TIDMROSE
RNS Number : 2048H
Rose Petroleum PLC
06 June 2017
6 June 2017
Rose Petroleum plc
("Rose", the "Company" or the "Group")
Final results for the year ending 31 December 2016
and notice of annual general meeting
Rose (AIM: ROSE), the AIM quoted natural resources business,
announces its final results for the year to 31 December 2016.
The Company also announces that its Annual General Meeting of
shareholders ("AGM") will be held at 9:30 am on 29 June 2017 at the
offices of Allenby Capital Limited, 3 St. Helen's Place, London
EC3A 6AB.
A copy of the Company's annual report and accounts, which
include the notice of AGM, will be available on its website,
www.rosepetroleum.com, shortly and will be sent to shareholders
later today.
Enquiries:
Rose Petroleum Tel: +44 (0)
plc 20 7225 4595
Matthew Idiens (CEO) Tel: +44 (0)
Chris Eadie (CFO) 20 7225 4599
Jeremy Porter / James Allenby Capital Tel: +44 (0)
Reeve / Limited 20 3328 5656
Liz Kirchner
James Pope / Ben Turner Pope Tel: +44 (0)20
Turner Investments 3621 4120
Chairman's Statement
In the Company's Interim Results statement for 2016, published
in September 2016, it was outlined that the recent period has been
one of restructuring, consolidation and transformation for the
Group. This has been a continuing theme in the period since, and
the Board has continued to adopt a strategy to ensure that the
Group is positioned to create value from its existing assets while
being flexible and agile to take advantage of opportunities that
arise both before and after a recovery in the natural resources
sector. Conserving existing cash resources has also been a key
priority during the period.
There is no doubt that the prevailing market conditions of the
last few years have provided the Board with an extremely
challenging backdrop against which to operate, but the decisive
action of the Board has sought to de-risk and safeguard the
existing asset portfolio, reduced liabilities and operational
overheads and enabled us to identify and chase some very convincing
potential opportunities.
Despite the withdrawal from the Mancos acreage, and disposal of
the Cisco Dome field, associated wells and associated
infrastructure during the period, the Board fundamentally believes
that the Group's Oil and Gas ("O&G") portfolio is of a scale
and quality to deliver significant shareholder value. The Paradox
assets were acquired due to their prospectivity, size, location and
low breakeven price, and despite the downturn in the oil sector,
the Board believes that they remain a highly desirable asset. In
addition, by reducing the size of the Company's acreage through the
disposal of the Mancos acreage, the Board achieved the twin
objective of both retaining the core part of the Group's O&G
portfolio and also significantly reducing costs and liabilities. We
have kept the market regularly updated on our progress to secure
the permit for the 3D seismic survey in the Paradox Basin and we
remain on track to shoot the survey by the end of this year. This
will be a major step in the process of unlocking value from the
Paradox acreage and will hopefully be the precursor for the
drilling of our first well in the Paradox Basin during 2018.
The Board has reviewed numerous potential opportunities in the
natural resources sector since the downturn in the oil price,
looking to create shareholder value ahead of the recovery in the
sector, and I was delighted that we were able to secure an
investment in the Company during the period to pursue some exciting
prospects in Cuba. The overall economic and political changes
taking place in Cuba present a striking opportunity, with direct
foreign investment now being a priority, to realise the country's
anticipated growth. While there is no certainty that any
transaction will complete, we have had, and continue to be in
direct discussions with the relevant Government owned corporations
in Cuba about potential transactions in both the Oil and Gas and
building materials sectors.
Post period end the Company announced that it had entered into
negotiations to dispose of its SDA Mill in Mexico. While there is
no guarantee that the transaction will complete, should it do so,
the Group will allocate the funds towards the total funds required
for the 3D seismic shoot in the Paradox Basin. While the SDA Mill
remains a viable standalone business for Rose, albeit with a low
level of profitability, the Board believes that the current outlook
for US energy is extremely encouraging, and therefore a strategic
focus on the Paradox acreage is currently the optimal way to
deliver short-term value to shareholders.
While the cost cutting across the Group to date has been radical
and far-reaching, the Board has ensured that it has retained an
operational capability sufficient to meet its commitments for the
foreseeable future. As well as protecting the existing asset base
and positioning the Group for short-term growth, the Board is also
confident that the Company has the capacity to take advantage of
potential acquisition opportunities, such as those that we are
currently looking at in Cuba, which we believe will inevitably
arise.
I am looking forward to the period ahead, and I would like to
take this opportunity to thank our investors, advisers and
employees for their continuing support during this transformational
period. The Board is looking forward to updating you on progress
throughout 2017, which promises to be an exciting period in the
Company's ongoing evolution.
PE Jeffcock
5 June 2017
REVIEW OF OPERATIONS
Oil & Gas Division
U.S.A.
During the strong oil price environment of 2014 and early 2015,
the Group entered into agreements under which it was able to
commence earning into a 75% working interest in approximately
263,000 gross acres in Utah. The area of focus of the acreage was
on two unconventional oil and gas basins: the Uinta Basin, which
targets the Mancos Shale at a maximum depth of approximately
3,200ft, and the Paradox Basin that targets the Paradox Clastics at
a maximum depth of approximately 10,500ft.
Under the terms of the original agreement, the Group was to
carry the seller of the acreage, Rockies Standard Oil Company LLC
("RSOC"), which was to retain a 25% working interest in the
leasehold, for the first US$17 million expenditure on the projects:
US$9.5 million in the Uinta Basin and US$7.5 million in the Paradox
Basin. Under the terms of the agreement, the obligation is not
contractually committed and therefore, no liability or contingent
liability has been recognized in these financial statements.
During 2014, and subsequent to the acquisition of the Cisco Dome
field, Ryder Scott Company LP ("Ryder Scott") completed a reserve
report on the Utah leasehold. Based on that reserve report, the
Group's Mean Un-Risked Recoverable Prospective Resources across its
total acreage were estimated to be 1.8 billion barrels of oil
("BO") and 6.45 trillion cubic feet of gas ("TCFG"). Of these total
resources, it was estimated by Ryder Scott that the Paradox acreage
contained over 1.1 billion BO (61% of the total BO resources
estimated) and circa 2.2 TCFG (34% of the total gas resources
estimated), whilst the Mancos acreage contained circa 710 million
BO (39% of the total BO resources estimated) and circa 4,260 TCFG
(66% of the total gas resources estimated).
In the report, Ryder Scott also gave an opinion on the chance of
success in the Paradox and Mancos acreage and concluded that the
chance of success within the Paradox leases was up to 56%, compared
with 30% in the Mancos leases.
During the latter part of 2014 and during 2015, the Group
concentrated its efforts on the Mancos due to the relative ease of
drilling with its shallow depth, low drilling costs, and good
infrastructure. The Board was hopeful that a demonstration of the
prospectivity of the Mancos could be achieved in quick time and
that a successful drilling campaign would provide the catalyst of
cashflow that would enable the commencement of the Paradox
activity. However, following the initial work programme at the
Mancos, the Board concluded that the Paradox Basin presented a
lower risk opportunity, with greater scale and a higher chance of
success.
Revised agreement with RSOC
Having considered all of the above, the Board announced in April
2016 that it had entered into an agreement with RSOC to cease
earning into the Mancos acreage and dispose of the Cisco Dome
field, wells, pipelines, gas tap, gas plant, and all the associated
equipment and liabilities to RSOC, with the intention of focusing
solely on the Group's Paradox acreage.
As part of the revised agreement with RSOC, the Group agreed to
cover the cost of the existing plug and abandonment ("P&A")
liability of the four wells already scheduled for P&A with the
authorities, which was calculated to be US$0.3 million and which
was settled in the year. The Group also agreed to leave the
existing operator bonds in place with the State of Utah and Bureau
of Land Management ("BLM"), which are now refundable to RSOC rather
than the Group.
RSOC, in turn, agreed to reduce the Group's obligation to earn
the 75% working interest in the Paradox acreage by US$2 million to
US$5.5 million. Under the terms of the agreement, the obligation is
not contractually committed and therefore no liability or
contingent liability has been recognized in these financial
statements.
The revised agreement with RSOC has significantly reduced
operational costs including lease rental/minimum royalty payments
associated to the Mancos leasehold. Further, and potentially more
importantly, the Group will no longer be liable for the P&A
liability of the fifty plus wells in the Cisco Dome field. This
reduction of acreage has also enabled a reduction of headcount and
a material reduction in operating costs in the O&G Denver
office.
