Grit Inv Tst Regulatory News (GRIT)

To: RNS

From: Global Resources Investment Trust plc

LEI: 2138005OJKGWG3X4SY51

Date: 28 September 2018

Chairman's Statement

Introduction

I am writing to you for the first time since I became Chairman on 27 April 2018. The intervening five months have been extremely difficult ones for your Company.

Investment and Share Price Performance

At 31 December 2017 the Company had three major investments, Anglo-African Minerals plc ("AAM": £2.1m), Siberian Goldfields ("Siberian": £1.8m) and Kalia Holdings ("Kalia": £2.4m), together with four smaller investments (£1.3m).

When my predecessor wrote to you in April, the Board expected the refinancing of AAM to be completed within weeks. Two sources of funding had been identified, and while one fell away the other progressed, albeit more slowly than anticipated. Insufficient progress has been made in recent weeks, however, and the Board has concluded that it can no longer be confident that the funding will be forthcoming. It has therefore this week taken the decision to write down the value of the investment in AAM to £nil, although a £0.5m debtor remains as an asset on the Company's Balance Sheet.

Siberian has also been seeking funding and, in light of increasing international tension with Russia generally and certain Russian citizens in particular, may have to reduce the price at which it is doing so. The Board has therefore made the decision to write down the value of Siberian by 42% in aggregate.

Kalia became a listed position during the period and is carried at the price at which the company trades on the Australian stock exchange.

The Executive Director writes more fully concerning all the Company's investments in his Review.

The write downs of AAM and Siberian are both adjusting post-balance sheet events and their impact is included in the 30 June 2018 results. Your Company's net asset value at 30 June 2018 was 10.4 pence per share, a decrease of 47.2% from the 19.7 pence at which it stood on 31 December 2017.

The Company's ordinary share price stood at 9.85 pence, a nominal discount of 5.3%, but this did not reflect the subsequent write downs in AAM and Siberian.

Receiver

On 10 August 2018 the Board was notified that Tygola Pty Ltd had appointed receivers over certain assets of the Company in connection with expenses of US$251,000 that Tygola claimed were due to it from the Company in connection with the guarantee by the Company of a US$500,000 loan by Tygola to AAM.

On 27 September the receivers were discharged, the parties having reached agreement. The all-in costs to the Company in dealing with this matter are estimated at £0.3m.

General Meeting

The Company's largest shareholder, Mardasa Nominees Pty Ltd (owning 29.7% of the Company) requisitioned a General Meeting of the Company which was held on 22 August 2018. As a result of that meeting Mr David Johnston and Mr Jonathan Reynolds were appointed to the Board as non-executive Directors. The Board does not consider Mr Johnston or Mr Reynolds to be independent.

Outlook

The Board is urgently considering the future direction of the Company and all options, including those of a sale of the Company or Members' Voluntary Liquidation, which would see the assets of the Company realised and the proceeds distributed to shareholders, are "on the table". The Board will advise shareholders in due course of any proposals that it recommends should be implemented.

Simon Farrell

Chairman

28 September 2018

Executive Director's Review

As already outlined in the Chairman's Statement, it has been a difficult and disappointing six months for the Company. The majority of the poor performance is a result of the Board's decision to write down the carrying value of the Company's investment in Anglo African Minerals plc ("AAM").

This was not a decision taken lightly, for as a major shareholder and loan note holder in AAM, GRIT has been supportive of the company and its management in them further developing their world class bauxite projects in Guinea. ‎Earlier this year, AAM had agreed a refinancing proposal which would have put the company on a solid footing; unfortunately this did not complete following the failure of the new lender to deliver [on the agreed and signed Term Sheet].

Since that disappointment AAM has continued to pursue alternative funding solutions and for some time has been in advanced negotiations with another existing loan note holder to secure the refinancing of existing debts and the provision of new working capital. These conversations have been on-going for a number of weeks now, but as I write this Interim Report, no new funding agreement has been agreed and signed.

It is this lack of an agreed and completed refinancing solution that has led the Board to reduce the carrying value of its investment in AAM and with no certainty regarding the completion of the refinancing, the decision has been taken to write the equity and loan note values down to nil, while retaining a [secured] debtor balance of £500,000. This has had the effect of reducing the NAV by 5.8 pence per share.

While extremely disappointing, it should be noted that if AAM were to complete a refinancing at any time in the future, the Board would look to once again revalue the investment based on the terms of that completed transaction.

