REG - Petro Matad Ltd - Final Results for Year Ended 31 December 2021
27/06/2022 07:00
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RNS Number : 2060Q Petro Matad Limited 27 June 2022
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IN THE PUBLIC DOMAIN.
27 June 2022
Petro Matad Limited
("Petro Matad" or the "Company")
Final results for year ended 31 December 2021
Significant year of progress with exploitation Licence for Block XX obtained
Petro Matad Limited ("Petro Matad" or "the Company"), the AIM quoted Mongolian
oil explorer, announces its audited final results for the year ended 31
December 2021. All dollar values are expressed in United States dollars unless
otherwise stated.
2021 Operational Highlights
· The Company secured approval for the Plan of Development for the
Heron discovery and subsequently obtained the Exploitation Licence for Block
XX.
· Contract negotiations commenced with infrastructure service providers
and procurement of equipment for the Heron development that targets first oil
from the completion of the Heron 1 well in 2022.
· Agreement was reached with the industry regulator, the Mineral
Resources and Petroleum Authority of Mongolia (MRPAM), to pursue export of
Heron crude through PetroChina's nearby processing and export facilities until
Mongolia's new domestic oil refinery begins operations in the coming years.
Meetings were subsequently held with PetroChina to commence commercial
negotiations.
· The 2021 moratorium on Block V has extended the Exploration Period of
the Production Sharing Contract (PSC) until July 2023. This allows the Company
sufficient time to pursue further drilling opportunities on the acreage and,
with success, time to secure an Exploitation Licence on any discovery made.
· During 2021 the Covid-19 pandemic continued to have a significant
impact on the Company's ability to operate, but towards year end 2021
in-country travel restrictions eased. International travel remained
problematic, and border restrictions imposed by China severely impacted the
activities of other operators in Mongolia during 2021. Preparations are well
advanced for operations in the 2022 drilling season to be executed once the
border restrictions are eased or lifted and land access is resolved.
Current situation
· The Covid-19 control restrictions imposed by China at its land border
crossings with Mongolia have started to ease. On 20 June, the northerly of the
two oil export border crossings at Bayankhoshuu was opened and oil export from
the PetroChina operated fields has resumed. The southerly oil export crossing
at Bichigt remains closed. China has not yet opened the border crossing to the
passage of consumables and equipment, although the oil field contractors are
hopeful that this will happen soon. Transfer of personnel across the land
borders is not expected to be allowed by the Chinese authorities in the near
future; therefore, service providers are looking at flying in their crews when
internal travel restrictions within China allow.
· Following the Cabinet resolution in April on expediting a solution to
the land access issues for oil exploration and production companies, draft
amendments to the Land Law have been prepared by the relevant ministries for
presentation to Parliament to resolve the existing conflicts within the
legislation. At the same time, Petro Matad is in dialogue with MRPAM to obtain
the special purpose land certification for its areas of operation which will
secure long-term land access. Until this certification is issued, land use
permits are required to be granted by the local authorities and to date, in
the province in which Petro Matad's Block XX Exploitation Area is located,
they have not done so. Petro Matad is not the only operator impacted in this
way.
2021 Financial Highlights
· As of 31 December 2021, the Group's cash position was $8.2 million,
including Term Deposits (Financial Assets) (31 December 2020: $1.0 million)
· A successful fund raise totalling $10.4 million was completed by
early August 2021.
· The Group's net loss after tax for the twelve months ended 31
December 2021 was $2.1 million (31 December 2020: loss $3.2 million)
· No dividends have been paid or are proposed in respect of the year
ended 31 December 2021 (2020: Nil).
Mike Buck, CEO of Petro Matad, said:
"2021 was a pivotal year for Petro Matad as we obtained the Exploitation
Licence for Block XX, which will see the Company transition from explorer to
active producer.
In the spring and summer months of this year, Covid-19 has continued to affect
operations with China's zero Covid-19 policy slowing progress with contractors
and all cross-border business. Similarly, the land access issue within
Mongolia needs to be resolved before we mobilise to site and we are pursuing
all avenues available to remedy this..
We continue the preparations for our 2022 work programme despite the
bureaucratic delays, and our negotiations with infrastructure service
providers are progressing. As we have said before, we are prioritising
bringing Heron 1 into production and we are still targeting first oil this
year.
Finally, I would again like to thank our loyal shareholders for their support
during 2021 and into this year. I look forward to updating you in the coming
months with our progress."
About Petro Matad
Petro Matad is the parent company of a group focused on oil exploration, as
well as future development and production in Mongolia. Currently, Petro Matad
holds 100% working interest and the operatorship of two Production Sharing
Contracts with the Government of Mongolia. Block XX has an area of 218 square
kilometres in the far eastern part of the country, and Block V has an area of
7,937 square kilometres in the central western part of the country.
Petro Matad Limited is incorporated in the Isle of Man under company number
1483V. Its registered office is at Victory House, Prospect Hill, Douglas, Isle
of Man, IM1 1EQ.
For more information, please contact:
Petro Matad Limited
Mike Buck, CEO +97 670 141 099 / +97 675 751 099
Shore Capital (Nominated Adviser and Broker)
Toby Gibbs +44 (0) 20 7408 4090
John More
Arden Partners (Joint Broker) +44 (0) 20 7416 4900
Simon Johnson
FTI Consulting (Communications Advisory Firm)
Ben Brewerton +44 (0) 20 3727 1000
Christopher Laing
Annual Report and Accounts
The Company's statutory annual report and accounts will be dispatched
electronically to shareholders shortly and will be posted shortly to
shareholders who have elected to receive hard copies of the Annual Report.
Additional copies of the Annual Report may be requested directly from the
Company and an electronic copy is available on the Company's website
www.petromatadgroup.com (http://www.petromatadgroup.com) .
Annual General Meeting ("AGM")
A notice of the Company's AGM will be distributed in due course and made
available on the Company's website www.petromatadgroup.com
(http://www.petromatadgroup.com) .
