its interests as rather too long-term and subject to
the risks of growing political unrest. Gippsland's interests are principally in
the Middle East and focus on the Arabian Nubian Shield region, with a 40% home
interest in the largest Australian tin project in Heemekirk Tasmania.
The development of the 44.5 million tonne Abu Dabbab tantalum/feldspar deposit,
located in the Egyptian Central Desert, will result in the creation of one of
the world's foremost sources of tantalum, a metal vital to the electronics and
aerospace industries. The project is managed under a 50:50 partnership with an
Egyptian state company. A minimum 2 million tonne mill feed rate per annum
yielding 650,000lb of tantalum will give the now operating mine a 20 year life,
with further ultimate back-up available from an adjacent 98 million tonne
Nuweibi deposit mine also 50% owned by Gippsland.
Another 100% owned subsidiary, Nubian Resources, is involved in gold and copper
prospecting in Eritrea. Doubts about Gippsland's ability to finance the
development of its significant portfolio of interests, coupled with a lack of
regular news releases to the market, may have served to undermine its more
recent share rating.
International Mining & Infrastructure Corporation plc - AIM ticker: IMIC
Website: www.imicplc.com
International Mining & Infrastructure Corporation (IMIC), the Africa-centric
company focused on infrastructure solutions primarily for the iron ore
sector, has established a key strategic partnership with African Iron Ore Group
(AIOG) to bring to the Government of Guinea a fully financed, integrated
transport solution for the multi-billion dollar Simandou South iron ore project.
With West and Central African nations seeking to develop their resource
potential as a means of unlocking their economic development, so the need for
major infrastructure improvements to already over-stretched existing rail, port,
and power facilities has become critical to ensuring access of their resources
to the consumer markets of the industrialised world. Therefore, the challenge
is to develop requisite infrastructure solutions as a stimulus for balanced
growth and the broad-based economic empowerment of the people. And commonly
this necessitates close association and involvement of development institutions
as well as the assistance of consuming nations.
Against this background, IMIC saw an opportunity to become the funding partner
to AIOG and to get involved in the creation and funding of the special
purpose vehicles (SPVs) to carry out such infrastructure work, with Guinea being
the first target area and with the involvement of substantial Chinese consortia
in the Simandou project work. Presently, IMIC is the only listed route to
involvement in private company AIOG and the related infrastructure potential now
fast developing. IMIC has a 10% equity stake in AIOG, while AIOG in turn owns
11.9% of IMIC. IMIC intends to take equity stakes in mining companies operating
in the region, a 3.9% stake having been taken in AIM-listed Afferro Mining
operating in Cameroon.
Minera IRL Limited - AIM ticker: MIRL
Website: www.minera-irl.com
Minera is a Jersey registered company and together with its subsidiaries is a
Latin American precious metals mining, development and exploration company,
listed on the AIM Market, the Lima Stock Exchange, and the Toronto TSX Exchange.
In Peru the company operates the Corihuarmi gold mine, has completed a pre-
feasibility study on the Ollachea Project, and is exploring a number of other
gold prospects. In Argentina the company has completed a feasibility study on
the Don Nicolas gold project in Patagonia, and is prospecting large land package
under exploration licences held in its name.
Results for the past year showed impressive advancement on all fronts and with
the development projects of Ollachea and Don Nicolas starting production within
the next three years, overall production should reach 170,000 oz by 2015. Add
the enviable cash balance in hand end June of US$ 23 million and the conclusion
must be that an excessive perception of country risk associated with Argentina
could be unfairly impacting on the share price.
The remainder accounting for 5% of the portfolio value:
Agricola Resources plc - PLUS ticker: AGRI - suspended
Website: www.agricolaresources.com
Agricola Resources has withdrawn from its gold exploration activities in Morocco
following a reassessment of the licence potential. There is talk of projects in
New Zealand and Kazakhstan, but no certainty of outcome.
CAP Energy Limited - PLUS ticker: CAPP
Website: www.capenergy.co.uk
Cap Energy invests in oil and gas projects in the USA. Following a re-
capitalisation and re-organisation of the business earlier this year, in which
Starvest was not invited to participate, we were heavily diluted and so now have
a nominal interest only.
Carpathian Resources Limited - Sydney ASX ticker: CPN - suspended
Website: www.carpathian.com.au
Carpathian Resources is an Australian ASX-listed oil and gas explorer and
producer with a focus on Central Europe and a primary sector concentration on
the Czech Republic. The company's production interests are 50% participations
in the Janovice gas block in northern Moravia and the Krasna oil field and a
90% interest in the Rosnov gas project.