Paradox Basin acreage
By way of background, the Paradox Basin has been actively
exploited by Fidelity Exploration and Production ("Fidelity"),
mainly in the Cane Creek Formation, south southeast of the Group's
main group Paradox lease blocks. Fidelity has been the most active
operator in the Paradox Basin over the past two years with average
Q1 2015 production of 2,100 barrels of oil equivalent per day
("boepd"). In addition to Fidelity's success, multiple wells in the
area of the Group's leases have produced oil and gas to surface
from various formations, and it is a combination of all these
factors that led the Board to the conclusion that it should focus
on the Group's Paradox Basin acreage.
Throughout the period under review, and since, the Group has
been undertaking the process of securing the permit to enable it to
shoot a 3D seismic survey over the Paradox acreage. Consistent with
Fidelity, the strategy is to shoot the seismic lines that will
assist in identifying drilling targets for the Group's first wells
in the Paradox.
Significant progress has been made in the process in recent
months and on 7 March 2017, the Group announced that the 15-day
public consultation period for its 3D seismic shoot permit had
formally begun. Following the completion of this period, and based
on comments received, the Group was informed by the Bureau of Land
Management ("BLM") that certain questions raised in the comments
received should have been addressed by the BLM in the original
Environmental Assessment Study ("EA") that supports the permit
application. As a result, the Group has now amended the shoot
design to accommodate the points raised and resubmitted the
documents to the BLM for review. Once this review is complete, the
revised and updated EA will be published and made available for a
further 15-day public consultation period. The BLM has assured Rose
that the revised timing for granting of the permits will not impact
the commencement of the proposed physical shoot in H2 2017.
The Company has also now begun the process of assembling its
technical team for the seismic shoot and has engaged the services
of two key individuals, Dave List and Todd Fockler. Dave and Todd
are geophysicists and both previously worked for Fidelity
Exploration and Production Company on their Paradox seismic shoots
and subsequent drilling programmes. Dave and Todd bring with them
substantial relevant expertise and will help the Group to ensure
that the technical and operational aspects of the shoot are managed
in the optimal way. Their extensive operational experience in the
Basin will be of significant benefit to our programme going
forward.
Mining Division
Gold and Silver Mining Operations, Mexico
Throughout most of 2016, the Group continued its milling
operations through its wholly owned subsidiary, Minerales VANE S.A.
de C.V., which owns the SDA Mill. All milling consisted of
processing third-party ore ("toll milling") while joint-venture
production opportunities were evaluated. A total of approximately
20,300 tonnes of ore were processed during the year which covered
the unit's operating costs. A number of joint venture production
opportunities were evaluated which resulted in two strong project
candidates being pursued, however, factors outside the Company's
control meant that no transaction was completed.
In early 2017, Magellan Gold Corporation (OTCBB: MAGE)
approached the Company with a view to acquiring the SDA Mill and,
in March 2017, the two companies entered into a Memorandum of
Understanding ("MOU") in respect of a transaction. The transaction
is presently in the due diligence phase.
Under the terms of the MOU, the Company has granted Magellan a
90-day option period, for a non-refundable US$0.05 million deposit,
to purchase the SDA Mill subject to the satisfaction of a number of
conditions. The MOU also provides Magellan with the option of
extending this option period by a further 60 days in consideration
of an additional US$0.1 million which would be credited against the
final purchase price should the sale proceed. The total purchase
price for the SDA Mill is US$1.5 million, payable as US$1.0 million
in cash and US$0.5 million in restricted common stock (shares) in
Magellan. On 1 June 2017, the Company announced that Magellan had
exercised its option to extend the 90-day option period for a
further 60 days and the non-refundable payment of US$0.1 million
has been received.
Completion of the disposal of the SDA Mill is subject to a
number of conditions, including, but not limited to, the Group and
Magellan entering into a separate asset purchase agreement, the
completion of satisfactory due diligence by Magellan and Rose,
Magellan completing a financing to acquire the SDA Mill, and an
audit by Magellan of the SDA Mill's financial statements at
Magellan's cost. In addition, as the SDA Mill has contributed the
majority of Rose's revenue in the past 12 months, any sale would be
subject to the approval of the shareholders of Rose at a general
meeting of the Company. There can therefore be no assurance at this
stage that the sale of the SDA Mill will be completed.
Base and precious metals exploration, Mexico
The Group's single exploration project is the Tango
copper/molybdenum porphyry and associated precious metals veins
property located 70 kilometres east of Mazatlán in southern
Sinaloa. Efforts to fund and organise the permitted drilling
programme for 2017 are currently being re-evaluated due to the
pending SDA Mill sale to Magellan Gold Corporation.
IVA recovery, Mexico
Throughout the period, the Group has been in the process of
recovering approximately MX$17.9 million (c.US$1.0 million) of IVA
(Mexican value added tax) and associated inflation adjustment
payments owed to it from the Mexican tax authority, Servicio de
Administración Tributaria ("SAT"). Post-period, SAT commenced
refunding the Group's IVA claim and approximately MX$9.2 million
(c.US$0.5 million) has been received at the date of this report.
The Company continues to seek the recovery of the remaining MX$8.8
million (c.US$0.5 million) owed to it by SAT.
Copper exploration, southwest U.S.A.
In April 2016, the Group announced that it had entered into an
agreement with privately held Burdett Gold LLC, to conduct
exploration drilling on the Ardmore copper project which consists
of 18 unpatented mining claims located north of Tucson, Arizona.
Burdett assumed control of the claims and is the operator of the
project and has commenced exploration work.
Uranium exploration, U.S.A.
The bulk of the Group's uranium assets are held in a joint
venture with Anfield Resources Inc. (TSXV: ARY) covering property
holdings in the breccia pipe district of northern Arizona. The
Group also owns 100% of the North Wash project in Utah. The land
holdings in Arizona consist of a number of drill-proven breccia
pipes, some containing mineralization, and breccia pipe targets.
The North Wash project in Utah contains a resource of uranium and
vanadium. These holdings are being held on care and maintenance
while management reviews its options to develop the projects
further.
With respect to the political situation behind the land
withdrawal in northern Arizona which negatively impacts all
breccia-pipe holdings on federal lands, the election of President
Trump provides optimism for a possible change in the status of
those lands during his tenure.
In respect of the disposal of the Company's 50% interest in the
Wate breccia pipe deposit to Energy Fuels Resources Inc. (TSE:EFR)
in 2015, the Company and EFR further revised the terms of the
Purchase and Sale Agreement during the period under review. Under
the revised agreement, EFR paid the Company US$50,000 in 2016 and a
further US$450,000 is payable on the date on which the first
Commercial Production from the Wate Project occurs.
Cuban Opportunities
In May 2016, the Group announced that it had raised gross
proceeds of US$1.2 million (GBP0.8 million) from Earth Source
Investment Inc, primarily to further develop opportunities that had
arisen in Cuba and specifically around the processing and
manufacturing of gypsum and associated building materials.
As announced on 4 July 2016 and in the period since, Rose, with
the assistance of its technical team supported by Grenzebach BSH
(GmbH) ("Grenzebach"), has been negotiating with Empressa
Materiales de Construccion ("EMC"), the local state company, to
construct the proposed gypsum processing and manufacturing
facilities to supply the domestic and Caribbean market with various
gypsum products including, but not limited to, gypsum wall and
ceiling panels. Multiple models and plant facilities have been
discussed involving various end products and production rates and
Rose put forward its proposal on the agreed capacity and products
at the end of the year, although the process is no longer exclusive
to Rose. Having been through multiple versions of both capacity and
end product requirements, which was an extremely challenging
process, the Board of Rose would like to take this opportunity to
thank Grenzebach for its continuing support. We are presently
engaged in further discussions regarding the transaction and we
will update the market when we have further clarity around the
ongoing process.
As a result of the Group developing good relationships in Cuba,
we have now also engaged with the Cuban national oil company,
CUPET, and are in early stage discussions regarding oil & gas
licences. We feel that the oil and energy sectors in Cuba offer
excellent potential and hope to be able to progress our
discussions.
FINANCIAL REVIEW
Income Statement
The Income Statement reports total revenue for the year ended 31
December 2016 of US$0.9 million (2015: US$4.3 million), arising
from the Group's precious mining and milling operations in Mexico.
The decrease in revenues was primarily the result of having a near
full year of production from the Mina Charay gold and silver
project in 2015, which ceased in December 2015.
