Tri-Star Resources: Bald Hill Shows Further Potential

Tri-Star has announced further promising results at Bald Hill, with two further trend areas discovered. Some of these results correlate with previous discoveries and we feel they underpin the potential of the wider Bald Hill area, of which only a small region has been explored. As such, this asset now shows significant potential, in our view, and the company intends to continue its exploration here while progressing its flagship roaster project in Oman. While cautious of the risks, our stance remains speculative buy.

Further Antimony Trends Identified at Bald Hill

Tri-Star announced its fifth prospective antimony (Sb) trend within four kilometres of its Bald Hill Deposit in Canada. Two new prospects, 28 East and Carpenter Brook, returned prospecting assays of 4.61% Sb and 21.7% Sb, respectively, and are in close proximity to three existing trends. We believe these new trends support the implied potential of the wider Bald Hill area, which could be significant, and also provide the potential to add further scale to any processing plant. In addition, only a small proportion of the Bald Hill area has been explored (although no formal resources have been identified yet) and therefore further mineralised zones could be present. Tri-Star intends to conduct detailed exploration programmes at Carpenter Brook during 2015.

Roaster Project Activities Ramp-Up

Tri-Star is progressing its flagship roaster project in Oman and we understand that the planning stages could potentially be completed by the end of 2014 or in early 2015. Critical steps such as securing financing and obtaining permits are being pursuing vigorously. The company has also received positive interest in treating refractory gold ores for third parties.

Q3’14 Financials

Tri-Star recorded a loss after tax of £1.1m for Q3’14, a y-o-y reduction of £0.1m. At period-end the cash balance stood at £2.3m while net debt stood at £3.5m. This followed the completion of a £2.0m convertible bond issue on 26th August 2014 that will be used to progress the roaster project and for other working capital needs.

Valuation

We have updated our valuation for all of Tri-Star’s assets as we now believe the timeline over which these assets will come online has extended. Accordingly, our target price decreases by 0.11p but still remains well above the current share price at 0.49p. We note that there are risks to the investment case that could have a material effect on our valuation, such as Tri-Star not generating revenues as we expect or any future dilution given the lack of cash flow. However, with this in mind our stance remains speculative buy with a 0.49p target price.