Static trading has tended to restrict returns to the Group and a degree of
diversification has occurred in its investment interests with its controlling
stake taken in Singapore-based Somap International Shipping and Trading, with a
principal activity of buying and selling ships for recycling, breakage or
demolition, some 900 vessels having been sold since the business was originally
started. The company has also entered into a strategic cooperation and advisory
service contract with the Russian Gazprom Group, in particular connection with
the securing of debt financing.
Kincora Copper Limited, formerly Brazilian Diamonds Limited - Toronto TSX
ticker: KCC
Website: www.kincoracopper.com
The interest in Kincora Copper derives from a shareholding in the former
Brazilian Diamonds which was merged with private company Kincora Group and later
was transformed into Kincora Copper.
TSX-listed Kincora Copper is based in Vancouver and is focused on Mongolia, home
of the world-class Oyu Tolgoi copper-gold belt, and as yet underexplored and
undeveloped. Kincora operates in south-east Mongoli the deposits of Bronze Fox,
Tourmaline Hills, North Fox and Golden Goose prospect, together forming a highly
prospective licence area.
Kincora Copper has not been as forthcoming with announcements of drilling
progress and results as one might expect in view of the significance of its
asset base. It continues to enjoy significant financial support from its 29%
shareholder, Origo Partners, and is understood to have had adequate funds in
hand to carry out a good part of its 2012 exploration programme. But
realistically the day when Kincora takes on a major development partner cannot
be far away.
Kuwait Energy plc, formerly Concorde Oil & Gas plc
Website: www.kec.com
The interest in Kuwait Energy arises from the takeover of the Luzskoye and
Chikshina projects of Concorde Oil & Gas plc. After a long period of silence,
it transpires that Starvest has an interest in Kuwait Energy, a Jersey
registered company, and in Kuwait Energy Company KSCC, a Kuwaiti company. A
London listing for Kuwait Energy is expected when it should be possible to
attribute some value to the holding.
Rare Earths and Metals plc, formerly Lisungwe plc - PLUS ticker: REMP
Website: www.rareearthsandmetals.com
Rare Earths and Metals has made few announcements during the past year but we
expect news during the next few months as the company has a 30 September year
end so will be required to issue an update soon.
Silvermere Energy plc - AIM ticker: SLME
Website: www.silvermere-energy.com
Silvermere Energy, formerly Chalkwell Investments, has oil and gas interests in
the Gulf of Mexico. Following a re-capitalisation of the business, in which
Starvest was not invited to participate, we were heavily diluted and so now have
a nominal interest only.
Woburn Energy plc - AIM ticker: WBN
Website: www.woburnenergy.com.
Our investment in Woburn Energy has seen a marked upturn in its potential after
a somewhat disappointing performance with the consistent losses it had reported
on its Colombian activities in the past. This welcome change in its fortunes
has arisen through its recent disposal for cash of its entire portfolio of
Colombian beneficial oil and gas interests, and thereby settling all its local
outstanding liabilities. Woburn expects that by April 2013 its receipt of the
net sales settlement from its 51%owned local subsidiary LOQC will amount to US$5
million.
Woburn has no assets at this time other than this pending settlement and so is
now an investing company under the AIM Rules. Following the final settlement of
its outstanding loan and of other due fees and costs, Woburn will have a
significant cash resource of over $3 million to pursue new investment
opportunities to be sought in the oil and gas sector outside the Americas.
Companies with other interests
Alpha Universal Management plc, formerly Lotus Resources plc - PLUS ticker:
AUNP
Alpha Universal is in business to acquire debt portfolios and other discounted
assets. Following a re-capitalisation of the business, in which we were not
invited to participate, Starvest was heavily diluted and so now has a nominal
interest only.
Guild Acquisitions plc - PLUS ticker: GACQ
Guild Acquisitions is a small Isle of Man based investment company. Amongst its
investments is a 19.59% interest in Equity Resources plc. Others are not
disclosed in the financial statements to 31 December 2011.
Marechale Capital plc - AIM ticker: MAC
Website: www.marechalecapital.com
Marechale Capital is 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 past year saw the company moving into operating profit.
Marechale considers it now has a good pipeline of growth and capital development
transactions in its chosen sectors, but remains cautious about overall market
conditions affecting the operating environment of their client companies and of
debt and fund-raising opportunities in general.
