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Westmount Energy Ld (WTE)

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Thursday 31 October, 2019

Westmount Energy Ld

Final Results & Notice of AGM

RNS Number : 7109R
Westmount Energy Limited
31 October 2019
 

31 October 2019

 

WESTMOUNT ENERGY LIMITED

("Westmount" or the "Company")

 

Final Results & Notice of AGM

 

The Company is pleased to announce its Final Results for the year ended 30 June 2019, and hereby gives notice that the Annual General Meeting of Westmount Energy Limited will be held at No 2 The Forum, Grenville Street, St Helier, Jersey JE1 4HH, Channel Islands on 11 December 2019 at 11.00 am.

 

Copies of the Company's results and Notice of AGM are available on the Company's website, www.westmountenergy.com, and will be posted to shareholders today.

 

CHAIRMAN'S REVIEW

 

2019 Highlights

 

·      Operating Profit of £2,013,415 for the Year Ended June 30, 2019

 

·      Material new investments in single asset private companies, JHI Associates Inc and Cataleya Energy Corp increasing exposure to ExxonMobil operated drilling on the Canje and Kaieteur Blocks in 2020.

 

·      Exposure to multi-well, funded, drilling portfolio offshore Guyana, during 2019-2020 has yielded two oil discoveries (Jethro-1 and Joe-1) to date

 

·      Investments in Eco (Atlantic) Oil and Gas Limited and Ratio Petroleum performed strongly

 

·      Post Year End - Subscription offer and Subscription Extension (at 13 pence per share) yields £5.57m in aggregate
 

·      Focus remains on deploying capital in the prolific, emerging, Guyana-Suriname Basin

 

The year under review was one of material progress for your Company as our early toehold investments in the Guyana offshore space continued to deliver capital gains.

 

The financial results show an operating profit of £2,013,415 for the year, a significant +350% increase on the 2018 operating profit.  As reported at the interim results stage the main driver of the operating profit was the strong share price performance of your company's investments in Guyana focused Eco (Atlantic) Oil & Gas Limited ("EOG") and Ratio Petroleum Energy Limited Partnership ("Ratio Petroleum"), both publicly listed companies.

 

During the year your Company raised £1.6m by way of a 10% p.a. Unsecured Convertible Loan Note 2021 Issue ("CLN") to provide capital to access Guyanese investment opportunities without diluting shareholders at what would have been unacceptably low share price levels via an equity issue. The Convertible Loan Note proceeds enabled your board to inter alia take advantage of opportunities to make material investments in JHI Associates Inc ("JHI") and Cataleya Energy Corp ("CEC").  

 

It should be noted the actual interest cost during the period was lower than 10%, as approximately 59% of the Convertible Loan Notes were redeemed during the period, as noted below, with all interest waived by the Noteholder. 

 

Subsequent to the CLN issue, and a positive AIM market response in our share price, the board was able to announce on February 27, 2019 the early repayment of £940,000 principal of the CLN by way of a share subscription at 9 pence per share. The residual CLN principal at year end was £660,000.

 

In addition, the strong share price performance of EOG in the first half of 2019 enabled the crystallization of a +400% gain via a part disposal of our EOG holding realising a further £1.34m in proceeds for reinvestment in CEC.

 

Offshore Guyana has continued to capture global exploration headlines during this period with an additional 6 exploration successes (Hammerhead, Pluma, Tilapia, Haimara, Yellowtail and Tripletail) reported on the Stabroek Block by ExxonMobil and 2 exploration successes (Jethro and Joe) on the Orinduik Block announced by Tullow Oil. Fifteen of the sixteen successes, announced to date, have been reported as oil discoveries with the exception of Haimara-1, in the southeast of the Stabroek Block, reported as a gas-condensate discovery in February 2019. Although the Upper Cretaceous Liza play continues to dominate, the discoveries made so far have proved the presence of 4 separate hydrocarbon plays and, when combined with an exploration drilling success rate in excess of 87%, confirm the deepwater Guyana-Suriname Basin as a prolific, emerging, hydrocarbon province. ExxonMobil is currently reporting an aggregate discovered resource in excess of six billion oil equivalent barrels, on the Stabroek Block, since early 2015.

 

These discoveries have the potential to be transformational for Guyana and its people. The arrival of the Liza Destiny FPSO, offshore Guyana, in late August 2019 heralds the commencement of 'first oil production' from the Liza Phase 1 Development (120,000 BOPD) in Q1 2020 - less than 5 years after discovery. Industry analysis indicates that continued accelerated development of these discoveries will propel Guyana to become a 'top 5 global' deep-water oil producer by 2026 with the potential to produce in excess of 1 million barrels of oil per day at peak.

 

Access to opportunities in offshore Guyana remains one of the key challenges for both the industry and investors. No new offshore deep-water licences have been awarded since January 2016 and Total remains the only major player to gain access (post Liza-1 Discovery) to direct licence interests via its 2018 multi-block farm-in to the Orinduik, Kanuku and Canje Licences. On 27th August 2019 Total announced that Qatar Petroleum had acquired a 40% interest in its subsidiary holding company with respect to the Orinduik and Kanuku Blocks. 

Eco (Atlantic) Oil & Gas ("EOG")

The investment made in EOG on its AIM Initial Public Offering in early 2017 provided our shareholders with a material toehold in the Guyana offshore story. This investment has turned out to be the star performer to date.

 

Subsequent to our financial year end, EOG and its partners on the Orinduik block, Tullow (operator) and Total, announced the drilling of two successful wells, Jethro-1 and Joe-1, which represent the first discoveries, offshore Guyana, to be made outside the Stabroek Block where ExxonMobil is operator.

 

In August it was announced that the Jethro-1 exploration well had been drilled by the Stena Forth drillship to a total depth of 14,331 feet (4,400 meters) in approximately 1,350 meters of water. This well encountered a net oil pay of 55m in a high-quality sandstone reservoir of Lower Tertiary age, which exceeded pre-drill expectations. A March 2019 Competent Person's Report ("CPR") commissioned by EOG indicates pre-drill P50 recoverable volume estimates of approximately 220 MMboe for the Jethro prospect.

 

A second discovery on the Orinduik Block was announced in September 2019 with the drilling of the Joe-1 exploration well by the Stena Forth drillship to a total depth of 7,176 feet (2,175 meters) in approximately 2,546 feet (780 meters) of water. This well encountered 16m of net oil pay in a high-quality sandstone reservoir of Upper Tertiary age and the result has been confirmed by EOG as falling within their pre-drill estimated volumetric range for the Joe prospect of 75-150 MMboe.

