Final Results & notice of AGM

RNS Number : 4174Q

Rose Petroleum PLC

06 June 2018

 

Prior to publication, the information contained within this announcement was deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 ("MAR"). With the publication of this announcement, this information is now considered to be in the public domain.

6 June 2018

Rose Petroleum plc

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

 Final results for the year ending 31 December 2017 and notice of Annual General Meeting

A year of substantial progress as the Company works towards drilling its first well in Paradox Basin, Utah, U.S.A., before the end of 2018

Rose Petroleum plc (AIM: ROSE), the AIM quoted natural resources business, announces its final results for the year ended 31 December 2017.

Business highlights

·      Sale of the Group's ore processing mill in the State of Nayarit, Mexico, to Magellan Gold Corporation ("Magellan"), as part of the strategy to increase the focus on the Paradox Basin.

·      The mill sale was completed on 1 December 2017 for a total consideration of US$1.5 million, of which US$1.0 million has been received in cash and US$0.5 million equivalent in Magellan shares.

·      In August 2017, after a three year process, the Group announced it had received approvals to shoot its 3D seismic survey in the Paradox Basin, a watershed moment for the Group.

·      On 5 October 2017 the 3D seismic survey shoot commenced and was completed on time and within budget.

·      The high-quality data obtained highlighted the significant scale and prospectivity of the Group's Paradox acreage.

Financial

·      On 22 September 2017, the Company announced that it had raised gross proceeds of US$4.0 million (£3.0 million) in a share placing in order to fund the seismic shoot.

·      Cash and cash equivalents at 31 December 2017 were US$2.2 million (2016: US$1.3 million).

·      Total investment in the Group's intangible exploration and evaluation assets at 31 December 2017 was US$12.1 million (2016: US$10.1 million) primarily reflecting investment in the Utah O&G assets.

Post period highlights

·      Interpretation of the data from the seismic shoot has identified approximately 60 drill targets on the Group's Paradox acreage.

·      In April 2018, the Group increased its land position in the Paradox Basin by acquiring a 75% working interest in an additional 3,320 gross acres for US$36 per acre, a total consideration of approximately US$120,000, satisfied from existing cash resources.

·      The Group has assembled a highly experienced subsurface and surface operations team with extensive experience and a successful track record in the Paradox Basin.

·      This team previously designed, managed and implemented a nine-well drilling programme in the Paradox Basin for Fidelity Exploration and Production Inc., directly to the south of the Group's acreage. Eight of these wells were commercial and production grew from circa 100 barrels of oil per day (BOPD) to over 3,500 BOPD from 2012 to 2014.

·      The operations team has now largely completed the subsurface assessment, well location selection and basic well design and engineering for the Group's first proposed horizontal well, the GVU 29-1.

·      In May 2018, the Group completed a £1 million equity fundraise. Proceeds from the fundraise will be used for ongoing activity in the Paradox Basin, working capital and business development.

Outlook for 2018

·      The Application for Permit to Drill ("APD") process for the GVU 29-1 is well underway and it is expected the APD will be granted in Q3 2018.

·      The Group is on track with its plans to drill its first Paradox well later this year.

·      It is currently expected that the total cost of the well (including completion, testing and tie-in costs) will be in the range of US$7-8 million, which is well below the previous budgeted forecast of up to US$10 million.

·      The next key step will be completion of the funding process for the first Paradox wells - the virtual data room is now established. The Board is very pleased by the interest shown in the project to date, following exhibiting at NAPE 2018 in Houston earlier in the year.

·      The Group is awaiting the updated Competent Person's Report ("CPR") which will provide an updated resource estimate for the Group's Paradox acreage within the 3D seismic shoot area. It is expected that the updated CPR will provide independent verification of the geological and economic strength of the Paradox project.

Matthew Idiens, Chief Executive Officer of Rose Petroleum, said:

"This has been a period of intense activity and sustained progress for the Group and we are now working towards drilling our first well in the Paradox Basin later this year.

"The Group is awaiting the updated Competent Person's Report and the resource estimate for the Paradox acreage, within the 3D seismic acquisition area, which is expected to provide independent verification of the geological and economic strength of the Paradox project.

"We have assembled a high quality and experienced operations team with a proven track record and activity is now focused on the well design, permitting and funding for the first Paradox wells.

"This is a busy and exciting time for the Group and the Board and management team are more convinced than ever that the Paradox acreage is a highly prospective asset which can deliver strong returns to Shareholders. We hope this will be a landmark year for the Company."

Annual report and notice of Annual General Meeting

The Company also announces that its Annual General Meeting of shareholders ("AGM") will be held at 11.00 am on 28 June 2018 at the offices of Allenby Capital Limited, 5 St. Helen's Place, London EC3A 6AB.  

A copy of the Company's annual report and accounts, which include the notice of AGM, will be available on its website, www.rosepetroleum.com, shortly and will be sent to shareholders later today.

Enquiries:

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

Media enquiries:

Allerton Communications Peter Curtain

Tel: [phone] [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 acres in the 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 clastics formation with the intention of commencing a drilling programme in H2 2018, once necessary permits and funding have been secured.

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.

