ROSE.L Regulatory News (ROSE)

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

Final Results for the year ending 31 December 2015

Rose Petroleum plc, the AIM quoted (AIM: ROSE) natural resources company, announces its final results for the year to 31 December 2015.

Matthew Idiens, CEO of Rose Petroleum, commented: "Market conditions in 2015 resulted in a transformational year for the Company and we are now strategically well positioned for the future.

"We have fundamentally restructured our existing asset portfolio, and this, combined with the potential opportunity in Cuba gives a solid base from which to move the Company forward. The Board is now looking to the future with optimism.

We would like to thank our investors for their continued support."

A copy of the Company's annual report and accounts has been posted to its website, www.rosepetroleum.com, in accordance with the Company's articles of association.

The Company also announces that its Annual General Meeting of shareholders ("AGM") will be held at 10.00 am on 30 June 2016 at the offices of Allenby Capital Limited, 3 St. Helen's Place, London EC3A 6AB.

A notice of this AGM has been posted to its website, www.rosepetroleum.com, in accordance with the Company's articles of association (the "Notice"). Included in the resolutions to be put to shareholders is to approve the issue of the shares and options to Earth Source Investment Inc. described in the announcement of 3 May 2016; further details can be found in the Notice.

Copies of both the annual report and accounts and the AGM notice will be posted to those shareholders who have requested hard copies.

For further information, please contact:

CHAIRMAN'S STATEMENT

The period under review has been a time of restructuring, consolidation and transformation for the Company as the Board looks to adapt the strategy and direction of the Company to reflect current market conditions and ensure its future growth and development. The Board believes that the Company is now better positioned, not only to survive the current market shakeup, but also to be in a position to take advantage of opportunities that may arise both before and after a recovery in the sector.

As outlined in the Company's Interim financial results, which were released in September 2015, the prevailing market conditions have provided the Board with an extremely challenging backdrop against which to operate. As a consequence, the Board has taken decisive action during the period that have de-risked and safeguarded the existing asset portfolio, reduced liabilities and which have materially reduced operational costs to conserve existing cash resources. In addition the Board has been flexible and proactive in identifying potential opportunities.

Despite the post period end withdrawal from its Mancos and Cisco Dome acreage, the Board believes that its oil and gas portfolio is still of a scale and quality to deliver long term shareholder value. The Paradox assets were acquired due to their prospectivity, size, location, and relatively low breakeven price, and despite the downturn in the oil sector, all these factors still apply. However, by reducing the size of the Company's acreage, the Board has achieved the twin objective of both retaining the core part of its Oil and Gas portfolio and also significantly reducing costs and liabilities.

While the cost cutting across the Group to date has been radical and far-reaching, the Board has ensured that it has retained an operational capability sufficient to meet its commitments for the foreseeable future. As well as protecting the existing asset base and positioning the Group for the eventual upturn, the Board is also confident that the Company can take advantage of potential acquisition opportunities that will inevitably arise.

We have reviewed numerous potential opportunities since the downturn in the oil price, looking to create shareholder value ahead of the recovery of the oil sector, and I was delighted that we have recently secured an investment in the Company which will enable us to pursue some very exciting prospects in Cuba. We believe that a transaction in this space would complement our existing asset portfolio, and that the investment demonstrates confidence in the Company's management team to deliver on the project.

The overall economic and political changes taking place in Cuba present a striking opportunity, with direct foreign investment now being a priority, to realise the country's anticipated growth. In the tourism industry alone, the planned expansion of hotel developments from both domestic and international brands is considerable. While there is no certainty that any transaction will complete, we have had, and continue to be in direct discussions with, both a Cuban Government owned company and the relevant ministries in Havana about a potential transaction.

In summary, the strategy of the Company is clear and the next phase of activity is clearly defined; the mining and Oil and Gas asset portfolio is de-risked, secure and is well positioned for recovery, costs and liabilities have been reduced to ensure the longevity of the Company and we will continue to whole-heartedly pursue the Cuban opportunity and any other projects that will deliver value near-term to our shareholders.

I would like to take this opportunity to thank the Rt Hon Earl of Kilmorey PC for his commitment and support during his time as Chairman, and to our investors, advisers and employees for their continuing support during this challenging period. The Board is looking forward to updating you on progress throughout the rest of 2016, which promises to be an exciting period in the Company's ongoing evolution.

PE Jeffcock

6 June 2016

STRATEGIC REPORT

The Directors present their strategic report on the Group for the year ended 31 December 2015.

Rose Petroleum plc is a diversified O&G and Mining Company with both exploration and production assets. The key strategic objective is to deliver shareholder returns through the enhancement of these assets.

This key objective will be achieved by various strategies:

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

· strong and experienced management teams to maximise returns from the Company's underlying O&G and Mining assets;

· the potential acquisition of further interests through acquisition, farm-in agreements and joint arrangements to deliver near-term value to stakeholders;

· consideration of the capital and financing required to achieve our objectives and market perception; and

· tight financial control and cash conservation.

During the strong oil price environment of 2014 and early 2015, the Group entered into agreements under which it was able to earn into a 75% working interest in approximately 263,000 gross acres in Utah. The area of focus of the acreage is on two unconventional oil and gas basins: the Uinta Basin, which targets the Mancos Shale at a maximum depth of approximately 3,200ft, and the Paradox Basin that targets the Paradox Clastics at a maximum depth of approximately 10,500ft.

Under the terms of the original agreement, the Group was to carry the seller of the acreage, Rockies Standard Oil Company LLC ("RSOC"), which was to retain a 25% working interest in the leasehold, for the first US$17 million expenditure on the projects: US$9.5 million in the Uinta Basin and US$7.5 million in the Paradox Basin.

