15 June 2016
Paternoster Resources plc
("Paternoster" or the "Company")
Final results for the year ended 31 December 2015
Paternoster Resources plc (AIM: PRS), an investment company focused on the natural resources
sector, is pleased to announce its audited final results for the year ended 31 December 2015.
Nicholas Lee, Chairman of Paternoster, commented: "The Company has made good progress this year
in building its net asset value. We are now well positioned to continue this growth and have made a very strong start to
2016"
For more information please visit www.paternosterresources.com or contact:
Paternoster Resources plc:
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Nicholas Lee, Chairman
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+44 20 7580 7576
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Nominated Advisor and Joint Broker:
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Stockdale Securities
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Antonio Bossi/David Coaten
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+44 20 7601 6100
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Joint Broker:
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Peterhouse Corporate Finance
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Lucy Williams
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+44 20 7562 3351
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INTRODUCTION
During the year ended 31 December 2015, the Company has continued to build its investment
portfolio and this growth has continued strongly into 2016.
FINANCIAL
During 2015, the Company made a loss from continuing operations of £308,873 (2014: loss of
£120,372). The net asset value of the Company as at 31 December 2015 was £2,948,406 (2014: £2,758,784).
The Company's investment portfolio at 31 December 2015, is divided into the following
categories:
Category
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Principal investments
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Cost or valuation (£)
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Unlisted/pre IPO
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Bison Energy Services Limited, Andiamo Exploration Limited, Elephant Oil Limited, MX Oil
plc and Alecto Minerals plc
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947,221
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Listed special situations
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Metal Tiger plc, MX Oil plc, Plutus Powergen plc, Shumba Energy Limited and New World
Oil and Gas plc
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1,455,438
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Investment portfolio
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2,402,659
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Cash resources
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464,570
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Total
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2,867,229
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At 31 December 2015, the Company had cash balances amounting to £464,570 (2014:
£359,094).
REVIEW OF THE YEAR
Details of the investments made in the year, together with development of investments during the
year and significant developments since the year end are set out in the Strategic Report.
In November 2015, Paternoster raised gross proceeds of £300,000 via a placing of 150,000,000 new
ordinary shares at a price of 0.2 pence per share. Also in November 2015, the Company issued 100,000,000 new ordinary
shares for the purchase of US$495,365 (£325,000) nil coupon convertible unsecured loan stock ("CULs") in Alecto Minerals
plc.
OUTLOOK AND STRATEGY
The Company has made good progress with its current portfolio, whilst adding more interesting
and attractive investments. At the same time, given the current market environment, the Company is keen to ensure that it
maintains a healthy cash balance or cash equivalents in order to take advantage of new opportunities as they arise.
The current portfolio represents an exciting mix of investments, a number of which are poised
for significant further growth. This potential has already been demonstrated in the first half of 2016 with the value of
the Company's investment portfolio having now increased to around £3.4 million, comprising mainly cash and listed
investments.
Since Paternoster was restructured in April 2011, it has focused on investing in opportunities
within the natural resources sector that provide scope to make significant gains through the provision of funding and/or active
management. This strategy has been successful and has yielded some significant returns. The natural resources sector, whilst
starting to recover, is still not an easy market for companies seeking investment and expansion capital. Indeed, as a result of
the downturn in the sector, it has been necessary for certain of the Company's investments to pursue opportunities in new
sectors. For example, both Plutus PowerGen plc and New World Oil and Gas plc were originally natural resources companies but have
now moved or are expected to move into the power generation and market research industries, respectively.
Against this background, considering the particular opportunities that we are now seeing and
given the skills and experience of the board, we have concluded that we should expand the Company's investment strategy to
include opportunities in the financial services sector as well as continuing to invest in the natural resources sector. The
financial services sector is attractive due to its cash generative nature and relatively low cost scalability. Furthermore,
given our current level of cash resources, we believe that we are very well placed to make some new and exciting
investments. We believe that the expansion of our current strategy will help create additional value for Paternoster
shareholders and, to this end, we are seeking shareholder approval for
this expansion at our upcoming AGM.
STRATEGIC REPORT
The Directors present their Strategic Report on the Company for the year ended 31 December
2015.