Chairman's Statement

The period under review has been one of significant activity and sustained progress, and the Group remains on track to achieve its key strategic objective of spudding its first well on its acreage in the Paradox Basin, Utah, U.S.A. ("Paradox acreage" or "Paradox"). The Group is currently focusing its efforts and resources into achieving this before the end of 2018. The Group has a 75% working interest in approximately 80,000 acres in the Paradox acreage through its joint venture partnership with Rockies Standard Oil Company ("RSOC").

There is no doubt that the prevailing market conditions of the last few years provided the Board with an extremely challenging operating environment, but the decisive action taken during that period to consolidate the Group's key assets, while reducing liabilities and operational overheads, was critical. It has given the Group a clear strategic focus and a strong operational footing as market conditions have begun to improve. The Group is now moving forward with a clear strategy and timeline for growth.

The period has been one of continued restructuring and transformation for the Group. Subsequent to the disposal of the Group's mining operations in Mexico, which completed in December 2017, the strategy became increasingly focused on the Paradox. This restructuring activity was supplemented by the ongoing operational success in the Paradox including the 3D seismic acquisition and interpretation of the data, the commencement of the permitting, well design engineering, development plan and processes to obtain funding that will pave the way for the drilling of the first Paradox well. This activity has been carried out against a backdrop of continued cash conservation which remains a key priority for the Board.

The strategic decision to dispose of the Group's core mining assets and to focus resources on the Paradox acreage has, to date, proved a successful one. Funds from the disposal of the SDA ore processing mill in Mexico, together with the proceeds from the Company's fundraise completed in October 2017, were invested in the 3D seismic acquisition and, since the completion of the seismic acquisition in Q4 2017, the Group has been able to assemble a high-quality operations team with basin experience to deliver the Group's first Paradox well.

The Board was delighted by the quality of the data obtained from the 3D seismic acquisition which highlighted the significant scale and prospectivity of the Paradox acreage. To date, circa 60 drill targets have been identified on the Group's Paradox acreage, including additional acreage recently acquired by the Group.

The next key step for the Group will be the completion of the funding process for the first Paradox wells. The virtual data room ("VDR") is now established. The Board is very pleased by the interest shown in the project to date and was especially encouraged by interest shown whilst exhibiting at NAPE in Houston. The Group is also awaiting the updated Competent Person's Report ("CPR") which will provide an updated resource estimate for the Paradox acreage, including the recently acquired acreage. It is expected that the updated CPR will provide independent verification of the geological and economic strength of the Paradox project.

The next period promises to be a busy one for the Group. The Group acquired its initial Paradox acreage in March 2014 and it is very exciting to be close to spudding our first well, as we continue discussions towards securing the funding required to undertake the drilling programme. It is fair to say that the downturn in the natural resource sector and time-consuming permitting process for the 3D seismic acquisition delayed the timeline for drilling the first wells, but the Board and management team remain more convinced than ever that the Paradox acreage represents a highly prospective asset and one which can deliver strong returns to shareholders. Furthermore, the continued rally in oil prices significantly helps the economics of the project and should make the Paradox acreage even more appealing to funders.

I am very much looking forward to the period ahead, and I would like to take this opportunity to thank our shareholders, advisers and employees for their continuing support. The Board is looking forward to updating you on progress, and I very much hope the next period will be the one in which Rose makes the paradigm shift from explorer to producer and one in which our patient shareholders will begin to see a return on their investments.

PE Jeffcock

5 June 2018

 

REVIEW OF OPERATIONS

Oil & Gas Division

Paradox Basin, Utah, U.S.A.

The period under review has been one of significant progress as the Group continues to earn into a 75% working interest in a total of approximately 80,000 acres in the Paradox Basin. Following the recent completion of the successful seismic acquisition, activity on the ground continues apace, and the Group is on track to secure the permissions required to drill its first Paradox well later this year.

Background

The Group's Paradox acreage constitutes a project of considerable scale and prospectivity. According to the resource report prepared by Ryder Scott Company LP ("Ryder Scott") in 2014, there are potential resources of 1.1 billion barrels of oil ("BO") and 2.2 trillion cubic feet of gas ("TCFG") on the Group's Paradox acreage, this included all the existing acreage and all formations (15), but not including the new acreage acquired by the Group in April 2018. The Group has recently commissioned the preparation of a revised resource report to take account of both the new acreage acquisition and the information and data gathered from the seismic acquisition. The report will be specific to the acreage covered by the 3D seismic acquisition and also specific to the main target formation, being clastic 21 also known as the Cane Creek Cycle.

The Paradox Basin is a natural fracture driven basin, therefore drilling targets "fracture swarms" to enable the natural fracturing to provide the permeability and porosity for commercial flow rates so "hydraulic fracking" is not utilised.

The Paradox has been actively exploited by Fidelity Exploration and Production Inc. ("Fidelity"), mainly in the Cane Creek Cycle, south of the Group's main group Paradox lease blocks. Fidelity had been the most active operator in the Paradox Basin with average Q1 2015 production of 2,100 barrels of oil equivalent per day ("boepd"). In addition to Fidelity's success, multiple wells in the area of the Group's leases have produced oil and gas to surface from various formations, and it is a combination of these factors which led the Board to make the strategic decision to focus the Group's activities on the Paradox acreage.

