Rose Petroleum PLC Final Results (7364D)

TIDMROSE

RNS Number : 7364D

Rose Petroleum PLC

28 June 2019

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.

28 June 2019

Rose Petroleum plc

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

Final Results and notice of AGM

Rose Petroleum plc (AIM: ROSE), the AIM quoted natural resources business, announces its final audited results for the year ended 31 December 2018.

Annual report and notice of Annual General Meeting

The Company also announces that its Annual General Meeting of shareholders ("AGM") will be held at 12.00 noon on 30 July 2019 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.

Contacts:

 
                                                               Tel: [phone] 
 Rose Petroleum plc                                                           4595 
  Matthew Idiens (CEO)                                         Tel: [phone] 
  Chris Eadie (CFO)                                                           4599 
 Allenby Capital Limited - AIM Nominated                       Tel: [phone] 
  Adviser                                                                     5656 
  Jeremy Porter / James Reeve / Liz Kirchner 
 Cantor Fitzgerald Europe - Financial                          Tel: [phone] 
  Adviser and Joint Broker                                                    7686 
  David Porter 
 Novum Securities Limited - Joint Broker                       Tel: [phone] 
  Colin Rowbury                                                               9427 
 Turner Pope Investments - Joint Broker                        Tel: [phone] 
  Andy Thacker                                                                4120 
 Media enquiries:                                             Tel: [phone] 
  Allerton Communications                                                     1730 
  Peter Curtain                                  [e-mail] 
 

Notes to editors

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

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

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

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

Rose Petroleum has been quoted on AIM since June 2004.

Chairman's Statement

INTRODUCTION

This is my first Chairman's statement since being appointed as Executive Chairman in May 2019.

While this Annual Report technically covers the twelve months to 31 December 2018, there have been important developments in the period since. As such, I would like to take this opportunity to detail management and Board changes, as well as set out the restructured Board's vision for the future of the Group. I will also outline my opinion of how the Group is currently positioned, as I believe Rose has strong prospects for growth, both from its existing portfolio and from the potential of carefully targeted acquisitions.

BOARD AND MANAGEMENT CHANGES

It is my key initial challenge to put together a team best positioned to deliver long awaited value to our patient Shareholders. As part of this effort, I am delighted to announce the appointment of Rick Grant as a non-executive Board member. In addition to being a co-founder of Origin Creek Energy ("OCE"), Rick has a 40-year track record of success in the oil and gas industry. Prior to OCE, Rick was CEO of Suez North America LNG and then served as CEO of Suez Global LNG ("Suez LNG"). During his tenure, Suez LNG grew from an initial US$680 million acquisition of Cabot LNG (where Rick previously served as President), into the world's third largest liquefied natural gas ("LNG") business, one active across the entire global natural gas chain from upstream production through to distribution to end-users. Before his time at Cabot, Rick was President of Mountaineer Gas, the largest natural gas distribution company in West Virginia (which also held a sizable upstream portfolio). During his career, Rick has had significant success managing multi-billion dollar organisations and developments, and has been involved in a number of highly profitable corporate exits. I know he will bring a wealth of sector experience, knowledge and relationships to the Rose Board.

The Board continues to evaluate roles and needs at the executive and Board levels. Related to this effort, Matthew Idiens has informed the Company of his intention to step down as a Board member and CEO after assisting through a transition period to an updated management team. We expect to make additional announcements about changes to the executive team during the next quarter.

EXISTING OPERATIONS

The headway achieved by the Group during 2018 was made against the backdrop of challenging market conditions that saw volatility in oil prices, particularly towards the end of the year. In spite of this, Rose made progress with continued preparations for the start of drilling at its primary asset in the Paradox Basin, Utah, U.S.A. ("Paradox acreage" or "Paradox"). The Group is earning into a 75% working interest in approximately 80,000 acres in the Paradox acreage through its joint venture partnership with Rockies Standard Oil Company ("RSOC").

Utilising the results of the 3D seismic shoot completed in 2017, a Competent Person's Report ("CPR") completed in June 2018 by Gaffney Cline & Associates ("GCA") confirmed the scale and prospectivity of the Paradox project. The Group is now operationally in a position to deliver value with the successful drilling of an initial well, and such drilling would complete the earn-in obligation at the Paradox.

Discussions with potential farm-in, financial and strategic partners in regard to funding drilling of the first Paradox well continue, and based on the scale and prospectivity of the Paradox asset, I am hopeful that this key funding objective can be met prior to the end of this calendar year.

FUTURE OPERATIONS

By way of background, it may be helpful to remind readers that I also serve as Chief Executive of OCE, an investment firm focused on upstream oil and gas opportunities in the U.S.A. OCE subscribed US$ 0.4 million (GBP0.3 million) in the Company's shares in May 2019 and has a 14.84% shareholding in the Company. Our newest Board member, Rick Grant, also serves as Chairman of OCE.

OCE's principals have significant experience generating value from the highly fragmented small-cap end of the U.S.A. exploration and production sector, and we believe it is a segment of the market where outsize investment returns can be achieved. To access these returns, however, we believe it is critical to align with strong operational management teams - groups with a high degree of focus and experience within specific geographic basins.

We also believe in the value of constructing a balanced portfolio, one with a mix of:

   --      Current production acquired at compelling valuations; 

-- Access to near-term, lower risk, yet highly economic development opportunities located in core acreage positions in established basins. We particularly like infill, horizontal development drilling opportunities in basins long established through vertical production; and

-- Longer term high upside exploration projects designed to add significant scale, such as the current opportunity in the Paradox.

The Group has already laid a strong foundation for developing scale from the Paradox. Apart from our plans to develop that asset, we expect to see the Group focus on near-term opportunities to acquire accretive production and development projects, particularly in established basins nearby. Longer term, we will seek to execute transactions and developments that build a balanced portfolio of production, development and exploration, focused solely on basins where our growing operations team has the deepest experience, with a particular emphasis on the Rocky Mountains region.

VISION AND ALIGNMENT

The decision to invest in Rose was made after significant evaluation. OCE takes a long-term view on its investments and has had success with its portfolio to date. Aligning OCE with an AIM quoted partner such as Rose was a logical step for the business. OCE and our operating partners have considerable experience with upstream operations, exploration, drilling, production and corporate turnarounds. We have longstanding relationships with a large network of industry partners and investors in the U.S.A. exploration and production sector, relationships which we will utilise for the benefit of all Shareholders. A point worth reinforcing is that as a 14.8% Shareholder, OCE is highly aligned with the Group's other Shareholders as we seek to build value from our collective investments in Rose.

As I mentioned earlier, a key part of my role is to continue to review the resourcing of the Group to ensure we have the right blend of team to help deliver the strategy outlined above. Cash conservation will remain a priority.

CONCLUSION

In conclusion, I am excited to have joined the Group at this pivotal stage in its development and look forward to providing further updates as we deliver on key milestones in the transformation of the Group. Most importantly, I want to thank our Shareholders, employees and advisers for their continued support - we welcome and take seriously the opportunity to grow the value of your investment alongside ours.

JC Harrington

27 June 2019

Strategic report

The Directors present their strategic report on the Group for the year ended 31 December 2018.

PRINCIPAL OBJECTIVES AND STRATEGIES

Rose Petroleum plc is an Oil & Gas ("O&G") exploration company with some residual mining assets. The key strategic objective is to deliver Shareholder returns through the enhancement of these assets.

This key objective will be achieved by various strategies:

-- Continuing development of a Board consisting of highly experienced professionals covering O&G, mineral exploration, financing and financial control of public companies;

-- Employing strong and experienced management teams to maximise returns from the Group's underlying assets;

-- The potential addition of further interests through acquisition, farm-in agreements or joint arrangements to deliver near-term value to stakeholders;

-- Consideration of the capital and financing required to achieve the Group's objectives and market perception; and

   --    Tight financial control and cash conservation. 

REVIEW OF OPERATIONS

Oil & Gas Division

The period under review was one of sustained activity as the Group worked towards delivering on its key strategic objective of spudding its first well on its Paradox acreage.

Following on from the successful 3D seismic acquisition in late 2017, the key operational milestones achieved during the period, and since, have been:

-- the assembling of a high quality operations team with extensive Paradox Basin experience to deliver the Paradox project;

   --    the completion of the interpretation of the 3D data; 

-- completion of an updated CPR on the resources within Clastic 21 in the area covered by the 3D acquisition;

-- U.S. Bureau of Land Management ("BLM") approval of Application for Permit to Drill ("APD") for the GV22-1 which will be the Group's first Paradox well;

   --    well design engineering and detailed costings of GV22-1 completed; 

-- the acquisition of further highly prospective new acreage that falls within the 3D shoot area;

-- the engagement with financial and industry partners with a view to obtaining funding for the drilling of the first Paradox well and overall development of the project; and

-- Schlumberger were engaged to provide a third party verification on the fracture characterisation on the Paradox acreage.

The work carried out during the period and since, and particularly the interpretation and resource update work, has continued to highlight the substantial scale, value and geological potential of the Paradox project.

Following the completion of the 3D seismic acquisition and interpretation, and to quantify and highlight the potential of the Paradox, GCA were engaged to prepare a CPR on the acreage of the 3D seismic acquisition held by the Group (the "3D area"), being approximately 17,250 acres of the total acreage held by the Group in Utah. This CPR focused solely on a single reservoir, the Cane Creek reservoir (the "CCR" or "Clastic 21"), of the multiple prospective reservoirs within the Paradox Formation. The CPR upgraded the resource classification from Prospective Resources to Contingent Resources within the 3D seismic acquisition area, and reported, net to the Group, a 2C Contingent Resource of 9.25 million barrels of oil ("MBO") and 18.50 billion standard cubic feet ("Bscf") of gas and an unrisked pre-tax NPV10 of US$122 million. For a full summary of the CPR, please refer to the Group's announcement on 22 June 2018.

The CPR clearly demonstrates the significant potential upside of the Paradox acreage. 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. Up to five additional clastics, above the Cane Creek Cycle, are also thought to be prospective. The CPR covered only a portion of the Group's total acreage position which is covered by the 3D acquisition, providing the opportunity to significantly increase resource numbers on the Paradox project in the future, with additional acquisition of further seismic coverage.

The Board believes that the CPR ratifies the proposed appraisal plans for the Paradox acreage, which will be the first combination of horizontal drilling steered by high quality 3D seismic data in the Paradox acreage. A similar approach has proved very successful in the development of the Cane Creek Field analogue directly south of the Group's acreage. Further, we continue to evaluate the remaining Clastic 21 potential outside the 3D area and shallower prospective zones both within the 3D area and outside it, which represent further upside opportunities within the Group's acreage footprint.

In a further show of its confidence in the Paradox, the Group announced in April 2018 that it had increased its land position in the Paradox Basin with the acquisition of some highly prospective new acreage. The Joint Venture acquired an additional 3,320 gross acres (2,490 net acres) (the "New Acreage") for US$36 per gross acre, resulting in a total consideration of approximately US$120,000.

The acquisition of the New Acreage, which is continuous with the joint venture's existing acreage and is in close proximity to the producing 28-11 well, was achieved following detailed technical analysis of its geological potential. The New Acreage is covered by the Group's 3D seismic survey, which was acquired in late 2017, which shows multiple highly attractive geological structures and potential well site locations.