Part of the Group's land position was secured through the acquisition, in October 2014, of the Cisco Dome Field, adjacent to the Mancos acreage, which included 76 miles of a mid-stream gathering system, a gas processing plant, a compressor station and main pipeline tap and meter into Williams' 26" natural gas pipeline. The Cisco Dome field also contained over fifty historical conventional wells.

During 2014, and subsequent to the acquisition of the Cisco Dome field, Ryder Scott Company LP ("Ryder Scott") completed a reserve report on the Utah leasehold. Based on that reserve report, the Group's Mean Un-Risked Recoverable Prospective Resources across its total acreage were estimated to be 1.8 billion barrels of oil ("BO") and 6.45 trillion cubic feet of gas ("TCFG"), see Table 1 below. Of these total resources, it was estimated by Ryder Scott that the Paradox acreage contained over 1.1 billion BO (61% of the total BO resources estimated) and circa 2.2 TCFG (34% of the total gas resources estimated), whilst the Mancos acreage contained circa 710 million BO (39% of the total BO resources estimated) and circa 4,260 TCFG (66% of the total gas resources estimated).

Table 1: Estimated 100% Gross Volumes Unrisked Prospective Recoverable Hydrocarbon Resources (Estimated Ultimate Recoverable Reserves -EUR) in the Mancos Shale (Uinta Basin) and Paradox Formation (Paradox Basin):

 (MMBO = million barrels of oil, BCFG = billion cubic feet gas)

(Full Report available on the website: www.rosepetroleum.com)

In the report, Ryder Scott also gave an opinion on the chance of success in the Paradox and Mancos acreage and concluded that the chance of success within the Paradox leases was up to 56%, compared with 30% in the Mancos leases.

During the latter part of 2014 and during 2015, the Group concentrated its efforts on the Mancos due to the relative ease of drilling with its shallow depth, low drilling costs, and good infrastructure. The Board was hopeful that a demonstration of the prospectivity of the Mancos could be achieved in quick time and that a successful drilling campaign would provide the catalyst of cashflow that would enable the commencement of the Paradox activity.

Although the initial analytical results from the core taken at the State 1-34 well within the Mancos acreage were encouraging, the Group's follow up work, which was designed to further de-risk the opportunity, was not as convincing as was hoped and it led the Board to conclude, as part of its strategic review, that the Mancos, due to its depth in the location of the Group's acreage, may have had insufficient pressure/energy to be commercial and therefore represents too high a risk profile to merit further work at that stage.

The Board concluded that the Paradox basin presents a lower risk opportunity, with greater potential and a higher chance of success.

The Paradox Basin has been actively exploited by Fidelity Exploration and Production ("Fidelity"), mainly in the Cane Creek Formation, 18 to 27 miles south-south east of the main group Paradox lease blocks. Fidelity has been the most active operator in the Paradox basin over the past two years with average Q1 2015 production of 2,100 barrels of oil per day ("boepd"). In addition to Fidelity's success, multiple wells in the area of the Group's leases have produced oil and gas to surface from various formations, and it is a combination of all these factors that led the Board to the conclusion that it should focus on its Paradox Basin acreage.

Having considered all of the above, the Board announced in April 2016 that it had entered into an agreement with RSOC to terminate its earn-in rights to the Mancos acreage and dispose of the Cisco Dome field, wells, pipelines, gas tap, gas plant, and all the associated equipment and liabilities.

As part of the revised agreement with RSOC, the Group agreed to cover the cost of the existing plug and abandonment ("P&A") liability of the four wells already scheduled for P&A with the authorities, which was calculated to be US$0.3 million. The Group also agreed to leave the existing operator bonds in place with the State of Utah and Bureau of Land Management ("BLM"). 

RSOC , in turn, agreed to reduce the Group's carry obligation to earn the 75% working interest in the Paradox acreage by US$2 million to US$5.5 million. The Group also gained the exclusive option to acquire 100% of RSOC's interest (as opposed to the earn-in to 75% of RSOC's interest) in the Paradox acreage for a one-time payment of US$1.0 million at any time prior to 30 June 2016.

The reassignment of the Mancos assets will significantly reduce the future expenses the Group would have had to pay on this acreage including lease rental/minimum royalty payments associated to the Mancos leasehold. Further, and potentially more importantly, the Group will no longer be liable for the P&A liability of the fifty plus wells in the Cisco Dome field. This reduction of acreage has also led to a reduction of headcount in the O&G Denver office and there is now only one full-time employee managing the Paradox acreage.

The Group is currently in the process of obtaining permits for a 61 square mile 3D seismic shoot in the Paradox which we anticipate will be granted in Q4 2016. It is hoped that positive results from this seismic will provide a sufficient base on which to secure a funding partner to enable the Group to drill its first Paradox well.

The Board feels that its strategy to unlock value from the Paradox should be the same as that used by Fidelity, namely a 3D seismic shoot for target identification followed by drilling. 

The Group's mining projects in Mexico continue to be operated by its wholly owned subsidiary, Minerales VANE S.A. de C.V. ("MV"), which is headquartered in Acaponeta, Nayarit. Mill production is carried out at its nearby mill in San Dieguito de Arriba ("SDA") where it also operates an analytical facility.

Mine production from the Mina Charay Mine located in northern Sinaloa commenced in late December 2014 and continued until November 2015. Production ramped up as the mine was developed and by the end of June, ore production had reached the forecasted rate of 100 tonnes/day.

A total of approximately 23,500 tonnes of ore were mined from Mina Charay during 2015, and these tonnes were processed by the SDA mill. This tonnage yielded 3,391 ounces ("oz ") of gold and 26,736 oz of silver. The average mill head grade for period averaged 6.03 grammes per tonne ("g/T") gold and 61.4 g/T silver. Recoveries for the period averaged 71.7% for gold and 54.4% for silver. These recoveries were slightly lower than had been forecasted due to oxide ore being encountered while developing the mine in the upper part of the vein where there was no drill coverage.