Consistent with the other successful wells drilled within the basin, and as outlined in the Group's 2016 Annual Report, the Group adopted a strategy to shoot the seismic acquisition that would assist in identifying and steering drilling targets for the Group's first wells.

3D Seismic Acquisition

After a process that took almost three years, in August 2017, the Group announced that it had finally received all necessary approvals to shoot its 3D seismic survey. This marked a watershed moment for the Group as the permitting process had taken considerably longer than had originally been anticipated and was essential for moving the Paradox project forward.

During the latter stages of the permitting process, the Group was working on the optimisation for the proposed state of the art survey and, on 31 August 2017, the Group announced that the shoot would be focused on an area of 40 square miles, within the 61 square miles permitted area, but in an area that retained the same coverage over the Group's acreage, only cutting out extended areas of the shoot which were not covering the Group's acreage. The revised shoot was designed with high fold (greater than 35-fold with offsets up to 10,000 feet) wide-azimuth design which the Directors believed were better parameters than previous surveys in the area. The shoot was designed to tie in the State 16-42 (with modern logs) and the Federal 28-11 (Cane Creek producer) wells.

On 22 September 2017, the Company announced that it had raised gross proceeds of US$4.0 million (£3.0 million) in order to fund the seismic shoot and, on 5 October 2017, the shoot commenced under the guidance of the Group's turnkey consultants Dawson Geophysical.

The shoot itself was successful and was completed on time and within budget. The shoot comprised 6,886 total receiver points and 4,665 total source points. The accelerated timeline was possible due to the vibrator truck set up change, from two teams of four vibrator trucks, to three teams of three vibrator trucks, enabling an average of 311 source points shot per day. Once completed, the next phase of work was the interpretation of the data collected from the shoot.

On 29 January 2018, the Group announced that that key geological structures targeted by 3D seismic had been found to be present across the shoot area, and following the analysis of the data, multiple drilling targets were identified.

The structural interpretation, which is an ongoing process, had at that date identified 53 well locations in the Cane Creek reservoir zone alone, within the 20 square miles of the Gunnison Valley Unit ("GVU") lease holding covered by the 3D seismic data. The initial internal resource estimates are consistent with the report prepared by our independent resource analysts, Ryder Scott, in April 2014 for the Grand Main leasehold area (85 square miles), which includes the GVU acreage. This report suggests that for the 20 square mile area covered by the 3D, the gross resource potential is as follows:

·        Mean unrisked undiscovered Original Hydrocarbon in Place of 450 million barrels of oil equivalent ("mmboe"); and

·        A mean unrisked Prospective Recoverable Resource of 32.5 mmboe.

A further 65 square miles of the Group's Grand Main leasehold area, and 48 square miles of its Emery Main leasehold area contains additional prospectivity in the Cane Creek reservoir zone and the other Paradox Formation clastic intervals.

On 4 April 2018, the Group announced that it had increased its land position in the Paradox Basin with the acquisition of some highly prospective new acreage. The Group acquired a 75% working interest in an additional 3,320 gross acres (2,490 net acres) in the Paradox Basin (the "new acreage") for $36 per gross acre, resulting in a total consideration of approximately US$120,000, which was satisfied from the Group's existing cash resources.

The acquisition of the new acreage was achieved through careful planning between the Group and Rockies Standard Oil Company LLC ("RSOC"). Following detailed technical analysis and, given its geological potential and close proximity to the Joint Venture's existing acreage, RSOC formally nominated the acreage for auction. The Group and RSOC then successfully acquired the acreage at the subsequent Utah Bureau of Land Management ("BLM") auction.

Significantly, the new acreage falls within the area covered by the Group's 3D seismic survey, for which the Group already had the structural interpretation. Multiple highly attractive geological structures and potential well site locations had already been identified on the new acreage. On the basis of the previous resource reports prepared by Ryder Scott, the Board believes that there may be unrisked recoverable resources of 5.5 mmboe on the new acreage in the Cane Creek Cycle (clastic 21) alone. To elaborate, the Paradox Formation is made up of approximately 24 clastic zones, of which the Cane Creek Cycle (clastic 21) is the primary producing zone of the basin to date. Additional clastics, above and below the Cane Creek Cycle, are also thought to be prospective so there are potentially resources significantly in excess of the 5.5 mmboe within the acreage.

The prospectivity of the Group's new acreage is underpinned by the existence of the producing 28-11 well which is only 365 metres to the west of the new acreage. The 28-11 was a vertical well, drilled in 2006 without 3D seismic by Delta Petroleum and has produced 141,000 barrels of oil equivalent ("BOE") from Clastic 21. These factors give management a high degree of confidence in the potential of the Group's acreage and, as a result, it has been decided to proceed with the permitting of a second well location in the new acreage, the 22-1 well, which is planned to be a horizontal well.

Since year end, the Company has raised gross proceeds of US$1.3 million (£1.0 million) by way of an equity fundraise which, in part, will help to fund the Group's planned activities in the Paradox Basin.

Current Status

Following the completion of the seismic acquisition and the subsequent interpretation, current activity is now focused on the well design, permitting and funding for the first Paradox wells.