In addition to the 28-11 well, three other vertical wells have been drilled within the 3D seismic areal extent and all show the presence of moveable oil within the reservoir matrix. These factors give the Board a high degree of confidence in respect to the Group's acreage and, as a result, it was decided to proceed to apply for an APD permit for an additional well location in the New Acreage, the GV22-1 well. The APD for the GV22-1 was approved by the BLM in the fourth quarter of 2018 and was announced on 1 November 2018.

The GV22-1 will be a horizontal well which the Group's management consider has a potential Estimated Ultimate Recovery ("EUR") of 894,000 barrels of oil equivalent ("BOE"), consistent with the GCA's CPR. As already mentioned, the potential of the GV22-1 well is supported by its close analogy to highly productive structures (>1mmboe EUR) within the nearby Cane Creek Field (12 miles south) and locally by its close proximity to the producing 28-11. This well produces from the porous and permeable fracture network within Clastic 21 and can be tied to the GV22-1 location within the 3D seismic data set. The 28-11 is a vertical well that was drilled by Delta Petroleum in 2006 without the benefit of 3D seismic. It has produced 141,000 BOE, and represents a key piece of evidence for the presence of hydrocarbons and of a greater fracture network across the area covered by the 3D seismic. These factors give the Board a high degree of confidence in the potential of the GV22-1 well, and it was for these reasons that the Group decided to prioritise the GV22-1 location as its first well.

The selection of the GV22-1 well as the first well was also validated by the fracture characterisation study undertaken by Schlumberger on behalf of the Group, the results of which were announced in January 2019. In Schlumberger's detailed analysis of the GV22-1, the models of the combined fracture sets developed in the study show that the well is situated optimally to capture the fold and fault related fractures. The study also states that it is expected that both fault and fold related fracture sets are viable from the geomechanical modeling. Targeting both fracture sets maximises potential productivity from a successful well.

The Group is now working with the BLM to include the New Acreage, and therefore the GV22-1 proposed well site, within the Gunnison Valley Unit ("GVU"), where the Group's operational activity has been focused. The addition of the New Acreage within the GVU will give the Group more options in terms of the future drilling programme. These discussions with the BLM are being carried out in tandem with ongoing work to manage the existing acreage position and the GVU itself which requires careful oversight, particularly when taking into account the more proactive approach of the BLM towards land usage under the new political administration.

If the BLM approves the proposed plan to include the New Acreage within the GVU, then the Group will be able to propose the GV22-1 as the next obligation well. The GVU, which covers approximately 60,000 acres, presently requires four obligation wells; the first obligation well has already been completed (GVU22-9) by Anadarko.

The ongoing discussions with the BLM in respect of the GVU reshape are expected to coincide with the Group's timeline to spud the GV22-1 well before the end of the year. The next obligation well for the GVU is required to be drilled within six months of completion of operations at GV22-1.

To support the proposed drilling activities, 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 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. As the Group progressed through the well selection and permitting processes for the first Paradox well, the Group is already realising the benefits of having such a first class team.

In conclusion, the technical work required ahead of the spudding the GV22-1 has all now been completed, the well has been permitted and the final step in the process is securing the financing to complete the well. Discussions with industry partners continue albeit that the recent oil price volatility and investors focus on the established oil producing basins in the U.S.A, has meant that these discussions, and the subsequent negotiations, have taken longer than might have otherwise been hoped. The Board remains confident that it will be in a position to spud the GV22-1 before the end of this calendar year. Potential farm-in partners who have reviewed the data related to the projects have consistently commented on the high quality of the technical assessment of the project.

As the Group's activity in the Paradox basin has intensified, it has been approached by a number of third parties about potential partnering and investment opportunities in the region. While the Group remains wholly focused on the Paradox, the Directors believe that they should appraise any additional opportunities further, particularly those comprising producing or near-term producing assets, to see if there may be commercial synergies with the existing Paradox operations and whether they might add value to the Group's portfolio. The Paradox activity will remain the absolute priority, and there are no guarantees that any opportunities reviewed will develop further.

MINING DIVISION

Copper exploration, southwest U.S.A.

In April 2016, the Group announced that it had entered into an agreement with privately owned Burdett Gold LLC ("Burdett"), 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 is currently undertaking a 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. A number of the properties fall within the area covered by the U.S.A. Government moratorium on uranium exploration. There is speculation that the moratorium may soon be lifted meaning that the licence areas may be reinstated. This may result in the Group being able to derive value from these licences whether through disposal or potentially through compensation claims.

In November 2018, the Group announced that it had entered into an agreement with enCore Energy Corporation ("ENCORE") (TSX.V:EU) with respect to the Group's uranium exploration project database (the "Agreement"). The database is comprised of geological, geophysical, aerial photography, drilling, and evaluation data on the uranium breccia pipe district of northern Arizona, specifically the region south of the Colorado River where a number of discoveries have been made. In return for the Group providing exclusive access to its uranium project database, ENCORE issued the Group 3,000,000 ordinary shares in ENCORE. The initial term of the agreement is five-years, and ENCORE will seek, at its own cost, to use the database to generate exploration prospects and to subsequently develop these prospects into commercial operations.

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

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

As part of the Agreement with ENCORE, the Group excluded its 100% owned North Wash stratabound vanadium/uranium project in Garfield County, Utah from the transaction.

With respect to the North Wash project, as previously announced the Group contracted an independent mining pre-scoping study in May 2012, upon the Group's completion of a two-year drilling programme. This study was prepared to determine the mining method and development costs in an effort to assess the general feasibility of the project. Due to the recent strength of the present vanadium market, interest in the North Wash project significantly improved. The report covered preliminary design engineering sufficient to gain an indicative estimate of capital and operating costs, manpower requirements and a preliminary development and production schedule, and highlights that it has the potential to be developed into a commercial project. The Group will continue to review all of its options in respect of the project and will keep Shareholders updated on any progress.

FINANCIAL REVIEW

Income Statement

The Group reports a net loss after tax from continuing operations of US$0.8 million or a loss 0.58 cents per share for the year ended 31 December 2018 (2017: net loss after tax from continuing operations of US$3.5 million or 6.22 cents per share). Due to the ongoing cash conservation programme, administrative costs for the year of US$1.6 million were materially lower than those in the prior year (2017: US$2.1 million).

Foreign exchange gains on the restatement of the Company's loans to its subsidiaries were US$1.1 million (2017: losses of US$1.4 million).

Balance Sheet

Total investment in the Group's intangible exploration and evaluation assets at 31 December 2018 was US$13.1 million (2017: US$12.1 million) reflecting continuing investment in the Utah O&G assets.

Cash and cash equivalents at 31 December 2018 were US$0.6 million (2017: US$2.2 million). During the period, the Company raised gross proceeds of US$1.3 million (2017: US$4.0 million) through the placing of the Company's Ordinary Shares.

Going Concern

The Directors have set out in note 3 to the financial statements their consideration of the future financing requirements of the Group. 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.

On behalf of the Board

MC Idiens

Chief Executive Officer

27 June 2019

CONSOLIDATED INCOME STATEMENT

For the year ended 31 December 2018

 
                                                                   Restated 
                                                             2018      2017 
                                                 Notes    US$'000   US$'000 
 
Continuing operations 
Administrative expenses                                   (1,646)   (2,063) 
Development expenses                              6         (178)     (154) 
Impairment of intangible exploration 
 and evaluation assets                            7           (4)        82 
Foreign exchange gains/(losses)                             1,084   (1,378) 
 
Operating loss                                              (744)   (3,513) 
 
Fair value loss on investments                    8         (284)         - 
Other income                                      9           264         - 
Finance income                                   10             3         1 
 
Loss on ordinary activities before 
 taxation                                        11         (761)   (3,512) 
 
Taxation charge                                  14             -       (1) 
 
Loss for the year from continuing operations                (761)   (3,513) 
 
Discontinued operations 
Profit from discontinued operations, 
 net of tax                                      15           860       382 
 
Profit/(loss) for the year attributable 
 to owners of the parent company                               99   (3,131) 
 
 
 
Profit/(loss) per Ordinary Share 
From continuing operations 
Basic and diluted, cents per share               16        (0.58)    (6.22) 
 
 
From continuing and discontinued operations 
Basic and diluted, cents per share               16          0.08    (5.54) 
 
 
 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 December 2018

 
                                                           Restated 
                                                    2018       2017 
                                                 US$'000    US$'000 
 
Profit/(loss) for the year attributable 
 to owners of the parent company                      99    (3,131) 
 
Other comprehensive income 
Items that may be subsequently reclassified 
 to profit or loss, net of tax 
Foreign currency translation differences 
 on foreign operations                             2,394    (3,671) 
 
Total comprehensive income for the 
 year attributable to owners of the 
 parent company                                    2,493    (6,802) 
 
 

CONSOLIDATED BALANCE SHEET

As at 31 December 2018

 
 
                                               2018       2017 
                                   Notes    US$'000    US$'000 
 
Non-current assets 
Investments                        19             -        500 
Intangible assets                  17        13,148     12,098 
Property, plant and equipment      18            22         27 
 
                                             13,170     12,625 
 
Current assets 
Investments                        19           464          - 
Trade and other receivables        21           426        583 
Cash and cash equivalents          22           616      2,185 
 
                                              1,506      2,768 
 
Total assets                                 14,676     15,393 
 
Current liabilities 
Trade and other payables           23         (387)      (584) 
 
Total liabilities                             (387)      (584) 
 
Net assets                                   14,289     14,809 
 
Equity 
Share capital                      26        40,504     40,463 
Share premium account              28        36,472     35,657 
Warrant reserve                    27           341          - 
Share-based payment reserve        28         3,645      3,687 
Cumulative translation reserve     28       (8,909)    (6,864) 
Retained deficit                   28      (57,764)   (58,134) 
 
Equity attributable to owners 
 of the parent company                       14,289     14,809 
 
 
 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 31 December 2018

 
 
                                            Share                 Share-based      Cumulative 
                                          premium     Warrant         payment     translation     Retained 
                        Share capital     account     reserve         reserve         reserve      deficit       Total 
                              US$'000     US$'000     US$'000         US$'000         US$'000      US$'000     US$'000 
 
 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 forfeited 
  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 
 
 Transactions with 
 owners in their 
 capacity as 
 owners: 
 Issue of equity 
  shares                           41       1,304           -               -               -            -       1,345 
 Expenses of issue 
  of equity shares                  -       (148)           -              67               -            -        (81) 
 Transfer to 
  warrant 
  reserve                           -       (341)         341               -               -            -           - 
 Share-based 
  payments                          -           -           -             172               -            -         172 
 Transfer to 
  retained 
  deficit in 
  respect 
  of forfeited 
  options                           -           -           -           (271)               -          271           - 
 Effect of foreign 
  exchange rates                    -           -           -            (10)               -            -        (10) 
 
 Total transactions 
  with owners in 
  their capacity 
  as owner                         41         815         341            (42)               -          271       1,426 
 
 Profit for the 
  year                              -           -           -               -               -           99          99 
 Other 
 comprehensive 
 income: 
 Currency 
  translation 
  differences                       -           -           -               -           2,394            -       2,394 
 
