1 Oct 2008 07:00
ABN 88 002 522 009 16 Southport Street West Leederville, 6007 Western Australia Ph: +61 8 6389 5700 F: +61 8 9381 4944 1 October 2008 admin@rangeresources.com.au 2008 ANNUAL REPORTPlease find below a summary of the Annual Report, including financial accounts,for Range Resources Ltd ("Range" or the "Company") for the year ended 30 June2008. A complete pdf version of this report is available for download from theCompany's website at www.rangeresources.com.au.Australia UK Range Resources Ltd. Range Resources Ltd. Robert Hyndes Peter Landau +61.8.9324.8513 +44.207.389.8191 robert@hyndes.com p.landau@rangeresources.com.au RFC Corporate Finance Fox-Davies Capital (Nominated Advisor) (Broker) Stuart Laing Daniel Fox-Davies+61.8.9.480.2500 +44.207.936.5200 RANGE RESOURCES LIMITED AND CONTROLLED ENTITIES ABN 88 002 522 009 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2008 REVIEW OF OPERATIONS
Dharoor and Nogal Exploration Projects, Puntland
In July 2008, Africa Oil Corp (Africa Oil) commenced seismic work in theDharoor Valley of Puntland, Somalia. Africa Oil plans to acquire up to 2,600kilometres of 2D vibroseis data on the Dharoor Block. To date, approximately300 kilometres of seismic has been acquired and the daily production ratecontinues to increase.
In the Nogal Basin, Africa Oil has acquired more than 4,000 kilometres of good quality 2D data which was recorded in the late 1980's.
Africa Oil entered into a contract for a drilling rig to begin drilling in itsPuntland concessions in 2008. The contract covered the drilling of two wellswith an option to drill two additional wells. Due to logistical and securitydifficulties in and around Somalia Africa Oil made the decision to delay thestart of its 2008 drilling programme, originally scheduled to start in July2008. Africa Oil has negotiated an option with the rig contractor to contractand utilize the original rig later in 2008.Current operational plans by Africa Oil envisage that the seismic program inthe Dharoor Valley will be completed by the end of 2008, allowing the selectionof drilling locations in that area. As a result it is anticipated that thedrilling program will be reinstated by the end of 2008 and that drilling willcommence end 2008, early 2009.The Dharoor and Nogal sedimentary basins were contiguous with the prolificMarib and Masila basins in Yemen during the Jurassic and Cretaceous periods.Over 9 billion BOE have been discovered in Yemen but exploration has beenlimited to date in Somalia. Only 3 wells have been drilled in basinal settingsin these concessions before operations ceased in the early 1990's. Those wellsconfirmed thick sedimentary sequences, encountered oil in Cretaceous sandstonesand proved the presence of active petroleum systems in both basins.
Puntland Government reaffirms Range Resources and Africa Oil Exploration Rights
During the year there was much speculation and debate in relation to theproposed introduction of a National Oil Law by the Transitional FederalGovernment (TFG) of Somalia. Of particular concern was the impact that thisNational Oil Law would have had on the Range concessions. Range was pleased toadvise that in September 2007, the Government of Puntland had reinforced itssupport for Range and its joint venture partner Africa Oil, and formally statedthat it will not accept the proposed National Oil Law. The Puntland Governmentnoted that in their opinion, the proposed law was not only inconsistent withthe rights validly granted by the Puntland Government to Range (which were alsoendorsed by the TFG), but it would also be detrimental to the Somali people asa whole.
Given the proximity of the drilling program of Range and Africa Oil the resultant success and generation of oil production royalties ensures that Range, Africa Oil and the Puntland Government remain committed to the exploration and development of Puntland's natural resources.
This view was further endorsed in formal statements by Puntland's Minister for Energy and Resources.