REVIEW OF THE BUSINESS AND FUTURE DEVELOPMENTS
LISTED INVESTMENTS
NEW WORLD OIL AND GAS PLC
On 22 September 2015, Paternoster acquired 366,618,383 shares in New World Oil and Gas plc ("New
World") at a price of 0.07 pence per share, for an aggregate consideration of £256,688, amounting to a shareholding in the
company of 8.0%. New World's principal assets comprised, at the time, the Blue Creek Project in Belize and around US$4.5
million (£2.9 million) of cash. This investment provided Paternoster with a significant interest in a listed company with a
substantial cash balance at an attractive valuation. Since then, Adam Reynolds and Nicholas Lee have become directors of
the company and have worked on reducing the company's cost base and reviewing various investment opportunities.
The company has recently announced that it has entered into a non-binding agreement to acquire a
business called Big Sofa Limited which operates in the market research sector. As this acquisition would be classified as a
reverse takeover, the company's shares have been suspended pending the publication of an admission document or a decision not to
proceed with the acquisition.
ALECTO MINERALS PLC
On 24 November 2015, Paternoster acquired US$495,365 of CULs in Alecto Minerals plc ("Alecto")
in exchange for the issue of 100,000,000 new ordinary shares in Paternoster. Alecto, which is listed on AIM, is an
Africa-focused exploration and development company involved in gold and base metals. In particular, it has gold and copper
interests in four countries in Africa and six projects covering exploration to near term production.
The issue of CULs was in connection with Alecto's acquisition of the Matala and Dunrobin gold
mines in Zambia which have, in aggregate, 760,000 oz Au JORC code compliant resource estimate in the Measured, Indicated and
Inferred categories at an average grade of 2.3g/t Au. Over US$20 million has been invested to date in these mines,
principally on drilling and test work.
On 5 April 2016, Paternoster decided to convert its CULs at a price of 0.08 pence per share into
434 million shares in the company. This currently represents a shareholding in the company of 9.7%. The company has
been making good progress in putting in place the necessary financing in order to bring the 400,000 tonnes per annum open-pit
Matala mine into low-cost production in the near to mid-term. In particular, it is at an advanced stage with regard to
securing vendor financing with regard to plant and infrastructure costs and it recently raised around £665,000 by way of a
placing.
PLUTUS POWERGEN PLC
Plutus PowerGen is continuing to make good progress in developing flexible energy generation
capacity in the UK. In January 2015, the company raised £500,000 in new funding and in February 2015 it closed a £3.4 million
direct equity financing with Rockpool Investments LLP ("Rockpool") to fund the development of its first power generation
site. In May 2015, the company received planning permission for its first 20MW flexible stand-by power generation plant in
Plymouth which is expected to be generating power in 2016. The company has also now secured connection agreements for 260MW
of capacity which exceeds the company's three-year target set out at the time of its re-listing. It also now has five management
contracts for the construction and operation of 20MW flexible stand-by electricity plants which will
generate income for the company in the short term. The company has also entered into a partnership with the
newly established funding provider, Reliance Energy Limited, a developer of renewable energy and flexible generation projects in
the UK, for the development of further individual 20MW flexible power generation sites. This is
complementary to its existing arrangements with Rockpool.
In December 2015, the company was awarded capacity mechanism contracts for three 20MW sites in
the UK meaning that each site will receive £360K per annum for 15 years from 2019. In February 2016, it was awarded two
further management contracts for the construction and operation of 20MW of flexible stand-by electricity
plants, by SelectGen Limited and Reliance Generation Limited being two major customers of Rockpool. This agreement brings
the total number of management contracts granted to Plutus Powergen to nine, equivalent to 180MW. Under these agreements,
Plutus will be paid £150,000 per annum by each company for these services in addition to an equity stake of 45% in the capital of
each company. The company has also signed a memorandum of understanding with UK based Green Biofuels Limited for the supply
of its proprietary renewable fuel 'Green D+' for use across the company's power generation projects, enabling Plutus to become a
low carbon renewable power generator.
On 1 December 2015, Paternoster announced the sale of 25 million shares in Plutus PowerGen at a
price of 1.1 pence per share for a total consideration of £275,000 before expenses. This represented a 4.4 times return on
Paternoster's original investment made at the time when Paternoster was involved in the establishment of the precursor company to
Plutus PowerGen. The proceeds from just this sale alone exceed the cost of the Company's entire investment in Plutus
PowerGen, whilst still continuing to hold 69.3 million shares. Within this holding, 20 million shares were subject to an
option in favour of certain members of the company's management team at a price of 0.75 pence per share. This option has
recently been exercised resulting in the Company realising another £150,000 from its investment or a 3 times multiple on its
original investment. Since 31 March 2016, the Plutus PowerGen share price has been recovering and is currently trading at
1.32 pence. The Company still owns 49.3 million shares or 7.1% of the company.
