Final Results and notice of AGM
Rose Petroleum plc
("Rose" or the "Company")
Final results for the year ended 31 December 2013
Notice of AGM
Rose Petroleum plc (AIM Ticker: ROSE) is pleased to announce its final audited results for the year ended 31 December 2013.
General highlights
· Strategic review of operations resulting in the pursuit of Oil & Gas opportunities
· Change of name from VANE Minerals plc to Rose Petroleum plc
· Establishment of a new Oil & Gas division
· Matthew Idiens replaced David Newton as CEO
Financial highlights
· Revenue maintained at £5.71 million (2012: £5.76 million)
· Fundraise during the year raising gross proceeds of £1.4 million (2012: £nil)
· Cash balances of £1.18 million as at 31 December 2013 (2012: £0.53 million)
The Rt Hon Earl of Kilmorey PC, chairman of Rose, said: "I am pleased to inform our shareholders that the Company was successful in carrying out significant changes in 2013 and has entered the new year with momentum.
The Company elected to move the emphasis of its core business into the Oil & Gas sector based on the excellent opportunities that have become available from the innovations revolutionising the Oil & Gas industry."
Rose also announces that the Annual General Meeting of the Company will be held at the offices of Allenby Capital Limited, 3 St Helen's Place, London, EC3A 6AB on 27 June 2014 at 09:00 am. The Company's Annual Report and Accounts will be posted to shareholders shortly and will be available to view and download on the Company's website at www.rosepetroleum.com in accordance with AIM Rule 20.
For further information, please contact:
Rose Petroleum Plc +44 (0) 20 7225 4595
Matthew Idiens, CEO
Allenby Capital (Nominated Adviser & Joint Broker) +44 (0) 20 3328 5656 Jeremy Porter / Alex Price
Pareto Securities (Joint Broker) +44 (0) 207 786 4370
Guy Wilkes
Lionsgate Communications (Public Relations) +44 (0) 20 3697 1209 Jonathan Charles / Lynn Carratt
About Rose Petroleum
Rose Petroleum plc (AIM Ticker: ROSE) is focusing on developing its oil & gas portfolio, whilst seeking to create value from its existing mining portfolio. In 2013, Rose Petroleum raised additional capital, appointed John Blair as Head of New Ventures and brought in an in-house technical team including geological and drilling expertise to pursue new oil and gas assets.
In January 2014, the Company announced that it had completed the acquisition of three licences in Germany, two licences in Baden-Württemberg covering approximately 635,000 acres (2,560 square kilometres) with each licence area represented to have at least four target pay zones, and the third licence covering 657,000 acres (2,640 square kilometres) located in the Weiden Basin (northeast Bavaria).
In March 2014, Rose signed a farm-in agreement under which its newly formed subsidiary, Rose Petroleum (Utah) LLC, can earn 75% of certain oil, gas and hydrocarbon leases covering approximately 195,000 net acres in Grand and Emery Counties, Utah, USA, within the Paradox and Uinta basins. This acreage was then increased to 230,000 in May 2014. Management intends to build on these projects to establish a balanced international asset portfolio.
For further information please consult the Company's website: www.rosepetroleum.com
FINAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2013
Additional highlights
gold AND silver production and milling
· 5,643 oz. Au and 71,639 oz. Ag produced in 2013 at a direct production cost of US$717.81 equivalent per oz. Au; or US$11.62 equivalent per oz. Ag (2012: 4,341 oz. Au and 85,241 oz. Ag produced at a direct production cost of $682.33 equivalent per oz. Au; or $12.62 equivalent per oz. Ag)
· 37,195 tonnes processed in period (114% of target) (2012: 32,070 tonnes)
· Average grades 8.26 g/T Au and 105 g/T Ag (2012: 6.07 g/T Au and 121 g/T Ag)
· Average metal price received on sales of concentrates was US$1,358/oz. gold and US$22.40/oz. silver (2012: average prices of $1,662/oz. gold and $30.70/oz. silver)
· Average recovery rate of 81% Au and 74% Ag (2012: 79% Au and 77% Ag)
Copper portfolio
· Partner sought to help fund exploration programmes on copper properties
· Company's agreement with Freeport-McMoRan Copper and Gold Inc. which provides access to Freeport's extensive domestic and international exploration files extended for an additional two-year period to 30 June 2015
URANIUM PorTFOLIO
· Key asset is Wate Mining Company LLC (Member companies VANE Minerals (US) LLC, as manager, and Uranium One Americas Inc., each holding 50%) which controls NI 43-101 compliant inferred resource of 1.118m Ibs eU3O8 at Wate breccia pipe project. Mineral Lease application in process
· Extension of the Mining Venture Agreement with Uranium One to 31 December 2017
· Remaining exploration programme continued on care and maintenance
· Intention to sell assets announced
Oil & Gas portfolio
· Appointment of Kelly Scott as Technical Director with responsibility for building Oil & Gas drilling and completion programmes
· Appointment of Dr Fivos Spathopoulos as Chief Consulting Geologist with responsibility for the development of the Company's European exploration programme
· Conditional sale and purchase agreement to acquire two hydrocarbon licences over 635,000 acres in Molasse Basin, southwest Germany
· Application submitted for an additional hydrocarbon licence covering approximately 657,000 acres in the Weiden Basin, southeast Germany
POST YEAR-END HIGHLIGHTS
OIL & GAS
· Completed acquisition of the three hydrocarbon licenses in Germany
· Appointed John Blair as Head of New Ventures Oil & Gas
· Signed farm-in agreement on significant U.S. shale oil play in the Uinta and Paradox Basins of Utah encompassing over 230,000 acres with nearby oil production
· Prospective Resources Report by Ryder Scott Company on Utah project estimates unrisked prospective (recoverable) resources of Best Case 966 MMBO and 1,888 BCFG on the Paradox Formation leasehold and 486 MMBO and 2,903 BCFG on the Mancos Shale leasehold
COPPER
· Joint venture agreement entered into with Lowell Copper Ltd on TC Project in State of New Mexico, U.S.A.
URANIUM
U.S. Federal Court of Claims dismisses the Company's damages lawsuit pertaining to losses suffered as a consequence of the withdrawal of Federal lands in northern Arizona. The Company still has standing in lawsuit pending in U.S. District Court
CHAIRMAN'S STATEMENT
I am pleased to inform our shareholders that the Company was successful in carrying out significant changes in 2013 and has entered the new year with momentum.
The Company elected to move the emphasis of its core business into the Oil & Gas sector based on the excellent opportunities that have become available from the innovations revolutionising the Oil & Gas industry.
The Board itself has undergone substantial change during 2013 which reflect the Company's new and extended strategy. Matthew Idiens was appointed as Chief Executive Officer in July, having acted previously as a non-executive Director. Matthew was mandated to build both an Oil & Gas team and a portfolio of projects. This he has achieved with impressive results. Philip Jeffcock was appointed to the Board as a non-executive Director in August 2013. Philip has a distinguished career in Finance and Property, having worked at Goldman Sachs International, Barclays Capital and Royal Bank of Scotland, before setting up Cew Capital LLP. We believe his appointment will provide a significant contribution to the Board. We give a warm welcome to Kelly Scott who was appointed as Technical Director in September 2013 in recognition of the Company's intention to extend its activities into the Oil & Gas sector. Kelly has over 40 years of experience in both onshore and offshore drilling and has an international reputation in the Oil & Gas industry. Since the year-end, John Blair has joined the team as Head of New Ventures Oil & Gas. John has 27 years of experience in the industry mostly in the U.S. He has been a key hire and has played a major part in the Company's success in finding and acquiring our Utah project. Steve Van Nort and L Clark Arnold have resigned as non-executive Directors as the weighting of the Board moves more towards the new business. Steve and Clark have contributed a significant amount to the Company over the years and we are delighted that they will remain as consultants for AVEN, the porphyry copper exploration arm of the business.