Directors' Statement 2021
Summary
Against the backdrop of continuing global impacts of the Covid-19 pandemic,
the Company's focus during early 2021 was securing the approval for the Plan
of Development for the Heron discovery and subsequently obtaining the
Exploitation Licence for Block XX. The procedure under Mongolian law for
securing an Exploitation Licence is long and complex and has only been
followed through to award on two previous occasions. As a result, it was a
major achievement during 2021 for the Company to secure only the third ever
Exploitation Licence awarded in Mongolia when the Minister for Mining and
Heavy Industry signed off in early July. When applying for the licence, the
Company was insistent that the retained area should include not only the Heron
discovery but also the nearby Gazelle discovery and the near field exploration
potential. The Mongolian government was open to this and agreed to the
retention of an area of 218km(2) in which further exploration and appraisal
activity can occur, focused on significant additional resource potential, in
parallel with development activities on the Heron field.
With the Exploitation Licence secured, a successful equity fundraise totalling
$10.4 million was completed by early August which allowed the Company to
commence contract negotiations with infrastructure service providers and
procurement of equipment for the Heron development that targets first oil from
the completion of the Heron 1 well in 2022. Agreement was reached with the
industry regulator, the MRPAM, to pursue export of Heron crude through
PetroChina's nearby processing and export facilities until Mongolia's new
domestic oil refinery begins operations in the coming years. Meetings were
subsequently held with PetroChina to commence commercial negotiations. The
preparations for the Company's 2022 operational activities are progressing
well although China's Covid-19 restrictions and Mongolian land law
inconsistencies are impacting the timing of oil field programmes for a number
of operators, including Petro Matad.
The 2021 moratorium on Block V continued to year-end, so extending the expiry
of the Exploration Period under the PSC to July 2023. This allows the Company
sufficient time to pursue further drilling opportunities in the acreage and,
with success, time to secure an Exploitation Licence on any discovery made.
The Company continued in its efforts to partner with local and/or foreign
companies on development and exploration activities in Mongolia and held
several virtual data rooms during the year. It is also pursuing a strategy to
work up and apply for new exploration/appraisal areas in Mongolia on
technically high graded areas. The Company also took the decision to seek to
expand its activities in Mongolia into the sustainable and renewable energy
sector in addition to its ongoing work in the oil and gas sector.
Covid-19
During 2021, the Covid-19 pandemic continued to have a significant impact on
the Company's ability to operate, but towards year end 2021 in-country travel
restrictions eased. International travel remained problematic, and border
restrictions imposed by China severely impacted the activities of other
operators in Mongolia during 2021. Most of the oilfield support contractors
are Chinese companies, and the zero Covid-19 policy in China has had a large
knock on effect for the oil industry in Mongolia. The exact timing and
execution of Petro Matad's planned 2022 operations will be impacted by these
restrictions, which have remained in place well into 2022. Preparations are
well advanced for operations in the 2022 drilling season to be executed once
the border restrictions are eased or lifted.
Land access
Petro Matad has been pushing for local and central government action on the
conflicts in the land laws since they first impacted the Company's activities
in 2019. Recent progress and the elevation of the issue to the highest level
of government are positive but the matters have still not been resolved and
until they are, the Company will not mobilise without legally valid permits
in place. We continue to push.
2021 Review
HSSE
The Company's Health, Safety, Security and Environmental Management System
(HSSE MS) continues in its improvement process, which is structured to follow
International Association of Oil and Gas Producers (IOGP) best practices and
guidelines and has been updated and expanded to accommodate best practice in
mitigating the impacts of the Covid-19 pandemic. The Company's efforts
throughout the year have been very successful in this regard. As per national
and international standard practice, all reported HSSE incidents continue to
be fully investigated, recorded and classified according to IOGP guidelines,
and learnings are openly shared through the management review process.
The Company is pleased to report that Petro Matad, along with its
sub-contractors, followed all Mongolian national standards in all aspects of
the 2021 operations and that there were no environmental incidents, lost time
incidents or recordable incidents during 2021.
With the Exploration Period of the Block XX PSC due to expire in July 2021 and
the relinquishment of all acreage not incorporated within the Exploitation
Licence area, the technical and biological restoration of previous drilling
sites and related camp sites were completed and inspected by officials from
Ministry of Mining and Heavy Industry (MMHI) with participation from Ministry
of Environment, MRPAM, and Aimag and Soum officials. Subsequently, Petro Matad
received the Handover Act, which is the final environmental document required
to formalize the relinquishment and return of the acreage to the State.
The Company is fully committed to environmental protection and ensures all
practical measures are implemented to fully comply with national and
international standards with reference to ISO 14001 as the benchmark.
Operations
Following the approval of the Heron 1 Reserves Report by Mineral Resources
Professional Council (MRPC) at 2020 year-end, the Company's focus during early
2021 was securing the approval for the Plan of Development (PoD) and
subsequently obtaining the Exploitation Licence over the Heron discovery in
Block XX before the expiry of the Exploration Licence term. Navigation of this
process was not without challenges given that nine years had passed since the
last time this process was used. With the support of MRPAM and experts in the
MMHI's Petroleum Division, the PoD was approved, and the Exploitation Licence
was awarded in early July by resolution of the Minister of Mining and Heavy
Industry. This is a significant milestone in the country's petroleum industry,
being only the third Exploitation Licence ever awarded.
With the proven reserves for the Heron field registered in the Mineral Reserve
Fund of Mongolia, production from the Heron field is authorised by law within
the defined proven area. This area will expand with further successful
development and appraisal drilling and with the acquisition of additional 3D
seismic. With the use of modern completion and stimulation technologies, the
Company aims to achieve a minimum recovery factor of c. 30%, increasing the
total recoverable potential of Heron from 33 MMbo as certified in Leap
Energy's Competent Persons' Report to a value nearer 60 MMbo. Importantly, the
Minister's resolution awarding the Exploitation Licence confirmed the
exploitation area to be 218km(2). This area includes the entirety of the
extension of the proven Tosun Uul sub-basin into Block XX and during the
Exploitation Period, exploration and appraisal activity can occur in parallel
with development activities on the Heron field. The Company assesses the near
field exploration potential of the area to be significant with potential
prospective recoverable resources in the range 100 MMbo to 200 MMbo. This
potential can be targeted with new, low-cost exploration wells. Success will
allow the rapid tie-in of any additional discoveries into the Heron processing
and export facilities at low cost.