"The Regional State of Puntland was formed with the full consent of itsinhabitants and to safeguard and develop the lives and interests of its people,with no malice or hatred towards our brothers in the other regions of Somalia.On the contrary, instead of opting for separation from the rest of the SomaliRepublic, as some regions, the leaders of Puntland climbed the proverbial talland short tree in order to realize the reunification of the Republic, but, witha better system of governance. Puntland believes that the reconciliation andreunification of the Somali people is beneficial to its inhabitants both inregards to security and development. This is why Puntland played a pivotal rolein the formation of the TFG and provided sustenance to the TFG when it wasisolated in Jowhar and Baidoa. Puntland was able to provide such support at theexpense of its developmental goals, recognizing that security is a majorrequirement to development. Hence, the government of Puntland did not spare theproceeds it received from taxation, from the port services in Bosasso, and therevenues it received from the exploration agreements in order to defend itselfand the TFG from the onslaught of fanatic groups based in Mogadishu. Puntlandreserves the right to manage its own development without sacrificing the"COMMON GOOD". Puntland reserves the right to manage its natural resources,Ports, airports (except Customs and Immigration), fisheries, commerce etc¢â‚¬¦Puntland is willing to share its revenue in a just and equitable manner withthe rest of Somalia." [ March 25, 2008]"The Puntland Government remains fully committed to its existing agreement withAfrica Oil and Range Resources, covering concessions in Dharoor and the NogalValley of Puntland, the concessions agreements covering those areas remain ineffect and are supported by the full force of the laws of Puntland." [August20, 2008]As clearly defined in the 19 March, 2008 Puntland Government Policy Statement(puntlandgovt.com) "Until such time an all inclusive federal constitution iseffected and state governments, convinced with the sharing of power andresources, are instituted, Puntland's support of the TFG should not beinterpreted in any manner that Puntland is part of the TFG - Puntland shallremain independent for its laws, policies and interests." [August 20, 2008]
Offshore Acreage
Range is in advanced stages of negotiations with regards to the completion of a15,000km 2D line seismic programme to be funded by proposed joint venturepartners. Subject to the consummation of these negotiations the expected timingfor commencement of the offshore seismic could be as early as December 2008.Recent incidents offshore Puntland have delayed finalisation of thesenegotiations but the Company remains confident that agreements can beconcluded, particularly with the recent offer of assistance from various worldorganisations regarding naval security.
Minerals Exploration
Previously a number of exploration targets have been identified in Puntland,however, remote site access and drill availability have been long standingissues which have hindered further work being undertaken. The substantialincrease in exploration in recent years has resulted in a shortage of drillingequipment and manpower with current lead times on exploration drills and drillcontracts typically around two years. The need to drill in Northern Somalia hasfurther compounded the difficulties of securing drill rigs and contractors.As a result the Company looked to securing its own exploration drill rig andhas now been successful in securing a versatile drill rig suitable for ruggedand remote conditions. It is expected that prior to the rig being deployed toPuntland the rig is first to be utilised domestically on the tenements held bythe Company in the central and southern areas of the Forrestania GreenstoneBelt near Southern Cross. These tenements have the potential for gold andnickel mineralisation. A geological review of historic exploration has beenundertaken during the year to highlight areas of interest and targetdevelopment.
The Board are currently reviewing available strategic options to realise shareholder value from it significant Western Australia tenement portfolio.
Aim Listing
A major highlight was the successful admission of the Company's shares onto theAIM market of the London Stock Exchange in August 2007. The AIM listingenhanced the profile of Range, provided international investors easier accessto Range's securities and broadening the potential investor base of the Companyfor capital raisings that may be required to support its oil and gas andmineral exploration and development activities in Puntland.
Puntland Activities
During the year Range completed a number of initiatives with respect to assisting Puntland:
* Continued funding of Government projects, including Bossaso Airport and
Bosasso Port.
* Journalist and investor analyst trips into Puntland to promote Range and
the region. The Puntland Government met the journalists and Company
representatives in Garowe and the President undertook several individual
question and answer sessions with the journalists. In addition, the
Puntland Government announced two major initiatives and formally launched a
new website www.puntlandgov.net in order to help better communicate the
Government's actions and policies. The Puntland Government also presented
to the Company and its guests with the Puntland Five Year Development Plan,
a comprehensive document which sets out the Puntland Strategic Vision and
the Policy Guidelines. * Identifying potential JV partners for infrastructure and fisheries development. FINANCIAL POSITIONThe net assets of the economic entity have increased by $26,446,239 from$57,839,547 at 30 June 2007 to $84,285,786 in 2008. The increase in Net Assetsduring the financial year largely resulted from a significant reduction inliabilities from the payment to Consort of the consideration for the Puntlandrights. This obligation was settled in early 2008.
