TIDMUEP
RNS Number : 3004N
UMC Energy Corporation
15 May 2015
UMC Energy Corporation
("UMC Energy" or the "Company")
Final Results
For the year ended 31 December 2014
The directors present their report with the audited Group
financial statements for the year ended 31 December 2014.
The financial statements are presented in United States dollars
which is the Group's functional currency.
Principal activities and review of business
The principal activity of the Group is investment directly and
indirectly in, and operation of, resource exploration and
development projects.
During the year the Group's main undertaking was the development
of the Papua New Guinea petroleum project in which the Group holds
a 30% interest following a subscription and financing arrangement
entered into with CNOOC Limited in March 2012 (100% prior to that
date) and continuing interest in the Morondava uranium exploration
project, based in Madagascar, in which the Company has an 80%
interest.
Over the year, the Group expended $nil (31 December 2013:
$146,219) on project related activities.
Key performance indicators
Year ended 31 Year ended 31
December 2014 December 2013
Loss for the year - $ (2,907,454) (2,594,252)
Loss per share - cents (0.59) (0.61)
Review of operations and state of affairs
Papua New Guinea In September 2011, the Group acquired one
on-shore (PPL 378) and two off-shore (PPLs 374 and 375) Petroleum
Prospecting Licences (PPLs) in Papua New Guinea through the
acquisition of PNG Energy Limited (PNG Energy) and that company's
wholly owned subsidiary Gini Energy Limited (Gini Energy).
Subsequently, in May 2012, Gini Energy was awarded an additional
on-shore licence, PPL 405, by the Government of Papua New
Guinea.
On 26 March 2012, the Group entered agreements with a subsidiary
of CNOOC Limited (CNOOC), the Chinese multi-national oil and gas
company, listed on the New York, Toronto and Hong Kong Stock
Exchanges, whereby CNOOC subscribed for a 70% equity interest in
PNG Energy and UMC Energy retained a 30% equity interest.
Pursuant to the agreements, and in consideration for the share
subscription, CNOOC is responsible for funding all exploration and
appraisal expenditure in respect of the four PNG PPLs, up to the
decision to move to commercial development. To the end of 2014,
approximately PGK42 million (US$16 million) in costs incurred by
PNG Energy in relation to the four PNG permits has been met by
CNOOC. Such expenditure will be repaid to CNOOC out of production
revenues and off-take of oil and gas once the assets of Gini Energy
enter production, should such production occur. If exploration and
appraisal work indicates the probable existence of commercial
reservoirs of oil or gas in any part of the PPLs at the end of the
exploration phase, the parties must each finance their pro-rata
share of all expenditure required in respect of the development
plan to bring such field(s) into production, either themselves or
by procuring sufficient finance from a third party.
PPL 378 onshore
The two blocks (western and eastern) of PPL 378 are located in
the Central Highlands of the Papua Fold Belt. The Western Block is
situated close to existing producing and processing facilities of
the Moran and Agogo oil and gas fields. The main gas pipeline
connecting Hides to ExxonMobil's newly operational LNG plant at
Port Moresby transects the block.
The western block contains the Paua-1X oil discovery drilled by
BP in 1996. Oil was recovered from RFT wireline tests from two
sandstone reservoir sequences in the Iagifu Formation. Some 37
metres of net oil pay is interpreted in 5 layers in separate Upper
and Lower Iagifu reservoirs.
Contingent oil and gas resources in the Iagifu assessed by
3D-GEO Pty Limited (3D-GEO), and reported in their Competent
Person's Report (CPR) on 5 August 2013 in accordance with the
definitions and guidelines set out in the Petroleum Resources
Management System (PRMS) are as follows:
All values GROSS CONTINGENT RESOURCES NET ATTRIBUTABLE CONTINGENT Chance
in MMbbls* WITHIN PPL378 West: Paua RESOURCES TO UMC ENERGY: of Success
or Bcf* Iagifu Sands Paua Iagifu Sands (%)
PPL 378 W Low Best High Low Best High
Operator: Estimate Estimate Estimate Estimate Estimate Estimate
CNOOC 1C 2C 3C 1C 2C 3C
------------- ------------ ------------- ------------- ------------- -------------- -------------
Oil
Contingent
Resource 7.6 25 73 2.3 7.4 39 55
------------- ------------ ------------- ------------- ------------- -------------- -------------
Gas
Contingent
Resource 264 130 56 79 39 17 55
------------- ------------ ------------- ------------- ------------- -------------- -------------
*Note: MMbbls = million barrels of recoverable oil, Bcf =
billion standard cubic feet of recoverable gas
The overlying Digimu and Toro sandstones were water-wet at
Paua-1X (wireline log evaluation suggests the presence of residual
hydrocarbon saturation at the well). Significant additional
potential for oil and gas is present on the back-limb of the Paua
Anticline within structural closure, up-dip from the well to the
north-east, as previously reported in the CPR.
CNOOC as the Operator of the permit has undertaken significant
technical work during the year to better define the Paua structure.
This work included additional reprocessing of the 2D seismic lines
across the structure tying into wells on the adjacent Moran Oil
Field. Remapping of the new data indicates the presence of
significant structural closure up-dip from Paua-1X to the NE. The
structural high is co-incident with the surface anticline defined
by surface geology and topography. This mapping supports volumetric
oil and gas estimates made by 3D-GEO in the CPR and suggests that
Paua is a robust structure of a sufficient size and commercial
potential to warrant appraisal drilling. CNOOC's internal experts
continue their well planning for Paua-2X, with drilling presently
expected to commence in late 2016.
PPL 405 onshore
PPL 405 is also located in the Central Highlands region of PNG
east of PPL 378. Technical evaluation of the licence was completed
in the first half of 2014. Owing to delays in collecting critical
well and seismic data, the work program in this licence (requiring
the drilling of one exploration well) was not completed by 7 May
2014, the end of the first two year licence term. The PNG
Government was approached by CNOOC, as the Operator, seeking a
variation to the work program commitments for this licence, where
the 2D seismic acquisition and well commitment be delayed to years
3 and 4 (ending on 7 May 2016). This variation was approved on 12
February 2015.
The initial technical study indicated low potential and high
exploration risk across most of the licence. Significant potential
was identified in some leads within the permit, however these
structures are presently defined by single 2D seismic lines and
will require additional seismic data acquisition and interpretation
in order to elevate the leads to prospect status prior to any
consideration for exploration drilling.
PPL 374 and PPL 375 offshore
PPLs 374 and 375 are contiguous licences located offshore in
deep water in the Gulf of Papua. CNOOC successfully completed
seismic acquisition of some 3,015 line kilometres of 2D data in
early January 2014. Processing and the majority of interpretation
of the new 2D data has been completed and a number of leads have
been identified.
CNOOC has also undertaken a series of geophysical studies,
including basin, source rock and reservoir modelling. These studies
indicate a high risk for both reservoir and trap formation, along
with marginal generation and expulsion values. The high costs for
drilling in the deeper waters of these permits requires robust
economic thresholds to be met to justify exploration drilling.
CNOOC and UMC plan to carefully assess the economics and
prospectivity of these offshore permits to develop recommendations
for future activity.
Madagascar Madagascar has experienced an extended period of
political upheaval and uncertainty. Due to this the Company has
continued to take a cautious approach to exploration and
accordingly has not conducted exploration activities during the
2014 financial year. The Company continues to monitor the
situation. Given these circumstances, the Directors have resolved
to fully impair the carrying value of this intangible asset.
Financing The Company remains dependent on loan funds being made
available to it by Natasa Mining Ltd to meet its working capital
and other requirements.
Future developments
The directors anticipate the Company's major future developments
will revolve around further investment in and development of the
Papua New Guinea petroleum and Morondava uranium projects.
