Financial Report for the Year Ended 30 June 2008
ABN 88 002 522 009
16 Southport Street
West Leederville, 6007
Western Australia
Ph: +61 8 6389 5700
F: +61 8 9381 4944
1 October 2008 admin@rangeresources.com.au
2008 ANNUAL REPORT
Please find below a summary of the Annual Report, including financial accounts,
for Range Resources Ltd ("Range" or the "Company") for the year ended 30 June
2008. A complete pdf version of this report is available for download from the
Company's website at www.rangeresources.com.au.
Australia UK
Range Resources Ltd. Range Resources Ltd.
Robert Hyndes Peter Landau
+61.8.9324.8513 +44.207.389.8191
robert@hyndes.com p.landau@rangeresources.com.au
RFC Corporate Finance Fox-Davies Capital
(Nominated Advisor) (Broker)
Stuart Laing Daniel Fox-Davies
+61.8.9.480.2500 +44.207.936.5200
RANGE RESOURCES LIMITED
AND CONTROLLED ENTITIES
ABN 88 002 522 009
FINANCIAL REPORT
FOR THE YEAR ENDED
30 JUNE 2008
REVIEW OF OPERATIONS
Dharoor and Nogal Exploration Projects, Puntland
In July 2008, Africa Oil Corp (Africa Oil) commenced seismic work in the
Dharoor Valley of Puntland, Somalia. Africa Oil plans to acquire up to 2,600
kilometres of 2D vibroseis data on the Dharoor Block. To date, approximately
300 kilometres of seismic has been acquired and the daily production rate
continues to increase.
In the Nogal Basin, Africa Oil has acquired more than 4,000 kilometres of good
quality 2D data which was recorded in the late 1980's.
Africa Oil entered into a contract for a drilling rig to begin drilling in its
Puntland concessions in 2008. The contract covered the drilling of two wells
with an option to drill two additional wells. Due to logistical and security
difficulties in and around Somalia Africa Oil made the decision to delay the
start of its 2008 drilling programme, originally scheduled to start in July
2008. Africa Oil has negotiated an option with the rig contractor to contract
and utilize the original rig later in 2008.
Current operational plans by Africa Oil envisage that the seismic program in
the Dharoor Valley will be completed by the end of 2008, allowing the selection
of drilling locations in that area. As a result it is anticipated that the
drilling program will be reinstated by the end of 2008 and that drilling will
commence end 2008, early 2009.
The Dharoor and Nogal sedimentary basins were contiguous with the prolific
Marib and Masila basins in Yemen during the Jurassic and Cretaceous periods.
Over 9 billion BOE have been discovered in Yemen but exploration has been
limited to date in Somalia. Only 3 wells have been drilled in basinal settings
in these concessions before operations ceased in the early 1990's. Those wells
confirmed thick sedimentary sequences, encountered oil in Cretaceous sandstones
and proved the presence of active petroleum systems in both basins.
Puntland Government reaffirms Range Resources and Africa Oil Exploration Rights
During the year there was much speculation and debate in relation to the
proposed introduction of a National Oil Law by the Transitional Federal
Government (TFG) of Somalia. Of particular concern was the impact that this
National Oil Law would have had on the Range concessions. Range was pleased to
advise that in September 2007, the Government of Puntland had reinforced its
support for Range and its joint venture partner Africa Oil, and formally stated
that it will not accept the proposed National Oil Law. The Puntland Government
noted that in their opinion, the proposed law was not only inconsistent with
the rights validly granted by the Puntland Government to Range (which were also
endorsed by the TFG), but it would also be detrimental to the Somali people as
a whole.
Given the proximity of the drilling program of Range and Africa Oil the
resultant success and generation of oil production royalties ensures that
Range, Africa Oil and the Puntland Government remain committed to the
exploration and development of Puntland's natural resources.
This view was further endorsed in formal statements by Puntland's Minister for
Energy and Resources.
"The Regional State of Puntland was formed with the full consent of its
inhabitants and to safeguard and develop the lives and interests of its people,
with no malice or hatred towards our brothers in the other regions of Somalia.