During the latter part of 2021 the Company embarked on the planning and
procurement processes aimed at commencing production from Heron during 2022.
This has entailed identifying all the equipment and services required for
converting the Heron 1 discovery well into a production well and establishing
the surface production and export facilities required. Drilling and 3D seismic
acquisition contract negotiations were also initiated. In parallel, and as
agreed with MRPAM, discussions have been held with PetroChina Tamsag LLC on a
cooperation agreement by which Petro Matad's crude can be processed and
exported via PetroChina's infrastructure in Block XIX to exploit economies of
scale and operating efficiencies. This cooperation is being pursued on the
basis of the Memorandum of Understanding (MoU) previously signed between the
companies.
Production Sharing Contracts (PSCs)
Block XX: The award of the Exploitation Licence secured a 218km(2) area around
the Heron discovery for 25 years (until 1 July 2046) with the option to extend
for two periods of five years each. The residual area of the expired
Exploration Licence (10,125 km(2)) was relinquished following the procedures
set by the Mongolian government.
Block V: The 2021 moratorium on this acreage ended at the close of the year
and extended the expiry of the Exploration Period of the PSC to 29 July 2023.
The Company is confident that there remains sufficient time on the licence to
drill at least one exploration well on the high graded Raptor trend and, if
successful, to gather sufficient data to support an application for an
Exploitation Licence to secure the acreage around a discovery for development.
Discussions were held with drilling contractors to determine potential timing
and costs of activities for drilling on the Raptor Trend, and the Company
progressed submission of an Environmental Impact Assessment for drilling
activities to the Ministry of Environment in order to operate in 2022 and
beyond. This was subsequently approved.
New Areas: The Company is actively working on detailed technical studies of
new exploration acreage where petroleum systems have been proven but also
where little exploration activity has occurred to date. The aim is to re-load
the acreage portfolio to create a balance of production, development,
appraisal, near field and high impact exploration. Applications for new
acreage will be lodged at the appropriate moment once the government's current
plans to revise the Petroleum Law are unveiled.
Sustainability opportunities
The Board of Petro Matad took the decision during 2021 for the Company to seek
opportunities in the sustainable and renewable energy sector in Mongolia, in
addition to its ongoing work in the oil and gas sector. Work has been done
this year to better understand the technical and commercial landscape of the
renewable energy sector in country, which clearly has substantial potential
for both wind and solar power generation growth supported by a government
imperative to reduce carbon emissions.
Petro Matad is looking at renewable energy possibilities to potentially deploy
in its Heron oilfield development and also the use of alternative technologies
to water injection for improving recovery factors, thereby reducing usage of
water, a scarce and precious commodity in Mongolia.
Community Relations
The Company takes its responsibilities in community engagement and community
relations very seriously. In advance of any work programme activity being
undertaken, the Company ensures that it obtains the necessary approvals from
MRPAM and all other relevant authorities. Company staff participate in joint
meetings with the regulator and the local communities to present and discuss
planned activities. In addition to meeting local government officials, the
socialisation programmes will typically include town hall meetings where
questions from local residents are answered. Company representatives will also
meet with nomadic herders who may be in proximity to planned operations to
ensure all parties are listened to. Representatives from the Community
Relations team are stationed at site during all operational activities.
A focussed programme of community projects is undertaken in areas where
operations are conducted, and this is done in cooperation with local
government. The Company views engagement with local communities as key to
conducting safe and successful operations that will in turn benefit the local
area.
Due to the Covid-19 pandemic and lack of field operations in 2021, the Company
did not undertake any substantial community projects during the year. The
Company will carefully review options for targeted community assistance
programmes once operations in the field recommence in 2022. Meetings with
local communities will be arranged well in advance of field operations.
Conclusions
During 2021, the Company has made landmark progress in establishing itself as
the first independent Mongolian oil exploration and production company with
the award of the Block XX Exploitation Licence. The operational focus has now
shifted to starting oil production and generating revenue as soon as possible.
The entire Company's staff are motivated to move quickly and efficiently to
the next stage of the Company's development.
Acknowledgements
The global pandemic continued to have a major impact on the ability to perform
operational activities in Mongolia in 2021. Petro Matad used this time to
secure the Company's future with the award of the Exploitation Licence over
the Heron discovery and progressed plans to achieve first oil in 2022.
The Directors would like to reiterate their appreciation to the staff of Petro
Matad, both technical and non-technical, who have continued to work with
enthusiasm, diligence and dedication throughout these trying times. Members of
staff and Directors willingly took significant pay cuts during the Covid-19
pandemic to ensure that cash resources were sufficient to see the Company
through to the award of the Block XX Exploitation Licence, and this underlines
the loyalty and dedication of the Petro Matad team. The Board looks forward to
an exciting period ahead as the Company transitions into an exploration and
production company.
The Board is fully committed to creating shareholder value through both
existing and potentially new opportunities and would like to express its
gratitude to shareholders for their continued support of the Company.
Consolidated Statement of Profit or Loss and Other Comprehensive Income
For the year ended 31 December 2021
Consolidated
31 Dec 2021 31 Dec 2020
Note $'000 $'000
Continuing operations
Revenue
Interest income 4(a) 33 25
Other income 4(a) 13 39
46 64
Expenditure
Consultancy fees (98) (80)
Depreciation and amortisation (181) (224)
Employee benefits expense 4(b) (1,010) (1,598)
Exploration and evaluation expenditure 4(c) (114) (433)
Other expenses 4(d) (759) (974)
(Loss) from continuing operations before income tax (2,116) (3,245)
Income tax expense 5 - -
(Loss)/Profit from continuing operations after income tax (2,116) (3,245)
Net (loss) for the year (2,116) (3,245)
Other comprehensive income
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translating foreign operations, net of income tax of - (16)
$Nil (2020: $Nil)
Other comprehensive (loss) for the year, net of income tax - (16)
Total comprehensive (loss) for the year (2,116) (3,261)
(Loss) attributable to owners of the parent (2,116) (3,245)
Total comprehensive (loss) attributable to owners of the parent (2,116) (3,261)
(Loss) per share (cents per share)
Basic (loss) per share 6 (0.3) (0.5)
6 (0.3) (0.5)
Diluted (loss) per share
The above Consolidated Statement of Profit or Loss and Other Comprehensive
Income should be read in conjunction with the accompanying notes.