Principal risks and Uncertainties facing the Group
The principal risks faced by the Group are as follows:
-- The ability to raise sufficient funds to pursue the exploration of its exploration permits.
-- The exploration licences are located in remote parts of Papua
New Guinea and Madagascar where power and communications
infrastructure is rudimentary.
-- The operations of the Group are in foreign jurisdictions
where there may be a number of associated risks over which it will
have no control. These may include economic, social or political
instability or change, terrorism, hyperinflation, currency
non-convertibility or instability, changes of laws affecting
foreign ownership, government participation, taxation, working
conditions, rates of exchange, exchange control, and exploration
licensing.
-- Papua New Guinea and Madagascar may have less developed legal
systems than more established economies.
-- The exploration licences may be subject to conditions which,
if not satisfied, may lead to the revocation of such licences.
-- The exploration for and development of mineral and petroleum
deposits involves significant risks, which even a combination of
careful evaluation, experience and knowledge may not eliminate. Few
properties, which are explored, are ultimately developed into
producing mines/fields. There can be no guarantee that the
estimates of quantities and grades of minerals or petroleum
disclosed will be available to extract. With all mining/extraction
operations there is uncertainty and, therefore, risk associated
with operating parameters and costs resulting from the scaling up
of extraction methods tested in pilot conditions. Mineral/petroleum
exploration is speculative in nature and there can be no assurance
that any mineralisation/ reservoir will be discovered or if
discovered that it will prove to be economic.
Results and dividends
The loss for the year on ordinary activities before and after
tax amounted to $2,907,454 (31 December 2013: $2,594,252). The
directors do not recommend the payment of a dividend.
Share capital
Details of the share capital are given in note 17 to the
financial statements.
Events since the balance sheet date
Since 1 January 2015, the Company has advanced a further $2,837
to Uramad SA, for use on uranium exploration project development
activities.
Since 1 January 2015, the Company has borrowed a further
$746,867 from Natasa Mining Ltd, for working capital purposes.
Financial assets and liabilities
See note 25 to the financial statements.
Directors and their interests
At 31 December 2014, the directors and their interests in the
Company's Ordinary Shares were as follows:
Ordinary shares Ordinary shares
of no par value of no par value
At 31 December At 1 January
2014 2014
C Kyriakou* 200,451,879 200,451,879
R Cleary (Resigned 23 April 2014) - -
C Hart - -
J Reynolds 500,000 500,000
R Shakesby - -
* C Kyriakou is a director of Natasa Mining Ltd, the Company's
major shareholder. Entities associated with C Kyriakou hold shares
in Natasa Mining Ltd. The shares owned by Natasa Mining Ltd in the
Company's share capital have been included in C Kyriakou's
interests.
Options held by the directors at 31 December 2014 were as
follows.
Options over Options over
ordinary shares ordinary shares
of no par value of no par value
At 31 December 2014 At 1 January 2014
C Kyriakou 3,000,000 3,000,000
R Cleary (Resigned 23 April
2014) 750,000 750,000
C Hart* 3,000,000 6,000,000
J Reynolds 1,500,000 1,500,000
R Shakesby 750,000 750,000
* C. Hart (i) holds an option over 3 million ordinary shares
under the 2012 Participants' Option Plan and (ii) held an option
over 3 million ordinary shares beneficially owned by a shareholder
of the Company.
No options were exercised by the directors during the year.
Substantial shareholdings
On 31 December 2014 the following shareholders held 3% or more
of the issued share capital of the Company:
Number of Percentage issued
Ordinary Shares Ordinary Shares
Natasa Mining Ltd 200,251,879 41.34%
Wealth Clear Global Investments
Ltd 30,120,000 6.22%
Blue Wings Development Ltd 19,032,000 3.93%
Bethlehem Beauty Ltd 15,750,000 3.25%
Corporate Governance
As UMC Energy Corporation is not a fully listed company, it is
not required to comply with the Code of Best Practice published by
the Committee on the Financial Aspects of Corporate Governance
("the UK Corporate Governance Code"). However, the directors do
place a high degree of importance on ensuring that high standards
of corporate governance are maintained. As a result, most of the
relevant principles set out in the Combined Code have been adopted
during the year and these are summarised below.
Directors
The Board of Directors is responsible for the corporate
governance of the Company. It oversees the business and affairs of
the Company, establishes the strategic and financial objectives to
be implemented by management and monitors standards of
performance.
The Board has established a framework for the management of the
Company including internal controls, a business risk management
process and the establishment of appropriate ethical standards.
The Board of Directors currently consists of a Chairman, two
Executive Directors and one Non-Executive Director, who is an
Independent Non-Executive Director. Responsibility for the
operation and administration of the Company is delegated by the
Board to the executive management team who are accountable to the
Board.
After consultation with the Chairman, each Director has the
right to seek independent professional advice at the consolidated
entity's expense.
The Board may at any time appoint a director to fill a casual
vacancy and at each annual general meeting, one-third of directors
together with any director appointed since the last annual general
meeting retire from office and may stand for re-election.
The composition of the Board is reviewed regularly to ensure
that the range of expertise and experience of Board members is
appropriate for the activities and operations of the Company.
The Articles of Association specifies that the aggregate
remuneration of Directors, other than salaries paid to Executive
Directors, shall be determined from time to time by a general
meeting. An amount not exceeding the amount determined is divided
between those Directors as they agree.
The Role of Shareholders
The Board of Directors aims to ensure the shareholders are
informed of all major developments affecting the Company's state of
affairs. Information is communicated to shareholders as
follows:
-- The annual report is distributed to all shareholders who have
requested a hard copy and is displayed on the Company's website.
The Board ensures that the annual report includes relevant
information about the operations of the Company during the year,
changes in its state of affairs and details of future developments,
in addition to the other disclosures required by International
Financial Reporting Standards.
-- The half-yearly report contains summarised financial
information and a review of the operations of the Company during
the period. Half-year financial statements prepared in accordance
with the requirements of International Financial Reporting
Standards are displayed on the Company's website. The financial
statements are sent to any shareholder who requests them.
-- The external auditor attends the annual general meetings to
answer questions concerning the conduct of the audit, the
preparation and content of the Auditor's Report, accounting
policies adopted by the Company and the independence of the auditor
in relation to the conduct of the audit.
The Board encourages full participation of shareholders at the
Annual General Meeting to ensure a high level of accountability and
identification with the consolidated entity's strategy and
goals.
Nomination Committee
The Nomination Committee oversees the appointment of directors
and the selection, appointment and succession planning of the
Company's Chairman. The committee makes recommendations to the
Board on the appropriate skill mix, personal qualities, expertise
and diversity of each position. Where, through whatever cause, it
is considered that the Board would benefit from the services of a
new director with particular skills, the Board would then appoint
the most suitable candidate who must stand for election at a
general meeting of shareholders.
The committee comprises the following members:
-- Mr C. Kyriakou (Chairman of the Committee) Executive
-- Mr R Shakesby Non-executive
Audit Committee
The Board has appointed an Audit Committee which operates under
written terms of reference. The Audit Committee oversees the
financial reporting process to ensure the balance, transparency and
integrity of published financial information; reviews the
effectiveness of the Company's internal financial control; ensures
an independent audit process; recommends the appointment of the
external auditor; assesses the performance of the external auditor;
and oversees the Company's compliance with acts and regulations in
relation to financial reporting.
The committee comprises the following members:
-- Mr C. Kyriakou (Chairman of the Committee) Executive
-- Mr R Shakesby Non-executive
-- Mr J Reynolds Executive
External Auditors
The Audit Committee monitors the performance of the external
auditors. The current external auditors were appointed in 2013. The
external auditors are provided with the opportunity, at their
request, to meet with the Board of Directors without management
being present.