The Group reports a net loss after tax of US$0.2 million or 0.01
cents per share for the year ended 31 December 2016 (2015: net loss
after tax US$9.1million or 0.45 cents per share). Due to the
radical cost cutting programme, administrative costs for the year
fell to US$2.3 million (2015: US$5.1m). The Group has made a
share-based payment charge of US$0.3 million (2015: US$1.5
million).
The Group has made a provision for impairment of intangible
exploration and evaluation assets of US$0.36 million (2015: US$3.7
million) during the year. The charge relates primarily to the
Group's uranium and copper assets in the U.S.A. and Mexico
respectively.
Foreign exchange gains on the restatement of the Company's loans
to its subsidiaries were US$2.5 million (2015: US$0.4 million).
This has had a significant impact on the results for the year and
can be primarily attributed to the weakening of sterling since
Brexit.
The income statement for the year includes a non-cash deferred
tax credit of US$1.1m (2015: US$0.8 million).
Balance Sheet
Total investment in the Group's intangible exploration and
evaluation assets at 31 December 2016 was US$10.1 million (2015:
US$10.2 million) primarily reflecting investment in the Utah
O&G assets.
The carrying value of property, plant and equipment at 31
December 2016 was US$0.3million (2015: US$0.6 million) reflecting
the continued depreciation of the ore processing mill.
Trade and other receivables of US$1.2 million (2015: US$1.5
million) includes US$0.8 million in respect of VAT and tax
recoverable in Mexico.
Cash and cash equivalents at 31 December 2016 were US$1.3
million (2015: US$2.4 million). During the period, the Company
raised gross proceeds of US$2.4 million through the placing of the
Company's Ordinary Shares.
Going Concern
The Directors have set out in note 3 to the financial statements
their consideration of the future financing requirements of the
Group and acknowledge that the circumstances represent a material
uncertainty that may cast significant doubt upon the Group and
Company's ability to continue as a going concern which has resulted
in the auditor including an emphasis of matter in their report.
Nevertheless, having given consideration to the uncertainties, the
Directors have a reasonable expectation that a sale of the SDA mill
will be completed in due course, and the 3D seismic permit will be
granted, which will allow the Group to raise sufficient funding to
continue in operational existence for the foreseeable future.
Despite challenging capital markets, the Company and Group have
been successful historically in raising equity finance and consider
that they have reasonable grounds for believing these past
successes will continue. For these reasons, the Directors continue
to adopt the going concern basis in preparing the consolidated
financial statements.
This assessment has been carried out in the light of the
guidance issued to the Directors by the Financial Reporting
Council.
FUTURE DEVELOPMENTS
Your Board, management and dedicated teams continue to operate
the Group's existing O&G and mining assets and will continue to
look to enhance the value from these. In addition, the Group
continues to investigate and evaluate new opportunities to increase
shareholder value.
We would like to thank all shareholders for their continued
support.
CONSOLIDATED INCOME STATEMENT
For the year ended 31 December 2016
2016 2015
Notes US$'000 US$'000
Continuing operations
Revenue 5 898 4,320
Cost of sales (820) (3,806)
Gross profit 78 514
Operating and development
expenses 7 (600) (1,522)
Administrative expenses (2,313) (5,123)
Project development expenses 8 (580) -
Impairment of intangible exploration
and evaluation assets 9 (360) (3,694)
Foreign exchange gains 2,496 438
Loss on disposal of assets
held for sale 24 - (485)
Operating loss (1,279) (9,872)
Finance income 10 9 13
Finance costs 11 - (5)
Loss before taxation 12 (1,270) (9,864)
Taxation 15 1,120 797
Loss for the year attributable
to owners of the parent company (150) (9,067)
Loss per Ordinary Share
Basic and diluted, cents per
share 16 (0.01) (0.45)
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2016
2016 2015
US$'000 US$'000
Loss for the year attributable
to owners of the parent company (150) (9,067)
Other comprehensive income
Items that may be subsequently
reclassified to profit or
loss, net of tax
Foreign currency translation
differences on foreign operations 6,498 904
6,498 904
Total comprehensive income
for the year attributable
to owners of the parent company 6,348 (8,163)
CONSOLIDATED BALANCE SHEET
As at 31 December 2016
2016 2015
Notes US$'000 US$'000
Non-current assets
Intangible assets 17 10,117 10,221
Property, plant and equipment 18 337 620
10,454 10,841
Current assets
Inventories 21 - 19
Trade and other receivables 22 1,236 1,484
Cash and cash equivalents 23 1,273 2,399
2,509 3,902
Total assets 12,963 14,743
Current liabilities
Trade and other payables 25 (524) (684)
Provisions 27 (110) -
Taxation payable (1) (3)
(635) (687)
Non-current liabilities
Provisions 27 - (192)
- (192)
Total liabilities (635) (879)
Net assets 12,328 13,864
Equity
Share capital 28 40,362 38,765
Share premium account 32,183 31,471
Share-based payment reserve 3,028 2,899
Cumulative translation
reserves (8,376) (4,384)
Retained deficit (54,869) (54,887)
Equity attributable to
owners of the parent
company 12,328 13,864
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2016
Share Share-based Cumulative
premium payment translation Retained
Share account reserve reserves deficit Total
capital
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
As at 1 January
2015 37,130 28,471 1,540 (2,258) (45,937) 18,946
Transactions
with owners
in their capacity
as owners:
Issue of equity
shares 1,635 3,271 - - - 4,906
Expenses of
issue of equity
shares - (271) - - - (271)
Share-based
payments - - 1,523 - - 1,523
Transfer to
retained earnings
in respect
of forfeit
options - - (117) - 117 -
Effect of
foreign exchange
rates - - (47) - - (47)
Total transactions
with owners
in their capacity
as owner 1,635 3,000 1,359 - 117 6,111
Loss for the
year - - - - (9,067) (9,067)
Other comprehensive
income:
Currency translation
differences - - - 904 - 904
Total other
comprehensive
income for
the year - - - 904 - 904
Total comprehensive
income for
the year - - - 904 (9,067) (8,163)
Currency translation
differences
on equity
at historical
rates - - - (3,030) - (3,030)
As at 1 January
2016 38,765 31,471 2,899 (4,384) (54,887) 13,864
Transactions
with owners
in their capacity
as owners:
Issue of equity
shares 1,597 783 - - - 2,380
Expenses of
issue of equity
shares - (71) - - - (71)
Share-based
payments - - 326 - - 326
Transfer to
retained earnings
in respect
of forfeit
options - - (168) - 168 -
Effect of
foreign exchange
rates - - (29) - - (29)
Total transactions
with owners
in their capacity
as owner 1,597 712 129 - 168 2,606
Loss for the
year - - - - (150) (150)
Other comprehensive
income:
Currency translation
differences - - - 6,498 - 6,498
Total other
comprehensive
income for
the year - - - 6,498 - 6,498
Total comprehensive
income for
the year - - - 6,498 (150) 6,348
Currency translation
differences
on equity
at historical
rates - - - (10,490) - (10,490)
As at 31 December
2016 40,362 32,183 3,028 (8,376) (54,869) 12,328
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 31 December 2016
2016 2015
US$'000 US$'000
Operating activities
Loss before taxation (1,270) (9,864)
Finance income (9) (13)
Finance costs - 5
Adjustments for:
Depreciation of property, plant
and equipment 201 234
Loss on disposal of property,
plant and equipment 17 -
Impairment of Intangible exploration
and evaluation assets 360 3,694
Loss on disposal of assets held
for sale - 485
Share-based payments 326 1,523
Unrealised foreign exchange (2,626) (725)
Operating outflow before movements
in working capital (3,001) (4,661)
Decrease in inventories 19 38
Decrease(increase) in trade and
other receivables 100 (514)
Decrease in trade and other payables (163) (171)
Cash used in operations (3,045) (5,308)
Income tax paid - (10)
Net cash used in operating activities (3,045) (5,318)
Investing activities
Interest received 4 13
Purchase of property, plant and
equipment - (67)
Purchase of intangible exploration
and evaluation assets (272) (5,433)
Proceeds on disposal of property,
plant and equipment 9 -
Proceeds on disposal of intangible
assets 5 -
Proceeds from disposal of assets
held for sale 50 250
Net cash used in investing activities (204) (5,237)
Financing activities
Proceeds from issue of shares 2,380 4,906
Expenses of issue of shares (71) (302)
Net cash from financing activities 2,309 4,604
Net decrease in cash and cash
equivalents (940) (5,951)
Cash and cash equivalents at
beginning of year 2,399 8,408
Effect of foreign exchange rate
changes (186) (58)
Cash and cash equivalents at
end of year 1,273 2,399
SELECTED NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2016
3. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The financial statements have been prepared in accordance with
International Financial Reporting Standards ("IFRS") as issued by
the International Accounting Standards Board ("IASB") and as
adopted by the European Union ("EU").