The revised strategy of the Company has resulted in the establishment of a highly experienced and respected technical team and brought immediate rights to Oil & Gas interests located in Germany. During the second half of 2013 the new team evaluated a number of acquisition opportunities which, in early 2014, led to the signing of a farm-in agreement on an exciting opportunity in Utah in the Paradox and Uinta Basins which are undergoing a substantial increase in production. This opportunity, consisting of 230,000 acres, is surrounded by producing wells and increasing interest and activity. A Prospective Resources Report prepared by Ryder Scott Company, a leading Oil & Gas reserves consultant, as part of Rose's due diligence on this acquisition confirmed that the acreage being acquired holds very significant production potential. We look forward to developing this exciting project.
The Mexican operations continued to perform solidly despite the decrease in the prices received for our gold and silver sold. Ore throughput at the SDA mill increased as a result of mill improvements. The La Colorada ore deposit afforded us the ability, through selective mining, to raise the overall grade of ore mined and shipped to help offset the decrease in metals prices. I am optimistic that moving into 2014 our Mexican operations will continue to produce at 2013 levels and our efforts to locate additional production opportunities will result in the need to expand milling capacity at SDA.
Although the Mexican operations continued to be strong, the decrease in metals prices prevented us from funding fully our copper programme. We maintained several of our key copper properties while seeking funding from third parties. We extended our agreement with Freeport-McMoRan Copper and Gold Inc. on the exploration database for another two years to 30 June 2015. We met with several interested parties during the year including several field visits and I am pleased that this effort resulted in an agreement with Lowell Copper Ltd in early 2014 on our TC project. We continue to have interest in our copper assets and hope to see this culminate in further joint venture agreements in the coming year.
Our uranium programme continued on care and maintenance as we searched for a buyer of these assets. Since the year end we were informed that the U.S. Court of Federal Claims dismissed our damages case and we do not anticipate appealing. However, the case in U.S. District Court continues and we stand to benefit should a decision, expected in late 2014, be favourable.
We would like to thank our investors for their continuing support. We look forward to updating you with our progress throughout the rest of 2014.
Rt Hon Earl of Kilmorey PC
30 May 2014
STRATEGIC REPORT
The Directors present their strategic report on the Group for the year ended 31 December 2013.
PRINCIPAL OBJECTIVES AND STRATEGIES
Rose Petroleum plc, formally VANE Minerals plc, was a mineral exploration company focused on the evaluation and development of mineral exploration targets, principally gold, silver, uranium and copper, together with the development and operation of precious metals mining and milling operations. During the year the Company underwent a strategic review and announced our intention to extend our activities into the Oil & Gas sector. Our objective is now to invest in the Oil & Gas and minerals sectors through the continuing investigation and evaluation of new properties thereby improving share price and, ultimately, enhancing shareholder value.
We will achieve these objectives through various strategies:
· continuing development of a Board consisting of highly experienced professionals covering Oil & Gas, mineral exploration, mine development, financing and financial control of public companies;
· establishment of a new division for our proposed diversification and ultimate shifting of emphasis into the Oil & Gas sector;
· commitment to operations involving the exploration and development of mineral deposits;
· the acquisition of interests in Oil & Gas and minerals projects or companies holding those interests in exchange for cash, royalties or other deferred interests;
· the acquisition of interests in Oil & Gas and minerals properties and projects through farm-in agreements and joint ventures; and
· consideration of the capital and financing required to achieve our objectives and market perception.
REVIEW OF OPERATIONS
Oil & Gas Division
During the year the Company indicated its intention to extend operating activities into the Oil & Gas sector, and changed the name of the Company to Rose Petroleum plc. A highly experienced Oil & Gas technical team was established with the appointment of Kelly Scott to the Board of Directors as Technical Director, Dr Fivos Spathopoulos as Chief Consulting Geologist and soon after, John Blair joined the team as Head of New Ventures.
The Company intends to capitalise on the many opportunities that have developed within the Oil & Gas industry as a result of successful production innovations which have transformed the industry during the last few years.
The Company made significant progress with the transition of the Company into a new petroleum company when it entered into a sale and purchase agreement in August 2013 to acquire the entire issued share capital of a company that was, at that time, in the process of renewing two hydrocarbon exploration licences in southwest Germany, covering an area of approximately 635,000 acres. This represented a significant opportunity for the Company to enter the Oil & Gas arena in a highly prospective geological setting with multiple target zones.
The appointment of Kelly Scott and Dr Spathopoulas in September 2013 put the Company in a strong position as it implemented its new strategy. Kelly Scott has over 40 years of experience in both onshore and offshore drilling, construction and completion, from Southeast Asia to South America and the Middle East. As Technical Director, Kelly will be responsible for building drilling and completion programmes and overseeing field well site supervision, field drilling coordination and field construction and regulatory coordination. As Chief Consulting Geologist, Dr Spathopoulos is responsible for the development of the Company's European exploration programmes and assessment of new projects within the region. He has over 20 years of experience in conventional petroleum exploration, extensive experience in international exploration and is an expert on organic geochemistry and reservoir maturity modelling.
German hydrocarbon licences
The two licences subject to the sale and purchase agreement signed in August 2013, the Konstanz and Biberach, were renewed in Q4 2013. The licences cover areas in the Molasse Basin in the State of Baden-Württemberg, southwest Germany, and contain both conventional and unconventional petroleum plays.
The first of the licences, Konstanz, covers an area of 369,863 acres and has significant historic data available, including two oilfields and two deep wells in the area, which have enabled the identification of four main target horizons: (a) shale oil in Tertiary black shales (Schoneck shales); (b) shale oil in Lower Jurassic (Posidonienschiefer) black shales; (c) shale gas in Early Permian (Autunian) black shales; and (d) tight gas in Upper Carboniferous (Stephanian) sandstones. All the shale sections have been sampled and show promising geochemical, maturity and petrological properties and all of the targets can be tested with a single well.
The Company believes that the second of the licences, Biberach, which covers an area of 266,073 acres, has similar target horizons: (a) shale oil in Tertiary black shales (Schoeneck shales); (b) shale oil in Lower Jurassic Posidonienschiefer black shales; and (c) possible shale gas and tight gas from Early Permian and Upper Carboniferous formations. Additional seismic data will be required to confirm the targets.
Two conventional oilfields exist as separate permits in this licence area owned by a third party.
In Q4 2013, the Company made a further licence application in respect of a concession for hydrocarbon exploration covering approximately 657,000 acres in the Weiden Basin, located in the State of Bavaria, southeast Germany. The licence is a conventional petroleum play and the Company established a new German subsidiary company, Naab Energie GmbH, through which it intends to hold the licences.
The Weiden licence was applied for based on the relatively recent discovery of hydrocarbons in the Weiden Basin. In 1989, the town of Weiden drilled a geothermal well (Weiden-1) which indicated the presence of oil in the Permian sandstones. A core, bleeding of oil, was recovered and, following analyses, it was reported that the oil came from Permian-Carboniferous source rocks. Later in 1989, the town of Weiden applied for a petroleum exploration licence covering a small area surrounding the town, but relinquished the licence in 1991. The exploration efforts were subsequently taken up by the consortium of Preussag/Maxus, companies headquartered in Germany and Texas. The permit awarded to these companies was called "Oberpfalz" and included all the prospective area of the Weiden Basin and the consortium shot four new seismic lines. The permit was relinquished in 1994 and the seismic data was subsequently acquired by Gaz de France (Germany), when it took over Preussag. Some of the seismic data and structural maps were published and several exploration targets are indicated in this seismic data. Conventional prospectivity is expected to focus on the oil charged by Paleozoic source rocks, found in structural traps in Permian sandstones.
Utah, U.S.A.
In early 2014, the Company appointed John Blair as Head of New Ventures. John, who is engaged as a consultant to Rose, has 27 years of experience in the upstream Oil & Gas industry and was previously Senior Vice President of Knowledge Reservoir, a global Oil & Gas consulting firm, which was sold to the RPS Group in 2013. He founded, and was President of three successful private U.S. Independent Oil & Gas companies with significant combined asset values. John has extensive experience in identifying, analysing and negotiating Oil & Gas investment opportunities worldwide and is considered as a recognised expert in both conventional and unconventional Oil & Gas exploration and development. He has particular expertise in operating in the Utah area, having operated there for 17 years.