 

These discoveries have confirmed that the petroleum system extends beyond the Stabroek Block and substantially derisk the Tertiary plays across the Orinduik Block. This has resulted in further appreciation in the EOG share price given EOG's 15% participating interest in the block and with EOG being fully funded for at least 3 additional high impact exploration wells in Orinduik. Westmount continues to retain 1.5m shares in EOG which provides our shareholders with exposure to discovered oil resources and further upside via a 2020 pre-funded drilling campaign on Orinduik.

 

Cataleya Energy Corporation ("CEC")

Our initial investment in CEC was announced on May 14 2019 via the purchase of 253,685 common shares at US$ 10 per share for an aggregate investment of US $2,536,850 (equivalent to £1,949,324) to acquire a 2.4% fully diluted stake in CEC.

 

Subsequent to the financial year end, on August 30, 2019 your Board announced that it had acquired an additional 313,500 common shares in CEC at a price of US $10 per share, for a total consideration of US$3,135,000 (equivalent to £2,582,372) including transaction costs. As a result of this share purchase, Westmount holds a total of 567,185 common shares in CEC, representing approximately 5.4% of the fully diluted share capital of CEC.

 

CEC is a private, Canadian registered company established in 2015 and focused on oil exploration opportunities in the emerging Guyana-Suriname Basin. CEC's main asset is a 25% participating interest in the Kaieteur Block, which it holds through its wholly owned subsidiary Cataleya Energy Limited ("CEL"). The 13,500 km2 Kaieteur Block is located outboard of, and adjacent to, the Ranger Oil Discovery which is located on the Stabroek Block, offshore Guyana.

 

The Kaieteur Block is currently operated by an ExxonMobil subsidiary, Esso Production & Exploration Guyana Limited (35%), with CEL (25%), Ratio Guyana Limited (25%) and a subsidiary of Hess Corporation (15%) as partners.

 

Ratio Petroleum Energy Limited Partnership ("Ratio Petroleum")

Your company holds 1.2m units in Ratio Petroleum which has a 25% Gross interest in the Kaieteur Block offshore Guyana. This investment provided a toehold in the Kaieteur block that has since been augmented by the CEC investment.

On 14th May 2019, Ratio Petroleum announced that ExxonMobil and partners are planning to spud the first well in the Kaieteur Block on the Tanager Prospect in the first half of 2020. Ratio Petroleum also published a CPR by NSAI which describes the Tanager Prospect as a stacked reservoir prospect (Maastrichtian to Turonian reservoir intervals) and assigns a 'Best Estimate' Unrisked Gross (100%) Prospective Oil Resource of 256.2 MMBBLs to the prospect (Low to High Estimates 135.6 MMBBLs to 451.6 MMBBLs), with an aggregate Probability of Geologic Success (POSg) of 72%.

 

Ratio Petroleum is fully funded for the ExxonMobil operated drilling of the Tanager-1 well in the first half of 2020.

 

As a result of our investments in CEC and Ratio Petroleum, we look forward to the drilling of the Tanager-1 well which has the potential to de-risk the Kaieteur block and provide Westmount shareholders with exposure to a potentially significant capital gain should it be successful.

JHI Associates Inc ("JHI")

During the period your Company announced that it had increased its equity position in JHI to approximately 3% of the issued share capital as of 21st December 2018. JHI's main asset is a 17.5% carried interest in the Canje Block covering over 6,000 square kilometres, immediately outboard of the Stabroek Block.  As a result of a farm-in by Total, announced in February 2018, JHI is carried for the drilling of up to four wells and is funded for the drilling of additional wells. It is anticipated that the first wells in the Canje Block will be drilled in early 2020, with Total recently indicating that the Bulletwood and Jabillo prospects, located in the north-west portion of the block, as the most likely initial drilling targets.

 

We look forward to the Exxon Mobil operated drilling campaign on Canje which has the potential for transformational value uplifts should it be successful.

 

Share Subscription

 

After the year end, on August 23rd and 28th, 2019 your Board announced the raising of £5.573m in total at 13p per share, by way of a share subscription to pursue Westmount's ongoing investment strategy, focused on the Guyana-Suriname Basin. This financing inter alia enabled the completion of our second CEC investment announced on the 30th August 2019.

 

I would like to welcome our new institutional and private shareholders and thank our new and existing investors for their support. We believe that the successful financing in August is a testament to the Guyana specific story and access that Westmount offers to the opportunity. I wish all our shareholders success with their investment over the coming year.

Summary/Outlook

 

Your Board remains focused on accessing investment opportunities and deploying capital that gives additional exposure to the emerging Guyana Suriname basin. We have been focusing on Guyana for over 3 years and in spite of rising valuations and limited access, opportunities remain. Guyana is emerging as a hydrocarbon province with first oil production from the Liza field expected in the coming months. Our initial toehold investments have proven successful and our investments in the private single asset companies hold the potential for transformational value uplift should the ExxonMobil operated drilling campaign in 2020 be successful.

 

As we have demonstrated recently, there is capital available in London for Guyana and besides EOG, Westmount Energy is the only other London listed junior company focused on the Guyana offshore space and offering investors material exposure to this emerging basin.

 

Westmount continues to offer the opportunity for private companies, with assets in offshore Guyana, to gain access to London capital markets via RTO or to provide a liquidity event for their shareholders.  While these private companies decide on their path forward, our strategy of investing across four different companies (EOG, Ratio, JHI, CEC) with interests in three different exploration blocks, (Orinduik, Canje, Kaieteur), continues to provide our shareholders with exposure to the two discoveries on Orinduik, already announced this year, and a potential further 3 to 7 funded high impact wells over the next 12-15 months.

 

History has shown that small percentages in big assets can reap material returns. The upcoming exploration wells and their respective geological risks are independent of each other and therefore our strategy provides shareholders with some risk diversification and a portfolio effect. Success in some of these wells could result in transformational value changes.  The condensed drilling time frame and number of exploration wells points to exciting times ahead for shareholders.