Remuneration Committee
The Board has appointed a Remuneration Committee which operates
under written terms of reference. Remuneration of senior management
personnel is determined by the remuneration committee, taking into
account information obtained via reputable industry remuneration
surveys and / or independent consultant reports. This also includes
responsibility for share option schemes, incentive performance
packages, retirement and termination entitlements.
The committee comprises the following members:
-- Mr C. Kyriakou (Chairman of the Committee) Executive
-- Mr R Shakesby Non-executive
Risk Management
The Board oversees the establishment, implementation and
operation of the Company's risk management procedures for
assessing, monitoring and managing all risks, including material
business risks. Material business risks for the Company may arise
from such matters as governmental policy changes, the impact of
exchange rate movements and the impact of changes in commodity
prices.
Internal Control Framework
The Board acknowledges that it is responsible for the overall
internal control framework but recognises that no cost effective
internal control system will preclude all errors and
irregularities. The system is based upon policies and guidelines
and the careful selection and training of qualified personnel. The
Board believes the current control framework to be suitable for the
Company's current operations. There is no internal audit function
as the cost would significantly outweigh the benefits given the
size of the current operations.
Director Dealings in Company Shares
Directors and senior management may acquire shares in the
Company, but are prohibited from dealing in Company shares or
exercising options during Close Periods or whilst in the possession
of price sensitive information that has not been made public. The
Company has established a written code on share dealing.
Transactions with Natasa Mining Ltd ("Natasa")
Any proposed transaction between the Company (or a subsidiary
undertaking of the Company) and Natasa or a director of Natasa
(whilst Natasa holds not less than 30% of the issued ordinary
shares of the Company) must be on arms length commercial terms and
be approved by the independent non-executive directors of the
Company in advance of it being entered into by the Company. For the
avoidance of doubt, no director who is interested in any way in
such a contract shall take part in any deliberations on the part of
the Company (or a subsidiary undertaking of the Company) with
regard to the approval of such a contract.
Conflict of Interest
Directors must keep the Board advised, on an ongoing basis, of
any interest that could potentially conflict with those of the
Company. Details of director related entity transactions with the
Company are set out in Note 23 to the accounts.
Ethical Standards and Performance
The Company is not of sufficient size to warrant the preparation
of a formal code of ethical business standards for the Company. The
Board does, however, require of itself and its employees the
highest ethical standards when carrying out their duties and when
acting on behalf of the Company. In particular, any transactions
with Directors of the Company are formally approved by the Board.
The Director concerned does not participate in discussion or
approval of the transaction.
Political and charitable donations
No political or charitable donations were made during the
year.
By order of the board.
J Reynolds
Company Secretary
15 May 2015
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2014
Year Year
Ended Ended
31 December 31 December
2014 2013
Notes $ $
Administrative expenses (968,645) (1,970,118)
Impairment charge 9 - -
Share of net result of associates (130,535) (87,225)
_________ _________
Loss from operations (1,099,180) (2,057,343)
Finance costs 5 (1,803,449) (1,538,047)
Foreign exchange (loss) /
gain (4,825) 1,001,138
_________ _________
Loss before taxation (2,907,454) (2,594,252)
Income tax expense 7 - -
Loss for the year (2,907,454) (2,594,252)
Attributable to:
Equity holders of the parent (2,862,863) (2,972,182)
Non-controlling interest (44,591) 377,930
_________ _________
(2,907,454) (2,594,252)
Loss per share in cents -
including
share of associate's results
Basic 8 (0.59) (0.61)
Loss per share in cents- excluding
share of associate's results
Basic 8 (0.56) (0.60)
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2014
Year Year
Ended Ended
31 December 31 December
2014 2013
$ GBP
Other comprehensive expense for
the year (2,907,454) (2,594,252)
Foreign currency translation
differences
for foreign operations - 21,573
_________ _________
Other comprehensive income /
(expense) for the year - 21,573
_________ _________
Total comprehensive expense for
the year (2,907,454) (2,572,679)
Attributable to:
Equity holders of the parent (2,862,863) (2,950,609)
Non-controlling interest (44,591) 377,930
_________ _________
Total comprehensive expense for
the year (2,907,454) (2,572,679)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2014
31 December 31 December
2014 2013
ASSETS Notes $ $
Non-current assets
Intangible assets 9 - -
Property, plant and equipment 10 - 199
Investment in associated undertaking 11 26,167,122 26,297,657
Taxation receivable 13 - -
Total non-current assets 26,167,122 26,297,856
Current assets
Cash and cash equivalents 14 83,487 211,683
Total current assets 83,487 211,683
_________ _________
TOTAL ASSETS 26,250,609 26,509,539
EQUITY AND LIABILITIES
Current liabilities
Loans 15 14,446,509 12,001,620
Trade and other payables 16 276,295 72,660
Total current liabilities 14,722,804 12,074,280
_________ _________
Total liabilities 14,722,804 12,074,280
Equity
Share capital 17 17,242,518 17,242,518
Share based payments reserve 18 1,449,557 1,482,165
Foreign currency translation
reserve 19 - -
Accumulated loss (6,883,784) (4,053,529)
Equity attributable to equity
holders of the parent 11,808,291 14,671,154
Non-controlling Interest 20 (280,486) (235,895)
Total equity 11,527,805 14,435,259
_________ _________
TOTAL EQUITY AND LIABILITIES 26,250,609 26,509,539
The financial statements were approved by the Board of directors
on 15 May 2015 and signed on its behalf by:
C Kyriakou
Chairman
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2014
Share Foreign
Based Currency Non-
Share Payment Translation Accumulated Controlling
Capital Reserve Reserve Loss Interest Total
$ $ $ $ $ $
1 January
2014 17,242,518 1,482,165 - (4,053,529) (235,895) 14,435,259
Total
comprehensive
expense for
the year:
Loss - - - (2,862,863) (44,591) (2,907,454)
________ ________ _______ _________ ________ ________
Total
comprehensive
expense for
the year - - - (2,862,863) (44,591) (2,907,454)
Share
options
lapsed in
year - (32,608) - 32,608 - -
________ ________ _______ _________ ________ ________
31 December
2014 17,242,518 1,449,557 - (6,883,784) (280,486) 11,527,805
Share Foreign
Based Currency Non-
Share Payment Translation Accumulated Controlling
Capital Reserve Reserve Loss Interest Total
$ $ $ $ $ $
1 January
2013 17,242,518 1,434,424 (21,573) (1,081,347) (613,825) 16,960,197
Total
comprehensive
expense for
the year:
Loss - - - (2,972,182) 377,930 (2,594,252)
Total other
comprehensive
income /
(expense) - - 21,573 - - 21,573
Total
comprehensive
expense for
the year - - 21,573 (2,972,182) 377,930 (2,572,679)
Share options
granted in
year - 65,216 - - - 65,216
Share options
lapsed in
year - (17,475) - - - (17,475)
________ ________ _______ _________ ________ ________
31 December
2013 17,242,518 1,482,165 - (4,053,529) (235,895) 14,435,259
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2014
Notes
Year Year
Ended Ended
31 December 31 December
2014 2013
$ $
Net cash outflow from operating
activities 21 (769,636) (1,364,826)
Investing activities
Investments in associated undertaking - (146,219)
_______ __________
Net cash outflow from investing
activities - (146,219)
Financing activities
Loans 2,444,889 3,136,560
Loan interest & charges (1,803,449) (1,538,047)
_________ _________
Net cash inflow from financing
activities 641,440 1,598,513
Net increase in cash and cash equivalents (128,196) 87,468
Cash and cash equivalents at beginning
of year 211,683 124,215
Cash and cash equivalents at end
of year 14 83,487 211,683
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2014
1. General information and Corporate restructure
UMC Energy Corporation is a company incorporated in the Cayman
Islands. The consolidated financial report of the Company as at and
for the year ended 31 December 2014 comprises the Company and its
subsidiaries (together referred to as the "Group") and the Group's
interest in associates.
