ROSE PETROLEUM PLC
REPORT & FINANCIAL STATEMENTS
Year ended 31 December 2013
Rose Petroleum plc
DIRECTORS, ADVISORS AND OFFICERS
DIRECTORS
Rt Hon Earl of Kilmorey PC
PE Jeffcock
MC Idiens
KK Hefton
KB Scott
Non‐Executive Chairman
Non‐Executive Director
Chief Executive Officer
Chief Operating Officer
Technical Director
SECRETARY
IH McNeill
REGISTERED OFFICE
145‐157 St John Street
London
EC1V 4PW
AUDITOR
Baker Tilly UK Audit LLP
2 Whitehall Quay
Leeds
LS1 4HG
REGISTRARS
Capita Registrars
3 St. Helen’s Place
London
EC3A 6AB
SOLICITORS
Memery Crystal LLP
44 Southampton Buildings
London
WC2A 1AP
NOMINATED ADVISER AND BROKER
Allenby Capital Limited
3 St Helen's Place
London
EC3A 6AB
FINANCIAL PUBLIC RELATIONS
Lionsgate Communications Limited
1 The Mews
Farley Castle
Castle Hill
Farley Hill
Wokingham
Berkshire
RG7 1XD
BANKERS
Barclays Bank Plc
Level 27
1 Churchill Place
London
E14 5HP
2
Rose Petroleum plc
HIGHLIGHTS
GENERAL HIGHLIGHTS
Strategic review of operations resulting in the pursuit of Oil & Gas opportunities
Change of name from VANE Minerals plc to Rose Petroleum plc
Establishment of a new Oil & Gas division
Matthew Idiens replaced David Newton as CEO
FINANCIAL HIGHLIGHTS
Revenue maintained at £5.71 million (2012: £5.76 million)
Fundraise during the year raising gross proceeds of £1.4 million (2012: £nil)
Cash balances of £1.18 million as at 31 December 2013 (2012: £0.53 million)
GOLD AND SILVER PRODUCTION AND MILLING
5,643 oz. Au and 71,639 oz. Ag produced in 2013 at a direct production cost of US$717.81 equivalent
per oz. Au; or US$11.62 equivalent per oz. Ag (2012: 4,341 oz. Au and 85,241 oz. Ag produced at a
direct production cost of $682.33 equivalent per oz. Au; or $12.62 equivalent per oz. Ag)
37,195 tonnes processed in period (114% of target) (2012: 32,070 tonnes)
Average grades 8.26 g/T Au and 105 g/T Ag (2012: 6.07 g/T Au and 121 g/T Ag)
Average metal price received on sales of concentrates was US$1,358/oz. gold and US$22.40/oz. silver
(2012: average prices of $1,662/oz. gold and $30.70/oz. silver)
Average recovery rate of 81% Au and 74% Ag (2012: 79% Au and 77% Ag)
COPPER PORTFOLIO
Partner sought to help fund exploration programmes on copper properties
Company’s agreement with Freeport‐McMoRan Copper and Gold Inc. which provides access to
Freeport’s extensive domestic and international exploration files extended for an additional two‐year
period to 30 June 2015
URANIUM PORTFOLIO
Key asset is Wate Mining Company LLC (Member companies VANE Minerals (US) LLC, as manager, and
Uranium One Americas Inc., each holding 50%) which controls NI 43‐101 compliant inferred resource
of 1.118m Ibs eU3O8 at Wate breccia pipe project. Mineral Lease application in process
Extension of the Mining Venture Agreement with Uranium One to 31 December 2017
Remaining exploration programme continued on care and maintenance
Intention to sell assets announced
OIL & GAS PORTFOLIO
Appointment of Kelly Scott as Technical Director with responsibility for building Oil & Gas drilling and
completion programmes
Appointment of Dr Fivos Spathopoulos as Chief Consulting Geologist with responsibility for the
development of the Company’s European exploration programme
Conditional sale and purchase agreement to acquire two hydrocarbon licences over 635,000 acres in
Molasse Basin, southwest Germany
Application submitted for an additional hydrocarbon licence covering approximately 657,000 acres in
the Weiden Basin, southeast Germany
3
Rose Petroleum plc
HIGHLIGHTS
POST YEAR‐END HIGHLIGHTS
OIL & GAS
Completed acquisition of the three hydrocarbon licenses in Germany
Appointed John Blair as Head of New Ventures Oil & Gas
Signed farm‐in agreement on significant U.S. shale oil play in the Uinta and Paradox Basins of Utah
encompassing over 230,000 acres with nearby oil production
Prospective Resources Report by Ryder Scott Company on Utah project estimates unrisked
prospective (recoverable) resources of Best Case 966 MMBO and 1,888 BCFG on the Paradox
Formation leasehold and 486 MMBO and 2,903 BCFG on the Mancos Shale leasehold
COPPER
Joint venture agreement entered into with Lowell Copper Ltd on TC Project in State of New Mexico,
U.S.A.
URANIUM
U.S. Federal Court of Claims dismisses the Company’s damages lawsuit pertaining to losses suffered as
a consequence of the withdrawal of Federal lands in northern Arizona. The Company still has
standing in lawsuit pending in U.S. District Court
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Rose Petroleum plc
CHAIRMAN’S STATEMENT
I am pleased to inform our shareholders that the Company was successful in carrying out significant changes in
2013 and has entered the new year with momentum.
The Company elected to move the emphasis of its core business into the Oil & Gas sector based on the
excellent opportunities that have become available from the innovations revolutionising the Oil & Gas
industry.
The Board itself has undergone substantial change during 2013 which reflect the Company’s new and
extended strategy. Matthew Idiens was appointed as Chief Executive Officer in July, having acted previously as
a non‐executive Director. Matthew was mandated to build both an Oil & Gas team and a portfolio of projects.
This he has achieved with impressive results. Philip Jeffcock was appointed to the Board as a non‐executive
Director in August 2013. Philip has a distinguished career in Finance and Property, having worked at Goldman
Sachs International, Barclays Capital and Royal Bank of Scotland, before setting up Cew Capital LLP. We believe
his appointment will provide a significant contribution to the Board. We give a warm welcome to Kelly Scott
who was appointed as Technical Director in September 2013 in recognition of the Company’s intention to
extend its activities into the Oil & Gas sector. Kelly has over 40 years of experience in both onshore and
offshore drilling and has an international reputation in the Oil & Gas industry. Since the year‐end, John Blair
has joined the team as Head of New Ventures Oil & Gas. John has 27 years of experience in the industry mostly
in the U.S. He has been a key hire and has played a major part in the Company’s success in finding and
acquiring our Utah project. Steve Van Nort and L Clark Arnold have resigned as non‐executive Directors as the
weighting of the Board moves more towards the new business. Steve and Clark have contributed a significant
amount to the Company over the years and we are delighted that they will remain as consultants for AVEN,
the porphyry copper exploration arm of the business.
The revised strategy of the Company has resulted in the establishment of a highly experienced and respected
technical team and brought immediate rights to Oil & Gas interests located in Germany. During the second half
of 2013 the new team evaluated a number of acquisition opportunities which, in early 2014, led to the signing
of a farm‐in agreement on an exciting opportunity in Utah in the Paradox and Uinta Basins which are
undergoing a substantial increase in production. This opportunity, consisting of 230,000 acres, is surrounded
by producing wells and increasing interest and activity. A Prospective Resources Report prepared by Ryder
Scott Company, a leading Oil & Gas reserves consultant, as part of Rose’s due diligence on this acquisition
confirmed that the acreage being acquired holds very significant production potential. We look forward to
developing this exciting project.
The Mexican operations continued to perform solidly despite the decrease in the prices received for our gold
and silver sold. Ore throughput at the SDA mill increased as a result of mill improvements. The La Colorada ore
deposit afforded us the ability, through selective mining, to raise the overall grade of ore mined and shipped to
help offset the decrease in metals prices. I am optimistic that moving into 2014 our Mexican operations will
continue to produce at 2013 levels and our efforts to locate additional production opportunities will result in
the need to expand milling capacity at SDA.
Although the Mexican operations continued to be strong, the decrease in metals prices prevented us from
funding fully our copper programme. We maintained several of our key copper properties while seeking
funding from third parties. We extended our agreement with Freeport‐McMoRan Copper and Gold Inc. on the
exploration database for another two years to 30 June 2015. We met with several interested parties during
the year including several field visits and I am pleased that this effort resulted in an agreement with Lowell
Copper Ltd in early 2014 on our TC project. We continue to have interest in our copper assets and hope to see
this culminate in further joint venture agreements in the coming year.
Our uranium programme continued on care and maintenance as we searched for a buyer of these assets.
Since the year end we were informed that the U.S. Court of Federal Claims dismissed our damages case and
5
Rose Petroleum plc
CHAIRMAN’S STATEMENT
we do not anticipate appealing. However, the case in U.S. District Court continues and we stand to benefit
should a decision, expected in late 2014, be favourable.
We would like to thank our investors for their continuing support. We look forward to updating you with our
progress throughout the rest of 2014.
Rt Hon Earl of Kilmorey PC
30 May 2014
6
Rose Petroleum plc
STRATEGIC REPORT
The Directors present their strategic report on the Group for the year ended 31 December 2013.
PRINCIPAL OBJECTIVES AND STRATEGIES
Rose Petroleum plc, formally VANE Minerals plc, was a mineral exploration company focused on the
evaluation and development of mineral exploration targets, principally gold, silver, uranium and copper,
together with the development and operation of precious metals mining and milling operations. During the
year the Company underwent a strategic review and announced our intention to extend our activities into the
Oil & Gas sector. Our objective is now to invest in the Oil & Gas and minerals sectors through the continuing
investigation and evaluation of new properties thereby improving share price and, ultimately, enhancing
shareholder value.
We will achieve these objectives through various strategies:
continuing development of a Board consisting of highly experienced professionals covering Oil & Gas,
mineral exploration, mine development, financing and financial control of public companies;
establishment of a new division for our proposed diversification and ultimate shifting of emphasis into
the Oil & Gas sector;
commitment to operations involving the exploration and development of mineral deposits;
the acquisition of interests in Oil & Gas and minerals projects or companies holding those interests in
exchange for cash, royalties or other deferred interests;
the acquisition of interests in Oil & Gas and minerals properties and projects through farm‐in
agreements and joint ventures; and
consideration of the capital and financing required to achieve our objectives and market perception.
REVIEW OF OPERATIONS
Oil & Gas Division
During the year the Company indicated its intention to extend operating activities into the Oil & Gas sector,
and changed the name of the Company to Rose Petroleum plc. A highly experienced Oil & Gas technical team
was established with the appointment of Kelly Scott to the Board of Directors as Technical Director, Dr Fivos
Spathopoulos as Chief Consulting Geologist and soon after, John Blair joined the team as Head of New
Ventures.
The Company intends to capitalise on the many opportunities that have developed within the Oil & Gas
industry as a result of successful production innovations which have transformed the industry during the last
few years.
The Company made significant progress with the transition of the Company into a new petroleum company
when it entered into a sale and purchase agreement in August 2013 to acquire the entire issued share capital
of a company that was, at that time, in the process of renewing two hydrocarbon exploration licences in
southwest Germany, covering an area of approximately 635,000 acres. This represented a significant
opportunity for the Company to enter the Oil & Gas arena in a highly prospective geological setting with
multiple target zones.
The appointment of Kelly Scott and Dr Spathopoulas in September 2013 put the Company in a strong position
as it implemented its new strategy. Kelly Scott has over 40 years of experience in both onshore and offshore
drilling, construction and completion, from Southeast Asia to South America and the Middle East. As Technical
Director, Kelly will be responsible for building drilling and completion programmes and overseeing field well
site supervision, field drilling coordination and field construction and regulatory coordination. As Chief
Consulting Geologist, Dr Spathopoulos is responsible for the development of the Company’s European
exploration programmes and assessment of new projects within the region. He has over 20 years of
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Rose Petroleum plc
STRATEGIC REPORT
experience in conventional petroleum exploration, extensive experience in international exploration and is an
expert on organic geochemistry and reservoir maturity modelling.
German hydrocarbon licences
The two licences subject to the sale and purchase agreement signed in August 2013, the Konstanz and
Biberach, were renewed in Q4 2013. The licences cover areas in the Molasse Basin in the State of Baden‐
Württemberg, southwest Germany, and contain both conventional and unconventional petroleum plays.
The first of the licences, Konstanz, covers an area of 369,863 acres and has significant historic data available,
including two oilfields and two deep wells in the area, which have enabled the identification of four main
target horizons: (a) shale oil in Tertiary black shales (Schoneck shales); (b) shale oil in Lower Jurassic
(Posidonienschiefer) black shales; (c) shale gas in Early Permian (Autunian) black shales; and (d) tight gas in
Upper Carboniferous (Stephanian) sandstones. All the shale sections have been sampled and show promising
geochemical, maturity and petrological properties and all of the targets can be tested with a single well.
The Company believes that the second of the licences, Biberach, which covers an area of 266,073 acres, has
similar target horizons: (a) shale oil in Tertiary black shales (Schoeneck shales); (b) shale oil in Lower Jurassic
Posidonienschiefer black shales; and (c) possible shale gas and tight gas from Early Permian and Upper
Carboniferous formations. Additional seismic data will be required to confirm the targets.
Two conventional oilfields exist as separate permits in this licence area owned by a third party.
In Q4 2013, the Company made a further licence application in respect of a concession for hydrocarbon
exploration covering approximately 657,000 acres in the Weiden Basin, located in the State of Bavaria,
southeast Germany. The licence is a conventional petroleum play and the Company established a new German
subsidiary company, Naab Energie GmbH, through which it intends to hold the licences.
The Weiden licence was applied for based on the relatively recent discovery of hydrocarbons in the Weiden
Basin. In 1989, the town of Weiden drilled a geothermal well (Weiden‐1) which indicated the presence of oil in
the Permian sandstones. A core, bleeding of oil, was recovered and, following analyses, it was reported that
the oil came from Permian‐Carboniferous source rocks. Later in 1989, the town of Weiden applied for a
petroleum exploration licence covering a small area surrounding the town, but relinquished the licence in
1991. The exploration efforts were subsequently taken up by the consortium of Preussag/Maxus, companies
headquartered in Germany and Texas. The permit awarded to these companies was called "Oberpfalz" and
included all the prospective area of the Weiden Basin and the consortium shot four new seismic lines. The
permit was relinquished in 1994 and the seismic data was subsequently acquired by Gaz de France (Germany),
when it took over Preussag. Some of the seismic data and structural maps were published and several
exploration targets are indicated in this seismic data. Conventional prospectivity is expected to focus on the oil
charged by Paleozoic source rocks, found in structural traps in Permian sandstones.
Utah, U.S.A.
In early 2014, the Company appointed John Blair as Head of New Ventures. John, who is engaged as a
consultant to Rose, has 27 years of experience in the upstream Oil & Gas industry and was previously Senior
Vice President of Knowledge Reservoir, a global Oil & Gas consulting firm, which was sold to the RPS Group in
2013. He founded, and was President of three successful private U.S. Independent Oil & Gas companies with
significant combined asset values. John has extensive experience in identifying, analysing and negotiating Oil &
Gas investment opportunities worldwide and is considered as a recognised expert in both conventional and
unconventional Oil & Gas exploration and development. He has particular expertise in operating in the Utah
area, having operated there for 17 years.
In March 2014, the Company announced that it had signed a farm‐in agreement in relation to approximately
230,000 acres in the Paradox and Uinta Basins in Utah. This is now the main focus of the Company’s operations
8
Rose Petroleum plc
STRATEGIC REPORT
with significant production potential. Ryder Scott Company completed a resource evaluation of the leases
which confirms the immense, potential scale of the project.
The Utah project gives exposure to two different basins with two separate target formations. The Paradox
Formation of the Paradox Basin has up to 18 target horizons including the Cane Creek Clastic, the deepest at
around 10,000 feet. The Mancos Shale within the Uinta Basin has 5 separate potential pay intervals at depth of
approximately 3,000 feet.
A summary of the Ryder Scott Prospective Resources Report is set out below:
(Full Report available on the website: www.rosepetroleum.com)
Table 1: Estimated 100% Gross Volumes Unrisked Undiscovered Original Hydrocarbon In Place (OOIP & OGIP)
in the Mancos Shale and Paradox Formation:
Prospect/
Formation
Mancos Shale
Collective Total
Paradox Formation
Collective Total
Total
OOIP ‐ MMBO
OGIP – BCFG
P90
P50
P10
P90
P50
P10
14,545
17,309
20,383
81,059
103,265
129,231
15,876
19,139
23,008
26,005
32,999
41,300
30,421
36,448
43,391
107,064
136,264
170,531
(MMBO = million barrels oil, BCFG = billion cubic feet gas)
Table 2: Estimated 100% Gross Volumes Unrisked Prospective Recoverable Hydrocarbon Resources (Estimated
Ultimate Recoverable Reserves ‐EUR) in the Mancos Shale and Paradox Formation:
Prospect /
Formation
Mancos
Totals
Paradox
Totals
EUR Oil/Condensate ‐ MMBO
EUR Gas – BCFG
Low
Best
High
MEAN
Low
Best
High
MEAN
168.20
486.49
1,376.11
666.11
995.13
2,903.39
8,272.99
3,998.72
452.27
966.37
1,994.50
1,115.29
874.43
1,888.46
3,913.55
2,187.46
Paradox Formation, Paradox Basin, Utah
The Paradox source rocks and reservoir rocks are trapped vertically and laterally by thick salt intervals. This
restricted the ability for the generated oil to migrate out of the salt‐enclosed clastic cycles and thus has set up
a regional resource play.
