Magnolia Petroleum Plc / Index: AIM / Epic: MAGP / Sector: Oil & Gas
22 September 2014
Magnolia Petroleum Plc (`Magnolia' or `the Company')
Interim Results
Magnolia Petroleum Plc, the AIM quoted US focused oil and gas exploration and
production company, announces its interim results for the six month period
ended 30 June 2014.
Highlights
* 93% increase in H1 2014 revenues to US$1,755,459 (H1 2013: US$910,721)
* Half year EBITDA of US$699,397 compared to US$237,552 (after removing gain
on foreign exchange) during six months to 30 June 2013
* 155 producing wells in proven US onshore formations such as the Bakken/
Three Forks Sanish, North Dakota, and the Mississippi Lime, Woodford/
Hunton, Oklahoma, 32% year on year increase (H1 2013: 117)
* Reported initial production rates (`IPRs') for 15 wells
* Elected to participate in 39 new wells - 74 wells currently at various
stages of development
* Daily production of 257 boepd as at 1 July 2014 compared to 150 boepd as at
1 April 2014 due to number of wells commencing production in which Magnolia
has larger interests - Parmley 1-1WH (12.187%)
* US$9.143 million value of proven developed producing reserves (`PDP')
compared to US$8.416 million as at 1 April 2014
* Total net proved reserves (`1P') of 719 Mbbl of oil and condensate and
2,093 MMcf gas with NPV10 of US$31.832 million as at 1 July 2014
* Strong pipeline of opportunities across all formations both as participant
and operator - over 600 potential drilling locations on existing acreage
Magnolia CEO, Steven Snead said, "As this latest set of half year numbers show,
Magnolia's well count, production, and revenues continue to grow at
double-digit rates. With proven reserves valued at US$32 million providing
asset backing, production of 257 boepd as at 1 July 2014 generating revenues of
US$1,755,459 over the course of the last half year, and a new and improved US$6
million credit facility secured, we have a strong platform with which to prove
up the reserves on our 13,500 net minerals acres. We already have a pipeline of
74 wells under development and continue to receive multiple proposals to
participate in new drilling activity on our leases in proven US onshore
formations, and as a result we expect to report further excellent growth going
forward."
Chief Executive's Statement
We are successfully building an extensive portfolio of proven reserves in
liquids rich US onshore formations such as the prolific Bakken and Three Forks
Sanish, North Dakota and the Woodford and Mississippi Lime, Oklahoma. From a
standing start, the value of Magnolia's proven reserves have grown to US$32
million, having been just US$1.5 million at the time of our Admission to AIM in
October 2011. This growth has not been achieved by purchasing leases with
production already established, but is the result of success at the drill bit.
This in turn is due to our focus on proven US onshore formations, our
participation in drilling alongside leading operators such as Devon Energy,
Chesapeake Energy and Statoil, and the use of advanced technologies and
techniques to enhance flow and recovery rates. With over 600 possible drilling
locations on our leases, we have merely scratched the surface of proving up our
portfolio's potential, and we expect further strong growth in the value of our
reserves going forward.
At the half year end, Magnolia had interests in 155 producing wells on leases
covering over 13,500 net mineral acres in liquids rich US onshore plays. As at
1 July 2014, these wells produced 257 boepd net to Magnolia and had proven
developed producing reserves (`PDP') valued at US$9.1 million. Compare these to
the equivalent figures at the time of our Admission to AIM: 1,259 net mineral
acres; interests in 64 wells producing approximately 7 boepd with PDP reserves
of US$919,000. The excellent progress made by Magnolia in terms of building a
portfolio of leases, growing production and proving up reserves is clear.
Over the last six months, 15 new wells were brought into production on our
acreage. In line with our strategy, Magnolia has higher interests in a number
of these wells such as the Parmley 1-1WH well (12.187%) and, combined with
excellent initial production rates, the strong operational performance on the
ground has translated into another record set of financial numbers. Half yearly
revenues have almost doubled to US$1,755,459 million, compared to the
equivalent period last year (H1 2013: US$910,721) and have risen 15% compared
to the second half of 2013 (H2 2013: US$1,532,523). This is the 5th consecutive
half year period we have reported double digit revenue growth and importantly
we expect to extend this run going forward thanks to a long pipeline of future
production and revenue growth. During the six month period we elected to
participate in a further 35 new wells and at the time of writing, Magnolia has
interests in 74 wells at various stages of development.