In March 2014, the Company announced that it had signed a farm-in agreement in relation to approximately 230,000 acres in the Paradox and Uinta Basins in Utah. This is now the main focus of the Company's operations with significant production potential. Ryder Scott Company completed a resource evaluation of the leases which confirms the immense, potential scale of the project.
The Utah project gives exposure to two different basins with two separate target formations. The Paradox Formation of the Paradox Basin has up to 18 target horizons including the Cane Creek Clastic, the deepest at around 10,000 feet. The Mancos Shale within the Uinta Basin has 5 separate potential pay intervals at depth of approximately 3,000 feet.
A summary of the Ryder Scott Prospective Resources Report is set out below:
(Full Report available on the website: www.rosepetroleum.com)
Table 1: Estimated 100% Gross Volumes Unrisked Undiscovered Original Hydrocarbon In Place (OOIP & OGIP) in the Mancos Shale and Paradox Formation:
|
Prospect/ Formation |
OOIP - MMBO |
OGIP - BCFG |
||||
|
P90 |
P50 |
P10 |
P90 |
P50 |
P10 |
|
|
Mancos Shale Collective Total |
14,545 |
17,309 |
20,383 |
81,059 |
103,265 |
129,231 |
|
Paradox Formation Collective Total |
15,876 |
19,139 |
23,008 |
26,005 |
32,999 |
41,300 |
|
Total |
30,421 |
36,448 |
43,391 |
107,064 |
136,264 |
170,531 |
(MMBO = million barrels oil, BCFG = billion cubic feet gas)
Table 2: Estimated 100% Gross Volumes Unrisked Prospective Recoverable Hydrocarbon Resources (Estimated Ultimate Recoverable Reserves -EUR) in the Mancos Shale and Paradox Formation:
|
Prospect / Formation |
EUR Oil/Condensate - MMBO |
EUR Gas - BCFG |
||||||
|
|
Low |
Best |
High |
MEAN |
Low |
Best |
High |
MEAN |
|
Mancos Totals |
168.20 |
486.49 |
1,376.11 |
666.11 |
995.13 |
2,903.39 |
8,272.99 |
3,998.72 |
|
Paradox Totals |
452.27 |
966.37 |
1,994.50 |
1,115.29 |
874.43 |
1,888.46 |
3,913.55 |
2,187.46 |
Paradox Formation, Paradox Basin, Utah
The Paradox source rocks and reservoir rocks are trapped vertically and laterally by thick salt intervals. This restricted the ability for the generated oil to migrate out of the salt-enclosed clastic cycles and thus has set up a regional resource play.
The Paradox is approximately 3,000 feet thick across the Rose leasehold at the depth of 6,500 to 10,000 feet.
The collective Low Case Prospective Recoverable Resource potential that Ryder Scott has determined for the Paradox Formation on Rose's leases is 450 MMBO and 875 BCFG from the collective 15 prospective reservoirs that they identified (see Table 2). This is not to say that every prospective reservoir is necessarily going to be economic. Thus, Ryder Scott has placed a Chance of Success (COS) risk factor on each prospective reservoir, which vary across each individual reservoir from as low as a 21% COS to as high as a 56% COS.
Fidelity Exploration and Production (a wholly-owned subsidiary of MDU Resources Group - NYSE: MDU) is actively developing the Paradox immediately south of Rose's Paradox acreage. Since 2012, Fidelity has regularly achieved IP initial rates of production of 1,000 BOPD (barrels of oil per day) per well and has produced over 5.2 MMBO and 4.2 BCFG from 20 wells. Fidelity is currently producing over 4,500 BOPD from the Paradox. Fidelity has reported individual well reserves of recent horizontal wells as high 1.5 MMBO per well.
The Paradox Formation consists of a series of clastic cycles of which the above production figures are primarily only from the lowest interval, known as the Cane Creek. However, Fidelity has established 10 additional clastic cycles within the Paradox that it believes to be productive and is just now beginning to develop those. Fidelity has released reserve estimates of 150 to 440 MBO (thousand barrels of oil) per interval per well for each of these additional 10 zones. Fidelity has a capital budget for the Paradox of $170M for 2014.
Mancos Shale, Uinta Basin, Utah
The Mancos Shale is stratigraphically equivalent to the Niobrara in northwest Colorado and the Eagle Ford in south Texas. The Mancos has a long history of production in the region having produced over 300 MMBO (million barrels of oil) and 5 TCFG (trillion cubic feet of gas).
The Mancos was divided into eleven prospects with each prospect having five separate potential "pay" intervals based on existing well control and surrounding production. The collective Low Case Prospective Recoverable Resource potential that Ryder Scott has determined for the Mancos on Rose's leases is 168 MMBO and 995 BCFG. Similarly to the Paradox, Ryder Scott has cautioned that not every interval is necessarily going to be economic. Therefore, Ryder Scott has placed a Chance of Success (COS) risk factor on each of the five Mancos intervals. As the Mancos is much more homogeneous than the Paradox, the COS that Ryder Scott developed for the Mancos is the same for each of the five intervals. Ryder Scott's COS for all the Mancos is 30%.
Rose plans to develop the project during the remainder of 2014. 3D seismic is planned particularly over the Paradox basin where Fidelity has proven 3D to be particularly effective. Rose also plans to drill 4 wells in the Mancos and one in the Paradox over the next 12-18 months. This will transform Rose into a producing Oil & Gas company and the Board anticipates this to be by Q2 2015.
Gold and Silver Mining Operations, Mexico
Minerales VANE SA de CV, the 100% owned subsidiary of Rose Petroleum plc, continued to improve its production performance in 2013. Its operations are directed from the headquarters located in Acaponeta, Nayarit that include offices and living quarters. Mill production is carried out at its nearby mill in San Dieguito de Arriba (SDA) where it also operates its analytical facility.
During the year, production focused primarily on ore from our joint venture with Met-Sin, located in La Rastra, Sinaloa. The joint venture has an area of interest covering some 1,500 square kilometres in southern Sinaloa. It includes three separate mining districts; La Rastra, Escuinapa and Rosario as well as four concessions controlled by Met-Sin. The La Colorada concession produced 96.5% of the ore shipped to and processed by SDA during 2013 which was subject to the 50:50 profit split under the terms of the JV agreement. The remaining production came from the Company's 100% owned Diablito Mine where 1,297 tonnes of remaining pillar ore were mined and processed prior to starting mine closure.
Production of gold and silver from our operations continued to improve overall with a 30% increase in ounces of gold produced, which more than offset the 16% decrease in ounces of silver produced, compared with 2012. This was caused by higher average gold grades, but lower average silver grades of the ore milled as well as a 16% increase in SDA mill throughput. However, revenue has remained fairly consistent with that achieved in 2012 as a result of the decrease in metals prices during 2013, which saw an 18% decrease in gold price and 27% decrease in silver price received on sales of concentrates averaged over the year.
During the year, the SDA Mill produced 5,643 ounces of gold (Au) and 71,639 ounces of silver (Ag) at a direct production cost of US$717.81 per ounce and US$11.62 per ounce equivalent, respectively (2012: 4,341 ounces Au and 85,241 ounces Ag at a direct production cost of $682.33 per ounce Au and $12.62 per ounce Ag equivalent). This was produced from 37,195 tonnes of ore averaging 8.26 g/T Au and 105 g/T Ag processed through the mill (2012: 32,070 tonnes of ore averaging 6.07 g/T Au and 121 g/T Ag). Production averaged approximately 3,100 tonnes per month which is 114% of targeted production capacity (2012: 2,672 tonnes per month, 107% of targeted production capacity). The average mill recovery rates were 81% Au and 74% Ag (2012: 79% Au and 77% Ag). The average metal prices received on sales of concentrates were US$1,358 per ounce Au and $22.40 per ounce Ag (2012: $1,662per ounce Au and $30.70 per ounce Ag).
The Company anticipates production from its Mexican operations to continue at the same rate during 2014 and continues to evaluate opportunities that could lead to the expansion of production and milling.