The Paradox is approximately 3,000 feet thick across the Rose leasehold at the depth of 6,500 to 10,000 feet.
The collective Low Case Prospective Recoverable Resource potential that Ryder Scott has determined for the
Paradox Formation on Rose’s leases is 450 MMBO and 875 BCFG from the collective 15 prospective reservoirs
that they identified (see Table 2). This is not to say that every prospective reservoir is necessarily going to be
economic. Thus, Ryder Scott has placed a Chance of Success (COS) risk factor on each prospective reservoir,
which vary across each individual reservoir from as low as a 21% COS to as high as a 56% COS.
Fidelity Exploration and Production (a wholly‐owned subsidiary of MDU Resources Group – NYSE: MDU) is
actively developing the Paradox immediately south of Rose’s Paradox acreage. Since 2012, Fidelity has
regularly achieved IP initial rates of production of 1,000 BOPD (barrels of oil per day) per well and has
produced over 5.2 MMBO and 4.2 BCFG from 20 wells. Fidelity is currently producing over 4,500 BOPD from
the Paradox. Fidelity has reported individual well reserves of recent horizontal wells as high 1.5 MMBO per
well.
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Rose Petroleum plc
STRATEGIC REPORT
The Paradox Formation consists of a series of clastic cycles of which the above production figures are primarily
only from the lowest interval, known as the Cane Creek. However, Fidelity has established 10 additional clastic
cycles within the Paradox that it believes to be productive and is just now beginning to develop those. Fidelity
has released reserve estimates of 150 to 440 MBO (thousand barrels of oil) per interval per well for each of
these additional 10 zones. Fidelity has a capital budget for the Paradox of $170M for 2014.
Mancos Shale, Uinta Basin, Utah
The Mancos Shale is stratigraphically equivalent to the Niobrara in northwest Colorado and the Eagle Ford in
south Texas. The Mancos has a long history of production in the region having produced over 300 MMBO
(million barrels of oil) and 5 TCFG (trillion cubic feet of gas).
The Mancos was divided into eleven prospects with each prospect having five separate potential “pay”
intervals based on existing well control and surrounding production. The collective Low Case Prospective
Recoverable Resource potential that Ryder Scott has determined for the Mancos on Rose’s leases is 168
MMBO and 995 BCFG. Similarly to the Paradox, Ryder Scott has cautioned that not every interval is necessarily
going to be economic. Therefore, Ryder Scott has placed a Chance of Success (COS) risk factor on each of the
five Mancos intervals. As the Mancos is much more homogeneous than the Paradox, the COS that Ryder Scott
developed for the Mancos is the same for each of the five intervals. Ryder Scott’s COS for all the Mancos is
30%.
Rose plans to develop the project during the remainder of 2014. 3D seismic is planned particularly over the
Paradox basin where Fidelity has proven 3D to be particularly effective. Rose also plans to drill 4 wells in the
Mancos and one in the Paradox over the next 12‐18 months. This will transform Rose into a producing Oil &
Gas company and the Board anticipates this to be by Q2 2015.
Gold and Silver Mining Operations, Mexico
Minerales VANE SA de CV, the 100% owned subsidiary of Rose Petroleum plc, continued to improve its
production performance in 2013. Its operations are directed from the headquarters located in Acaponeta,
Nayarit that include offices and living quarters. Mill production is carried out at its nearby mill in San Dieguito
de Arriba (SDA) where it also operates its analytical facility.
During the year, production focused primarily on ore from our joint venture with Met‐Sin, located in La Rastra,
Sinaloa. The joint venture has an area of interest covering some 1,500 square kilometres in southern Sinaloa. It
includes three separate mining districts; La Rastra, Escuinapa and Rosario as well as four concessions
controlled by Met‐Sin. The La Colorada concession produced 96.5% of the ore shipped to and processed by
SDA during 2013 which was subject to the 50:50 profit split under the terms of the JV agreement. The
remaining production came from the Company’s 100% owned Diablito Mine where 1,297 tonnes of remaining
pillar ore were mined and processed prior to starting mine closure.
Production of gold and silver from our operations continued to improve overall with a 30% increase in ounces
of gold produced, which more than offset the 16% decrease in ounces of silver produced, compared with 2012.
This was caused by higher average gold grades, but lower average silver grades of the ore milled as well as a
16% increase in SDA mill throughput. However, revenue has remained fairly consistent with that achieved in
2012 as a result of the decrease in metals prices during 2013, which saw an 18% decrease in gold price and
27% decrease in silver price received on sales of concentrates averaged over the year.
During the year, the SDA Mill produced 5,643 ounces of gold (Au) and 71,639 ounces of silver (Ag) at a direct
production cost of US$717.81 per ounce and US$11.62 per ounce equivalent, respectively (2012: 4,341 ounces
Au and 85,241 ounces Ag at a direct production cost of $682.33 per ounce Au and $12.62 per ounce Ag
equivalent). This was produced from 37,195 tonnes of ore averaging 8.26 g/T Au and 105 g/T Ag processed
through the mill (2012: 32,070 tonnes of ore averaging 6.07 g/T Au and 121 g/T Ag). Production averaged
approximately 3,100 tonnes per month which is 114% of targeted production capacity (2012: 2,672 tonnes per
month, 107% of targeted production capacity). The average mill recovery rates were 81% Au and 74% Ag
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Rose Petroleum plc
STRATEGIC REPORT
(2012: 79% Au and 77% Ag). The average metal prices received on sales of concentrates were US$1,358 per
ounce Au and $22.40 per ounce Ag (2012: $1,662per ounce Au and $30.70 per ounce Ag).
The Company anticipates production from its Mexican operations to continue at the same rate during 2014
and continues to evaluate opportunities that could lead to the expansion of production and milling.
Copper Exploration, Southwest U.S.A.
The Company’s porphyry copper programme is operated by the Company’s wholly‐owned subsidiary AVEN
Associates LLC with offices located in Tucson, Arizona.
The global downturn in metals which severely impacted junior companies, carried over into AVEN’s
operations. As a result of decreased revenue available from the Company’s Mexican operations due to
declining metals prices, the copper exploration programme continued on a care and maintenance basis with
the property positions being kept current while third‐party financing was sought to continue the programme.
AVEN met with a number of interested parties during the year including several field visits, and interest
continued through the end of the year.
AVEN’s covered‐area concept and programme holds a number of prospective targets such as McGhee Peak,
Peg Leg, Lone Hill, Railroad Well, and Cherry Creek where land positions are held as well as targets “in the
pipeline”.
Uranium Exploration, U.S.A.
The Company’s uranium programme is led by the joint venture project with Uranium One Americas Inc. (U1) in
northern Arizona.
All of the Company’s uranium assets, other than set out below, are currently held on a care and maintenance
basis following the withdrawal of Federal lands in northern Arizona and the weakening of the uranium market.
The most significant asset within the joint venture is the Wate Project located on State of Arizona lands and
operated under Wate Mining Company LLC. The project has a NI 43‐101 compliant resource of 1.118m lbs
eU3O8 with an average grade of 0.79% eU3O8. Ownership of the project is 50:50 between VANE Minerals (US)
LLC (“VANE US”) and U1 and will remain 50:50 assuming that all development costs are split equally between
the parties. VANE US is the manager of the Wate LLC. A Mineral Lease has been applied for with the Arizona
State Land Department. A Mineral Lease gives authority to develop the project contingent on obtaining
environmental compliance permits from the Arizona Department of Environmental Quality (ADEQ).
The Company continues to pursue the sale of its uranium assets.
Legal Update
As previous announced, VANE US, the wholly‐owned subsidiary of Rose, filed a lawsuit, as principal, in the U.S.
Court of Federal Claims seeking redress on financial losses as a result of the withdrawal of the Federal lands
where VANE US held its mining claims on which it had invested. Since the year end, the U.S. Court of Federal
Claims dismissed our damages case and we do not anticipate appealing. However, the case in U.S. District
Court is ongoing and we stand to benefit should a decision expected in late 2014 be favourable.
FINANCIAL REVIEW
Revenue
Revenue for the year has been generated primarily from the Met‐Sin joint venture mine, La Colarada. The
Income Statement reports total revenue for the year ended 31 December 2013 of £5,710,172 (2012:
£5,759,225). Despite the decrease in gold and silver prices during 2013, revenue from the Met‐Sin joint
venture have remained robust due to higher levels of production, grade control and improved recovery rates.
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Rose Petroleum plc
STRATEGIC REPORT
Income Statement
The Group reported a net loss after tax of £3,309,130 or 0.57p per share for the year ended 31 December 2013
(2012: net loss after tax of £542,619 or 0.12p). The Group reported a gross profit of £1,571,007 (2012:
£1,707,977) after charging profit share payments due under the terms of the joint venture of £1,045,655
(2012: £1,428,558) and depreciation of £124,219 (2012: £379,954).
Impairment of the Group’s intangible uranium exploration and evaluation assets resulted in a charge of
£2,939,708 (2012: £nil) during the year.
Investment income representing interest received on the Group’s cash balances was £2,596 (2012: £5,959).
Balance Sheet
Total investment in intangible assets at 31 December 2013 was £2,389,367 (2012: £5,254,481) reflecting an
impairment of £2,939,708 recognised during the year.
Property, plant and equipment at 31 December 2013 was £614,156 (2012: £688,756) reflecting the continued
depreciation of the Ore processing mill.
Trade and other receivables of £1,434,701 (2012: £702,541) represents amounts due in relation to trade
receivables and VAT recoverable together with the sum of £257,577 in respect of the deposit paid under the
terms of the SPA agreement in relation to the two hydrocarbon licences in southwest Germany.
Cash and cash equivalents at 31 December 2013 were £1,179,069 (2012: £529,367). During the year the
Company completed a placing of 349,750,000 Ordinary Shares of 0.1p each at a price of 0.4p per share, raising
gross proceed of £1,399,000.
Provision for decommissioning of the Diablito mine has now been treated as a current provision as the
restoration of the site is expected to take place within the next twelve months.
Significant Equity Events
On 15 August 2013, the Company completed a placing of 349,750,000 Ordinary Shares of 0.1p each at a price
of 0.4p per share, raising gross proceeds of £1,399,000.
Going Concern
The Directors have set out in note 3 to the financial statements their consideration of the future financing
requirements of the Group and, having made appropriate enquiries and having examined the major areas
which could affect the Group’s financial position, the Directors are satisfied that the Group has adequate
resources to continue in operation for the foreseeable future. For this reason, they consider it appropriate to
adopt the going concern basis in preparing the financial statements. This assessment has been carried out in
the light of the guidance issued to the Directors by the Financial Reporting Council.
KEY PERFORMANCE INDICATORS
The Group measures its progress against a number of key performance indicators which are reviewed regularly
by the Board. These are set out below in respect of 2013.
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Rose Petroleum plc
STRATEGIC REPORT
Item
Actual
Target
Comment
Maintenance of
mineral grades
‐ Met‐Sin JV
8.26 Au/104.9g Ag
6gAu/110g Ag
Recovery rates
‐ Met‐Sin JV
81.1%Au/74.5%Ag 75%Au/70%Ag
Mill throughput
monthly averages
(tonnes)
3,100
3,000
RISKS AND UNCERTAINTIES AND RISK MANAGEMENT
Production grades were 37.6% higher
than expectations and reflect the higher
grades achieved from the Met‐Sin JV
mined ore
Recovery rates continue to improve due
to better processing techniques
Target achieved due to excellent
performance at SDA by Rose’s technical
team
There are a number of potential risks and uncertainties which could have a material impact on the Group’s
long term performance and could cause actual results to differ from expected and historical results. The
principal risks and uncertainties that we face are:
Non‐Financial Risks
Overseas territories experience varying degrees of political instability. There can be no assurance that
political stability will continue in those countries where the Group currently has, or in future will have,
operations. Political instability or changes in government law or policies could materially affect the
rights and title to the interests held by the Group, and the operations and financial condition of the
Group could be adversely affected.
The U.S. Department of Interior has issued a 20‐year withdrawal from mineral entry on approximately
1,000,000 acres in the northern Arizona’s uranium breccia pipe district. This order prevents work on
our claims located on Federal lands. State of Arizona lands, on which the Group is now focusing its
efforts, are unaffected by this withdrawal.
The geographic locations of the Group’s operations can present logistical difficulties in the
installation, operation and maintenance of equipment related to the activities of the business. The
Group currently generates its income from mining activities operated by contractors and is at risk of
any disruption to mining or milling activities for reasons beyond the Group’s control. The Group has
excellent relationships with mining contractors operating at the mine and has access to alternative
contractors if required.
The Group’s operations are such that minor and major injuries as well as fatalities could occur which
could result in the temporary closure of the Group’s operations.
In certain overseas territories the Group is unable to obtain the comprehensive level of insurance
cover that would be available in the United Kingdom.
Financial Risks
There is a risk that the carrying value of the Group’s assets will not be recovered through future
revenues, leading to significant impairment losses. The Group manages the recoverability of its assets
and assesses the economic viability throughout the exploration, development and production phases.
The activities of the Group are subject to fluctuations in prices and demand for minerals, which are
volatile and cannot be controlled. The Group sells all its concentrates to the only third party smelter in
Mexico currently accepting custom concentrates. In addition to the risks of having a single outlet for
concentrates, the Group is restricted to the commercial charges of those parties and the availability of
capacity and continuity of labour. However, the Group’s cyanide leach plant, the Merrill Crowe
facility, is operational and in the future the Group has the option of processing its concentrates
through this facility should it be required. This alleviates any potential bottleneck at the smelter and
13
Rose Petroleum plc
STRATEGIC REPORT
provides the Group with the option of processing its own concentrates to produce high‐grade zinc
precipitates which can then be sold to a wider market.
Changes in the U.S. mining laws may affect future operations in that royalties on minerals extracted
from federal lands may be imposed.
Funds are maintained by the Group in GBP, MXN and USD. There is a risk that purchasing power in
Mexico and the U.S. is lost though foreign exchange translation. The Group considers its foreign
exchange risk to be a normal and acceptable business exposure and does not hedge against the risk.
There is a risk that there will be insufficient funds to meet all corporate, development and production
obligations and activities and continue as a going concern into the foreseeable future. The Group
manages liquidity risk by maintaining adequate cash reserves and monitoring forecast and actual cash
flows. Management regularly reviews the Group’s cash flow projections and forecasts.
CORPORATE SOCIAL RESPONSIBILITY
Employee Recruitment and Retention
Although the Group had no quantitative target for the number of employees it needs or retains, this metric is
closely monitored. The Group has an excellent record of retaining key staff.
Health and Safety
It is the objective of the Group to ensure the health and safety of its employees and of any other persons who
could be affected by its operations. It is the Group’s policy to provide working environments which are safe
and without risk to health and provide information, instruction, training and supervision to ensure the health
and safety of its employees.
Significant Relationships
The Company enjoys good relationships with all of its suppliers, professional advisers and joint venture
partners.
FUTURE DEVELOPMENTS
Your Board, management and dedicated exploration team continue to investigate and evaluate new
opportunities designed to improve share price and, ultimately, shareholder value. The Company will continue
to operate its gold and silver operations in Mexico and intends to open additional mines in the next 12
months. The Directors will seek to progress the sale of its uranium assets, identify further partners to finance
its porphyry copper exploration programme and consider corporate actions.
However, the main focus of the company going forward will be its Oil & Gas assets. In January 2014, the
Company announced the completion of the acquisition of Parkyn Energy Holdings plc which in turn owns 100%
of Parkyn Energy Germany Ltd, the sole owner of the two hydrocarbon licences in southwest Germany. Also in
January 2014, the new hydrocarbon licence in the Weiden Basin, Germany was granted to the Company and
commenced 1 February 2014 for an initial period of three years. The Company will be targeting the
conventional reservoirs that are believed to exist within the licence areas. The initial programme will be mainly
desktop evaluation.
The Ryder Scott Prospective Resources Report recently released shows the huge potential of the Utah project
and its potential to dramatically change the Company going forward. We will be seeking to finance the
exploration and development programme of this project and subject to the success of that funding, the
development programme will be aggressively pursued.
Next year we plan to be our first year as a producing Oil & Gas company, we plan to expand this part of the
business not only through organic growth but also through seeking additional acquisitions. As we have shown
this year, we have a team capable of assessing opportunities quickly, efficiently and successfully. We plan to
14
Rose Petroleum plc
STRATEGIC REPORT
use this skill set to develop further opportunities whilst utilising the Oil & Gas team’s operational track record
to develop the projects on the ground.
