Paternoster Resources : Final results for the year ended 31 December 2015

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RNS Number : 2892B Paternoster Resources PLC 15 June 2016

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:
Nicholas Lee, Chairman	+44 20 7580 7576

Nominated Advisor and Joint Broker:
Stockdale Securities
Antonio Bossi/David Coaten	+44 20 7601 6100

Joint Broker:
Peterhouse Corporate Finance
Lucy Williams	+44 20 7562 3351

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	Principal investments	Cost or valuation (£)
Unlisted/pre IPO	Bison Energy Services Limited, Andiamo Exploration Limited, Elephant Oil Limited, MX Oil plc and Alecto Minerals plc	947,221

Listed special situations	Metal Tiger plc, MX Oil plc, Plutus Powergen plc, Shumba Energy Limited and New World Oil and Gas plc	1,455,438
Investment portfolio	2,402,659
Cash resources	464,570
Total	2,867,229

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.