UMC Energy Corporation was incorporated and registered under the
laws of the Cayman Islands on 10 October 2012 as an exempted
company with limited liability and limited by shares under the
Cayman Islands Companies Law with Cayman Islands company registered
number MC-272327 with the name UMC Cayman Corporation. On 21
February 2013, the name of the company was changed to UMC Energy
Corporation. The Company acquired all the assets and liabilities of
UMC Energy PLC (incorporated in the United Kingdom ("PLC")). The
acquisition of the assets and liabilities was met by the issue of
484,444,763 ordinary shares in the Company, which shares were
distributed to the shareholders of PLC on a 1:1 basis such that the
shareholders of PLC became the shareholders of the Company. The
results for the year ended to 31 December 2013 are those of the
Group as if no capital reconstruction has taken place. See note 26
for additional detail.
The principal activity of the Group is the investment in, and
exploration and development of natural resources projects,
specifically in a petroleum exploration project in Papua New Guinea
and a uranium exploration project in Madagascar.
The Group's principal activity is carried out in US dollars. The
financial statements are presented in United States dollars which
is the Group's functional currency.
2. Accounting policies
Basis of accounting
The financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRSs), as adopted in
the European Union.
The financial statements have been prepared on the historical
cost basis except that certain financial instruments are accounted
for at fair values. The principal accounting policies adopted are
set out below.
Standards applied
During the year the Group has adopted the following relevant
standards:
Effective for financial
year beginning
IAS 27 - Investment Entities (Amendments) 1 January 2014
IAS 32 - Offsetting Financial Assets and Financial 1 January 2014
Liabilities
IFRS 10 - Consolidated Financial Statements 1 January 2014
IFRS 12 - Disclosure of Interests in Other Entities 1 January 2014
The adoption of these standards did not have a material impact
on the Group's financial position or performance.
The following relevant new standards, amendments and
interpretations have been issued, but are not effective for the
financial year beginning on 1 January 2014 and have not been early
adopted:
Effective for financial
year beginning
IFRS 9 - Financial Instruments 1 January 2018
IFRS 11 - Accounting for Acquisition of Interests 1 January 2016
in Joint Operations
IFRS 15 - Revenue from Contracts with Customers 1 January 2017
IAS 16 and IAS 38 - Clarification of Acceptable 1 January 2016
Methods of Depreciation and Amortisation
IAS 27 - Equity Method in Separate Financial 1 January 2016
Statements
Going Concern
The financial statements have been prepared on a going concern
basis, which contemplates continuity of normal business activities
and the realisation of assets and settlement of liabilities in the
ordinary course of business.
The Directors believe that it is appropriate to prepare the
financial statements on a going concern basis, principally due to
the loan facility the Company has secured from Natasa Mining Ltd
(Natasa), and the confidence of the Directors that funds will
continue to be made available to the Company under this facility.
In addition, the Directors are of the view that the Company will be
able to raise additional funds through further debt or equity
raisings when required. The Directors are of the opinion that the
Natasa loan facility, any proposed debt or equity raising measures
and the existing cash resources of the Company will provide
sufficient funds to enable the Company to continue its operations
for at least the next twelve months.
Basis of consolidation
The consolidated financial statements incorporate the financial
statements of the Company and entities controlled by the Company
(its subsidiaries) made up to 31 December each year. Control is
achieved where the Company has the power to govern the financial
and operating policies of an investee entity so as to obtain
benefits from its activities.
On acquisition, the assets and liabilities and contingent
liabilities of a subsidiary are measured at their fair values at
the date of acquisition. Any excess of the cost of acquisition over
the fair values of the identifiable net assets acquired is
recognised as goodwill. Any deficiency of the cost of acquisition
below the fair values of the identifiable net assets acquired (i.e.
discount on acquisition) is credited to the income statement in the
period of acquisition.
The results of subsidiaries acquired or disposed of during the
period are included in the consolidated income statement from the
effective date of acquisition or up to the effective date of
disposal, as appropriate.
Where necessary, adjustments are made to the financial
statements of subsidiaries to bring the accounting policies used
into line with those used by the Group.
All intra-group transactions, balances, income and expenses are
eliminated on consolidation.
The acquisition of UMC Energy PLC has been accounted for as a
group reconstruction as explained in Note 1 and 26 of the financial
statements.
Non-controlling interests
Non-controlling interests are that part of the net results of
operations and of net assets of a subsidiary attributable to
interests which are not owned directly or indirectly by the Group.
They are measured at the non-controlling interests' share of the
fair value of the subsidiary's identifiable assets and liabilities
at the date of acquisition by the Group and the non-controlling
interests' share of changes in equity since the date of
acquisition. Profit or loss and each component of other
comprehensive income are attributed to the owners of the parent and
to non-controlling interests. Total comprehensive income is
attributed to the owners of the parent and to the non-controlling
interests even if this results in the non-controlling interests
having a deficit balance as non-controlling interests are
considered to participate proportionally in the risks and rewards
of an investment in the subsidiary whether or not they have a legal
obligation to make any further investment.
Investments in associates
An associate is an entity over which the Group is in a position
to exercise significant influence, but not control or joint
control, through participation in the financial and operating
policy decisions of the investee.
The results and assets and liabilities of associates are
incorporated in these financial statements using the equity method
of accounting. Investments in associates are carried in the
statement of financial position at cost as adjusted by
post-acquisition changes in the Group's share of net assets of the
associate, less any impairment in the value of individual
investments. Losses of the associates in excess of the Group's
interest in those associates are not recognised.
Where a Group company transacts with an associate of the Group,
unrealised profits and losses are eliminated to the extent of the
Group's interest in the relevant associate. Losses may provide
evidence of an impairment of the asset transferred, in which case
appropriate provision is made for impairment.
The Group and its associated undertakings have complied with the
requirements of IFRS 6 - Exploration for and evaluation of mineral
resources.
Revenue recognition
Interest income is accrued on a time basis, by reference to the
principal outstanding and at the effective interest rate
applicable, which is the rate that exactly discounts estimated
future cash receipts through the expected life of the financial
asset, to that asset's net carrying amount.
Other operating income represents the amounts receivable for the
provision of consultancy, management and office services provided
in the normal course of business, net of VAT.
Segmental reporting
An operating segment is a component of the Group that engages in
business activities from which it may earn revenues and incur
expenses, including revenues and expenses that relate to
transactions with any of the Group's other components. All
operating segments' operating results are regularly reviewed by the
Board of Directors to make decisions about resources to be
allocated to the segment and assess its performance, and for which
discrete financial informational is available.
Segment results that are reported to the Board of Directors
include items directly attributable to the segment as well as those
that can be allocated on a reasonable basis.
Foreign currencies
Transactions in currencies other than US dollars are recorded at
the rates of exchange prevailing on the dates of the individual
transactions. For practical reasons, a rate that approximates to
the actual rate at the date of the transaction is often used. At
each year end date, monetary assets and liabilities that are
denominated in foreign currencies are retranslated at the rates
prevailing on the year end date. Non-monetary assets and
liabilities that are denominated in foreign currencies are
retranslated at historical rates. Gains and losses arising on
retranslation are included in the income statement for the period.
On consolidation, the assets and liabilities of the Group's
overseas operations are translated at exchange rates prevailing on
the year end date. Income and expense items are translated at the
average exchange rates for the period unless exchange rates
fluctuate significantly. Exchange differences arising, if any, are
classified as equity and transferred to the Group's translation
reserve. Such translation differences are recognised as income or
as expenses in the period in which the operation is disposed
of.
Non-current intangible assets
Non-current intangible assets have a finite life and are shown
at cost less any provisions made in respect of impairment.