Unfortunately, the positive operational efforts were overshadowed by the continued decline in metals prices. This, combined with the lower than expected recoveries put a strain on the operation and the Board took the decision to suspend operations, a decision which was announced to the market on 9 December 2015.

The Company is now focusing on toll milling third party ore at the SDA mill while it searches for new joint production opportunities. The processing of third party ore has already commenced and further ore has been identified which will enable the Company to keep the mill operating and is expected to more than cover the direct operating costs of the mill.

During 2014, the Group added the Tango project to its portfolio, consisting of the Tango, Tango 2, Tango 3 and Tango 5 concessions located in southern Sinaloa. The Tango property covers what appears to be a classic base and precious metals porphyry system. The property hosts two porphyries, one containing copper and the other, molybdenum mineralization as well as several historic high-grade, narrow-vein gold and silver mines on the margin of and associated with the porphyries which could provide near-term production to SDA. Minera Camargo had completed significant exploration on the property and brought the program to the drilling stage. MV verified the work and the project was entered into by means of a profit share and option agreement with Minera Camargo S.A. de C.V. ("Camargo"). The four Tango concessions cover 3,954 hectares (39.54km²).

Under the terms of the agreement, MV will operate all mining activities and gross margin from the precious metals veins would be allocated on the basis of a 50:50 profit split. In addition, MV holds an option to earn a 75% ownership of the base metals (the porphyries) by investing US$5 million in work expenditures over a period of five years. 

During 2015, the Group was active in preparing permit applications and all permits required to commence drilling at the project have now been received. The Board is now reviewing options for the commencement of a drilling programme. These permits will also cover drilling the high-grade vein structure at the San Agustin gold and silver mine. It is hoped that, when drilled, this mine will, due to its close proximity, provide ore for the Company's SDA mill, which is located considerably closer to the mill than the Mina Charay Mine.

Due to current market conditions, there have not yet been sufficient funds available to commence drilling at the Tango project. The Board is now considering a number of different options for advancing the project and will keep the market updated on progress.

The Group's U.S. porphyry copper programme is operated by its wholly owned subsidiary AVEN Associates LLC located in Tucson, Arizona.

The copper exploration programme continues on a care and maintenance basis with the property positions being kept current while third-party financing is sought to continue the programme. AVEN met with a number of interested parties during the year and interest continued through the end of the year and into 2016.

In April 2016, the Group announced that it had entered into an agreement with privately held Burdett Gold LLC to conduct exploration drilling on the Ardmore copper project which consists of 18 unpatented mining claims located north of Tucson. The terms included a US$5,350 cash payment to the Group and a retained 15% carried interest on the claims as well as any property that Burdett acquires which is located within a 3-mile area of interest. Burdett will be responsible for operations and the Group is released from all costs and liabilities. Burdett has received the drilling permit and commenced drilling during April.

The Group's uranium assets continue to be held and managed in its wholly owned subsidiary VANE Minerals (US) LLC ("VANE"), and the programme is led by the joint operation with Anfield Resources Inc. ("Anfield"). During 2015, Anfield acquired the 50% interest in the joint operation previously held by Uranium One Americas Inc.

The most significant asset was the Wate Project located on State of Arizona lands and operated under Wate Mining Company LLC. ("Wate"), and in February 2015, the Board disposed of the Group's 50% interest in Wate project to EFR Arizona Strip LLC. ("EFR"), a subsidiary of Energy Fuels Resources. A total consideration of US$1.75 million was agreed, consisting of an immediate cash payment of US$0.25 million, a US$0.5 million non-interest bearing promissory note, payable in two equal instalments of US$0.25 million on each of the first and second anniversaries of Closing, a further US$0.5 million conditional cash, and a 2% production royalty on EFR's stake in the project.

A further US$0.25 million tranche of consideration was due to be paid to the Group in Q1 2016. The Group was informed by EFR that it is having delays with the State of Arizona over obtaining the Mineral Lease on the project due to the State's unusual condition that EFR obtain access rights to the project over private land that surrounds the State parcel. Consequently, EFR proposed an addendum to the agreement terms whereby they would pay US$0.05 million of the US$0.25 million due in Q1 2016 and defer the rest of the payment until the commencement of commercial production. The only real alternative was for EFR to default on the agreement and return the Group's 50% interest in the project. Given EFR's scale and presence in this market, the Group felt that it was in the best interests of shareholders to accept the US$0.05 million and agree to the addendum to the original contract. Therefore, by the end of February 2016, EFR had paid US$0.3 million of its contractual consideration payments. EFR is actively engaged in securing access to, as well as the environmental permitting, on the project.

In May 2016, the Group announced that it has raised gross proceeds of US$1.2 million (£800,000), primarily to further develop opportunities that have arisen in Cuba and specifically around the processing and manufacturing of gypsum and associated building materials.

As mentioned in the Chairman's Statement, the Board believes that there are significant near term opportunities in the Cuban construction industry, which would complement the existing asset base and enable the Group to seek to create value in this rapidly expanding market.

The overall economic and political changes taking place in Cuba present a significant opportunity, with direct foreign investment now being a priority to realise the country's anticipated growth. In the tourism industry alone the planned expansion of hotel developments from both domestic and international brands is considerable. The Group could be well positioned to benefit from this should we successfully complete our negotiations.

It is worth noting that, at present, there is no domestic supply or production of gypsum panels or wallboard for the construction of internal walls within Cuba, and providing domestic sources is naturally very important for Cuba and its development. Cuban authorities have stated that there are significant gypsum resources within Cuba that can support manufacturing and have allowed Group representatives to visit one of the deposits.

The Board will keep the market fully updated on progress.