We would like to thank all shareholders for their continued support.
By order of the board
MC Idiens
Chief Executive Officer
15
Rose Petroleum plc
DIRECTORS’ REPORT
The Directors present the annual report and financial statements of the Group for the year ended 31
December 2013. The Corporate Governance Statement and the Strategic Review form part of this report.
REVIEW OF THE BUSINESS
A review of the business, future developments and the principal risks and uncertainties facing the Group is
given in the Strategic Report. The key performance indicators, which the Directors consider to be effective in
managing the business, are included in the Strategic Report.
DIVIDENDS
The Directors do not recommend a dividend for the year ended 31 December 2013 (2012: £nil).
DIRECTORS
The following were Directors during the year and held office throughout the year, unless otherwise indicated:
Rt Hon Earl of Kilmorey PC
SD Van Nort ‐ resigned 29 January 2014
LC Arnold ‐ resigned 29 January 2014
MC Idiens
KK Hefton
DJ Newton ‐ resigned 31 July 2013
PE Jeffcock ‐ appointed 15 August 2013
KB Scott ‐ appointed 3 September 2013
DIRECTORS' INTERESTS IN SHARES AND SHARE OPTIONS
The Directors who held office at 31 December 2013 had the following interests, including family interests, in
the Ordinary Shares of the Company as follows:
Number of Ordinary Shares
Rt Hon Earl of Kilmorey PC
SD Van Nort
LC Arnold
MC Idiens
KK Hefton
PE Jeffcock
KB Scott
31 December 2013
2,330,000
6,500,000 1
10,500,000 2
16,805,880
116,000
18,006,741 3
‐
1 January 2013
2,330,000
6,500,000 1
10,500,000 2
16,805,880
116,000
506,741 3
‐
1Beneficial interest held through the Van Nort Family Trust.
2Beneficial interest held through L Clark and Ardith P Arnold Family Trust.
3Beneficial interest held through the Glenville Discretionary Trust.
Directors’ interests in share options of the Company, including family interests, as at 31 December 2013 were
as follows:
MC Idiens
KK Hefton
Rt Hon Earl of Kilmorey PC
KK Hefton
Rt Hon Earl of Kilmorey PC
MC Idiens
Rt Hon Earl of Kilmory PC
MC Idiens
KB Scott
Date of
replacement/
grant
28 Sep 2011
28 Sep 2011
28 Sep 2011
30 Sep 2011
30 Sep 2011
30 Sep 2011
3 Sep 2013
3 Sep 2013
3 Sep 2013
No. of
shares
5,200,000
4,400,000
500,000
1,600,000
250,000
800,000
7,500,000
15,800,000
23,800,000
Exercise
price
1.125p
1.125p
1.125p
1.125p
1.125p
1.125p
1.125p
1.125p
0.475p
Option exercise period
28/09/11 to 30/09/21
28/09/11 to 30/09/21
28/09/11 to 30/09/21
01/09/12 to 29/09/21
01/09/12 to 29/09/21
01/09/12 to 29/09/21
03/09/14 to 01/09/23
03/09/14 to 01/09/23
03/09/14 to 01/09/23
The market price of the shares at 31 December 2012 and 31 December 2013 was 0.75p and 0.40p respectively
and the average during the year was 0.53p.
16
Rose Petroleum plc
DIRECTORS’ REPORT
THIRD PARTY INDEMNITY PROVISION FOR DIRECTORS
The Company currently has in place, and had for the year ended 31 December 2013, Directors and officers
liability insurance for the benefit of all Directors of the Company.
SUBSTANTIAL SHAREHOLDINGS
Other than the Directors’ interests shown above, the Company has been notified of the following substantial
interests as at 30 May 2014:
Caithness Limited
RG Williams
POST BALANCE SHEET EVENTS
Number of shares
125,000,000
103,015,050
Percentage of
issued share capital
15.77%
13.00%
Events after the balance sheet date have been disclosed in note 35 to the financial statements.
FINANCIAL INSTRUMENTS
During the year the Company and its subsidiary undertakings applied financial risk management policies as
disclosed in note 33 to the financial statements.
STATEMENT AS TO DISCLOSURE OF INFORMATION TO THE AUDITOR
The Directors who were in office on the date of approval of these financial statements have confirmed that, as
far as they are aware, there is no relevant audit information of which the auditor is unaware. Each of the
Directors has confirmed that they have taken all the steps that they ought to have taken as Directors in order
to make themselves aware of any relevant audit information and to establish that it has been communicated
to the auditor.
AUDITOR
The Directors resolved that Baker Tilly UK Audit LLP be re‐appointed as auditor. Baker Tilly UK Audit LLP has
indicated its willingness to continue in office.
By order of the board
IH McNeill
Company Secretary
30 May 2014
17
Rose Petroleum plc
CORPORATE GOVERNANCE STATEMENT
The policy of the Board is to manage the affairs of the Group using the principles of the QCA Guidance as best
practice. This statement describes how the principles of corporate governance are applied to the Group to the
extent that the Board considers is appropriate for a group of its size, nature and stage of development.
THE BOARD AND ITS COMMITTEES
Board meetings are scheduled to take place every two months with contact between meetings as required.
The meetings are held to set and monitor strategy, review exploration and trading performance, examine
acquisition possibilities and approve reports to shareholders. The matters reserved for the Board include,
amongst others, approval of the Group’s long term objectives, policies and budgets, changes relating to the
Group’s management structure, approval of the Group’s financial statements and ensuring maintenance of
good systems of internal control. Procedures are established to ensure that appropriate information is
communicated to the Board in a timely manner to enable it to fulfil its duties.
Details of Directors who served during the year are set out in the Directors’ Report. The Board is now
comprised of three executive Directors and two non‐executive Directors, one of whom acts as Chairman.
There are separate roles for the Chairman and the Chief Executive Officer.
The Board has established an Audit Committee, which comprises the Chief Executive Officer, MC Idiens, a non‐
executive Director, PE Jeffcock, and the non‐executive Chairman, Rt Hon Earl of Kilmorey PC. The Audit
Committee meets twice a year and the external auditor is invited to meetings where appropriate. The main
responsibilities of the Audit Committee are to review and report to the Board on matters relating to:
the integrity of the financial statements of the Group, including its annual and interim accounts;
the effectiveness of the Group’s internal controls and risk management systems;
the accounting policies and practices of the Group;
audit plans and auditor’s report, including any significant concerns the external auditor may have
arising from their audit work; and
the terms of appointment, remuneration and independence of the auditor.
The Board has established a Remuneration Committee, which comprises an executive Director, PE Jeffcock,
and the non‐executive Chairman, Rt Hon Earl of Kilmorey PC. The Remuneration Committee meets twice a
year and reviews the performance of the executive Directors and the scale and structure of their remuneration
having due regard to the interests of the shareholders. The Committee is also responsible for awards under
the share option plan. No Director is involved in any decision relating to his own remuneration and the
remuneration of Clark Arnold has not been revised during the time he has served on this committee.
COMMUNICATION WITH SHAREHOLDERS
The Board encourages regular dialogue with shareholders. All shareholders are invited to the AGM at which
Directors are available for questioning. The notice of AGM is sent to all shareholders at least 21 working days
before the meeting. The number of proxy votes received for and against each resolution is disclosed at the
AGM and a separate resolution is proposed on each item. Financial and other information about the Company
is available on the Company’s website www.rosepetroleum.com.
INTERNAL CONTROLS
The Board is responsible for establishing the Group’s system of internal controls and for reviewing its
effectiveness. However, such a system is designed to manage rather than eliminate the risk of failure to
achieve business objectives, and can only provide the Board with reasonable and not absolute assurance
against material misstatement or loss. The key procedures that have been established, and which are designed
to provide effective internal control are as follows:
each of the Group’s subsidiaries is managed by an executive Director and there is a management
reporting process in place to enable the Board to monitor the performance of the Group on a regular
basis;
an annual forecast is prepared and formally adopted by the Board. This is reviewed on a regular basis
and actual performance against forecast is closely monitored;
the Board reviews the major business risks faced by the Group and determines the appropriate course
of actions required to manage those risks;
18
Rose Petroleum plc
CORPORATE GOVERNANCE STATEMENT
the Board approves proposals for the acquisition of new businesses and sets guidelines for the
development of new properties. Capital expenditure is regulated and written proposals must be
submitted to the Board for any expenditure above specified levels; and
consolidated management information is prepared on a regular basis.
The Board reviews the effectiveness of the system of internal controls and the control environment. No
significant control deficiencies were reported during the year and no weaknesses in internal controls have
resulted in any material losses, contingencies or uncertainty which would require disclosure as recommended
by the guidance for Directors on reporting on internal controls. The Board has reviewed the need for an
independent internal audit function and has concluded that the Group is not large enough to warrant this at
the present time.
19
Rose Petroleum plc
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the Strategic Report and the Directors’ Report and the financial
statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare group and company financial statements for each financial
year. The Directors are required by the AIM Rules of the London Stock Exchange to prepare group financial
statements in accordance with International Financial Reporting Standards ("IFRS") as adopted by the
European Union (“EU”) and have elected under company law to prepare the company financial statements in
accordance with IFRS as adopted by the EU.
The financial statements are required by law and IFRS adopted by the EU to present fairly the financial position
of the Group and the Company and the financial performance of the Group. The Companies Act 2006 provides
in relation to such financial statements that references in the relevant part of that Act to financial statements
giving a true and fair view are references to their achieving a fair presentation.
Under company law the Directors must not approve the financial statements unless they are satisfied that they
give a true and fair view of the state of affairs of the Group and the Company and of the profit or loss of the
Group for that period.
In preparing the Group and Company financial statements, the Directors are required to:
a.
select suitable accounting policies and then apply them consistently;
b. make judgements and accounting estimates that are reasonable and prudent;
c.
d.
state whether they have been prepared in accordance with IFRSs adopted by the EU;
prepare the financial statements on the going concern basis unless it is inappropriate to presume that
the Group and the Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain
the Group’s and the Company’s transactions and disclose with reasonable accuracy at any time the financial
position of the Group and the Company and enable them to ensure that the financial statements comply with
the Companies Act 2006. They are also responsible for safeguarding the assets of the Group and the Company
and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and financial information
included on the Rose Petroleum plc website.
Legislation in the United Kingdom governing the preparation and dissemination of financial statements may
differ from legislation in other jurisdictions.
20
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
Rose Petroleum plc
We have audited the Group and parent company financial statements (“the financial statements”) on pages 23
to 61. The financial reporting framework that has been applied in their preparation is applicable law and
International Financial Reporting Standards (IFRSs) as adopted by the European Union and, as regards the
Parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006.
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of
the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s
members those matters we are required to state to them in an auditor’s report and for no other purpose. To
the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the
Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we
have formed.
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITOR
As more fully explained in the Directors’ Responsibilities Statement set out on page 20, the Directors are
responsible for the preparation of the financial statements and for being satisfied that they give a true and fair
view. Our responsibility is to audit and express an opinion on the financial statements in accordance with
applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply
with the Auditing Practices Board’s (APB’s) Ethical Standards for Auditors.
SCOPE OF THE AUDIT OF THE FINANCIAL STATEMENTS
A description of the scope of an audit of financial statements is provided on the Financial Reporting
Council’s website at http://www.frc.org.uk/auditscopeukprivate
OPINION ON FINANCIAL STATEMENTS
In our opinion
the financial statements give a true and fair view of the state of the Group’s and the Parent’s affairs as at
31 December 2013 and of the Group’s loss for the year then ended;
the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the
European Union;
the Parent financial statements have been properly prepared in accordance with IFRSs as adopted by the
European Union and as applied in accordance with the Companies Act 2006; and
the financial statements have been prepared in accordance with the requirements of the Companies Act
2006.
OPINION ON OTHER MATTER PRESCRIBED BY THE COMPANIES ACT 2006
In our opinion the information given in the Strategic Report and the Directors’ Report for the financial year for
which the financial statements are prepared is consistent with the financial statements.