Key to the future success of the project, the Group has assembled a highly experienced subsurface and surface operational team with extensive experience and a successful track record in the Paradox Basin. The team designed, managed and implemented a nine-well drilling programme in the Paradox Basin for Fidelity directly to the south of the Group's acreage. Eight of these wells were commercial and production grew from circa 100 barrels of oil per day ("BOPD") to over 3,500 BOPD from 2012 to 2014.

Our operational team has now largely completed the subsurface assessment, well location selection and basic well design and engineering for the Group's first proposed horizontal well, the GVU 29-1. The Application for Permit to Drill ("APD") process for GVU 29-1 is well underway. The Notice of Staking, which is the first requirement for the APD, was lodged and accepted by the BLM in April 2018 and the Group had an onsite inspection of the proposed well location in May 2018. It is currently expected that the APD will be granted in Q3 2018, which will permit the Group to commence drilling operations soon thereafter.

Following the completion of the first phase of the well design work, the new operational team has also completed time/cost estimates for the initial well. It is currently expected that the total cost of the well (including completion, testing and tie-in costs) will be in the range of US$7-8 million, which is well below the previous budgeted forecast of up to US$10 million. It is expected that forecast will reduce further during the development phase as operations increase. Discussions with industry and financial partners to fund the drilling programme are underway and, as previously announced, the Board is committed to avoiding dilution to existing shareholders wherever possible.

Mining Division

Disposal of SDA Mill, Mexico

The key event in the mining division during the period under review was the successful disposal of the Group's ore processing mill in San Dieguito de Arriba, State of Nayarit, Mexico, together with its associated assets, licences and agreements (together, the "SDA Mill") to Magellan Gold Corporation ("Magellan") (OTCQB:MAGE).

The Group had operated the SDA Mill for over ten years and had previously carried out mill production for the Group's gold and silver mining operations at the Mina Charay mine in Mexico ("Mina Charay"). In December 2015, it was decided to cease operations at Mina Charay due to high transportation costs and depressed commodity prices. As a result, the SDA Mill was instead utilised for custom milling of third party ore whilst the Group aimed to identify joint-venture opportunities which would generate better returns than custom milling. The focus of these efforts was to identify advanced-stage projects located in the vicinity of the SDA Mill which met several criteria including minimum production levels. 

Having assessed the opportunities presented, the Board determined that the proposed disposal of the SDA Mill was the best course of action for the Group. The disposal dovetailed into the Group's decision to focus its resources on the Paradox Basin and proceeds from the sale of the SDA Mill were allocated towards the cost of the 3D seismic survey.

The transaction was completed on 1 December 2017, with a total consideration of US$1.5 million, US$1.0 million payable in cash (which has been received) and US$0.5 million equivalent in Magellan shares. The US$0.5 million was met by the issue of 14,200,834 restricted common stock (shares) in Magellan. The consideration shares represent approximately 15 per cent of Magellan's enlarged share capital. Under SEC regulations, the Magellan stock will not be freely tradeable for a period of twelve months post issue. In order to facilitate the disposal of these shares, the Group agreed to grant Magellan an option to acquire these shares for US$0.5 million within the six-month period following the completion of the disposal, or to acquire them for US$0.55 million in the period from six months following the completion of the disposal to the expiry of the option. This option expires one year and five business days after the completion date. If the option is not exercised during the option period, the shares will be freely tradeable with no restrictions.

Copper exploration, southwest U.S.A.

In April 2016, the Group announced that it had entered into an agreement with privately held Burdett Gold LLC, to conduct exploration drilling on the Ardmore copper project which consists of 18 unpatented mining claims located north of Tucson, Arizona. Burdett assumed control of the claims and is the operator of the project and has commenced exploration work. Burdett has recently carried out a two-hole drill programme on the project and the Group is awaiting the assay results.

Uranium exploration, U.S.A.

The majority of the Group's uranium assets were held in a joint venture with Anfield Resources Inc. (TSXV: ARY) covering property holdings in the breccia pipe district of northern Arizona. The joint venture has now expired and the properties held have now reverted to their original owners. The Group also owns 100% of the North Wash project in Utah.

The Group's land holdings in Arizona consist of a number of drill-proven breccia pipes, some containing mineralization, and breccia pipe targets. The North Wash project in Utah contains a resource of uranium and vanadium. These holdings are being held on care and maintenance while management reviews its options to develop the projects further. 

 

FINANCIAL REVIEW

Income Statement

Total revenue for the year ended 31 December 2017, was US$0.3 million (2016: US$0.9 million), arising from the Group's milling operations in Mexico, and is reported within discontinued operations. (see note 14). The decrease in revenues was the result of the suspension of milling activities pending the disposal of the SDA Mill to Magellan.

The Group reports a net loss after tax from continuing operations of US$3.5 million or 6.23 cents per share for the year ended 31 December 2017 (2016: net profit after tax US$0.3 million or 1.03 cents per share). Due to the ongoing cash conservation programme, administrative costs for the year of US$2.1 million were consistent with those in the prior year (2016: US$2.1 million).

As the Group directed its focus to the Paradox project, there has been a significant reduction in operating and development expenditure and project development expenditure during the year from US$1.0 million in 2016 to US$0.2 million in the year ended 31 December 2017.