In addition, we continue to receive multiple proposals from operators to
participate in new wells on our leases. Armed with a refined view of the
Mississippi Lime formation's geology, which is now viewed as being comprised of
a series of highly productive wedges rather than a uniform resource, we are
focusing on drilling Mississippi Lime `sweet spots' identified on our leases.
The benefits of this strategy are already bearing fruit and post period end we
announced initial production rates of 525.52 boepd for the Chesapeake Energy
operated Cummings 31-28-12-1H well in which we have a 3.34% interest. These are
among the best rates we have seen for our Mississippi Lime wells and highlight
the potential of this historic play. In our view, Cummings bodes well for
Magnolia's future participation in the Mississippi Lime, not just in terms of
production, but also reserves. In the latest Reserves Report, a large portion
of Mississippi Lime possible and probable reserves (`2P' and `3P') were
reclassified as resources to reflect this new wedge model for the play. Future
drilling will upgrade these substantial resources into the reserves categories.
The Woodford formation provides another exciting potential source of
substantial reserves growth. We have always known that across the majority of
our leases in Oklahoma, the Woodford formation lies below the Mississippi Lime.
The Woodford is at an earlier stage of development than the Lime play but as
more wells are drilled this is changing fast with the industry increasingly
regarding it as being the more prospective and productive of the two plays.
Initial production rates for wells in which Magnolia has an interest such as
the Bolay#1-19HW (542 boepd) and the Parmley 1-1 WH (445 boepd) are consistent
with this view. More horizontal wells need to be drilled to the Woodford before
Magnolia's reserves in the formation are upgraded from the resources
classification but the impact on our reserves could far outstrip that of the
Mississippi Lime. The Woodford promises to do to our Oklahoma acreage what the
Three Forks Sanish has done to our leases in North Dakota, effectively doubling
the number of potential drilling locations on each section to eight, four per
formation, and increasing recovery rates. We are already starting to see
operators propose drilling eight wells per section in Oklahoma to maximise the
recovery of reserves from both the Woodford and Mississippi Lime.
The presence of multiple payzones was one of the reasons why we acquired leases
covering over 5,000 plus net mineral acres in Oklahoma. The Mississippi Lime
however was the priority target. Now with the Woodford looking so promising
following highly positive drilling results across the play, we view the lower
lying formation's prospectivity as at least equal to if not greater than that
of the Mississippi Lime. As both formations are present on the majority of our
leases, our footprint and potential drilling locations are effectively doubled.
With our revenues maintaining their upwards trajectory and a new and improved
US$6 million credit facility secured post period end, Magnolia is well placed
to fund the drilling activity required to prove up what we believe are
substantially higher recoverable resources/ reserves on our acreage.
Financial Review (extracted from the Strategic Report)
During the six months to 30 June 2014, net production generated revenues of
US$1,755,459, a 93% increase on last year's US$910,721. EBITDA (after removal
of non-cash items) totalled US$699,397 compared to US$237,552 (after removing
gain on foreign exchange) in H1 2013. These funds were reinvested into drilling
new wells.
Tangible assets as at end June 2014 stood at US$9,932,918, a 19% increase on
the US$8,352,385 reported as at end December 2013 while intangible assets (new
leases and wells that are drilling but not yet completed) stood at US$6,329,437
compared to US$6,400,258 in H2 2013. In line with our policy to invest as much
of our revenues into drilling new wells and acquiring additional leases,
administrative costs continue to be tightly managed.
Post period end, the Company secured a new two year US$6 million revolving
credit facility with an initial borrowing base of US$4.6 million and an
improved rate of interest charged on credit drawn down at Wall Street Journal
Prime (currently 3.25%) +0.75%. In tandem with the Company's revenues, the
credit facility funds drilling activity on our leases.
Outlook
From the outset, we set out to create value by proving up the reserves on our
leases. The post period end sale of 24 small interests in non-core wells for
US$240,750, almost three times the US$83,000 value assigned to their combined
PDPs, demonstrates both how the market values non-operated properties such as
these, and also highlights the strong appetite for de-risked US onshore leases.
The sale provides a real time, albeit much smaller scale, example of what we
are aiming to achieve with the Company as a whole by acquiring and developing
leases in US onshore formations. With a new US$6 million credit facility
secured and rapidly growing revenues, Magnolia is in a stronger than ever
position to monetise its leases and in the process generate significant value
for all shareholders.