 Total other 
  comprehensive 
  income for the 
  year                              -           -           -               -           2,394            -       2,394 
 
 Total 
  comprehensive 
  income for the 
  year                              -           -           -               -           2,394           99       2,493 
 
 Currency 
  translation 
  differences on 
  equity at 
  historical 
  rates                             -           -           -               -         (3,614)            -     (3,614) 
 Recycled foreign 
  currency 
  translation 
  differences on 
  discontinued 
  operations                        -           -           -               -           (825)            -       (825) 
 
 As at 31 December 
  2018                         40,504      36,472         341           3,645         (8,909)     (57,764)      14,289 
 
 

CONSOLIDATED CASH FLOW STATEMENT

For the year ended 31 December 2018

 
                                             Notes       2018   Restated 
                                                      US$'000       2017 
                                                                 US$'000 
 Operating activities 
 Loss before taxation from continuing 
  operations                                            (761)    (3,512) 
 Profit before taxation from discontinued 
  operations                                 15           860        402 
 
                                                           99    (3,110) 
 
 Fair value loss on investments                           284          - 
 Other income                                           (264)          - 
 Finance income                                           (3)       (42) 
 
 Adjustments for: 
 Depreciation of property, plant 
  and equipment                                             5         54 
 Profit on disposal of property, 
  plant and equipment                                     (6)          - 
 Gain on disposal of discontinued 

  operations                                                -    (1,339) 
 Impairment of Intangible exploration 
  and evaluation assets                                     4       (82) 
 Provision for non-recoverable 
  taxes                                                     -        197 
 Share-based payments                                     172        314 
 Unrealised foreign exchange (gain)/loss              (2,023)      1,388 
 
 Operating outflow before movements 
  in working capital                                  (1,732)    (2,620) 
 Decrease in trade and other receivables                  260        419 
 (Decrease)/Increase in trade and 
  other payables                                        (204)         93 
 
 Cash used in operations                              (1,676)    (2,108) 
 Income tax recovered                                       -        143 
 
 Net cash used in operating activities                (1,676)    (1,965) 
 
 Investing activities 
 Interest received                                          3         42 
 Purchase of intangible exploration 
  and evaluation assets                               (1,002)    (1,990) 
 Proceeds on disposal of property,                          6          - 
  plant and equipment 
 Net cash inflow on disposal of 
  discontinued operations                                  53        950 
 Loans advanced                                         (195)          - 
 
 Net cash used in investing activities                (1,135)      (998) 
 
 Financing activities 
 Proceeds from issue of shares                          1,345      4,019 
 Expenses of issue of shares                             (81)      (250) 
 
 Net cash from financing activities                     1,264      3,769 
 
 Net (decrease)/increase in cash 
  and cash equivalents                                (1,547)        806 
 
 Cash and cash equivalents at beginning 
  of year                                               2,185      1,273 
 
 Effect of foreign exchange rate 
  changes                                                (22)        106 
 
 Cash and cash equivalents at end 
  of year                                                 616      2,185 
 
 

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2018

The figures for the years ended 31 December 2018 and 2017 do not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006. The figures for the year ended 31 December 2018 have been extracted from the statutory accounts for that year on which the auditor

has issued an unqualified audit report containing a material uncertainty in relation to going concern paragraph which have yet to be delivered to the Registrar of Companies. The figures for the year ended 31 December 2017 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. This announcement was approved by the board of directors on 27 June 2019 and authorised for issue on 28 June 2019.

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 preliminary statement has been extracted from the audited financial statements for the year ended 31

December 2018 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').

   1.            CORPORATE INFORMATION 

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 and is limited by shares. The address of the registered office is 20-22 Wenlock Road, London, N1 7GU.

The nature of the Group's operations and its principal activity is the exploration and development of O&G resources.

   2.            ADOPTION OF NEW AND REVISED STANDARDS 

STANDARDS AFFECTING PRESENTATION AND DISCLOSURE

The Group has adopted all of the new or amended Accounting Standards and interpretations issued by the International Accounting Standards Board ("IASB") that are mandatory and relevant to the Group's activities for the current reporting period. The Group has applied IFRS 9 Financial instruments from 1 January 2018. A number of other new standards are also effective from 1 January 2018, including IFRS 15 Revenue from contracts with customers, but they do not have a material effect on the Group's financial statements.

IFRS 9 Financial instruments

IFRS 9 introduced new classification and measurement models for financial assets, financial liabilities and some contracts to buy or sell non-financial items. As a result of the adoption of IFRS 9 the Group has adopted consequential amendments to IAS 1 Presentation of financial statements, which requires impairment of financial assets to be presented in a separate line item in the statement of profit or loss and other comprehensive income. Previously the Group's approach was to include the impairment of trade receivables in other expenses. Additionally, the Group has adopted consequential amendments to IFRS 7 Financial instruments: disclosures that are applied to disclosures about 2018 but have not been generally applied to comparative information.

There has been no impact of transition to IFRS 9 on the opening balance of reserves and retained earnings at 1 January 2018.

Under IFRS 9, financial assets shall be measured at amortised cost if it is held within a business model whose objective is to hold assets in order to collect contractual cash flows which arise on specified dates and that are solely principal and interest. A debt investment shall be measured at fair value through other comprehensive income if it is held within a business model whose objective is to both hold assets in order to collect contractual cash flows which arise on specified dates that are solely principal and interest as well as selling the asset on the basis of its fair value. All other financial assets are classified and measured at fair value through profit or loss unless the Group makes an irrevocable election on initial recognition to present gains and losses on equity instruments (that are not held-for-trading or contingent consideration recognised in a business combination) in other comprehensive income. Despite these requirements, a financial asset may be irrevocably designated as measured at fair value through profit or loss to reduce the effect of, or eliminate, an accounting mismatch. For financial liabilities designated at fair value through profit or loss, the standard requires the portion of the change in fair value that relates to the Group's own credit risk to be presented in other comprehensive income (unless it would create an accounting mismatch). New simpler hedge accounting requirements are intended to more closely align the accounting treatment with the risk management activities of the Group. New impairment requirements use an 'expected credit loss' ("ECL") model to recognise an allowance. Impairment is measured using a 12-month ECL method unless the credit risk on a financial instrument has increased significantly since initial recognition, in which case, the lifetime ECL method is adopted. For receivables, a simplified approach to measuring expected credit losses using a lifetime expected loss allowance is available.

There has been no impact of transition to IFRS 9 on the Group's classification and measurement of financial assets and financial liabilities, nor its accounting policies related to financial liabilities at 1 January 2018.

The Group has determined that transition to IFRS 9 did not result in an additional provision for impairment and there was no impact on the opening balance of reserves or retained earnings at 1 January 2018, in respect of either the Group or the Company.

STANDARDS ISSUED BUT NOT YET EFFECTIVE

Any new or amended Accounting Standards or interpretations that are not yet mandatory have not been early adopted by the Group for the year ended 31 December 2018. The assessment of the impact of these new or amended Accounting Standards and interpretations, most relevant to the Group are set out below.

-- IFRS 16 - Leases

The Group is required to adopt IFRS 16 Leases from 1 January 2019. The Group has assessed the estimated impact that initial application of IFRS 16 will have on its consolidated financial statements, as described below. The actual impact of adopting the standard on 1 January 2019 may change because the new accounting policies are subject to change until the Group presents its first financial statements that include the date of initial application.

IFRS 16 introduces a single, on-balance sheet lease accounting model for lessees. A lessee recognises a right-of-use asset representing its right to use the underlying asset and a lease liability representing its obligation to make lease payments. There are recognition exemptions for short-term leases and leases of low-value items. Lessor accounting remains similar to the current standard and the Group does not undertake any transactions as a lessor.

Leases in which the Group is a lessee

The Group will recognise new assets and liabilities for its operating leases of office facilities. The nature of the expense related to those leases will now change because the Group will recognise a depreciation charge for right-of-use assets and interest expense on lease liabilities.

Previously, the Group recognised operating lease expense on a straight-line basis over the term of the lease, and recognised assets and liabilities only to the extent that there was timing difference between actual lease payments and the expense recognised.

The Group plans to apply IFRS 16 initially on 1 January 2019, using the modified retrospective approach. Therefore, the cumulative effect of adopting IFRS 16 will be recognised as an adjustment to the opening balance of retained earnings at 1 January 2019, with no restatement of comparative information. The Group do not anticipate that there will be a material impact on adoption of IFRS 16.

The Group plans to apply the practical expedient to grandfather the definition of a lease on transition. This means that it will apply IFRS 16 to all contracts entered into before 1 January 2019 and identified as leases in accordance with IAS 17 and IFRIC 4.

-- IAS 19 - Employee benefits

-- IFRIC 23 - Uncertainty over income tax treatments

-- Amendments to IAS 28 - Long-term interests in associates and joint ventures

-- Amendments resulting from annual improvements to IFRS Standards 2015-2017

-- Amendments to references to conceptual framework in IFRS Standards

The Directors do not expect that the adoption of these Standards or Interpretations in future periods will have a material impact on the financial statements of the Company or the Group.

   3.            SIGNIFICANT ACCOUNTING POLICIES 

BASIS OF PREPARATION

The financial statements have been prepared and approved by the Directors in accordance with International Financial Reporting Standards as adopted by the EU ("Adopted IFRSs").

The financial statements have been prepared on the historical cost basis, other than certain financial assets and liabilities which are stated at their fair value. Historical cost is generally based on the fair value of the consideration given in exchange for assets.

The financial statements are presented in United States dollars ("US$") as the Group's business is influenced by pricing in international commodity markets which are primarily US$ based. All amounts have been rounded to the nearest thousand, unless otherwise indicated.

The Directors continue to adopt the going concern basis in preparing the consolidated financial statements. The financial statements do not include any adjustment that would result from the basis of preparation being inappropriate.

The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in these financial statements. In accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, the comparative income statement has been re-presented so that the disclosures in relation to discontinued operations relate to all operations that have been discontinued by the balance sheet date.

Judgements made by the Directors in the application of these accounting policies that have significant impact on the financial statements and estimates with a significant risk of material adjustment in the next year, are discussed in note 4.

GOING CONCERN

As an exploration group, the Directors are mindful that there is an ongoing need to monitor overheads and costs associated with delivering the exploration programme and raise additional working capital on an ad hoc basis to support the Group's activities. The Group has no bank facilities and has been meeting its working capital requirements from cash resources. At the year end, the Group had cash and cash equivalents amounting to US$0.6 million (2017: US$2.2 million).

The Directors have prepared cash flow forecasts for the Group for the period to June 2020 based on their assessment of both the discretionary and the non-discretionary cash requirements of the Group during this period. These cash flow forecasts include its normal operating costs for operations together with all committed development expenditure.

The Board have been working to secure the financing for the spudding of the first well in the Paradox Basin throughout the year and since the year end. Discussions with industry partners continue albeit that the recent oil price volatility and investors focus on the established oil producing basins in the U.S.A. has meant that these discussions, and the subsequent negotiations, have taken longer than might otherwise have been hoped. Whilst the Board remains confident that the Group will be able to secure the required funding through equity issue, farm in arrangements or other mechanisms, the timing and availability of funding sources is outside of the control of the Board. There can also be no certainty over the timing and extent of cash flows arising from the Group's exploration activities and hence any forecasts prepared by the Board will have inherent uncertainties.