Copper Exploration, Southwest U.S.A.
The Company's porphyry copper programme is operated by the Company's wholly-owned subsidiary AVEN Associates LLC with offices located in Tucson, Arizona.
The global downturn in metals which severely impacted junior companies, carried over into AVEN's operations. As a result of decreased revenue available from the Company's Mexican operations due to declining metals prices, the copper exploration programme continued on a care and maintenance basis with the property positions being kept current while third-party financing was sought to continue the programme. AVEN met with a number of interested parties during the year including several field visits, and interest continued through the end of the year.
AVEN's covered-area concept and programme holds a number of prospective targets such as McGhee Peak, Peg Leg, Lone Hill, Railroad Well, and Cherry Creek where land positions are held as well as targets "in the pipeline".
Uranium Exploration, U.S.A.
The Company's uranium programme is led by the joint venture project with Uranium One Americas Inc. (U1) in northern Arizona.
All of the Company's uranium assets, other than set out below, are currently held on a care and maintenance basis following the withdrawal of Federal lands in northern Arizona and the weakening of the uranium market.
The most significant asset within the joint venture is the Wate Project located on State of Arizona lands and operated under Wate Mining Company LLC. The project has a NI 43-101 compliant resource of 1.118m lbs eU3O8 with an average grade of 0.79% eU3O8. Ownership of the project is 50:50 between VANE Minerals (US) LLC ("VANE US") and U1 and will remain 50:50 assuming that all development costs are split equally between the parties. VANE US is the manager of the Wate LLC. A Mineral Lease has been applied for with the Arizona State Land Department. A Mineral Lease gives authority to develop the project contingent on obtaining environmental compliance permits from the Arizona Department of Environmental Quality (ADEQ).
The Company continues to pursue the sale of its uranium assets.
Legal Update
As previous announced, VANE US, the wholly-owned subsidiary of Rose, filed a lawsuit, as principal, in the U.S. Court of Federal Claims seeking redress on financial losses as a result of the withdrawal of the Federal lands where VANE US held its mining claims on which it had invested. Since the year end, the U.S. Court of Federal Claims dismissed our damages case and we do not anticipate appealing. However, the case in U.S. District Court is ongoing and we stand to benefit should a decision expected in late 2014 be favourable.
FINANCIAL REVIEW
Revenue
Revenue for the year has been generated primarily from the Met-Sin joint venture mine, La Colarada. The Income Statement reports total revenue for the year ended 31 December 2013 of £5,710,172 (2012: £5,759,225). Despite the decrease in gold and silver prices during 2013, revenue from the Met-Sin joint venture have remained robust due to higher levels of production, grade control and improved recovery rates.
Income Statement
The Group reported a net loss after tax of £3,309,130 or 0.57p per share for the year ended 31 December 2013 (2012: net loss after tax of £542,619 or 0.12p). The Group reported a gross profit of £1,571,007 (2012: £1,707,977) after charging profit share payments due under the terms of the joint venture of £1,045,655 (2012: £1,428,558) and depreciation of £124,219 (2012: £379,954).
Impairment of the Group's intangible uranium exploration and evaluation assets resulted in a charge of £2,939,708 (2012: £nil) during the year.
Investment income representing interest received on the Group's cash balances was £2,596 (2012: £5,959).
Balance Sheet
Total investment in intangible assets at 31 December 2013 was £2,389,367 (2012: £5,254,481) reflecting an impairment of £2,939,708 recognised during the year.
Property, plant and equipment at 31 December 2013 was £614,156 (2012: £688,756) reflecting the continued depreciation of the Ore processing mill.
Trade and other receivables of £1,434,701 (2012: £702,541) represents amounts due in relation to trade receivables and VAT recoverable together with the sum of £257,577 in respect of the deposit paid under the terms of the SPA agreement in relation to the two hydrocarbon licences in southwest Germany.
Cash and cash equivalents at 31 December 2013 were £1,179,069 (2012: £529,367). During the year the Company completed a placing of 349,750,000 Ordinary Shares of 0.1p each at a price of 0.4p per share, raising gross proceed of £1,399,000.
Provision for decommissioning of the Diablito mine has now been treated as a current provision as the restoration of the site is expected to take place within the next twelve months.
Significant Equity Events
On 15 August 2013, the Company completed a placing of 349,750,000 Ordinary Shares of 0.1p each at a price of 0.4p per share, raising gross proceeds of £1,399,000.
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, having made appropriate enquiries and having examined the major areas which could affect the Group's financial position, the Directors are satisfied that the Group has adequate resources to continue in operation for the foreseeable future. For this reason, they consider it appropriate to adopt the going concern basis in preparing the 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 exploration team continue to investigate and evaluate new opportunities designed to improve share price and, ultimately, shareholder value. The Company will continue to operate its gold and silver operations in Mexico and intends to open additional mines in the next 12 months. The Directors will seek to progress the sale of its uranium assets, identify further partners to finance its porphyry copper exploration programme and consider corporate actions.
However, the main focus of the company going forward will be its Oil & Gas assets. In January 2014, the Company announced the completion of the acquisition of Parkyn Energy Holdings plc which in turn owns 100% of Parkyn Energy Germany Ltd, the sole owner of the two hydrocarbon licences in southwest Germany. Also in January 2014, the new hydrocarbon licence in the Weiden Basin, Germany was granted to the Company and commenced 1 February 2014 for an initial period of three years. The Company will be targeting the conventional reservoirs that are believed to exist within the licence areas. The initial programme will be mainly desktop evaluation.
The Ryder Scott Prospective Resources Report recently released shows the huge potential of the Utah project and its potential to dramatically change the Company going forward. We will be seeking to finance the exploration and development programme of this project and subject to the success of that funding, the development programme will be aggressively pursued.
Next year we plan to be our first year as a producing Oil & Gas company, we plan to expand this part of the business not only through organic growth but also through seeking additional acquisitions. As we have shown this year, we have a team capable of assessing opportunities quickly, efficiently and successfully. We plan to use this skill set to develop further opportunities whilst utilising the Oil & Gas team's operational track record to develop the projects on the ground.
We would like to thank all shareholders for their continued support.