On the contrary, instead of opting for separation from the rest of the Somali
Republic, as some regions, the leaders of Puntland climbed the proverbial tall
and short tree in order to realize the reunification of the Republic, but, with
a better system of governance. Puntland believes that the reconciliation and
reunification of the Somali people is beneficial to its inhabitants both in
regards to security and development. This is why Puntland played a pivotal role
in the formation of the TFG and provided sustenance to the TFG when it was
isolated in Jowhar and Baidoa. Puntland was able to provide such support at the
expense of its developmental goals, recognizing that security is a major
requirement to development. Hence, the government of Puntland did not spare the
proceeds it received from taxation, from the port services in Bosasso, and the
revenues it received from the exploration agreements in order to defend itself
and the TFG from the onslaught of fanatic groups based in Mogadishu. Puntland
reserves the right to manage its own development without sacrificing the
"COMMON GOOD". Puntland reserves the right to manage its natural resources,
Ports, airports (except Customs and Immigration), fisheries, commerce etc…
Puntland is willing to share its revenue in a just and equitable manner with
the rest of Somalia." [ March 25, 2008]
"The Puntland Government remains fully committed to its existing agreement with
Africa Oil and Range Resources, covering concessions in Dharoor and the Nogal
Valley of Puntland, the concessions agreements covering those areas remain in
effect and are supported by the full force of the laws of Puntland." [August
20, 2008]
As clearly defined in the 19 March, 2008 Puntland Government Policy Statement
(puntlandgovt.com) "Until such time an all inclusive federal constitution is
effected and state governments, convinced with the sharing of power and
resources, are instituted, Puntland's support of the TFG should not be
interpreted in any manner that Puntland is part of the TFG - Puntland shall
remain independent for its laws, policies and interests." [August 20, 2008]
Offshore Acreage
Range is in advanced stages of negotiations with regards to the completion of a
15,000km 2D line seismic programme to be funded by proposed joint venture
partners. Subject to the consummation of these negotiations the expected timing
for commencement of the offshore seismic could be as early as December 2008.
Recent incidents offshore Puntland have delayed finalisation of these
negotiations but the Company remains confident that agreements can be
concluded, particularly with the recent offer of assistance from various world
organisations regarding naval security.
Minerals Exploration
Previously a number of exploration targets have been identified in Puntland,
however, remote site access and drill availability have been long standing
issues which have hindered further work being undertaken. The substantial
increase in exploration in recent years has resulted in a shortage of drilling
equipment and manpower with current lead times on exploration drills and drill
contracts typically around two years. The need to drill in Northern Somalia has
further compounded the difficulties of securing drill rigs and contractors.
As a result the Company looked to securing its own exploration drill rig and
has now been successful in securing a versatile drill rig suitable for rugged
and remote conditions. It is expected that prior to the rig being deployed to
Puntland the rig is first to be utilised domestically on the tenements held by
the Company in the central and southern areas of the Forrestania Greenstone
Belt near Southern Cross. These tenements have the potential for gold and
nickel mineralisation. A geological review of historic exploration has been
undertaken during the year to highlight areas of interest and target
development.
The Board are currently reviewing available strategic options to realise
shareholder value from it significant Western Australia tenement portfolio.
Aim Listing
A major highlight was the successful admission of the Company's shares onto the
AIM market of the London Stock Exchange in August 2007. The AIM listing
enhanced the profile of Range, provided international investors easier access
to Range's securities and broadening the potential investor base of the Company
for capital raisings that may be required to support its oil and gas and
mineral exploration and development activities in Puntland.
Puntland Activities
During the year Range completed a number of initiatives with respect to
assisting Puntland:
* Continued funding of Government projects, including Bossaso Airport and
Bosasso Port.
* Journalist and investor analyst trips into Puntland to promote Range and
the region. The Puntland Government met the journalists and Company
representatives in Garowe and the President undertook several individual
question and answer sessions with the journalists. In addition, the
Puntland Government announced two major initiatives and formally launched a
new website www.puntlandgov.net in order to help better communicate the
Government's actions and policies. The Puntland Government also presented
to the Company and its guests with the Puntland Five Year Development Plan,
a comprehensive document which sets out the Puntland Strategic Vision and
the Policy Guidelines.
* Identifying potential JV partners for infrastructure and fisheries
development.
FINANCIAL POSITION
The net assets of the economic entity have increased by $26,446,239 from
$57,839,547 at 30 June 2007 to $84,285,786 in 2008. The increase in Net Assets
during the financial year largely resulted from a significant reduction in
liabilities from the payment to Consort of the consideration for the Puntland
rights. This obligation was settled in early 2008.
