Katoro Gold Regulatory News (KAT)

Opera Investments plc

Update of Potential Acquisition

Competent Persons Report issued on Helium Two Project

27 June 2016

Further to the announcement by Opera Investments plc ("Opera" or the "Company") on 15 June 2016 regarding the heads of terms agreed with Highlands Natural Resources plc ("Highlands") to acquire all of the issued share capital of Highland's subsidiary, Highlands Helium Development Limited, the Company is pleased to note Highland's announcement earlier today that it has received the results of a Competent Persons Report ("CPR") from Knowledge Reservoir LLC dba RPS ("RPS") on its Helios Two helium and natural gas project in Montana, USA.

Opera notes that a copy of the CPR will be available shortly on the Highlands's website (www.highlandsnr.com). As announced by Highlands, the Executive Summary from the CPR is set out below.

Executive Summary

On 19th May 2016, Knowledge Reservoir LLC dba RPS ('RPS') was engaged by Highlands Natural Resources Plc ('Highlands') to provide a Competent Person's Report (the 'Report') on the resource potential of low saturation gas found in the Muddy Formation in southeast Montana, U.S.A (the Muddy Prospect).

The Muddy Prospect is located within the Northeastern part of the Powder Basin of southeast Montana and Wyoming which has been a prolific producer of hydrocarbons. Conventional exploration in the area has targeted and been developed in fields that exhibit normally expected hydrocarbon saturations with typical conventional flow characteristics. However, many wells were drilled into equivalent reservoirs across the area through time and were reported as finding low gas saturation in brines (high water saturation) which would bubble and/or ignite at the surface but were not thought to be commercially productive, and certainly not in comparison to the high gas saturation accumulations that were being discovered at the time. Consequently, the low gas saturation reservoirs were ignored and classified as water-wet.

However, two further developments have occurred since those times:

• The development of Helium gas in the area which now commands very high prices and is forecast to be increasingly short-supply;

• The advent of commercial "co-production" in other similar reservoirs which provide good analogues to support the belief that the high water saturation reservoirs in the Cretaceous of southeast Montana (and elsewhere in the local) could be a by-passed play.

The combination of these two factors in the Muddy Prospect area means that, if the concept can be proved via a pilot test program, a whole new economic play may open up.

The Muddy Formation is of Lower Cretaceous Aptian age and is time equivalent to the Viking/Bow Island formations of Alberta, Newcastle Formation of Manitoba and the J sandstones of Colorado. The sands were deposited in valleys cut during periods of low-stand into the underlying basinal Skull Creek shales and filled with estuarine / tidal delta sediments during the subsequent transgression. A key feature of the Muddy formation is a high clay and fine silt content contained within otherwise reasonably porous and permeable sands (hence the name). These clays (primarily Kaolinite and Illite) are thought to act as a resistivity suppressant resulting in low and unrepresentative water saturations when calculated using the conventional "Archie" type method. The true initial gas saturations are still very low when compared with less clay rich and conventional reservoirs but the production technique of "co-production" has now been documented in several analogue cases from Oklahoma, Japan and elsewhere, and, in one particular well (Jorgenson #1-R drilled into and tested the Virgelle Member of the Milk River Formation in Hill County, Montana), in close proximity to the area in 2002. Co-production is a production method whereby a well is produced by lifting (pumping) produced water with low gas saturations and as the reservoir pressure drops gas becomes more mobile and gradually increases in ratio (gas to water ratio), in some cases to the point where gas flows at good to excellent rates. This co-production methodology requires the production, handling and disposal of significant quantities of water (normally via re-injection) and the balance between disposal costs and revenue realization from a slow-buildup of the gas production profile may be uneconomic. However, low concentrations of Helium in the produced gas may well deliver significant net-back economics since the Helium price is currently more than $100/Mcf and predicted to increase as stored volumes are drawn down and demand increases. The Muddy sands have been shown to contain 0.36% Helium, from analysis of produced gas from a drill stem test of a wildcat well drilled by Pan American Petroleum Corporation in Section 23, Twp 5N Range 52E, Custer County, Montana in 1969.