21
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
Rose Petroleum plc
MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to
report to you if, in our opinion:
adequate accounting records have not been kept by the Parent company, or returns adequate for our
audit have not been received from branches not visited by us; or
the Parent company financial statements are not in agreement with the accounting records and returns;
or
certain disclosures of Directors’ remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
Andrew Allchin (Senior Statutory Auditor)
For and on behalf of BAKER TILLY UK AUDIT LLP, Statutory Auditor
Chartered Accountants
2 Whitehall Quay
Leeds
LS1 4HG
2 June 2014
22
Rose Petroleum plc
CONSOLIDATED INCOME STATEMENT
For the year ended 31 December 2013
Continuing operations
Revenue
Cost of sales
Profit share payments
Gross profit
Operating expenses
Administrative expenses
Impairment of intangible exploration & evaluation assets
Other operating income
Operating (loss)/profit
Investment income
Other gains and losses
Finance costs
(Loss)/profit before taxation
Taxation
Notes
2013
£
2012
£
5
7
8
9
10
11
12
13
16
5,710,172
(3,093,510)
(1,045,655)
5,759,225
(2,622,690)
(1,428,558)
1,571,007
1,707,977
(241,588)
(1,260,108)
(2,939,708)
‐
(247,156)
(1,351,365)
‐
55,435
(2,870,397)
164,891
2,596
‐
(113,500)
5,959
15,000
(131,546)
(2,981,301)
54,304
(327,829)
(596,923)
Loss for the year attributable to owners of the parent company
(3,309,130)
(542,619)
Loss per Ordinary Share
Basic and diluted
17
(0.57p)
(0.12p)
23
Rose Petroleum plc
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2013
2013
£
2012
£
Loss for the year attributable to owners of the parent company
(3,309,130)
(542,619)
Other comprehensive income
Exchange differences arising on translation of foreign operations
Income tax relating to components of other comprehensive income
(21,183)
95,314
(183,248)
229,165
74,131
45,917
Total comprehensive income for the year attributable to owners of the
parent company
(3,234,999)
(496,702)
24
Rose Petroleum plc
CONSOLIDATED BALANCE SHEET
As at 31 December 2013
Non‐current assets
Intangible assets
Property, plant and equipment
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total assets
Current liabilities
Trade and other payables
Taxation
Provisions
Non‐current liabilities
Convertible loan notes
Deferred tax
Provisions
Total liabilities
Net assets
Equity
Share capital
Share premium account
Share option reserve
Other reserves
Cumulative translation reserves
Retained deficit
Notes
2013
£
2012
£
18
19
22
23
24
25
28
26
27
28
29
30
2,389,367
614,156
5,254,481
688,756
3,003,523
5,943,237
548,372
1,434,701
1,179,069
704,187
702,541
529,367
3,162,142
1,936,095
6,165,665
7,879,332
(785,238)
(2,879)
(16,424)
(688,005)
‐
(15,180)
(804,541)
(703,185)
(852,117)
(32,005)
(30,954)
(819,563)
(40,460)
(40,841)
(915,076)
(900,864)
(1,719,617)
(1,604,049)
4,446,048
6,275,283
19,613,377
6,838,894
487,432
269,317
149,643
(22,912,615)
19,263,627
5,838,030
457,090
269,317
75,512
(19,628,293)
Equity attributable to owners of the parent company
4,446,048
6,275,283
The financial statements on pages 23 to 61 were approved by the Directors and authorised for issue on 30 May
2014 and are signed on its behalf by:
Rt Hon Earl of Kilmorey PC, Chairman
MC Idiens, Chief Executive Officer
25
Rose Petroleum plc
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2013
Share capital
£
Share
premium
account
£
Share option
reserve
£
Other
Reserves
(note 30)
£
Cumulative
translation
reserves
£
Retained
deficit
£
Total
£
As at 1 January 2012
19,263,627
5,838,030
396,679
261,220
29,595
(19,275,678)
6,513,473
Loss for the year
Other comprehensive
income:
Currency translation
differences
Deferred tax
Total other comprehensive
income for the year
Total comprehensive
income for the year
Share‐based payments
Equity component of
convertible loan note
Transfer to retained
earnings in respect of
equity component of
convertible loan notes
redeemed
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
(542,619)
(542,619)
(183,248)
229,165
45,917
‐
‐
‐
(183,248)
229,165
45,917
45,917
(542,619)
(496,702)
60,411
‐
198,101
‐
(190,004)
‐
‐
‐
‐
‐
60,411
198,101
190,004
‐
As at 1 January 2013
19,263,627
5,838,030
457,090
269,317
75,512
(19,628,293)
6,275,283
Transactions with owners
in their capacity as
owners:
Issue of equity shares
Expenses of issue of equity
shares
Total transactions with
owners in their capacity
as owners
Loss for the year
Other comprehensive
income:
Currency translation
differences
Deferred tax
Total other comprehensive
income for the year
Total comprehensive
income for the year
Share‐based payments
Transfer to retained
earnings in respect of
forfeit options
349,750
1,049,250
‐
(48,386)
349,750
1,000,864
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
55,150
(24,808)
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
1,399,000
(48,386)
‐
1,350,614
(3,309,130)
(3,309,130)
(21,183)
95,314
74,131
‐
‐
‐
(21,183)
95,314
74,131
74,131
(3,309,130)
(3,234,999)
‐
‐
‐
55,150
24,808
‐
As at 31 December 2013
19,613,377
6,838,894
487,432
269,317
149,643
(22,912,615)
4,446,048
26
Rose Petroleum plc
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 31 December 2013
Operating activities
(Loss)/profit before taxation
Investment income
Finance costs
Adjustments for:
Depreciation of property, plant and equipment
Profit on disposal of property, plant and equipment
Impairment of Intangible exploration and evaluation assets
Share‐based payments
Other gains and losses
Effect of foreign exchange rate changes
Operating inflow before movements in working capital
Decrease/(increase) in inventories
Increase in trade and other receivables
Increase/(decrease) in trade and other payables
Cash used in operations
Income tax paid
Interest paid
2013
£
2012
£
(2,981,301)
54,304
(2,596)
113,500
(5,959)
131,546
138,716
(74,737)
2,939,708
55,150
‐
(57,931)
130,509
155,815
(687,588)
97,233
(304,031)
(7,968)
(80,946)
384,029
(1,200)
‐
60,411
(15,000)
29,766
637,897
(340,467)
(664,562)
(22,462)
(389,594)
(66,247)
(107,301)
Net cash used in operating activities
(392,945)
(563,142)
Investing activities
Interest received
Purchase of property, plant and equipment
Purchase of intangible exploration and evaluation assets
Proceeds on disposal of property, plant and equipment
Proceeds on disposal of available‐for‐sale investment
Decommissioning provision utilised
Advance on acquisition of subsidiaries
2,596
(110,255)
(30,696)
117,219
‐
(7,263)
(257,577)
5,959
(106,964)
(600,244)
1,200
15,000
‐
‐
Net cash used in investing activities
(285,976)
(685,049)
Financing activities
Proceeds from issue of shares
Expenses of issue of shares
Redemption of convertible loan notes
Net cash from/(used in) financing activities
1,399,000
(48,386)
‐
‐
‐
(500,000)
1,350,614
(500,000)
Net increase/(decrease) in cash and cash equivalents
671,693
(1,748,191)
Cash and cash equivalents at beginning of year
Effect of foreign exchange rate changes
529,367
2,299,546
(21,991)
(21,988)
Cash and cash equivalents at end of year
1,179,069
529,367
27
Rose Petroleum plc
COMPANY BALANCE SHEET
As at 31 December 2013
Non‐current assets
Investments
Current assets
Trade and other receivables
Cash and cash equivalents
Total assets
Current liabilities
Trade and other payables
Non‐current liabilities
Convertible loan notes
Total liabilities
Net assets
Equity
Share capital
Share premium account
Share option reserve
Other reserves
Retained deficit
Total equity
Company No 04573663
Notes
2013
£
2012
£
20
23
24
25
26
29
30
4,470,047
7,545,335
253,207
579,187
832,394
53,101
17,869
70,970
5,302,441
7,616,305
(123,990)
(78,948)
(852,117)
(819,563)
(976,107)
(898,511)
4,326,334
6,717,794
19,613,377
6,838,894
487,432
269,317
(22,882,686)
19,263,627
5,838,030
457,090
269,317
(19,110,270)
4,326,334
6,717,794
The financial statements on pages 23 to 61 were approved by the Directors and authorised for issue on 30 May
2014 and are signed on its behalf by:
Rt Hon Earl of Kilmorey PC, Chairman
MC Idiens, Chief Executive Officer
28
Rose Petroleum plc
COMPANY STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2013
Share capital
£
Share
premium
account
£
Share
option
reserve
£
Other
reserves
(note 30)
£
Retained
deficit
£
Total
£
As at 1 January 2012
19,263,627
5,838,030
396,679
261,220
(18,930,077)
6,829,479
Loss for the year
Total comprehensive
income for the year
Share ‐based payments
Equity component of
convertible loan note
Transfer to retained
earnings in respect of
equity component of
convertible loan notes
redeemed
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
60,411
‐
‐
‐
‐
‐
198,101
(370,197)
(370,197)
(370,197)
(370,197)
‐
‐
60,411
198,101
(190,004)
190,004
‐
As at 1 January 2013
19,263,627
5,838,030
457,090
269,317
(19,110,270)
6,717,794
Transactions with owners
in their capacity as
owners:
Issue of equity shares
Expenses of issue of
equity shares
Total transactions with
owners in their capacity
as owners
Loss for the year
Total comprehensive
income for the year
Share ‐based payments
Transfer to retained
earnings in respect of
forfeit options
349,750
1,049,250
‐
(48,386)
349,750
1,000,864
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
55,150
(24,808)
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
1,399,000
(48,386)
1,350,614
(3,797,224)
(3,797,224)
(3,797,224)
(3,797,224)
‐
55,150
24,808
‐
As at 31 December 2013
19,613,377
6,838,894
487,432
269,317
(22,882,686)
4,326,334
29
Rose Petroleum plc
COMPANY CASH FLOW STATEMENT
For the year ended 31 December 2013
Operating activities
Loss from operations
Investment income
Finance costs
Adjustments for:
Impairment of investments in subsidiary undertakings
Share ‐based payments
2013
£
2012
£
(3,797,224)
(370,197)
(225,035)
112,554
(225,321)
130,803
3,663,679
55,150
300,000
60,411
Operating cash outflow before movements in working capital
(190,876)
(104,304)
(Increase)/decrease in trade and other receivables
Increase in trade and other payables
Cash used in operations
Interest paid
(200,106)
45,041
(345,941)
(80,000)
45,567
1,543
(57,194)
(106,558)
Net cash used in operating activities
(425,941)
(163,752)
Investing activities
Interest received
Loans to subsidiary undertakings
Net cash used in investing activities
Financing activities
Proceeds from the issue of shares
Expenses of issue of shares
Repayment of convertible loan notes
Net cash from/(used in) financing activities
611
(363,966)
4,882
(361,589)
(363,355)
(356,707)
1,399,000
(48,386)
‐
‐
‐
(500,000)
1,350,614
(500,000)
Net increase/(decrease) in cash and cash equivalents
561,318
(1,020,459)
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
17,869
1,038,328
579,187
17,869
30
Rose Petroleum plc
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2013
1.
GENERAL INFORMATION
At a General Meeting held on 15 August 2013, a resolution was passed by the shareholders of VANE Minerals
plc by which the name of the Company was changed to Rose Petroleum plc.
Rose Petroleum plc (the ’Company’ and, together with its subsidiaries, the ‘Group’) is domiciled and
incorporated in the United Kingdom under the Companies Act 2006. The address of the registered office is 145‐
157 St John Street, London, EC1V 4PW.
The nature of the Group’s operations and its principal activities are the evaluation and acquisition of mineral
exploration targets, principally gold, silver, uranium and copper targets in the United States, and the
development and operation of mines in Mexico. During the year the Group underwent a strategic review and
announced its intention to extend its activities into the Oil & Gas sector, establishing a new division for this
purpose.
The financial statements are presented in pounds sterling as this is the currency in which funds from financing
are generated and in which receipts are usually retained. Foreign operations are included in accordance with
the policies set out in note 3.
As permitted by section 408 of the Companies Act 2006, the parent company's income statement and
statement of other comprehensive income have not been included in these financial statements.
2.
ADOPTION OF NEW AND REVISED STANDARDS
STANDARDS AFFECTING PRESENTATION AND DISCLOSURE
In the current year, the following new and revised Standards have been adopted but have not had any material
impact on the amounts reported in these financial statements.
IFRS 7 (amended 2011)
IFRS 13
IAS 1 (amended 2011)
IAS 19 (amended 2011)
IAS 32 (amended 2011)
Financial instruments disclosure: offsetting financial assets
and financial liabilities
Fair value measurement
Presentation of items of other comprehensive income
Employee benefits
Financial instruments presentation: offsetting financial
assets and financial liabilities
At the date of authorisation of the financial statements, the following Standards and Interpretations which
have not been applied in the financial statements were in issue but not yet effective (and in some cases had
not yet been adopted by the EU):
IFRS 2 (amended 2013)
IFRS 3 (amended 2013)
IFRS 8 (amended 2013)
IFRS 9
IFRS 10
IFRS 11
IFRS 12
IAS 27 (amended 2011)
IAS 28 (amended 2011)
IAS 36 (amended
Improvements to IFRS (May 2012)
Share‐based payment
Business combinations
Operating segments
Financial instruments
Consolidated financial statements
Joint arrangements
Disclosure of interests in other entities
Separate financial statements
Investments in associates and joint ventures
Impairment of assets
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. As a result of the adoption of IFRS
31
Rose Petroleum plc
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2013
11 Joint arrangements, the accounting treatment for the joint venture operated within Wate Mining LLC will be
accounted for as a joint venture using the equity method of accounting. However this will not have a material
impact on the numbers presented. The Mining Venture Agreement with Uranium One Exploration U.S.A Inc.
(‘U1’) will be classified as a joint operation and will continue to recognise its share of the underlying assets,
liabilities, revenues and expenses. The Met Sin joint venture will continue to be treated as a profit share
agreement.
3.
SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The financial statements have been prepared in accordance with International Financial Reporting Standards
(‘IFRS’) as issued by the International Accounting Standards Board (‘IASB’) and as adopted by the European
Union (‘EU’).
The financial statements have been prepared on the historical cost basis. Historical cost is generally based on
the fair value of the consideration given in exchange for assets. The principal accounting policies adopted are
set out below.
GOING CONCERN
The Group currently generates cash through its mining operations in Mexico and this activity provides cash
flow to fund the other activities of the Group. Whilst the Group's exploration expenditure is largely
discretionary and its activities can be adjusted to enable the Group to operate within available resources
should this be required, the uranium and copper activities are operating at a loss and the Directors believe that
there is some uncertainty that the Group will generate sufficient funds to fully finance its exploration and
development programme for at least the next twelve months.
In addition to the capital resources available at the date of the financial statements and income generated
from future operations, additional funding will need to be raised and the Company intends to seek further
funding by means of a significant equity fund raise in June 2014. The Group’s management believe that
sufficient additional funding will be raised which will enable the Group to meet its obligations for the
foreseeable future and continue as a going concern. Whilst the Board are confident that sufficient funds will be
made available from the fundraise, the Company has prepared detailed forecasts and sensitivities which have
been submitted to a significant shareholder in the Company. The Company is in receipt of a letter of comfort
from that shareholder confirming its ability and willingness to support the Group financially so that the Group
maintains adequate financial and working capital resources, based on those forecasts, for a minimum period of
12 months commencing from the date of signing of these financial statements.
Having made appropriate enquires, having considered all the matters raised in the preceding paragraphs, and
having examined the major areas which could affect the Group’s financial position, the Directors are satisfied
that the Group can generate adequate resources to continue in operation for the foreseeable future. For this
reason, they consider it appropriate to adopt the going concern basis in preparing the financial statements.
OPERATING EXPENSES
Costs incurred prior to obtaining the legal rights to explore an area together with any costs which cannot be
allocated to a specific exploration project are expensed directly to the income statement and included as
operating expenses.
BASIS OF CONSOLIDATION
The consolidated financial statements incorporate the financial statements of the Company and its subsidiary
undertakings (together, ‘the Group’) made up to 31 December each year.
Subsidiary undertakings are those entities controlled directly or indirectly by the Company. Control is achieved
where the Company has the power to govern the financial and operating policies of an investee entity so as to
obtain benefits from its activities.
On acquisition, the assets and liabilities and contingent liabilities of a subsidiary are measured at their fair
values at the date of acquisition. Any excess of the cost of the acquisition over the fair values of the identifiable
32
Rose Petroleum plc
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2013
net assets acquired is recognised as goodwill. Any deficiency of the cost of acquisition below the fair values of
the identifiable net assets acquired (i.e. discount on acquisition) is credited to the income statement in the
period of acquisition.
The results of subsidiaries acquired or disposed of during the year are included in the consolidated income
statement from the effective date of acquisition or up to the effective date of disposal, as appropriate. Where
necessary, adjustments are made to the financial statements of subsidiaries to bring accounting policies used
into line with those used by the Group.
All intra‐group transactions, balances, income and expenses are eliminated on consolidation.
JOINT VENTURES
A joint venture is a contractual arrangement whereby the Group and other parties undertake an economic
activity that is subject to joint control (i.e. when the strategic, financial and operating decisions relating to the
activities of the joint venture require the unanimous consent of the parties sharing control).
When a group entity undertakes activities under joint venture arrangements directly, the Group’s share of
jointly controlled assets and any liabilities incurred jointly with other ventures are recognised in the financial
statements of the relevant entity and classified according to their nature. Liabilities and expenses incurred
directly in respect of interest in jointly controlled assets are accounted for on an accrual basis. Income from the
sale or use of the Group’s share of the output of jointly controlled assets, and its share of joint venture
expenses, are recognised when it is probable that the economic benefits associated with the transactions will
flow to/from the Group and their amount can be measured reliably.
The Group reports its interest in joint venture arrangements using proportionate consolidation. The Group’s
share of the assets, liabilities, income and expenses of jointly controlled entities is combined with the
equivalent items in the consolidated financial statements on a line‐by‐line basis, apart from the Met‐Sin joint
venture which has been accounted for as a profit share arrangement.
INVESTMENTS
Long term investments representing interests in subsidiary undertakings are stated at cost less any provision
for impairment in the value of the non‐current investment.
INTANGIBLE EXPLORATION AND EVALUATION ASSETS
The Group applies the full cost method of accounting for Exploration and Evaluation (‘E&E’) costs, having
regard to the requirements of IFRS 6 Exploration for and Evaluation of Mineral Resources. Under the full cost
method of accounting, costs of exploring for and evaluating mineral resources are accumulated by reference to
appropriate cost centres being the appropriate licence area, but are tested for impairment on a cost pool basis
as described below.
E&E assets comprise costs of (i) E&E activities that are on‐going at the balance sheet date, pending
determination of whether or not commercial reserves exist and (ii) costs of E&E that, whilst representing part
of the E&E activities associated with adding to the commercial reserves of an established cost pool, did not
result in the discovery of commercial reserves.
Costs incurred prior to having obtained the legal rights to explore an area are expensed directly to the income
statement as they are incurred.
Exploration and evaluation costs
All costs of E&E are initially capitalised as E&E assets. Payments to acquire the legal right to explore, costs of
technical services and studies, seismic acquisition, exploratory drilling and testing are capitalised as intangible
E&E assets.
Intangible costs include directly attributable overheads together with the cost of other materials consumed
during the exploration and evaluation phases.
33
Rose Petroleum plc
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2013
Treatment of E&E assets at conclusion of appraisal activities
Intangible E&E assets related to each exploration licence/project are carried forward until the existence (or
otherwise) of commercial reserves has been determined. If commercial reserves have been discovered, the
related E&E asset are assessed for impairment on a cost pool basis as set out below and any impairment is
recognised in the income statement. The carrying value, after any impairment loss, of the relevant E&E assets
is then reclassified as development and production assets.
Intangible E&E assets that related to E&E activities that are determined not to have resulted in the discovery of
commercial reserves remain capitalised as intangible E&E assets at cost less accumulated amortisation, subject
to meeting a pool‐wide impairment test in accordance with the accounting policy for impairment of E&E assets
set out below. Such E&E assets are amortised on a unit‐of‐production basis over the life of the commercial
reserves of the pool to which they relate.
IMPAIRMENT OF INTANGIBLE EXPLORATION AND EVALUATION ASSETS
E&E assets are assessed for impairment when facts and circumstances suggest that the carrying amount may
exceed its recoverable amount. Such indicators include, but are not limited to, those situations outlined in
paragraph 20 of IFRS 6 Exploration for and Evaluation of Mineral Resources and include the point at which a
determination is made as to whether or not commercial reserves exist.
Where there are indications of impairment, the E&E assets concerned are tested for impairment. Where the
E&E assets concerned fall within the scope of an established full cost pool, the E&E assets are tested for
impairment together with all development and production assets associated with that cost pool, as a single
cash generating unit.
The aggregate carrying value is compared against the expected recoverable amount of the pool, generally by
reference to the present value of the future net cash flow expected to be derived from production of
commercial reserves. Where the E&E assets to be tested fall outside the scope of any established cost pool,
there will generally be no commercial reserves and the E&E assets concerned will generally be written off in
full.
If the recoverable amount of a cash‐generating unit is estimated to be less than its carrying amount, the
carrying amount of the cash‐generating unit is reduced to its recoverable amount. An impairment loss is
recognised immediately in profit or loss.
When an impairment loss subsequently reverses, the carrying amount of the cash‐generating unit is increased
to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed
the carrying amount that would have been determined had no impairment loss been recognised for the cash‐
generating unit in prior years. A reversal of an impairment loss is recognised immediately in profit or loss.