Revenue for the year was generated primarily from the Group's precious metals mining and milling operations in Mexico. The Income Statement reports total revenue for the year ended 31 December 2015 of US$4.3 million (2014: US$3.1 million). The increase in revenues was primarily the result of having a near full year of production from the Mina Charay gold/silver project which was not the case in 2014. Operations at Mina Charay ceased in December 2015 and the Group is currently focusing on toll milling third party ore at the SDA mill while it explores new opportunities.

The Group reports a net loss after tax of US$9.1 million or 0.45 cents per share for the year ended 31 December 2015 (2014: net loss after tax of US$5.9 million or 0.55 cents per share). The net loss for 2015 includes a non-cash charge of US$1.5 million (2014: US$0.8 million) relating to share-based payments.

An impairment of part of the Group's intangible exploration and evaluation assets resulted in a charge of US$3.7 million (2014: US$1.0 million) during the year.

Total investment in intangible assets at 31 December 2015 was US$10.2 million (2014: US$9.9 million) primarily reflecting investment into the Utah O&G assets.

Property, plant and equipment at 31 December 2015 was US$0.6 million (2014: US$0.8 million) reflecting the continued depreciation of the ore processing mill.

Trade and other receivables of US$1.5 million (2014: US$1.0 million) represent amounts due in relation to trade and other receivables and VAT recoverable. VAT and tax recoverable in Mexico make up US$1.0 million of the current outstanding.

Cash and cash equivalents at 31 December 2015 were US$2.4 million (2014: US$8.4 million). During the year the Company raised gross proceeds of US$3.1 million through the placing of the Company's Ordinary Shares.

In May 2015, the Company raised gross proceeds of US$3.1 million by way of a conditional placing and a subscription of 1,040,000,007 Ordinary Shares of 0.1p each at a price of 0.3p per share.

In May 2016, post period end, the Company raised gross proceeds of US$ 1.2 million (£0.8 million) by way of an unconditional placing of 500,000,000 Ordinary Shares of 0.1p each at a price of 0.16p per share.

The Directors have set out in note 3 to the financial statements their consideration of the future financing requirements of the Group and, having made appropriate enquiries and having examined the major areas which could affect the Group's financial position, the Directors are satisfied that the Group has adequate resources to continue in operation for the foreseeable future. For this reason, they consider it appropriate to adopt the going concern basis in preparing the financial statements. This assessment has been carried out in the light of the guidance issued to the Directors by the Financial Reporting Council.

The Group measures its progress against a number of key performance indicators ("KPIs") which are reviewed regularly by the Board. These are set out below:

· tight cost control and monitoring of actual expenditure versus budget;

· operational efficiencies at the Group's milling operation including monitoring gold recoveries from ore;

· CAPEX controls including the monitoring of overall costs of drilling wells in the Paradox Basins; and

· monitoring of G&A expenditure versus budget and peer group.

There are a number of potential risks and uncertainties which could have a material impact on the Group's long term performance and could cause actual results to differ from expected and historical results. The principal risks and uncertainties that we face are:

· Overseas territories experience varying degrees of political instability. There can be no assurance that political stability will continue in those countries where the Group currently has, or in future will have, operations. Political instability or changes in government law or policies could materially affect the rights and title to the interests held by the Group, and the operations and financial condition of the Group could be adversely affected.

· The U.S.A. Department of Interior has issued a 20-year withdrawal from mineral entry on approximately 1 million acres in the northern Arizona's uranium breccia pipe district. This order prevents work on our claims located on Federal lands. State of Arizona lands, on which the Group is now focusing its efforts, are unaffected by this withdrawal.

· The geographic locations of the Group's operations can present logistical difficulties in the installation, operation and maintenance of equipment related to the activities of the business. The Group currently generates its income from mining activities operated by contractors and is at risk of any disruption to mining or milling activities for reasons beyond the Group's control. The Group has excellent relationships with mining contractors operating at the mine and has access to alternative contractors if required.

· The Group's operations are such that minor and major injuries as well as fatalities could occur which could result in the temporary closure of the Group's operations.

· In certain overseas territories the Group might be unable to obtain the comprehensive level of insurance cover that would be available in the United Kingdom.

· There is a risk that the carrying value of the Group's assets will not be recovered through future revenues, leading to significant impairment losses. The Group manages the recoverability of its assets and assesses the economic viability throughout the exploration, development and production phases.

· The activities of the Group are subject to fluctuations in prices and demand for commodities, which are volatile and cannot be controlled.

· Changes in U.S. legislation may affect future operations in that royalties on minerals extracted from federal lands may be imposed.

· Funds are maintained by the Group in GBP, MXN and USD. There is a risk that purchasing power in Mexico and the U.S. is lost through foreign exchange translation. The Group considers its foreign exchange risk to be a normal and acceptable business exposure and does not hedge against the risk.

· There is a risk that there will be insufficient funds to meet all corporate, development and production obligations and activities and continue as a going concern into the foreseeable future. The Group manages liquidity risk by maintaining adequate cash reserves and monitoring forecast and actual cash flows. Management regularly reviews the Group's cash flow projections and forecasts.

CORPORATE SOCIAL RESPONSIBILITY

It is the objective of the Group to ensure the health and safety of its employees and of any other persons who could be affected by its operations. It is the Group's policy to provide working environments which are safe and without risk to health and provide information, instruction, training and supervision to ensure the health and safety of its employees.

The Group enjoys good relationships with all of its suppliers, professional advisers and operational partners.

Your Board, management and dedicated teams continue to investigate and evaluate new opportunities to increase shareholder value. The Company will continue to operate its existing O&G and Mining assets and will continue to look to enhance the value from these.

We would like to thank all shareholders for their continued support.

By order of the board

MC Idiens

Chief Executive Officer

6 June 2016

Rose Petroleum plc

CONSOLIDATED INCOME STATEMENTFor the year ended 31 December 2015

The notes form part of the financial statements.