Finally, I would like to thank the Board, management team and all our advisers
for their hard work during the period and also to our shareholders for their
continued support.
Steven Snead
CEO
Chief Operations Officer's Report
The Bakken / Three Forks Sanish Formations, North Dakota
The Bakken currently produces over 850,000 bopd and is estimated to hold a mean
of 3.65 billion barrels of undiscovered, technically recoverable oil (2013 US
Geological Survey). As the Three Forks Sanish lies beneath the Bakken, the
number of wells which can be drilled per section doubles to eight (four per
formation), providing Magnolia with a total of 120 proven development locations
on its acreage, 60 on the Bakken and 60 on the Three Forks Sanish.
Magnolia holds leases in respect of 11,520 gross acres across 28 sections,
equating to 421 net mineral acres within the boundaries of the Bakken / TFS
formations. In their latest report dated 1 July 2014, Moyes & Co. (`Moyes')
estimate Magnolia's Bakken 1P reserves at 145,000 barrels of oil and condensate
and 67 MMcf of natural gas to which Moyes has assigned a value of US$3.691
million. Meanwhile, Magnolia's 1P reserves in the Three Forks Sanish formation
are estimated at 56,000 barrels of oil and condensate and 28 MMcf of natural
gas which Moyes has assigned a value of US$1.439 million.
Mississippi Lime Formation, Oklahoma
Since its admission to AIM in November 2011, Magnolia has acquired
approximately 5,500 net mineral acres in the Mississippi Lime. The acquired
acreage includes leases with working interests of up to 100%.
As more horizontal wells are drilled on the formation and more production rates
are reported, the Mississippi Lime is increasingly being regarded as comprised
of multiple wedges rather than a uniform resource. Production rates therefore
vary markedly depending on whether or not a well encounters a very productive
wedge. This industry wide re-evaluation of the Mississippi Lime has resulted in
the reclassification of a significant amount of Magnolia's 2P and 3P reserves
to contingent resources. As more wells are drilled, the Directors expect these
to be upgraded to reserves categories.
In the latest Reserves Report dated 1 July 2014, Moyes & Co. estimated the
Company's Mississippi Lime 1P reserves at 395,000 barrels of oil and condensate
and 1,002 MMcf with a value of US$20.605 million.
The Mississippi Lime is an historic oil and gas system that has been producing
at depths ranging from 4,500 to 7,000 feet from several thousand vertical wells
for over 50 years. As with the Bakken, new technology and horizontal drilling
has reopened the oil play. Due to the relatively shallow depths and less tight
rock formation, drilling costs at between US$2.4 million and US$3.5 million per
well in the Mississippi Lime are considerably lower than those in the Bakken,
which should lead to shorter pay-out periods.
Woodford Formation, Oklahoma
The Woodford, lies below and is the source rock to the Mississippi Lime
formation in Oklahoma. As a result much of Magnolia's leases in Oklahoma are
prospective for both the Woodford and the Mississippi Lime.
In the updated Reserves Report dated 1 July 2014, Moyes & Co. estimated the
Company's Woodford 1P reserves at 77,000 barrels of oil and condensate and 808
MMcf natural gas with a value of US$4.214 million. As the Woodford is at an
earlier stage of development compared to the Mississippi Lime, the Reserves
Report does not fully reflect the potential of the formation. This is expected
to change as more wells are drilled to the Woodford.
Like the Bakken, the Woodford formation in Oklahoma is an established reservoir
that has been reopened following the introduction of horizontal drilling and
stimulation technology.
Summary
During the period, initial production rates were reported for 15 new wells in
proven US onshore formations in which Magnolia has an interest. In addition we
elected to participate in 39 new wells, bringing the total number we currently
have under development to 74. A number of these are increased density or infill
wells that maximise the recovery of reserves on leases held by production. As
well as increasing production, infill wells have the potential to quickly add
to our PDPs which in turn determine the borrowing base limit of our credit
facility. This creates a virtuous circle, as along with our growing revenues,
the larger credit line increases the funds available to participate in further
drilling to increase production further and prove up more reserves. I look
forward to providing further updates on our progress over the course of the
second half of 2014.