 

 

GERARD WALSH

Chairman

30 October 2019

 

 

 

For further information, please contact:

Westmount Energy Limited

www.westmountenergy.com

David King, Director

Jane Vlahopoulou

Tel: +44 (0)1534 823133

 

 

 

 

 

 

Cenkos Securities plc Nomad and Broker

Tel: +44 (0)20 7397 8900

Nicholas Wells / Harry Hargreaves (Corporate Finance)

 

 

 

 

STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 30 JUNE 2019

 

 

 

 

 

 

 

 

 

 

Year ended 30 June 2019

 

Year ended 30 June 2018

Notes

 

£

 

£

 

 

 

 

 

 

 

 

 

 

 

 

Net fair value gains on financial assets held at fair value through profit or loss

 

 

2,654,137

 

     722,333 

Net fair value losses on financial liabilities held at fair value through profit or loss

Impairment of intangible assets

Finance costs

Administrative expenses

 

 

6

7

4

 

 

(183,753)

(66,667)

(79,987)

(229,462)

 

 

 

                -

                -

                -

(150,166)

Share options expensed

14

 

(80,853)

 

(11,087)

 

 

 

 

 

 

Operating profit

 

 

2,013,415

 

561,080

 

 

 

 

 

 

 

 

 

 

 

 

Profit before tax

 

 

2,013,415

 

561,080

 

 

 

 

 

 

Tax

 

 

-

 

-

 

 

 

 

 

 

 

 

 

 

 

 

Profit after tax

 

 

2,013,415

 

561,080

 

 

 

 

 

 

Other comprehensive income

 

 

-

 

-

 

 

 

 

 

 

Total comprehensive income for the year

 

 

2,013,415

 

561,080

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share (pence) continuing and total operations

5

 

3.83

 

1.34

 

 

 

 

 

 

Diluted earnings per share (pence) continuing and total operations

5

 

3.51

 

1.34

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Company has no items of other comprehensive income.

 

 

 

STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2019

 

 

 

 

 

 

 

 

 

 

 

 

As at

 

As at

 

 

 

 

30 June 2019

 

30 June 2018

 

 

Notes

 

£

 

£

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

Non-current assets

 

 

 

 

 

 

    Intangible assets

 

6

 

33,333

 

-

    Financial assets held at fair value through profit or                             loss

8

 

6,745,797

 

1,727,539

 

 

 

 

6,779,130

 

1,727,539

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

    Receivables

 

9

 

7,001

 

8,213

    Cash and cash equivalents

 

10

 

63,374

 

557,182

 

 

 

 

 

 

 

 

 

 

 

70,375

 

565,395

 

 

 

 

 

 

 

Total assets

 

 

 

6,849,505

 

2,292,934

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

Non-current liabilities

 

 

 

 

 

 

   Derivative financial instruments

 

11

 

221,411

 

-

   Borrowings

 

11

 

598,375

 

-

 

 

 

 

819,786

 

-

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

    Trade and other payables

    Derivative financial instruments

    Borrowings

 

12

11

11

 

45,422

3,592

50,967

 

43,170

-

-

 

 

 

 

99,981

 

43,170

 

 

 

 

 

 

 

Total Liabilities

 

 

 

919,767

 

43,170

 

EQUITY

 

 

 

 

 

 

    Stated capital

 

13

 

5,829,872

 

4,244,166

    Share based payment

 

14

 

444,846

 

363,993

    Retained earnings

 

 

 

(344,980)

 

(2,358,395)

 

 

 

 

 

 

 

Total equity

 

 

 

5,929,738

 

2,249,764

 

 

 

 

 

 

 

Total liabilities and equity

 

 

 

6,849,505

 

2,292,934

 

 

 

 

 

 

 

 

 

These financial statements were approved and authorised for issue by the Board of Directors on       October 2019 and were signed on its behalf by:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

D R King

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Director

 

30 October 2019

 

 

 

 

 

 

 

                       

 

 

STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 30 JUNE 2019

 

 

 

 

 

 

 

 

 

 

 

 

Stated

 

Share-based

Retained

Total

 

 

Notes

capital

payment reserve

earnings

equity

 

 

 

£

£

£

£

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As at 1 July 2017

 

 

3,772,244

352,906

(2,919,475)

1,205,675

 

 

 

 

 

 

 

Comprehensive income

 

 

 

 

 

 

Total Comprehensive income for the year ended 30 June 2018

 

 

-

-

561,080

561,080

Transactions with owners

 

 

 

 

 

 

Warrants converted

 

13

471,922

-

-

471,922

Share options expensed

 

14

-

11,087

-

11,087

 

 

 

 

 

 

 

As at 30 June 2018

 

 

4,244,166

363,993

(2,358,395)

2,249,764

 

 

 

 

 

 

 

Comprehensive income

 

 

 

 

 

 

Total Comprehensive income for the year ended 30 June 2019

 

 

-

-

2,013,415

2,013,415

Share issue

 

13

1,585,706

-

-

1,585,706

Transactions with owners

 

 

 

 

 

 

Share options expensed

 

14

-

80,853

-

80,853

 

 

 

 

 

 

 

As at 30 June 2019

 

 

5,829,872

444,846

(344,980)

5,929,738

 

 

 

STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 30 JUNE 2019

 

 

 

 

 

 

 

 

 

 

Year ended 30 June 2019

 

Year ended 30 June 2018

 

Notes

 

£

 

£

 

 

 

 

 

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

 

 

 

Profit for the year

 

 

2,013,415

 

561,080

Adjustments for:

 

 

 

 

 

Net gain on financial assets at fair value through profit or loss

 

 

(2,654,137)

 

(722,333)

Net loss on financial liabilities at fair value through profit or loss

 

 

183,753

 

-

Impairment of intangible assets

6

 

66,667

 

-

Interest on borrowings

 

 

79,987

 

-

Share options expensed

14

 

80,853

 

11,087

Movement in other receivables

 

 

1,212

 

2,565

Movement in trade and other payables

 

 

2,252

 

(30,566)

Proceeds from sale of investments

 

 

1,499,100

 

-

Purchase of investments

 

 

 

(284,615)

Net cash used in operating activities

 

 

 

(462,782)

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

 

 

 

 

 

Proceeds from borrowings

11

 

1,600,000

 

-

Interest and charges on borrowings

11

 

(49,395)

 

-

Proceeds from issue of ordinary shares

13

 

-

 

471,922

Net cash generated from financing activities

 

 

1,550,605

 

471,922

 

 

 

 

 

 

Net (decrease) / increase in cash and cash equivalents

 

 

 

9,140

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents at beginning of year

 

 

557,182

 

548,042

 

 

 

 

 

 

Cash and cash equivalents at end of year 

10

 

 

557,182

 

 

 

 

 

 

 

 

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2019

 

1.         GENERAL INFORMATION AND STATEMENTS OF COMPLIANCE WITH INTERNATIONAL FINANCIAL REPORTING STANDARDS AS ADOPTED BY THE EUROPEAN UNION

 

Westmount Energy Limited (the "Company") operates solely as an energy investment company. The investment strategy of the Company is to invest in and provide follow on capital to small and medium sized companies that have significant growth possibilities.