Rose Petroleum plc

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEFor the year ended 31 December 2015

Rose Petroleum plc

CONSOLIDATED BALANCE SHEETAs at 31 December 2015 Company No 04573663

The financial statements were approved by the Directors and authorised for issue on 6 June 2016 and are signed on its behalf by:

CJ Eadie, Chief Financial Officer

Rose Petroleum plc

CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFor the year ended 31 December 2015

Rose Petroleum plc

CONSOLIDATED CASH FLOW STATEMENTFor the year ended 31 December 2015

Rose Petroleum plc

The financial statements were approved by the Directors and authorised for issue on 6 June 2016 and are signed on its behalf by:

CJ Eadie, Chief Financial Officer

Rose Petroleum plc

COMPANY STATEMENT OF CHANGES IN EQUITY

For the year ended 31 December 2015

Rose Petroleum plc

COMPANY CASH FLOW STATEMENT

For the year ended 31 December 2015

Rose Petroleum plc

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2015

1. GENERAL INFORMATION

Rose Petroleum plc (the "Company" and, together with its subsidiaries, the "Group") is domiciled and incorporated in the United Kingdom under the Companies Act 2006. The address of the registered office is 145-157 St John Street, London, EC1V 4PW.

The nature of the Group's operations and its principal activities are the exploration and development of O&G resources together with the evaluation and acquisition of other mineral exploration targets, principally gold, silver, uranium and copper, and the development and operation of mines in Mexico.

As permitted by section 408 of the Companies Act 2006, the parent company's income statement and statement of other comprehensive income have not been included in these financial statements.

The loss for the Company for the year ended 31 December 2015 is US$8.9 million (2014: US$0.9 million).

2. ADOPTION OF NEW AND REVISED STANDARDS

STANDARDS AFFECTING PRESENTATION AND DISCLOSURE

In the current year, the following new and revised Standards have been adopted but have not had any material impact on the amounts reported in these financial statements:

Amendments to IAS 19 Defined benefit plan: employee contributions

IFRIC 21 Levies

Annual improvements to IFRSs 2010-2012 cycle

Annual improvements to IFRSs 2011-2013 cycle

At the date of authorisation of the financial statements, the following Standards and Interpretations which have not been applied in the financial statements were in issue but not yet effective (and in some cases had not yet been adopted by the EU):

IFRS 9 Financial instruments

IFRS 14 Regulatory deferral accounts

IFRS 15 Revenue from contracts with customers

IFRS 16 Leases

Amendments to IFRS 10 and IAS 28 Sale of contribution of assets between an investor and its associates or joint venture

Amendments to IFRS 10, IFRS 12 and IAS 28 Investment entities: applying the consolidation exception

Amendments to IFRS 11 Accounting for acquisitions of interests in joint operations

Amendments of IAS 1 Presentation of financial statements - disclosure initiative

Amendments of IAS 7 Statement of cash flows - disclosure initiative

Amendments of IAS 12 Recognition of deferred tax assets for unrealised losses

Amendments to IAS 16 and IAS 38 Clarification of acceptable methods of depreciation and amortisation

Amendments to IAS 27 Equity method in separate financial statements

Annual improvements to IFRSs 2012-2014 cycle

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

3. SIGNIFICANT ACCOUNTING POLICIES

BASIS OF ACCOUNTING

The financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") and as adopted by the European Union ("EU").

The financial statements have been prepared on the historical cost basis. Historical cost is generally based on the fair value of the consideration given in exchange for assets.

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

The principal accounting policies adopted are set out below.

RESTATEMENT

With effect from 1 January 2015, the Company and the Group's presentation currency changed from pounds sterling ("£") to United States dollar ("US$") as the Directors considered the US$ to be more representative of the sector in which the Group primarily operates.

In accordance with International Accounting Standards, this change has been applied retrospectively and comparatives for the year ended 31 December 2014 were translated, for all balance sheet items except equity, using US$: £ exchange spot rate at that date, being US$ 1.5532, for the income statement using the average US$: £ exchange rate during the year being US$1.6476, and for the opening balances as at 1 January 2014, except equity, using the US$: £ spot rate on that date being US$1.6488.

Share capital, share premium and other reserves were translated at the historic rates prevailing at the dates of transactions, and assets and liabilities of Group entities, where the functional currency is other than US$, were translated into US$ at the relevant closing rates of exchange. Trading results were translated into US$ at the relevant average rates of exchange. Historical differences arising from the retranslation to US$ up to 1 January 2014 have been taken directly to the foreign currency translation reserve.

Foreign operations are included in accordance with the policies set out in note 3.

GOING CONCERN

These financial statements have been prepared on the going concern basis. The Group currently generates small amounts of cash through its third party toll milling operations in Mexico which the Group intends to continue for the foreseeable future.

The Group has no bank facilities and meets its working capital requirements from cash resources. At the year end, the Group had cash and cash equivalents amounting to US$2.4 million.

The Directors have prepared cash flow forecasts for the Group for the period to June 2017 based on their assessment of the prospects of the Group's operations. The cash flow forecast includes US$1.2 million from an unconditional share placing of 500,000,000 Ordinary Shares of 0.1p each, which the Company completed in May 2016. These cash flow forecasts, which include the Group's expected operating costs for all operations, including the necessary and specific expenditure to meet the minimum O&G operational and exploration licence expenditure, indicate that the Group has sufficient funding to meet its minimum obligations as they fall due.

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

The Directors acknowledge that if the Group chooses to continue into the development stage it will require the Group to raise additional funds. Despite challenging capital markets, the Company and Group have been successful historically in raising equity finance and consider that they have reasonable grounds for believing these past successes will, if required, and based on operational progress, continue and so enable the Group to expand development and/or take advantage of any new exploration opportunities that arise.

In preparing these financial statements the Directors have given consideration to the above matters and on that basis they believe that it remains appropriate to prepare the financial statements on a going concern basis.