The financial statements have been prepared on the historical
cost basis. Historical cost is generally based on the fair value of
the consideration given in exchange for assets.
The Directors continue to adopt the going concern basis in
preparing the consolidated financial statements. The financial
statements do not include any adjustment that would result from the
basis of preparation being inappropriate.
The principal accounting policies adopted are set out below.
GOING CONCERN
In the period under review, the Group generated its revenue from
third-party toll milling operations from the Group owned mill ("SDA
mill" or "mill") in Mexico. Toll milling ceased in March 2017 and
since then the Group has been generating revenue from the
processing of historic tailings produced at the mill site. Also in
March 2017, the Group announced that it had entered into a
memorandum of understanding ("MOU") with Magellan Gold Corporation
("Magellan") for the potential disposal of the mill and its
associated assets, licences and agreements for a total
consideration of US$1.5 million (US$1.0 million cash and US$0.5
million in restricted common stock in Magellan). Under the terms of
the MOU, the Group granted Magellan a 90-day option period, for a
non-refundable US$0.05 million deposit, already paid by Magellan,
to purchase the mill subject to the satisfaction of a number of
conditions. The MOU also provided Magellan with the option of
extending the period by a further 60 days in consideration of an
additional US$0.1 million, which will be credited against the final
purchase price should the sale proceed. At the date of signing of
the accounts, Magellan has exercised its option to extend the MOU
period by 60 days which expires on 31 July 2017.
During the year, the Group has been undertaking the process of
securing the permit to enable it to complete a 3D seismic shoot
over the Paradox acreage, which will enable the Group to identify
future drilling targets. The application for the 3D shoot permit is
currently under consideration by the Bureau of Land Management
("BLM") following the application being resubmitted to address
points raised by the BLM in the first submission.
As primarily an exploration Group, the Directors are mindful
that there is an ongoing need to monitor overheads and costs
associated with delivering the exploration programme, and raise
additional working capital on an ad hoc basis to support the
Group's activities. The Group has no bank facilities and has been
meeting its working capital requirements from cash resources. At
the year end, the Group had cash and cash equivalents amounting to
US$1.3 million (2015: US$2.4 million).
The Directors have prepared cash flow forecasts for the Group
for the period to June 2018 based on their assessment of the
prospects of the Group's operations. These cash flow forecasts
include its normal operating costs for all operations,
discretionary and non-discretionary exploration and development
expenditure (including the 3D seismic shoot under the assumption
that the permit will be issued by the BLM), and the sale of the SDA
mill. These forecasts indicate that the Group will be required to
raise additional equity funding in the forecasted period. In the
event that the sale of the SDA mill does not proceed, or is
completed at reduced consideration, and the Group ceases all
discretionary expenditure (including the 3D seismic shoot), the
forecasts still indicate that the Group will require additional
equity funding in the foreseeable future. The ability of the
Company to raise sufficient additional equity funding in the
foreseeable future may be affected by market conditions and may be
subject to shareholder approval.
The Directors acknowledge that the circumstances detailed above
represent a material uncertainty that may cast significant doubt
upon the Group and Company's ability to continue as a going concern
and that therefore the Group and Company may be unable to realise
their assets and discharge their liabilities in the normal course
of business. Nevertheless, having given consideration to the
uncertainties described above, the Directors have a reasonable
expectation that a sale of the SDA mill will be completed in due
course, and the 3D seismic permit will be granted, which will allow
the Group to raise sufficient funding to continue in operational
existence for the foreseeable future. Despite challenging capital
markets, the Company and Group have been successful historically in
raising equity finance and consider that they have reasonable
grounds for believing these past successes will continue. For these
reasons, the Directors continue to adopt the going concern basis in
preparing the consolidated financial statements. The financial
statements do not include any adjustment that would result from the
basis of preparation being inappropriate.
SEGMENTAL REPORTING
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision maker.
The chief operating decision maker, who is responsible for
allocating resources and assessing performance of the operating
segments and making strategic decisions, has been identified as the
Board of Directors.
4. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
In the application of the Group's accounting policies, which are
described in note 3, the Directors are required to make judgements,
estimates and assumptions about the carrying amounts of the assets
and liabilities that are not readily apparent from other sources.
The estimates and associated assumptions are based on historical
experience and other factors that are considered to be relevant.
Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an
on-going basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised if the revision affects
only that period or in the period of the revision and future
periods if the revision affects both the current and future
periods.
The following are the critical judgements and estimations that
the Directors have made in the process of applying the Group's
accounting policies and that have the most significant effect on
the amounts recognised in the financial statements:
RECOVERABILITY OF INTANGIBLE EXPLORATION AND EVALUATION
ASSETS
Determining whether an exploration and evaluation asset is
impaired requires an assessment of whether there are any indicators
of impairment, including by reference to specific impairment
indicators prescribed in IFRS 6 Exploration for and Evaluation of
Mineral Resources. If there is any indication of potential
impairment, an impairment test is required based on the recoverable
amount of the asset. The value in use calculation requires the
entity to estimate the future cash flows expected to arise from the
cash-generating unit and a suitable discount rate in order to
calculate present value. At 31 December 2016, the Directors
determined that there were indicators of impairment in respect of
the Group's intangible O&G exploration and evaluation assets
held in Germany and of the Group's uranium and copper exploration
and evaluation assets held in U.S.A and Mexico, on the basis that
the carrying amount of these assets may not be recovered in full.
The Directors therefore considered that it was appropriate to make
a provision for impairment in respect of these assets at the year
end.
The carrying amount of intangible exploration and evaluation
assets at the balance sheet date was US$10.1 million (2015: US$10.2
million) and an impairment of US$0.36 million (2015: US$3.7
million) was identified and recognised in the year to 31 December
2016, US$0.34 in respect of uranium and copper assets and US$0.02
in respect of O&G assets held in Germany.
RECOVERABILITY OF LOANS TO SUBSIDIARY UNDERTAKINGS
The Company has outstanding loans from its directly held
subsidiaries which have then made a number of loans to their own
subsidiaries as the primary method of financing the activity of
those subsidiaries. The principal loans are shown in the Company
balance sheet on the basis that the loans incur interest at a
commercial rate according to the Group's inter-company loan policy,
which is being rolled up until such time as the subsidiaries are in
a position to settle. However, there is a risk that the indirectly
held subsidiaries will not commence revenue-generating activities
and that the carrying amount of the Company's investment will,
therefore, exceed the recoverable amount. The Board have assessed
the recoverability of its loans based on this risk and the
Directors consider that, in consideration of the losses currently
being generated and the impairment of the Group's intangible
exploration and evaluation assets which was recognised at 31
December 2016, a provision of US$1.5 million (2015: US$8.2 million)
should be recognised by the Company in the year to 31 December
2016.
5. REVENUE
The external revenue of the Group arises from the sale of
precious minerals arising from activities in Mexico. The revenue
reported during the year ended 31 December 2016 of US$0.9 million
relates to the milling of third party ore in Mexico.
6. SEGMENTAL INFORMATION
For management purposes, the Group is organised into three
operating divisions based on its principal activities of gold and
silver mining, research and evaluation of potential uranium and
copper properties and the exploration and development of O&G
resources. These divisions are the basis on which the Group reports
its segment information.
Segment information about these divisions is presented
below.
2016 2015
US$'000 US$'000
Income statement
Revenue
Gold and silver 898 4,129
O&G - 191
898 4,320
Segmental results
Uranium and copper (483) (3,470)
Gold and silver (454) (698)
O&G 1,544 (1,975)
Total segment results 607 (6,143)
Loss on disposal of assets
held for sale - (485)
Unallocated results (1,877) (3,236)
Current and deferred tax 1,120 797
Loss after taxation (150) (9,067)
The unallocated results of US$1.87 million include costs
associated with the Cuba project (refer to note 8), Directors
remuneration and other general and administrative costs incurred by
the Company.