Costs relating to the acquisition, exploration and development
of mining projects are capitalised under intangible assets. When it
is determined that such costs will be recouped through successful
development and exploitation or alternatively by sale of such
interests acquired, the expenditure will be transferred to tangible
assets and depreciated over the expected productive life of the
asset. Whenever a project is considered no longer viable, the
associated exploration expenditure is written off to the income
statement.
Impairment of tangible and intangible assets
At each year end date, the Group reviews the carrying amounts of
its tangible and intangible assets to determine whether there is
any indication that those assets have suffered an impairment loss.
If any such indication exists, the recoverable amount of the asset
is estimated, in order to determine the extent of the impairment
loss (if any). Where the asset does not generate cash flows that
are independent from other assets, the Group estimates the
recoverable amount of the cash-generating unit to which the asset
belongs. An intangible asset with an indefinite useful life is
tested for impairment annually and whenever there is an indication
that the asset may be impaired.
The recoverable amount is the higher of fair value less costs to
sell and value in use. Value in use is assessed by reference to the
net present value of expected future cash flows of the relevant
income generating unit or disposal value, if higher. If an asset is
impaired, a provision is made to reduce the carrying amount to its
estimated recoverable amount. An impairment loss is recognised as
an expense immediately.
Non-current asset investments
Loan investments are shown at cost less provision for any
permanent diminution in value. Loan investments are recognised as
an asset when sums are advanced.
Property, plant and equipment
Equipment and furniture are shown at cost less accumulated
depreciation and any recognised impairment loss. Depreciation is
charged so as to write off the cost of assets over their estimated
useful lives, using the straight line method on the following
basis:
Equipment 25% -100%
Furniture 25% - 100%
Financial instruments
Financial assets and financial liabilities are recognised on the
statement of financial position when the Company becomes a party to
the contractual provisions of the instrument.
Cash and cash equivalents
Cash and cash equivalents comprise cash held at bank and on
short term deposits.
Financial liabilities and equity
Financial liabilities and equity instruments are classified
according to the substance of the contractual arrangement entered
into. An equity instrument is any contract that evidences a
residual interest in the assets of the Company after deducting all
of its liabilities.
Trade payables
Trade payables are not interest bearing and are stated at their
nominal value.
Trade receivables
Trade receivables do not carry any interest and are stated at
their nominal value as reduced by appropriate allowances for
estimated irrecoverable amounts.
Borrowing costs
Borrowing costs on loans payable are recognised in the income
statement in the period in which they are incurred.
Equity instruments
Equity instruments issued by the Company are recorded at the
proceeds received except where those proceeds appear to be less
than the fair value of the equity instruments issued, in which case
the equity instruments are recorded at fair value. The difference
between the proceeds received and the fair value is reflected in
the share based payments reserve.
Share based payments
The Group has applied the requirements of IFRS 2 Share-based
Payments.
The Group issues equity-settled based payments to Directors and
certain professional advisors of the Group. Equity-settled
share-based payments are measured at fair value at the date of
grant. The fair value determined at the grant date of
equity-settled share-based payments is expensed on a straight-line
basis over the vesting period, based on the Group's estimate of
shares that will eventually vest.
Fair value is measured by use of a Black Scholes model. The
expected life used in the model has been adjusted, based on
management's best estimate, for the effects of non-transferability,
exercise restrictions, and behavioural considerations.
Critical Accounting Judgements and Key Sources of Estimation
Uncertainty
In the process of applying the Company's accounting policies
above, management necessarily makes judgements and estimates that
have a significant effect on the amounts recognised in the
financial statements. Changes in the assumptions underlying the
estimates could result in a significant impact to the financial
statements. The most critical of these accounting judgement and
estimation areas are as follows:
Exploration and evaluation expenditure has been incurred in
respect of the Papua New Guinea petroleum exploration project which
has yet to reach a stage of development where a determination of
the technical feasibility and commercial viability of the project
can be assessed on a comprehensive basis. In these circumstances,
the directors have used their experience to determine whether there
is any indication that the asset has been impaired and have
concluded that an impairment adjustment is required of $nil (31
December 2013: $nil) in relation to the investment in associated
undertakings.
3. Segmental analysis
The Group has one reportable segment which is that of the
investment directly and indirectly in, and operation of, resource
exploration and development projects. The Group's operational
activities are wholly focused in Papua New Guinea and Madagascar.
The Board of Directors reviews internal management reports at least
monthly.
The Group has not yet commenced commercial resource production
and has no turnover in the year.
Information regarding the results of the reportable segments is
shown below. Performance is measured based on the segment profit
before income tax as included in the internal management reports
that are reviewed by the Board of Directors. There is no
inter-segment pricing.
Reportable segment
Year Year Year Year
Ended Ended Ended Ended Year
31 December 31 December 31 December
2014 2014 31 Ended
$ $ 2014 December 31
$ December
2014 2013
$ $
Other
Madagascar Papua New Reconciling
Guinea Items Total Total
External revenue - - - - -
Financial income - - - - -
Financial expenses - - (1,803,449) (1,803,449) (1,538,047)
Depreciation
and amortisation - - (199) (199) (788)
Impairment charge - - - -
Share based
payment - - - - (65,216)
Reportable segment
(profit)/ loss (287,338) - - (287,338) (289,355)
Share of associate's
loss - (130,535) - (130,535) (87,225)
Segmental assets - 26,167,122 83,487 26,250,609 26,509,539
Segmental liabilities (222,956) - (14,499,848) (14,722,804) (12,074,280)
Additions to
non-current
assets - - - - 146,219
Geographical segments
In presenting information on the basis of geographical segments,
segment assets are based on the geographical location of the
assets.
Year Year
Ended Ended
31 December 31 December
2014 2013
$ $
Non-current assets
Papua New Guinea 26,167,122 26,297,657
Madagascar - -
The Group did not generate any revenue during the financial year
ended 31 December 2014 (31 December 2013: $nil).
4. Net loss from operations
Net loss from operations is stated after
charging/(crediting):
Year ended Year ended
31 December 2014 31 December 2013
$ $
Auditors remuneration:
as auditors 38,279 38,990
as reporting accountants 21,946 41,122
tax compliance 4,733 -
Audit fee - other auditors 9,050 9,579
Foreign exchange losses / (gains) 4,825 (1,001,138)
Depreciation 199 788
5. Finance costs
Year ended Year ended
31 December 2014 31 December 2013
$ $
Loan charges and interest 1,803,449 1,538,047
________ ________
1,803,449 1,538,047
6. Particulars of employees and directors
The Group had no employees during the year or previous year.
The Group had 5 (31 December 2013: 5) directors during the year
with aggregate emoluments in respect of qualifying services as
follows:
Year ended Year ended
31 December 2014 31 December 2013
$ $
Share based payments - 65,216
Amounts paid directly or to third
parties for the provision of services 233,204 356,915
7. Income tax expense
There is no corporation tax chargeable in the Cayman
Islands.
8. Loss per share
Including share of associate's results
Loss per share has been calculated by dividing the loss for the
year after taxation, including share of associate's results
attributable to the equity holders of the parent company of
$2,862,863 (31 December 2013: $2,972,182) by the weighted average
number of shares in issue at the year end of 484,444,763 (31
December 2013: 484,444,763).
Excluding share of associate's results
Loss per share has been calculated by dividing the loss for the
year after taxation, excluding share of associate's results
including share of associate's results, attributable to the equity
holders of the parent company of $2,732,328 (31 December 2013:
$2,884,957) by the weighted average number of shares in issue at
the year end of 484,444,763 (31 December 2013: 484,444,763).