BASIS OF CONSOLIDATION

The consolidated financial statements incorporate the financial statements of the Company and its subsidiary undertakings (together, 'the Group') made up to 31 December each year.

Subsidiary undertakings are those entities controlled directly or indirectly by the Company. Control is achieved when the Company is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity.

The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the date on which control is transferred to the Group or, up to the date that control ceases, as appropriate. Where necessary, adjustments are made to the financial statements of subsidiaries to bring accounting policies used into line with those used by the Group.

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

Where applicable, the consideration for the acquisition includes any asset or liability resulting from a contingent consideration arrangement, measured at its acquisition-date fair value. Subsequent changes in such fair values are adjusted against the cost of acquisition where they qualify as measurement period adjustments. All other subsequent changes in the fair value of contingent consideration classified as an asset or liability are accounted for in accordance with relevant IFRSs. Contingent consideration that is classified as equity is not re-measured, and its subsequent settlement is accounted for within equity.

Acquisition-related costs are recognised in profit or loss as incurred.

On acquisition, the assets and liabilities and contingent liabilities of a subsidiary are measured at their fair values at the date of acquisition. Any excess of the cost of the acquisition over the fair values of the identifiable net assets acquired is recognised as goodwill. Any deficiency of the cost of acquisition below the fair values of the identifiable net assets acquired (i.e. discount on acquisition) is credited to the income statement in the period of acquisition.

Where a business combination is achieved in stages, the Group's previously-held interests in the acquired entity are re-measured at fair value at the acquisition date and the resulting gain or loss, if any, is recognised in profit or loss. Amounts arising from interests in the acquiree prior to the acquisition date that have previously been recognised in other comprehensive income are reclassified to profit or loss, where such treatment would be appropriate if that interest were disposed of.

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

JOINT ARRANGEMENTS

The Group identifies joint arrangements as those arrangements in which two or more parties have joint control, where joint control is evidenced by the contractually agreed sharing of control of an arrangement, which exists where the decisions about the relevant activities require the unanimous consent of the parties sharing control.

Investments in joint arrangements are classified as either joint operations or joint ventures depending on the contractual rights and obligations of each investor.

 Joint operations are identified as those agreements whereby the parties have rights to the assets and obligations for liabilities relating to the arrangement. Joint operations are accounted for by recognising the operator's relevant share of assets, liabilities, revenues and expenses.

Joint ventures are identified as those agreements whereby the parties have rights to the net assets of the arrangement and are accounted for using equity accounting in accordance with IAS 28. Interest in joint ventures are initially recognised at cost and adjusted thereafter to recognise the Group's share of the post-acquisition profits or losses and movements in other comprehensive income. When the Group's share of losses in a joint venture equals or exceeds its interests in the joint ventures (which includes any long-term interests that form part of the Group's net investment in the joint ventures), the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the joint venture.

 The Group has assessed the nature of its joint arrangements and determined them to be joint operations. The Group's share of the assets, liabilities, income and expenses of jointly controlled entities is combined with the equivalent items in the consolidated financial statements on a line-by-line basis.

NON-CURRENT ASSETS HELD FOR SALE

Non-current assets (and disposal groups) classified as held for sale are measured at the lower of carrying amount and fair value less costs to sell.

Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset (or disposal group) is available for immediate sale in its present condition. Management must be committed to the sale which should be expected to qualify for recognition as a completed sale within one year from the date of classification.

When the Group is committed to a sale plan involving loss of control of a subsidiary, all of the assets and liabilities of that subsidiary are classified as held for sale when the criteria described above are met, regardless of whether the Group will retain a non-controlling interest in its former subsidiary after the sale. 

INVESTMENTS

Long term investments representing interests in subsidiary undertakings are stated at cost less any provision for impairment in the value of the non-current investment.

INTANGIBLE EXPLORATION AND EVALUATION ASSETS

The Group applies the full cost method of accounting for Exploration and Evaluation ("E&E") costs, having regard to the requirements of IFRS 6 Exploration for and Evaluation of Mineral Resources. Under the full cost method of accounting, costs of exploring for and evaluating mineral resources are accumulated by reference to appropriate cost centres being the appropriate licence area, but are tested for impairment on a cost pool basis as described below.

E&E assets comprise costs of (i) E&E activities that are on-going at the balance sheet date, pending determination of whether or not commercial reserves exist and (ii) costs of E&E that, whilst representing part of the E&E activities associated with adding to the commercial reserves of an established cost pool, did not result in the discovery of commercial reserves.

Costs incurred prior to having obtained the legal rights to explore an area are expensed directly to the income statement as they are incurred.

Exploration and evaluation costs

All costs of E&E are initially capitalised as E&E assets. Payments to acquire the legal right to explore, costs of technical services and studies, seismic acquisition, exploratory drilling and testing are capitalised as intangible E&E assets.

Intangible costs include directly attributable overheads together with the cost of other materials consumed during the exploration and evaluation phases.

Treatment of E&E assets at conclusion of appraisal activities

Intangible E&E assets related to each exploration licence/project are carried forward until the existence (or otherwise) of commercial reserves has been determined. If commercial reserves have been discovered, the related E&E asset are assessed for impairment on a cost pool basis as set out below and any impairment is recognised in the income statement. The carrying value, after any impairment loss, of the relevant E&E assets is then reclassified as development and production assets.

Intangible E&E assets that related to E&E activities that are determined not to have resulted in the discovery of commercial reserves remain capitalised as intangible E&E assets at cost less accumulated amortisation, subject to meeting a pool-wide impairment test in accordance with the accounting policy for impairment of E&E assets set out below. Such E&E assets are amortised on a unit-of-production basis over the life of the commercial reserves of the pool to which they relate.