2016 2015
US$'000 US$'000
Depreciation
Uranium and copper 2 2
Gold and silver 164 182
O&G 35 50
201 234
2016 2015
US$'000 US$'000
Impairment
Uranium and copper 344 3,141
O&G 16 553
360 3,694
Employees
The average numbers of employees for the year for each of the
Group's principal divisions were as follows:
2016 2015
Number Number
Uranium and copper 1 2
Gold and silver 36 41
O&G 2 9
Total segment employees 39 52
Unallocated employees 2 2
Total employees 41 54
2016 2015
US$'000 US$'000
Balance Sheet
Segment assets
Uranium and copper 60 467
Gold and silver 1,410 2,318
O&G 10,237 10,289
Total segment assets 11,707 13,074
Unallocated assets including
cash and cash equivalents 1,256 1,669
Total assets 12,963 14,743
Segment liabilities
Uranium and copper 5 3
Gold and silver 192 306
O&G 105 163
Total segment liabilities 302 472
Unallocated liabilities 332 404
Current and deferred tax 1 3
Total liabilities 635 879
Segment net assets
Uranium and copper 55 464
Gold and silver 1,217 2,009
O&G 10,132 10,126
Total segment net assets 11,404 12,599
Unallocated net assets including
cash and cash equivalents 924 1,265
Total net assets 12,328 13,864
7. OPERATING AND DEVELOPMENT EXPENSES
2016 2015
US$'000 US$'000
Operating expenses - mining 162 364
Operating expenses - O&G 405 818
Development expenses 33 340
600 1,522
Development expenses represent expenditure incurred by the Group
in respect of mining activities prior to the commencement of
production.
8. PROJECT DEVELOPMENT EXPENSES
2016 2015
US$'000 US$'000
Cuba project 580 -
Project development expenses represent expenditure incurred by
the Group in respect of the assessment and pursuit of new
projects.
9. IMPAIRMENT OF INTANGIBLE EXPORATION AND EVALUATION ASSETS
2016 2015
US$'000 US$'000
Uranium and copper assets 344 3,141
O&G assets 16 553
360 3,694
During 2016, the Group relinquished its interest in its
hydrocarbon licences in the Weiden Basin, located in the State of
Bavaria, southeast Germany. The assets were impaired in full during
the year, resulting in an impairment charge of US$0.01 million
being recognised in the year, and the Group ceased to recognise the
assets at 31 December 2016. See note 17.
At 31 December 2016, there were indicators of impairment of both
the Group's intangible uranium assets held in the U.S.A. and its
intangible copper assets held in Mexico. The Directors consider
that there is reasonable uncertainty that the Group will recover
the carrying value of these assets and as a result an impairment
charge of US$0.3 million has been recognised in the year.
In April 2016, the Board announced that it had entered into an
agreement with Rockies Standard to terminate its earn-in rights to
the Mancos acreage and dispose of the Cisco Dome field and related
assets. The Group had a number of operator bonds in place with the
State of Utah and Bureau of Land Management ("BLM"), and under the
terms of this agreement the Group agreed to leave these bonds in
place for the benefit of Rockies Standard. The Board determined
that it was appropriate to make a provision for impairment in
respect of these bonds, and as a result an impairment charge of
US$0.006 million (2015: US$0.4 million) has been recognised in the
year.
The remaining intangible exploration and evaluation assets have
not reached a stage which permits a reasonable assessment of the
existence or otherwise of economically recoverable reserves. These
assets are not amortised until technical feasibility and commercial
viability is established.
10. FINANCE INCOME
2016 2015
US$'000 US$'000
Interest on bank deposits 4 13
Unwinding of discount on provisions 5 -
9 13
11. FINANCE COSTS
2016 2015
US$'000 US$'000
Unwinding of discount on provisions - 5
12. LOSS BEFORE TAXATION
The loss for the year has been arrived at after
charging/(crediting):
2016 2015
US$'000 US$'000
Depreciation of property, plant and equipment 201 234
Loss on disposal of property, plant and equipment 17 -
Staff costs excluding share-based payments 1,409 2,788
Share-based payments 326 1,523
Operating leases - land and buildings 166 284
Net foreign exchange gains (2,496) (438)
13. AUDITOR'S REMUNERATION
Amounts payable to the external auditors and their associates in
respect of both audit and non-audit services:
2016 2015
US$'000 US$'000
Audit of these financial statements 23 23
Amounts receivable by the Company's
auditor and its associates in respect
of:
Audit of financial statements of
subsidiaries of the Company 41 46
64 69
14. STAFF COSTS
The average monthly number of employees (including Executive
Directors) was:
2016 2015
Number Number
Office and management 2 6
Operations 39 48
41 54
Their aggregate remuneration comprised:
2016 2015
US$'000 US$'000
Wages and salaries 1,204 3,079
Social security costs 177 294
Other pension costs 29 129
Share-based payments 210 1,398
1,620 4,900
There were no wages and salaries capitalised to intangible
exploration and evaluation assets during the year ended 31 December
2016 (2015: US$0.7 million).
The remuneration of the highest paid Director was US$0.2 million
(2015: US$0.3 million) and pension contributions of US$0.02 were
made on their behalf.
15. TAXATION
2016 2015
US$'000 US$'000
Current tax:
Current year 8 10
Total current tax 8 10
Deferred tax:
Origination and reversal of
temporary differences (1,128) (807)
Total deferred tax (1,128) (807)
Tax credit on loss for the year (1,120) (797)
The credit charge for the year can be reconciled to the loss per
the income statement as follows:
Loss before tax 1,270 9,864
Loss multiplied by rate of corporation tax for UK
companies of 20% (2015: 20.25%) (254) (1,998)
Effects of:
Expenses not deductible for
tax purposes 153 960
Temporary differences (605) (407)
Share-based payments 65 309
Unrelieved tax losses carried
forward 42 734
Difference in foreign tax rates (521) (395)
Tax credit on loss for the year (1,120) (797)
There has been no impact due to changes in UK taxation rates
during the years reported.
Unrelieved tax losses carried forward, as detailed in note 26,
have not been recognised as a deferred tax asset, as there is
currently insufficient evidence that the asset will be recoverable
in the foreseeable future. The losses must be utilised in relation
to the same operations. Tax for other jurisdictions is provided at
rates prevailing in those countries.
Income tax charge included in other comprehensive income during
the year is:
2016 2015
US$'000 US$'000
Foreign tax on net investment in foreign operations 1,128 1,212
16. LOSS PER ORDINARY SHARE
Basic loss per Ordinary Share is calculated by dividing the net
loss for the year attributable to owners of the parent company by
the weighted average number of Ordinary Shares in issue during the
year. The calculation of the basic and diluted loss per Ordinary
Share is based on the following data:
2016 2015
US$'000 US$'000
Losses
Losses for the purpose of basic
loss per Ordinary Share being
net loss attributable to owners
of the parent company (150) (9,067)
Number Number
'000 '000
Number of shares
Weighted average number of
shares for the purpose of basic
loss per Ordinary Share 3,008,811 2,037,308
Loss per Ordinary Share
Basic and diluted, cents per
share (0.01) (0.45)
Due to the losses incurred in the years reported, there is no
dilutive effect from the existing share options, share based
compensation plan or warrants.
17. INTANGIBLE ASSETS
Exploration
and
evaluation
assets
US$'000
Cost
At 1 January 2015 15,433
Additions 4,010
Relinquishment of licences (887)
Exchange differences (45)
At 1 January 2016 18,511
Additions 276
Disposals (607)
Relinquishment of licences (2,303)
Exchange differences (54)
At 31 December 2016 15,823
Impairment
At 1 January 2015 5,486
Impairment charge 3,694
Relinquishment of licences (887)
Exchange differences (3)
At 1 January 2016 8,290
Impairment charge 360
Disposals (602)
Relinquishment of licences (2,303)
Exchange differences (39)
At 31 December 2016 5,706
Carrying amount
At 31 December 2016 10,117
At 31 December 2015 10,221
ROCKIES STANDARD EARN-IN AGREEMENT
In March 2014, the Group signed an agreement under which its
subsidiary, Rose Petroleum (Utah) LLC ("Rose Utah"), acquired the
right to commence earning into a 75 per cent working interest of
certain oil, gas and hydrocarbon leases in Grand and Emery
Counties, Utah, from Rockies Standard Oil Company LLC ("RSOC"),
which retains the remaining 25 per cent working interest.
Farm-in costs incurred by the Group are accounted for as
required by the relevant accounting standards including the
capitalisation of intangible exploration and evaluation assets in
accordance with IFRS 6.
In April 2016, the Group entered into a revised agreement with
RSOC to cease earning into the Mancos acreage and dispose of the
Cisco Dome field, wells, pipelines, gas tap, gas plant and all the
associated equipment and liabilities.