By order of the board
MC Idiens
Chief Executive Officer
CONSOLIDATED INCOME STATEMENT
For the year ended 31 December 2013
|
|
|
2013 £ |
2012 £ |
|
|
|
|
|
|
Continuing operations |
|
|
|
|
Revenue |
|
5,710,172 |
5,759,225 |
|
Cost of sales |
|
(3,093,510) |
(2,622,690) |
|
Profit share payments |
|
(1,045,655) |
(1,428,558) |
|
|
|
|
|
|
Gross profit |
|
1,571,007 |
1,707,977 |
|
|
|
|
|
|
Operating expenses |
|
(241,588) |
(247,156) |
|
Administrative expenses |
|
(1,260,108) |
(1,351,365) |
|
Impairment of intangible exploration & evaluation assets |
|
(2,939,708) |
- |
|
Other operating income |
|
- |
55,435 |
|
|
|
|
|
|
Operating (loss)/profit |
|
(2,870,397) |
164,891 |
|
|
|
|
|
|
Investment income |
|
2,596 |
5,959 |
|
Other gains and losses |
|
- |
15,000 |
|
Finance costs |
|
(113,500) |
(131,546) |
|
|
|
|
|
|
(Loss)/profit before taxation |
|
(2,981,301) |
54,304 |
|
|
|
|
|
|
Taxation |
|
(327,829) |
(596,923) |
|
|
|
|
|
|
Loss for the year attributable to owners of the parent company |
|
(3,309,130) |
(542,619) |
|
|
|
|
|
|
|
|
|
|
|
Loss per Ordinary Share |
|
|
|
|
Basic and diluted |
|
(0.57p) |
(0.12p) |
|
|
|
|
|
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2013
|
|
|
2013 £ |
2012 £ |
|
|
|
|
|
|
Loss for the year attributable to owners of the parent company |
|
(3,309,130) |
(542,619) |
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income |
|
|
|
|
Exchange differences arising on translation of foreign operations |
|
(21,183) |
(183,248) |
|
Income tax relating to components of other comprehensive income |
|
95,314 |
229,165 |
|
|
|
|
|
|
|
|
74,131 |
45,917 |
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income for the year attributable to owners of the parent company |
|
(3,234,999) |
(496,702) |
|
|
|
|
|
CONSOLIDATED BALANCE SHEET
As at 31 December 2013
|
|
|
2013 £ |
2012 £ |
|
|
|
|
|
|
Non-current assets |
|
|
|
|
Intangible assets |
|
2,389,367 |
5,254,481 |
|
Property, plant and equipment |
|
614,156 |
688,756 |
|
|
|
|
|
|
|
|
3,003,523 |
5,943,237 |
|
|
|
|
|
|
Current assets |
|
|
|
|
Inventories |
|
548,372 |
704,187 |
|
Trade and other receivables |
|
1,434,701 |
702,541 |
|
Cash and cash equivalents |
|
1,179,069 |
529,367 |
|
|
|
|
|
|
|
|
3,162,142 |
1,936,095 |
|
|
|
|
|
|
Total assets |
|
6,165,665 |
7,879,332 |
|
|
|
|
|
|
Current liabilities |
|
|
|
|
Trade and other payables |
|
(785,238) |
(688,005) |
|
Taxation |
|
(2,879) |
- |
|
Provisions |
|
(16,424) |
(15,180) |
|
|
|
|
|
|
|
|
(804,541) |
(703,185) |
|
|
|
|
|
|
Non-current liabilities |
|
|
|
|
Convertible loan notes |
|
(852,117) |
(819,563) |
|
Deferred tax |
|
(32,005) |
(40,460) |
|
Provisions |
|
(30,954) |
(40,841) |
|
|
|
|
|
|
|
|
(915,076) |
(900,864) |
|
|
|
|
|
|
Total liabilities |
|
(1,719,617) |
(1,604,049) |
|
|
|
|
|
|
Net assets |
|
4,446,048 |
6,275,283 |
|
|
|
|
|
|
Equity |
|
|
|
|
Share capital |
|
19,613,377 |
19,263,627 |
|
Share premium account |
|
6,838,894 |
5,838,030 |
|
Share option reserve |
|
487,432 |
457,090 |
|
Other reserves |
|
269,317 |
269,317 |
|
Cumulative translation reserves |
|
149,643 |
75,512 |
|
Retained deficit |
|
(22,912,615) |
(19,628,293) |
|
|
|
|
|
|
Equity attributable to owners of the parent company |
|
4,446,048 |
6,275,283 |
|
|
|
|
|
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2013
|
|
Share capital |
Share premium account |
Share option reserve |
Other Reserves
|
Cumulative translation reserves |
Retained |
Total |
|
|
£ |
£ |
£ |
£ |
£ |
£ |
£ |
|
|
|
|
|
|
|
|
|
|
As at 1 January 2012 |
19,263,627 |
5,838,030 |
396,679 |
261,220 |
29,595 |
(19,275,678) |
6,513,473 |
|
|
|
|
|
|
|
|
|
|
Loss for the year |
- |
- |
- |
- |
- |
(542,619) |
(542,619) |
|
Other comprehensive income: |
|
|
|
|
|
|
|
|
Currency translation differences |
- |
- |
- |
- |
(183,248) |
- |
(183,248) |
|
Deferred tax |
- |
- |
- |
- |
229,165 |
- |
229,165 |
|
|
|
|
|
|
|
|
|
|
Total other comprehensive income for the year |
- |
- |
- |
- |
45,917 |
- |
45,917 |
|
|
|
|
|
|
|
|
|
|
Total comprehensive income for the year |
- |
- |
- |
- |
45,917 |
(542,619) |
(496,702) |
|
|
|
|
|
|
|
|
|
|
Share-based payments |
- |
- |
60,411 |
|
- |
- |
60,411 |
|
|
|
|
|
|
|
|
|
|
Equity component of convertible loan note |
- |
- |
- |
198,101 |
- |
- |
198,101 |
|
Transfer to retained earnings in respect of equity component of convertible loan notes redeemed |
- |
- |
- |
(190,004) |
- |
190,004 |
- |
|
|
|
|
|
|
|
|
|
|
As at 1 January 2013 |
19,263,627 |
5,838,030 |
457,090 |
269,317 |
75,512 |
(19,628,293) |
6,275,283 |
|
|
|
|
|
|
|
|
|
|
Transactions with owners in their capacity as owners: |
|
|
|
|
|
|
|
|
Issue of equity shares |
349,750 |
1,049,250 |
- |
- |
- |
- |
1,399,000 |
|
Expenses of issue of equity shares |
- |
(48,386) |
- |
- |
- |
- |
(48,386) |
|
|
|
|
|
|
|
|
|
|
Total transactions with owners in their capacity as owners |
349,750 |
1,000,864 |
- |
- |
- |
- |
1,350,614 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss for the year |
- |
- |
- |
- |
- |
(3,309,130) |
(3,309,130) |
|
Other comprehensive income: |
|
|
|
|
|
|
|
|
Currency translation differences |
- |
- |
- |
- |
(21,183) |
- |
(21,183) |
|
Deferred tax |
- |
- |
- |
- |
95,314 |
- |
95,314 |
|
|
|
|
|
|
|
|
|
|
Total other comprehensive income for the year |
- |
- |
- |
- |
74,131 |
- |
74,131 |
|
|
|
|
|
|
|
|
|
|
Total comprehensive income for the year |
- |
- |
- |
- |
74,131 |
(3,309,130) |
(3,234,999) |
|
|
|
|
|
|
|
|
|
|
Share-based payments |
- |
- |
55,150 |
- |
- |
- |
55,150 |
|
Transfer to retained earnings in respect of forfeit options |
- |
- |
(24,808) |
- |
- |
24,808 |
- |
|
|
|
|
|
|
|
|
|
|
As at 31 December 2013 |
19,613,377 |
6,838,894 |
487,432 |
269,317 |
149,643 |
(22,912,615) |
4,446,048 |
|
|
|
|
|
|
|
|
|
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 31 December 2013
|
|
|
2013 £ |
2012 £ |
|
|
|
|
|
|
Operating activities |
|
|
|
|
(Loss)/profit before taxation |
|
(2,981,301) |
54,304 |
|
|
|
|
|
|
Investment income |
|
(2,596) |
(5,959) |
|
Finance costs |
|
113,500 |
131,546 |
|
|
|
|
|
|
Adjustments for: |
|
|
|
|
Depreciation of property, plant and equipment |
|
138,716 |
384,029 |
|
Profit on disposal of property, plant and equipment |
|
(74,737) |
(1,200) |
|
Impairment of Intangible exploration and evaluation assets |
|
2,939,708 |
- |
|
Share-based payments |
|
55,150 |
60,411 |
|
Other gains and losses |
|
- |
(15,000) |
|
Effect of foreign exchange rate changes |
|
(57,931) |
29,766 |
|
|
|
|
|
|
Operating inflow before movements in working capital |
|
130,509 |
637,897 |
|
Decrease/(increase) in inventories |
|
155,815 |
(340,467) |
|
Increase in trade and other receivables |
|
(687,588) |
(664,562) |
|
Increase/(decrease) in trade and other payables |
|
97,233 |
(22,462) |
|
|
|
|
|
|
Cash used in operations |
|
(304,031) |
(389,594) |
|
Income tax paid |
|
(7,968) |
(66,247) |
|
Interest paid |
|
(80,946) |
(107,301) |
|
|
|
|
|
|
Net cash used in operating activities |
|
(392,945) |
(563,142) |
|
|
|
|
|
|
Investing activities |
|
|
|
|
Interest received |
|
2,596 |
5,959 |
|
Purchase of property, plant and equipment |
|
(110,255) |
(106,964) |
|
Purchase of intangible exploration and evaluation assets |
|
(30,696) |
(600,244) |
|
Proceeds on disposal of property, plant and equipment |
|
117,219 |
1,200 |
|
Proceeds on disposal of available-for-sale investment |
|
- |
15,000 |
|
Decommissioning provision utilised |
|
(7,263) |
- |
|
Advance on acquisition of subsidiaries |
|
(257,577) |
- |
|
|
|
|
|
|
Net cash used in investing activities |
|
(285,976) |
(685,049) |
|
|
|
|
|
|
Financing activities |
|
|
|
|
Proceeds from issue of shares |
|
1,399,000 |
- |
|
Expenses of issue of shares |
|
(48,386) |
- |
|
Redemption of convertible loan notes |
|
- |
(500,000) |
|
|
|
|
|
|
Net cash from/(used in) financing activities |
|
1,350,614 |
(500,000) |
|
|
|
|
|
|
|
|
|
|
|
Net increase/(decrease) in cash and cash equivalents |
|
671,693 |
(1,748,191) |
|
|
|
|
|
|
Cash and cash equivalents at beginning of year |
|
529,367 |
2,299,546 |
|
|
|
|
|
|
Effect of foreign exchange rate changes |
|
(21,991) |
(21,988) |
|
|
|
|
|
|
Cash and cash equivalents at end of year |
|
1,179,069 |
529,367 |
|
|
|
|
|
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2013
1. GENERAL INFORMATION
At a General Meeting held on 15 August 2013, a resolution was passed by the shareholders of VANE Minerals plc by which the name of the Company was changed to Rose Petroleum plc.