Based on these forecasts, the current cash position and from their ongoing discussions with its major Shareholders and brokers, the Directors are confident that the Group has, or has access to, sufficient resources to continue in operation for at least the next twelve months.

The Directors continue to adopt the going concern basis in preparing the consolidated financial statements. The financial statements do not include any adjustment that would result from the basis of preparation being inappropriate.

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 when the Company is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity.

The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the date on which control is transferred to the Group or, up to the date that control ceases, 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.

The Group applies the acquisition method to account for business combinations. The consideration for each acquisition is measured at the aggregate of the fair values (at the date of exchange) of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquire.

All intra-group transactions, balances, income and expenses are eliminated on consolidation.

INVESTMENTS IN SUBSIDIARY UNDERTAKINGS

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, 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 of assets less their residual values over their useful lives at the following rates:

   Plant and machinery                       over 5 years 
   Office equipment                            over 5 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 or loss.

LEASING

Rentals payable under operating leases are charged to income on a straight-line basis over the term of the relevant lease. Lease incentives received are recognised in the income statement as an integral part of the total lease expense.

FOREIGN CURRENCIES

For the purpose of the consolidated financial statements, the results and financial position are expressed in United States dollar, which is the presentation currency for both company and 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 company and consolidated financial statements, the assets and liabilities of the Company, and the Group's operations which have a functional currency other than United States dollar, 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. Equity items are translated at the exchange rates at the date of transactions and foreign exchange differences arising, if any, are accumulated directly in equity.

On the disposal of a foreign operation (i.e. a disposal of the Group's entire interest in a foreign operation, a disposal involving loss of control over a subsidiary that includes a foreign operation or loss of joint control over a jointly controlled entity that includes a foreign operation), all of the accumulated exchange differences in respect of that operation attributable to the Group are reclassified to profit or loss. Where there is no change in the proportionate percentage interest in an entity then there has been no disposal or partial disposal and accumulated exchange differences attributable to the Group are not 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.

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.

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 probable 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.

DISCONTINUED OPERATIONS

A discontinued operation is a component of the Group that has been disposed of or is classified as held for sale and that represents a separate major line of business or geographical area of operations, is part of a single co-ordinated plan to dispose of such a line of business area or operation, or is a subsidiary acquired exclusively with a view to resale.

Classification of a discontinued operation occurs at the earlier of disposal or when the operation meets the criteria to be classified as held for sale.

The results of discontinued operations are presented separately on the face of the income statement and other comprehensive income. The comparative statement of profit or loss and other comprehensive income Is re-presented as if the operations had been discontinued from the start of the comparative year.

INVESTMENTS AND OTHER 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, and are initially measured at fair value. Transaction costs are included as part of the initial measurement, except for financial assets at fair value through profit or loss.

Investments and other financial assets are subsequently measured at either amortised cost or fair value depending on their classification. Classification is determined based on both the business model within which such assets are held and the contractual cash flow characteristics of the financial asset unless an accounting mismatch is being avoided.

Financial liabilities are subsequently measured at either amortised cost or fair value.

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.

On derecognition of a financial asset and financial liability a gain or loss is recognised in profit or loss.

Financial assets at fair value through profit or loss

Financial assets not measured at amortised cost or at fair value through other comprehensive income are classified as financial assets at fair value through profit or loss. Typically, such financial assets will be held for trading, where they are acquired for the purpose of selling in the short term with an intention of making a profit. Gains and losses arising from changes in fair value are recognised directly in profit or loss.

Impairment of financial assets

The Group recognises a loss allowance for expected credit losses on financial assets which are measured at amortised cost. The measurement of the loss allowance depends upon the Group's assessment at the end of each reporting period as to whether the financial instrument's credit risk has increased significantly since initial recognition, based on reasonable and supportable information that is available without undue cost or effort to obtain.

Where there has not been a significant increase in exposure to credit risk since initial recognition, a 12-month expected credit loss allowance is estimated. This represents a portion of the asset's lifetime expected credit losses that is attributable to a default event that is possible within the next 12 months. Where a financial asset has become credit impaired or where it is determined that credit risk has increased significantly, the loss allowance is based on the asset's lifetime expected credit losses. The amount of expected credit loss recognised is measured on the basis of the probability weighted present value of anticipated cash shortfalls over the life of the instrument discounted at the original effective interest rate.

For financial assets measured at fair value through other comprehensive income, the loss allowance is recognised within other comprehensive income. In all other cases, the loss allowance is recognised in profit or loss.

Trade and other receivables

Trade and other receivables are measured at initial recognition at fair value, and are subsequently measured at amortised cost using the effective interest method, less any allowance for expected credit losses.

The Group has applied the simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance. To measure the expected credit losses, trade receivables are grouped on the basis of days overdue.

Cash and cash equivalents

Cash and cash equivalents comprise cash-in-hand and on-demand deposits.

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.

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.

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, considering 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.

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. Periodic charges for changes in the net present value of the decommissioning provision arising from discounting are included in finance costs.

FAIR VALUE MEASUREMENT

Measurement of fair value is based on the price that would be received to sell an asset, or paid to transfer a liability in an orderly transaction between market participants at the measurement date, and assumes that the transactions will take place either, in the principal market, or in the absence of a principal market, in the most advantageous market.

Fair value is measure using the assumptions that market participants would use when pricing the asset or liability, assuming they act in their economic best interests. For non-financial assets, the fair value measurement is based on its highest and best use. Valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, are used, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.

Assets and liabilities measure at fair value are classified into three levels, using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. Classifications are measured at each reporting date and transfers between levels are determined based on a reassessment of the lowest level of input that is significant to the fair value measurement.

SHARE-BASED PAYMENTS

The Group has applied the requirements of IFRS 2 Share-based Payment for all grants of equity instruments.

The Group operates an equity-settled share option plan and a share-based compensation plan in respect of certain Directors, employees and consultants. Equity-settled share-based payments are measured at fair value (excluding the effect of non-market based vesting conditions) at the date of grant. The fair value of the service received in exchange for the grant of options and equity is recognised as an expense. 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 of option grants 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.

The grant by the Company of options and share-based compensation plans over its equity instruments to the employees of subsidiary undertakings in the Group is treated as a capital contribution. The fair value of employee services received, measured by reference to the grant date fair value, is recognised over the vesting period as an increase to investment in subsidiary undertakings, with a corresponding credit to equity in the parent entity accounts.

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.

DEVELOPMENT EXPENSES

Costs incurred by the Group in respect of the assessment and pursuit of potential new projects are expensed directly to the income statement and included as development expenses. Material expenses relating to a specific project are disclosed on a separate line in the income statement.

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 LOANS TO SUBSIDIARY UNDERTAKINGS

The Company has outstanding loans from its directly held subsidiaries which have then made a number of loans to indirectly held subsidiaries as the primary method of financing the activity of those subsidiaries. The principal loans are shown in the Company balance sheet on the basis that the loans incur interest at a commercial rate according to the Group's inter-company loan policy, which is being rolled up until such time as the subsidiaries are in a position to settle. However, there is a risk that the indirectly held subsidiaries will not commence revenue-generating activities and that the carrying amount of the Company's investment will, therefore, exceed the recoverable amount.

At 31 December 2018, the Company has total investments and loans in its directly held subsidiaries of US$48.2 million and the Board has assessed the recoverability of these based on the expected future cash flows arising to the Company from its subsidiary entities. Based on this assessment the Directors consider that, in consideration of the losses currently being generated and the impairment of the Group's intangible exploration and evaluation assets a provision of US$1.3 million (2017: US$5.8 million) should be recognised by the Company in the year to 31 December 2018. At 31 December 2018, there is a total impairment provision in respect of the investments and loans to subsidiaries of US$34.8 million. See note 19.

Further sensitivity analysis prepared by management on the recoverability of the Company's investments and loans is based on the performance of the underlying operations. Any downside in these estimates would result in an additional impairment of the underlying investments.

   5.            SEGMENTAL INFORMATION 

Prior to the sale of the Group's milling assets ("discontinued operations") in the year ended 31 December 2017, 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 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 primarily based in U.S.A. These divisions are the basis on which the Group reports its segmental information.

Segmental information about these divisions is presented below.

 
                                                              2018   Restated 
                                                           US$'000       2017 
                                                                      US$'000 
 Income statement 
 Revenue 
       Discontinued operations                                   -        304 
 
 Segmental results 
       Uranium and copper                                      222      (137) 
       O&G                                                     682    (1,677) 
 
       Total segmental results                                 904    (1,814) 
       Unallocated results                                 (1,665)    (1,698) 
       Current and deferred tax                                  -        (1) 
 
       Loss after taxation from continuing operations        (761)    (3,513) 
       Discontinued operations, net of tax                     860        382 
 
       Profit/(loss) after taxation                             99    (3,131) 
 
 
 

The unallocated results of US$1.7 million (2017: US$1.7 million) include costs associated with the development of new projects (refer to note 6), Directors remuneration and other general and administrative costs incurred by the Company only.

 
                                                  2018          2017 
                                               US$'000       US$'000 
 Depreciation 
  O&G                                                5         27 
  Discontinued operations                            -         27 
 
                                                     5         54 
 
                                                  2018       2017 
                                               US$'000    US$'000 
 Impairment 
       Uranium and copper                            4         43 
       O&G                                           -      (125) 
 
                                                     4       (82) 
 
 
                                                  2018       2017 
                                               US$'000    US$'000 
 Net foreign exchange (gains)/losses 
       O&G                                     (1,067)      1,333 
       Unallocated                                (17)         45 
       Discontinued operations                     892          - 
 
                                                 (192)      1,378 
 
 
 

Employees

The average numbers of employees for the year for each of the Group's principal divisions were as follows:

 
                                                                 2018       2017 
                                                               Number     Number 
 
            Uranium and copper                                      1          1 
            O&G                                                     1          1 
            Discontinued operations                                 -         27 
 
            Total segmental employees                               2         29 
            Unallocated employees                                   2          3 
 
            Total employees                                         4         32 
 
 
                                                                 2018       2017 
                                                              US$'000    US$'000 
  Balance Sheet 
 Segmental assets 
            Uranium and copper                                    275         23 
            O&G                                                13,244     12,205 
 
            Total segmental assets                             13,519     12,228 
            Unallocated assets including cash and cash 
             equivalents                                        1,089      2,738 
 
            Continuing operations                              14,608     14,966 
            Discontinued operations                                68        427 
 
            Total assets                                       14,676     15,393 
 
 Segmental liabilities 
            Uranium and copper                                      1         50 
            O&G                                                   219         85 
 
            Total segmental liabilities                           220        135 
            Unallocated liabilities                               154        297 
 
            Continuing operations                                 374        432 
            Discontinued operations                                13        152 
 
            Total liabilities                                     387        584 
 
 Segmental net assets 
            Uranium and copper                                    274       (27) 
            O&G                                                13,025     12,120 
 
            Total segmental net assets                         13,299     12,093 
            Unallocated net assets including cash and 
             cash equivalents                                     935      2,441 

            Discontinued operations                                55        275 
 
            Total net assets                                   14,289     14,809 
 
                                                                 2018       2017 
                                                              US$'000    US$'000 
 Additions to investments 
             Unallocated                                            -        500 
             O&G                                                  264          - 
 
                                                                  264        500 
 
                                                                 2018       2017 
                                                              US$'000    US$'000 
 Additions to intangible assets 
             Uranium and copper                                     4         43 
             O&G                                                1,050      1,980 
 
                                                                1,054      2,023 
 
 
 
   6.         DEVELOPMENT EXPENSES 
 
             Continuing   Continuing 
                   2018         2017 
                US$'000      US$'000 
 
Cuba                  -          154 
U.S.A.              178            - 
 
                    178          154 
 
 

Development expenses represent material expenditure incurred by the Group in respect of the assessment and pursuit of specific projects.