Consolidated Statement of Financial Position
As at 31 December 2021
Consolidated
31 Dec 2021 31 Dec 2020
Note $'000 $'000
ASSETS
Current Assets
Cash and cash equivalents 7 1,162 939
Trade and other receivables 8 21 10
Prepayments 9 176 222
Financial assets 10 7,045 11
Inventory 11 221 224
Total Current Assets 8,625 1,406
Non-Current Assets
Exploration and evaluation assets 12 15,275 15,275
Property, plant and equipment 13 99 145
Right-of-Use asset 13 93 36
Total Non-Current Assets 15,467 15,456
TOTAL ASSETS 24,092 16,862
LIABILITIES
Current Liabilities
Trade and other payables 14 371 364
Lease liability 14 6 25
Total Current Liabilities 377 389
TOTAL LIABILITIES 377 389
NET ASSETS 23,715 16,473
EQUITY
Equity attributable to owners of the parent
Issued capital 15 154,057 144,011
Reserves 16 182 1,392
Accumulated losses (130,524) (128,930)
TOTAL EQUITY 23,715 16,473
The above Consolidated Statement of Financial Position should be read in
conjunction with the accompanying notes.
Consolidated Statement of Cash Flows
For the year ended 31 December 2021
Consolidated
31 Dec 2021 31 Dec 2020
Note $'000 $'000
Cash flows from operating activities
Payments to suppliers and employees (2,424) (3,340)
Interest received 33 25
Other income 13 52
Net cash flows (used in)/provided by operating activities 7 (2,378) (3,263)
Cash flows from investing activities
Purchase of property, plant and equipment (16) (13)
Purchase of financial assets (7,034) 1,499
Proceeds from the sale of property, plant and equipment - -
Net cash flows used in investing activities (7,050) 1,486
Cash flows from financing activities
Proceeds from issue of shares 10,491 31
Capital raising cost (664) -
Payments of lease liability principal (176) (114)
Net cash flows from financing activities 9,651 (83)
Net (decrease)/increase in cash and cash equivalents 223 (1,860)
Cash and cash equivalents at beginning of the year 939 2,815
Net foreign exchange differences - (16)
Cash and cash equivalents at the end of the year 7 1,162 939
The above Consolidated Statement of Cash Flows should be read in conjunction
with the accompanying notes.
Consolidated Statement of Changes in Equity
For the year ended 31 December 2021
Consolidated
Attributable to equity holders of the parent
Issued Accumulated Losses Other Total
Capital Reserves
Note 16
Note $'000 $'000 $'000 $'000
As at 1 January 2020 143,174 (126,474) 3,062 19,762
Net loss for the year - (3,245) - (3,245)
Other comprehensive income - - (16) (16)
Total comprehensive gain/(loss) for the year - (3,245) (16) (3,261)
Issue of share capital 15 192 - - 192
Cost of capital raising 15 - - - -
Share-based payments 15 & 16 - - (220) (220)
Exercise of Conditional Share Awards 15, 16 & 17 645 - (645) -
Expiry of Options 16 & 17 - 789 (789) -
As at 31 December 2020 144,011 (128,930) 1,392 16,473
Net loss for the year - (2,116) - (2,116)
Other comprehensive income - - - -
Total comprehensive gain/(loss) for the year - (2,116) - (2,116)
Issue of share capital 15 10,491 - - 10,491
Cost of capital raising 15 (664) - - (664)
Share-based payments 15 & 16 - - (469) (469)
Exercise of Conditional Share Awards 15, 16 & 17 219 - (219) -
Expiry of Options 16 & 17 - 522 (522) -
As at 31 December 2021 154,057 (130,524) 182 23,715
The above Consolidated Statement of Changes in Equity should be read in
conjunction with the accompanying notes.
Notes to the Consolidated Financial Statements
For the year ended 31 December 2021
1 Corporate information
The financial report of Petro Matad Limited (Company) for the year ended 31
December 2021 was authorised for issue in accordance with a resolution of the
Directors dated 24 June 2022, which was approved on 27 June 2022.
This financial report presents the consolidated results and financial position
of Petro Matad Limited and its subsidiaries.
Petro Matad Limited (Company) incorporated in the Isle of Man on 30 August
2007 has five wholly owned subsidiaries, including Capcorp Mongolia LLC and
Petro Matad LLC (both incorporated in Mongolia), Central Asian Petroleum
Corporation Limited (Capcorp) and Petromatad Invest Limited (both incorporated
in the Cayman Islands) and Petro Matad Singapore Pte Ltd. The Company and its
subsidiaries are collectively referred to as the "Group". The Group's
principal activity in the course of the financial year consisted of oil
exploration and development in Mongolia.
Petrovis Matad Inc. (Petrovis) is a major shareholder of the Company, holding
approximately 21.08% of the shareholding at the year end of 2021.
2 Summary of significant accounting policies
(a) Basis of preparation
This financial report complies with International Financial Reporting
Standards (IFRS) as adopted by the European Union.
This financial report has been prepared on a historical cost basis, except
where otherwise stated. Historical cost is generally based on the fair values
of the consideration given in exchange for goods and services. Fair value is
the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the
measurement date, regardless of whether that price is directly observable or
estimated using another valuation technique.
In addition, for financial reporting purposes, fair value measurements are
categorised into Level 1, 2 or 3 based on the degree to which the inputs to
the fair value measurements are observable and the significance of the inputs
to the fair value measurement in its entirety, which are described as follows:
· Level 1 inputs are quoted prices (unadjusted) in active markets for
identical assets or liabilities that the entity can access at the measurement
date;
· Level 2 inputs are inputs, other than quoted prices included within
Level 1, that are observable for the asset or liability, either directly or
indirectly; and
· Level 3 inputs are unobservable inputs for the asset or liability.