9. Intangible assets
31 December 2014 31 December 2013
Development expenditure $ $
Cost
Balance brought forward 2,578,626 2,578,626
Balance carried forward 2,578,626 2,578,626
Exploration licences
Balance brought forward 6,642,279 6,642,279
Balance carried forward 6,642,279 6,642,279
Impairment
Balance brought forward 9,220,905 9,220,905
Balance carried forward 9,220,905 9,220,905
Net book value - -
The development expenditure relates to development of the
uranium exploration project in the Morondava basin of
Madagascar.
The exploration licences relate to uranium exploration licences
in the Morondava basin.
The Morondava uranium project has yet to reach a stage of
development where a determination of the technical feasibility or
commercial viability can be assessed. In addition, Madagascar has
experienced an extended period of political upheaval and
uncertainty. Due to this the Company has continued to take a
cautious approach to exploration and accordingly has not conducted
exploration activities during the 2014 financial year. The Company
continues to monitor the situation. Given these circumstances, the
Directors have resolved to fully impair the carrying value of this
intangible asset. Further, the Directors have resolved that it is
not appropriate to capitalise any further expenditure on the
intangible asset until circumstances change.
10. Property, plant and equipment
Equipment and furniture
31 December 2014 31 December
2013
$ $
Cost
Balance brought forward 4,620 4,620
Balance carried forward 4,620 4,620
Depreciation
Balance brought forward 4,421 3,608
Charge for the year 199 788
Exchange movement - 25
Balance carried forward 4,620 4,421
Net book value - 199
11. Investments in associated undertaking
On 26 March 2012, UMC Energy entered agreements with a
subsidiary of CNOOC Limited ("CNOOC"), the Chinese multi-national
oil and gas company listed on the New York, Toronto and Hong Kong
Stock Exchanges, whereby CNOOC subscribed for a 70% equity interest
in PNG Energy Limited with UMC Energy retaining a 30% equity
interest.
As a result of these agreements, the Group has an equity holding
in the following associate undertaking:
PNG Energy
group
Direct -
Indirect 30%
Total 30%
The country of incorporation of the associate undertaking is the
British Virgin Islands and the principal place of business is Papua
New Guinea.
31 December 2014 31 December 2013
$ $
Cost
Balance brought forward 26,297,657 26,238,663
Additions in the year - 146,219
Share of associated undertaking's
results (130,535) (87,225)
Balance carried forward 26,167,122 26,297,657
Amortisation/impairment
Balance brought forward - -
Balance carried forward - -
Net book value 26,167,122 26,297,657
The Papua New Guinea petroleum project has yet to reach a stage
of development where a determination of the technical feasibility
or commercial viability can be assessed. In these circumstances,
whether there is any indication that the asset has been impaired is
a matter of judgment, as is the determination of the quantum of any
required impairment adjustment. The Directors have used their
experience to conclude that no impairment adjustment is required in
the current year (31 December 2013: $nil). A Competent Persons
Report was issued on 5 August 2013 by 3D-Geo Pty Limited and the
resources identified are noted in the Report of the Directors.
Summarised results of the associate undertaking, PNG Energy
Group, as translated into US dollars are as follows:
Year ended Year ended
31 December 2014 31 December 2013
$ $
Revenue 2,612 596
Loss for the period 435,116 290,751
Total assets 16,945,990 4,105,663
Total liabilities 17,892,499 4,627,135
12. Controlled entities
Subsidiary Country of Holding Proportion of Nature of
Undertaking incorporation voting shares Business
held
China Pacific Cayman Islands Ordinary shares 100% Holding company
Petroleum
Corporation
UMC Energy British Virgin Ordinary shares 100% Holding company
Ltd Islands
Helios No Papua New Ordinary shares 100% Dormant
56 Ltd Guinea
Uramad Ltd British Virgin Ordinary shares 100% Holding company
Islands
Uramad SA Madagascar Ordinary shares 80% Uranium exploration
13. Taxation receivable - non-current
31 December 2014 31 December 2013
$ $
Value added tax - Madagascar 370,944 370,944
Impairment brought forward 370,944 370,944
Impairment carried forward 370,944 370,944
Net book value - -
The value added tax is recoverable upon commencement of
production of the mining project in Madagascar.
Following the impairment write down of the intangible assets
(see note 9) the receivable has been impaired in full.
14. Cash and cash equivalents
31 December 31 December 2013
2014
$ $
Cash at bank and in hand 83,487 211,683
15. Loans
31 December 31 December 2013
2014
$ $
Balance brought forward 12,001,620 9,865,769
Amounts advanced 641,440 1,598,513
Loan interest and charges 1,803,449 1,538,047
Exchange movement - (1,000,709)
Balance carried forward 14,446,509 12,001,620
On 2 August 2013, Natasa and the Company entered into a loan
facility agreement whereby Natasa agreed to make available to the
Company a loan facility at a rate of interest of 15% compounded
annually and a fee of 3% of amounts drawn down, capitalised with
the loan, and repayment on 60 days notice. Security for this
facility is a charge over the shares held by the Company in its
subsidiaries.
16. Trade and other payables
31 December 2014 31 December
2013
$ $
Trade payables 7,136 21,215
Other payables 222,956 -
Accruals 46,203 51,445
276,295 72,660
17. Called up share capital
31 December 31 December 31 December 31 December
2014 2014 2013 2013
Allotted and fully Number $ Number $
paid
Ordinary shares of
no par value 484,444,763 17,242,518 484,444,763 17,242,518
The Company has one class of ordinary shares which carry no
right to fixed income. Holders of ordinary shares are entitled to
receive dividends as declared from time to time and are entitled to
one vote per share at shareholders' meetings.
Share options over ordinary shares in existence at 31 December
2014 are as follows:
Number Exercise price Expiry date
15,300,000 16.5p per share 31 October 2017
18. Share based payment reserve
31 December 2014 31 December 2013
$ $
Balance brought forward 1,482,165 1,434,424
Arising on grant of options under
the Company's 2012 Participants
Option Plan - 65,216
Transfer to accumulated loss (32,608) (17,475)
Balance carried forward 1,449,557 1,482,165
The share based payment reserve relates to share options granted
to directors, consultants, staff and certain professional
advisors.
The share options vested on grant and are capable of being
exercised at any time between the date of grant and the expiry
date, subject to that, unless exercised, these share options expire
180 days following the grantee ceasing to be an executive /
consultant of the Company.
Movement on share options was as follows:
31 December 2014 31 December 2013
No of options No of options
Options at beginning of year 15,700,000 19,744,476
Options granted - 800,000
Options lapsed (400,000) (4,844,476)
Options at end of year 15,300,000 15,700,000
Options exercisable at end of
year 15,300,000 15,700,000
Weighted average exercise prices
were as follows:
31 December 31 December 2013
2014
Options at beginning of year 16.5p 16.24p
Options granted - 16.5p
Options lapsed 16.5p 3.88p
Options at end of year 16.5p 16.5p
Options exercisable at year end 16.5p 16.5p
31 December 2014 31 December 2013
Weighted average remaining contracted
life of options outstanding at
the year end 2.8 years 3.8 years
31 December 2014 31 December 2013
Exercise prices of options outstanding
at the year end
Exercise price per share No of options No of options
16.5p 15,300,000 15,700,000
15,300,000 15,700,000
The option pricing model used in calculating the fair value of
options granted was the Black Scholes model.
Under the terms of the option incentive plan dated 19 December
2012, the exercise price is stated in sterling.
19. Translation reserve
31 December 2014 31 December 2013
$ $
Balance brought forward - (21,573)
Translation difference arising
on consolidation - 21,573
Balance carried forward - -
20. Non-controlling interest
The non-controlling interest is in relation to a 20% share in
Uramad SA.