 

 

 

 

 

 

 

 

 

 

The Company was incorporated in Jersey on 1 October 1992 under the Companies (Jersey) Law 1991, as amended, and is a public company with registered number 53623. The Company is listed on the London Stock Exchange Alternative Investment Market ("AIM").

 

Basis of Preparation

The financial statements are prepared on a going concern basis in accordance with International Financial Reporting Standards as adopted by the European Union ("IFRS") and applicable legal and regulatory requirements of the Companies (Jersey) Law 1991. The financial statements have been prepared under the historical cost convention as modified by the valuation of financial assets held at fair value through profit or loss.

 

 

 

 

 

 

 

 

 

 

2.         ACCOUNTING POLICIES

 

 

 

 

 

 

 

 

 

 

The significant accounting policies that have been applied in the preparation of these financial statements are summarised below. These accounting policies have been used throughout all periods presented in the financial statements.

 

Standards, amendments and interpretations to existing standards that are effective and have been adopted by the Company

The Company has applied the following standards and amendments for the first time for their annual reporting period commencing 1 July 2018:

 

IFRS 9 Financial Instruments (effective 1 January 2018)

In preparing these financial statements the Directors have applied IFRS 9, Financial Instruments. Under IFRS 9 the classification of financial assets is based both on the business model within which the asset is held and the contractual cash flow characteristics of the asset. There are three principal classification categories for financial assets that are debt instruments: (i) amortised cost, (ii) fair value through other comprehensive income (FVTOCI) and (iii) fair value through profit or loss (FVTPL). Equity investments in the scope of IFRS 9 are measured at fair value with gains and losses recognised in profit or loss unless an irrevocable election is made to recognise gains or losses in other comprehensive income.

 

The application of IFRS 9 has had no material impact on the financial statements as the principal activity of the Company is to invest in listed and non-listed companies and the management has not made the irrevocable election to recognise gains or losses in other comprehensive income.

 

New standards, amendments and interpretations to existing standards that are not yet effective and have not been adopted early by the Company

At the date of authorisation of these financial statements there are no other standards that are not yet effective and that would be expected to have a material impact on the Company in the current or future reporting periods and on foreseeable future transactions.

 

Use of estimates and judgements

The preparation of financial statements in conformity with IFRS requires the use of accounting estimates and the exercise of judgement by management while applying the Company's accounting policies in relation to the impairment of intangible assets, value of options issued and derivative financial instruments, as set out in notes 6, 11 and 15. Derivative financial instruments, which are embedded in the convertible loan notes issued by the Company, have been presented separately from the host contract. The bifurcation of the embedded derivative financial instruments requires judgement by management to estimate the fair value of the derivatives on initial recognition of the financial instrument. The valuation and subsequent impairment reviews of the Company's intangible assets requires the use

 

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2019

 

2.          ACCOUNTING POLICIES (continued)

 

Use of estimates and judgements (continued)

of accounting estimates and judgement by the management. These estimates are based on the management's best knowledge of the events which existed at the date of issue of the financial statements and at the statement of financial position date however, the actual results may differ from these estimates.

 

Financial assets at fair value through profit and loss that are not listed have been valued in accordance with IFRS using the International Private Equity and Venture Capital ("IPEVC") Guidelines and information received from the investment entity. The inputs to value these assets require significant estimates and judgements to be made by the Directors.

 

Functional and presentation currency

The functional currency of the Company is United Kingdom Pounds Sterling ("Sterling"), the currency of the primary economic environment in which the Company operates. The presentation currency of the Company for accounting purposes is also Sterling.

 

Foreign currency monetary assets and liabilities are translated into Sterling at the rate of exchange ruling on the last day of the Company's financial year. Foreign currency non-monetary items that are measured at fair value in a foreign currency are translated into Sterling using the exchange rates at the date when the fair value was determined. Foreign currency transactions are translated at the exchange rate ruling on the date of the transaction. Gains and losses arising on the currency translation are included in administrative expenses in the Statement of Comprehensive Income in the year in which they arise.

 

Financial instruments

Financial assets and financial liabilities are recognised when the Company becomes party to the contractual provisions of the instrument.

 

(a)  Classification

The Company classifies its financial assets in the following measurement categories:

-           those to be measured subsequently at fair value (either through other comprehensive income or through profit or loss); and

-           those to be measured at amortised cost.

 

The classification depends on the entity's business model for managing the financial assets and the contractual terms of the cash flows. The Company determines the classification of its financial assets and financial liabilities at initial recognition.

 

Financial liabilities which are not financial liabilities held at fair value through profit or loss are classified as other financial liabilities and held at amortised cost.

 

(b)  Recognition and measurement

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately in the statement of comprehensive income.

 

Subsequent to initial recognition, financial assets at fair value through profit or loss are re-measured at fair value. For listed investments, fair value is determined by reference to stock exchange quoted market bid prices at the close of business at the end of the reporting year, without deduction for transaction costs necessary to realise the asset. For non-listed investments fair value is determined by using recognised valuation methodologies, in accordance with the IPEVC Guidelines.  Gains or losses arising from changes in the fair value of financial assets at fair value through profit or loss are presented in the statement of comprehensive income in the period in which they arise.

 

 

 

 

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2019

 

2.         ACCOUNTING POLICIES (continued)

(b)  Recognition and measurement (continued)

Subsequent measurement of the Company's debt instruments depends on the model for managing the asset and the cash flow characteristics of the asset.

 

The Company measures debt instruments at amortised cost if they are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortised cost. The Company recognises any impairment loss on initial recognition and any subsequent movement in the impairment provision in the statement of comprehensive income, see Note 6.

 

Debt instruments which do not represent solely payments of principal and interest are measured at fair value through profit or loss.

 

Financial liabilities, which includes borrowings, are measured at amortised cost using the effective interest method. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability or, where appropriate, a shorter period, to the net carrying amount on initial recognition.

 

Financial liabilities at fair value through profit or loss are re-measured at fair value. The fair value of the derivative financial instruments is determined by reference to stock exchange quoted market bid prices at the close of business at the end of the reporting year, without deduction for transaction costs incurred by the Company on realisation of the liability, see note 11. Gains or losses arising from changes in fair value of financial liabilities at fair value through profit or loss are presented in the statement of comprehensive income in the period in which they arise.