Rose Petroleum plc (the 'Company' and, together with its subsidiaries, the 'Group') is domiciled and incorporated in the United Kingdom under the Companies Act 2006. The address of the registered office is 145-157 St John Street, London, EC1V 4PW.
The nature of the Group's operations and its principal activities are the evaluation and acquisition of mineral exploration targets, principally gold, silver, uranium and copper targets in the United States, and the development and operation of mines in Mexico. During the year the Group underwent a strategic review and announced its intention to extend its activities into the Oil & Gas sector, establishing a new division for this purpose.
The financial statements are presented in pounds sterling as this is the currency in which funds from financing are generated and in which receipts are usually retained. Foreign operations are included in accordance with the policies set out in note 3.
As permitted by section 408 of the Companies Act 2006, the parent company's income statement and statement of other comprehensive income have not been included in these financial statements.
2. BASIS OF PREPARATION
The financial information set out above is abridged and does not constitute the Company's statutory financial statements for the year ended 31 December 2013. The financial information has been extracted from the financial statements for the year ended 31 December 2013, which have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board and as adopted by the European Union, and were approved by the Board on 30 May 2014 and on which the auditors' have reported without qualification.
The statutory financial statements for the year ended 31 December 2013 will be posted no later than 3 June 2014 to shareholders and, once approved, will be delivered to the Registrar of Companies following the Annual General Meeting on 27 June 2014.
3. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING
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 principal accounting policies adopted are set out below.
GOING CONCERN
The Group currently generates cash through its mining operations in Mexico and this activity provides cash flow to fund the other activities of the Group. Whilst the Group's exploration expenditure is largely discretionary and its activities can be adjusted to enable the Group to operate within available resources should this be required, the uranium and copper activities are operating at a loss and the Directors believe that there is some uncertainty that the Group will generate sufficient funds to fully finance its exploration and development programme for at least the next twelve months.
In addition to the capital resources available at the date of the financial statements and income generated from future operations, additional funding will need to be raised and the Company intends to seek further funding by means of a significant equity fund raise in June 2014. The Group's management believe that sufficient additional funding will be raised which will enable the Group to meet its obligations for the foreseeable future and continue as a going concern. Whilst the Board are confident that sufficient funds will be made available from the fundraise, the Company has prepared detailed forecasts and sensitivities which have been submitted to a significant shareholder in the Company. The Company is in receipt of a letter of comfort from that shareholder confirming its ability and willingness to support the Group financially so that the Group maintains adequate financial and working capital resources, based on those forecasts, for a minimum period of 12 months commencing from the date of signing of these financial statements.
Having made appropriate enquires, having considered all the matters raised in the preceding paragraphs, and having examined the major areas which could affect the Group's financial position, the Directors are satisfied that the Group can generate adequate resources to continue in operation for the foreseeable future. For this reason, they consider it appropriate to adopt the going concern basis in preparing the financial statements.
OPERATING EXPENSES
Costs incurred prior to obtaining the legal rights to explore an area together with any costs which cannot be allocated to a specific exploration project are expensed directly to the income statement and included as operating expenses.
BASIS OF CONSOLIDATION
The consolidated financial statements incorporate the financial statements of the Company and its subsidiary undertakings (together, 'the Group') made up to 31 December each year.
Subsidiary undertakings are those entities controlled directly or indirectly by the Company. 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 the 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 year 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 accounting policies used into line with those used by the Group.
All intra-group transactions, balances, income and expenses are eliminated on consolidation.
JOINT VENTURES
A joint venture is a contractual arrangement whereby the Group and other parties undertake an economic activity that is subject to joint control (i.e. when the strategic, financial and operating decisions relating to the activities of the joint venture require the unanimous consent of the parties sharing control).
When a group entity undertakes activities under joint venture arrangements directly, the Group's share of jointly controlled assets and any liabilities incurred jointly with other ventures are recognised in the financial statements of the relevant entity and classified according to their nature. Liabilities and expenses incurred directly in respect of interest in jointly controlled assets are accounted for on an accrual basis. Income from the sale or use of the Group's share of the output of jointly controlled assets, and its share of joint venture expenses, are recognised when it is probable that the economic benefits associated with the transactions will flow to/from the Group and their amount can be measured reliably.
The Group reports its interest in joint venture arrangements using proportionate consolidation. The Group's share of the assets, liabilities, income and expenses of jointly controlled entities is combined with the equivalent items in the consolidated financial statements on a line-by-line basis, apart from the Met-Sin joint venture which has been accounted for as a profit share arrangement.
INVESTMENTS
Long term investments representing interests in subsidiary undertakings are stated at cost less any provision for impairment in the value of the non-current investment.
INTANGIBLE EXPLORATION AND EVALUATION ASSETS
The Group applies the full cost method of accounting for Exploration and Evaluation ('E&E') costs, having regard to the requirements of IFRS 6 Exploration for and Evaluation of Mineral Resources. Under the full cost method of accounting, costs of exploring for and evaluating mineral resources are accumulated by reference to appropriate cost centres being the appropriate licence area, but are tested for impairment on a cost pool basis as described below.
E&E assets comprise costs of (i) E&E activities that are on-going at the balance sheet date, pending determination of whether or not commercial reserves exist and (ii) costs of E&E that, whilst representing part of the E&E activities associated with adding to the commercial reserves of an established cost pool, did not result in the discovery of commercial reserves.
Costs incurred prior to having obtained the legal rights to explore an area are expensed directly to the income statement as they are incurred.
Exploration and evaluation costs
All costs of E&E are initially capitalised as E&E assets. Payments to acquire the legal right to explore, costs of technical services and studies, seismic acquisition, exploratory drilling and testing are capitalised as intangible E&E assets.
Intangible costs include directly attributable overheads together with the cost of other materials consumed during the exploration and evaluation phases.
Treatment of E&E assets at conclusion of appraisal activities
Intangible E&E assets related to each exploration licence/project are carried forward until the existence (or otherwise) of commercial reserves has been determined. If commercial reserves have been discovered, the related E&E asset are assessed for impairment on a cost pool basis as set out below and any impairment is recognised in the income statement. The carrying value, after any impairment loss, of the relevant E&E assets is then reclassified as development and production assets.
Intangible E&E assets that related to E&E activities that are determined not to have resulted in the discovery of commercial reserves remain capitalised as intangible E&E assets at cost less accumulated amortisation, subject to meeting a pool-wide impairment test in accordance with the accounting policy for impairment of E&E assets set out below. Such E&E assets are amortised on a unit-of-production basis over the life of the commercial reserves of the pool to which they relate.