As part of the revised agreement the Group agreed to cover the
cost of the existing plug and abandonment liability of the four
wells already scheduled with the authorities for the sum of US$0.3
million, and this obligation was settled during the year. The Group
also agreed to leave the existing operator bonds in place with the
State of Utah and Bureau of Land Management, which are now
refundable to RSOC rather than the Group.
RSOC has, in turn, agreed to reduce the Group's carry obligation
to earn the 75 per cent working interest in the Paradox acreage by
US$2.0 million to US$5.5 million. Under the terms of the agreement,
the obligation is not contractually committed and therefore no
liability or contingent liability has been recognised in these
financial statements. The Group was also given an exclusive option
to acquire RSOC's 25 per cent interest in the Paradox acreage for a
one-time payment of US$1.0 million at any time prior to 30 June
2016, however, this option was not exercised.
The Group has not recognised any disposal of its intangible
exploration and evaluation assets, other than the bonds, as it
considers its total expenditure on the project as one cost pool
whose carrying value is supported by the remaining acreage in the
Paradox.
The Group's total expenditure in respect of its U.S.A. O&G
assets, included within intangible exploration and evaluation
assets, as at 31 December 2016 is US$10.1 million (2015: US$9.9
million).
TANGO PROJECT
On 25 August 2014, Minerales VANE S.A. de C.V., a wholly owned
subsidiary of the Group, entered into an agreement with Minera
Camargo S.A de C.V. ("Camargo"), in respect of both gold and silver
and base metal exploration. Under the terms of the agreement MV has
the right to operate gold and silver mining activities at
concessions owned by Camargo with gross margin earned to be
allocated on the basis of 50 per cent to MV and 50 per cent to
Camargo. In addition, MV has the option to earn a 75 per cent
ownership of the base metals (porphyries) by investing US$5.0
million in work expenditures over a period of 5 years. Under the
terms of the agreement, the option to earn-in is not contractually
committed and therefore no liability or contingent liability has
been recognised in these financial statements.
The Directors consider that there is reasonable uncertainty that
the Group will recover the carrying value of these assets and as a
result they have been impaired in full at 31 December 2016.
GERMAN LICENCES
At 31 December 2015, the Group had relinquished, and ceased to
recognise its interest in two hydrocarbon licences in south-western
Germany. During 2016, the Group has further relinquished its
interest in its hydrocarbon licences in the Weiden Basin, located
in the State of Bavaria, southeast German, and has ceased to
recognise them at 31 December 2016.
U.S.A. COPPER PROJECTS
On 2 March 2016, the Group entered into an agreement with
Burdett Gold LLC ("Burdett") to conduct exploration drilling on the
Ardmore copper project. The terms included a cash payment of
US$5,350 and the Group retained a 15 per cent net profit interest
in the Ardmore project and any other claims that Burdett might
acquire within a three-mile area.
In May 2016, the Group assigned its interest in the Bouse copper
project to a third party. No compensation was received in respect
of this assignment.
All remaining licences relating to U.S.A. copper projects were
relinquished during the year and have ceased to be recognised at 31
December 2016.
18. PROPERTY, PLANT AND EQUIPMENT
Diablito Ore processing Plant and
mine mill machinery Total
US$'000 US$'000 US$'000 US$'000
Cost
At 1 January
2015 6,752 797 930 8,479
Additions - 56 66 122
De-recognition (6,343) - - (6,343)
Exchange differences (409) (119) (117) (645)
At 1 January
2016 - 734 879 1,613
Additions - 10 - 10
Disposals - - (64) (64)
Exchange differences - (120) (110) (230)
At 31 December
2016 - 624 705 1,329
Accumulated depreciation
At 1 January
2015 6,752 543 361 7,656
Charge for the
year - 79 155 234
De-recognition (6,343) - - (6,343)
Exchange differences (409) (88) (57) (554)
At 1 January
2016 - 534 459 993
Charge for the
year - 93 108 201
Disposals - - (38) (38)
Exchange differences - (96) (68) (164)
At 31 December
2016 - 531 461 992
Carrying amount
At 31 December
2016 - 93 244 337
At 31 December
2015 - 200 420 620
The depreciation has been charged to the income statement as
follows:
2016 2015
US$'000 US$'000
Cost of sales 124 110
Operating and development expenses 38 69
Administrative expenses 39 55
______ ______
201 234
______ ______
19. INVESTMENTS
Company
Shares
in Loans to
subsidiary subsidiary
undertakings undertakings Total
US$'000 US$'000 US$'000
Cost
At 1 January
2015 6,040 34,268 40,308
Additions - 8,810 8,810
Capital contribution - 797 797
Exchange differences (283) (1,629) (1,912)
At 1 January
2016 5,757 42,246 48,003
Additions - 2,194 2,194
Capital contribution - (195) (195)
Exchange differences (958) (7,079) (8,037)
At 31 December
2016 4,799 37,166 41,965
Impairment
At 1 January
2015 - 23,800 23,800
Impairment charge - 8,186 8,186
Exchange differences - (1,376) (1,376)
At 1 January
2016 - 30,610 30,610
Impairment charge 3,572 (2,050) 1,522
Exchange differences (320) (4,910) (5,230)
At 31 December
2016 3,252 23,650 26,902
Carrying amount
At 31 December
2016 1,547 13,516 15,063
At 31 December
2015 5,757 11,636 17,393
The Company has a number of loans made to its subsidiaries which
incur interest at a commercial rate, according to the Group's
inter-company loan policy. However, there is a risk that the
subsidiaries will not commence revenue-generating activities and
that the carrying amount of the investments exceed the recoverable
amount. The Board have assessed the recoverability of these loans
and consider that a provision of US$1.5 million (2015: US$8.2
million) should be recognised in the period.
The Company had investments in the following subsidiary
undertakings as at 31 December 2016 which principally affected the
losses and net assets of the Group:
Place of Proportion
incorporation Proportion of voting
(or registration) of ownership power Principal
and operation interest held activity
Directly owned:
VANE Minerals
(UK) Limited UK 100% 100% Holding company
Rose Petroleum
(UK) Limited UK 100% 100% Holding company
Rose Cuba Limited UK 100% 100% Holding company
Rose Resources
Limited UK 100% 100% Holding company
Indirectly owned:
AVEN Associates
LLC U.S.A. 100% 100% Exploration
VANE Minerals
(US) LLC U.S.A. 100% 100% Exploration
Minerales VANE
S.A. de C.V. Mexico 100% 100% Mining
Minerales VANE
Operaciones
S.A. de C.V. Mexico 100% 100% Mining
Naab Energie
GmbH Germany 100% 100% Exploration
Rose Petroleum
(US) LLC U.S.A. 100% 100% Holding company
Rose Petroleum
(Utah) LLC U.S.A. 100% 100% Exploration
Rose Gypsum Limited UK 100% 100% Holding company
Parkyn Energy Germany GmbH, a wholly owned subsidiary of Rose
Petroleum (UK) Limited, was dissolved on 11 August 2015 and the
required period of liquidation was completed on 31 December
2016.
Parkyn Energy (Holdings) plc and Parkyn Energy (Germany) Limited
were struck off by the Company during the year.
The registered office address of all companies incorporated in
the United Kingdom is 20-22 Wenlock Road, London, N1 7GU.
The registered office address for VANE Minerals (US) LLC and
AVEN Associates LLC is 8987 E. Tanque Verde Road, Tucson, Arizona
85749.
The registered office address for all companies registered in
Mexico is Humboldt No. 121, Colonia del Valle, C.P. 78200, San Luis
Potosi, S.L.P.
The registered office address for Rose (US) LLC and Rose
Petroleum (Utah) LLC is 383 Inverness Parkway, Ste 330, Englewood,
CO 80112.
The registered office address for Naab Energie GmbH is
Merzhauser Strasse 4, D-79100 Freiburg, Germany.
20. JOINT OPERATIONS
ARIZONA PROJECT
On 1 September 2008, the Group entered into a Mining Venture
Agreement with Uranium One Americas Inc. ("U1"). The terms of this
agreement created a Joint Venture Agreement ("JVA") between VANE
Minerals (US) LLC ("VANE") and U1, with each partner holding a 50
per cent interest. The Mining Venture Agreement was amended on 15
July 2013 to extend the terms of the agreement to 31 December 2017.
During the year ended 31 December 2015, U1 sold its 50 per cent
interest to Anfield Resources Inc. ("Anfield").
The JVA established an agreed sharing of control with decisions
about the relevant activities requiring the unanimous consent of
VANE and Anfield. The parties have rights to the assets and
obligations for liabilities relating to the arrangement and the JVA
has, therefore, been accounted for as a joint operation recognising
the Group's relevant share of assets, liabilities, revenues and
expenses as appropriate.