NORTH AMERICAN PETROLEUM/NORTHCOTE ENERGY PLC
In January 2015, North American Petroleum agreed to sell all of its assets to Northcote Energy
plc ("Northcote") in exchange for new shares in Northcote. Paternoster finally received its shares in
Northcote in December 2015 and these shares have now been sold.
MX OIL PLC
During 2015, MX Oil plc ("MX Oil") and its consortium partner, Geo Estratos, were actively
seeking to secure onshore conventional acreage in Mexico, by participating in Bid Round 1, for mature onshore conventional fields
in the states of Tabasco, Veracruz and Tamaulipas.
The consortium was successful in bidding for four onshore licences in December 2015. Given
the funding obligations associated with the development of four licences, the company then agreed to assign three of these
licences to its consortium partner, Geo Estratos, whilst retaining a 66% share in the fourth licence, subject to a satisfactory
outcome from a Competent Person Report that had been commissioned. This assignment was expected to take place in May
2016. Unfortunately, at the last minute, due to certain funding issues in Mexico, this assignment could not take place.
Furthermore, the outcome of the CPR was unsatisfactory so the company decided not proceed with the fourth licence.
In July 2015, MX Oil invested indirectly in a Nigerian oil and gas licence, OML 113, which
includes the Aje Field. This asset is offshore Lagos with production scheduled to commence in early 2016. At that
stage, the drilling of the first well in a two well first phase programme was in progress. As part of the investment, the company
raised around £6 million before expenses, principally for capital expenditure. Since then, the company has raised additional
funding by way of both equity and debt in order to fund this investment against the background of a sharply deteriorating oil
price. Funding for the development to first oil has now been completed. In February 2016, the company agreed in principle,
subject to certain conditions, to sell this asset for US$18 million which is significantly above the company's current market
value. On 4 May 2016, the company announced that the Aje Field had commenced production. The initial production phase
is progressing as planned and the company may decide to retain this investment rather than to sell it, particularly against the
background of an increasing oil price. On 31 May 2016, the company announced an additional fund raising of £3.4
million.
METAL TIGER PLC
Metal Tiger plc ("Metal Tiger") comprises two distinct investment divisions: the Asset Trading
Division; and the Metal Projects Division. The Asset Trading Division is focused on taking advantage of the low valuations of
many listed junior resource companies. During 2015, this division has made investments in companies such as Kibo, Eurasia, Ariana
and New World Oil and Gas and has already realised some significant profits.
The Metal Projects Division is focused on the company's key projects in Botswana, Spain and
Thailand. In Botswana, Metal Tiger has a growing interest in the large and highly prospective
Kalahari copper/silver belt in joint venture with ASX listed MOD Resources Limited. In Spain, the company has tungsten and gold interests in the highly mineralised Extremadura region. In Thailand,
Metal Tiger has expanding interests over licences, applications and critical historical data covering antimony, copper, gold,
silver, lead and zinc opportunities.
The company has also raised new funds through placings and the exercise of warrants and so is
well funded.
Since 31 December 2015, the company's share price has increased very significantly and
Paternoster has now sold over 15 million shares in Metal Tiger at an average price of 4.2 pence per share for a total
consideration of over £650,000 before expenses. This represents a 4.6 times return on Paternoster's investment in Metal
Tiger. Paternoster continues to retain a holding of Metal Tiger shares, although this is now below the 3% disclosure
threshold.
