Tri-Star Resources, the integrated antimony development company, has completed its funding package for its share of the Oman Antimony Roaster, a 20,000 tonne per year antimony roasting facility being developed in Sohar, Oman, and the first of its kind to be built outside of China in over 40 years and to World highest environmental standards. The company is now permitted and funded to progress the closure of the joint venture terms and proceed to construction. We have updated our forecasts, and continue to estimate fair value per share of 0.48p, which suggests 299% upside to the current share price of 0.12p. This, however, does not capture the further valuation upside for the company’s upstream antimony assets and the major global potential for the refractory gold roasting technology.
Tri-Star has raised a total of £3.5 million (before expenses) through the issue of both shares and convertible bonds. The recent fundraising included the issuance of £1.5 million in shares (before expenses), at a price of 0.10p per share, and the issuance of a further £2 million secured convertible bonds due in 2018. As at 30th June 2015, the outstanding principal and accrued interest of the Loan Notes stood at £7.5 million. It has also conditionally agreed a number of revisions to the loan note instrument governing the terms of the convertible unsecured loan notes of total initial nominal value of $6 million, and has, in principle, agreed revised terms with respect to the capital structure of Strategic & Precious Metals Processing (SPMP), a company of which Tri-Star owns 40%.
Conditional Sale of Intellectual Property Rights
Tri-Star has also agreed the conditional sale of all its intellectual property rights relating to clean antimony concentrate roasting and the related clean roasting of refractory gold for a potential total fee of $6 million.
We believe our assumptions are conservative and that there is further upside based on the unlocking of value in their upstream assets and in bringing to light the major global value of the refractory gold technology, of which an independent report has verified the commercial viability. The report also estimates that there are (at least) 39 projects it would work with, and that each facility it can build has a NPV of $1 billion. Once the Oman antimony roaster is fully operational, the dividend pay-out ratio could be as high as 90%, equating to a fully diluted dividend per share of 0.058p or a dividend yield of 48%, which compares to a typical yield for a processing company of 4%-6%. We also note that on a fully diluted basis and on FY18 earnings estimates, the shares trade on a PE of just 2x.