(Alliance News) - Tri-Star Resources PLC said Friday negotiations for the funding of its investment in Strategic & Precious Metals Processing LLC are continuing but the company is unhappy with the terms currently offered.
Shares in the mineral processor were down 58% in London in morning trade at 14.48 pence each.
Tri-Star's principal activity is its investment in an antimony and gold production facility in Oman which is being developed by Strategic & Precious Metals Processing, a company which Tri-Star has a 40% stake in.
The other joint venture partners are The Oman Investment Fund - which holds a 40% stake - and DNR Industries Ltd, part of Dutco Group in Dubai - holding a 20% stake.
SPMP is currently seeking further financing to up production at its Oman facility, which is targeting 100% capacity by the end of 2020. In order to achieve this, SPMP has determined it will need to raise USD160 million of working capital, which includes USD60 million for building up inventories and continued investment to meet current debt obligations.
Tri-Star said: "SPMP has considered several different combinations and types of finance including debt, mezzanine and equity funding and although negotiations with various potential providers of finance continue, the terms offered to date are, in the view of the board of Tri-Star, unacceptable."
"It is also the board of Tri-Star's view that any such provider of further finance to SPMP will require comfort that the total funding required of up to USD160 million is available prior to confirming its individual commitment to the funding package," the company added.
Tri-Star said the long-term future of SPMP remains "uncertain" due to its inability to secure funding on agreeable terms, but stressed negotiations are ongoing.
Tri-Star added: "Negotiations between the shareholders of SPMP continue as to how to provide short term financing to SPMP in order for it to continue its operations. No agreement has yet been reached. However, the various outcomes might include the dilution of Tri-Star's share-holding in SPMP (as a result of the financial contributions of other shareholders) and the temporary suspension of operations at SPMP."
The company noted SPMP is currently in technical default of its current banking facility with Bank Nizwa and Al Aziz Bank, as SPMP was unable to meet its most recent repayment obligation. Tri-Star said short term funding from shareholders is expected to "remedy" the default.
Tri-Star's obligation is 40% of the total liabilities of about USD75 million, but noted the obligations are cancelled once the plant in Oman reaches commercial production - which Tri-Star believes to now be the case.
In November, Tri-Star said SPMP informed the company commercial grade antimony had been produced and commercial grade gold dore had been produced and sold.
"The guarantee will be formally discharged once an independent consultant certifies to the banks that commercial production has been successfully started," Tri-Star added.
By Paul McGowan; paulmcgowan@alliancenews.com
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