For the purpose of preparing the consolidated financial statements, the
Company is a for-profit entity.
(b) Statement of compliance
This general-purpose financial report has been prepared in accordance with the
requirements of all applicable IFRS as adopted by the European Union and
related Interpretations and other authoritative pronouncements.
(c) Going concern
The financial statements have been prepared on a going concern basis, which
contemplates the continuity of normal business activity and the realisation of
assets and the settlement of liabilities in the ordinary course of business.
The Group generated a loss of $2.12 million for year 2021 (2020 Loss: $3.25
million) and experienced net cash outflows from operating activities of $2.38
million (2020 Outflow: $3.26 million). In addition, as outlined in Note 18(b)
the Group is required to meet minimum exploration commitments on its Block XX
Production Sharing Contract (PSC) of approximately $6.5 million as of 31
December 2021. The Company has reached an agreement with the Mineral Resources
and Petroleum Authority of Mongolia (MRPAM) that this underspent minimum
exploration commitment can be transferred to and spent on exploration and
appraisal activities during the exploitation period. The Company's application
for a 25-year Exploitation Licence (EL) for Block XX has been approved. The
approval of the EL enabled the Company to conclude a $10.4 million fundraise
in August 2021. The proceeds of this fundraise will enable the Company to
further appraise the Heron discovery and commence production operations in
2022.
The Company believes that the current cash balance is sufficient to continue
operations until at least July 2023. This expectation is enhanced by the
impact of the planned commencement of production in the second half of 2022.
Cumulative expenditures to end 2021 in Block V exceed financial commitments by
$3.0 million. The Company applied for moratoria on Block V for both 2020 and
2021 which have been approved by MRPAM. The Block V PSC exploration term is
now due to expire in July 2023.
(c) Going concern (continued)
The Directors have prepared a cash flow forecast which indicates that the
Group will have sufficient cash to meet their working capital requirements for
the twelve-month period from the date of signing the financial report.
(d) Application of new and revised Accounting Standards
Accounting Standards that are mandatorily effective for the current reporting
year
The Group has adopted all of the new and revised Standards and Interpretations
issued by the Australian Accounting Standards Board (AASB) that are relevant
to its operations and effective for an accounting period that begins on or
after 1 January 2020.
The Directors have determined that there is no material impact of the new and
revised Standards and Interpretations on the Group and, therefore, no material
change is necessary to Group accounting policies.
Standards and Interpretations in issue not yet adopted
At the date of authorisation of the financial statements, the Group has not
applied the new and revised Australian Accounting Standards, Interpretations
and amendments that have been issued but are not yet effective. Based on a
preliminary review of the standards, interpretations and amendments, the
Directors do not anticipate a material change to the Group's accounting
policies, however further analysis will be performed when the relevant
standards are effective.
(e) Basis of consolidation
The consolidated financial statements incorporate the financial statements of
the Company and entities controlled by the Company and its subsidiaries.
Control is achieved when the Company:
· has power over the investee;
· is exposed, or has rights, to variable returns from its involvement
with the investee; and
· has the ability to use its power to affect its returns.
The Company reassesses whether it controls an investee if facts and
circumstances indicate that there are changes to one or more of the three
elements of control listed above.
The financial statements of the subsidiaries are included in the consolidated
financial statements from the date that control commences until the date that
control ceases.
The financial statements of subsidiaries are prepared for the same reporting
period as the parent company, using consistent accounting policies.
Adjustments are made to bring into line any dissimilar accounting policies
that may exist.
A change in the ownership interest of a subsidiary that does not result in a
loss of control is accounted for as an equity transaction.
All intercompany balances and transactions, including unrealised profits
arising from intra-group transactions, have been eliminated in full.
Unrealised losses are eliminated unless costs cannot be recovered.
(f) Foreign currency translation
Functional and presentation currency
Both the functional and presentation currency of Petro Matad Limited is United
States Dollars (USD). The Cayman Islands and Singaporean subsidiaries'
functional currency is USD. The Mongolian subsidiaries' functional currency is
Mongolian Tugrugs (MNT) which is then translated to the presentation currency,
USD.
Transactions and balances
Transactions in foreign currencies are initially recorded in the functional
currency by applying the exchange rates ruling at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies are
retranslated at the rate of exchange ruling at the reporting date.
Non-monetary items that are measured in terms of historical cost in a foreign
currency are translated using the exchange rate as at the date of the initial
transaction. Non-monetary items measured at fair value in a foreign currency
are translated using the exchange rates at the date when the fair value was
determined.
Exchange differences are recognised in profit or loss in the period in which
they arise except for:
· Exchange differences on transactions entered into to hedge
certain foreign currency risks; and
· Exchange differences on monetary items receivable from or
payable to a foreign operation for which settlement is neither planned nor
likely to occur (therefore forming part of the net investment in the foreign
operation), which are recognised initially in other comprehensive income and
reclassified from equity to profit or loss on disposal or partial disposal on
the net investment.
Translation of subsidiaries' functional currency to presentation currency
The results of the Mongolian subsidiaries are translated into USD
(presentation currency) as at the date of each transaction. Assets and
liabilities are translated at exchange rates prevailing at the reporting date.
Exchange differences resulting from the translation are recognised in other
comprehensive income and accumulated in the foreign currency translation
reserve in equity.
On consolidation, exchange differences arising from the translation of the net
investment in Mongolian subsidiaries are recognised in other comprehensive
income and accumulated in the foreign currency translation reserve. If a
Mongolian subsidiary was sold, the proportionate share of exchange difference
would be transferred out of equity and recognised in profit and loss.
(g) Cash and cash equivalents
Cash and short-term deposits in the statement of financial position comprise
cash at bank and in hand and short-term deposits with an original maturity of
three months or less.
For the purposes of the statement of cash flows, cash and cash equivalents
consist of cash and cash equivalents as defined above, net of outstanding bank
overdrafts.