Foreign exchange losses on the restatement of the Company's loans to its subsidiaries were US$1.4 million (2016: gain of US$2.5 million). This has had a significant impact on the results for the year and can be attributed to the strength of sterling against the US dollar at the year-end.

Balance Sheet

Total investment in the Group's intangible exploration and evaluation assets at 31 December 2017 was US$12.1 million (2016: US$10.1 million) reflecting investment in the Utah O&G assets.

The carrying value of property, plant and equipment at 31 December 2017 was US$0.03 (2016: US$0.3 million) reflecting the disposal of the SDA ore processing mill.

Cash and cash equivalents at 31 December 2017 were US$2.2 million (2016: US$1.3 million). During the period, the Company raised gross proceeds of US$4.0 million (£3.0 million) through the placing of the Company's Ordinary Shares.

 

Going Concern

The Directors continue to adopt the going concern basis in preparing the consolidated financial statements. 

This assessment has been carried out in the light of the guidance issued to the Directors by the Financial Reporting Council.

FUTURE DEVELOPMENTS

Your Board, management and dedicated teams continue to operate the Group's existing O&G assets and will continue to look to enhance the value from these, particularly through the drilling of the first Paradox wells. In addition, the Group continues to investigate and evaluate new opportunities to increase shareholder value.

We would like to thank all shareholders for their continued support.

CONSOLIDATED INCOME STATEMENT
For the year ended 31 December 2017

	Notes	2017 US$'000	2016 US$'000
Continuing operations
Operating and development expenses		-	(405)
Administrative expenses		(2,065)	(2,058)
Cuba development expenses		(154)	(580)
Impairment of intangible exploration and evaluation assets	8	82	(360)
Foreign exchange (losses)/gains		(1,378)	2,578
Operating loss		(3,515)	(825)
Finance income		1	9
Loss on ordinary activities before taxation	10	(3,514)	(816)
Taxation (charge)/credit		(1)	1,127
(Loss)/profit for the year from continuing operations		(3,515)	311
Discontinued operations
Profit/(loss) from discontinued operations, net of tax	14	384	(461)
Loss for the year attributable to owners of the parent company		(3,131)	(150)
(Loss)/profit per Ordinary Share
From continuing operations
Basic and diluted, cents per share	15	(6.23)	1.03
From continuing and discontinued operations
Basic and diluted, cents per share	15	(5.54)	(0.50)

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2017

		2017 US$'000	2016 US$'000
Loss for the year attributable to owners of the parent company		(3,131)	(150)
Other comprehensive income
Items that may be subsequently reclassified to profit or loss, net of tax
Foreign currency translation differences on foreign operations		(3,671)	6,498
Total comprehensive income for the year attributable to owners of the parent company		(6,802)	6,348

CONSOLIDATED BALANCE SHEET
As at 31 December 2017                                                 

	Notes	2017 US$'000	2016 US$'000
Non-current assets
Investments		500	-
Intangible assets	16	12,098	10,117
Property, plant and equipment		27	337
		12,625	10,454
Current assets
Trade and other receivables		583	1,236
Cash and cash equivalents		2,185	1,273
		2,768	2,509
Total assets		15,393	12,963
Current liabilities
Trade and other payables		(584)	(524)
Provisions		-	(110)
Taxation payable		-	(1)
		(584)	(635)
Total liabilities		(584)	(635)
Net assets		14,809	12,328
Equity
Share capital		40,463	40,362
Share premium account		35,657	32,183
Share-based payment reserve		3,687	3,028
Cumulative translation reserve		(6,864)	(8,376)
Retained deficit		(58,134)	(54,869)
Equity attributable to owners of the parent company		14,809	12,328

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2017

	Share capital	Share premium account	Share-based payment reserve	Cumulative translation reserves	Retained deficit	Total
	US$'000	US$'000	US$'000	US$'000	US$'000	US$'000
As at 1 January 2016	38,765	31,471	2,899	(4,384)	(54,887)	13,864
Transactions with owners in their capacity as owners:
Issue of equity shares	1,597	783	-	-	-	2,380
Expenses of issue of equity shares	-	(71)	-	-	-	(71)
Share-based payments	-	-	326	-	-	326
Transfer to retained deficit in respect of forfeit options	-	-	(168)	-	168	-
Effect of foreign exchange rates	-	-	(29)	-	-	(29)
Total transactions with owners in their capacity as owner	1,597	712	129	-	168	2,606
Loss for the year	-	-	-	-	(150)	(150)
Other comprehensive income:
Currency translation differences	-	-	-	6,498	-	6,498
Total other comprehensive income for the year	-	-	-	6,498	-	6,498
Total comprehensive income for the year	-	-	-	6,498	(150)	6,348
Currency translation differences on equity at historical rates	-	-	-	(10,490)	-	(10,490)
As at 1 January 2017	40,362	32,183	3,028	(8,376)	(54,869)	12,328
Transactions with owners in their capacity as owners:
Issue of equity shares	101	3,918	-	-	-	4,019
Expenses of issue of equity shares	-	(250)	-	-	-	(250)
Share-based payments	-	(194)	508	-	-	314
Transfer to retained deficit in respect of forfeit options	-	-	134	-	(134)	-
Effect of foreign exchange rates	-	-	17	-	-	17
Total transactions with owners in their capacity as owner	101	3,474	659	-	(134)	4,100
Loss for the year	-	-	-	-	(3,131)	(3,131)
Other comprehensive income:
Currency translation differences	-	-	-	(3,671)	-	(3,671)
Total other comprehensive income for the year	-	-	-	(3,671)	-	(3,671)
Total comprehensive income for the year	-	-	-	(3,671)	(3,131)	(6,802)
Currency translation differences on equity at historical rates	-	-	-	5,183	-	5,183
As at 31 December 2017	40,463	35,657	3,687	(6,864)	(58,134)	14,809