   7.         IMPAIRMENT OF INTANGIBLE EXPORATION AND EVALUATION ASSETS 
 
                                Continuing     Continuing 
                                      2018           2017 
                                   US$'000        US$'000 
 
Uranium and copper assets                4           43 
O&G assets                               -        (125) 
 
                                         4         (82) 
 
 

At 31 December 2018, 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 accordingly the intangible copper assets held in Mexico remain fully impaired. An impairment charge of US$4,292 (2017: US$42,896) has been recognised in the year in respect of the Group's intangible uranium assets, with the result that these assets have been impaired in full at 31 December 2018.

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 was reversed and 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. See note 23.

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.

   8.         FAIR VALUE LOSS ON INVESTMENTS 
 
                                          Continuing     Continuing 
                                                2018           2017 
                                             US$'000        US$'000 
 
Change in fair value of investments              284            - 
 
 

On 9 September 2017, the Group entered into a Stock Purchase Agreement with Magellan Gold Corporation ('Magellan"), which resulted in the disposal of the majority of the Group's ore processing mill in Mexico, together with its associated assets, licences and agreements. See note 15. The consideration for the transaction, which completed on 1 December 2017, included US$0.5 million in restricted common stock in Magellan. By reference to the quoted price of Magellan stock, the Directors consider that the fair value of the stock at 31 December 2018 was US$0.2 million, which approximates to its market value at that date of US$0.31 million. This has resulted in a charge of US$0.3 million in respect of the change in fair value during the year ended 31 December 2018.

   9.         OTHER INCOME 
 
                                Continuing     Continuing 
                                      2018           2017 
                                   US$'000        US$'000 
 
enCore Energy Corporation              264            - 
 
 

On 27 November 2018, the Group announced that it had entered into an agreement with enCore Energy Corporation ('ENCORE') in respect of its U.S.A. uranium exploration project database. The agreement gave ENCORE exclusive access to the Group's database for an initial term of five years to enable them to identify exploration projects which could be developed into commercial operations. Under the terms of the agreement ENCORE issued 3 million Ordinary Shares to the Group's wholly owned subsidiary, VANE Minerals (US) LLC, which represented approximately 2.1% of the existing share capital of ENCORE. See note 19.

The Group has recognised the ENCORE shares as investments at fair value through the profit or loss, with a corresponding credit to other income during the year ended 31 December 2018.

   10.       FINANCE INCOME 
 
                                Continuing     Continuing 
                                      2018           2017 
                                   US$'000        US$'000 
 
Interest on bank deposits                3            1 
 
 
   11.       LOSS BEFORE TAXATION 

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

 
                                          Continuing     Continuing 
                                                2018           2017 
                                             US$'000        US$'000 
 
Other income                                   (264)            - 
Depreciation of property, 
 plant and equipment                               5           27 
Staff costs excluding share-based 
 payments                                        553          792 
Share-based payments                             172          314 
Operating leases - land 
 and buildings                                    24           90 
Net foreign exchange (gains)/losses          (1,084)        1,378 
 
 
   12.       AUDITOR'S REMUNERATION 

Amounts payable to the external auditors and their associates in respect of both audit and non-audit services:

 
                                      Continuing     Continuing 
                                            2018           2017 
                                         US$'000        US$'000 
 
Audit of these financial 
 statements                                   54           45 
 
Amounts receivable by the 
Company's auditor and its 
associates in respect of: 
Audit of financial statements 
of subsidiaries of the Company                10           10 
Taxation services - compliance                 6           11 
 
                                              70           66 
 
 
   13.       STAFF COSTS 

The average monthly number of employees (including Executive Directors) was:

 
                                      Group 
                            Continuing     Continuing 
                                  2018           2017 
                                Number         Number 
 
Office and management                2            3 
Operations                           2            2 
 
                                     4            5 
 
 

Their aggregate remuneration comprised:

 
                                      Group 
                            Continuing     Continuing 
                                  2018           2017 
                               US$'000        US$'000 
 
Wages and salaries                 536          658 
Social security costs               63           61 
Other pension costs                 36           75 
Share-based payments               118          265 
 
                                   753        1,059 
 
 

Included within wages and salaries is US$0.08 million (2017: nil) capitalised to intangible exploration and evaluation assets.

 
                                     Company 
                            Continuing     Continuing 
                                  2018           2017 
                                Number         Number 
 
Office and management                2            3 
Operations                           1            - 
 
                                     3            3 
 
 

Their aggregate remuneration comprised:

 
                                     Company 
                            Continuing     Continuing 
                                  2018           2017 
                               US$'000        US$'000 
 
Wages and salaries                 483          379 
Social security costs               58           44 
Other pension costs                 36           60 
Share-based payments                83          164 
 
                                   660          647 
 
 

Included within wages and salaries is US$0.1 million (2017: nil) which was recharged to other Group entities during the year ended 31 December 2018.

Refer to note 32 for details regarding the remuneration of the highest paid Director.

   14.       TAXATION 
 
                                    Continuing  Continuing 
                                          2018        2017 
                                       US$'000     US$'000 
Current tax: 
     Current year                            -           1 
 
                                             -           1 
 
Deferred tax: 
     Origination and reversal                -           - 
      of temporary differences 
 
                                             -           - 
 
Tax charge on loss for the 
 year                                        -           1 
 
 
 

The charge for the year can be reconciled to the loss per the income statement as follows:

 
                                                    Continuing     Restated 
                                                                 Continuing 
                                                          2018         2017 
                                                       US$'000      US$'000 
 
Loss before tax                                          (761)      (3,512) 
 
Loss multiplied by the rate 
 of corporation tax for UK 
 companies of 19% (2017: 
 19.25%)                                                 (145)        (676) 
 
Effects of: 
Expenses/income not deductible/chargeable 
for tax purposes                                          (68)        (236) 
Share-based payments                                        33           60 
Unrelieved tax losses carried 
 forward                                                   180          853 
 
Tax charge on loss for the 
 year                                                        -            1 
 
 
 

There has been no impact due to changes in UK taxation rates during the years reported.

Unrelieved tax losses carried forward, as detailed in note 24, have not been recognised as a deferred tax asset, as there is currently insufficient evidence that the asset will be recoverable in the foreseeable future. The losses must be utilised in relation to the same operations.

   15.       DISCONTINUED OPERATIONS 

MEXICO MINING 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 was 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. See note 19.

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 was 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.

The Mexico operations were treated as discontinued operations in the year ended 31 December 2017, and together with additional costs incurred during the year ended 31 December 2018, have been shown within a single amount on the face of the consolidated income statement.

U.S.A. COPPER EXPLORATION

Whilst all remaining licences relating to the Group's U.S.A. copper projects had previously been relinquished, AVEN Associates LLC, the Group's U.S.A. copper exploration company finally ceased all activity and was closed during the year ended 31 December 2018. In accordance with IAS 21, all cumulative translation reserves relating to the entity have been recycled to the profit or loss and has been shown within a single amount on the face of the consolidated income statement for the year ended 31 December 2018. 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:

 
                                                         2018               2017 
                                                      US$'000            US$'000 
MEXICO MINING OPERATIONS 
Revenue                                                     -                304 
Cost of sales                                               -              (259) 
 
Margin                                                      -                 45 
Other income                                                -                 50 
Operating and development costs                             -              (373) 
Expenses                                                 (36)              (698) 
Recycled currency translation differences, net 
 of tax                                                    11                  - 
 
                                                         (25)              (976) 
Gain on disposal of property, plant and equipment           6                  - 
Finance income                                              -                 41 
 
Loss before taxation                                     (19)              (935) 
Taxation charge                                             -               (20) 
 
Loss attributable to discontinued operations             (19)              (955) 
Gain on disposal of discontinued operations                 -              1,339 
 
(Loss)/profit from discontinued operations, 
 net of tax                                              (19)                384 
 
 
 

GAIN ON DISPOSAL OF DISCONTINUED OPERATIONS

 
                                                                      2018                      2017 
                                                                   US$'000                   US$'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 
 
 
                                                                             2018           Restated 
                                                                          US$'000               2017 
                                                                                             US$'000 
U.S.A. COPPER EXPLORATION 
Expenses                                                               (2)                       (2) 
 
Loss attributable to discontinued operations                           (2)                       (2) 
Foreign currency exchange                                               67                         - 
Recycled currency translation differences, net 
 of tax                                                                814                         - 
 
Gain/(loss) from discontinued operations, net 
 of tax                                                                879                       (2) 
 
TOTAL DISCONTINUED OPERATIONS 
(Loss)/profit before taxation: Mexico mining 
 operations                                                           (19)                       404 
Profit/(loss) before taxation: U.S.A. copper 
 exploration                                                           879                       (2) 
 
Profit before taxation from discontinued operations                    860                       402 
Taxation charge: Mexico mining operations                                -                      (20) 
 
Profit from discontinued operations, net of 
 tax                                                                   860                       382 
 
Profit per Ordinary Share 
 Basic and diluted, cents per share                                   0.66                      0.68 
 
 
 
   16.       PROFIT/(LOSS) PER ORDINARY SHARE 

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

 
                                        Continuing          Continuing     Restated           Continuing 
                                        operations   and discontinuing   Continuing     and discontinued 
                                                            operations   operations           operations 
                                              2018                2018         2017                 2017 
                                           US$'000             US$'000      US$'000              US$'000 
Profits/(losses) 
     Profits/(losses) for 
      the purpose of basic 
      profit/(loss) per Ordinary 
      Share being net profit/(loss) 
      attributable to owners 
      of the parent company                  (761)                  99      (3,513)              (3,131) 
 
 
                                            Number              Number       Number               Number 
                                              '000                '000         '000                 '000 
Number of shares 
     Weighted average number 
      of shares for the purpose 
      of basic profit/(loss) 
      per Ordinary Share                   131,814             131,814       56,467               56,467 
 
Profit/(loss) per Ordinary 
 Share 
     Basic and diluted, cents 
      per share                             (0.58)                0.08       (6.22)             (5.54) 
 
 
 

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

   17.       INTANGIBLE ASSETS 
 
                             Exploration 
                                     and 
                              evaluation 
                                  assets 
                                 US$'000 
Cost 
     At 1 January 2017            15,823 
     Additions                     2,023 
     Exchange differences             17 
 
     At 1 January 2018            17,863 
     Additions                     1,054 
     Exchange differences              1 
 
     At 31 December 2018          18,918 
 
Impairment 
     At 1 January 2017             5,706 
     Impairment charge                43 
     Exchange differences             16 
 
     At 1 January 2018             5,765 
     Impairment charge                 4 
     Exchange differences              1 
 
     At 31 December 2018           5,770 
 
Carrying amount 
     At 31 December 2018          13,148 
 
     At 31 December 2017          12,098 
 
     At 1 January 2017            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, 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 2018 is US$13.1 million (2017: US$12.1 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. No expenditure has been incurred in either of the years presented.