 

(c)  Impairment

Under IFRS 9, the new impairment model requires the recognition of impairment provisions based on expected credit losses ("ECL") rather than only incurred credit losses as is the case under IAS 39. IFRS 9 permits a simplified approach to trade and other receivables which allows the Company to recognise the loss allowance at initial recognition and throughout its life at an amount equal to lifetime ECL. ECL are a probability-weighted estimate of credit losses. A credit loss is the difference between the cash flows that are due to an entity in accordance with the contract and the cash flows that the entity expects to receive discounted at the original effective interest rate. ECL consider the amount and timing of payments, thus a credit loss arises even if the entity expects to be paid in full but later than when contractually due. 

 

(d)  Derecognition

A financial asset or part of a financial asset is derecognised when the rights to receive cash flows from the asset have expired and substantially all risks and rewards of the asset have been transferred.

 

The Company derecognises a financial liability when the obligation under the liability is discharged, cancelled or expired.

 

Intangible assets

Separately acquired Net Profit Interest licences ("NPI licences") are classified as intangible assets and are shown at historical cost. Such NPI licences, which are not subject to amortisation, allow the Company to benefit from exploration and extraction of energy resources, if successful, from investee companies granting such NPI licences.

 

The value of the NPI licences are assessed periodically for possible impairment when events indicate that the fair value of the intangible asset may be below the Company's carrying value. When such a condition is deemed to be other than temporary, the carrying value of the investment is written down to its fair value, and the amount of the write-down is included in net profit or loss on financial assets held at fair value through profit or loss. In making the determination as to whether a decline is other than temporary, the Company considers such factors as the duration and extent of the decline, the investee company's financial performance, and the Company's ability and intention to retain its investment for a period that will be sufficient to allow for any anticipated recovery in the NPI licences' market value.

 

 

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2019

 

2.         ACCOUNTING POLICIES (continued)

 

Cash and cash equivalents

Cash and cash equivalents include cash in hand, deposits held on call with banks and cash with broker. For the purpose of the Statement of Cash Flows, cash and cash equivalents are considered to be all highly liquid investments with maturity of three months or less at inception.

 

Equity, reserves and dividend payments

Ordinary shares are classified as equity. Transaction costs associated with the issuing of shares are deducted from stated capital. Retained earnings include all current and prior period retained profits. Shares are classified as equity when there is no obligation to transfer cash or other assets.

 

Expenditure

The expenses of the Company are recognised on an accruals basis in the Statement of Comprehensive Income.

 

Share options

Equity-settled share-based payment transactions are measured at the fair value of the goods and services received unless that cannot be reliably estimated, in which case they are measured at the fair value of the equity instruments granted. Fair value is measured at the grant date and is estimated using valuation techniques as set out in note 15. The fair value is recognised in the Statement of Comprehensive Income, with a corresponding increase in equity via the share option account. When options are exercised, the relevant amount in the share option account is transferred to stated capital.

 

3.         TAXATION

 

 

 

 

 

 

 

 

 

            The Company is subject to income tax at a rate of 0%. The Company is registered as an International Services Entity under the Goods and Services Tax (Jersey) Law 2007 and a fee of £200 has been paid, which has been included in administrative expenses.

 

4.       ADMINISTRATIVE EXPENSES

 

 

2019

2018

 

£

£

 

 

 

Administration and consultancy fees

47,439

34,094

Advisory fees

25,275

25,000

Audit fees

13,344

13,880

Directors' fees

15,000

12,000

Foreign exchange losses

25,814

-

Legal and professional fees

32,890

6,277

Printing and stationery

10,200

9,086

Registered agent's fees

16,726

16,902

Other expenses

42,774

32,927

 

 

 

 

229,462

150,166

 

 

5.          EARNINGS PER SHARE

Basic earnings per share (pence)

3.83

1.34

Diluted earnings per share (pence)

3.51

1.34

 

 

 

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2019

 

5.          EARNINGS PER SHARE (continued)

 

The table below presents information on the profit attributable to the shareholders and the weighted average number of shares used in the calculating the basic and diluted earnings per share.

 

 

 

2019

2018

Basic earnings per share

£

£

Profit attributable to the shareholders of the Company

2,013,415

561,080

 

 

 

Diluted earnings per share

 

 

Profit attributable to the shareholders of the Company:

 

 

Used in calculating basic earnings per share

2,013,415

561,080

Add interest expense

79,987

-

Less fair value of share options not expensed during the period

(3,000)

-

Profit attributable to the shareholders of the Company used in calculating diluted earnings per share

2,090,402

561,080

       

 

 

No. of shares

No. of shares

Weighted average number of ordinary shares used as the denominator in calculating basic earnings per share

52,561,113

41,760,211

Adjustments for calculating of diluted earnings per share:

 

 

Share options

687,786

-

Convertible loan notes

4,032,549

-

Weighted average number of ordinary shares and potential ordinary shares used as the denominator in calculating diluted earnings per share

57,281,448

41,760,211

 

 

 

Share options

The share options have been included in the determination of the diluted earnings per share to the extent to which they are dilutive. The share options granted prior to 30 June 2018 did not have an impact on diluted earnings per share as the option price was above the average share price.

 

The 1,500,000 options granted in April 2019 are not included in the calculation of diluted earnings per share because they are antidilutive as at 30 June 2019.  These potentially dilute earnings per share in the future as these may not be exercised before their expiration date.

 

Convertible loan notes

Conversion options over convertible loan notes issued during the year are considered to be potential ordinary shares and have been included in the determination of diluted earnings per share from their date of issue. Interest accrued on the convertible loan notes, which may be converted to ordinary shares, is also considered to be dilutive and is included in the diluted earnings per share.

 

6.     INTANGIBLE ASSETS

 

2019

2018

 

£

£

At 1 July

-

-

Acquisition

100,000

-

Impairment

(66,667)

-

At 30 June

33,333

-

         

The Company acquired Net Profit Interest licences ("NPI") in three offshore UK blocks for £100,000. The NPI licences allow the Company to benefit from near term exploration and appraisal drilling targets, with independent prospect risks, if such exploration and drilling is successful. The NPI licences require no additional investment from the Company. The licences are initially recorded in the books of the Company at cost.  An impairment test is performed on an annual basis by the Directors and they are subsequently measured at cost less any adjustments for impairment losses.  Two of the licences were deemed to be fully impaired by the Directors, as the underlying operating licences had been relinquished by the company granting each NPI licence at the date of this report.

