Database Agreement & North Wash Vanadium update

RNS Number : 5460I

Rose Petroleum PLC

27 November 2018

 

27 November 2018

Rose Petroleum plc

("Rose", the "Company" or the "Group")

Further divestiture of non-core assets through

Database Agreement on Uranium Exploration projects in U.S.A

 and North Wash Vanadium project update

Rose Petroleum plc (AIM: ROSE), the AIM quoted natural resources business, is pleased to announce that its wholly owned subsidiary, VANE Minerals (US) LLC ("VANE"), has entered into an agreement (the "Agreement") with enCore Energy Corporation ("ENCORE") (TSX.V:EU) with respect to VANE's U.S.A. uranium exploration project database.  The database is comprised of geological, geophysical, aerial photography, drilling, and evaluation data on the uranium breccia pipe district of northern Arizona, specifically the region south of the Colorado River where a number of discoveries have been made.

In return for VANE providing exclusive access to VANE's uranium project database, ENCORE will issue to VANE 3,000,000 ordinary shares in ENCORE which have a current market valuation of approximately US$300,000 and which represent approximately 2.1% of the existing share capital of ENCORE. The shares will be locked-up for an initial four month period after which Rose will be able to dispose of them, subject to certain orderly market provisions.

The initial term of the agreement will be five-years, and ENCORE will seek, at its own cost, to use the database to generate exploration prospects and to subsequently develop these prospects into commercial operations.

If any of the prospects reach the development stage, VANE will have a one-off opportunity to participate in these projects. VANE will be able to participate up to a maximum 25% interest in any developed projects, at its sole discretion. The purchase price for the VANE interest, at the development stage, will be 250% of the pro-rata exploration costs incurred on the project to advance it to the development stage. From the point at which VANE acquires an equity interest in any project it will be responsible for the development expenditure for its specific portion of its interest. If VANE does not elect to participate in the projects in accordance with the Agreement it will have no further rights in respect of that particular project.

Should VANE seek to develop any of its 8 existing breccia pipe uranium projects on which it currently controls the mineral rights, which are currently held on care and maintenance, ENCORE will have the opportunity to participate in these projects on the same terms that VANE can participate in the ENCORE projects.  Under the terms of the Agreement, ENCORE will have a first right of refusal to acquire any mineral rights on these 8 projects that VANE chooses to dispose of during the term of the Agreement.

As part of the Agreement with ENCORE, VANE has excluded its North Wash stratabound vanadium/uranium project in Garfield County, Utah from the transaction as discussions with third parties are already underway which may or may not lead to a separate divestiture of this project.

North Wash vanadium project update

With respect to the North Wash project, as previously announced VANE contracted an independent mining pre-scoping study in May 2012 upon VANE's completion of a two-year drilling programme.  This study was prepared to determine the mining method and development costs in an effort to assess the general feasibility of the project. Due to the strength of the present vanadium market, interest in the North Wash project has significantly improved.  The report covered preliminary design engineering sufficient to gain an indicative estimate of capital and operating costs, manpower requirements and a preliminary development and production schedule, and now shows it has the potential to be developed into a commercial project and the Group is in ongoing discussions with third parties in respect of this. Vanadium is a key component in redox/flow battery energy storage systems.

The North Wash project, originally drilled by Cotter Corporation in the 1970s and subsequently acquired by VANE, has 162 drill holes, 34 of which were drilled by VANE in 2007-2008, ranging from depths of 205 to 385 feet. The internal resource estimate identified approximately 166,700 lbs of uranium (eU₃O₈) based on close-spaced drilling with a reasonable potential to double that estimate based on wider-spaced drilling southwest of the main resource.  Additionally, assays on drilling core indicate a vanadium to uranium ratio of 5:1 resulting in approximately 833,500 lbs vanadium(V₂O₅) in the main resource and the potential for a total of 1.6M lbs V₂O₅ including the drilling to the southwest.