The directors believe the group is in a strong and stable financial position to expand and grow its current operations.
SIGNIFICANT CHANGES IN STATE OF AFFAIRS
* On 04 July 2007 Toufic Rahi resigned as Non-Executive Director of the Company. * On 14 July 2007 payment of US$10m was made to Consort Private Limited
representing the cash component for the remaining 49.9% carried interest in
the Contract of Work for the exploration and development of Puntland's mineral and hydrocarbon resources. * On 21 August 2007 the Company confirmed that along with Africa Oil
Corporation it has valid Production Sharing Agreements with the Government
of Puntland, following the Transitional Federal Government of Somalia's proposed introduction of a National Oil Law. * On 10 September 2007, the Company issued 30,000,000 Shares to Consort Private Limited. * On 12 September 2007, the Company issued 8,270,025 Ordinary Fully Paid Shares as an incentive to Chairman Sir Sam Jonah.
* On 23 October 2007 the Company was admitted to trading on the AIM market of
the London Stock Exchange.
* On 19 November 2007 the Company completed an AIM placement of 18,180,000
new ordinary shares an issue price of 22 pence each through London based
broker Fox-Davies Capital Limited.
* On 22 November 2007 Ms Joanna Kiernan resigned as Company Secretary. Mr
Peter Landau, an Executive Director of Range assumed the Company Secretary
position.
* On 28 November 2007 the Company became a substantial shareholder in Contact
Uranium Limited having acquired 8,000,000 Ordinary Shares.
* On 18 December 2007 Range Director Marcus Edwards-Jones acquired 100,000
Ordinary Fully Paid Shares in the Company via an on market purchase on AIM.
* On 21 December 2007 the Company issued 63,723,930 unlisted options pursuant
to an Option Placement Offer and 15,271,144 Options pursuant to an Option
Rights Offer.
* On 31 December 2007 1,136,000 Shares that were part of the AIM placement
were cancelled. AFTER BALANCE DATE EVENTS
On 16 July 2008 Mr Peter Landau resigned as Company Secretary. Ms Susan Hunter was appointed as the Company Secretary.
On 22 July 2007 Mr Liban Bogor resigned as a Director of the Company. Range Executive Director Mr Michael Povey moved into a Non Executive position
FUTURE DEVELOPMENTS, PROSPECTS AND BUSINESS STRATEGIES
To further improve the economic entity's profit and maximise shareholders wealth, the Company is committed to further developing the exploration potential of its Puntland Project and invite interested parties into joint venture arrangements.
LIKELY DEVELOPMENTSOther than information disclosed elsewhere in this annual report, informationon likely developments in the operations of the Group and the expected resultsof those operations in future financial years has not been included in thisdirectors' report because the directors believe, on reasonable grounds, that toinclude such information would be likely to result in unreasonable prejudice tothe Group.ENVIRONMENTAL ISSUESThe economic entity's operations are not regulated by any significantenvironmental regulation under a law of the Commonwealth or of a state orterritory. INCOME STATEMENT FOR THE YEAR ENDED 30 JUNE 2008 Note Economic Entity Parent Entity 2008 2007 2008 2007 $ $ $ $ Revenue from continuing 2 501,452 217,757 501,452 217,757operations Other income 2 10,743 5,175,131 10,743 5,175,131 Finance costs (8,960) (1,003,604) (8,770) (1,003,604) Depreciation expense (58,174) (37,366) (58,174) (37,366) Directors fees 5 (1,031,958) (696,128) (1,031,958) (696,128) Directors remuneration 5 - (1,319,250) - (1,319,250) Directors share based 5 (4,713,914) - (4,713,914) -payment Corporate management (854,359) (573,217) (854,359) (573,217)services Consultants (204,545) (654,542) (204,545) (654,451) Loss on sale of (1,426,448) - (1,427,411) -Peruvian project Foreign exchange (612,759) - (612,759) -differences Marketing & public (275,833) (266,841) (275,833) (266,841)relations Costs associated with (40,755) (62,814) (40,755) (62,814)AIM listing Garowe airport project - (591,411) - (591,411) Travel Expenditure (361,712) (879,208) (361,712) (879,208) Write down of available (2,893,450) - (2,893,450) -for sale assets Other expenses 3 (1,368,801) (1,106,068) (2,186,638) (1,110,328) Loss before income tax (13,339,473) (1,797,561) (14,158,083) (1,801,730) Income tax expense 4 - - - - Loss from continuing (13,339,473) (1,797,561) (14,158,083) (1,801,730)operations Loss attributable to (13,339,473) (1,797,561) (14,158,083) (1,801,730)members of the parent entity Earnings per share for profit attributable to the ordinary equity holders of the company: Basic loss per share 7 7.4c 0.15c (cents per share) Diluted loss per share 7 NA NA (cents per share)
The Company's potential ordinary shares were not considered dilutive as the company is in a loss position.