(h) Trade and other receivables
Trade receivables, which generally have 30-60 day terms, are recognised
initially at fair value and subsequently measured at amortised cost using the
effective interest method, less an allowance for impairment.
Collectability of trade receivables is reviewed on an ongoing basis. An
impairment provision is recognised when there is objective evidence that the
Group will not be able to collect the receivable. Objective evidence of
impairment includes financial difficulties of the debtor, default payments or
debts more than 60 days overdue. The amount of the impairment loss is the
amount by which the receivable carrying value exceeds the present value of the
estimated future cash flows, discounted at the original effective interest
rate.
(i) Plant and equipment
Plant and equipment is stated at historical cost less accumulated depreciation
and any impairment in value.
Depreciation is calculated on a straight-line basis over the estimated useful
life of the asset and is currently estimated to be an average of 6 years.
The assets' residual values, useful lives and amortisation methods are
reviewed, and adjusted if appropriate, at each financial year end.
Derecognition
An item of property, plant and equipment is derecognised upon disposal or when
no further future economic benefits are expected from its use or disposal.
(j) Financial instruments
Initial recognition and measurement
Financial assets and financial liabilities are recognised when the entity
becomes a party to the contractual provisions to the instruments. For
financial assets, this is equivalent to the date that the Company commits
itself to either purchase or sell of the asset (i.e. trade date accounting is
adopted).
Financial instruments are initially measured at fair value plus transaction
costs, except where the instruments is classified at 'Fair value through
profit or loss' in which case transaction costs are expensed to profit or loss
immediately. Financial instruments are classified and measured as set out
below.
Classification and subsequent measurement
Financial instruments are subsequently measured at either fair value,
amortised cost using the effective interest rate method or cost. Fair value
represents the price that would be received to sell an asset or paid to
transfer a liability in orderly transaction between market participants at the
measurement date. Where available, quoted prices in an active market are used
to determine fair value. In other circumstances, valuation techniques are
adopted.
Amortised cost is calculated as (i) the amount at which the financial asset or
financial liability is measured at initial recognition; (ii) less principal
repayments; (iii) plus or minus the cumulative amortization of the difference,
if any, between the amount initially recognised and the maturity amount
calculated using the effective interest method; and (iv) less any reduction
for impairment.
The effective interest method is used to allocate interest income or interest
expense over the relevant period and is equivalent to the rate that exactly
discounts estimated future cash payments or receipts (including fees,
transaction costs and other premiums or discounts) through the expected life
(or when this cannot be reliably predicted, the contractual term) of the
financial instrument to the net carry amount of the financial asset or
financial liability. Revisions to expected future net cash flows will
necessitate an adjustment to the carrying value with a consequential
recognition of an income or expense in profit or loss. The Group does not
designate any interest in subsidiaries, associates or joint venture entities
as being subject to the requirements of accounting standards specifically
applicable to financial statements.
(i) Financial assets at fair value through profit and loss or
through other comprehensive Income
Financial assets are classified at 'Fair value through profit or loss' or Fair
value through other comprehensive Income' when they are either held for
trading for purposes of short term profit taking, derivatives not held for
hedging purposes, or when they are designated as such to avoid an accounting
mismatch or to enable performance evaluation where a group of financial assets
is managed by key management personnel on a fair value basis in accordance
with a documented risk management or investment strategy. Such assets are
subsequently measured at fair value with changes in carrying value being
included in profit or loss if electing to choose 'fair value through profit or
loss' or other comprehensive income if electing 'Fair value through other
comprehensive income'.
(ii) Financial Liabilities
The Group's financial liabilities include trade and other payables, loan and
borrowings, provisions for cash bonus and other liabilities which include
deferred cash consideration and deferred equity consideration for acquisition
of subsidiaries & associates.
(j) Financial instruments (continued)
All financial liabilities are recognised initially at fair value and, in the
case of loans and borrowings, and payables, net of directly attributable
transaction costs.
Fair value
Fair value is determined based on current bid prices for all quoted
investments. Valuation techniques are applied to determine the fair value for
all unlisted securities, including recent arm's length transactions, reference
to similar instruments and option pricing models.
Derecognition
Financial assets are derecognised where the contractual rights to receipts of
cash flows expire or the asset is transferred to another party whereby the
entity no longer has any significant continuing involvement in the risk and
benefits associated with the asset. Financial liabilities are recognised where
the related obligations are either discharged, cancelled or expire. The
difference between the carrying value of the financial liability extinguished
or transferred to another party and the fair value of consideration paid,
including the transfer of non-cash assets or liabilities assumed, is
recognised in profit or loss.
(k) Inventory
Inventories are stated at the lower of cost and net realisable value. Costs of
inventories are determined on a first-in-first-out basis. Net realisable value
represents the estimated selling price for inventories less all estimated
costs of completion and costs necessary to make the sale.
(l) Exploration and evaluation expenditure
Exploration and evaluation expenditure incurred by the Group is expensed
separately for each area of interest. The Group's policy is to expense all
exploration and evaluation costs funded out of its own resources.
(m) Exploration and evaluation assets
Exploration and evaluation assets arising out of business combinations are
capitalised as part of deferred exploration and evaluation assets. Subsequent
to acquisition, exploration expenditure is expensed in accordance with the
Group's accounting policy.
(n) Impairment of tangible and intangible assets other than goodwill
At each reporting date, the Group assesses whether there is any indication
that tangible and intangible asset may be impaired. Where an indicator of
impairment exists, the Group makes a formal estimate of recoverable amount for
each asset or cash generating unit to determine the extent of the impairment
loss (if any). Where the carrying amount of an asset (or cash-generating unit)
exceeds its recoverable amount the asset is considered impaired and is written
down to its recoverable amount.
Recoverable amount is the greater of fair value less costs to sell and value
in use. It is determined for an individual asset, unless the asset's value in
use cannot be estimated to be close to its fair value less costs to sell and
it does not generate cash inflows that are largely independent of those from
other assets or groups of assets, in which case, the recoverable amount is
determined for the cash-generating unit to which the asset belongs.
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.