The JVA combined interests in over 60 breccia pipe targets,
including 10 known mineralised pipes, in northern Arizona and also
secured access to U1's Ticaboo Mill in Utah for ore developed on JV
properties.
The aggregate amounts related to the joint operation included
within the consolidated accounts are:
2016 2015
US$'000 US$'000
Net assets 47 53
Expenses (3) (3)
21. INVENTORIES
Group
2016 2015
US$'000 US$'000
Work in progress - 19
22. TRADE AND OTHER RECEIVABLES
Group Company
2016 2015 2016 2015
US$'000 US$'000 US$'000 US$'000
Trade receivables - 12 - -
Amounts owed by Group
companies - - - 242
Amounts owed by joint
arrangement partners 35 35 - -
VAT recoverable 608 683 25 16
Tax recoverable 263 311 - -
Other receivables 35 161 3 15
Prepayments & accrued
income 295 282 41 49
1,236 1,484 69 322
At 31 December 2015, other receivables included the sum of
US$0.05 million in respect of the disposal of assets held for sale
at 31 December 2014 and which was received during the year ended 31
December 2016. See note 24.
The Directors consider that the carrying amount of trade and
other receivables approximates their fair value.
23. CASH AND CASH EQUIVALENTS
Cash and cash equivalents held by the Group and the Company as
at 31 December 2016 were US$1.3 million and US$1.2 million
respectively (2015: US$2.4 million, US$1.6 million). The Directors
consider that the carrying amount of these assets approximate to
their fair value.
24. ASSETS HELD FOR SALE
At 31 December 2014, the Board had resolved to dispose of the
Group's interest in Wate Mining Company LLC and these operations
were classified as non-current assets held for sale and presented
separately in the balance sheet.
On 17 February 2015 (the "closing"), the Company completed the
sale of its 50 per cent interest in Wate Mining Company LLC
("Wate") to EFR Arizona Strip LLC ("EFR"). As consideration for the
50 per cent interest EFR agreed to pay a total of US$1.75 million,
consisting of an immediate cash payment of US$0.25 million, a
US$0.5 million non-interest bearing promissory note, payable in two
equal instalments of US$0.25 million on each of the first and
second anniversaries of the closing, a further US$0.5 million
conditional cash, and 2 per cent production royalty on EFR's stake
in the project. The royalty can be purchased by EFR upon payment to
the Company of an additional sum of US$0.75 million, less any
royalties previously paid.
The Company received the immediate cash payment of US$0.25
million on closing, however, prior to payment of the first
instalment of the non-interest bearing promissory note due, an
addendum to the terms of the original agreement was agreed with
EFR. Under the terms of this addendum it was agreed that EFR would
make a payment of US$0.05 million in respect of the US$0.25 million
due on 17 February 2016 and defer the remainder of all payments due
under the non-interest bearing promissory note until the
commencement of commercial production. No further payments have
fallen due during the year ended 31 December 2016.
Due to the uncertainty surrounding the commencement of
commercial production and receipt of further funds the Company has
only recognised those funds of which there was certainty, when
calculating the loss on disposal of Wate.
The net assets of Wate at the date of disposal were:
17 February
2015
US$'000
Intangible exploration
and evaluation assets 785
Loss on disposal (485)
Proceeds
on disposal 300
Wate Mining Company LLC did not contribute to the Group's net
operating cash flows during the year ended 31 December 2015.
25. TRADE AND OTHER PAYABLES
Group Company
2016 2015 2016 2015
US$'000 US$'000 US$'000 US$'000
Trade payables 102 134 55 58
Amounts owed to Group
companies - - - 31
VAT payable 7 14 - -
Taxes and social
security 40 38 17 16
Other payables - - - -
Accruals 375 498 92 99
524 684 164 204
Trade payables and accruals principally comprise amounts
outstanding for trade purchases and on-going costs. The average
credit period taken for trade purchases is 30 days (2015: 30 days).
The Group has financial risk management policies to ensure that all
payables are paid within the credit time frame.
The Directors consider that the carrying amount of trade and
other payables approximates to their fair value. No interest is
generally charged on balances outstanding.
26. DEFERRED TAX
There are unrecognised deferred tax assets in relation to:
2016 2015
US$'000 US$'000
UK tax losses 5,252 5,428
U.S.A. tax losses 15,952 17,355
German tax losses - 57
Mexican tax losses 2,271 1,953
Republic of Ireland tax
losses - 41
23,475 24,834
The unrecognised deferred tax asset in relation to tax losses in
the Company at 31 December 2016 was US$0.8 million (2015: US$0.5
million).
There has been no impact due to changes in UK taxation rates
during the years reported.
27. PROVISIONS
Group
Decommissioning
2016 2015
US$'000 US$'000
At 1 January 192 52
Additions 10 143
On disposal (87) -
Unwinding of discount (5) 5
Exchange differences - (8)
At 31 December 110 192
Current provision 110 -
Non-current provision - 192
At 31 December 110 192
In accordance with the Group's environmental policy and
applicable legal requirements, the Group expects to restore sites
where it has carried on activities, following final conclusion of
those activities.
Under the terms of the revised agreement with RSOC, the Group no
longer has any restoration obligations in respect of its O&G
assets. See note 17.
A provision is required to cover the decommissioning costs for
the ore processing mill and the Directors' assumptions are that
restoration of the Mill will take place within twelve months of the
Balance Sheet date.
28. SHARE CAPITAL
Group and Company
2016 2015
Number US$'000 Number US$'000
'000 '000
Authorised
Ordinary Shares
of 0.1p each 7,779,297 9,599 7,779,297 11,515
Deferred Shares
of 9.9p each 190,108 23,223 190,108 27,858
7,969,405 32,822 7,969,405 39,373
Allotted, issued
and fully paid
Ordinary Shares
of 0.1p each 3,764,471 5,722 2,550,185 4,125
Deferred Shares
of 9.9p each 190,108 34,640 190,108 34,640
3,954,579 40,362 2,740,293 38,765
The Deferred Shares are not listed on AIM, do not give the
holders any right to receive notice of, or to attend or vote at,
any general meetings, have no entitlement to receive a dividend or
other distribution or any entitlement to receive a repayment of
nominal amount paid up on a return of assets on a winding up nor to
receive or participate in any property or assets of the Company.
The Company may, at its option, at any time redeem all of the
Deferred Shares then in issue at a price not exceeding GBP0.01 from
all shareholders upon giving not less than 28 days' notice in
writing.
ISSUED ORDINARY SHARE CAPITAL
On 6 May 2016, the Company issued 500,000,000 Ordinary Shares of
0.1p each at a price of 0.16p per share, raising gross proceeds of
US$1.16 million (GBP0.8 million).
On 26 October 2016, the Company issued 714,285,714 Ordinary
Shares of 0.1p each at a price of 0.14p per share, raising gross
proceeds of US$1.22 million (GBP1.0 million). In addition, for
every two shares issued the subscriber received a warrant to
subscribe for a new Ordinary Share at a price of GBP0.25p per
share, resulting in the issue of 357,142,857 warrants which are
exercisable at any time until October 2019. Considering the
Company's average share price during the year in relation to the
exercise price of the warrants, no value has been attributed to the
warrants and the full value of the consideration received for the
share placing has been allocated to share capital.
Ordinary
Shares
Number
'000
At 1 January 2015 1,510,185
Allotment of shares 1,040,000
At 1 January 2016 2,550,185
Allotment of shares 1,214,286
At 31 December 2016 3,764,471
29. SHARE-BASED PAYMENTS
EQUITY SETTLED SHARE OPTION PLAN
The Company has a Share Option Plan under which options to
subscribe for the Company's shares have been granted to certain
Directors and to selected employees and consultants. The Rose
Petroleum plc Share Option Plan was originally adopted by the
Company on 25 May 2004, and in August 2013, was replaced by the
adoption of the 2013 Share Option Plan Part A (employees) and 2013
Share Option Plan Part B (non-employees).
No share options were granted during the year ended 31 December
2016 (2015: 20 million).
At 31 December 2016, 130.8 million options had been granted
under the terms of the Share Option Plans and not exercised.
The Company has no legal or constructive obligation to
repurchase or settle the options in cash. The latest date for
exercise of the options is 15 March 2025 and the options are
forfeited if the employee or consultant leaves the Group before the
options vest, or if those options which have vested are not
exercised within three months of leaving.