The directors believe the group is in a strong and stable financial position to
expand and grow its current operations.
SIGNIFICANT CHANGES IN STATE OF AFFAIRS
* On 04 July 2007 Toufic Rahi resigned as Non-Executive Director of the
Company.
* On 14 July 2007 payment of US$10m was made to Consort Private Limited
representing the cash component for the remaining 49.9% carried interest in
the Contract of Work for the exploration and development of Puntland's
mineral and hydrocarbon resources.
* On 21 August 2007 the Company confirmed that along with Africa Oil
Corporation it has valid Production Sharing Agreements with the Government
of Puntland, following the Transitional Federal Government of Somalia's
proposed introduction of a National Oil Law.
* On 10 September 2007, the Company issued 30,000,000 Shares to Consort
Private Limited.
* On 12 September 2007, the Company issued 8,270,025 Ordinary Fully Paid
Shares as an incentive to Chairman Sir Sam Jonah.
* On 23 October 2007 the Company was admitted to trading on the AIM market of
the London Stock Exchange.
* On 19 November 2007 the Company completed an AIM placement of 18,180,000
new ordinary shares an issue price of 22 pence each through London based
broker Fox-Davies Capital Limited.
* On 22 November 2007 Ms Joanna Kiernan resigned as Company Secretary. Mr
Peter Landau, an Executive Director of Range assumed the Company Secretary
position.
* On 28 November 2007 the Company became a substantial shareholder in Contact
Uranium Limited (ASX:CTS) having acquired 8,000,000 Ordinary Shares.
* On 18 December 2007 Range Director Marcus Edwards-Jones acquired 100,000
Ordinary Fully Paid Shares in the Company via an on market purchase on AIM.
* On 21 December 2007 the Company issued 63,723,930 unlisted options pursuant
to an Option Placement Offer and 15,271,144 Options pursuant to an Option
Rights Offer.
* On 31 December 2007 1,136,000 Shares that were part of the AIM placement
were cancelled.
AFTER BALANCE DATE EVENTS
On 16 July 2008 Mr Peter Landau resigned as Company Secretary. Ms Susan Hunter
was appointed as the Company Secretary.
On 22 July 2007 Mr Liban Bogor resigned as a Director of the Company. Range
Executive Director Mr Michael Povey moved into a Non Executive position
FUTURE DEVELOPMENTS, PROSPECTS AND BUSINESS STRATEGIES
To further improve the economic entity's profit and maximise shareholders
wealth, the Company is committed to further developing the exploration
potential of its Puntland Project and invite interested parties into joint
venture arrangements.
LIKELY DEVELOPMENTS
Other than information disclosed elsewhere in this annual report, information
on likely developments in the operations of the Group and the expected results
of those operations in future financial years has not been included in this
directors' report because the directors believe, on reasonable grounds, that to
include such information would be likely to result in unreasonable prejudice to
the Group.
ENVIRONMENTAL ISSUES
The economic entity's operations are not regulated by any significant
environmental regulation under a law of the Commonwealth or of a state or
territory.
INCOME STATEMENT
FOR THE YEAR ENDED
30 JUNE 2008
Note Economic Entity Parent Entity
2008 2007 2008 2007
$ $ $ $
Revenue from continuing 2 501,452 217,757 501,452 217,757
operations
Other income 2 10,743 5,175,131 10,743 5,175,131
Finance costs (8,960) (1,003,604) (8,770) (1,003,604)
Depreciation expense (58,174) (37,366) (58,174) (37,366)
Directors fees 5 (1,031,958) (696,128) (1,031,958) (696,128)
Directors remuneration 5 - (1,319,250) - (1,319,250)
Directors share based 5 (4,713,914) - (4,713,914) -
payment
Corporate management (854,359) (573,217) (854,359) (573,217)
services
Consultants (204,545) (654,542) (204,545) (654,451)
Loss on sale of (1,426,448) - (1,427,411) -
Peruvian project
Foreign exchange (612,759) - (612,759) -
differences
Marketing & public (275,833) (266,841) (275,833) (266,841)
relations
Costs associated with (40,755) (62,814) (40,755) (62,814)
AIM listing
Garowe airport project - (591,411) - (591,411)
Travel Expenditure (361,712) (879,208) (361,712) (879,208)
Write down of available (2,893,450) - (2,893,450) -
for sale assets
Other expenses 3 (1,368,801) (1,106,068) (2,186,638) (1,110,328)
Loss before income tax (13,339,473) (1,797,561) (14,158,083) (1,801,730)
Income tax expense 4 - - - -
Loss from continuing (13,339,473) (1,797,561) (14,158,083) (1,801,730)
operations
Loss attributable to (13,339,473) (1,797,561) (14,158,083) (1,801,730)
members of the parent
entity
Earnings per share for
profit attributable to
the ordinary equity
holders of the company:
Basic loss per share 7 7.4c 0.15c
(cents per share)
Diluted loss per share 7 NA NA
(cents per share)
The Company's potential ordinary shares were not considered dilutive as the
company is in a loss position.