This EPS is for continuing operations as the discontinued operations have a negligible impact on the Income Statement (Note 12).
The accompanying notes form part of these financial statements. BALANCE SHEET AS AT 30 JUNE 2008 Note Economic Entity Parent Entity 2008 2007 2008 2007 $ $ $ $ ASSETS CURRENT ASSETS Cash and cash 8 4,137,360 22,896,484 4,097,097 22,856,019equivalents Trade and other 9 1,441,220 606,551 1,441,220 606,551receivables Other current assets 10 108,932 61,191 108,932 61,191 TOTAL CURRENT ASSETS 5,687,512 23,564,226 5,647,249 23,523,761 NON-CURRENT ASSETS Trade and other 9 - - 781,535 353,364receivables Financial assets 11 2,004,561 3,363,450 1,370,811 8,310,862available for sale Property, plant and 13 288,119 105,767 288,119 105,767equipment Exploration & 14 77,120,784 84,026,027 77,013,262 78,718,075Evaluation Expenditure TOTAL NON-CURRENT 79,413,464 87,495,244 79,453,727 87,488,068ASSETS TOTAL ASSETS 85,100,976 111,059,470 85,100,976 111,011,829 CURRENT LIABILITIES Trade and other 15 815,190 53,219,923 815,190 53,219,923payables TOTAL LIABILITIES 815,190 53,219,923 815,190 53,219,923 NET ASSETS 84,285,786 57,839,547 84,285,786 57,791,906 EQUITY Issued capital 16 101,619,057 70,866,367 101,619,057 70,866,367 Reserves 17 11,014,714 10,975,482 11,880,964 10,975,482 Accumulated losses (28,347,985) (24,002,302) (29,214,235) (24,049,943) TOTAL EQUITY 84,285,786 57,839,547 84,285,786 57,791,906 The accompanying notes form part of these financial statements. STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2008Economic Entity Issued Share Based Available Accumulated Total Capital Payment for Sale Losses 2007-2008 Reserve Investment Equity $ Revaluation $ $ Reserve $ $ Opening balance as at 70,866,367 10,975,482 - (24,002,303) 57,839,5461 July 2007 Loss for the year - - - (13,339,473) (13,339,473) Total recognised - - - (13,339,473) (13,339,473)income and expenditure for the year: Issue of share 31,864,370 - - - 31,864,370capital Exercise of options 23,283 - - - 23,283 Share issue costs (1,108,578) - - - (1,108,578) Reduction in partly (26,385) - - 26,385 -paid shares Cost of share based - 9,842,077 - - 9,842,077payment Transferred to - (8,967,406) - 8,967,406 -accumulated losses Revaluation in - - (835,439) - (835,439)investment Closing balance as 101,619,057 11,850,153 (835,439) (28,347,985) 84,285,786at 30 June 2008 Economic Entity Issued Share Available Accumulated Total Capital Based for Sale Losses 2006-2007 Payment Investment Equity $ Reserve Revaluation $ Reserve $ $ $ Opening balance as at 34,891,091 8,499,345 - (22,204,742) 21,185,6941 July 2006 Loss for the year - - - (1,797,561) (1,797,561) Total recognised - - - (1,797,561) (1,797,561)income and expenditure for the year: Issue of share capital 40,265,872 - - - 40,265,872 Share issue costs (6,049,596) - - - (6,049,596) Partly paid shares 1,759,000 1,759,000issued during the year Cost of share based - 2,476,137 - - 2,476,137payment Closing balance as 70,866,367 10,975,482 - (24,002,303) 57,839,546at 30 June 2007 STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2008Parent Entity Issued Share Based Available Accumulated Total Capital Payment for Sale Losses 2007-2008 Reserve Investment Equity $ Revaluation $ $ Reserve $ $ Opening