Details of the share options outstanding at the end of the year
were as follow:
2016 2015
Number of options Weighted average Number of options Weighted average
'000 exercise price '000 exercise price
Outstanding at 1 January 155,533 1.938p 183,200 1.725p
Granted - - 20,000 1.800p
Forfeited/cancelled (24,750) 2.437p (47,667) 1.062p
Outstanding at 31
December 130,783 1.843p 155,533 1.938p
Exercisable at 31
December 104,950 1.615p 71,967 1.596p
The options outstanding and not yet vested at 31 December 2016
had an estimated weighted average remaining contractual life of 0.7
years (2015: 1 year), with an exercise price ranging between 1.625p
and 3.425p.
SHARE-BASED COMPENSATION
Under the terms of a contract of employment the Company agreed
to issue Ordinary Shares in the Company to a Director in return for
services provided. The fair value of the services provided can be
measured directly, and accordingly, an expense of US$0.05 million
was recognised in the year ended 31 December 2015. No further
expense has been recognised in the current year.
WARRANTS
On 26 October 2016, the Company issued 42,857,142 warrants to
Turner Pope Investments, in respect of broker services provided by
them in relation to the placing of the Company's shares which took
place on the same date. The warrants permit the holder to subscribe
for one new Ordinary Share at a price of 0.25 pence per share and
are exercisable at any time until October 2019.
As the fair value of the services provided by the warrant holder
cannot be measured directly, the Company has measured the value of
the services by reference to the fair value of the equity
instruments granted as consideration, using the Black-Scholes
model. The significant inputs into the model for the IFRS 2
valuation were as follows:
Grants in year
42,857,142 warrants
Exercise price (pence) 0.25
Expected volatility (%) 105-117
Expected life (years) 2.52
Risk free rates (%) 0.19-0.27
Expected dividends -
Performance condition None
Expected volatility was calculated considering Rose Petroleum
plc share price movements over a period commensurate with the
expected term immediately prior to the issue date.
The fair value of the warrants issued during the year was
US$0.05 million (2015: US$ nil).
In the year ended 31 December 2016, the Company recognised a
total expense of US$0.32 million (2015: US$1.5 million) related to
equity-settled share-based payment transactions. This represented
US$0.27 million (2015: US$1.45 million) in respect of the Share
Option Plan, US$0.05 million (2015: US$ nil) in respect of warrants
and US$ nil (2015: US$0.05) in respect of share-based
compensation.
30. COMMITMENTS UNDER OPERATING LEASES
The Group has entered into commercial leases on certain
properties. The future minimum rentals payable under
non-cancellable operating leases are as follows:
Group Company
2016 2015 2016 2015
US$'000 US$'000 US$'000 US$'000
Land and buildings
Amounts due within
one year 74 126 6 59
Amounts due in 2-5
years 83 232 83 163
157 358 89 222
31. FINANCIAL INSTRUMENTS
CAPITAL RISK MANAGEMENT
The Group manages its capital to ensure that entities in the
Group will be able to continue as going concerns, while maximising
the return to shareholders through the optimisation of the debt and
equity balance. The Group's overall strategy remains unchanged from
2015.
The capital structure of the Group consists of cash and cash
equivalents and equity attributable to equity holders of the
parent, comprising issued capital, reserves and retained
earnings.
The Group is not subject to externally imposed capital
requirements.
The Group plans its capital requirements on a regular basis and
as part of this review the Directors consider the cost of capital
and the risks associated with each class of capital.
SIGNIFICANT ACCOUNTING POLICIES
Details of the significant accounting policies and methods
adopted, including the criteria for recognition, the basis of
measurement, the basis on which income and expenses are recognised,
in respect of each class of financial asset, financial liability
and equity instrument are disclosed in note 3.
CATEGORIES OF FINANCIAL INSTRUMENTS
Group Company
2016 2015 2016 2015
US$'000 US$'000 US$'000 US$'000
Financial assets
measured at amortised
cost
Cash and cash equivalents 1,273 2,399 1,185 1,582
Trade receivables - 12 - 242
Amounts owed by joint
arrangement partners 35 35 - -
Other receivables 35 161 3 15
Loans to subsidiary
undertakings - - 13,599 11,636
1,343 2,607 14,787 13,475
Group Company
2016 2015 2016 2015
US$'000 US$'000 US$'000 US$'000
Financial liabilities
measured at amortised
cost
Trade payables 102 134 55 89
102 134 55 89
On 26 October 2016, the Company issued 714,285,714 Ordinary
Shares of 0.1p each at a price of 0.14p per share, raising gross
proceeds of US$1.22 million (GBP1.0 million). In addition, for
every two shares issued the subscriber received a warrant to
subscribe for a new Ordinary Share at a price of GBP0.25p per
share, resulting in the issue of 357,142,857 Warrants which are
exercisable at any time until October 2019. Considering the
Company's average share price during the year in relation to the
exercise price of the warrants, no value has been attributed to the
warrants and the full value of the consideration received for the
share placing has been allocated to share capital.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Directors consider that the carrying amount of its financial
instruments approximates their fair value.
FINANCIAL RISK MANAGEMENT OBJECTIVES
Management provides services to the business, co-ordinates
access to domestic and international financial markets and monitors
and manages the financial risks relating to the operations of the
Group. These risks include foreign currency risk, credit risk,
liquidity risk and cash flow interest rate risk.
The policies for managing these risks are regularly reviewed and
agreed by the Board.
The Group does not enter into or trade financial instruments,
including derivative financial instruments, for speculative
purposes.
FOREIGN EXCHANGE RISK AND FOREIGN CURRENCY RISK MANAGEMENT
The Group undertakes certain transactions denominated in foreign
currencies, with the result that exposure to exchange rate
fluctuations arise.
The Group does not normally hedge against the effects of
movements in exchange rates. The Group policy is not to repatriate
any currency where there is the requirement or obligation to spend
in the same denomination. When foreign exchange is required the
Group purchases using the best spot rate available. As a result,
there is limited currency risk within the Group and the carrying
amount of the Group's currency denominated monetary assets and
liabilities at the reporting date are not material.
INTEREST RATE RISK MANAGEMENT
The Group's policy on interest rate management is agreed at
Board level and is reviewed on an on-going basis.
The Group has no substantial exposure to fluctuating interest
rates on its liabilities. The Group has no liabilities which
attract interest charges at 31 December 2016.
LIQUIDITY RISK MANAGEMENT
Ultimate responsibility for liquidity risk management rests with
the Board of Directors, which has built an appropriate liquidity
risk management framework for the management of the Group's short,
medium and long-term funding and liquidity management requirements.
The Group manages liquidity risk by maintaining adequate cash
reserves and by continuously monitoring forecast and actual cash
flow.
CREDIT RISK MANAGEMENT
Credit risk refers to the risk that a counterparty will default
on its contractual obligations resulting in financial loss to the
Group. The Group does not have any significant credit risk exposure
on trade receivables.
The Group makes allowances for impairment of receivables where
there is an identified event which, based on previous experience,
is evidence of a reduction in the recoverability of cash flows.
The credit risk on liquid funds (cash) is considered to be
limited because the counterparties are financial institutions with
high and good credit ratings assigned by international
credit-rating agencies.
The carrying amount of financial assets recorded in the
financial statements represents the Group's maximum exposure to
credit risk.
32. RELATED PARTY TRANSACTIONS
AMOUNTS DUE FROM SUBSIDIARIES
Balances and transactions between the Company and its
subsidiaries which are related parties, have been eliminated on
consolidation and are not disclosed in this note.
The Company has entered into a number of unsecured related party
transactions with subsidiary undertakings. The most significant
transactions carried out between the Company and their subsidiary
undertakings are management charges for services provided to the
subsidiary company and long-term financing. Details of these
transactions are as follows:
2016 2015
Transactions Amounts Transactions Amounts
in the owing in the owing
year US$'000 year US$'000
US$'000 US$'000
Loans 1,092 29,787 7,162 34,422
Management charges 562 2,783 1,070 2,664
Interest (1.5%) 539 3,712 578 3,865
Capital contribution (195) 884 797 1,295
During the year, Group companies entered into the following
transactions with related parties who are not members of the
Group:
2016 2015
Transactions Amounts Transactions Amounts
in the owing in the owing
year US$'000 year US$'000
US$'000 US$'000
Accommodation
and office rent 10 4 - -
The related party is a relative of a Director of the
Company.
33. POST BALANCE SHEET EVENTS
All matters relating to events since the balance sheet date have
been disclosed elsewhere in the financial statements.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR GMGGVGKMGNZZ
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