TSTR.L Regulatory News (TSTR)

28 February 2012

Tri-Star Resources plc

("Tri-Star" or the "Company")

UAE Antimony Roaster

Independent Preliminary Engineering Report & Cost Benefit Analysis

Tri-Star Resources (AIM: TSTR), the antimony exploration and development company, is pleased to announce that is has received an independent preliminary engineering report and cost benefit analysis in respect of its proposed antimony roaster in the Emirate of Ras Al Khaimah ("RAK") in the UAE.

Highlights

• Capital costs for the construction of 20,000tpa capacity roaster are estimated at U$60 million

• Project sensitivity undertaken by GBM demonstrate that the proposed project is "highly viable"

• Recommendation to proceed to a Bankable Feasibility Study

Introduction

As previously announced on 26 July 2011, Tri-Star Union FZ LLC ("Tri-Star Union"), the joint venture between Tri-Star and Union International Holdings Group, proposes to develop a 20,000 tonne per annum antimony metal and tri-oxide finished products facility, located in the Al Ghail Industrial Zone in RAK, which is owned and operated by the Ras Al Khaimah Investment Authority ("RAK-IA"), the sovereign investment company of RAK. On 17 October 2011, the Company announced that it had received preliminary environmental clearance for the project.

As part of Tri-Star's ongoing work in respect of this proposed project, GBM Mineral Engineering Consultants Limited ("GBM"), an independent consultancy firm based in Twickenham, London, have been commissioned to deliver a preliminary engineering report and cost benefit analysis ("GBM Report") for the 20,000tpa antimony products facility, the conclusions of which are outlined below.

Additional information concerning this project, including a summary copy of the GBM Report, will be made available in due course on the Company's web site at www.tri-starresources.com.

Commenting on the project, Emin Eyi, Managing Director of Tri-Star, said: 

"Should the Company source the necessary capital and proceed with the construction of the UAE based roaster, it will represent an important piece of infrastructure for the world antimony industry. This modern facility, currently designed to handle a mix of feeds efficiently and in an environmentally compliant way, will provide an alternative to concentrate suppliers presently shipping their material to China. At full capacity, the plant could provide up to 12% of the world's demand for antimony products and is strategically located so as to serve both European and Asian consumers, with the GBM Report now demonstrating the project's robust economic characteristics.

"China has dominated the antimony industry for over a century, having controlled the majority of its processing capability in the past 40 years, but we are confident that should we proceed with the UAE roaster, Tri-Star will be able to begin addressing this dominance. I look forward to providing further updates on this exciting project in course."

Cost estimates

The GBM Report estimates that the total capital expenditure requirement for the proposed plant to be up to approximately U$60 million, comprised of U$36 million for direct capital costs, U$15 million of indirect costs and U$9 million of working capital for the plant.

The facility is designed to produce both antimony ingots and powdered antimony trioxide at high purity for sale to end users. The feedstock is designed around antimony sulphide concentrates supplied from either Tri-Star owned deposits or from purchases of third-party concentrates from various international sources.

Working capital estimates for the project have been estimated by GBM to be U$63 million on a "base case" scenario, assuming all feedstock is sourced and paid for from third-party sources.

If constructed, the proposed facility would be one of the first sizeable Western World antimony roasters designed to be fully compliant with modern environmental legislation, high recoveries and relatively low energy input costs. Antimony metal and its products have been identified by independent sources as being of 'critical' importance to European industrial production.

The largest operating cost item is expected to be the transportation costs of delivering feed concentrate to the facility and then exporting the finished products to European ports. Based on current specifications, the plant is expected to employ approximately 70 full time personnel.

The project is to be located on a 20 hectare serviced site in the Al Ghail Industrial Park and Tri-Star Union has now secured gas allocation from RAK Gas, the park's natural gas provider. As designed, there remains scope on site to expand the facility and incorporate additional value added by additional product capture equipment in the future, such as a Merrill Crowe and CIL plant, to handle antimony concentrates that often carry precious metal credits. These value added units are not included in the capital or operating cost benefit analysis conducted at this stage by GBM in the GBM report.

Cost benefit analysis

GBM have conducted a cost benefit analysis of the roaster economics and concluded that the project was "highly viable" under the limits of the model used and recommended that the project be taken to the next stage of development in the form of a Bankable Feasibility Study ("BFS").

Under the base case assumptions detailed in the GBM Report, it is estimated that the project could return an internal rate of return of up to 41%, a Net Present Value of up to U$241.5 million and full year EBITDA of up to U$59.6 million, based on steady state production estimates. Although these estimates are illustrative at this preliminary stage, sensitivity analysis was undertaken by GBM to demonstrate that the project could be "financially viable even with major changes in the inputs" and this will be further explored during the BFS stage of the project's development.

Marketing team

Tri-Star not only intends to supply antimony concentrate from the Company's own operations to the roaster, but will also seek to acquire certain types of concentrates from additional third parties at international market terms and conditions.

In order to secure relationships with concentrate suppliers and to access finished product consumers, the Company is currently in the process of assembling an internal marketing team, headed by Vehbi Eyi, a long established antimony and minor metals trader.

Funding requirements

As previously disclosed, the successful development of the proposed project is clearly dependent on the availability of sufficient funding and the Company's ability to raise such funds when needed. Accordingly, the Company is in the process of exploring a variety of funding initiatives for the proposed roaster project, as well as Tri-Star's other up-stream mining assets in Turkey and Canada, including equity, project finance, off-take linked funding, Government related funding and project equity stakes. The Company expects to develop and clarify its funding strategy during the remainder of 2012 and will provide further updates as appropriate. Initially, the Company will be taking the project to the next stage of development, being a BFS.

Enquiries:

Brian Spratley, the Company's Technical Director, has relevant experience within the sector and meets the criteria of a qualified person under the AIM note for mining, oil and gas companies and has reviewed and approved the technical information contained in this announcement.