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 2018.

U.S.A. COPPER PROJECTS

On 2 March 2016, the Group entered into an agreement with Burdett Gold LLC ("Burdett") to conduct exploration drilling on the Ardmore copper project. The terms included a cash payment of US$5,350 and the Group retained a 15 per cent net profit interest in the Ardmore project and any other claims that Burdett might acquire within a three-mile area. No payments have been received in respect of the project in either of the years presented.

   18.       PROPERTY, PLANT AND EQUIPMENT 
 
                                           Group                     Company 
                            Ore processing   Plant and                Office 
                                      mill   machinery     Total   Equipment 
                                   US$'000     US$'000   US$'000     US$'000 
Cost 
 At 1 January 2017                     624         705     1,329           - 
 Discontinued operations             (684)       (573)   (1,257)           - 
 Exchange differences                   60          51       111           - 
 
 At 1 January 2018                       -         183       183           - 
 Group transfer                          -           -         -          22 
 Discontinued operations                 -        (21)      (21)           - 
 Derecognition                           -         (3)       (3)           - 
 
 At 31 December 2018                     -         159       159          22 
 
Accumulated depreciation 
 At 1 January 2017                     531         461       992           - 
 Charge for the year                    17          37        54           - 
 Discontinued operations             (599)       (375)     (974)           - 
 Exchange differences                   51          33        84           - 
 
 At 1 January 2018                       -         156       156           - 
 Charge for the year                     -           5         5           - 
 Discontinued operations                 -        (21)      (21)           - 
 Derecognition                           -         (3)       (3)           - 
 
 At 31 December 2018                     -         137       137           - 
 
Carrying amount 
 At 31 December 2018                     -          22        22          22 
 
 At 31 December 2017                     -          27        27           - 
 
 At 1 January 2017                      93         244       337           - 
 
 

The Group depreciation charge has been allocated to the income statement as follows:

 
                                                  Continuing     Continuing 
                                                        2018           2017 
                                                     US$'000        US$'000 
 
 Administrative expenses                                   5           27 
 
 
 
   19.       INVESTMENTS 
 
                                     Group                        Company 
                                Investment   Investment      Shares in       Loans to 
                                carried at   carried at     subsidiary     subsidiary 
                                fair value   fair value   undertakings   undertakings      Total 
                                   US$'000      US$'000        US$'000        US$'000  US$'000 
Cost 
 At 1 January 2017                       -            -          4,799         37,166     41,965 
 Additions                             500          500              -          2,308      2,808 
 Capital contribution                    -            -              -            254        254 
 Exchange differences                    -            -            457          3,568      4,025 
 
 At 1 January 2018                     500          500          5,256         43,296     49,052 
 Additions                             264            -              -          2,565      2,565 
 Change in fair 
  value                              (284)        (284)              -              -      (284) 
 Capital contribution                    -            -              -          (197)      (197) 
 Exchange differences                 (16)         (16)          (294)        (2,453)    (2,763) 
 
 At 31 December 
  2018                                 464          200          4,962         43,211     48,373 
 
Impairment 
 At 1 January 2017                       -            -          3,252         23,650     26,902 
 Impairment charge                       -            -          1,373          4,380      5,753 
 Exchange differences                    -            -            377          2,468      2,845 
 
 At 1 January 2018                       -            -          5,002         30,498     35,500 
 Impairment charge                       -            -          (136)          1,459      1,323 
 Exchange differences                    -            -          (274)        (1,770)    (2,044) 
 
 At 31 December 

  2018                                   -            -          4,592         30,187     34,779 
 
Carrying amount 
 Non-current assets                      -            -            370         13,024     13,394 
 Current assets                        464          200              -              -        200 
 
 At 31 December 
  2018                                 464          200            370         13,024     13,594 
 
Carrying amount 
 Non-current assets                    500          500            254         12,798     13,552 
 Current assets                          -            -              -              -          - 
 
 At 31 December 
  2017                                 500          500            254         12,798     13,552 
 
 
 

On 9 September 2017, the Group entered into a Stock Purchase Agreement with Magellan Gold Corporation ('Magellan"), which resulted in the disposal of the majority of the Group's ore processing mill in Mexico, together with its associated assets, licences and agreements. See note 15. The consideration for the transaction, which completed on 1 December 2017, included US$0.5 million in restricted common stock in Magellan. By reference to the quoted price of Magellan stock, the Directors consider that the fair value of the stock at 31 December 2018 was US$0.2 million, which approximates to its market value at that date of US$0.31 million.

On 27 November 2018, the Group announced that it had entered into an agreement with enCore Energy Corporation ('ENCORE') in respect of its U.S.A. uranium exploration project database. The database is comprised of geological, geophysical and evaluation data on the uranium breccia pipe district of northern Arizona. The agreement gave ENCORE exclusive access to the Group's database for an initial term of five years to enable them to identify exploration projects which could be developed into commercial operations. Under the terms of the agreement ENCORE issued 3 million Ordinary Shares to the Group's wholly owned subsidiary, VANE Minerals (US) LLC, which represented approximately 2.1% of the existing share capital of ENCORE. In addition, should any prospects identified by ENCORE reach development stage, the Group will have an opportunity to participate in the project up to a maximum 25% interest. The purchase price for this participation will be 250% of the pro-rata exploration costs incurred on the project to advance it to the development stage and the Group would then be responsible for the development expenditure relating to its specific percentage interest. If the Group does not elect to participate in the projects in accordance with the agreement it will have no further rights in respect of that particular project. Should the Group develop any of its existing breccia pipe uranium projects, excluding the North Wash project in Utah, which are currently held on care and maintenance, ENCORE would have the right to participate in these projects on the same terms that the Group can participate in the ENCORE projects. In addition, ENCORE will have the right of first refusal to acquire any of the projects the Group chooses to dispose of during the term of the agreement. By reference to the quoted price of Encore stock, the Directors consider that the fair value of the stock at 31 December 2018 was US$0.26 million, which has been recognised as other income during the year ended 31 December 2018. See note 9.

The Company has a number of loans made to its subsidiaries which incur interest at a commercial rate, according to the Group's inter-company loan policy. For years beginning after 1 January 2018, changes to measurement techniques on intercompany loans came into effect under IFRS 9. These changes require that intercompany loans be recognised based on the recoverability of the discounted value of future cash flows with effective interest taken to the income statement and that any impairment should be recognised. The Board has assessed the recoverability of the loans and investments based on the expected future cash flows arising to the Company from its subsidiary entities and consider that a provision of US$1.3 million (2017: US$5.8 million) should be recognised in the period.

The Company had investments in the following subsidiary undertakings as at 31 December 2018:

 
                                                  Place of 
                                             incorporation     Proportion   Proportion 
                                         (or registration)   of ownership    of voting        Principal 
                                             and operation       interest   power held         activity 
Directly owned: 
 VANE Minerals (UK)                                                                             Holding 
  Limited                            UK               100%                        100%          company 
 Rose Petroleum (UK)                                                                            Holding 
  Limited                            UK               100%                        100%          company 
                                                                                                Holding 
 Rose Cuba Limited                   UK               100%                        100%          company 
 Rose Resources                                                                                 Holding 
  Limited                            UK               100%                        100%          company 
 
Indirectly owned: 
 VANE Minerals (US) 
  LLC                            U.S.A.               100%                        100%      Exploration 
 Minerales VANE S.A. 
  de C.V.                        Mexico               100%                        100%           Mining 
 Naab Energie GmbH              Germany               100%                        100%      Exploration 
 Rose Petroleum (US)                                                                            Holding 
  LLC                            U.S.A.               100%                        100%          company 
 Rose Petroleum 
  (Utah) 
  LLC                            U.S.A.               100%                        100%      Exploration 
                                                                                                Holding 
 Rose Gypsum Limited                 UK               100%                        100%          company 
 
 

During the year ended 31 December 2018, the Group closed AVEN Associates LLC, which previously held the Group's U.S.A. copper assets. Expenditure incurred has been classified as discontinued operations, and primarily comprise costs of cessation and recycling of foreign currency reserves through profit or loss. See note 15.

The registered office address of all companies incorporated in the United Kingdom is 20-22 Wenlock Road, London, N1 7GU.

The registered office address for VANE Minerals (US) LLC is 8987 E. Tanque Verde Road, Tucson, Arizona 85749.

The registered office address for Minerales VANE S.A. de C.V. is Humboldt No. 121, Colonia del Valle, C.P. 78200, San Luis Potosi, S.L.P.

The registered office address for Naab Energie GmbH is Merzhauser Strasse 4, D-79100 Freiburg, Germany.

The registered office address for Rose Petroleum (US) LLC and Rose Petroleum (Utah) LLC is 383 Inverness Parkway, Ste 330, Englewood, CO 80112.

   20.       JOINT OPERATIONS 

ARIZONA PROJECT

On 1 September 2008, the Group entered into a Mining Venture Agreement with Uranium One Americas Inc. ("U1"). The terms of this agreement created a Joint Venture Agreement ("JVA") between VANE Minerals (US) LLC ("VANE") and U1, who later sold their interest to Anfield Resources Inc. ("Anfield"), with each partner holding a 50 per cent interest

The parties have rights to the assets and obligations for liabilities relating to the arrangement and the JVA had, therefore, been accounted for as a joint operation recognising the Group's relevant share of assets, liabilities, revenues and expenses as appropriate.

The JVA combined interests in over 60 breccia pipe targets, including 10 known mineralised pipes, in northern Arizona and also secured access to U1's Ticaboo Mill in Utah for ore developed on JV properties.

The Mining Venture Agreement was amended on 15 July 2013 to extend the terms of the agreement to 31 December 2017. Since 31 December 2017, the JVA has not been extended and each party has been reassigned the assets originally contributed to the joint venture. The Group's interest in these assets is now held within its wholly owned subsidiary, VANE Minerals (US) LLC.

The aggregate amounts related to the joint operation included within the consolidated accounts are:

 
                           2018      2017 
                        US$'000   US$'000 
 
 Net assets                   -        15 
 Expenses                   (3)       (4) 
 
 
 
   21.       TRADE AND OTHER RECEIVABLES 
 
                                      Group              Company 
                                    2018      2017      2018      2017 
                                 US$'000   US$'000   US$'000   US$'000 
 
Trade receivables                      -       246         -         - 
VAT recoverable                       28        55        17        23 
Tax recoverable                       48        92         -         - 
Other receivables                    267       107       195         - 
Prepayments & accrued income          83        83        52        58 
 
                                     426       583       264        81 
 
 

At 31 December 2018, other receivables include the sum of US$0.2 million in respect of a loan made to Magellan, which is non-interest bearing and is due for repayment when Magellan recovers indirect tax incurred in Mexico upon acquisition of the Group's ore processing mill in the year ended 31 December 2017. The Directors anticipate that the loan will be repaid within 12 months, and was made to facilitate completion of the sale of its Mexico assets.