CONSOLIDATED CASH FLOW STATEMENT
For the year ended 31 December 2017

		2017 US$'000	2016 US$'000
Operating activities
Loss before taxation from continuing operations		(3,514)	(816)
Profit/(loss) before taxation from discontinued operations		404	(454)
		(3,110)	(1,270)
Finance income		(42)	(9)
Adjustments for:
Depreciation of property, plant and equipment		54	201
Loss on disposal of property, plant and equipment		-	17
Gain on disposal of discontinued operations		(1,339)	-
Impairment of Intangible exploration and evaluation assets		(82)	360
Provision for non-recoverable taxes		197	-
Share-based payments		314	326
Unrealised foreign exchange loss/(gain)		1,388	(2,626)
Operating outflow before movements in working capital		(2,620)	(3,001)
Decrease in inventories		-	19
Decrease in trade and other receivables		419	100
Increase/(decrease) in trade and other payables		93	(163)
Cash used in operations		(2,108)	(3,045)
Income tax recovered		143	-
Net cash used in operating activities		(1,965)	(3,045)
Investing activities
Interest received		42	4
Purchase of intangible exploration and evaluation assets		(1,990)	(272)
Proceeds on disposal of property, plant and equipment		-	9
Proceeds on disposal of intangible assets		-	5
Net cash inflow on disposal of discontinued operations		950	-
Proceeds from disposal of assets held for sale		-	50
Net cash used in investing activities		(998)	(204)
Financing activities
Proceeds from issue of shares		4,019	2,380
Expenses of issue of shares		(250)	(71)
Net cash from financing activities		3,769	2,309
Net increase/(decrease) in cash and cash equivalents		806	(940)
Cash and cash equivalents at beginning of year		1,273	2,399
Effect of foreign exchange rate changes		106	(186)
Cash and cash equivalents at end of year		2,185	1,273

Notes 

The figures for the years ended 31 December 2017 and 2016 do not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006. The figures for the year ended 31 December 2017 have been extracted from the statutory accounts for that year on which the auditor has issued an unqualified audit report which have yet to be delivered to the Registrar of Companies. The figures for the year ended 31 December 2016 have been extracted from the statutory accounts for that year which have been delivered to the Registrar of Companies and on which the auditor has issued an unqualified audit report. No statement has been made by the auditor under Section 498(2) or (3) of the Companies Act 2006 in respect of either of these sets of accounts.

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards adopted by the International Accounting Standards Board ('IASB') and interpretations issued by the International Financial Reporting Interpretations Committee of the IASB (together 'IFRS') as endorsed by the European Union. The information in this announcement has been extracted from the audited financial statements for the year ended 31 December 2017 and as such, does not contain all the information required to be disclosed in the financial statements prepared in accordance with the International Financial Reporting Standards ('IFRS').

These financial statements are presented in US dollars as that is the currency of the primary economic environment in which the Group operates.

The following selected notes are extracted from the full Annual Report:

5.                SEGMENTAL INFORMATION

Prior to the sale of the Groups milling assets ("discontinued operations"), for management purposes the Group was organised into three operating divisions based on its principal activities of gold and silver mining, research and evaluation of potential uranium and copper properties and the exploration and development of O&G resources. Subsequent to the discontinuance of operations in Mexico the Group now has two main operating segments, research and evaluation of potential uranium and copper properties and the exploration and development of O&G resources, which are all based in U.S.A. These divisions are the basis on which the Group reports its segment information.

Segment information about these divisions is presented below.

			2017 US$'000	2016 US$'000
Income statement
Revenue
		Discontinued operations	304	898
Segmental results
		Uranium and copper	(139)	(483)
		O&G	(1,677)	1,544
		Total segment results	(1,816)	1,061
		Unallocated results	(1,698)	(1,877)
		Current and deferred tax	(1)	1,127
		Loss after taxation from continuing operations	(3,515)	311
		Discontinued operations, net of tax	384	(461)
		Loss after taxation	(3,131)	(150)

The unallocated results of US$1.7 million (2016: US$1.9 million) include costs associated with the Cuba project, Directors remuneration and other general and administrative costs incurred by the Company only.               