This has the potential to change the economics even at low concentrations but it should be noted that the methane is not valueless if sufficient volume and hence revenue can be achieved to cover the water disposal costs.

RPS has reviewed data supplied by Highlands and accessed the production database for all gas wells in Southeastern Alberta and Southwestern Saskatchewan, using Accumap, to look for other local analogues. RPS has found good evidence of Helium production and has a logical and coherent explanation for the Helium concentrations found as well as support for the fact that the sample in the area could well be representative over a wider area and maybe even pessimistic. Based on RPS' independent analyses and drawing on suitable analogue data, RPS has developed a model of the in-place volumes expected per acre, the Resource potential for the three Township area and a type well based on production characteristics from two key wells (Howard #17-1 and Jorgenson #1-R). RPS has estimated the Geologic Chance of Success for the prospect at 80%, with the primary identified risk being the risk of being able to mobilize and produce gas at commercial rates from the highly water saturated gas reservoirs.

A conceptual development plan for the full three Township area has been modelled for economics in excel and supplied to RPS. RPS has reviewed this model and updated the well production forecast based on an RPS derived type well production, and for capital and operating costs based on RPS estimates. This gives a simplistic but reasonable view of the potential Resource volumes of Methane and Helium and also an indicative success case value based on Highlands's assumptions which have been reviewed and do not seem unreasonable and will be further demonstrated by the pilot program in terms of cost control etc. The table below summarizes our findings of gross and net attributable Prospective Resources for the three Township area of the Muddy Prospect and the following Report gives more detail on the work and assumptions behind the results.

Prospective Resources Summary for Muddy Prospect

The unrisked P50 indicative success case valuation (NPV10), before income tax, calculated for the 100 Section development based on capital cost and operating cost estimates built up by RPS is US$341MM. This value does not represent any form of market value for the asset and requires several critical events to occur to be achieved including discovery, appraisal, capital expenditure and the successful negotiation of the third-party midstream service contract described in Section 7.2.2 of the Report.

This indicative success case valuation does not include specific economics for the Helium as it is not possible to estimate Capex and Opex requirements until the Helium percentage content has been confirmed as the scale of the processing and methodology for extraction will be critically dependent on this ratio. As noted above, however, Helium is in increasing demand and could be a significant upside to the existing success case based on the methane project alone.

Background

Opera and Highlands have conditionally agreed that Opera will acquire all of the issued share capital of Highlands Helium Development Limited which owns Highlands' Helios Two helium and natural gas project in Montana, USA for a consideration of approximately £4.0 million (the "Acquisition"). The heads of terms provide that the Acquisition will be satisfied by the issuance of new ordinary shares of £0.01 each in Opera ("Opera Shares") to Highlands at a price of £0.15 per Opera Share (the "Consideration Shares"), valuing the existing issued share capital of Opera at £2.5 million. In addition, it is envisaged that, in conjunction with completion of the Acquisition, there will be an equity financing raising net proceeds of not less than US$750,000 to fund certain future investment and working capital requirements of Helios Two. The heads of terms also stipulate that Opera will reimburse Highlands all of the professional costs incurred by Highlands on this project as well as any costs of further leases that could be acquired for the project (with any such further leases also being the subject of the Acquisition).

Both parties believe that the Helios Two assets represent a significant opportunity to take advantage of a potentially significant helium resource, at a time of global concerns around helium scarcity and helium price increases. It is the intention to establish a team dedicated to the development and commercialisation of the Helios Two project, which consists of exploration licences covering 59,033.82 acres in Custer, Carter and Fallon Counties, Montana. Numerous shows of gas have been encountered across the Helios Two target region. Historic gas analysis confirmed the gas contains elevated concentrations of helium (0.36 per cent) similar to the producing US Hugoton helium field, which is the largest natural accumulation of helium in the United States. Consequently, Highlands and Opera believe that a significant volume of gas containing helium could exist in this region which, if correct, would represent a significant helium resource in North America.