In addition to the above, Starvest has interests in the following quoted and
unquoted companies, none of which are deemed to have significant value at this
present time: Addworth plc - general investment holding company; Fundy Minerals
Limited, www.fundyminerals.com; Goliath Resources Inc - Pink Sheets OTC ticker -
GHRI; Silvermere Energy plc; Treslow Limited - a copper-nickel prospect near
Armstrong in North West Ontario, Canada.
Profit and loss account
for the year ended 30 September 2012
Year ended 30 September Year ended 30
2012 September 2011
£ £
Operating income - 3,788,942
Direct costs - (629,896)
------------------------- ---------------------
Gross profit - 3,159,046
Administrative expenses (199,791) (228,799)
Amounts written off trade (842,703) (104,724)
investments
------------------------- ---------------------
Operating (loss)/profit (1,042,494) 2,825,523
Interest receivable 10,932 1,877
Interest payable - (1,837)
------------------------- ---------------------
(Loss)/profit on ordinary (1,031,562) 2,825,563
activities before taxation
Tax on (loss)/profit on 284,044 (762,418)
ordinary activities
------------------------- ---------------------
(Loss)/profit on ordinary (747,518) 2,063,145
activities after taxation
------------------------- ---------------------
(Loss)/earnings per share - (2.0) pence 5.6 pence
basic
- 5.1 pence
(Loss)/earnings per share -
diluted
------------------------- ---------------------
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 2012
30 September 2012 30 September 2011
£ £
Current assets
Debtors 310,042 27,710
Trade investments 3,051,056 3,368,759
Cash at bank and in hand 199,036 1,893,536
------------------- ------------------
3,560,134 5,290,005
Creditors - amounts falling due (46,241) (867,008)
within one year
------------------- ------------------
Net current assets 3,513,893 4,422,997
------------------- ------------------
Share capital and reserves
Called-up share capital 394,173 390,173
Share premium account 2,118,396 2,100,396
Profit and loss account 1,001,324 1,932,428
------------------- ------------------
Equity shareholders' funds 3,513,893 4,422,997
------------------- ------------------
Cash flow statement
for the year ended 30 September 2012
Year ended Year ended
30 September 2012 30 September 2011
£ £
Net cash (outflow)/ inflow from (781,300) 2,317,308
operating activities
Returns on investment and
servicing of finance:
Interest received 10,932 1,877
Interest paid - (1,837)
------------------- -------------------
10,932 40
------------------- -------------------
Taxation (paid)/recovered (762,546) 9,490
------------------- -------------------
Dividend paid (183,586) (91,793)
------------------- -------------------
Financing:
Issue of new shares 22,000 -
------------------- -------------------
22,000 -
------------------- -------------------
(Decrease)/increase in cash in the (1,694,500) 2,235,045
year
------------------- -------------------
(Loss)/earnings per share Year ended 30 September Year ended 30 September
2012 2011
The basic (loss)/earnings £ £
per share is derived by
dividing the (loss)/profit
for the year attributable to
ordinary shareholders by the
weighted average number of
shares in issue.
(Loss)/profit for the year (747,518) 2,063,145
--------------------------------------------------
Weighted average number of 36,967,532 36,717,259
Ordinary shares of £0.01 in
issue (2.0) pence 5.6 pence
(Loss)/earnings per share -
basic
--------------------------------------------------
Weighted average number of 37,383,926 40,492,259
Ordinary shares of £0.01 in
issue inclusive of
outstanding options
(Loss)/earnings per share - - 5.1 pence
diluted
--------------------------------------------------
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, diluted earnings per share has not been
calculated; 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 2012, 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.
The Directors do not recommend the payment of a dividend for the year.
Copies of the report and financial statements will be posted to Shareholders no
later than 9 November 2012 and will be available for a period of one month
thereafter from the Company Secretary at the following business address: 67 Park
Road, Woking, Surrey, GU22 7DH, email: email@starvest.co.uk
Alternatively, the report may be downloaded from the Company's website,
www.starvest.co.uk.
Enquiries to:
* Bruce Rowan, telephone 020 7486 3997
* John Watkins, telephone 07768 512404, or to john@starvest.co.uk
* Gerry Beaney, Colin Aaronson or David Hignell, Grant Thornton Corporate
Finance, telephone 020 7383 5100
END
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originality of the information contained therein.
Source: Starvest plc via Thomson Reuters ONE
[HUG#1652549]