In 2012, the capital cost estimate for life of mine was US$10M at +/- 200 short tons (ton) per day including direct mining equipment costs, general mine surface facilities and indirect costs. Operating costs were estimated at US$72.38/ton including mining, crushing and sorting. Transportation costs to a mill were estimated at US$20/ton. It was estimated that the cost to produce one ton of mine produce was US$72/ton. Including the costs of selective mining in the narrower parts of the resource least one ton of waste is mined for each ton of ore resulting in a cost to produce a ton of ore of US$144.  In 2012, the contained vanadium and uranium value per ton of ore rendered the project uneconomic, but since then the vanadium price has risen from around US$5/lb to currently around US$29/lb, giving a per ton value (based on the grade of 3lbs (0.15%) U₃O₈ and 15 lbs V₂O₅ per ton) of approximately US$515/ton.  Milling costs are not currently available.

Matthew Idiens, CEO, commented: "I'm delighted that we have been able to complete this agreement with ENCORE, to utilise our extensive database, which not only provides the Group with upfront consideration but which will also enable Rose to retain an interest in any projects that move forward to development should we wish to do so.

The North Wash Vanadium project offers significant potential value and we will continue to progress discussions with third parties to create value for shareholders.

The joint venture Agreement with ENCORE, in addition to the disposals of the Group's Wate project and the SDA mill in Mexico last year, is in line with our strategy of creating value from our non-core assets whilst focusing on our onshore North-American oil and gas activities."

Kristopher K. Hefton, BSc Geology, Consultant to Rose Petroleum plc, who meets the criteria of a qualified person under the AIM Rules - Note for Mining and Oil & Gas Companies, has reviewed and approved the technical information contained within this announcement.

Contacts:

Rose Petroleum plc Matthew Idiens (CEO) Chris Eadie (CFO)	Tel: [phone] Tel: [phone]
Allenby Capital Limited - AIM Nominated Adviser Jeremy Porter / James Reeve / Liz Kirchner Cantor Fitzgerald Europe - Financial Adviser and Joint Broker Nick Tulloch David Porter Turner Pope Investments - Joint Broker	Tel: [phone] Tel: [phone] Tel: [phone]
Andy Thacker	Tel:  [phone]

Media enquiries:

Allerton Communications	Tel: [phone]
Peter Curtain	[e-mail]

Notes to editors

Rose Petroleum plc (http://rosepetroleum.com) is a North America-focused oil and gas company whose primary asset is approximately 80,000 net acres in the prolific oil and gas producing Paradox Basin in Utah, U.S.A., where it is earning into a 75% working interest. Using high-quality data gathered in a 3D seismic survey completed in October 2017, the Company has identified drilling locations in naturally fractured areas of the Paradox Formation and has chosen the first well location and it is now permitted to drill and plans to commence the drilling programme and the first well as soon as possible, subject to rig availability, stipulations of the leases and financing. All of which should be achievable within the next few months.

On 22 June 2018, Rose announced a Competent Person's Report ("CPR") and Maiden Contingent Resource by Gaffney Cline & Associates ("GCA") on the Rose acreage covered by the 3D seismic, approximately 17,250 acres of the 80,000 acres held.  The CPR estimated a 2C Contingent Resource, net to Rose, of 9.25 MMBbl of oil and 18.50 Bscf of gas, and an unrisked pre-tax Net Present Value (NPV10) on the 2C Resources, net to Rose, of US$122 million. The CPR focused solely on one single reservoir - the Cane Creek reservoir (the "CCR" or "Clastic 21") - of the multiple prospective reservoirs within the Paradox Formation.

The Company's established management is supported by an expert technical team with extensive experience of the basin, where current operations nearby have proven successful, with significant initial production rates and low decline rates, offering strong economics even in the present oil price environment.

The Company's strategy is to grow both organically and through acquisition, identifying additional hydrocarbon assets, conventional or unconventional, that would benefit from the Company's fast-acting, entrepreneurial approach.

Rose Petroleum has been quoted on AIM since June 2004.

 

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