SHUMBA ENERGY LIMITED
During the year Shumba Coal Limited changed its name to Shumba Energy Limited in order to better
reflect the strategic objectives of the company. It is focused on developing two independent power plant
projects. The first is Mabesekwa, where it is partnered with Mulilo Thermal, a South African
company with significant experience of power plant development and financing. Coal will be supplied by the company from its
Mabesekwa coal project in Botswana, where, the estimated JORC in-situ coal resource is over 800 million tonnes, predominately
contained in one coal seam, with an average seam thicknesses of greater than 18 metres with a flat and consistent profile with
the coal found at average depths of 50-60 metres. The second is Sechaba, where the company is the sole developer. Here coal
will be supplied from within the company's Sechaba coal licence in Botswana where the JORC in-situ coal resource is estimated to
be around 1.1 billion tonnes. The company is listed on the Stock Exchange of Mauritius as well as
on the Botswana Exchange, although liquidity is low. Consequently, during 2015 when the opportunity arose, 1 million shares
were sold returning a small profit on the Company's investment. Since the year end, a further 1 million shares have been
sold, again generating a small profit, leaving the Company with a shareholding of 500,000 shares.
UNLISTED INVESTMENTS
ANDIAMO EXPLORATION LIMITED
Andiamo Exploration Limited ("Andiamo"), together with its joint venture partner Environminerals
East Africa Ltd ("EEA"), has now completed a 2,000m diamond drilling programme on the Hoba prospect, located in the northern part
of the Haykota Exploration License area in Eritrea. This drilling work has confirmed the presence of a volcanic massive
sulphide deposit. The massive sulphide intersections display very high concentrations of sulphur and iron (often around 50%
each) which support the analysis of this being a typical massive sulphide lens. These results follow a successful 2015 programme
of stream sediment sampling, ground mapping, surface sampling, a hand-dug trenching program and an initial 1,000m scout diamond
drill programme. The agreement with EEA means that EEA can earn a 50% interest in discoveries in the northern part of this
area by spending a total of US$2.0m. Under the terms of the original agreement between the companies, EEA may then earn a 75%
interest in projects in the joint venture license area by completing a technical and economic assessment of an equivalent
standard required for a mining licence application.
In addition to the work carried out at Hoba, Denny Jones Pty Ltd of Brisbane, Australia has also
provided the company with an estimate of the Yacob Dewar mineral resource in compliance with JORC standards for the surface oxide
gold and the adjacent copper resources.
ELEPHANT OIL LIMITED
Elephant Oil Limited, is an oil and gas exploration company focused on West Africa, which holds
a 100% interest in Block B, onshore Benin, on the prolific West Africa Transform Margin. Elephant Oil Limited continues to
progress its work programme on Block B in Bénin. The company has now begun the Environmental Impact Assessment covering the area
of interest where future surveys and drilling are to be targeted. This assessment is a prerequisite to the new seismic
acquisition programme planned to be carried out as part of the first phase of development. The company has also identified
further potential acquisitions in West Africa and due diligence is being carried out on selected assets.
BISON ENERGY SERVICES LIMITED
This company is currently in the process of being restructured in order to be better positioned
to explore the various options available to it in order to capitalise on its deposit of frac sand and associated permits in the
US. It is expected to raise some additional funding for this process in the near future.
KEY PERFORMANCE INDICATORS
The key performance indicators are set out below:
COMPANY STATISTICS
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31 December
2015
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31 December
2014
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Change %
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Net asset value
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£2,948,406
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£2,758,784
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+7%
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Net asset value - fully diluted per share
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0.32p
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0.40p
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-20%
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Closing share price
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0.185p
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0.245p
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-24%
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Share price discount to net asset value - fully diluted
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(42%)
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(39%)
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Market capitalisation
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£1,707,000
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£1,648,000
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+4%
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KEY RISKS AND UNCERTAINTIES
Early stage investments in the natural resources sector carry a high level of risk and
uncertainty, although the rewards can be outstanding. At this stage there can be no certainty of outcome and, in addition,
there is often a lack of liquidity in the Company's investments that are either unquoted or quoted on AIM, such that the Company
may have difficulty in realising the full value in a forced sale. Accordingly, a commitment is only made after thorough
research into both the management and the business of the target, both of which are closely monitored thereafter. Furthermore,
the Company limits the amount of each commitment, both as to the absolute amount and percentage of the target company.
Details of other financial risks and their management are given in Note 16 to the financial statements.
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
Details of the Company's financial risk management objectives and policies are set out in Note
16 to these financial statements.
GOING CONCERN
The Company's assets comprise mainly cash and quoted securities and, accordingly, the Company
has adequate financial resources to continue in operational existence for the foreseeable future. Therefore, the directors
believe that as at the date of this report it is appropriate to continue to adopt the going concern basis in preparing the
financial statements.