‎In a similar vein, but nowhere near as drastic, the carrying value of Siberian Goldfields plc has also been reduced since the year end. Like AAM, Siberian has been trying to raise pre-IPO funding as a precursor to a listing on AIM. However, the increased investor concern related to Russian risk has made the fund raising difficult. We were previously valuing the investment at 12 pence per share, which was the level that Siberian had mandated its brokers to raise the pre-IPO funding, but that has now been written down to 7 pence per share.

Against the current investment background and with no improvement in the Russian situation, it is unlikely that Siberian will be able to complete a listing, but we are aware that the company is also in discussions with potential corporate partners to complete the development of the project and bring it into production.

I finish my report with some good news. During the period under review, the investment in the private company Kalia Holdings Pty Ltd was exchanged for shares in the ASX listed Kalia Limited, where GRIT now holds approximately 22% of the listed company.

Kalia has now agreed exploration access with the local community groups and a helicopter has been mobilised to begin work on the geophysical survey, with initial results expected in mid to late October.

We remain excited by the exploration potential of Bougainville Island and look forward to the initial results from Kalia with great anticipation.

Within the portfolio there remain three small listed holdings, and it remains our intention to sell these holdings to realise cash.

In conclusion, while these Interim Results are disappointing, it serves to highlight the risks involved in the small cap mining sector‎ and we hope that by the year end we will be able to report more positive news, ideally reporting that both AAM and Siberian have been able to complete fund raisings that will allow both companies to move forward. Additionally I would also hope to be able to report good news from Kalia's initial geophysical survey.

David Hutchins

28 September 2018

Enquiries:

David Hutchins

Director

Tel: +44 (0) 207 290 8541

Maitland Administration Services (Scotland) Limited

Martin Cassels

Tel: +44 (0) 131 550 3760

Income Statement

The 'total' column of this statement represents the Company's profit and loss account, prepared in accordance with IFRS. All revenue and capital items in this statement derive from continuing operations. All of the loss for the period is attributable to the owners of the Company.

No operations were acquired or discontinued in the year.

A Statement of Total Recognised Gains and Losses is not required as all gains and losses of the Company have been reflected in the above Income Statement.

Balance Sheet

Statement of Changes in Equity

The revenue reserve represents the amount of the Company's reserves distributable by way of dividend.

Cash Flow Statement

The accompanying notes are an integral part of the financial statements.

Notes

1. Interim Results

The condensed financial statements have been prepared in accordance with International Financial Reporting Standards ('IFRS') and IAS 34 'Interim Financial Reporting' as adopted by the European Union and the accounting policies set out in the statutory accounts of the Company for the year ended 31 December 2017. The condensed financial statements do not include all of the information required for a complete set of IFRS financial statements and should be read in conjunction with the financial statements of the Company for the year ended 31 December 2017, which were prepared under IFRS as adopted by the European Union. There have been no significant changes to management judgements and estimates.

Going Concern Basis of Accounting

The Company's operations have been cash flow negative since its inception; the Company relies on the sale of investments to generate the cash needed to continue to operate. £0.4m was realised from the sale of investments during the 6 month period under review.

With the Company's exposure to fewer more material investments, in conjunction with the disposal of the lower value more diversified portfolio in order to meet the Company's operating costs, the Board considers that the level of liquidity risk has increased as compared to prior years. The Directors nevertheless consider that the Company has adequate resources to continue in operational existence for the foreseeable future. For this reason they continue to adopt the going concern basis in preparing these financial statements.

2. Return per Ordinary Share

The revenue loss per ordinary share for the six months ended 30 June 2018 is based on a net loss after taxation of £573,000 and on a weighted average of 41,964,512 ordinary shares in issue during the period.

The capital return per ordinary share for the six months ended 30 June 2017 is based on a net capital loss after taxation of £3,305,000 and on a weighted average of 41,964,512 ordinary shares in issue during the period.

3. Net Asset Value per Ordinary Share

The net asset value per ordinary share is based on net assets of £4,373,000 (31 December 2017: £8,250,000) and on 41,964,512 (31 December 2017: 41,964,512) ordinary shares, being the number of ordinary shares in issue at the period end.

4. Warrant Instrument

The Company issued 5,000,000 warrants in 2014. The warrants are unlisted and are exercisable up to the fifth anniversary of admission in amounts or multiples of 50,000 warrants at £1.00 per ordinary share.