Rita Whittington
Chief Operations Officer
For further information on Magnolia Petroleum Plc visit
www.magnoliapetroleum.com or contact the following:
Steven Snead Magnolia Petroleum Plc +01 918 449 8750
Rita Whittington Magnolia Petroleum Plc +01 918 449 8750
Jo Turner/James Caithie Cairn Financial Advisers LLP +44 20 7148 7900
John Howes/Alice Lane Northland Capital Partners +44 20 7382 1100
Limited
Lottie Brocklehurst St Brides Media and Finance Ltd +44 20 7236 1177
Frank Buhagiar St Brides Media and Finance Ltd +44 20 7236 1177
Notes
Magnolia Petroleum Plc is an AIM quoted, US focused, oil and gas exploration
and production company. Its portfolio includes interests in 160 producing and
non-producing assets, primarily located in the highly productive Bakken/Three
Forks Sanish hydrocarbon formations in North Dakota as well as the oil rich
Mississippi Lime and the substantial and proven Woodford and Hunton formations
in Oklahoma.
Summary of Wells
Category Number of wells
Producing 161
Waiting on first sales / IP rates 8
Being drilled / completed 6
Elected to participate / waiting to 53
spud
TOTAL 228
Condensed Consolidated Statement of Comprehensive Income
6 months ended 30 June 2014
Note 6 months to 6 months to
30 June 2014 30 June 2013
Unaudited Unaudited
US $ US $
Continuing Operations
Revenue 1,755,459 910,721
Operating expenses (838,863) (410,147)
______ ______
Gross Profit 916,596 500,574
Administrative expenses (545,568) (667,634)
Impairment of mineral leases (229,385) (67,070)
(Loss)/profit on disposal of (2,841) 208,705
mineral leases
(Loss)/gain on foreign exchange (491,219) 669,999
______ ______
Operating (Loss)/Profit (352,417) 644,574
Finance income 3,374 -
Finance costs (32,477) -
______ ______
(Loss)/Profit from ordinary (381,520) 644,574
activities before tax
Taxation - -
______ ______
(Loss)/Profit for the period (381,520) 644,574
attributable to the equity
holders of the Company ______ ______
Other comprehensive income:
Items that may be reclassified 434,440 (696,872)
subsequently to profit or loss
Currency translation differences
______ ______
Total comprehensive income for 52,920 (52,298)
the period attributable to the
equity holders of the Company ______ ______
Earnings per share attributable 4 (0.042) 0.074
to the equity holders of the
Company (expressed in cents per (0.042) 0.072
share)
- basic
- diluted
Condensed Consolidated Balance Sheet
As at 30 June 2014
ASSETS Notes 30 June 31 December
2014 2013
Unaudited Audited
US $ US $
Non-Current Assets
Property, plant and equipment 5 9,932,918 8,352,385
Intangible assets 6 6,329,437 6,400,258
________ ________
Total Non Current Assets 16,262,355 14,752,643
Current Assets
Trade and other receivables 1,757,387 1,268,823
Cash and cash equivalents 9,210 128,002
________ ________
Total Current Assets 1,766,597 1,369,825
________ ________
Total Assets 18,028,952 16,149,468
________ ________
EQUITY & LIABILITIES
Equity
Called up share capital 1,481,396 1,481,396
Share premium account 13,954,026 13,954,026
Warrants and options reserve 209,042 209,042
Merger reserve 1,975,950 1,975,950
Reverse acquisition reserve (2,250,672) (2,250,672)
Translation reserve 949,829 515,389
Retained losses (2,241,233) (1,859,713)
________ ________
Total Equity - Capital and 14,078,338 14,025,418
Reserves
________ ________
Non-current Liabilities
Borrowings 2,100,000 900,000
________ ________
Total Non-current Liabilities 2,100,000 900,000
________ ________
Current Liabilities
Borrowings 100,381 -
Trade and other payables 1,750,233 1,224,050
_________ _________
Total Current Liabilities 1,850,614 1,224,050
_________ _________
Total Equity and Liabilities 18,028,952 16,149,468
_________ _________
Condensed Consolidated Statement of Changes in Equity
Attributable to the owners of the parent
Warrants
and Reverse
Share Share Merger Options Acquisition Translation Retained
Capital Premium Reserve Reserve Reserve Reserve Earnings Total
US $ US $ US $ US $ US $ US $ US $ US $
As at 1 January 1,390,244 11,888,717 1,975,950 66,603 (2,250,672) 47,300 (1,577,876) 11,540,266
2013
Comprehensive
income
Profit for the - - - - - - 644,574 644,574
period