The Directors consider that the carrying amount of trade and other receivables approximates to their fair value, and represents the Group's maximum exposure to credit risk.

Receivables disclosed above do not include any amounts which are past due or impaired, and the Group has not recognised a loss in profit or loss in respect of expected credit losses for the year ended 31 December 2018.

   22.       CASH AND CASH EQUIVALENTS 

Cash and cash equivalents held by the Group and the Company as at 31 December 2018 were US$0.6 million and US$0.6 million respectively (2017: US$2.2 million, US$2.2 million). The Directors consider that the carrying amount of these assets approximate to their fair value.

   23.       TRADE AND OTHER PAYABLES 
 
                                    Group               Company 
                                  2018       2017      2018      2017 
                               US$'000    US$'000   US$'000   US$'000 
 
Trade payables                     160        141        39        43 
Taxes and social security           22         30        22        31 
Other payables                     116         82         -         - 
Accruals                            89        331        87       101 
 
                                   387        584       148       175 
 
 
 

Trade payables and accruals principally comprise amounts outstanding for trade purchases and on-going costs.

At 31 December 2018, other payables (2017: included within accruals, US$0.1 million) represents the potential liability due to the German licencing authorities in respect of the relinquished hydrocarbon licences in south-western Germany. The Group has continued to recognise the remaining potential liability although it continues to negotiate further reductions with the German licencing authorities.

No interest is generally charged on balances outstanding.

The Group has financial risk management policies to ensure that all payables are paid within the credit time frame.

The Directors consider that the carrying amount of trade and other payables approximates to their fair value.

   24.       DEFERRED TAX 

There are unrecognised deferred tax assets in relation to:

 
                                2018      2017 
                             US$'000   US$'000 
 
UK tax losses                  5,178     5,398 
U.S.A. tax losses             16,367    18,189 
Mexican tax losses               511       332 
 
                              22,056    23,919 
 
 
 

A reduction in the UK corporation tax rate from 21% to 20% (effective from 1 April 2015) was substantively enacted on 2 July 2013. Further reductions to 19% (effective from 1 April 2017) and to 18% (effective 1 April 2020) were substantively enacted on 26 October 2015, and an additional reduction to 17% (effective 1 April 2020) was substantively enacted on 6 September 2016. This will reduce the Group's future current tax charge accordingly.

   25.       PROVISIONS 
 
                                 Group decommissioning 
 
                                       2018        2017 
                                    US$'000     US$'000 
 
At 1 January                              -         110 
Discontinued operations                   -       (120) 
Foreign exchange                          -          10 
 
At 31 December                            -           - 
 
Current provision                         -           - 
 
 
 

In accordance with the Group's environmental policy and applicable legal requirements, the Group expects to restore sites where it has carried on activities, following final conclusion of those activities.

As a result of the disposal of the Group's ore processing mill the Group no longer has any obligation in respect of decommissioning costs. See note 15.

Under the terms of the revised agreement with RSOC, the Group no longer has any restoration obligations in respect of its O&G assets. See note 17.

   26.       SHARE CAPITAL 
 
                                                                 Group and Company 
                                                   2018                       2017 
                                             Number       US$'000        Number      US$'000 
                                               '000                        '000 
 Authorised 
 Ordinary Shares of 0.1p each             7,779,297         9,926     7,779,297       10,514 
 Deferred Shares of 9.9p each               227,753        28,768       227,753       30,473 
 
                                          8,007,050        38,694     8,007,050       40,987 
 
 Allotted, issued and fully 
  paid 
 Ordinary Shares of 0.1p each               143,414           199       112,645          158 
 Deferred Shares of 9.9p each               227,753        40,305       227,753       40,305 
 
                                            371,167        40,504       340,398       40,463 
 
 
 

The Deferred Shares are not listed on AIM, do not give the holders any right to receive notice of, or to attend or vote at, any general meetings, have no entitlement to receive a dividend or other distribution or any entitlement to receive a repayment of nominal amount paid up on a return of assets on a winding up nor to receive or participate in any property or assets of the Company. The Company may, at its option, at any time redeem all of the Deferred Shares then in issue at a price not exceeding GBP0.01 from all Shareholders upon giving not less than 28 days' notice in writing.

On 18 September 2017, the Company consolidated every 100 Ordinary Shares at 0.1p each into one 'consolidated share'. Immediately following the consolidation each 'consolidated' share was sub-divided into one New Ordinary Share and one New Deferred Share. The sub-division was structured in such a way that each of the New Ordinary Shares retained the nominal value of 0.1p each. The New Ordinary and New Deferred Shares have the same rights as the existing Ordinary and Deferred shares.

ISSUED ORDINARY SHARE CAPITAL

On 28 September 2017, the Company issued 60,000,000 Ordinary Shares of 0.1p each at a price of 4p per share, raising gross proceeds of US$3.2 million (GBP2.4 million).

On 10 October 2017, the Company issued 15,000,000 Ordinary Shares of 0.1p each at a price of 4p per share, raising gross proceeds of US$0.8 million (GBP0.6 million).

On 10 May 2018, the Company issued 11,264,000 Ordinary Shares of 0.1p each at a price of 3.25p per share, raising gross proceeds of US$0.5 million (GBP0.4 million).

On 22 May 2018, the Company issued 19,505,231 Ordinary Shares of 0.1p each at a price of 3.25p per share, raising gross proceeds of US$0.8 million (GBP0.6 million).

 
                                      Ordinary  Deferred Shares 
                                        Shares 
                                        Number           Number 
                                          '000             '000 
 
At 1 January 2017                    3,764,471          190,108 
 
Share consolidation                     37,645           37,645 
Allotment of shares                     75,000                - 
 
At 1 January 2018                      112,645          227,753 
Allotment of shares                     30,769                - 
 
At 31 December 2018                    143,414          227,753 
 
 
 
   27.       WARRANT RESERVE 

In May 2018, the Company issued 30,769,231 Ordinary Shares of 0.1 each. See note 26. In addition to the placing shares, subscribers were issued warrants to subscribe for 30,769,231 new Ordinary Shares, representing one warrant for each placing share. The warrants are exercisable at a price of 6.5p per Ordinary Share for a period of two years from the date of issue.

The fair value of the subscriber warrants issued during the year has been calculated using the Black-Scholes model. The significant inputs into the model for the IFRS 2 valuation were as follows:

 
                               Issued in year 
                                   30,769,231 
                                     warrants 
 
 Exercise price (pence)                  6.5p 
 Expected volatility (%)                   82 
 Expected life (years)                      2 
 Risk free rates (%)                0.74-0.76 
 Expected dividends                         - 
 Performance condition                   None 
 

Expected volatility was calculated considering Rose Petroleum plc share price movements over a period commensurate with the expected term immediately prior to the grant date.

The fair value of the warrants granted to subscribers during the year was US$0.3 million (2017: nil), and this has been recognised out of gross proceeds as a warrant reserve within equity.

   28.       RESERVES 

The share premium account represents the sum paid, in excess of the nominal value, of shares allotted, net of the costs of issue.

The warrant reserve represents accumulated charges made in respect of the issue of warrants to Shareholders. See note 27.

The share-based payment reserve represents accumulated charges made under IFRS 2 in respect of share-based payments.

The cumulative translation reserve represents foreign exchange differences arising on the translation of foreign operations and any net gain/(loss) on the hedge of net investment in foreign subsidiaries. The cumulative translation reserve also represents the net effect of the fact that the functional currency of the parent undertaking is GBP, whilst its reporting currency is US$, resulting in exchange differences on translation of the parent undertakings equity.

The retained deficit includes all current and prior period retained losses.

   29.       SHARE-BASED PAYMENTS 

EQUITY SETTLED SHARE OPTION PLAN

The Company has a Share Option Plan, 2013 Share Option Plan Part A (employees) and 2013 Share Option Plan Part B (non-employees), under which options to subscribe for the Company's shares have been granted to certain Directors and to selected employees and consultants.

On 24 March 2017, the Company issued 2.45 million share options with an exercise price of 14p per Ordinary Share, which vest in three equal tranches on 24 March 2018, 2019 and 2020.

On 6 April 2018, the Company issued 7.9 million share options with an exercise price of 3.5p per Ordinary Share, which vest in three equal tranches on 6 April 2019, 2020 and 2021. The options can be exercised up until the tenth anniversary of the grant date.

At 31 December 2018, 11.3 million share options had been granted under the terms of the Share Option Plans and not exercised.

The Company has no legal or constructive obligation to repurchase or settle the options in cash. The latest date for exercise of the options is 24 March 2028 and, unless otherwise agreed, the options are forfeited if the employee or consultant leaves the Group before the options vest, or if those options which have vested are not exercised within three months of leaving.

Details of the share options outstanding at the end of the year were as follow:

 
                                                2018                                          2017 
                             Number of options          Weighted average   Number of options          Weighted average 
                                          '000            exercise price                '000            exercise price 
 
 Outstanding at 1 January                3,799                    189.0p               1,308                    184.3p 
 Granted                                 7,900                      3.5p               2,450                     14.0p 
 Forfeited/cancelled                     (432)                    60.65p                  41                    319.0p 
 Outstanding at 31 
  December                              11,267                    25.75p               3,799                     76.0p 
 Exercisable at 31 
  December                               1,967                   120.82p               1,299                    189.0p 
 

The options outstanding and not yet vested at 31 December 2018 had an estimated weighted average remaining contractual life of 1.17 years (2017: 1.23 years), with an exercise price ranging between 3.25p and 14p.

The fair value of the options issued during the year has been calculated using the Black-Scholes model. The significant inputs into the model for the IFRS 2 valuation were as follows:

 
                               Grants in year 
                                    7,900,000 
                                Share options 
 
 Exercise price (pence)                  3.5p 
 Expected volatility (%)               98-103 
 Expected life (years)                5.5-6.5 
 Risk free rates (%)                 1.12-1.2 
 Expected dividends                         - 
 Performance condition                   None 
 

Expected volatility was calculated considering Rose Petroleum plc share price movements over a period commensurate with the expected term immediately prior to the grant date.

The fair value of the options granted during the year was US$0.2 million (2017: US$0.2 million).

In the year ended 31 December 2018, the Company recognised a total expense of US$0.2 million (2017: US$0.3 million) in respect of the Share Option Plan.

SHARE-BASED COMPENSATION

Under the terms of a contract of employment the Company agreed to issue Ordinary Shares in the Company to a Director in return for services provided. The fair value of the services provided can be measured directly, and accordingly, an expense of US$0.05 million was recognised in full in the year ended 31 December 2015.

WARRANTS

On 18 September 2017, the Company issued 3,625,000 warrants to TPI, in respect of broker services provided by them in relation to the placing of the Company's shares. The warrants permit the holder to subscribe for one new Ordinary Share at a price of 7.125 pence per share and are exercisable at any time until 18 September 2020. The fair value of the services provided to the Company can be measured directly and, therefore, the fair value of the warrants issued during the year to TPI has been made with reference to the terms of the agreement which stated that the number of warrants issued should be based on 5 per cent of the equity proceeds raised by TPI.