					2017 US$'000	2016 US$'000
Depreciation
		Uranium and copper			-	2
		O&G			27	35
		Discontinued operations			27	164
					54	201
					2017 US$'000	2016 US$'000
Impairment
				Uranium and copper	43	344
				O&G	(125)	16
					(82)	360
					2017 US$'000	2016 US$'000
	Balance Sheet
Segment assets
			Uranium and copper		23	60
			O&G		12,205	10,237
			Total segment assets		12,228	10,297
			Unallocated assets including cash and cash equivalents		2,738	1,256
			Continuing operations		14,966	11,553
			Discontinued operations		427	1,410
			Total assets		15,393	12,963
Segment liabilities
			Uranium and copper		50	5
			O&G		85	105
			Total segment liabilities		135	110
			Unallocated liabilities		297	332
			Current and deferred tax		-	1
			Continuing operations		432	443
			Discontinued operations		152	192
			Total liabilities		584	635
Segment net assets
			Uranium and copper		(27)	55
			O&G		12,120	10,132
			Total segment net assets		12,093	10,187
			Unallocated net assets including cash and cash equivalents		2,441	924
			Discontinued operations		275	1,217
			Total net assets		14,809	12,328

 

8.                IMPAIRMENT OF INTANGIBLE EXPORATION AND EVALUATION ASSETS

		Continuing	Discontinued	Continuing	Discontinued
		2017 US$'000	2017 US$'000	2016 US$'000	2016 US$'000
Uranium and copper assets		43	-	344	-
O&G assets		(125)	-	16	-
		(82)	-	360	-

At 31 December 2017, there were indicators of impairment of both the Group's intangible uranium assets held in the U.S.A. and its intangible copper assets held in Mexico. The Directors consider that there is reasonable uncertainty that the Group will recover the carrying value of these assets and as a result an impairment charge of US$0.04 million (2016: US$0.3 million) has been recognised in the year.

At 31 December 2015, the Group had relinquished, and ceased to recognise its interest in two hydrocarbon licences in south-western Germany. The original recognition of these assets included an accrual for outstanding licence duties due to the German licencing authorities. During the year ended 31 December 2017, a reduction in the potential liability was agreed with the authorities and as a result, the previous impairment relating to the relinquished assets in respect of this cost has been reversed and has resulted in a credit in impairment of US$0.1 million. The Group has continued to recognise the remaining potential liability although it continues to negotiate further reductions with the German licencing authorities.

The remaining intangible exploration and evaluation assets have not reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves. These assets are not amortised until technical feasibility and commercial viability is established.

 

10.             LOSS BEFORE TAXATION

The loss before taxation for the year has been arrived at after charging/(crediting):

		Continuing	Discontinued	Continuing	Discontinued
		2017 US$'000	2017 US$'000	2016 US$'000	2016 US$'000
Other income		-	(50)	-	-
Depreciation of property, plant and equipment		27	27	37	164
Loss/(gain)on disposal of property, plant and equipment		-	-	26	(9)
Gain on disposal of discontinued operations		-	(1,339)	-	-
Staff costs excluding share-based payments		792	648	793	616
Share-based payments		314	-	326	-
Operating leases - land and buildings		90	-	166	-
Provision for VAT not recovered		-	197	-	-
Net foreign exchange losses/(gains)		1,378	74	(2,578)	82

14.             DISCONTINUED OPERATIONS

On 3 March 2017, the Group entered into a Memorandum of Understanding ("MOU") with Magellan Gold Corporation ("Magellan") for the potential disposal of the Group's ore processing mill in Mexico, together with its associated assets, licences and agreements. Under the terms of the agreement Magellan was granted a 90-day option period, for a non-refundable deposit of US$50,000 which has been presented as other income, within discontinued operations.

On 9 September 2017, the Group signed a Stock Purchase Agreement ("SPA") with Magellan and the transaction completed on 1 December 2017. The consideration for the transaction was US$1.5 million, US$1.0 million in cash and US$0.5 million in restricted common stock in Magellan.

The cash consideration was subject to the retention of US$50,000 by Magellan, which fell due for payment by 10 March 2018 and which was actually settled on 13 April 2018.

Although the SPA referred to the sale of stock, the substance of the transaction was the disposal of property, plant and equipment in Minerales VANE S.A. de C.V. and as a result the transaction has been accounted for as a disposal of property, plant and equipment. At the same time, the Group also agreed the sale of its wholly-owned subsidiary, Minerales VANE Operaciones S.A de C.V. ("MVO") for US$2,500, which was paid on 13 April 2018.

Under the terms of the agreement the Group is liable for payment of the net liabilities of MVO and other payables includes the sum of US$51,547 in respect of these liabilities. The Mexico operations have been treated as discontinued operations in the year ended 31 December 2017 and is shown as a single amount on the face of the consolidated income statement. The income statement for the prior period has been restated to conform to this presentation.

LOSS FROM DISCONTINUED OPERATIONS, NET OF TAX

The results of the discontinued operations, which have been included in the consolidated income statement were as follows:

				2017 US$'000			2016 US$'000
Revenue			304		898
Cost of sales			(259)		(820)
Margin			45		78
Other income			50		-
Operating and development costs			(373)		(204)
Expenses			(698)		(337)
			(976)		(463)
Gain on disposal of property, plant and equipment			-		9
Finance income			41		-
Loss before taxation			(935)		(454)
Taxation charge			(20)		(7)
Loss attributable to discontinued operations			(955)		(461)
Gain on disposal of discontinued operations			1,339		-
Gain/(loss) from discontinued operations, net of tax			384		(461)
Profit/(loss) per Ordinary Share Basic and diluted, cents per share			0.68			(1.53)