Where an impairment loss subsequently reverses, the carrying amount of the
asset (or 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 assets (or cash-generating unit) in prior years. A
reversal of an impairment loss is recognised immediately in profit or loss,
unless the relevant asset is carried at a revalued amount, in which case the
reversal of impairment loss is treated as a revaluation increase.
(n) Impairment of tangible and intangible assets other than goodwill
(continued)
Impairment review for deferred exploration and evaluation assets are carried
out on a project-by-project basis, where each project representing a single
cash generating unit. An impairment review is undertaken when indicators of
impairment arise, typically when one of the following circumstances apply:
· Unexpected geological occurrences that render the
resource uneconomic;
· Title to asset is compromised;
· Variations in prices that render the project
uneconomic; or
· Variations in the currency of operation.
(o) Trade and other payables
Trade and other payables are initially recognised at fair value. After initial
recognition, trade and other payables are carried at amortised cost and due to
their short-term nature are not discounted. They represent liabilities for
goods and services provided to the Group prior to the end of the financial
year that are unpaid and arise when the Group becomes obliged to make future
payments in respect of the purchase of these goods and services. The amounts
are unsecured and are usually paid within 30 days of recognition.
(p) Provisions
Provisions are recognised when the Group has a present obligation (legal or
constructive) as a result of a past event, and it is probable that an outflow
of resources embodying economic benefits will be required to settle the
obligation and a reliable estimate can be made of the amount of the
obligation.
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. If
the effect of the time-value of money is material, provisions are determined
by discounting the expected future cash flows at a pre-tax rate that reflects
current market assessments of the time value of money and, where appropriate,
the risks specific to the liability.
Where discounting is used, the increase in the provision due to the passage of
time is recognised as a finance cost.
(q) Leases
The Group as lessee
At inception of a contract, the Group assesses if the contract contains or is
a lease. If there is a lease present, a right-of-use asset and a corresponding
lease liability are recognised by the Group where the Group is a lessee.
However, all contracts that are classified as short-term leases (ie a lease
with a remaining lease term of 12 months or less) and leases of low-value
assets are recognised as an operating expense on a straight-line basis over
the term of the lease.
Initially the lease liability is measured at the present value of the lease
payments still to be paid at the commencement date. The lease payments are
discounted at the interest rate implicit in the lease. If this rate cannot be
readily determined, the Group uses the incremental borrowing rate.
Lease payments included in the measurement of the lease liability are as
follows:
· fixed lease payments less any lease incentives;
· variable lease payments that depend on an index or rate, initially
measured using the index or rate at the commencement date;
· the amount expected to be payable by the lessee under residual
value guarantees;
· the exercise price of purchase options, if the lessee is reasonably
certain to exercise the options;
· lease payments under extension options, if the lessee is reasonably
certain to exercise the options; and
· payments of penalties for terminating the lease, if the lease term
reflects the exercise of an option to terminate the lease.
The right-of-use assets comprise the initial measurement of the corresponding
lease liability, any lease payments made at or before the commencement date
and any initial direct costs. The subsequent measurement of the right-of-use
assets is at cost less accumulated depreciation and impairment losses.
Right-of-use assets are depreciated over the lease term or useful life of the
underlying asset, whichever is the shortest.
Where a lease transfers ownership of the underlying asset or the cost of the
right-of-use asset reflects that the Group anticipates to exercise a purchase
option, the specific asset is depreciated over the useful life of the
underlying asset.
The Group as lessor
Upon entering into each contract as a lessor, the Group assesses if the lease
is a finance or operating lease.
A contract is classified as a finance lease when the terms of the lease
transfer substantially all the risks and rewards of ownership to the lessee.
All other leases not within this definition are classified as operating
leases.
Rental income received from operating leases is recognised on a straight-line
basis over the term of the specific lease.
Initial direct costs incurred in entering into an operating lease (for
example, legal cost, costs to set up equipment) are included in the carrying
amount of the leased asset and recognised as an expense on a straight-line
basis over the lease term.
Rental income due under finance leases are recognised as receivables at the
amount of the Group's net investment in the leases. When a contract is
determined to include lease and non-lease components, the Group applies IFRS
15 to allocate the consideration under the contract to each component.
(r) Contributed equity
Ordinary shares are classified as equity. Incremental costs directly
attributable to the issue of new shares are shown in equity as a deduction,
net of tax, from the proceeds.
(s) Revenue
Revenue is recognised to the extent that it is probable that the economic
benefits will flow to the Group and the revenue can be reliably measured. The
following specific criteria must also be met before revenue is recognised:
Interest revenue
Revenue is recognised on an accrual basis using the effective interest method.
(t) Share-based payment transactions
The Group provides to certain key management personnel share-based payments,
whereby they render services in exchange for rights over shares
(equity-settled transactions).
The cost of these equity-settled transactions is measured by reference to the
fair value at the date at which they are granted. The fair value is determined
by use of the Black Scholes model.
In determining the fair value of the equity-settled transactions, vesting
conditions that are not market conditions are not taken into account.
The cost of equity-settled transactions is recognised as an expense on a
straight-line basis, together with a corresponding increase in equity, over
the period in which they vest.
The cumulative expense recognised for equity-settled transactions at each
reporting date until the vesting date reflects:
· the extent to which the vesting period has expired; and
· the number of awards that, in the opinion of the Directors of the
Group, will ultimately vest.
This opinion is formed based on the best available information at the
reporting date. The impact of the revision of original estimates, if any, is
recognised in profit or loss such that the cumulative expense reflects the
revised estimate, with a corresponding adjustment to equity reserves.
(t) Share-based payment transactions (continued)
Where the terms of an equity-settled award are modified, as a minimum, an
expense is recognised as if the terms had not been modified. In addition, an
expense is recognised for any increase in the value of the transaction as a
result of the modification, as measured at the date of modification.
Where an equity-settled award is cancelled, it is treated as if it had vested
on the date of cancellation, and any expense not yet recognised for the award
is recognised immediately. However, if a new award is substituted for the
cancelled award and designated as a replacement award on the date that it is
granted, the cancelled and new award are treated as if they were a
modification of the original award, as described in the previous paragraph.