IMPAIRMENT OF INTANGIBLE EXPLORATION AND EVALUATION ASSETS

E&E assets are assessed for impairment when facts and circumstances suggest that the carrying amount may exceed its recoverable amount. Such indicators include, but are not limited to, those situations outlined in paragraph 20 of IFRS 6 Exploration for and Evaluation of Mineral Resources and include the point at which a determination is made as to whether or not commercial reserves exist.

Where there are indications of impairment, the E&E assets concerned are tested for impairment. Where the E&E assets concerned fall within the scope of an established full cost pool, the E&E assets are tested for impairment together with all development and production assets associated with that cost pool, as a single cash generating unit.

The aggregate carrying value is compared against the expected recoverable amount of the pool, generally by reference to the present value of the future net cash flow expected to be derived from production of commercial reserves. Where the E&E assets to be tested fall outside the scope of any established cost pool, there will generally be no commercial reserves and the E&E assets concerned will generally be written off in full.

If the recoverable amount of a cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the cash-generating unit is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss.

When an impairment loss subsequently reverses, the carrying amount of the cash-generating unit is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the cash-generating unit in prior years. A reversal of an impairment loss is recognised immediately in profit or loss.

The Group considers each area of exploration, gold and silver, uranium, copper and oil & gas on a geographical basis to be a separate cost pool and therefore aggregates all specific assets for the purposes of determining whether impairment of E&E assets has occurred.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. The cost of an item of property, plant and equipment comprises its purchase price and any costs directly attributable to bringing the asset into use.

Depreciation is recognised so as to write off the cost of assets less their residual values over their useful lives at the following rates:

Ore processing mill over the life of the mill

Plant and machinery over 5 to 10 years

The estimated useful lives, residual value and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit and loss. 

IMPAIRMENT OF PROPERTY, PLANT AND EQUIPMENT

At each reporting date, the Group reviews the carrying amounts of its property, plant and equipment and intangible assets with finite lives to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash generating unit to which the asset belongs.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately.

Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised as income immediately.

INVENTORIES

Inventories are stated at the lower of cost and net realisable value. Costs comprise direct materials and, where applicable, direct labour costs and those overheads that have been incurred in bringing the inventories to their present location and condition. Cost is calculated using the weighted average method. Net realisable value represents the estimated selling price for inventories less all estimated costs of completion and costs to be incurred in marketing, selling and distribution.

REVENUE RECOGNITION

Revenue from the sale of minerals and oil and gas products is recognised when persuasive evidence of an arrangement exists, usually in the form of an executed sales agreement, indicating that there has been a transfer of risks and rewards to the customer, no further work or processing is required by the Group, the quantity and quality of the goods has been determined with reasonable accuracy and the goods have been delivered. This is when title is determined to pass. Revenue is measured at the fair value of the consideration received or receivable.

Royalty payments are recognised as a cost of sale when the related production revenue is recognised.

Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to the Group and the amount of income can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable.

OPERATING EXPENSES

Costs incurred prior to obtaining the legal rights to explore an area together with any costs which cannot be allocated to a specific exploration project are expensed directly to the income statement and included as operating expenses.

Operating expenses in respect of oil and gas activities include lease operating expenses, production taxes, general and administrative expenses and oil and gas depreciation, depletion and amortisation.

Lease operating expenses

Costs incurred in respect of maintaining and operating property and equipment on a producing oil and gas lease are included as lease operating expenses.

DEVELOPMENT EXPENSES

Costs incurred in respect of mining activities, prior to the commencement of production, are expensed directly to the income statement and included as development expenses.

LEASING

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

FOREIGN CURRENCIES

For the purpose of the consolidated financial statements, the results and financial position are expressed in United States dollar, which is the presentation currency for both company and consolidated financial statements.

In preparing the financial statements of the individual companies, transactions in currencies other than the functional currency of each group company ("foreign currencies") are translated into the functional currency at the rates of exchange prevailing on the dates of the transactions. At each reporting date, monetary assets and liabilities that are denominated in foreign currencies are retranslated into the functional currency at the rates prevailing on the reporting date. Non-monetary assets and liabilities carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

Foreign exchange differences are recognised in the profit or loss in the period in which they arise, except for foreign exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned nor likely to occur and which, therefore, form part of the net investment in the foreign operation. Foreign exchange differences arising on the translation of the Group's net investment in foreign operations are recognised as a separate component of shareholders' equity via the statement of other comprehensive income. On disposal of foreign operations and foreign entities, the cumulative translation differences are recognised in the income statement as part of the gain or loss on disposal. 

For the purpose of presenting company and consolidated financial statements, the assets and liabilities of the Company, and the Group's operations which have a functional currency other than United States dollar, are translated using exchange rates prevailing at the end of each reporting period. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during that period, in which case the exchange rates at the date of transactions are used. Foreign exchange differences arising, if any, are recognised in other comprehensive income and accumulated in equity. Equity items are translated at the exchange rates at the date of transactions and foreign exchange differences arising, if any, are accumulate directly in equity.

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

Fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the rate of exchange prevailing at the end of each reporting period. Exchange differences arising are recognised in equity.

RETIREMENT BENEFITS

The Group makes contributions to the personal pension schemes for some of its employees and Directors. Payments to these schemes are charged as an expense in the income statement in respect of pension costs payable in the year. There were no unpaid contributions at the period end.

TAXATION

The tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the consolidated income statement because it excludes items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting date.

Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction which affects neither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probably that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interest are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the assets to be recovered.

Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates that have been enacted or substantively enacted at the reporting date.

Current and deferred tax are recognised in profit or loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity respectively. Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.

FINANCIAL INSTRUMENTS

Recognition of financial assets and financial liabilities

Financial assets and financial liabilities are recognised on the Group's Balance Sheet when the Group becomes a party to the contractual provisions of the instrument.