5. Related Party Transactions

The Board of Directors is considered to be a related party. Mr Farrell and Ms Fukuda are considered to be independent. The Board does not consider Mr Hutchins, Mr Johnston or Mr Reynolds to be independent.

The Directors of the Company received fees for their services. Total fees for the six months to 30 June 2018 were £45,000 (six months ended 30 June 2017: £42,000) of which £2,600 (30 June 2017: £3,750) remained payable at the period end.

RDP Fund Management LLP ('RDP') received £nil in relation to the six months ended 30 June 2018, (six months ended 30 June 2017: £25,000) of which £nil (30 June 2017: £nil) remained payable at the period end.

The issue of up to four tranches of shares to RDP were approved at the General Meeting held on 16 January 2017, each of 2,000,000 shares at a price of £0.05, subject to the satisfying of certain conditions, in particular share price triggers. The first tranche of shares was issued following the General Meeting and RDP received 1,994,500 shares; 5,500 further shares remain to be issued. The second tranche of shares falls to be issued if the Company's share price remains for a period of at least one month at or above 14p; the third and fourth tranches similarly fall to be issued at trigger prices of 16p and 18p respectively.

6. Post Balance Sheet Events

· On 10 August 2018 the Board was notified that Tygola Pty Ltd had appointed receivers over certain assets of the Company in connection with expenses of US$251,000 that Tygola claimed were due to it from the Company in connection with the guarantee by the Company of a US$500,000 loan by Tygola to AAM.

On 27 September the receivers were discharged, the parties having reached agreement. The all-in costs to the Company in dealing with this matter are estimated at £0.3m.

· Following the failure of refinancing proposals at Anglo-African Minerals plc ("AAM") to complete prior to the publishing of this Interim Report, the value of the Company's investment in AAM was written down to £nil. This constituted an adjusting post balance sheet event and the revised investment valuation has been reflected in the 30 June 2018 numbers.

· Following the failure of fundraising proposals at Siberian Goldfields Ltd ("Siberian") to complete at 12 pence per share, fundraising is now being sought at a lower price. The value of the Company's investment in Siberian has been written down to £1.1m, reflecting this lower price. This constituted an adjusting post balance sheet event and the revised investment valuation has been reflected in the 30 June 2018 numbers.

7. Interim Report Statement

The Company's auditor KPMG LLP, has not audited or reviewed the Interim Report to 30 June 2018 pursuant to the Auditing Practices Board guidance on 'Review of Interim Financial Information'. These are not full statutory accounts in terms of Section 434 of the Companies Act 2006 and are unaudited. Statutory accounts for the year ended 31 December 2017, which received an unqualified audit report and which did not contain a statement under Section 498 of the Companies Act 2006, have been lodged with the Registrar of Companies. No full statutory accounts in respect of any period after 30 November 2017 have been reported on by the Company's auditor or delivered to the Registrar of Companies.

Directors' Statement of Principle Risks and Uncertainties

The risks, and the way in which they are managed, are described in more detail in the Strategic report contained within the Annual Report and Financial Statements for the year ended 31 December 2017. In the opinion of the Directors, apart from the following matter, the Company's principal risks and uncertainties have not changed materially since the date of the report and are not expected to change materially for the rest of the Company's financial reporting period to 31 December 2018.

Liquidity Risk: with the Company's exposure to fewer more material investments, in conjunction with the disposal of the lower value more diversified portfolio in order to meet the Company's operating costs, the Board considers that the level of liquidity risk has increased as compared to prior years.

Statement of Directors' Responsibilities in Respect of the Interim Report

We confirm that to the best of our knowledge:

· the condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting' and gives a true and fair view of the assets, liabilities, financial position and profit of the Company;

· the Chairman's Statement and Investment Manager's Review (together constituting the Interim Management Report) include a fair review of the information required by the Disclosure Guidance and Transparency Rules ('DTR') 4.2.7R, being an indication of important events that have occurred during the first six months of the year and their impact on the financial statements;

· the Statement of Principle Risks and Uncertainties referred to above is a fair review of the information required by DTR 4.2.7R; and

· the condensed set of financial statements included a fair review of the information required by DTR 4.2.8R, being related party transactions that have taken place in the first six months of the year and that have materially affected the financial position or performance of the Company during the period.

On behalf of the Board

Simon Farrell

Chairman

28 September 2018