IMPAIRMENT OF INTANGIBLE EXPLORATION AND EVALUATION ASSETS
E&E assets are assessed for impairment when facts and circumstances suggest that the carrying amount may exceed its recoverable amount. Such indicators include, but are not limited to, those situations outlined in paragraph 20 of IFRS 6 Exploration for and Evaluation of Mineral Resources and include the point at which a determination is made as to whether or not commercial reserves exist.
Where there are indications of impairment, the E&E assets concerned are tested for impairment. Where the E&E assets concerned fall within the scope of an established full cost pool, the E&E assets are tested for impairment together with all development and production assets associated with that cost pool, as a single cash generating unit.
The aggregate carrying value is compared against the expected recoverable amount of the pool, generally by reference to the present value of the future net cash flow expected to be derived from production of commercial reserves. Where the E&E assets to be tested fall outside the scope of any established cost pool, there will generally be no commercial reserves and the E&E assets concerned will generally be written off in full.
If the recoverable amount of a cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the cash-generating unit is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss.
When an impairment loss subsequently reverses, the carrying amount of the cash-generating unit is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the cash-generating unit in prior years. A reversal of an impairment loss is recognised immediately in profit or loss.
The Group considers each area of exploration, gold and silver, uranium, copper and Oil & Gas on a geographical basis to be a separate cost pool and therefore aggregates all specific assets for the purposes of determining whether impairment of E&E assets has occurred.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. The cost of an item of property, plant and equipment comprises its purchase price and any costs directly attributable to bringing the asset into use.
Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives at the following rates:
Diablito Mine over the life of the mine
Ore processing mill over 10 years
Plant and machinery over 5 to 10 years
The estimated useful lives, residual value and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit and loss.
IMPAIRMENT OF PROPERTY, PLANT AND EQUIPMENT
At each reporting date, the Group reviews the carrying amounts of its property, plant and equipment and intangible assets with finite lives 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.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised as income immediately, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
INVENTORIES
Inventories are stated at the lower of cost and net realisable value. Costs comprise direct materials and, where applicable, direct labour costs and those overheads that have been incurred in bringing the inventories to their present location and condition. Cost is calculated using the weighted average method. Net realisable value represents the estimated selling price for inventories less all estimated costs of completion and costs to be incurred in marketing, selling and distribution.
REVENUE RECOGNITION
Revenue from the sale of minerals is recognised when persuasive evidence of an arrangement exists, usually in the form of an executed sales agreement, indicating that there has been a transfer of risks and rewards to the customer, no further work or processing is required by the Group, the quantity and quality of the goods has been determined with reasonable accuracy, the price is fixed or determinable, and collectability is reasonably assured. This is generally when title passes. Revenue is measured at the fair value of the consideration received or receivable.
Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to the Group and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable.
LEASING
Rentals payable under operating leases are charged to income on a straight-line basis over the term of the relevant lease.
FOREIGN CURRENCIES
The individual financial statements of each group company are presented in the currency of the primary economic environment in which it operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each group company are expressed in pound sterling, which is the functional currency of the Company and the presentation currency for the consolidated financial statements.
In preparing the financial statements of the individual companies, transactions in currencies other than the functional currency of each group company ('foreign currencies') are translated into the functional currency at the rates of exchange prevailing on the dates of the transactions. At each reporting date, monetary assets and liabilities that are denominated in foreign currencies are retranslated into the functional currency at the rates prevailing on the reporting date. Non-monetary assets and liabilities carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
Foreign exchange differences are recognised in the profit or loss in the period in which they arise, except for foreign exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned nor likely to occur and which, therefore, form part of the net investment in the foreign operation. Foreign exchange differences arising on the translation of the Group's net investment in foreign operations are recognised as a separate component of shareholders' equity via the statement of other comprehensive income. On disposal of foreign operations and foreign entities, the cumulative translation differences are recognised in the income statement as part of the gain or loss on disposal.
For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group's foreign operations are translated using exchange rates prevailing at the end of each reporting period. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during that period, in which case the exchange rates at the date of transactions are used.
Foreign exchange differences arising, if any, are recognised in other comprehensive income and accumulated in equity. On the disposal of a foreign operation all of the exchange differences accumulated in equity in respect of that operation are reclassified to profit or loss.
Fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the rate of exchange prevailing at the end of each reporting period. Exchange differences arising are recognised in equity. The Group has elected to treat fair value adjustments arising on acquisitions before the date of transition to IFRS as pound sterling denominated assets and liabilities.
RETIREMENT BENEFITS
The Group makes contributions to the personal pension schemes for some of its employees and Directors. Payments to these schemes are charged as an expense in the income statement in respect of pension costs payable in the year. There were no unpaid contributions at the period end.
TAXATION
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the consolidated income statement because it excludes items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting date.
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction which affects neither the taxable profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probably that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interest are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the assets to be recovered.
Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates that have been enacted or substantively enacted at the reporting date.
Current and deferred tax are recognised in profit or loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity respectively. Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.
FINANCIAL INSTRUMENTS
Recognition of financial assets and financial liabilities
Financial assets and financial liabilities are recognised on the Group's Balance Sheet when the Group becomes a party to the contractual provisions of the instrument.
Derecognition of financial assets and financial liabilities
The Group derecognises a financial asset only when the contractual rights to cash flows from the asset expire, or it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its retained interest in the asset and an associated liability for the amount it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.
The Group derecognises financial liabilities when the Group's obligations are discharged, cancelled or expired.
Financial Assets
Trade and other receivables
Trade and other receivables are measured at initial recognition at fair value, and are subsequently measured at amortised cost less any provision for impairment.
Cash and cash equivalents
Cash and cash equivalents comprise cash in hand and on-demand deposits and other short-term highly liquid investments that are readily convertible to a known amount of cash with three months or less remaining to maturity and are subject to an insignificant risk of changes in value.
Financial liabilities and equity instruments
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. Equity instruments issued by the Group are recognised at the proceeds received, net of direct issue costs.
The costs of an equity transaction are accounted for as a deduction from equity to the extent they are incremental costs directly attributable to the equity transaction that would otherwise have been avoided.
Trade and other payables
Trade and other payables are initially measured at their fair value, and are subsequently measured at amortised cost using the effective interest rate method.
Compound Instruments
The component parts of compound instruments (convertible loan notes) issued by the Company are classified separately as financial liabilities and equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument. Conversion option that will be settled by the exchange of a fixed amount of cash or another financial asset for a fixed number of the Company's own equity instruments is an equity instrument.
At the date of issue, the fair value of the liability component is estimated using the prevailing market interest rate for similar non-convertible instruments. This amount is recorded as a liability on an amortised cost basis using the effective interest method until extinguished upon conversion or at the instrument's maturity date.
The conversion option classified as equity is determined by deducting the amount of the liability component from the fair value of the compound instrument as a whole. This is recognised and included in equity, net of income tax effects, and is not subsequently re-measured.
Transaction costs that relate to the issue of the convertible loan notes are allocated to the liability and equity components in proportion to the allocation of the gross proceeds. Transaction costs relating to the equity component are recognised directly in equity. Transaction costs relating to the liability component are included in the carrying amount of the liability component and are amortised over the lives of the convertible loan notes using the effective interest method.
PROVISIONS
Provisions are recognised when the Group has a legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic resources will result and that outflow can be reliably measured.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flow estimated to settle the present obligation, its carrying amount is the present value of those cash flows.
When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receipt can be measured reliably.
Decommissioning
Provision for decommissioning is recognised in full when the related facilities are installed. The decommissioning provision is calculated as the net present value of the Group's share of the expenditure expected to be incurred at the end of the producing life of the facility in the removal and decommissioning of the production, storage and transportation facilities currently in place. The cost of recognising the decommissioning provision is included as part of the cost of the relevant asset and is thus charged to the income statement in accordance with the Group's policy for depreciation of property, plant and equipment. Period charges for changes in the net present value of the decommissioning provision arising from discounting are included in finance costs.
SHARE-BASED PAYMENTS
The Group has applied the requirements of IFRS 2 Share-based Payment for all grants of equity instruments.