On 22 May 2018, the Company issued 1,538,461 warrants to TPI, in respect of broker services provided by them in relation to the placing of the Company's shares. The warrants permit the holder to subscribe for one new Ordinary Share at a price of 6.5 pence per share and are exercisable at any time until 22 May 2020. The fair value of the services provided to the Company can be measured directly and, therefore, the fair value of the warrants issued during the year to TPI has been made with reference to the terms of the agreement which stated that the number of warrants issued should be based on 5 per cent of the equity proceeds raised by TPI.

The fair value of the warrants issued during the year was US$0.06 million (2017: US$ 0.2 million). In accordance with the Group's accounting policy, the costs of an equity transaction are accounted for as a deduction from equity to the extent that they are incremental costs directly attributable to the equity transaction that would otherwise have been avoided. As a result, there is no impact on the Group's income statement during the year ended 31 December 2018.

Details of the warrants included in share-based payments and outstanding at the end of the year were as follow:

 
                                             Number of 
                                              warrants 
 
At 1 January 2017                           42,857,142 
 
At 1 January 2017 share consolidation 
(see note 26)                                  428,571 
Granted                                      3,625,000 
 
At 1 January 2018                            4,053,571 
Granted                                      1,538,461 
 
At 31 December 2018                          5,592,032 
 
 
   30.       COMMITMENTS UNDER OPERATING LEASES 

The Group has entered into commercial leases on certain properties. The future minimum rentals payable under non-cancellable operating leases are as follows:

 
                                     Group              Company 
                                   2018      2017      2018      2017 
                                US$'000   US$'000   US$'000   US$'000 
Land and buildings 
Amounts due within one year          23        24        23        24 
Amounts due in 2-5 years             46        73        46        73 
 
                                     69        97        69        97 
 
 

None of the operating leases above have any contingency rent, renewal or purchases options, escalation clauses nor have any restrictions relating to additional debt or further leasing.

   31.       FINANCIAL INSTRUMENTS 

FINANCIAL RISK MANAGEMENT OBJECTIVES

Management provides services to the business, co-ordinates access to domestic and international financial markets and monitors and manages the financial risks relating to the operations of the Group. These risks include foreign currency risk, credit risk, liquidity risk and cash flow interest rate risk.

The policies for managing these risks are regularly reviewed and agreed by the Board.

The Group does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes.

CAPITAL RISK MANAGEMENT

The Group manages its capital to ensure that entities in the Group will be able to continue as going concerns, while maximising the return to Shareholders through the optimisation of the debt and equity balance. The Group's overall strategy remains unchanged from 2017.

The capital structure of the Group consists of cash and cash equivalents and equity attributable to equity holders of the parent, comprising issued capital, reserves and retained earnings.

The Group is not subject to externally imposed capital requirements.

The Group plans its capital requirements on a regular basis and as part of this review the Directors consider the cost of capital and the risks associated with each class of capital.

SIGNIFICANT ACCOUNTING POLICIES

Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement, the basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are disclosed in note 3.

CATEGORIES OF FINANCIAL INSTRUMENTS

 
                                          Group              Company 
                                        2018      2017      2018      2017 
                                     US$'000   US$'000   US$'000   US$'000 
Financial assets measured at 
 amortised cost 
Cash and cash equivalents                616     2,185       598     2,156 
Trade receivables                          -       246         -         - 
Other receivables                        267       107       195         - 
Loans to subsidiary undertakings           -         -    13,024    18,250 
 
                                         883     2,538    13,817    20,406 
 
                                          Group              Company 
                                        2018      2017      2018      2017 
                                     US$'000   US$'000   US$'000   US$'000 
Financial assets measured at 
 fair value 
Investments 
 Hierarchy, Level 1                      464       500       200       500 
 
                                          Group              Company 
                                        2018      2017      2018      2017 
                                     US$'000   US$'000   US$'000   US$'000 
Financial liabilities measured 
 at amortised cost 
Trade payables                           160       141        39        43 
Other payables                           116        82         -         - 
 
                                         276       223        39        55 
 
 

FAIR VALUE OF FINANCIAL INSTRUMENTS

The Directors consider that the carrying amount of its financial instruments approximates to their fair value.

FOREIGN EXCHANGE RISK AND FOREIGN CURRENCY RISK MANAGEMENT

The Group undertakes certain transactions denominated in foreign currencies, with the result that exposure to exchange rate fluctuations arise.

The Group does not normally hedge against the effects of movements in exchange rates. The Group policy is not to repatriate any currency where there is the requirement or obligation to spend in the same denomination. When foreign exchange is required the Group purchases using the best spot rate available. As a result, there is limited currency risk within the Group other than cash and cash equivalents whose functional currency is different to presentation currency.

The carrying amounts of the Group's foreign currency denominated monetary assets and monetary liabilities at the reporting date are as follows:

 
          Liabilities            Assets 
           2018      2017      2018      2017 
        US$'000   US$'000   US$'000   US$'000 
 
GBP         116         -       354     1,266 
 
 

Foreign currency sensitivity analysis

The functional currencies of the Group are Pound Sterling (GBP), US dollars (US$), Euro (EUR) and Mexican Peso (MXN). The financial statements of the Group's foreign subsidiaries are denominated in foreign currencies.

The Group is exposed primarily to movements in US$ in respect of foreign currency risk arising from recognised assets.

Sensitivity analysis has been performed to indicate how the profit or loss would have been affected by changes in the exchange rate between GBP and US$. The analysis is based on the weakening and strengthening of US$ by five per cent. A movement of five per cent reflects a reasonably positive sensitivity when compared to historical movements over a three to five-year timeframe. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the period end for a five per cent change in foreign currency rates.

The table below details the Group's sensitivity to a five per cent decrease in US$ against GBP. A positive number below indicates an increase in profit where US$ strengthens five per cent against GBP. For a five per cent weakening of US$ there would be an equal and opposite impact on the profit, and the balance below would be negative.

 
                          2018      2017 
                       US$'000   US$'000 
 
Income statement         (988)       879 
 
 

INTEREST RATE RISK MANAGEMENT

The Group's policy on interest rate management is agreed at Board level and is reviewed on an on-going basis.

The Group has no substantial exposure to fluctuating interest rates on its liabilities. The Group has no liabilities which attract interest charges at 31 December 2018.

LIQUIDITY RISK MANAGEMENT

Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has built an appropriate liquidity risk management framework for the management of the Group's short, medium and long-term funding and liquidity management requirements. The Group manages liquidity risk by maintaining adequate cash reserves and by continuously monitoring forecast and actual cash flow.

CREDIT RISK MANAGEMENT

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. The Group does not have any significant credit risk exposure on trade and other receivables.

The Group has adopted a lifetime expected loss allowance in estimating expected credit losses to trade receivables through the use of a provisions matrix using fixed rates of credit loss provisioning. These provisions are considered representative across all customers of the Group based on recent sales experience, historical collection rates and forward-looking information that is available. Generally, trade receivables are written off when there is no reasonable expectation of recovery. Indicators of this include the failure of a debtor to engage in a repayment plan and a failure to make contractual payments for a period greater than one year.

The maximum exposure to credit risk at the reporting date to recognised financial assets is the carrying amount, net of any provisions for impairment of those assets. The Group does not hold any collateral.

Generally, financial assets are written off when there is no reasonable expectation of recovery.

The credit risk on liquid funds (cash) is considered to be limited because the counterparties are financial institutions with high and good credit ratings assigned by international credit-rating agencies.

   32.       RELATED PARTY TRANSACTIONS 

AMOUNTS DUE FROM SUBSIDIARIES

Group

Balances and transactions between the Company and its subsidiaries which are related parties, have been eliminated on consolidation and are not disclosed in this note.

Company

The Company has entered into a number of unsecured related party transactions with subsidiary undertakings. The most significant transactions carried out between the Company and their subsidiary undertakings are management charges for services provided to the subsidiary company and long-term financing. Details of these transactions are as follows:

 
                                           2018                      2017 
                                  Transactions    Amounts   Transactions    Amounts 
                                   in the year      owing    in the year      owing 
                                       US$'000    US$'000        US$'000    US$'000 
 
      Loans                              1,164     32,956          1,050     33,675 
      Management charges                   749      4,309            723      3,806 
      Interest (1.5% to 1.75%)             685      4,989            500      4,591 
      Capital contribution               (197)        957            254      1,223 
 
 
 

REMUNERATION OF KEY MANAGEMENT PERSONNEL

The remuneration of key management personnel of the Group is set out below in aggregate for each of the categories specified in IAS 24 Related Party Disclosures.

 
                                                    2018                      2017 
                                        Purchase of    Amounts   Purchase of services    Amounts 
                                           services      owing                US$'000      owing 
                                            US$'000    US$'000                           US$'000 
 
  Short-term employee 
   benefits                                     444          -                    447          - 
  Consultancy payments                           54          6                     16          1 
  Post-employment benefits                       34          2                     57         11 
  Share-based payments                          107          -                    274          - 
 
                                                639          8                    794         12 
 
 
 

The amounts outstanding are unsecured and will be settled in cash. No guarantees have been given or received.

All transactions with related parties have been conducted on an arm's length basis.

DIRECTORS' EMOLUMENTS

Remuneration paid to Directors during the year was as follows:

 
                                        2018 
                        Emoluments  Emoluments(1)   Consultancy    Pension      Total 
                       entitlement          taken       US$'000    US$'000    US$'000 
                           US$'000        US$'000 
Executive Directors 
  MC Idiens                    200            208             -         20        228 
  KB Scott                      13             13            54          -         67 
  CJ Eadie                     136            143             -         14        157 
 
Non-executive 
 Directors 
  PE Jeffcock                   34             34             -          -         34 
 
                               383            398            54         34        486 
 
 
 

(1) Emoluments include benefits-in-kind which are not included in emoluments entitlement

 
                                            2017 
                            Emoluments  Emoluments(1)    Pension      Total 
                           entitlement          taken    US$'000    US$'000 
                               US$'000        US$'000 
Executive Directors 
  MC Idiens                        193            200         46        246 
  KK Hefton                      54(2)             54          2         56 
  KB Scott                          16             16          -         16 
  CJ Eadie                         118            124          9        133 
 
Non-executive Directors 
  PE Jeffcock                       24             24          -         24 
 
                                   405            418         57        475 
 
 
 

(1) Emoluments include benefits-in-kind which are not included in emoluments entitlement

(2) Emolument to the date of resignation on 1 July 2017

The remuneration of Directors and key executives is decided by the remuneration committee having regard to comparable market statistics.

Directors' share options are detailed in the Directors Report.

Directors' pensions

 
                                                    2018  2017 
                                                      No    No 
  The number of Directors to whom retirement 
  benefits are accruing under money purchase 
  schemes was                                          3     2 
 
 
 
   33.       POST BALANCE SHEET EVENTS 

EQUITY FUNDRAISE

On 24 May 2019, the Company raised gross proceeds of US$0.4 million (GBP0.3 million) by way of a placing of 25 million Ordinary Shares of 0.1p each at a price of 1.2 pence per share.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact [e-mail] or visit www.rns.com.

END

FR UBUWRKBANUAR

(END) Dow Jones Newswires

June 28, 2019 02:00 ET (06:00 GMT)