This EPS is for continuing operations as the discontinued operations have a
negligible impact on the Income Statement (Note 12).
The accompanying notes form part of these financial statements.
BALANCE SHEET
AS AT
30 JUNE 2008
Note Economic Entity Parent Entity
2008 2007 2008 2007
$ $ $ $
ASSETS
CURRENT ASSETS
Cash and cash 8 4,137,360 22,896,484 4,097,097 22,856,019
equivalents
Trade and other 9 1,441,220 606,551 1,441,220 606,551
receivables
Other current assets 10 108,932 61,191 108,932 61,191
TOTAL CURRENT ASSETS 5,687,512 23,564,226 5,647,249 23,523,761
NON-CURRENT ASSETS
Trade and other 9 - - 781,535 353,364
receivables
Financial assets 11 2,004,561 3,363,450 1,370,811 8,310,862
available for sale
Property, plant and 13 288,119 105,767 288,119 105,767
equipment
Exploration & 14 77,120,784 84,026,027 77,013,262 78,718,075
Evaluation
Expenditure
TOTAL NON-CURRENT 79,413,464 87,495,244 79,453,727 87,488,068
ASSETS
TOTAL ASSETS 85,100,976 111,059,470 85,100,976 111,011,829
CURRENT LIABILITIES
Trade and other 15 815,190 53,219,923 815,190 53,219,923
payables
TOTAL LIABILITIES 815,190 53,219,923 815,190 53,219,923
NET ASSETS 84,285,786 57,839,547 84,285,786 57,791,906
EQUITY
Issued capital 16 101,619,057 70,866,367 101,619,057 70,866,367
Reserves 17 11,014,714 10,975,482 11,880,964 10,975,482
Accumulated losses (28,347,985) (24,002,302) (29,214,235) (24,049,943)
TOTAL EQUITY 84,285,786 57,839,547 84,285,786 57,791,906
The accompanying notes form part of these financial statements.
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2008
Economic Entity Issued Share Based Available Accumulated Total
Capital Payment for Sale Losses
2007-2008 Reserve Investment Equity
$ Revaluation $
$ Reserve $
$
Opening balance as at 70,866,367 10,975,482 - (24,002,303) 57,839,546
1 July 2007
Loss for the year - - - (13,339,473) (13,339,473)
Total recognised - - - (13,339,473) (13,339,473)
income and
expenditure for the
year:
Issue of share 31,864,370 - - - 31,864,370
capital
Exercise of options 23,283 - - - 23,283
Share issue costs (1,108,578) - - - (1,108,578)
Reduction in partly (26,385) - - 26,385 -
paid shares
Cost of share based - 9,842,077 - - 9,842,077
payment
Transferred to - (8,967,406) - 8,967,406 -
accumulated losses
Revaluation in - - (835,439) - (835,439)
investment
Closing balance as 101,619,057 11,850,153 (835,439) (28,347,985) 84,285,786
at 30 June 2008
Economic Entity Issued Share Available Accumulated Total
Capital Based for Sale Losses
2006-2007 Payment Investment Equity
$ Reserve Revaluation $
Reserve $
$
$
Opening balance as at 34,891,091 8,499,345 - (22,204,742) 21,185,694
1 July 2006
Loss for the year - - - (1,797,561) (1,797,561)
Total recognised - - - (1,797,561) (1,797,561)
income and expenditure
for the year:
Issue of share capital 40,265,872 - - - 40,265,872
Share issue costs (6,049,596) - - - (6,049,596)
Partly paid shares 1,759,000 1,759,000
issued during the year
Cost of share based - 2,476,137 - - 2,476,137
payment
Closing balance as 70,866,367 10,975,482 - (24,002,303) 57,839,546
at 30 June 2007
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2008
Parent Entity Issued Share Based Available Accumulated Total
Capital Payment for Sale Losses
2007-2008 Reserve Investment Equity
$ Revaluation $
$ Reserve $
$