TheGroup operates an equity-settled share option plan. The fair value of the service received in exchange for the grant of options is recognised as an expense. Equity-settled share-based payments are measured at fair value (excluding the effect non-market based vesting conditions) at the date of grant. The fair value determined at the grant date of equity-settled share-based payment is expensed on a straight-line basis over the vesting period, based on the Group's estimate of shares that will eventually vest and adjusted for the effect of non-market based vesting conditions.
Fair value is measured by use of the Black Scholes model for non-performance based options. The expected life used in the model has been adjusted, based on management's best estimate, for the effect of non-transferability, exercise restrictions and behavioural considerations.
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 2013 the Directors determined that there were indicators of impairment in respect of the Group's intangible uranium exploration and evaluation assets 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 £2,389,367 (2012: £5,254,481) and an impairment of £2,939,708 was identified and recognised in the period (2012: £nil).
RECOVERABILITY OF LOANS TO SUBSIDIARY UNDERTAKINGS
The Company has an outstanding loan from its directly held subsidiary which has then made a number of loans to its own subsidiaries as the primary method of financing the activity of those subsidiaries. The principal loan is shown in the Company balance sheet on the basis that the loan incurs interest at a commercial rate according to the Group's inter-company loan policy, which is being rolled up until such time as the subsidiary is 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 loan based on this risk and, whilst the Mexican subsidiary, Minerales VANE S.A. de C.V., is generating revenue and cash and has commenced repayment of its loan the Directors consider that, in consideration of the losses currently being generated in the US and the impairment of its intangible exploration and evaluation assets which was recognised at 31 December 2013 a provision of £3,663,679 (2012: £300,000) should be recognised by the Company in the period to 31 December 2013.
5. 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 Oil & Gas resources. These divisions are the basis on which the Group reports its segment information.
Segment information about these divisions is presented below.
|
|
|
2013 £ |
2012 £ |
|
|
Income statement |
|
|
||
|
Revenue |
|
|
||
|
|
Gold and silver |
5,710,172 |
5,759,225 |
|
|
|
|
|
|
|
|
Segmental results |
|
|
||
|
|
Uranium and copper |
(3,274,899) |
(510,477) |
|
|
|
Gold and silver |
1,221,580 |
1,397,917 |
|
|
|
Oil & Gas |
(103,656) |
- |
|
|
|
|
|
|
|
|
|
Total segment results |
(2,156,975) |
887,440 |
|
|
|
Unallocated results |
(824,326) |
(833,136) |
|
|
|
Current and deferred tax |
(327,829) |
(596,923) |
|
|
|
|
|
|
|
|
|
Loss after taxation |
(3,309,130) |
(542,619) |
|
|
|
|
|
|
|
|
Depreciation |
|
|
||
|
|
Uranium and copper |
1,184 |
3,795 |
|
|
|
Gold and silver |
137,532 |
380,234 |
|
|
|
|
|
|
|
|
|
|
138,716 |
384,029 |
|
|
|
|
|
|
|
|
Impairment |
|
|
||
|
|
Uranium and copper |
2,939,708 |
- |
|
|
|
|
|
|
|
Employees
The average numbers of employees for the year for each of the Group's principal divisions were as follows:
|
|
|
2013 Number |
2012 Number |
||
|
|
|
|
|||
|
|
Uranium and copper |
2 |
3 |
||
|
|
Gold and silver |
46 |
46 |
||
|
|
Oil & Gas |
1 |
- |
||
|
|
|
|
|
||
|
|
Total segment employees |
49 |
49 |
||
|
|
Unallocated employees |
3 |
3 |
||
|
|
|
|
|
||
|
|
Total employees |
52 |
52 |
||
|
|
|
|
|
||
|
|
|
|
|
||
|
|
|
2013 £ |
2012 £ |
||
|
|
Balance Sheet |
|
|
||
|
Segment Assets |
|
|
|||
|
|
Uranium and copper |
2,559,684 |
5,393,126 |
||
|
|
Gold and silver |
2,695,995 |
2,382,501 |
||
|
|
Oil & Gas |
31,119 |
- |
||
|
|
|
|
|
||
|
|
Total segment assets |
5,286,798 |
7,775,627 |
||
|
|
Unallocated assets |
878,867 |
103,705 |
||
|
|
|
|
|
||
|
|
Total assets |
6,165,665 |
7,879,332 |
||
|
|
|
|
|
||
|
Segment Liabilities |
|
|
|||
|
|
Uranium and copper |
211,233 |
63,250 |
||
|
|
Gold and silver |
455,251 |
580,562 |
||
|
|
Oil & Gas |
36,519 |
- |
||
|
|
|
|
|
||
|
|
Total segment liabilities |
703,003 |
643,812 |
||
|
|
Unallocated liabilities |
984,609 |
919,777 |
||
|
|
Current and Deferred Tax |
32,005 |
40,460 |
||
|
|
|
|
|
||
|
|
Total liabilities |
1,719,617 |
1,604,049 |
||
|
|
|
|
|
||
|
Capital Additions |
|
|
|||
|
|
Uranium and copper |
30,696 |
600,244 |
||
|
|
Gold and silver |
110,255 |
106,964 |
||
|
|
|
|
|
||
|
|
|
140,951 |
707,208 |
||
|
|
|
|
|
||
|
Net Assets |
|
|
|||
|
|
Uranium and copper |
2,348,452 |
5,329,876 |
||
|
|
Gold and silver |
2,208,738 |
1,761,479 |
||
|
|
Oil & Gas |
(5,400) |
- |
||
|
|
|
|
|
||
|
|
Total segment net assets |
4,551,790 |
7,091,355 |
||
|
|
Unallocated net liabilities |
(105,742) |
(816,072) |
||
|
|
|
|
|
||
|
|
Total net assets |
4,446,048 |
6,275,283 |
||
|
|
|
|
|
||
6. IMPAIRMENT OF INTANGIBLE EXPORATION AND EVALUATION ASSETS
|
|
|
2013 £ |
2012 £ |
|
|
|
|
|
|
|
|
Intangible exploration and evaluation assets - uranium |
2,939,708 |
- |
||
|
|
|
|
|
|
At 31 December 2013, there were indicators of potential impairment of the Group's intangible uranium exploration and evaluation assets and an impairment test was performed. Based on the estimation of future cash flows expected to arise and using a suitable discount rate in order to calculate present value, an impairment was identified and recognised in the period (2012: £nil).
7. (LOSS)/PROFIT BEFORE TAXATION
The (loss)/profit for the year has been arrived at after charging/(crediting):
|
|
|
2013 £ |
2012 £ |
|
|
|
|
|
|
Cost of inventories recognised as expense |
3,165,984 |
2,485,666 |
|
|
Depreciation of property, plant and equipment |
138,716 |
384,029 |
|
|
Profit on disposal of property, plant and equipment |
(74,737) |
(1,200) |
|
|
Staff costs |
933,969 |
934,489 |
|
|
Share-based payments |
55,150 |
60,411 |
|
|
Operating leases - land and buildings |
67,776 |
73,551 |
|
|
Non-recoverable VAT |
28,364 |
- |
|
|
Net foreign exchange losses |
77,096 |
54,668 |
|
|
|
|
|
|
8. 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:
|
|
|
2013 £ |
2012 £ |
|
|
|
|
|
|
|||
|
Losses |
|
|
|||
|
|
Losses for the purpose of basic loss per Ordinary Share being net loss attributable to owners of the parent company |
(3,309,130) |
(542,619) |
||
|
|
|
|
|
||
|
|
Number |
Number |
|||
|
Number of shares |
|
|
|||
|
|
Weighted average number of shares for the purpose of basic loss per Ordinary Share |
575,157,905 |
442,923,658 |
||
|
|
|
|
|
||
|
|
|
|
|||
|
Loss per Ordinary Share |
|
|
|||
|
|
Basic and diluted |
(0.57p) |
(0.12p) |
||
|
|
|
|
|
||
Due to the losses incurred in 2013 and 2012, there is no dilutive effect from the existing share options or convertible loan notes.
This information is provided by RNS
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