GAIN ON DISPOSAL OF DISCONTINUED OPERATIONS

					US$'000
Property, plant and equipment				(283)
Decommissioning provision				120
				(163)
Consideration on disposal of discontinued operations				1,502
Gain on disposal of discontinued operations				1,339
Consideration on disposal of discontinued operations
Consideration on disposal of property, plant and equipment				1,500
Consideration on disposal of MVO				2
Total consideration on disposal of discontinued operations				1,502
Consideration settled in restricted common stock				(500)
Deferred consideration				(52)
Net cash inflow				950

15.             (LOSS)/PROFIT PER ORDINARY SHARE

Basic (loss)/profit per Ordinary Share is calculated by dividing the net (loss)/profit 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)/profit per Ordinary Share is based on the following data:

			Continuing operations	Continuing and discontinuing operations	Continuing operations	Continuing and discontinued operations
			2017 US$'000	2017 US$'000	2016 US$'000	2016 US$'000
(Losses)/profits
		(Losses)/profits for the purpose of basic (loss)/profit per Ordinary Share being net (loss)/profit attributable to owners of the parent company	(3,515)	(3,131)	311	(150)
			Number '000	Number '000	Number '000	Number '000
Number of shares
		Weighted average number of shares for the purpose of basic (loss)/profit per Ordinary Share	56,467	56,467	30,088	30,088
(Loss)/profit per Ordinary Share
		Basic and diluted, cents per share	(6.23)	(5.54)	1.03	(0.50)

Due to the losses incurred in the years reported, there is no dilutive effect from the existing share options, share based compensation plan or warrants.

The information shown above has been restated to reflect the share consolidation which took place on 18 September 2017.

16.             INTANGIBLE ASSETS

				Exploration and evaluation assets US$'000
Cost
		At 1 January 2016		18,511
		Additions		276
		Disposals		(607)
		Relinquishment of licences		(2,303)
		Exchange differences		(54)
		At 1 January 2017		15,823
		Additions		2,023
		Exchange differences		17
		At 31 December 2017		17,863
Impairment
		At 1 January 2016		8,290
		Impairment charge		360
		Disposals		(602)
		Relinquishment of licences		(2,303)
		Exchange differences		(39)
		At 1 January 2017		5,706
		Impairment charge		43
		Exchange differences		16
		At 31 December 2017		5,765
Carrying amount
		At 31 December 2017		12,098
		At 31 December 2016		10,117

ROCKIES STANDARD EARN-IN AGREEMENT

In March 2014, the Group signed an agreement under which its subsidiary, Rose Petroleum (Utah) LLC ("Rose Utah"), acquired the right to commence earning into a 75 per cent working interest of certain oil, gas and hydrocarbon leases in Grand and Emery Counties, Utah, from Rockies Standard Oil Company LLC ("RSOC"), which retains the remaining 25 per cent working interest.

Farm-in costs incurred by the Group are accounted for as required by the relevant accounting standards including the capitalisation of intangible exploration and evaluation assets in accordance with IFRS 6.

In April 2016, the Group entered into a revised agreement with RSOC to cease earning into the Mancos acreage and dispose of the Cisco Dome field, wells, pipelines, gas tap, gas plant and all the associated equipment and liabilities. As part of the revised agreement the Group agreed to cover the cost of the existing plug and abandonment liability of the four wells already scheduled with the authorities for the sum of US$0.3 million, and this obligation was settled during the year ended 31 December 2016. The Group also agreed to leave the existing operator bonds in place with the State of Utah and Bureau of Land Management, which are now refundable to RSOC rather than the Group. The Group did not recognise any disposal of its intangible exploration and evaluation assets, other than the bonds, during the year ended 31 December 2016, as it considers its total expenditure on the project as one cost pool whose carrying value is supported by the remaining acreage in the Paradox.

RSOC agreed to reduce the Group's carry obligation to earn the 75 per cent working interest in the Paradox acreage by US$2.0 million to US$5.5 million. Under the terms of the agreement, the obligation is not contractually committed and therefore no liability or contingent liability has been recognised in these financial statements.

The Group's total expenditure in respect of its U.S.A. O&G assets, included within intangible exploration and evaluation assets, as at 31 December 2017 is US$12.1 million (2016: US$10.1 million).

TANGO PROJECT

On 25 August 2014, Minerales VANE S.A. de C.V., a wholly owned subsidiary of the Group, entered into an agreement with Minera Camargo S.A de C.V. ("Camargo"), in respect of both gold and silver and base metal exploration. Under the terms of the agreement MV has the right to operate gold and silver mining activities at concessions owned by Camargo with gross margin earned to be allocated on the basis of 50 per cent to MV and 50 per cent to Camargo. In addition, MV has the option to earn a 75 per cent ownership of the base metals (porphyries) by investing US$5.0 million in work expenditures over a period of 5 years. Under the terms of the agreement, the option to earn-in is not contractually committed and therefore no liability or contingent liability has been recognised in these financial statements.

The Directors consider that there is reasonable uncertainty that the Group will recover the carrying value of these assets and as a result they were impaired in full at 31 December 2016. No further expenditure has been incurred during the year ended 31 December 2017.

 

END

 

 

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