Opening balance as at 70,866,367 10,975,482 - (24,049,943) 57,791,906
1 July 2007
Loss for the year - - - (14,158,083) (14,158,083)
Total recognised - - - (14,158,083) (14,158,083)
income and
expenditure for the
year:
Issue of share 31,864,370 - - - 31,864,370
capital
Exercise of options 23,283 - - - 23,283
Share issue costs (1,108,578) - - - (1,108,578)
Reduction in partly (26,385) - - 26,385 -
paid shares
Cost of share based - 9,842,077 - - 9,842,077
payment
Transferred to - (8,967,406) - 8,967,406 -
accumulated losses
Revaluation in - - 30,811 - 30,811
investment
Closing balance as 101,619,057 11,850,153 30,811 (29,214,235) 84,285,786
at 30 June 2008
Parent Entity Issued Share Available Accumulated Total
Capital Based for Sale Losses
2006-2007 Payment Investment Equity
$ Reserve Revaluation $
Reserve $
$
$
Opening balance as at 34,891,091 8,499,345 - (22,248,213) 21,142,223
1 July 2006
Loss for the year - - - (1,801,730) (1,801,730)
Total recognised - - - (1,801,730) (1,801,730)
income and expenditure
for the year:
Issue of share capital 40,265,872 - - - 40,265,872
Share issue costs (6,049,596) - - - (6,049,596)
Partly paid shares 1,759,000 - - - 1,759,000
issued during the year
Cost of share based - 2,476,137 - - 2,476,137
payment
Closing balance as 70,866,367 10,975,482 - (24,049,943) 57,791,906
at 30 June 2007
The accompanying notes form part of these financial statements.
CASH FLOW STATEMENT
FOR YEAR ENDED
30 JUNE 2008
Note Economic Entity Parent Entity
2008 2007 2008 2007
$ $ $ $
CASH FLOWS FROM OPERATING
ACTIVITIES
Receipts from customers 12,789 - 12,790 -
Payments to suppliers and (3,643,295) (4,388,467) (3,285,736) (4,361,374)
employees
Interest received 458,117 215,568 458,117 215,568
Net cash outflow from 21(a) (3,172,389) (4,172,899) (2,814,829) (4,145,806)
operating activities
CASH FLOWS FROM INVESTING
ACTIVITIES
Proceeds - Somalia farm-in - 4,975,131 - 4,975,131
signature bonus
Payment for property, plant (240,526) (69,469) (240,526) (69,469)
& equipment
Payment for acquisition of (12,280,487) - (12,280,486) -
Somalian rights
Payment for investments (1,500,000) (6,027,227) - (6,027,227)
Payments for exploration (9,112,426) (4,214,900) (9,366,407) (4,203,968)
and evaluation
Loan - other entity (1,127,396) - (1,127,396) -
Loans to controlled entity - - (1,603,378) (41,385)
Purchase of investments - (500,000) - (500,000)
Deposit received for sale 12(d) - 200,000 - 200,000
of subsidiary
Net cash outflow from (24,260,835) (5,636,465) (24,618,193) (5,666,918)
investing activities
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from issue of 9,110,778 31,530,996 9,110,778 31,530,996
shares
Payment of share issue (435,125) (35,986) (435,125) (35,986)
costs
Loans to related entity (1,553) - (1,553)
Proceeds from borrowings - - - -
Repayment of borrowings - - - -
Net cash inflow from 8,674,100 31,495,010 8,674,100 31,495,010
financing activities
Net (decrease)/ increase in (18,759,124) 21,685,646 (18,758,922) 21,682,286
cash and cash equivalents
Cash and cash equivalents 22,896,484 1,210,838 22,856,019 1,173,733
at beginning of financial
year
Cash and cash equivalents 8 4,137,359 22,896,484 4,097,097 22,856,019
at end of financial year
The accompanying notes form part of these financial statements.
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