Other
comprehensive
income
Currency - - - - - (696,872) - (696,872)
translation
differences
________ ________ ________ ______ ________ _______ _______ ________
Total - - - - - (696,872) 644,574 (52,298)
comprehensive
income for the
period
________ ________ ________ ______ ________ _______ _______ ________
Proceeds from 91,152 2,187,648 - - - - - 2,278,800
share issue
Share issue - (122,339) - - - - - (122,339)
costs
________ ________ ________ ______ ________ _______ _______ ________
Transactions 91,152 2,065,309 - - - - - 2,156,461
with owners of
the parent,
recognised
directly in
equity
________ ________ ________ ________ ________ ________ ________ ________
As at 30 June 1,481,396 13,954,026 1,975,950 66,603 (2,250,672) (649,572) (933,302) 13,644,429
2013
________ ________ ________ ________ ________ ________ ________ ________
As at 1 January 1,481,396 13,954,026 1,975,950 209,042 (2,250,672) 515,389 (1,859,713) 14,025,418
2014
Comprehensive
income
Loss for the - - - - - - (381,520) (381,520)
period
Other
comprehensive
income
Currency - - - - - 434,440 - 434,440
translation
differences
________ ________ ________ ________ ________ ________ ________ ________
Total - - - - - 434,440 (381,520) 52,920comprehensive
income for the
period
________ ________ ________ ________ ________ ________ ________ ________
As at 30 June 1,481,396 13,954,026 1,975,950 209,042 (2,250,672) 948,829 (2,241,233) 14,078,338
2014
________ ________ ________ ________ ________ ________ ________ ________
Condensed Consolidated Cash Flow Statement
6 months ended 30 June 2014
6 months to 6 months to
30 June 30 June
2014 2013
Unaudited Unaudited
US $ US $
Cash flow from operating activities
(Loss)/profit/(Loss) before tax (381,520) 644,574
Finance income (3,374) -
Finance costs 32,477 -
Loss/(profit) on disposal of mineral 2,841 (208,705)
leases
Depreciation and amortisation 589,698 262,977
Exchange differences 420,691 (664,106)
Impairment of mineral leases 229,385 67,070
_______ _______
890,198 101,810
Changes to working capital
Increase in trade and other receivables (488,564) (270,214)
Increase in trade and other payables 526,183 1,023,867
_______ _______
927,817 855,463
Interest paid (32,477) -
_______ _______
Net cash inflow from operating 895,340 855,463
activities
_______ _______
Cash flows from investing activities
Purchases of intangible assets (153,758) (1,863,181)
Purchases of property, plant and (2,165,507) (2,488,000)
equipment
Proceeds from disposal of property, - 698,602
plant and equipment
Interest received 3,374 -
_______ _______
Net cash used in investing activities (2,315,891) (3,652,579)
_______ _______
Cash flows from financing activities
Proceeds from issue of ordinary shares - 2,278,800
Issue costs - (122,339)
Proceeds from borrowings 1,200,000 -
_______ _______
Net cash from financing activities 1,200,000 2,156,461
_______ _______
Net decrease in cash and cash (220,551) (640,655)
equivalents
Cash and cash equivalents at the 128,002 2,293,153
beginning of the period
Exchange gain/(loss) on cash and cash 1,378 (11,010)
equivalents
_______ _______
Cash and cash equivalents at the end of (91,171) 1,641,488
the period
_______ _______
Comprising:
Cash at bank 9,210 1,641,488
Bank overdraft (100,381) -
_______ _______
Notes to the unaudited financial statements
1. General information
The principal activity of the Group is the acquisition, exploration and
development of oil and gas properties primarily located onshore in the United
States.
The address of its registered office is Suite 321, 19-21 Crawford Street,
London, W1H 1PJ.
2. Basis of preparation
These condensed consolidated interim financial statements have been prepared in
accordance with the requirements of the AIM Rules for Issuers. As permitted,
the Company has chosen not to adopt IAS 34 "Interim Financial Statements" in
preparing this interim financial information. The condensed interim financial
statements should be read in conjunction with the annual financial statements
for the year ended 31 December 2013, which have been prepared in accordance
with International Financial Reporting Standards (IFRS) as adopted by the
European Union.