The Group considers each area of exploration, gold and silver, uranium, copper and Oil & Gas on a geographical
basis to be a separate cost pool and therefore aggregates all specific assets for the purposes of determining
whether impairment of E&E assets has occurred.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment
losses. The cost of an item of property, plant and equipment comprises its purchase price and any costs directly
attributable to bringing the asset into use.
Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over their
useful lives at the following rates:
Diablito Mine
Ore processing mill
Plant and machinery
over the life of the mine
over 10 years
over 5 to 10 years
The estimated useful lives, residual value and depreciation method are reviewed at the end of each reporting
period, with the effect of any changes in estimate accounted for on a prospective basis.
34
Rose Petroleum plc
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2013
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits
are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement
of an item of property, plant and equipment is determined as the difference between the sales proceeds and
the carrying amount of the asset and is recognised in profit and loss.
IMPAIRMENT OF PROPERTY, PLANT AND EQUIPMENT
At each reporting date, the Group reviews the carrying amounts of its property, plant and equipment and
intangible assets with finite lives to determine whether there is any indication that those assets have suffered
an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to
determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are
independent from other assets, the Group estimates the recoverable amount of the cash generating unit to
which the asset belongs.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the
estimated future cash flows are discounted to their present value using a pre‐tax discount rate that reflects
current market assessments of the time value of money and the risks specific to the asset for which the
estimates of future cash flows have been adjusted.
If the recoverable amount of an asset (or cash‐generating unit) is estimated to be less than its carrying amount,
the carrying amount of the asset (cash‐generating unit) is reduced to its recoverable amount. An impairment
loss is recognised as an expense immediately, unless the relevant asset is carried at a revalued amount, in
which case the impairment loss is treated as a revaluation decrease.
Where an impairment loss subsequently reverses, the carrying amount of the asset (cash‐generating unit) is
increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does
not exceed the carrying amount that would have been determined had no impairment loss been recognised for
the asset (cash‐generating unit) in prior years. A reversal of an impairment loss is recognised as income
immediately, unless the relevant asset is carried at a revalued amount, in which case the reversal of the
impairment loss is treated as a revaluation increase.
INVENTORIES
Inventories are stated at the lower of cost and net realisable value. Costs comprise direct materials and, where
applicable, direct labour costs and those overheads that have been incurred in bringing the inventories to their
present location and condition. Cost is calculated using the weighted average method. Net realisable value
represents the estimated selling price for inventories less all estimated costs of completion and costs to be
incurred in marketing, selling and distribution.
REVENUE RECOGNITION
Revenue from the sale of minerals is recognised when persuasive evidence of an arrangement exists, usually in
the form of an executed sales agreement, indicating that there has been a transfer of risks and rewards to the
customer, no further work or processing is required by the Group, the quantity and quality of the goods has
been determined with reasonable accuracy, the price is fixed or determinable, and collectability is reasonably
assured. This is generally when title passes. Revenue is measured at the fair value of the consideration
received or receivable.
Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to
the Group and the amount of income can be measured reliably. Interest income is accrued on a time basis, by
reference to the principal outstanding and at the effective interest rate applicable.
LEASING
Rentals payable under operating leases are charged to income on a straight‐line basis over the term of the
relevant lease.
FOREIGN CURRENCIES
The individual financial statements of each group company are presented in the currency of the primary
economic environment in which it operates (its functional currency). For the purpose of the consolidated
35
Rose Petroleum plc
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2013
financial statements, the results and financial position of each group company are expressed in pound sterling,
which is the functional currency of the Company and the presentation currency for the consolidated financial
statements.
In preparing the financial statements of the individual companies, transactions in currencies other than the
functional currency of each group company (‘foreign currencies’) are translated into the functional currency at
the rates of exchange prevailing on the dates of the transactions. At each reporting date, monetary assets and
liabilities that are denominated in foreign currencies are retranslated into the functional currency at the rates
prevailing on the reporting date. Non‐monetary assets and liabilities carried at fair value that are denominated
in foreign currencies are translated at the rates prevailing at the date when the fair value was determined.
Non‐monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
Foreign exchange differences are recognised in the profit or loss in the period in which they arise, except for
foreign exchange differences on monetary items receivable from or payable to a foreign operation for which
settlement is neither planned nor likely to occur and which, therefore, form part of the net investment in the
foreign operation. Foreign exchange differences arising on the translation of the Group’s net investment in
foreign operations are recognised as a separate component of shareholders’ equity via the statement of other
comprehensive income. On disposal of foreign operations and foreign entities, the cumulative translation
differences are recognised in the income statement as part of the gain or loss on disposal.
For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group’s foreign
operations are translated using exchange rates prevailing at the end of each reporting period. Income and
expense items are translated at the average exchange rates for the period, unless exchange rates fluctuate
significantly during that period, in which case the exchange rates at the date of transactions are used.
Foreign exchange differences arising, if any, are recognised in other comprehensive income and accumulated in
equity. On the disposal of a foreign operation all of the exchange differences accumulated in equity in respect
of that operation are reclassified to profit or loss.
Fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of
the foreign operation and translated at the rate of exchange prevailing at the end of each reporting period.
Exchange differences arising are recognised in equity. The Group has elected to treat fair value adjustments
arising on acquisitions before the date of transition to IFRS as pound sterling denominated assets and liabilities.
RETIREMENT BENEFITS
The Group makes contributions to the personal pension schemes for some of its employees and Directors.
Payments to these schemes are charged as an expense in the income statement in respect of pension costs
payable in the year. There were no unpaid contributions at the period end.
TAXATION
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in
the consolidated income statement because it excludes items of income or expense that are taxable or
deductible in other years and items that are never taxable or deductible. The Group’s liability for current tax is
calculated using tax rates that have been enacted or substantively enacted by the reporting date.
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in
the consolidated financial statements and the corresponding tax bases used in the computation of taxable
profit. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax
assets are generally recognised for all deductible temporary differences to the extent that it is probable that
taxable profits will be available against which those deductible temporary differences can be utilised. Such
deferred tax assets and liabilities are not recognised if the temporary difference arises from goodwill or from
the initial recognition (other than in a business combination) of other assets and liabilities in a transaction
which affects neither the taxable profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences associated with investments in
subsidiaries and interests in joint ventures, except where the Group is able to control the reversal of the
36
Rose Petroleum plc
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2013
temporary difference and it is probably that the temporary difference will not reverse in the foreseeable
future. Deferred tax assets arising from deductible temporary differences associated with such investments
and interest are only recognised to the extent that it is probable that there will be sufficient taxable profits
against which to utilise the benefits of the temporary differences and they are expected to reverse in the
foreseeable future.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it
is no longer probable that sufficient taxable profits will be available to allow all or part of the assets to be
recovered.
Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in
which the liability is settled or the asset realised, based on tax rates that have been enacted or substantively
enacted at the reporting date.
Current and deferred tax are recognised in profit or loss, except when they relate to items that are recognised
in other comprehensive income or directly in equity, in which case, the current and deferred tax are also
recognised in other comprehensive income or directly in equity respectively. Where current tax or deferred tax
arises from the initial accounting for a business combination, the tax effect is included in the accounting for the
business combination.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax
assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority
and the Group intends to settle its current tax assets and liabilities on a net basis.
FINANCIAL INSTRUMENTS
Recognition of financial assets and financial liabilities
Financial assets and financial liabilities are recognised on the Group’s Balance Sheet when the Group becomes
a party to the contractual provisions of the instrument.
Derecognition of financial assets and financial liabilities
The Group derecognises a financial asset only when the contractual rights to cash flows from the asset expire,
or it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another
entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and
continues to control the transferred asset, the Group recognises its retained interest in the asset and an
associated liability for the amount it may have to pay. If the Group retains substantially all the risks and
rewards of ownership of a transferred financial asset, the Group continues to recognise the financial asset and
also recognises a collateralised borrowing for the proceeds received.
The Group derecognises financial liabilities when the Group’s obligations are discharged, cancelled or expired.
Financial Assets
Trade and other receivables
Trade and other receivables are measured at initial recognition at fair value, and are subsequently measured at
amortised cost less any provision for impairment.
Cash and cash equivalents
Cash and cash equivalents comprise cash in hand and on‐demand deposits and other short‐term highly liquid
investments that are readily convertible to a known amount of cash with three months or less remaining to
maturity and are subject to an insignificant risk of changes in value.
Financial liabilities and equity instruments
Financial liabilities and equity instruments are classified according to the substance of the contractual
arrangements entered into.
37
Rose Petroleum plc
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2013
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of the Group after
deducting all of its liabilities. Equity instruments issued by the Group are recognised at the proceeds received,
net of direct issue costs.
The costs of an equity transaction are accounted for as a deduction from equity to the extent they are
incremental costs directly attributable to the equity transaction that would otherwise have been avoided.
Trade and other payables
Trade and other payables are initially measured at their fair value, and are subsequently measured at
amortised cost using the effective interest rate method.
Compound Instruments
The component parts of compound instruments (convertible loan notes) issued by the Company are classified
separately as financial liabilities and equity in accordance with the substance of the contractual arrangements
and the definitions of a financial liability and an equity instrument. Conversion option that will be settled by the
exchange of a fixed amount of cash or another financial asset for a fixed number of the Company’s own equity
instruments is an equity instrument.
At the date of issue, the fair value of the liability component is estimated using the prevailing market interest
rate for similar non‐convertible instruments. This amount is recorded as a liability on an amortised cost basis
using the effective interest method until extinguished upon conversion or at the instrument’s maturity date.
The conversion option classified as equity is determined by deducting the amount of the liability component
from the fair value of the compound instrument as a whole. This is recognised and included in equity, net of
income tax effects, and is not subsequently re‐measured.
Transaction costs that relate to the issue of the convertible loan notes are allocated to the liability and equity
components in proportion to the allocation of the gross proceeds. Transaction costs relating to the equity
component are recognised directly in equity. Transaction costs relating to the liability component are included
in the carrying amount of the liability component and are amortised over the lives of the convertible loan notes
using the effective interest method.
PROVISIONS
Provisions are recognised when the Group has a legal or constructive obligation, as a result of past events, for
which it is probable that an outflow of economic resources will result and that outflow can be reliably
measured.
The amount recognised as a provision is the best estimate of the consideration required to settle the present
obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the
obligation. When a provision is measured using the cash flow estimated to settle the present obligation, its
carrying amount is the present value of those cash flows.
When some or all of the economic benefits required to settle a provision are expected to be recovered from a
third party, a receivable is recognised as an asset if it is virtually certain that reimbursement will be received
and the amount of the receipt can be measured reliably.
Decommissioning
is recognised
in full when the related facilities are
Provision for decommissioning
installed. The
decommissioning provision is calculated as the net present value of the Group’s share of the expenditure
expected to be incurred at the end of the producing life of the facility in the removal and decommissioning of
the production, storage and transportation facilities currently in place. The cost of recognising the
decommissioning provision is included as part of the cost of the relevant asset and is thus charged to the
income statement in accordance with the Group’s policy for depreciation of property, plant and equipment.
Period charges for changes in the net present value of the decommissioning provision arising from discounting
are included in finance costs.
38
Rose Petroleum plc
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2013
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. The fair value of the service received in exchange for
the grant of options is recognised as an expense. Equity‐settled share‐based payments are measured at fair
value (excluding the effect non‐market based vesting conditions) at the date of grant. The fair value
determined at the grant date of equity‐settled share‐based payment is expensed on a straight‐line basis over
the vesting period, based on the Group’s estimate of shares that will eventually vest and adjusted for the effect
of non‐market based vesting conditions.
Fair value is measured by use of the Black Scholes model for non‐performance based options. The expected life
used in the model has been adjusted, based on management’s best estimate, for the effect of non‐
transferability, exercise restrictions and behavioural considerations.
SEGMENTAL REPORTING
Operating segments are reported in a manner consistent with the internal reporting provided to the chief
operating decision maker. The chief operating decision maker, who is responsible for allocating resources and
assessing performance of the operating segments and making strategic decisions, has been identified as the
Board of Directors.
4.
CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION
UNCERTAINTY
In the application of the Group’s accounting policies, which are described in note 3, the Directors are required
to make judgements, estimates and assumptions about the carrying amounts of the assets and liabilities that
are not readily apparent from other sources. The estimates and associated assumptions are based on historical
experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an on‐going basis. Revisions to accounting
estimates are recognised in the period in which the estimate is revised if the revision affects only that period or
in the period of the revision and future periods if the revision affects both the current and future periods.
The following are the critical judgements and estimations that the Directors have made in the process of
applying the Group’s accounting policies and that have the most significant effect on the amounts recognised
in the financial statements:
RECOVERABILITY OF INTANGIBLE EXPLORATION AND EVALUATION ASSETS
Determining whether an exploration and evaluation asset is impaired requires an assessment of whether there
are any indicators of impairment, including by reference to specific impairment indicators prescribed in IFRS 6
Exploration for and Evaluation of Mineral Resources. If there is any indication of potential impairment, an
impairment test is required based on the recoverable amount of the asset. The value in use calculation requires
the entity to estimate the future cash flows expected to arise from the cash‐generating unit and a suitable
discount rate in order to calculate present value. At 31 December 2013 the Directors determined that there
were indicators of impairment in respect of the Group’s intangible uranium exploration and evaluation assets
on the basis that the carrying amount of these assets may not be recovered in full. The Directors therefore
considered that it was appropriate to make a provision for impairment in respect of these assets at the year
end.
The carrying amount of intangible exploration and evaluation assets at the balance sheet date was £2,389,367
(2012: £5,254,481) and an impairment of £2,939,708 was identified and recognised in the period (2012: £nil).
RECOVERABILITY OF LOANS TO SUBSIDIARY UNDERTAKINGS
The Company has an outstanding loan from its directly held subsidiary which has then made a number of loans
to its own subsidiaries as the primary method of financing the activity of those subsidiaries. The principal loan
is shown in the Company balance sheet on the basis that the loan incurs interest at a commercial rate
according to the Group’s inter‐company loan policy, which is being rolled up until such time as the subsidiary is
39
Rose Petroleum plc
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2013
in a position to settle. However, there is a risk that the indirectly held subsidiaries will not commence revenue‐
generating activities and that the carrying amount of the Company’s investment will, therefore, exceed the
recoverable amount. The Board have assessed the recoverability of its loan based on this risk and, whilst the
Mexican subsidiary, Minerales VANE S.A. de C.V., is generating revenue and cash and has commenced
repayment of its loan the Directors consider that, in consideration of the losses currently being generated in
the US and the impairment of its intangible exploration and evaluation assets which was recognised at 31
December 2013 a provision of £3,663,679 (2012: £300,000) should be recognised by the Company in the period
to 31 December 2013.
5.
REVENUE
The external revenue of the Group arises solely from the sale of precious minerals arising from activities in
Mexico. Revenue is generated from one customer.
6.
SEGMENTAL INFORMATION
For management purposes, the Group is organised into three operating divisions based on its principal
activities of gold and silver mining, research and evaluation of potential uranium and copper properties and the
exploration and development of Oil & Gas resources. These divisions are the basis on which the Group reports
its segment information.
Segment information about these divisions is presented below.
Income statement
Revenue
Gold and silver
Segmental results
Uranium and copper
Gold and silver
Oil & Gas
Total segment results
Unallocated results
Current and deferred tax
Loss after taxation
Depreciation
Uranium and copper
Gold and silver
Impairment
Uranium and copper
Employees
2013
£
2012
£
5,710,172
5,759,225
(3,274,899)
1,221,580
(103,656)
(2,156,975)
(824,326)
(327,829)
(510,477)
1,397,917
‐
887,440
(833,136)
(596,923)
(3,309,130)
(542,619)
1,184
137,532
3,795
380,234
138,716
384,029
2,939,708
‐
The average numbers of employees for the year for each of the Group’s principal divisions were as follows:
40
Rose Petroleum plc
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2013
Uranium and copper
Gold and silver
Oil & Gas
Total segment employees
Unallocated employees
Total employees
Balance Sheet
Segment Assets
Uranium and copper
Gold and silver
Oil & Gas
Total segment assets
Unallocated assets
Total assets
Segment Liabilities
Uranium and copper
Gold and silver
Oil & Gas
Total segment liabilities
Unallocated liabilities
Current and Deferred Tax
Total liabilities
Capital Additions
Uranium and copper
Gold and silver
Net Assets
Uranium and copper
Gold and silver
Oil & Gas
Total segment net assets
Unallocated net liabilities
Total net assets
41
2013
Number
2012
Number
2
46
1
49
3
52
3
46
‐
49
3
52
2013
£
2012
£
2,559,684
2,695,995
31,119
5,286,798
878,867
5,393,126
2,382,501
‐
7,775,627
103,705
6,165,665
7,879,332
211,233
455,251
36,519
703,003
984,609
32,005
63,250
580,562
‐
643,812
919,777
40,460
1,719,617
1,604,049
30,696
110,255
600,244
106,964
140,951
707,208
2,348,452
2,208,738
(5,400)
4,551,790
(105,742)
5,329,876
1,761,479
‐
7,091,355
(816,072)
4,446,048
6,275,283
Rose Petroleum plc
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2013
7.