31 December 2014 31 December 2013
$ $
Share of net liabilities in Uramad
SA 280,486 235,895
21. Cash flows from operating activities
31 December 2014 31 December 2013
$ $
Net loss from operations (1,099,180) (2,057,343)
Adjustments for:
Share of associate undertaking's
losses 130,535 87,225
Translation and currency movements (4,825) 22,027
Depreciation 199 788
Share based payments charge - 47,741
Operating cash flows before movements
in working capital (973,271) (1,899,562)
Decrease in trade and other receivables - 539,597
Increase/(decrease) in trade and
other payables 203,635 (4,861)
Net cash outflow from operating
activities (769,636) (1,364,826)
22. Controlling party
The Company has no controlling entity and is the ultimate parent
of the Group.
23. Related party transactions
C Kyriakou and J Reynolds are directors of Natasa Mining Ltd
("Natasa"), a substantial shareholder in the Company.
As further described in Note 15, on 2 August 2013, Natasa and
the Company entered into a loan facility agreement whereby Natasa
agreed to make available to the Company a loan facility at a rate
of interest of 15% p.a. compounded annually and a fee of 3% of
amounts drawn down, capitalised with the loan, and repayment on 60
days notice. Security for this facility is a charge over the shares
held by the Company in its subsidiaries. At the same time the
parties entered a deed of novation whereby the Company assumed all
of the liabilities of UMC Energy PLC ("PLC") to Natasa. $10,817,642
of debt owing by PLC to Natasa was assumed by the Company under the
deed of novation, including accrued interest of $2,440,312. Of the
amount novated, $1,952,582 had been borrowed by PLC during the year
ended 31 December 2013, including interest and charges of
$1,036,225.
During the year ended 31 December 2014 the Company borrowed,
under the Natasa loan facility, $2,444,889 (2013: $1,183,978). This
amount includes interest and charges of $1,803,449 (2013:
$501,822).
At present, the Company is entirely dependent on funding from
Natasa for its continuing operation.
In 2013, the Company entered into an agreement with Natasa
Management SARL ("Management"), a wholly-owned subsidiary of
Natasa, pursuant to which Management will provide to the Company
office facilities and will facilitate the meetings of Directors in
order for them to manage and control the affairs of the Company. In
return for these services the Company agreed to pay Management the
cost of the services provided plus 10% subject to a minimum fee of
EUR250 per month, which during the year amounted to $27,626 (2013:
$1,698).
In 2014, the Company entered into an agreement with Natasa
Mining (UK) Limited ("NMUK"), a wholly-owned subsidiary of Natasa,
pursuant to which NMUK will provide to the Company office
facilities at a cost of GBP718 per month, which during the year
amounted to $4,580 (2013: $nil).
C Kyriakou paid expenses on behalf of the Company, for which he
was reimbursed, amounting to $39,992 (2013: $173,890).
Petro-Ex Pty Limited, a company in which C Hart has an interest,
paid expenses on behalf of the Company, for which it was
reimbursed, amounting to $1,305 (2013: $32,711).
The Company was charged $69,123 (2013: $65,656) by Resource
Capital Partners Inc for the provision of the consultancy services
of C Kyriakou.
The Company was charged $11,167 (2013: $31,265) by
Accomplishments Pty Limited for the provision of the services of R
Cleary as director.
The Company was charged $43,091 (2013: $136,021) by Petro-Ex Pty
Ltd for the provision of the consultancy services of C Hart.
The Company was charged $86,853 (2013: $92,709) by J Reynolds
for the provision of accounting and administration services. J
Reynolds paid expenses on behalf of the Company, for which he was
reimbursed, amounting to $25,751 (2013: $84,781).
The Company was charged $22,970 (2013: $31,265) by Shakesby
Investments Pty Limited for the provision of the services of R
Shakesby as director.
The parent company of the group is UMC Energy Corporation and
details of its subsidiaries are set out in note 12.
During the year, Group members made additional advances,
including the provision of support services and staff, to the
Company's subsidiary Uramad SA of $30,861 (2013: $267,181) and at
the year end, Uramad SA owed Group companies $6,152,625 (2013:
$6,119,403). The amount owing to Group members has been fully
impaired in the books of the relevant company.
During the year, Group members on-charged $nil (2013: $171,970)
of costs relating to the PNG Petroleum project to Gini Energy Ltd
for payment by CNOOC under the CNOOC/Gini non-recourse loan. The
amount outstanding at the year end was $nil (2013: $nil).
24. Post balance sheet events
Since 1 January 2015, the Company has advanced a further $2,837
to Uramad SA, for use on uranium exploration project development
activities.
Since 1 January 2015, the Company has borrowed a further
$746,867 from Natasa Mining Ltd, for working capital purposes.
25. Financial instruments
The Group's financial instruments comprise cash and cash
equivalents, loans payable and various items such as trade
receivables, trade payables, accruals and prepayments that arise
directly from its operations.
The main purpose of these financial instruments is to finance
the Group's operations.
The Board regularly reviews and agrees policies for managing the
level of risk arising from the Group's financial instruments. These
are summarised below:
Credit risk
Credit risk refers to the risk that a counterparty will default
on its contractual obligations resulting in financial loss to the
Group, and arises principally from the consolidated entity's bank
balances which, except for impairment adjustments recognised, is
considered by the directors to be recoverable in full.
The carrying amounts of the financial assets recognised in the
balance sheet best represents the Group's maximum exposure to
credit risk at the reporting date. In respect of these financial
assets and the credit risk embodied within them, the Group holds no
collateral as security and there are no other significant credit
enhancements in respect of these assets. The credit quality of all
financial assets that are neither past due nor impaired is
appropriate and is consistently monitored in order to identify any
potential adverse changes in credit quality. There are no financial
assets that have had renegotiated terms that would otherwise,
without that renegotiation, have been past due or impaired.
Liquidity risk
Liquidity risk is the risk that the Group will not be able to
meet its financial obligations as they fall due.
The Group's policy throughout the year has been to ensure that
it has adequate liquidity to meet its liabilities when due by
careful management of its working capital.
The following are the contractual maturities of financial
liabilities:
Carrying Greater than
31 December 2014 amount Cash flows 3 months or one year
less
$ $ $ $
Trade and other
payables 230,092 230,092 230,092 -
Loans payable 14,446,509 14,446,509 14,446,509 -
14,676,601 14,676,601 14,676,601 -
Carrying Greater than
31 December 2013 amount Cash flows 3 months or one year
less
$ $ $ $
Trade and other
payables 21,215 21,215 21,215 -
Loans payable 12,001,620 12,001,620 12,001,620 -
12,022,835 12,022,835 12,022,835 -
Market risk
Market risk is the risk that changes in market prices, such as
commodity prices, foreign exchange rates, interest rates and equity
prices will affect the Group's income or value of its holdings in
financial instruments.
Commodity price risk
The principal activity of the Group is the development of a
petroleum extraction project in Papua New Guinea and a uranium
mining project in Madagascar and the principal market risk facing
the Group is an adverse movement in the commodity price of
petroleum/natural gas or uranium.
Any long term adverse movement in these prices would affect the
commercial viability of the projects and hence the value of the
Group as a whole.
Foreign currency risk
The Group undertakes transactions principally in US Dollars,
Sterling, Papua New Guinea Kina, Malagasy Ariary and Australian
Dollars. While the Group continually monitors its exposure to
movements in currency rates, it does not utilise hedging
instruments to protect against currency risks. The main currency
exposure risk to the Group in relation to its financial assets is
to its Sterling bank account balance.
Sensitivity analysis for foreign exchange risk to Group.
The following analysis illustrates the effect that specific
changes could have had on the Group's income and equity for
Sterling to US Dollar exchange movements. This analysis is for
illustrative purposes only, as in practice market rates rarely
change in isolation. Actual results in the future may differ
materially from these results due to developments in the global
financial markets which may cause fluctuations in interest and
exchange rates to vary from the hypothetical amounts disclosed in
the following table, which therefore should not be considered a
projection of likely future events and losses.
