Tuesday 16 August 2011
General update
In view of the successful completion of two investee company disposals and
against the background of recent market turmoil, it seems appropriate that the
Company should issue a general update at this time.
The two disposals, resulting in a combined profit of £1.5m being 583% on the
original cost, were of Belmore Resources (Holdings) plc by Lundin Mining
Exploration Limited for cash and of Sheba Exploration (UK) plc by Centamin Egypt
Limited for a mixture of cash and Centamin shares.
These two PLUS quoted company take-overs at premium prices are in stark contrast
to the prevailing mood in which junior market share prices have drifted lower in
the absence of investor buying interest.
In the West we may be suffering from the economic crises of the past years, but
in China, India and emerging nations the demand for steel continues and shows no
sign of abating. Many of our investments are focused on meeting this increasing
demand or on the extraction of gold, the worldwide demand for which has pushed
the price towards $1,800 per oz.
Of the remaining core investments, some are exploring for gold or iron ore and
other minerals such as nickel; others are well advanced in their plans for
production or are already generating cash. Of these we focus on two where, we
believe, the companies are materially undervalued at present and on a third,
Regency Mines plc, that also has interests in Oracle Coalfields plc, and Red
Rock Resources plc:
* Oracle Coalfields plc (www.oraclecoalfields.com) which was admitted to the
AIM market in April, plans to start mining coal in Pakistan in 2013 in what
is seen to be a major development for revitalising the national economy:
It will produce a major new source of indigenous feedstock for initially
industrial and later power station consumption, thereby contributing towards
resolving a critical national shortage of electricity and by replacing coal
imports, alleviating the country's serious foreign exchange imbalances.
With the market capitalisation at £16.3m, a discount to the recent AIM
admission value, we expect a substantial re-rating.
* Red Rock Resources plc (www.rrrplc.com) has a 51% stake in a Columbian gold
mine where the continuing mine improvements are leading to increasing gold
recoveries, gold exploration in Kenya, an interest in Ascot Mining plc
(PLUS), iron ore exploration in North-West Greenland with NAMA Greenland
Limited, uranium and rare earths through Resource Star Limited (ASX) and Cue
Resources Limited (TVX). But the icing on the cake must be its 1.5% gross
production royalty on Jupiter Mines Limited's (ASX) Mt Ida high grade
magnetite iron ore project in Western Australia expected to commence
production during 2013. At present prices, the mine is valued by Jupiter
Mines at £1.04 bn with the royalty, at current prices, estimated by us to
generate approximately £10m pa for Red Rock Resources over 20 years; this is
in addition to Red Rock's 4% equity stake. With a current market
capitalisation of £45.95m, we believe Red Rock Resources to be seriously
underrated.
* Regency Mines plc (www.regency-mines.com) with a nickel exploration JV in
Papua New Guinea and an 11% investment in Oracle Coalfields as well as 20%
of Red Rock Resources we believe it is also substantially underrated at the
current market capitalisation of £17.4m.
Other projects managed by Ariana Resources plc, Centamin Egypt Limited,
Greatland Gold plc, Kefi Minerals plc and Minera IRL Limited have direct or
indirect interests in gold or gold exploration and therefore expect to benefit
from the improved gold price.
It remains the opinion of the Board that the Company can expect a significant
increase in its net asset value as these investee companies and their projects
mature in the coming years. It seems that this is something the market may be
recognising in that the Starvest closing price has increased slightly since 30
June 2011 to 13.5 pence and the discount to net asset value reduced slightly to
33.3%.
12 August 30 June 30 September Change since
2011 2011 2010 September 2010
%
Company asset value £7.71m £8.10m £4.19m 84%
net of tax
Net asset value - 20.25 pence 21.21 pence 11.28 pence 79%
fully diluted
p/share
Share price - mid 13.50 pence 12.50 pence 7.75 pence 74%
Share price discount 33.33% 41.1% 31.3%
to net asset value
Market £4.68m £4.59m £2.84m 65%
capitalisation
All valuations are based on the closing market bid prices or lower directors'
valuation as described in the 2010 annual report and are net of a 10% discount
totalling £648,000 applied to substantial holdings. Furthermore, since 30 June,
cash of £1.83m has been received from the disposals, thus strengthening the
balance sheet in these challenging times. With the gross profit for the year to
date of £2.6m, your Board remains confident that its patience is being
rewarded. As we await a full recovery, Shareholders enjoy a wide spread of
medium term interests, a pooling of risk and the prospect of a further modest
dividend.
R Bruce Rowan
Chairman & Chief Executive
16 August 2011
Enquiries to:
Bruce Rowan, Chairman 020 7486 3997 or John Watkins, Finance Director
07768 512404; john@starvest.co.uk
Gerry Beaney, Colin Aaronson or David Hignell, Grant Thornton Corporate Finance
020 7383 5100
END
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Source: Starvest plc via Thomson Reuters ONE
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