 

 

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2019

 

7.       FINANCE COSTS

The Company entered into a Loan Note Instrument (the 'Instrument') on 24 October 2018, constituting £5 million nominal 10% p.a. Convertible Unsecured Loan Notes 2021 of which £1.6 million was advanced.  Interest is payable to each of the relevant Noteholders on the principal amount of the Loan Note for the time being outstanding at a rate calculated in accordance with the Instrument.  The interest payable at 10% per annum on the Loan Notes held by any Noteholder can be converted into a corresponding number of new fully paid Ordinary Shares at the Company Conversion Price when certain conditions within the Instrument are met.

 

On 18 March 2019 the Company repaid £940,000 of the principal of the convertible loan notes, the interest accrued on the repaid portion of the convertible loan note was waived by the holder.

 

The interest charge through the profit or loss account during the year was £79,987. 

 

8.         FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

 

 

2019

 

2018

 

£

 

£

Equity investments

 

 

 

Argos Resources Ltd ("Argos")

26,300

 

63,000

Cataleya Energy Corporation ("Cataleya")

1,993,317

 

-

Rockhopper Exploration plc ("Rockhopper")

-

 

146,838

Pancontinental Oil & Gas NL ("Pancontinental")

-

 

6,716

Eco Atlantic Oil & Gas Ltd ("Eco Atlantic")

1,050,000

 

987,500

JHI Associates Inc ("JHI")

2,662,304

 

110,555

Ratio Petroleum Energy Limited Partnership ("Ratio")

1,013,876

 

412,930

 

 

 

 

Total investments

6,745,797

 

1,727,539

 

 

Net changes in fair value of financial assets designated at fair value through profit or loss

 

 

 

 

 

2019

 

2018

 

£

 

£

Beginning Balance

(621,453)

(1,343,786)

Net movement in fair value gains

2,654,137

 

722,333

 

 

 

 

Net fair value gain/ (loss) on financial assets at fair value through profit or loss

2,032,684

 

(621,453)

 

 

On 30 June 2019, the fair value of the Company's holding of 1,000,000 (2018: 1,000,000) ordinary fully paid shares in Argos, representing 0.46% (2018: 0.46%) of the issued share capital of the company, was £26,300 (2018: £63,000) (2.63p per share (2018: 6.30p per share)). No shares were disposed of in the current or prior year.

 

On 19 September 2018, the Company's entire holding of 358,142 shares in Rockhopper was sold for £130,722.

 

On 24 September 2018, the Company's entire holding of 3,000,000 shares in Pancontinental was sold for £11,543.

 

On 30 June 2019, the fair value of the Company's holding of 1,500,000 (2018: 3,125,000) ordinary fully paid shares in Eco Atlantic, representing 0.94% (2018: 1.98%) of the issued share capital of the company, was £1,050,000 (2018: £987,500) (70.00p per share (2018: 31.60p per share)). During the year, the Company sold 1,625,000 shares for £1,345,750.

 

 

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2019

 

8.         FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (continued)

During the year the Company purchased 253,685 ordinary fully paid shares in Cataleya for £1,943,894 (£7.66 per share). On 30 June 2019, the Directors' estimate of the fair value of the Company's holding of 253,685 shares in Cataleya was £1,993,317 (7.86p per share). No shares were disposed of in the current year.

 

During the year the Company purchased 2,053,770 ordinary fully paid shares in JHI for £1,908,369 (£0.93 per share) which includes a share issue by the Company of 7,145,505 new nil par value ordinary shares as part consideration for JHI shares received during the year (see note 13). On 30 June 2019, the Directors' estimate of the fair value of the Company's holding of 100,000 units (each unit comprising one common share plus one half of one common share purchase warrant) plus 2,113,770 shares (2018: 100,000 units plus 60,000 shares) in JHI was £2,662,304 (2018: £110,555) £1.20 per share (2018: 69.10p per share). No shares were disposed of in the current or prior year.

 

On 30 June 2019, the fair value of the Company's holding of 1,200,000 (2018: 1,200,000) ordinary fully paid shares in Ratio, representing 0.70% (2018: 1.05%) of the issued share capital of the company, was £1,013,876 (2018: £412,930).

 

9.         OTHER RECEIVABLES AND PREPAYMENTS

 

2019

 

2018

 

£

 

£

Prepayments

7,001

 

8,213

 

10.        CASH AND CASH EQUIVALENTS

 

 

2019

2018

 

£

£

Cash at bank

63,362

303,204

Cash at broker

12

253,978

 

63,374

557,182

 

 

 

11.        DERIVATIVE FINANCIAL INSTRUMENTS AND BORROWINGS

 

The Company issued £1,600,000 10% convertible loan notes on 24 October 2018. The notes are convertible into ordinary shares of the Company, at the option of the holder, or repayable on 31 March 2021. The conversion price is the higher of £0.08 per share or a 25% discount on the volume weighted average price ("VWAP") 5 days prior to the repayment date. Interest accrued up to and payable on 31 October 2019 may be converted into shares, at the option of the Company, at a conversion price of a 10% discount of VWAP 5 days prior to the payment date.  Interest accrued up to and payable on 31 October 2020 may be converted into shares, at the option of the holder, at a conversion price of the higher of £0.08 per share or a 25% discount of VWAP 5 days prior to the payment date.

 

On 18 March 2019 the Company repaid £940,000 of the principal of the convertible loan notes, the interest accrued on the repaid portion of the convertible loan note was waived by the holder.

 

 

Current

Non-current

Total

 

£

£

£

Face value of notes issued

-

1,600,000

1,600,000

Value of conversion rights

-

(100,000)

(100,000)

Issue costs

-

(49,395)

(49,395)

 

-

1,450,605

1,450,605

Repayment of convertible loan notes

-

(852,230)

(852,230)

Interest expense

50,967

-

50,967

Interest paid

-

-

-

Total borrowings

50,967

598,375

649,342

 

 

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2019

 

11.        DERIVATIVE FINANCIAL INSTRUMENTS AND BORROWINGS (Continued)

 

 

 

Current

Non-current

Total

 

£

£

£

Conversion rights measured at fair value through profit or loss

 

 

 

Opening balance at 1 July 2018

-

-

-

Initial recognition of conversion rights from issue of convertible loan notes

-

100,000

100,000

Repayment of convertible loan notes (cancellation of conversion rights)

-

(58,750)

(58,750)

Movement in fair value

3,592

180,161

183,753

Total derivative financial instruments at 30 June 2019

3,592

221,411

225,003

 

The initial fair value of the derivative portion of the convertible loan notes was determined by the potential loss on ordinary shares if converted on the date the convertible loan notes were issued. The derivative financial instruments are recognised as a financial liability measured at fair value through profit or loss. The remainder of the proceeds is allocated to the liability which is subsequently recognised on an amortised cost basis until extinguished on conversion or maturity of the convertible loan notes.