10% weakening of US dollar 10% strengthening of US
dollar
Impact on Impact on Impact on Impact on
Equity Income /Reserves Equity Income /Reserves
$ $ $ $
At 31.12.2014
Sterling (7,786) (7,786) 7,786 7,786
Interest rate risk - The Group utilises cash deposits at
variable rates of interest for a variety of short term periods,
depending on cash requirements. The rates are reviewed regularly
and the best rate obtained in the context of the Group's needs.
The financial assets and liabilities held by the Group at the
year end are shown below. The directors consider that the carrying
amounts approximates to their fair value.
Assets 31 December 31 December 31 December 31 December
2014 2014 2013 2013
$ $ $ $
Carrying Net fair Carrying Net fair
amount value amount value
Cash at bank and
in hand 83,487 83,487 211,683 211,683
Total 83,487 83,487 211,683 211,683
Liabilities 31 December 31 December 31 December 31 December
2014 2014 2013 2013
$ $ $ $
Carrying Net fair Carrying Net fair
amount value amount Value
Trade and other payables 230,092 230,092 21,215 21,215
Loans payable 14,446,509 14,446,509 12,001,620 12,001,620
14,676,601 14,676,601 12,022,835 12,022,835
Collateral
The loans payable of $14,446,509 are secured by a charge over
the shares held by the Company in its subsidiaries and are
repayable within 60 days following a demand by Natasa Mining Ltd
("Natasa") (see note 15).
Capital Management
The Company's capital consists wholly of ordinary shares. There
are no other categories of shares in issue and the Company does not
use any other financial instruments as capital substitutes or quasi
capital. The Company manages its issued capital by considering
future capital requirements of the Group which are largely dictated
by the exploration programme of its subsidiary, Uramad SA,
operating in Madagascar and of Gini Energy Ltd's possible future
development programme in Papua New Guinea, as well as the head
office overhead costs of the Company in Monaco. The Company's board
of directors as a whole manages the capital by considering the need
to raise further capital to meet the above costs on a rolling 12
month basis so as to enable the accounts to be prepared on a going
concern basis but without unnecessary dilution of existing
shareholder interests. The Board always places a priority on
maximising the return to existing shareholders before raising
further capital.
There are no externally imposed capital requirements on the
Company.
Details of the ordinary share capital are set out in note
17.
26. Corporate Restructure
UMC Energy Corporation (the "Company") was incorporated and
registered under the laws of the Cayman Islands on 10 October 2012
as an exempted company with limited liability and limited by shares
under the Cayman Islands Companies Law with Cayman Islands company
registered number MC-272327 with the name UMC Cayman Corporation.
On 21 February 2013, the name of the company was changed to UMC
Energy Corporation. The Company acquired all the assets and
liabilities of UMC Energy PLC (incorporated in the United Kingdom
("PLC")). The acquisition of the assets and liabilities was met by
the issue of 484,444,763 ordinary shares in the Company, which
shares were distributed to the shareholders of PLC on a 1:1 basis
such that the shareholders of PLC became the shareholders of the
Company with each shareholder holding the same number of shares in
the Company, in both absolute and percentage terms, as they did in
PLC, following which all the shares in PLC were cancelled.
The following agreements were entered into between the Company
and PLC to give effect to the redomiciliation.
Agreements for Asset Sale and Assignment
In accordance with the terms of the Deed of Accession and
Indemnity Agreement dated 4 December 2012, PLC sold to UMC Energy
Ltd, 1,000,000 ordinary shares of no par value in PNG Energy Ltd.
PLC also assigned and transferred to UMC Energy Ltd all
intellectual property owned by PLC pertaining to the assets of PNG
Energy Ltd and its wholly owned subsidiary Gini Energy Ltd. The
consideration for the sale of these securities and the assignment
of the intellectual property was in aggregate GBP16,351,282. In
satisfaction of the consideration, UMC Energy Ltd issued 99
ordinary shares with a par value of US$1 each together with an
aggregate share premium thereon so the aggregate of the nominal
value and the share premium equalled $26,252,100 (being the US$
equivalent of GBP16,351,282 as of 4 December 2012). PLC directed
UMC Energy Ltd to issue the 99 ordinary shares directly to China
Pacific Petroleum Corporation
in consideration of China Pacific Petroleum Corporation issuing
and allotting to the Company 99,999 ordinary shares of no par value
with an aggregate capital amount of US$26,252,100 in consideration
of the Company issuing and allotting to PLC 434,145,000 ordinary
shares of no par value with an aggregate capital amount of
US$26,252,100.
In accordance with the terms of the Deed of Accession and
Indemnity Agreement dated 18 December 2012 PLC sold to Uramad Ltd
398 ordinary shares with a par value of MGA 20,000.00 each in
Uramad S.A. for a consideration of GBP1,890,898 ($3,057,908). PLC
assigned to Uramad Ltd the entire balance of monies owed by Uramad
S.A. to PLC, being a capital amount of $5,846,160, for a
consideration of GBP1. In satisfaction of the consideration for the
sale of the securities and the assignment of the debt, Uramad Ltd
issued 99 ordinary shares with a par value of US$1 each together
with an aggregate share premium thereon so the aggregate of the
nominal value and the share premium equalled $3,057,910 (being the
US$ equivalent of GBP1,890,899 as of 18 December 2012). PLC
directed Uramad Ltd to issue the 99 ordinary shares directly to the
Company in consideration of the Company issuing to PLC 50,204,999
ordinary shares of no par value with an aggregate capital amount of
$3,057,910.
Transfer Agreement
On 2 August 2013, PLC and the Company entered into an asset sale
and purchase agreement pursuant to which the Company acquired all
of the remaining assets and assumed all of the liabilities of PLC.
The acquisition was funded by the Company issuing 94,763 ordinary
shares of no par value to PLC.
Subscription Agreement for One Share in UMC Energy PLC
On 2 August 2013, PLC and the Company entered into a
subscription agreement whereby the Company subscribed for and PLC
agreed to allot and issue one ordinary share of GBP0.005 in the
capital of PLC for a subscription price of GBP1. As a result of
this subscription PLC became a wholly-owned subsidiary of the
Company, at which time PLC's name was changed to UMC Energy Ltd.
This company was subsequently deregistered.
The Directors considered that the fair value of the net assets
of PLC equalled that of their net book value of $17,242,517 and
this value was attached to the 484,444,763 ordinary shares issued
by the Company to acquire the assets and liabilities of PLC.
The assets and liabilities acquired were as follows:
$
Cash and cash equivalents 18,558
Investment in group undertaking - PNG petroleum project 26,472,101
Intangible assets - Madagascar uranium project 3,068,676
Plant and equipment 465
Fair value of options granted under option incentive
plan (1,499,640)
Loan payable - Natasa Mining Ltd (10,817,642)
17,242,518
--------------
27. Publication of non statutory accounts
The financial information set out in this announcement does not
constitute statutory accounts.
The financial information for the year ended 31 December 2014
has been extracted from the Group's financial statements to that
date upon which the auditors' opinion is modified on the basis of
an emphasis of matter opinion on going concern.
28. Annual Report and Annual General Meeting
The Annual Report for the year ended 31 December 2014 will be
available from the Company's website www.umc-energy.com
tomorrow.
Details of the annual general meeting of the Company will be
advised to shareholders in the near future.
Enquiries:
Chrisilios Kyriakou, Chairman
UMC Energy Corporation
Telephone: +44 (0) 20 3642 1633
Angela Hallett / James Spinney
Strand Hanson Limited (Nominated Adviser)
Telephone: +44 (0) 20 7409 3494
Philip Haydn-Slater / Paul Dudley
HD Capital Partners Limited (Broker)
Telephone: +44 (0) 20 3551 4870
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR GGUWPAUPAURA
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