PROFIT SHARE PAYMENTS
In December 2010 the Group entered into a joint venture agreement with Jose Ruiz Armenta and Jesus Hector
Ruiz Armenta (‘Met‐Sin’) in relation to gold and silver mining activities in Mexico. This agreement was
subsequently revised on 3 October 2012, effective from 1 January 2013. See note 21.
Under the terms of the original joint venture agreement once a joint venture property became operational the
gross margin earned was allocated 60 per cent to the Group and 40 per cent to Met‐Sin. Under the terms of
the revised agreement this allocation was amended to 50 per cent to the Group and 50 per cent to Met‐Sin.
Met‐Sin
2013
£
2012
£
1,045,655
1,428,558
8.
IMPAIRMENT OF INTANGIBLE EXPORATION AND EVALUATION ASSETS
Intangible exploration and evaluation assets – uranium
2013
£
2,939,708
2012
£
‐
At 31 December 2013, there were indicators of potential impairment of the Group’s intangible uranium
exploration and evaluation assets and an impairment test was performed. Based on the estimation of future
cash flows expected to arise and using a suitable discount rate in order to calculate present value, an
impairment was identified and recognised in the period (2012: £nil).
9.
OTHER OPERATING INCOME
Administration fee income
2013
£
2012
£
‐
55,435
Administration fee income represents income from administrative services provided by the Group. No such
services were provided during the year ended 31 December 2013.
10.
INVESTMENT INCOME
Interest on bank deposits
11.
OTHER GAINS AND LOSSES
2013
£
2,596
2013
£
2012
£
5,959
2012
£
Profit on disposal of available‐for‐sale investment
‐
15,000
At 1 January 2012, the Group held an available‐for‐sale investment representing an investment of 17% in the
Ordinary Share capital of Darley Energy plc, a mining and exploration company, which was impaired in full at
that date. During the year ended 31 December 2012, the Group disposed of its investment for the sum of
£15,000. See note 20.
42
Rose Petroleum plc
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2013
12.
FINANCE COSTS
Interest on convertible loan notes
Other interest charges
13.
(LOSS)/PROFIT BEFORE TAXATION
The (loss)/profit for the year has been arrived at after charging/(crediting):
Cost of inventories recognised as expense
Depreciation of property, plant and equipment
Profit on disposal of property, plant and equipment
Staff costs
Share‐based payments
Operating leases ‐ land and buildings
Non‐recoverable VAT
Net foreign exchange losses
14.
AUDITOR’S REMUNERATION
2013
£
112,554
946
2012
£
130,803
743
113,500
131,546
2013
£
3,165,984
138,716
(74,737)
933,969
55,150
67,776
28,364
77,096
2012
£
2,485,666
384,029
(1,200)
934,489
60,411
73,551
‐
54,668
Amounts payable to Baker Tilly UK Audit LLP and its associates in respect of both audit and non‐audit services:
Audit services
Statutory audit of parent and consolidated accounts
25,750
28,320
2013
£
2012
£
Other services
The auditing of accounts of associates of the Company pursuant to
legislation (including that of countries and territories outside the United
Kingdom)
Taxation services (e.g. compliance and advisory)
15.
STAFF COSTS
The average monthly number of employees (including Executive Directors) was:
Office and management
Production
Their aggregate remuneration comprised:
43
5,250
6,050
5,000
5,500
37,050
38,820
2013
Number
2012
Number
8
44
52
9
43
52
Rose Petroleum plc
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2013
Wages and salaries
Social security costs
Other pension costs
Share‐based payments
Compromise agreement
2013
£
792,846
102,923
25,333
38,563
21,183
2012
£
820,197
102,068
20,167
50,835
‐
980,848
993,267
Included within wages and salaries is £8,316 (2012: £7,943) capitalised to intangible exploration and evaluation
assets.
16.
TAXATION
Current tax:
Foreign tax
Total current tax
Deferred tax:
Origination and reversal of temporary differences
Reversal of fair value adjustment on business combinations in prior
periods
Total deferred tax
Tax charge on (loss)/ profit for the year
2013
£
2012
£
240,970
339,374
240,970
339,374
86,859
‐
319,814
(62,265)
86,859
257,549
327,829
596,923
The credit charge for the year can be reconciled to the (loss)/profit per the income statement as follows:
(Loss)/profit before tax
(2,981,301)
54,304
(Loss)/profit multiplied by rate of corporation tax for UK companies of 23% (2012:
24.5%)
(685,699)
13,304
Effects of:
Expenses not deductible for tax purposes
Temporary differences
Share‐based payments
Unrelieved tax losses carried forward
Deferred tax asset not utilised
Mexican flat‐rate business tax
Difference in foreign tax rates
39,683
(91,579)
12,685
956,188
‐
‐
96,551
21,522
‐
14,801
358,571
65,713
1,180
121,832
Tax charge on (loss)/profit for the year
327,829
596,923
Unrelieved tax losses carried forward, as detailed in note 27, have not been recognised as a deferred tax asset,
as there is currently insufficient evidence that the asset will be recoverable in the foreseeable future. The
losses must be utilised in relation to the same operations. Tax for other jurisdictions is provided at rates
prevailing in those countries.
Income tax credit included in other comprehensive income during the year is:
44
Rose Petroleum plc
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2013
Foreign tax on exchange gain
17.
LOSS PER ORDINARY SHARE
2013
£
2012
£
(95,314)
(229,165)
Basic loss per Ordinary Share is calculated by dividing the net loss for the year attributable to owners of the
parent company by the weighted average number of Ordinary Shares in issue during the year. The calculation
of the basic and diluted loss per Ordinary Share is based on the following data:
Losses
Losses for the purpose of basic loss per Ordinary Share being net loss
attributable to owners of the parent company
2013
£
2012
£
(3,309,130)
(542,619)
Number
Number
Number of shares
Weighted average number of shares for the purpose of basic loss per
Ordinary Share
575,157,905
442,923,658
Loss per Ordinary Share
Basic and diluted
(0.57p)
(0.12p)
Due to the losses incurred in 2013 and 2012, there is no dilutive effect from the existing share options or
convertible loan notes.
18.
INTANGIBLE ASSETS
Cost
At 1 January 2012
Additions
Exchange differences
At 1 January 2013
Additions
Exchange differences
At 31 December 2013
Impairment
At 1 January 2012 and 2013
Additions
Exchange differences
At 31 December 2013
Carrying amount
At 31 December 2013
At 31 December 2012
45
Exploration and
evaluation
assets
£
4,865,067
600,244
(210,830)
5,254,481
30,696
(106,760)
5,178,417
‐
2,939,708
(150,658)
2,789,050
2,389,367
5,254,481
Rose Petroleum plc
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2013
19.
PROPERTY, PLANT AND EQUIPMENT
Cost
At 1 January 2012
Additions
Disposals
Exchange differences
At 1 January 2013
Additions
Disposals
Exchange differences
Diablito
mine
£
Ore processing
mill
£
Plant and
machinery
£
4,388,975
‐
‐
17,142
4,406,117
‐
‐
(21,511)
544,817
‐
‐
15,109
559,926
‐
‐
(13,788)
410,099
106,964
(4,622)
8,664
521,105
110,255
(69,349)
(12,676)
Total
£
5,343,891
106,964
(4,622)
40,915
5,487,148
110,255
(69,349)
(47,975)
At 31 December 2013
4,384,606
546,138
549,335
5,480,079
Accumulated depreciation
At 1 January 2012
Charge for the year
Disposals
Exchange differences
At 1 January 2013
Charge for the year
Disposals
Exchange differences
4,120,855
269,797
‐
15,465
4,406,117
‐
‐
(21,511)
198,289
59,872
‐
4,984
263,145
62,485
‐
(11,070)
79,794
54,360
(4,622)
(402)
129,130
76,231
(29,989)
(8,615)
4,398,938
384,029
(4,622)
20,047
4,798,392
138,716
(29,989)
(41,196)
At 31 December 2013
4,384,606
314,560
166,757
4,865,923
Carrying amount
At 31 December 2013
At 31 December 2012
‐
‐
231,578
382,578
614,156
296,781
391,975
688,756
The depreciation has been charged in the income statement as follows:‐
Cost of sales
Operating and administrative expenses
2013
£
124,219
14,497
2012
£
379,954
4,075
138,716
384,029
46
Rose Petroleum plc
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2013
20.
INVESTMENTS
Group
Available‐
for‐sale
investment
£
213,571
(213,571)
‐
‐
‐
‐
213,571
(213,571)
‐
‐
‐
‐
‐
‐
Shares in
subsidiary
undertakings
£
Company
Loans to
subsidiary
undertakings
£
3,889,004
‐
‐
3,889,004
1
14,296,607
‐
582,028
14,878,635
588,390
Total
£
18,185,611
‐
582,028
18,767,639
588,391
3,889,005
15,467,025
19,356,030
‐
‐
‐
‐
‐
‐
10,922,304
‐
300,000
11,222,304
3,663,679
10,922,304
‐
300,000
11,222,304
3,663,679
14,885,983
14,885,983
3,889,005
581,042
4,470,047
3,889,004
3,656,331
7,545,335
Cost
At 1 January 2012
Disposal
Additions
At 1 January 2013
Additions
At 31 December 2013
Impairment
At 1 January 2012
Disposal
Additions
At 1 January 2013
Additions
At 31 December 2013
Carrying amount
At 31 December 2013
At 31 December 2012
The Groups available‐for‐sale investment represented an investment of 17% in the Ordinary Share capital of
Darley Energy plc, a mining and exploration company. At 31 December 2011, licence applications for the
exploration area were dormant and as there was no active market for this equity instrument the Board
considered that it should be impaired in full.
During the year ended 31 December 2012, the Group disposed of its investment in the Ordinary Share capital
of Darley Energy plc for the sum of £15,000. See note 11.
During the year ended 31 December 2013, the Group became the sole shareholder of a newly incorporated
entity, Rose Petroleum (UK) Limited.
The Company has a number of loans made to its subsidiaries which incur interest at a commercial rate,
according to the Group’s inter‐company loan policy. However, there is a risk that the subsidiaries will not
commence revenue‐generating activities and that the carrying amount of the investments exceed the
recoverable amount. The Board have assessed the recoverability of these loans and consider that a provision of
£3,663,679 (2012: £300,000) should be recognised in the period.
47
Rose Petroleum plc
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2013
The Company had investments in the following subsidiary undertakings as at 31 December 2013 which
principally affected the losses and net assets of the Group:
Place of
incorporation (or
registration) and
operation
Proportion
of ownership
interest
Proportion of
voting power
held Principal activity
UK
UK
U.S.A.
U.S.A.
Mexico
Mexico
Germany
Germany
100%
100%
100%
100%
100%
100%
100%
100%
100% Holding company
100% Holding company
100% Exploration
100% Exploration
100% Mining
100%
Mining
100% Service company
100% Service company
Directly owned:
VANE Minerals (UK) Limited
Rose Petroleum (UK) Limited
Indirectly owned:
AVEN Associates LLC
VANE Minerals (US) LLC
Minerales VANE SA de CV
Minerales VANE Operaciones
SA de CV
Parkyn Energy Germany GmbH
Naab Energie GmbH
21.
JOINT VENTURES
ARIZONA PROJECT
On 5 September 2008 the Group entered into a Mining Venture Agreement with Uranium One Americas Inc.
(‘U1’). The terms of this agreement created an equal Joint Venture Agreement (‘JVA’) between VANE Minerals
(US) LLC (‘VANE’) and U1, combining interests in over 60 breccia pipe targets, including 10 known mineralized
pipes, in northern Arizona. The JVA 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.
The aggregate amounts related to the joint venture included within the consolidated accounts are:
Non‐current assets
Current assets
Current liabilities
Expenses
WATE MINING COMPANY LLC
2013
£
1,411,176
29,539
‐
(17,065)
2012
£
1,405,523
49,400
(658)
(53,536)
On 23 February 2011 the Group entered into a further JV operating agreement with U1 by which further study,
exploration and development of the Wate breccia pipe, identified under the 2008 JVA, would be conducted by
means of a limited liability company, Wate Mining Company LLC. (‘Wate’). Each party to the joint venture has
equal control of the Company.
The aggregate amounts related to the joint venture included within the consolidated accounts are:
Non‐current assets
Current assets
Current liabilities
Expenses
48
2013
£
176,836
21,920
(1,246)
(1,122)
2012
£
176,769
32,065
(6,278)
(3,858)
Rose Petroleum plc
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2013
MET‐SIN JOINT VENTURE
In December 2010 the Group entered into a JVA with Jose Ruiz Armenta and Jesus Hector Ruiz Armenta (‘Met‐
Sin’) in relation to gold and silver mining activities in Mexico.
Under the terms of the agreement:
Rose would operate all mining activities and would pay Met‐Sin for its services as mining contractors;
Rose would provide the capital necessary to acquire, explore and develop mining projects. Rose would
recover any capital cost at the rate of 150 per cent of the original cost (‘recoverable amount’);
once a property becomes operational the gross margin earned would be allocated on the basis of 60
per cent to Rose and 40 per cent to Met‐Sin; and
Met‐Sin would receive 20 per cent profit on presentation of an invoice and the other 20 per cent
would be allocated against Rose capital expenditure until the recoverable amount was nil. Thereafter,
the full 40 per cent would become due on presentation of an invoice.
On 3 October 2012 the terms of the original JVA were amended in respect of the following:
the gross margin earned would be allocated on the basis of 50 per cent to Rose and 50 per cent to
Met‐Sin, effective from 1 January 2013; and
Met‐Sin committed to build and install a flotation mill which would process any production resulting
from the joint venture activities in excess of 100 tons per day.
Rose exercises control over the activities of the JV and the Group has accounted for the operations on the basis
of a profit share agreement. Therefore, revenue and cost of sales are recognised in full in the consolidated
financial statements.
22.
INVENTORIES
Work in progress
Group
2013
£
2012
£
548,372
704,187
During the year £3,165,984 of inventories was expensed (2012: £2,485,666) to the income statement.
23.
TRADE AND OTHER RECEIVABLES
Trade receivables
Amounts owed by Group companies
Amounts owed by joint venture partners
VAT recoverable
Other receivables
Prepayments
Group
Company
2013
£
408,585
‐
18,844
278,111
425,690
303,471
2012
£
410,038
‐
26,464
209,035
16,494
40,510
2013
£
‐
220,650
‐
11,387
1,721
19,449
1,434,701
702,541
253,207
2012
£
‐
41,568
‐
3,950
‐
7,583
53,101
Trade receivables principally comprise amounts receivable from the sales of minerals. The average credit
period for trade receivables is 22 days (2012: 22 days). No interest is charged on trade receivables.
Other receivables includes an amount of £234,844 (2012: £nil) due under the Met‐Sin profit share agreement.
Prepayments includes an amount of £257,577 due under the terms of a share purchase agreement in respect
of a business combination signed in August 2013, and which completed in January 2014. See note 35.
The Directors consider that the carrying amount of trade and other receivables approximates their fair value.
49
Rose Petroleum plc
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2013
24.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents as at 31 December 2013 of £1,179,069 and £579,187 (2012: £529,367, £17,869)
comprise cash held by the Group and the Company respectively. The Directors consider that the carrying
amount of these assets approximate to their fair value.
25.
TRADE AND OTHER PAYABLES
Trade payables
Taxes and social security
Other payables
Accruals
Group
Company
2013
£
272,462
24,826
165,404
322,546
2012
£
191,068
23,569
180,437
292,931
2013
£
37,912
4,698
‐
81,380
785,238
688,005
123,990
2012
£
12,980
‐
‐
65,968
78,948
Trade payables and accruals principally comprise amounts outstanding for trade purchases and on‐going costs.
The average credit period taken for trade purchases is 38 days (2012: 44 days). The Group has financial risk
management policies to ensure that all payables are paid within the credit timeframe.
The Directors consider that the carrying amount of trade and other payables approximates to their fair value.
No interest is generally charged on balances outstanding.
26.
CONVERTIBLE LOAN NOTES
In 2007, the Company issued two convertible loan notes of £1,000,000 and £500,000 which were convertible
into Ordinary Shares of the Company at any time up to the maturity dates of 31 May 2012 and 30 September
2012 respectively. The exercise price was 29p per share for the £1,000,000 loan and 22.75p per share for the
£500,000 loan. If the notes were not converted into Ordinary Shares of the Company they would be redeemed
at par in May and September 2012 respectively.