 

12.        TRADE AND OTHER PAYABLES

 

2019

 

2018

 

£

 

£

 

 

 

 

Accrued expenses

45,422

 

43,170

 

 

13.        STATED CAPITAL

 

Allotted, called up and fully paid:

Ordinary shares

 

Ordinary shares

 

No.

 

£

 

 

 

 

1 July 2017

40,855,502

 

3,772,244

Additions

6,292,294

 

471,922

 

 

 

 

1 July 2018

47,147,796

 

4,244,166

Additions

17,618,949

 

1,585,706

 

 

 

 

At 30 June 2019

64,766,745

 

5,829,872

 

On 26 February 2019, in accordance with the terms of the JHI share purchase agreements, the Company issued a total of 7,174,505 new nil par value ordinary shares and a cash consideration of £553,665 for 1,103,770 JHI shares. The total valuation of the Company's share issue was £645,705.  

 

On 18 March 2019 the Company issued a total of 10,444,444 new nil par value ordinary shares for a total of £940,000 (note 11).  

 

There were no share redemptions during the year ended 30 June 2019 (2018: £Nil).

 

 

 

 

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2019

 

14.        SHARE-BASED PAYMENT RESERVE

 

 

2019

2018

 

£

£

 

 

 

At 1 July

363,993

352,906

Share options expensed

80,853

11,087

 

 

 

At 30 June

444,846

363,993

 

 

 

On 5 April 2019, the Company granted 1,500,000 share options at a weighted average exercise price of 14.0p per share. The options vested in the current financial year and are exercisable at the option of the option holder, expiring 31 December 2024.  The fair value of the options granted was £74,854 using the Black Scholes valuation model.

 

The following assumptions were used to determine the fair value of the options:

 

 

Weighted average share price at grant date (pence)

13.75

Exercise price (pence)

14.0

Expected volatility (%)

42.2%

Average option life (years)

5.0

Risk free interest rate (%)

0.380%

 

The expected volatility is based on the historic volatility of the Company's share prices over the last five years.

 

The number and weighted average exercise price of share options are as follows:

 

 

2019

 

2019

 

2018

 

2018

 

Weighted average exercise price (p)

 

 

 

Number of options

 

 

Weighted average exercise price (p)

 

 

 

Number of options

 

Outstanding at start of the year

7.5

 

2,250,000

 

7.5

 

1,750,000

Granted during the year

14.0

 

1,500,000

 

7.5

 

500,000

Exercised during the year

-

 

-

 

-

 

-

Outstanding at end of the year

10.10

 

3,750,000

 

7.5

 

2,250,000

Exercisable at end of the year

10.10

 

3,750,000

 

7.5

 

2,250,000

 

 

15.        FINANCIAL RISK

 

The Company's investment activities expose it to a variety of financial risks: market risk (including foreign exchange risk, price risk and interest rate risk), credit risk and liquidity risk. The Company's overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Company's financial performance.

 

a)    Market risk

i)     Foreign exchange risk

The Company's functional and presentation currency is sterling. The Company is exposed to currency risk through its investments in Cataleya, JHI and Ratio. The directors have not hedged this exposure.

 

 

 

 

 

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2019

 

15.        FINANCIAL RISK (continued)

 

a)    Market risk (continued)

 

Currency exposure as at 30 June:

 

 

 

Assets and net exposure

2019

 

Assets and net exposure

2018

Currency

 

 

£

 

£

US Dollars

 

 

2,113,578

 

110,555

Australian Dollars

 

 

-

 

6,716

Canadian Dollars

 

 

2,542,043

 

-

Israeli Shekel

 

 

1,013,876

 

412,930

 

 

 

 

 

 

Total

 

 

5,669,497

 

530,201

 

If the value of sterling had strengthened by 5% against all of the currencies, with all other variables held constant at the reporting date, the equity attributable to equity holders and the profit for the period would have decreased by £283,475 (2018: £25,250). The weakening of sterling by 5% would have an equal but opposite effect. The calculations are based on the foreign currency denominated financial assets as at year end and are not representative of the period as a whole.

 

ii)    Price risk

Price risk is the risk that the fair value of the future cash flows of a financial instrument will fluctuate due to changes in market prices.  The Company is exposed to price risk on the investments held by the Company and classified by the Company on the Statement of Financial Position as at fair value through profit or loss.  To manage its price risk, management closely monitor the activities of the underlying investments.

 

The Company's exposure to price risk is as follows:

 

Fair value

Fair Value Through Profit or Loss, as at 30 June 2019

6,745,797

Fair Value Through Profit or Loss, as at 30 June 2018

1,727,539

 

With the exception of JHI and Cateleya, the Company's investments are all publicly traded and listed on either the AIM or the Tel Aviv Stock Exchange.  A 30% increase in market price would increase the pre-tax profit for the year and the net assets attributable to ordinary shareholders by £627,053 (2018: £485,095).  A 30% reduction in market price would have decreased the pre-tax profit for the year and reduced the net assets attributable to shareholders by an equal but opposite amount.  30% represents management's assessment of a reasonably possible change in the market prices.

 

A 30% increase in the market price of JHI and Cataleya would increase the pre-tax profit for the year and the net assets attributable to ordinary shareholders by £1,396,686 (2018: £33,166).  A 30% reduction in market price would have decreased the pre-tax profit for the year and reduced the net assets attributable to shareholders by an equal but opposite amount. 30% represents management's assessment of a reasonably possible change in the market price of JHI and Cataleya based on the price of share purchases over the last two years.

 

iii)    Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.  The Company is not exposed to interest rate risk as the interest rate on borrowings is fixed and the Company's cash deposits do not currently earn interest.

 

b)    Credit Risk

Credit risk is the risk that an issuer or counterparty will be unable or unwilling to meet commitments it has entered into with the Company.  The Directors do not believe the Company is subject to any significant credit risk exposure regarding trade receivables.

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2019

 

15.        FINANCIAL RISK (continued)

 

Credit Risk (continued)

 

At the end of the reporting period, the Company's financial assets exposed to credit risk amounted to the following:

 

2019

 

2018

 

£

 

£

 

 

 

 

Cash and cash equivalents

63,374

 

557,182

 

The Company considers that all the above financial assets are not impaired or past due for each of the reporting dates under review and are of good credit quality.