The interim financial information set out above does not constitute statutory
accounts within the meaning of the Companies Act 2006. It has been prepared on
a going concern basis in accordance with the recognition and measurement
criteria of International Financial Reporting Standards (IFRS) as adopted by
the European Union. Statutory financial statements for the year ended 31
December 2013 were approved by the Board of Directors on 13 May 2014 and
delivered to the Registrar of Companies. The report of the auditors on those
financial statements was unqualified.
The preparation of consolidated interim financial statements requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities
at the end of the reporting period. Significant items subject to such estimates
are set out in the Group's 2013 Annual Report and Financial Statements. The
nature and amounts of such estimates have not changed significantly during the
interim period.
3. Accounting policies
The same accounting policies, presentation and methods of computation are
followed in this condensed consolidated financial information as were applied
in the preparation of the Company's annual audited financial statements for the
year ended 31 December 2013.
The presentational currency of the Group is US dollars.
4. Earnings per share - basic and diluted
The calculation of earnings per share is based on a loss of $381,520 for the 6
months ended 30 June 2014 (6 months ended 30 June 2013: profit $644,574) and
the weighted average number of shares in issue in the period to 30 June 2014 of
910,672,851 (30 June 2013: 865,258,486).
The basic and diluted loss per share in the period ended 30 June 2014 is the
same, as the effect of the exercise of share options and warrants would be to
decrease the loss per share.
Diluted earnings per share in the period ended 30 June 2013 assumes that
options and warrants outstanding at 30 June 2013 were exercised at 1 January
2013 for options and warrants where the exercise price was less than the
average price of the ordinary shares during the period. A calculation is done
to determine the number of shares that could have been acquired at fair value
based on the monetary value of subscription rights to outstanding share options
and warrants. The number of shares calculated above is compared with the number
of shares that would have been issued assuming the exercise of the options and
warrants. On this basis, the calculation of diluted earnings per share is based
on the profit attributable to ordinary shareholders divided by 890,051,915
shares.
5. Property, plant and equipment
Drilling
Producing costs and Motor
properties equipment Vehicles Total
$ $ $ $
Cost
At 1 January 2014 1,255,743 8,112,955 19,059 9,387,757
Additions 111,296 2,054,211 - 2,165,507
Transferred from intangible - 4,724 - 4,724
assets
At 30 June 2014 1,367,039 10,171,890 19,059 11,557,988
Depreciation
At 1 January 2014 190,841 837,233 7,298 1,035,372
Charge for the period 135,302 452,014 2,382 589,698
At 30 June 2014 326,143 1,289,247 9,680 1,625,070
Net Book Amount at 31 December 1,064,902 7,275,722 11,761 8,352,385
2013
Net Book Amount at 30 June 2014 1,040,896 8,882,643 9,379 9,932,918
6. intangible assets
Cost Goodwill Drilling Mineral Total
$ costs leases $
$ $
At 1 January 2014 381,733 3,995 6,014,530 6,400,258
Additions - 24,644 129,114 153,758
Transferred to property, plant and - (4,724) - (4,724)
equipment
Exchange movements 12,371 - - 12,371
Impairment - - (229,385) (229,385)
Disposals - - (2,841) (2,841)
As at 30 June 2014 394,104 23,915 5,911,418 6,329,437
Amortisation
At 1 January 2014 and - - - -
At 30 June 2014
Net Book Amount at 31 December 2013 381,733 3,995 6,014,530 6,400,258
Net Book Amount at 30 June 2014 394,104 23,915 5,911,418 6,329,437
Impairment review
Drilling costs and mineral leases represent acquired intangible assets with an
indefinite useful life and are tested annually for impairment. Expenditure
incurred on the acquisition of mineral leases is capitalised within intangible
assets until such time as the exploration phase is complete or commercial
reserves have been discovered. Exploration expenditure including drilling costs
are capitalised on a well by well basis if the results indicate the existence
of a commercially viable level of reserves.
The directors have undertaken a review to assess whether circumstances exist
which could indicate the existence of impairment as follows:
* The Group no longer has title to the mineral lease.
* A decision has been taken by the Board to discontinue exploration due to
the absence of a commercial level of reserves.
* Sufficient data exists to indicate that the costs incurred will not be
fully recovered from future development and participation.
Following their assessment the directors recognised an impairment charge to the
cost of mineral leases of $229,385 (2013 - $67,070) in respect of expired
mineral leases.
The Directors believe that no impairment is necessary on the carrying value of
goodwill.
* * ENDS * *