During the year ended 31 December 2012 the terms of the convertible loan notes were varied as follows:
the redemption date of the £500,000 loan notes was varied from 30 September 2012 to 31 May 2012,
with redemption to take place on that date;
the redemption date of the £1,000,000 loan notes was varied from 31 May 2012 to 31 May 2017. In
addition the exercise price was amended from 29p per share to 1.25p per share;
the holders of the £1,000,000 loan notes became entitled to convert the notes at any time after the
amendment of the conversion price was approved and before the 31 May 2017; and
if either: (a) at any time prior to the redemption date the volume weighted average price of the
Ordinary Shares on AIM (‘VWAP’) (for any consecutive period of 15 business days after 31 May 2012)
exceeds twice the conversion price; or (b) at any time after 31 May 2015, but prior to the redemption
date, the VWAP exceeds the conversion price, then the Company can serve an Early Redemption
Notice. The Company shall pay to the note holder the sum which is equal to the par value of the notes
being redeemed divided by the conversion price and multiplied by the VWAP set out in the Early
Redemption Notice, together with any interest accrued.
Interest is paid six monthly until the notes have been converted or redeemed.
The net proceeds received from the original issue of the convertible loan notes have been split between the
financial liability element and an equity component, representing the fair value of the embedded option to
convert the liability into equity Ordinary Shares. The equity component was credited to equity reserve. See
note 30.
50
Rose Petroleum plc
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2013
As a result of the variation in terms of the £1,000,000 loan notes the original split between the financial liability
element and the equity component has been revised using the Black‐Scholes model. The significant inputs into
the model for the valuation were as follows:
Weighted average share price
Conversion price
Expected term (years)
Expected volatility (%)
Expected dividends
Risk‐free rate (%)
Revised
Options
1.125p
1.25p
5
66.8
nil
0.73
Expected volatility was calculated by considering Rose Petroleum plc share price movements over a period
commensurate with the expected term immediately prior to 31 May 2012.
The risk‐free rate was calculated by reference to the yield on UK government gilt strips with duration similar to
that of the expected term.
The increased valuation of the equity component of £198,101 was credited to equity reserve in the year ended
31 December 2012. See note 30.
Liability component at 1 January
Repayment
Equity component
Interest charged
Interest paid
Group and Company
2013
£
819,563
‐
‐
112,554
(80,000)
2012
£
1,483,409
(500,000)
(198,101)
130,803
(96,548)
Liability component at 31 December
852,117
819,563
The interest expensed for the year is calculated by applying an effective interest rate to the liability
component. For the loans in issue, the relevant interest rates were 9.82% on the £1,000,000 loan and 10.8% on
the £500,000 loan to 31 May 2012. The effective interest rate on the £1,000,000 loan after this date was
13.73%.
The liability component is measured at amortised cost. The difference between the carrying amount of the
liability component at the date of issue and the amount reported in the balance sheet at 31 December 2013
represents the effective interest rate less interest paid to that date.
27.
DEFERRED TAX
There are unrecognised deferred tax assets in relation to:‐
2013
£
2,775,152
8,436,921
9,508
2012
£
2,514,165
4,657,264
‐
11,221,581
7,171,429
UK tax losses
US tax losses
German losses
The movement in the deferred tax balance was as follows:
51
Rose Petroleum plc
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2013
At 1 January
Release to income for the year
Charge to statement of changes in equity
Exchange difference
2013
£
40,460
86,859
(95,314)
‐
2012
£
12,523
257,549
(229,165)
(447)
At 31 December
32,005
40,460
The analysis of the deferred tax balance is as follows:‐
2013
£
2012
£
Mexico business combinations deferred tax liability
32,005
40,460
The unrecognised deferred tax asset in relation to tax losses in the Company at 31 December 2013 was
£306,066 (2012: £34,896).
28.
PROVISIONS
At 1 January
Utilised in the year
Exchange differences
At 31 December
Current provision
Non‐current provision
At 31 December
Group
Decommissioning
2013
£
2012
£
56,021
(7,263)
(1,380)
54,510
‐
1,511
47,378
56,021
16,424
30,954
15,180
40,841
47,378
56,021
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. Accordingly a
provision is required to cover the decommissioning costs for the Ore processing mill and operating mines.
The Directors' assumptions are that restoration of the Diablito mine site will take place within the next twelve
months, and that restoration of the Mill will not take place for at least a further twelve months.
52
Rose Petroleum plc
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2013
29.
SHARE CAPITAL
Authorised:
7,779,297,310 Ordinary Shares of 0.1p each
190,108,108 Deferred Shares of 9.9p each
Allotted, issued and fully paid:
792,673,658 Ordinary Shares of 0.1p each (2012: 442,923,658 Ordinary
Shares of 0.1p each)
190,108,108 Deferred Shares of 9.9p each
Group and Company
2013
£
2012
£
7,779,297
18,820,703
7,779,297
18,820,703
26,600,000
26,600,000
792,674
18,820,703
442,924
18,820,703
19,613,377
19,263,627
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 £0.01 from all shareholders upon
giving not less than 28 days notice in writing.
ISSUED ORDINARY SHARE CAPITAL
On 15 August 2013, the Company completed a placing of 349,750,000 Ordinary Shares of 0.1p each at a price
of 0.4p per share, raising gross proceeds of £1,399,000.
At 1 January 2012 and 1 January 2013
Allotment of shares
At 31 December 2013
30.
OTHER RESERVES
At 1 January
Recognition of equity component of convertible loan note
Reclassification of equity component of convertible loan notes
At 31 December
Ordinary Shares
Number
442,923,658
349,750,000
792,673,658
Group and Company
2013
£
269,317
‐
‐
2012
£
261,220
198,101
(190,004)
269,317
269,317
This reserve represents the equity component of the issued convertible loan notes (see note 26).
The reclassification of equity component represents the movement between reserves on redemption of
convertible loan notes.
53
Rose Petroleum plc
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2013
31.
SHARE‐BASED PAYMENTS
EQUITY SETTLED SHARE OPTION PLAN
The Company had a Share Option Plan under which options to subscribe for the Company’s shares had been
granted to certain Directors and to selected employees and consultants. The Rose Petroleum plc Share Option
Plan was originally adopted by the Company on 25 May 2004.
On 28 September 2011 the Share Option Plan was amended by a resolution of the Remuneration Committee
by which the existing options (‘old options’) were cancelled and replaced with new options (‘replacement
options’). These options were granted with a new exercise price based on the market value of each Ordinary
Share in the Company and were deemed to vest immediately.
On 30 September 2011 the Company issued a further 11,600,000 share options:
2,100,000 share options which vested on 1 September 2012; and
9,500,000 share options of which 3,166,667 vested on 1 September 2012 and the remainder vest in
two equal tranches on 1 September 2013 and 2014.
In August 2013, the 2004 Share Option Plan was replaced by the adoption of the 2013 Share Option Plan Part A
(employees) and 2013 Share Option Plan Part B (non‐employees).
On 3 September 2013 the Company issued a further 70,400,000 share options which vest in three equal
tranches on 3 September 2014, 2015 and 2016. Of these, 23,300,000 were granted with an exercise price of
1.125p and 47,100,000 with an exercise price of 0.475p.
At 31 December 2013, 89,600,000 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 1 September 2023 and the options are forfeited if the employee or consultant
leaves the Group before the options vest, or if those options which have vested are not exercised within three
months of leaving.
Details of the share options outstanding at the end of the year were as follow:
Outstanding at 1 January
Granted
Forfeited/lapsed
Exercised
Outstanding at 31 December
Exercisable at 31 December
2013
2012
Number
of options
26,100,000
70,400,000
(6,900,000)
‐
89,600,000
18,333,334
Weighted
average
exercise price
1.125p
0.69p
1.125p
‐
0.783p
1.125p
Number of
options
26,100,000
‐
‐
‐
26,100,000
19,766,667
Weighted
average
exercise price
1.125p
1.125p
‐
‐
1.125p
1.125p
The options outstanding at 31 December 2013 had an estimated weighted average remaining contractual life
of 2.3 years (2012: 4.6 years).
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 IFRS2 valuation were as follows:
54
Rose Petroleum plc
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2013
Exercise price
Expected volatility (%)
Expected life (years)
Risk free rates (%)
Expected dividends
Performance condition
Weighted average share price
Grants in year
47,100,000
Share options
Grants in year
23,300,000
Share options
0.475p
79 ‐ 82
5.5 ‐ 6.5
1.83 – 2.15
‐
None
0.475p
1.125p
79 ‐ 82
5.5 ‐ 6.5
1.83 – 2.15
‐
None
1.125p
Expected volatility was calculated considering Rose Petroleum plc share price movements over a period
commensurate with the expected term immediately prior to grant date.
The fair value of the options granted during the year was £211,377 (2012: £nil).
In the year ended 31 December 2013 the Company recognised a total expense of £55,150 (2012: £60,411)
related to equity‐settled share‐based payment transactions.
32.
COMMITMENTS UNDER OPERATING LEASES
LESSEE ACTIVITY
Operating lease payments represent total rentals payable by the Group for certain of its mining sites.
Land and buildings
Amounts due within one year
Amounts due in 2‐5 years
2013
£
115,481
337,518
Group
2012
£
121,076
462,404
452,999
583,480
There were no commitments under operating leases in relation to the Company at 31 December 2013 (2012:
£nil).
33.
FINANCIAL INSTRUMENTS
CAPITAL RISK MANAGEMENT
The Group manages its capital to ensure that entities in the Group will be able to continue as going concerns,
while maximising the return to shareholders through the optimisation of the debt and equity balance. The
Group’s overall strategy remains unchanged from 2012.
The capital structure of the Group consists of net debt (borrowings, as detailed in note 26, offset by 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.
55
Rose Petroleum plc
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2013
CATEGORIES OF FINANCIAL INSTRUMENTS
Financial assets measured at amortised cost
Cash and cash equivalents
Trade receivables
Amounts owed by joint venture partners
Other receivables
Financial liabilities measured at amortised cost
Trade payables
Other payables
Convertible loan notes
2013
£
1,179,069
408,585
18,844
328,301
2012
£
529,367
410,038
26,464
16,494
1,934,799
982,363
272,462
165,404
852,117
191,068
180,437
819,563
1,289,983
1,191,068
FINANCIAL RISK MANAGEMENT OBJECTIVES
Management provides services to the business, co‐ordinates access to domestic and international financial
markets and monitors and manages the financial risks relating to the operations of the Group. These risks
include foreign currency risk, credit risk, liquidity risk and cash flow interest rate risk.
The policies for managing these risks are regularly reviewed and agreed by the Board.
The Group does not enter into or trade financial instruments, including derivative financial instruments, for
speculative purposes.
FOREIGN EXCHANGE RISK AND FOREIGN CURRENCY RISK MANAGEMENT
The Group undertakes certain transactions denominated in foreign currencies, with the result that exposures
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 Company purchases using the best spot rate available.
The carrying amounts of the Group’s foreign currency denominated monetary assets and monetary liabilities at
the reporting date are as follows:
Liabilities
2013
£
‐
61,580
‐
2012
£
‐
14,917
‐
Assets
2013
£
‐
1,030,878
‐
2012
£
‐
739,224
‐
Pound sterling
US dollars
Mexican pesos
Foreign currency sensitivity analysis
The functional currencies of the Group companies are Pound Sterling (GBP), US dollars (USD) and Mexican
Pesos (MXN). The financial statements of the Group’s foreign subsidiaries are denominated in foreign
currencies.
The Group is exposed primarily to movements in USD, the currency in which the Group receives its revenue,
against other currencies, in which the Group incurs liabilities and expenditure.
56
Rose Petroleum plc
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2013
The Group is exposed to foreign currency risk arising from recognised assets and liabilities as well as
commitments arising from future trading transactions.
Sensitivity analyses have been performed to indicate how the profit or loss would have been affected by
changes in the exchange rate between GBP, MXN and USD. The analysis is based on a weakening and
strengthening of USD, in which the Group has significant assets and liabilities at the end of each respective
period, by ten per cent against GBP and MXN. A movement of ten 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 ten per cent change in foreign currency rates.
The table below details the Group’s sensitivity to a ten per cent dec rease in USD against GBP and MXN. A
positive number below indicates an increase in profit where USD weakens ten per cent against GBP and USD.
For a ten per cent strengthening of USD there would be an equal and opposite impact on the profit, and the
balance below would be negative.
Income statement
INTEREST RATE RISK MANAGEMENT
2013
£
2012
£
109,305
71,091
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 interest rates for the
convertible loan notes have been fixed from commencement of the agreements. The Group has no other
liabilities which attract interest charges.
LIQUIDITY RISK MANAGEMENT
Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has built an
appropriate liquidity risk management framework for the management of the Group’s short, medium and long‐
term funding and liquidity management requirements. The Group manages liquidity risk by maintaining
adequate cash reserves and by continuously monitoring forecast and actual cash flow.
CREDIT RISK MANAGEMENT
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial
loss to the Group. The Group does not have any significant credit risk exposure on trade receivables.
The Group makes allowances for impairment of receivables where there is an identified event which, based on
previous experience, is evidence of a reduction in the recoverability of cash flows.
The credit risk on liquid funds (cash) is considered to be limited because the counterparties are financial
institutions with high and good credit ratings assigned by international credit‐rating agencies.
The carrying amount of financial assets recorded in the financial statements represents the Group’s maximum
exposure to credit risk.
COMMODITY PRICE RISK
Inventories represent ore and concentrate already mined. The Group has exposure to risks in respect of the
market price at date of sale of the minerals and the currency risk arising from the difference between the
currency of the amount due (normally US Dollars) and pound sterling (being the currency in which the Group
financial statements are prepared).
The following table summarises the impact of increases/decreases in the commodity price of gold and silver,
these being the two precious metals, the sale of which comprises all of the Group’s revenue. The assumption is
that the sale of precious metals is split 83% gold and 17% silver, and price variances are calculated from the
historical values experienced during the appropriate year.
57
Rose Petroleum plc
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2013
The variances have been calculated as follows:
Commodity
Gold
Silver
Commodity
Gold
Silver
Year
USD
2013
2012
2013
2012
High
USD
1,694
1,792
32.23
37.23
Low
USD
1,195
1,540
19.05
26.67
Average
USD
High variance
USD
Low variance
USD
1,411
1,669
23.79
31.15
20%
7%
35%
20%
15%
8%
20%
14%
Impact on
revenue and
pre‐tax
loss/equity
£
266,898
(280,399)
415,946
(306,451)
Impact on
revenue and
pre‐tax
loss/equity
£
948,808
(725,342)
344,232
(195,503)
Variance
%
+20
‐15
+35
‐20
Variance
%
+7
‐8
+20
‐14
34.
RELATED PARTY TRANSACTIONS
AMOUNTS DUE FROM SUBSIDIARIES
The Company has entered into a number of unsecured related party transactions with a subsidiary
undertaking. The most significant transactions carried out between the Company and its subsidiary undertaking
are management charges for services provided to the subsidiary company and long‐term financing. Details of
these transactions are as follows:
2013
2012
Transactions
in the year
£
363,967
224,423
588,390
286,314
Amounts
owing
£
Transactions
in the year
£
13,492,385
1,974,640
15,467,025
220,650
361,589
220,439
582,028
155,180
Amounts
owing
£
13,128,418
1,750,217
14,878,635
41,568
Loans
Interest (1.5%)
Management charges
A provision of £3,663,679 (2012: £300,000) has been made in respect of the amounts owed by the subsidiary
company. The total provision at 31 December 2013 is £14,885,983 (2012: £11,222,304).
During the year, Group companies entered into the following transactions with related parties who are not
members of the Group:
2013
Amounts
owing/(receivable)
£
£
2012
Amounts
owing/(receivable)
£
£
Purchase of services
Sale of services
8,500
(23,621)
‐
‐
19,382
55,435
‐
(45,064)
A Director of the related party is also a Director of the Company.
58
Rose Petroleum plc
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2013
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.
Short‐term employee benefits
Consultancy payments
Share‐based payments
2013
Purchase of
services
£
310,045
129,799
35,893
Amounts
owing
£
28,410
99,947
‐
2012
Purchase of
services
£
367,975
112,968
44,973
475,737
128,357
525,916
Amounts
owing
£
‐
44,070
‐
44,070
The amounts outstanding are unsecured and will be settled in cash. No guarantees have been given or
received.
DIRECTORS’ EMOLUMENTS
Remuneration paid to Directors during the year was as follows:
Annual
salary
entitlement
£
Emoluments1
taken
£
Compromise
Agreement
£
2013
Consultancy
£
Pension
£
Total
£
Executive Directors
SD Van Nort
LC Arnold
MC Idiens
KK Hefton
DJ Newton
KB Scott
Non‐executive Directors
Rt Hon Earl of Kilmorey PC
(formerly Sir Richard
Needham)
MC Idiens
PE Jeffcock
24,000
24,000
125,000
100,000
110,000
7,671
‐
‐
64,437
120,631
36,360
2,507
25,000
23,333
20,000
20,000
11,937
7,590
‐
‐
‐
‐
21,183
‐
‐
‐
‐
41,194
42,190
‐
‐
‐
22,415
‐
24,000
‐
‐
‐
6,250
‐
17,333
‐
‐
‐
‐
41,194
42,190
70,687
120,631
74,876
24,922
23,333
35,937
7,590
455,671
266,795
21,183
129,799
23,583
441,360
1Emoluments include benefits‐in‐kind
MC Idiens became an executive Director with effect from 1 July 2013.