 

c)    Liquidity Risk

Liquidity risk is the risk that the Company cannot meet its liabilities as they fall due. The Company's primary source of liquidity consists of cash and cash equivalents and those financial assets which are publicly traded and held at fair value through profit or loss and which are deemed highly liquid.

 

The following table details the contractual, undiscounted cash flows of the Company's financial liabilities:

 

As at 30 June 2019

 

Up to 3 months

Up to 1 year

Over 1 year

Total

 

£

£

£

£

Financial liabilities

 

 

 

 

Borrowings 1

-

45,205

660,000

705,205

Trade and other payables

45,422

-

-

45,422

 

45,422

45,205

660,000

750,627

 

As at 30 June 2018

 

Up to 3 months

Up to 1 year

Over 1 year

Total

 

£

£

£

£

Financial liabilities

 

 

 

 

Trade and other payables

43,170

-

-

43,170

 

1 Borrowings are presented in the above tables at their nominal value which represents the undiscounted cash flow amount of the CLN. The amount may differ from the discounted cash flow amount included in the statement of financial position.

 

Capital Management

The Company's objective when managing capital is to safeguard the Company's ability to continue as a going concern in order to provide optimum returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce cost of capital.

 

In order to maintain or adjust the capital structure, the Company may issue new shares, return capital to shareholders or sell assets. The Company does not have any debt nor is the Company subject to any external capital requirements.

 

Fair Value Estimation

The Company has classified its financial assets as fair value through profit or loss and fair value is determined via one of the following categories:

 

Level I - An unadjusted quoted price in an active market provides the most reliable evidence of fair value and is used to measure fair value whenever available. As required by IFRS 7, the Company will not adjust the quoted price for these investments, (even in situations where it holds a large position and a sale could reasonably impact the quoted price). 

 

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2019

 

15.        FINANCIAL RISK (continued)

Fair Value Estimation (continued)

 

Level II - Inputs are other than unadjusted quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, and fair value is determined through the use of models or other valuation methodologies (see note 11).

 

Level III - Inputs are unobservable for the investment and include situations where there is little, if any, market activity for the investment.  The inputs into the determination of fair value require significant management judgment or estimation.

 

The following table shows the classification of the Company's financial assets and liabilities:

 

 

Level I

Level II

Level III

Total

 

£

£

£

£

At 30 June 2019

2,090,176

(225,003)

4,655,621

6,547,268

At 30 June 2018

1,616,984

-

110,555

1,727,539

 

 

 

 

 

 

 

The Company has classified listed investments as Level I, derivative financial instruments as Level II and unquoted investments as Level III.  The Level III investment is at an early stage of development and therefore has been valued based on the recent price of investment. The Directors have considered market expectations of future performance of the entity's industry sector, in particular known interest in the area of current exploration.  As such, the Directors consider that the recent price of investment in Cataleya and JHI fairly reflects the value of the investments as at 30 June 2019.

 

A reconciliation of the movements in Level III investments is shown below:

 

 

2019

 

2018

 

£

 

£

At start of the year

110,555

 

76,987

Purchases

3,852,263

 

39,567

Change in fair value

692,803

 

(5,999)

 

 

 

 

At end of the year

4,655,621

 

110,555

 

 

 

 

 

16.        DIRECTORS' REMUNERATION AND SHARE OPTIONS

 

 

At the year end the Company owed £nil (2018: £nil) in outstanding directors' fees.

 

1,500,000 share options were issued during the year ended 30 June 2019 (2018: 500,000) and nil (2018: nil) options were exercised during the year. The options issued during the year are due to expire on 31 March 2024 and the remaining 2,250,000 outstanding options are due to expire on 31 December 2019.

 

The Company does not employ any staff except for its Board of Directors. The Company does not contribute to the pensions or any other long-term incentive schemes on behalf of its Directors.

 

 

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2019

 

17.       RELATED PARTIES

 

Fees paid to the Directors are disclosed in note 16. 

 

Gerard Walsh, a director of the Company, subscribed for £500,000 of the convertible loan notes issued on 24 October 2018. The total loan payable to Gerard Walsh as at 30 June 2019 was £491,925 which includes £34,110 of accrued interest and the fair value of the conversion rights attributable to Gerard Walsh is £170,457. Details of the convertible loan notes are disclosed in note 11.

 

On 26 February 2019, in accordance with the terms of the JHI share purchase agreements between the Company and various JHI shareholders including Gerard Walsh, the Company issued 3,250,000 new nil par value ordinary shares and paid a cash consideration of £251,296 (CAN $437,500) for 500,000 JHI shares held by Gerard Walsh.

 

As detailed in Note 19 - Subsequent Events (below), Mr Gerard Walsh subscribed £292,050 for 2,246, 538 Nil Par Value shares after the year end.

 

Canaccord Genuity as a significant shareholder of the Company is considered a related party under AIM rules.

 

On October 24 2018 Canaccord Genuity subscribed for £1,000,000 principal of the total £1,600,000 10% p.a. convertible unsecured loan notes 2021 ("the Convertible Loan Notes") issued at that date.

 

On February 27 2019 Canaccord Genuity accepted early repayment of £940,000 principal, and waived all interest payable, of the £1,000,000 principal of the Convertible Loan Notes held by them and made a subscription for 10,444,444 new ordinary shares of nil par value in the Company issued at a price of 9 pence per share.

 

At year end Canaccord Genuity retain £60,000 principal of the Convertible Loan Notes and hold 28,161,946 Nil Par Value shares in the Company.

 

As detailed in Note 19 - Subsequent Events (below) Canaccord Genuity subscribed £1,356,000 for 10,430,769 Nil Par Value shares after the year end.

 

 

18.       CONTROLLING PARTY

 

            In the opinion of the Directors, the Company does not have a controlling party.

 

19.        SUBSEQUENT EVENTS

 

Share issue

On 23 August 2019 the Company raised £5.0 million through the issue of 38,461,538 new ordinary shares of nil par value at 13p each.

 

Included in the £5.0 million share issue was a £292,050 subscription from Mr Gerard Walsh in respect of 2,246,538 new ordinary Nil Par Value shares and a £1,356,000 subscription from Canaccord Genuity in respect of 10,430,769 new ordinary Nil Par Value Shares.

 

On 28 August 2019 the Company raised £0.573 million through the issue of 4,409,999 new ordinary shares of nil par value at 13p each.

 

Additional investment in Cataleya

On 30 August 2019 Company acquired an additional 313,500 common shares in Cataleya for a total consideration of USD 3,135,000 (£2,463,311). 

 

 


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