balance as at 70,866,367 10,975,482 - (24,049,943) 57,791,9061 July 2007 Loss for the year - - - (14,158,083) (14,158,083) Total recognised - - - (14,158,083) (14,158,083)income and expenditure for the year: Issue of share 31,864,370 - - - 31,864,370capital Exercise of options 23,283 - - - 23,283 Share issue costs (1,108,578) - - - (1,108,578) Reduction in partly (26,385) - - 26,385 -paid shares Cost of share based - 9,842,077 - - 9,842,077payment Transferred to - (8,967,406) - 8,967,406 -accumulated losses Revaluation in - - 30,811 - 30,811investment Closing balance as 101,619,057 11,850,153 30,811 (29,214,235) 84,285,786at 30 June 2008 Parent Entity Issued Share Available Accumulated Total Capital Based for Sale Losses 2006-2007 Payment Investment Equity $ Reserve Revaluation $ Reserve $ $ $ Opening balance as at 34,891,091 8,499,345 - (22,248,213) 21,142,2231 July 2006 Loss for the year - - - (1,801,730) (1,801,730) Total recognised - - - (1,801,730) (1,801,730)income and expenditure for the year: Issue of share capital 40,265,872 - - - 40,265,872 Share issue costs (6,049,596) - - - (6,049,596) Partly paid shares 1,759,000 - - - 1,759,000issued during the year Cost of share based - 2,476,137 - - 2,476,137payment Closing balance as 70,866,367 10,975,482 - (24,049,943) 57,791,906at 30 June 2007 The accompanying notes form part of these financial statements. CASH FLOW STATEMENT FOR YEAR ENDED 30 JUNE 2008 Note Economic Entity Parent Entity 2008 2007 2008 2007 $ $ $ $ CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers 12,789 - 12,790 - Payments to suppliers and (3,643,295) (4,388,467) (3,285,736) (4,361,374)employees Interest received 458,117 215,568 458,117 215,568 Net cash outflow from 21(a) (3,172,389) (4,172,899) (2,814,829) (4,145,806)operating activities CASH FLOWS FROM INVESTING ACTIVITIES Proceeds - Somalia farm-in - 4,975,131 - 4,975,131signature bonus Payment for property, plant (240,526) (69,469) (240,526) (69,469)& equipment Payment for acquisition of (12,280,487) - (12,280,486) -Somalian rights Payment for investments (1,500,000) (6,027,227) - (6,027,227) Payments for exploration (9,112,426) (4,214,900) (9,366,407) (4,203,968)and evaluation Loan - other entity (1,127,396) - (1,127,396) - Loans to controlled entity - - (1,603,378) (41,385) Purchase of investments - (500,000) - (500,000)
Deposit received for sale 12(d) - 200,000 -
200,000of subsidiary Net cash outflow from (24,260,835) (5,636,465) (24,618,193) (5,666,918)investing activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issue of 9,110,778 31,530,996 9,110,778 31,530,996shares Payment of share issue (435,125) (35,986) (435,125) (35,986)costs Loans to related entity (1,553) - (1,553) Proceeds from borrowings - - - - Repayment of borrowings - - - - Net cash inflow from 8,674,100 31,495,010 8,674,100 31,495,010financing activities Net (decrease)/ increase in (18,759,124) 21,685,646 (18,758,922) 21,682,286cash and cash equivalents Cash and cash equivalents 22,896,484 1,210,838 22,856,019 1,173,733at beginning of financial year Cash and cash equivalents 8 4,137,359 22,896,484 4,097,097 22,856,019at end of financial year
The accompanying notes form part of these financial statements.
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