59
Rose Petroleum plc
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2013
2012
Annual
salary
entitlement
£
Emoluments1
taken
£
Consultancy
£
Pension
£
Total
£
24,000
24,000
75,000
100,000
110,000
‐
‐
77,774
121,639
110,740
51,735
58,233
‐
‐
‐
‐
‐
9,167
‐
11,000
51,735
58,233
86,941
121,639
121,740
20,000
5,000
20,000
5,925
‐
3,000
‐
‐
20,000
8,925
358,000
336,078
112,968
20,167
469,213
Executive Directors
SD Van Nort
LC Arnold
MC Idiens
KK Hefton
DJ Newton
Non‐executive Directors
Rt Hon Earl of Kilmorey PC
(formerly Sir Richard Needham)
MC Idiens
1Emoluments include benefits‐in‐kind
The remuneration of Directors and key executives is decided by the remuneration committee having regard to
comparable market statistics.
SD Van Nort and LC Arnold waived their annual salary entitlement in the current and prior year to aid the cash
flow of the Group.
Directors share options are detailed in the Directors Report.
Directors’ pensions
The number of Directors to whom retirement benefits are accruing under money
purchase schemes was
2013
No
1
2012
No
2
35.
POST BALANCE SHEET EVENTS
PARKYN ENERGY HOLDINGS PLC
On 20 January 2014, the Company completed its purchase of the entire issued share capital of Parkyn Energy
Holdings plc, which in turn owns the entire issued share capital of Parkyn Energy Germany Limited, the sole
owner of two hydrocarbon licences in south‐western Germany.
Under the terms of the acquisition the Company has acquired a 100% interest in the two concessions covering
over 635,000 acres for €400,000. In addition, the licences are subject to a 2% overriding royalty interest of
gross sales of hydrocarbons, less certain costs, in favour of 3Legs Resources plc, plus a 0.5% overriding royalty
interest to the original finder.
GRANT OF NEW HYDROCARBON LICENCE
On 31 January 2014, Naab Energie GmbH, a newly formed 100% owned subsidiary of the Company, was
granted a new concession covering approximately 657,000 acres in the Weiden Basin, located in the state of
Bavaria, south‐eastern Germany for hydrocarbon exploration.
The licence commences on 1 February 2014 for an initial period of three years and the terms of the licence
requires the Company to carry out a programme of works over that period to include 2D seismic and
geophysical measurements designed to create a geological model of the licence are at an estimated cost of
approximately €900,000.
60
Rose Petroleum plc
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2013
The Licence is both a conventional and unconventional petroleum play and is subject to an overriding royalty
interest of 0.5% payable on any revenues to the original finder.
THOMPSON CANYON JOINT VENTURE
On 3 February 2014, the Company signed a Joint Venture Agreement through its wholly owned subsidiary
AVEN Associates LLC with Lowell Copper Ltd (‘Lowell’) in connection with AVEN’s TC porphyry copper project in
the State of New Mexico, U.S.A.
Under the terms of the agreement Lowell will provide financing for the initial exploration phase of US$250,000
in return for a 25% interest in the property. Lowell will then have the option of increasing its interest by:
(a) funding the next US$2,500,000 of the exploration programme to earn a 51% interest in the property; and
(b) funding the next US$3,500,000 of the exploration programme for a 70% interest in the property.
Once Lowell has provided the total of US$6,250,000 Lowell will have earned a 70% interest in the property.
Should Lowell elect to limit its investment to a 51% interest, then AVEN and Lowell will fund the programme
according to their percentage interests.
The term of the initial Joint Venture Agreement is four years and AVEN has full, complete and exclusive control
over the operations during this period of time.
MET‐SIN JOINT VENTURE
On 28 February 2014, the terms of the Met‐Sin Joint Venture Agreement in respect of gold and silver mining
activities in Mexico was amended in respect of the following:
Rose would provide the investment and operating funds to develop a new mining project in respect of
the concession ‘Maria Fernanda’ for a term of three years commencing from the date of signing;
Rose would recover any investment and development capital incurred prior to any distribution of
profits; and
once the property becomes operational and Rose has recovered its investment and development
capital, the gross margin earned would be allocated on the basis of 65% to Rose and 35% to Met‐ Sin.
OIL & GAS FARM‐IN AGREEMENT
In March 2014, the Company signed a farm‐in agreement under which its newly incorporated subsidiary, Rose
Petroleum (Utah) LLC (‘Rose Utah’) acquired the right to acquire 75% of certain oil, gas and hydrocarbon leases
covering approximately 195,000 net acres in Grand and Emery Counties, Utah, from Rockies Standard Oil
Company, LLC which retains the remaining 25% working interest. The net revenues to Rose Utah associated
with the leases is 80%.
Rose Utah is the designated operator and its 75% working interest in the leases equates to approximately
146,250 acres net, together with a 75% interest in one shut‐in well. The project targets two unconventional
shale resource plays, Mancos and Cane Creek Shales.
The consideration for the farm‐in agreement comprises:
cash payments totalling US$2,000,000 to be made between February 2014 and November 2015;
commitment from Rose to drill three Mancos wells and one Cane Creek well with a total project carry
obligation of US$9,500,000 and US$7,500,000 respectively.
There are no specified time requirements for the drilling commitment or the expenditure of the carry
obligations. Following completion of this commitment all costs and expenses in relation to the project are to be
split 75% to Rose Utah and 25% to Rockies Standard Oil Company, LLC.
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Rose Petroleum plc
NOTICE OF AGM
Notice is hereby given that the Annual General Meeting of the Company will be held at the offices of Allenby
Capital Limited, 3 St Helen’s Place, London, EC3A 6AB on 27 June 2014 at 09.00 AM at which the following
matters will be dealt with:
ORDINARY BUSINESS
1. To receive the Reports of the Directors and Auditors and the Financial Statements for the Year ended
31 December 2013.
2. To appoint Philip Jeffcock, who was appointed by the Board since the last Annual General Meeting, as
a Director of the Company.
3. To appoint Kelly Scott, who was appointed by the Board since the last Annual General Meeting, as a
Director of the Company.
4. To re‐elect Richard Kilmorey, who retires by rotation, as a Director of the Company.
5. To re‐elect Kris Hefton, who retires by rotation, as a Director of the Company.
6. To re‐appoint Baker Tilly UK Audit LLP as auditors of the Company to hold office from the conclusion
of this meeting until the conclusion of the next Annual General Meeting at which the requirements of
section 437 and 438 of the Companies Act 2006 (“2006 Act”) are complied with. .
7. To authorise the Directors to agree the remuneration of the auditors.
SPECIAL BUSINESS
As Special Business to consider and, if thought fit, to pass the following resolutions, of which resolution number
8 will be proposed as an ordinary resolution and resolution number 9 will be proposed as a special resolution:
8. That for the purposes of Section 551 of the 2006 Act (and so that expressions defined in that Section
shall bear the same meanings as in this resolution) the Directors be, and they are, generally and
unconditionally authorised to allot Relevant Securities (as defined in note 1 below) up to a maximum
nominal amount of £800,000 to such persons at such times and on such terms as they think proper
such authority to expire on the date falling 15 months from the date of passing of this resolution, or if
earlier, on the date of the next Annual General Meeting of the Company to be held after the passing of
this resolution (unless renewed, varied or revoked by the Company in general meeting)(or any
adjournment thereof) save that the Company may at any time before such expiry make an offer or
agreement which would or might require Relevant Securities to be allotted after such expiry and the
Directors may allot Relevant Securities in pursuance of such offer or agreement as if the authority
conferred hereby had not expired. This authority is in substitution for all previous authorities
conferred on the Directors in accordance with section 551 of the 2006 Act.
9. That the Directors be and they are hereby generally authorised pursuant to section 570 of the 2006
Act to allot equity securities (as defined in Section 560 of the 2006 Act) for cash of the Company
pursuant to the authority conferred by resolution 8 above (as varied from time to time by the
Company in general meeting) as if Section 561 of the Act did not apply to such allotment provided that
this power shall be limited:
a.
to the allotment of equity securities in connection with a rights issue, open offer or otherwise
in favour of the holders of Ordinary Shares of 0.1 pence each (‘Ordinary Shares’) where the
equity securities respectively attributable to the interests of all such shareholders are
proportionate (as nearly as may be practicable) to the respective numbers of Ordinary Shares
held by them on the record date for such allotment but subject to such exclusions or other
arrangements as the Directors may deem necessary or expedient in relation to fractional
entitlements or legal or practical problems under the laws of, or the requirements, of any
recognised regulatory body or any stock exchange in any territory;
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Rose Petroleum plc
NOTICE OF AGM
b.
c.
the allotment of 750,000,000 Ordinary Shares in connection with a potential placing; and
to the allotment otherwise than pursuant to subparagraph (a) above and (b) above of equity
securities not exceeding in aggregate the nominal amount of £50,000.
provided further that the authority hereby granted shall expire at the conclusion of the next Annual General
Meeting of the Company to be held after the date of passing this resolution or the date falling 15 months from
the date of passing this resolution (unless renewed, varied or revoked by the Company prior to or on that date)
(or any adjournment thereof) save that the Directors shall be entitled to make at any time before the expiry of
the power hereby conferred any offer or agreement which might require equity securities to be allotted after
the expiry of such power and the Directors may allot equity securities in pursuance of such offer or agreement
notwithstanding that the power conferred by this resolution has expired. This authority is in substitution for all
previous authorities conferred on the Directors in accordance with section 570 of the 2006 Act.
By Order of the Board 3 June 2014
Ian McNeill
Company Secretary
Rose Petroleum plc
145‐157 St John Street
London
EC1V 4PW
Notes:
Entitlement to attend and vote
1
“Relevant Securities” means;
(a)
shares in the Company other than shares allotted pursuant to:
(i)
an employee share scheme (as defined by section 1166 of the 2006 Act);
(ii) a right to subscribe for shares in the Company where the grant of the right itself
constituted a Relevant Security; or
(iii) a right to convert securities into shares in the Company where the grant of the right
itself constituted a Relevant Security.
(b)
any right to subscribe for or convert any security into shares in the Company other than
rights to subscribe for or convert any security into shares allotted pursuant to an
employee share scheme (as defined by section 1166 of the 2006 Act). References to the
allotment of Relevant Securities in the resolution include the grant of such rights.
2
Only those members registered on the Company's register of members at:
6.00 pm on 25 June 2014; or,
if this Meeting is adjourned, at 6.00 pm on the day two days prior to the adjourned
meeting, shall be entitled to attend and vote at the Meeting.
Appointment of proxies
A member is entitled to attend, speak and vote at the above meeting and is entitled to appoint one
or more proxies to attend, speak and vote in his stead. A proxy need not be a member of the
Company. You can only appoint a proxy using the procedures set out in these notes and the notes to
the proxy form. If you wish your proxy to speak on your behalf at the Meeting you will need to
appoint your own choice of proxy (not the Chairman) and give your instructions directly to them.
3
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Rose Petroleum plc
NOTICE OF AGM
You may appoint more than one proxy provided each proxy is appointed to exercise rights attached
to different shares. You may not appoint more than one proxy to exercise rights attached to any one
share. To appoint more than one proxy, each different proxy appointment form must be received by
Capita Asset Services, PXS1, 34 Beckenham Road, Beckenham, Kent, BR3 4ZF not less than 48 hours
before the time appointed for the meeting..
A vote withheld is not a vote in law which means that the vote will not be counted in the calculation
of votes for or against the resolution. If no voting indication is given, your proxy will vote or abstain
from voting at his or her discretion. Your proxy will vote (or abstain from voting) as he or she thinks
fit in relation to any other matter which is put before the Meeting.
A prepaid form of proxy is enclosed. To be valid any form of proxy and power of attorney or other
authority under which it is signed or a notarially certified or office copy of such power of authority
must be lodged with the Company's Registrars Capita Asset Services, PXS1, 34 Beckenham Road,
Beckenham, Kent, BR3 4ZF so as to be received not less than 48 hours before the time appointed for
the meeting or any adjourned meeting. The return of a form of proxy will not preclude a member
from attending and voting at the meeting in person should he subsequently decide to do so.
CREST members who wish to appoint a proxy or proxies by utilising the CREST electronic proxy
appointment service may do so for the Meeting and any adjournment(s) thereof by utilising the
procedures described in the CREST manual. CREST personal members or other CREST sponsored
members, and those CREST members who have appointed a voting service provider(s), should refer
to their CREST sponsor or voting service provider(s), who will be able to take the appropriate action
on their behalf.
In order for a proxy appointment made by means of CREST to be valid, the appropriate CREST
message (a CREST Proxy Instruction) must be properly authenticated in accordance with Euroclear
UK & Ireland Limited’s (EUI) specifications and must contain the information required for such
instructions, as described in the CREST manual. The message must be transmitted so as to be
received by the issuer's agent (Capita Asset Services, ID RA10) not less than 48 hours before the time
appointed for the meeting. For this purpose, the time of receipt will be taken to be the time (as
determined by the timestamp applied to the message by the CREST applications host) from which
the issuer's agent is able to retrieve the message by enquiry to CREST in the manner prescribed by
CREST.
CREST members and, where applicable, their CREST sponsors or voting service providers should note
that EUI does not make available special procedures in CREST for any particular messages. Normal
system timings and limitations will therefore apply in relation to the input of CREST proxy
instructions. It is the responsibility of the CREST member concerned to take (or, if the CREST member
is a CREST personal member or sponsored member or has appointed a voting service provider(s), to
procure that his CREST sponsor or voting service provider(s) take(s)) such action as shall be necessary
to ensure that a message is transmitted by means of the CREST system by any particular time. In this
connection, CREST members and, where applicable, their CREST sponsors or voting service providers
are referred, in particular, to those sections of the CREST manual concerning practical limitations of
the CREST system and timings.
The Company may treat as invalid a CREST proxy instruction in the circumstances set out in
Regulation 35(5) (a) of the Uncertificated Securities Regulations 2001.
In the case of joint holders, where more than one of the joint holders purports to appoint a proxy,
only the appointment submitted by the most senior holder will be accepted. Seniority is determined
by the order in which the names of the joint holders appear in the Company's register of members in
respect of the joint holding (the first‐named being the most senior).
4
5
6
7
8
9
10
11
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Rose Petroleum plc
NOTICE OF AGM
Changing proxy instructions
12
To change your proxy instructions simply submit a new proxy appointment using the methods set
out above. Note that the cut‐off time for receipt of proxy appointments (see above) also apply in
relation to amended instructions; any amended proxy appointment received after the relevant cut‐
off time will be disregarded.
Where you have appointed a proxy using the hard‐copy proxy form and would like to change the
instructions using another hard‐copy proxy form, please contact Capita Asset Services on 0871 664
0300 in the UK (Calls cost 10p per minute plus network extras). If calling from overseas please call
+44 (0)20 8639 3399 lines are open 8.30am to 5.30pm.
If you submit more than one valid proxy appointment, the appointment received last before the
latest time for the receipt of proxies will take precedence.
Termination of proxy appointments
13
In order to revoke a proxy instruction you will need to inform the Company by sending a signed hard
copy notice clearly stating your intention to revoke your proxy appointment to Capita Asset Services,
PXS, 34 Beckenham Road, Beckenham, Kent, BR3 4TU. In the case of a member which is a company,
the revocation notice must be executed under its common seal or signed on its behalf by an officer
of the Company or an attorney for the Company. Any power of attorney or any other authority
under which the revocation notice is signed (or a duly certified copy of such power or authority)
must be included with the revocation notice. The revocation notice must be received by Capita
Asset Services, PXS, 34 Beckenham Road, Beckenham, Kent, BR3 4TU no later than 48 hours prior to
the meeting.
If you attempt to revoke your proxy appointment but the revocation is received after the time
specified then, subject to the paragraph directly below, your proxy appointment will remain valid.
Appointment of a proxy does not preclude you from attending the Meeting and voting in person. If
you have appointed a proxy and attend the Meeting in person, your proxy appointment will
automatically be terminated.
Corporate representatives
14
A corporation which is a member can appoint one or more corporate representatives who may
exercise, on its behalf, all its powers as a member provided that no more than one corporate
representative exercises powers over the same share.
Issued shares and total voting rights
15
As at 6:00pm on 3 June 2014, the Company's issued share capital comprised 792,673,658 Ordinary
Shares of 0.1p each. Each Ordinary Share carries the right to one vote at a general meeting of the
Company and, therefore, the total number of voting rights in the Company as at 6:00pm on 3 June
2014 is 792,673,658.
Communication
Except as provided above, members who have general queries about the Meeting should contact the
Company Secretary at Rose Petroleum plc, First Floor, 9 Savoy Street, London, WC2E 7ER or on +44 (0)
207 225 4590 (no other methods of communication will be accepted). You may not use any electronic
address provided either:
in this notice of annual general meeting; or
any related documents (including the Chairman's letter and proxy form),
to communicate with the Company for any purposes other than those expressly stated.
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Rose Petroleum plc
NOTICE OF AGM
66
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