Derecognition of financial assets and financial liabilities

The Group derecognises a financial asset only when the contractual rights to cash flows from the asset expire, or it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its retained interest in the asset and an associated liability for the amount it may have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to recognise the financial asset and also recognises a collateralised borrowing for the proceeds received.

The Group derecognises financial liabilities when the Group's obligations are discharged, cancelled or expired.

Financial Assets

Trade and other receivables are measured at initial recognition at fair value, and are subsequently measured at amortised cost less any provision for impairment.

Cash and cash equivalents comprise cash-in-hand and on-demand deposits and other short-term highly liquid investments that are readily convertible to a known amount of cash with three months or less remaining to maturity and are subject to an insignificant risk of changes in value.

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into.

An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. Equity instruments issued by the Group are recognised at the proceeds received, net of direct issue costs.

The costs of an equity transaction are accounted for as a deduction from equity to the extent they are incremental costs directly attributable to the equity transaction that would otherwise have been avoided.

Trade and other payables are initially measured at their fair value, and are subsequently measured at amortised cost using the effective interest rate method.

PROVISIONS

Provisions are recognised when the Group has a legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic resources will result and that outflow can be reliably measured.

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flow estimated to settle the present obligation, its carrying amount is the present value of those cash flows.

When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receipt can be measured reliably.

Provision for decommissioning is recognised in full when the related facilities are installed. The decommissioning provision is calculated as the net present value of the Group's share of the expenditure expected to be incurred at the end of the producing life of the facility in the removal and decommissioning of the production, storage and transportation facilities currently in place. The cost of recognising the decommissioning provision is included as part of the cost of the relevant asset and is thus charged to the income statement in accordance with the Group's policy for depreciation of property, plant and equipment. Period charges for changes in the net present value of the decommissioning provision arising from discounting are included in finance costs.

SHARE-BASED PAYMENTS

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

The Group operates an equity-settled share option plan and a share-based compensation plan in respect of certain Directors, employees and consultants. The fair value of the service received in exchange for the grant of options and equity is recognised as an expense. Equity-settled share-based payments are measured at fair value (excluding the effect non-market based vesting conditions) at the date of grant. The fair value determined at the grant date of equity-settled share-based payment is expensed on a straight-line basis over the vesting period, based on the Group's estimate of shares that will eventually vest and adjusted for the effect of non-market based vesting conditions.

Fair value of option grants is measured by use of the Black Scholes model for non-performance based options. The expected life used in the model has been adjusted, based on management's best estimate, for the effect of non-transferability, exercise restrictions and behavioural considerations.

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

SEGMENTAL REPORTING

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments and making strategic decisions, has been identified as the Board of Directors.

4. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the Group's accounting policies, which are described in note 3, the Directors are required to make judgements, estimates and assumptions about the carrying amounts of the assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both the current and future periods.

The following are the critical judgements and estimations that the Directors have made in the process of applying the Group's accounting policies and that have the most significant effect on the amounts recognised in the financial statements:

RECOVERABILITY OF INTANGIBLE EXPLORATION AND EVALUATION ASSETS

Determining whether an exploration and evaluation asset is impaired requires an assessment of whether there are any indicators of impairment, including by reference to specific impairment indicators prescribed in IFRS 6 Exploration for and Evaluation of Mineral Resources. If there is any indication of potential impairment, an impairment test is required based on the recoverable amount of the asset. The value in use calculation requires the entity to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value. At 31 December 2015, the Directors determined that there were indicators of impairment in respect of the Group's intangible O&G exploration and evaluation assets held in Germany and of the Group's uranium and copper exploration and evaluation assets held in U.S.A, on the basis that the carrying amount of these assets may not be recovered in full. The Directors therefore considered that it was appropriate to make a provision for impairment in respect of these assets at the year end.

The carrying amount of intangible exploration and evaluation assets at the balance sheet date was US$10.2 million (2014: US$9.9 million) and an impairment of US$3.7 million (2014: US$1.0 million) was identified and recognised in the year to 31 December 2015.

RECOVERABILITY OF LOANS TO SUBSIDIARY UNDERTAKINGS

The Company has outstanding loans from its directly held subsidiaries which have then made a number of loans to their own subsidiaries as the primary method of financing the activity of those subsidiaries. The principal loans are shown in the Company balance sheet on the basis that the loans incur interest at a commercial rate according to the Group's inter-company loan policy, which is being rolled up until such time as the subsidiaries are in a position to settle. However, there is a risk that the indirectly held subsidiaries will not commence revenue-generating activities and that the carrying amount of the Company's investment will, therefore, exceed the recoverable amount. The Board have assessed the recoverability of its loans based on this risk and the Directors consider that, in consideration of the losses currently being generated and the impairment of the Group's intangible exploration and evaluation assets which was recognised at 31 December 2015, a provision of US$8.2 million (2014: US$0.7 million) should be recognised by the Company in the year to 31 December 2015.

PROVISION FOR DECOMMISSIONING

As a result of exploration activities, the Group is required to make a provision for decommissioning. Significant uncertainty exists as to the amount of decommissioning obligations which may be incurred due to the impact of possible changes in environmental legislation. The Board assessed the likely obligation for decommissioning in respect of the Mill and its O&G assets in U.S.A. Accordingly, a provision of US$0.1 million has been made in respect of the Mill, and an obligation of US$0.1 million, calculated using an estimated discount rate of 4.5 per cent, has been made in respect of O&G assets at 31 December 2015.

5. REVENUE

The external revenue of the Group arises from the sale of precious minerals arising from activities in Mexico and sales of oil and gas from its activities in U.S.A.

6. SEGMENTAL INFORMATION

For management purposes, the Group is organised into three operating divisions based on its principal activities of gold and silver mining, research and evaluation of potential uranium and copper properties and the exploration and development of O&G resources. These divisions are the basis on which the Group reports its segment information.

Segment information about these divisions is presented below.