The Acquisition remains conditional on a number of matters, including:

• The Acquisition will be considered a reverse takeover for Opera in accordance with the FCA Listing Rules and, consequently, will be subject to the publication of a prospectus by Opera and its shareholders' approval.

• New directors will be appointed to the board of Opera including, in particular, a non-executive director with experience of helium. In due course, but expected to be after completion of the Acquisition, Opera also expects to appoint a chief executive who is experienced in this industry. Highlands and Opera will also enter into a relationship agreement pursuant to which, amongst other things, Highlands will be entitled to nominate two directors to the Opera board.

• At the time of announcing the full terms of the Acquisition, Opera will also carry out a fundraising by way of the issue of new ordinary shares in Opera (the "Fundraising"), the purpose of which will be to put the Company in funds to carry out the first stage of the development plan for Helios Two, namely the drilling of the first two wells and their associated injection well.

• Following the issue of the Consideration Shares, Highlands will be a majority shareholder in Opera and, accordingly, the Acquisition will be subject to a Takeover Code whitewash (the "Whitewash") and Opera shareholder approval in respect of the provisions of Rule 9 of the Takeover Code. Details of the Whitewash will be contained in Opera's prospectus.

• Finally, the Acquisition will be subject to conclusion of the parties' due diligence, and the parties entering into final documentation including an acquisition agreement. It is expected that for the first 12 months following the Acquisition, Highlands will provide its expertise and management services to Opera in return for a management fee of £20,000 per month.

Enquiries:

Opera Investments plc

Paul Dudley +44 (0) 20 3551 4872

Buchanan

Ben Romney / Bobby Morse +44 (0) 20 7466 5000

This announcement is not intended to, and does not, constitute or form part of any offer, invitation or the solicitation of an offer to purchase, otherwise acquire, subscribe for, sell or otherwise dispose of, or vote in any manner, any securities pursuant to this announcement or otherwise. The distribution of this announcement in jurisdictions outside the United Kingdom may be restricted by law and therefore persons into whose possession this announcement comes should inform themselves about, and observe such restrictions. Any failure to comply with the restrictions may constitute a violation of the securities law of any such jurisdiction.

The statements contained in this announcement that are not historical facts are "forward-looking" statements. These forward-looking statements are subject to a number of substantial risks and uncertainties, many of which are beyond the Company's control and actual results and developments may differ materially from those expressed or implied by these statements for a variety of factors. These forward-looking statements are statements based on the Company's current intentions, beliefs and expectations about among other things, the Company's financial condition, prospects, growth, strategies and the industry in which the Company operates. Forward-looking statements are typically identified by the use of forward-looking terminology such as "believes", "expects", "may", "will", "could", "should", "intends", "estimates", "plans", "assumes" or "anticipates" or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy that involve risks and uncertainties. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. In addition, from time to time, the Company or its representatives have made or may make forward-looking statements orally or in writing. Furthermore, such forward-looking statements may be included in, but are not limited to, press releases or oral statements made by or with the approval of an authorised executive officer of the Company. No assurance can be given that such future results will be achieved; actual events or results may differ materially from those expressed in or implied by these statements as a result of risks and uncertainties facing the Company and its subsidiaries. Many of these risks and uncertainties relate to factors that are beyond the Company's ability to control or estimate precisely, such as changes in taxation and fiscal policy, future market conditions, currency fluctuations, the behaviour of other market participants, the actions of governmental regulators and other risk factors such as the Company's ability to continue to obtain financing to meet its liquidity needs, changes in the political, social and regulatory framework in which the Company operates or in economic or technological trends or conditions, including inflation and consumer confidence, on a global, regional or national basis. Such risks and uncertainties could cause actual results to vary materially from the future results indicated, expressed or implied in such forward-looking statements. The forward-looking statements contained in this announcement speak only as of the date of this announcement and the Company undertakes no duty to update any of them publicly in light of new information or future events, except to the extent required by applicable law or regulation.