(u) Income tax
Current tax
Current tax is calculated by reference to the amount of income taxes payable
or recoverable in respect of the taxable profit or tax loss for the year. It
is calculated using tax rates and tax laws that have been enacted or
substantively enacted by the reporting date. Current tax for current and prior
years is recognised as a liability (or asset) to the extent that it is unpaid
(or refundable).
Deferred tax
Deferred tax is accounted for using the comprehensive balance sheet liability
method in respect of temporary differences arising from differences between
the carrying amount of assets and liabilities and the corresponding tax base
of those items.
In principle, deferred tax liabilities are recognised for all taxable
temporary differences. Deferred tax assets are recognised to the extent that
it is probable that sufficient taxable amounts will be available against which
deductible temporary differences or unused tax losses and tax offsets can be
utilised. However, deferred tax assets and liabilities are not recognised if
the temporary differences giving rise to them arise from the initial
recognition of assets and liabilities (other than as a result of a business
combination) that affects neither taxable income nor accounting profit.
Furthermore, a deferred tax liability is not recognised in relation to taxable
temporary differences arising from goodwill.
Deferred tax assets and liabilities are measured at the tax rates that are
expected to apply to the year(s) when the asset and liability giving rise to
them are realised or settled, based on tax rates (and tax laws) that have been
enacted or substantively enacted by reporting date. The measurement of
deferred tax liabilities and assets reflects the tax consequences that would
follow from the manner in which the consolidated Group expects, at the
reporting date, to recover or settle the carrying amount of its assets and
liabilities.
Deferred tax assets and liabilities are offset when they relate to income
taxes levied by the same taxation authority and the Company intends to settle
its current tax assets and liabilities on a net basis.
Current and deferred tax for the year
Current and deferred tax is recognised as an expense or income in the profit
or loss, except when it relates to items credited or debited directly to
equity/other comprehensive income, in which case the deferred tax is also
recognised directly in equity/other comprehensive income, or where it arises
from the initial accounting for a business combination, in which case it is
taken into account in the determination of goodwill.
(v) Earnings per share
Basic earnings per share is calculated as net profit attributable to owners of
the parent, adjusted to exclude any costs of servicing equity (other than
dividends), divided by the weighted average number of ordinary shares,
adjusted for any bonus element.
Diluted earnings per share is calculated as net profit attributable to owners
of the parent, adjusted for:
· Costs of servicing equity (other than dividends);
· The after-tax effect of dividends and interest associated with
dilutive potential ordinary shares that have been recognised as expenses; and
· Other non-discretionary changes in revenues or expenses during the
year that would result from the conversion of dilutive potential ordinary
shares, divided by the weighted average number of ordinary shares and dilutive
potential ordinary shares, adjusted for any bonus element.
(w) Significant accounting judgments, estimates and assumptions
In applying the Group's accounting policies, management continually evaluates
judgments, estimates and assumptions based on experience and other factors,
including expectations of future events that may have an impact on the Group.
All judgments, estimates and assumptions made are believed to be reasonable
based on the most current set of circumstances available to management. Actual
results may differ from the judgments, estimates and assumptions.
Any 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 most critical estimates and judgments made by management
in applying the accounting policies and have the most significant effect on
the amounts recognised in the financial statements.
Share-based payments
The Group measures the cost of equity-settled transactions with Directors and
employees at the fair value of the equity instruments at the date at which
they are granted. The fair value is determined using a Black Scholes model.
One of the inputs into the valuation model is volatility of the underlying
share price which is estimated on the historical share price.
Recovery of the exploration and evaluation assets
The ultimate recoupment of the exploration and evaluation assets is dependent
upon successful development and commercial exploitation or alternatively the
sale of the respective areas of interest at an amount at least equal to book
value. At the point that it is determined that any capitalised exploration
and evaluation expenditure is not recoverable, it is written off.
Going Concern
The Group assesses the going concern of the Group on a regular basis,
reviewing its cash flow requirements, commitments and status of PSC
requirements and funding arrangements. Refer to Note 2(c) for further
details.
3 Operating segments
Operating segments have been identified on the basis of internal reports of
the Group that are regularly reviewed by the chief operating decision maker in
order to allocate resources to the segments and to assess their performance.
The chief operating decision maker has been identified as the Board of
Directors. On a regular basis, the Board receives financial information on a
consolidated basis similar to the financial statements presented in the
financial report, to manage and allocate their resources. Based on the
information provided to the Board of Directors, the Group has one operating
segment and geographical segment, being Mongolia; as such no separate
disclosure has been provided.
31 Dec 2021 31 Dec 2020
$'000 $'000
4 Revenues and expenses
(a) Revenue
Interest income 33 25
Other income:
Other income 13 39
46 64
(b) Employee benefits expense
Included in employee benefits expense are the following:
Wages and salaries 1,253 1,471
Bonuses 75 -
Non-Executive Directors' fees (including 121 96
Directors of affiliates)
Consultancy fees 30 251
Share-based payments (469) (220)
1,010 1,598
(c) Exploration and evaluation expenditure
Exploration and evaluation expenditure relates to the following PSCs:
Block XX 114 404
Block V - 29
114 433
(d) Other expenses
Included in other expenses are the following:
Administration costs 371 494
PSC administration costs 316 345
Audit fees 64 84
Travel expenses 8 51
759 974
31 Dec 2021 31 Dec 2020
Note $'000 $'000
5 Income tax
Income tax recognised in the statement of profit or loss:
Tax expense/(benefit) comprises:
Current tax expense/(benefit) - -
Deferred tax expense/(benefit) relating to the - -
origination and reversal of temporary differences
Total tax expense/(benefit) reported in the statement of profit or loss - -
The prima facie income tax benefit on pre-tax accounting loss from continuing
operations reconciles to the income tax expense/(benefit) in the financial
statements as follows:
Net (loss)/profit for the year (2,116) (3,245)
Income tax benefit calculated at 10% (i) 212 325
Effect of different tax rates on entities in different jurisdictions (ii) (16) (95)
Change in unrecognised deferred tax assets (196) (230)
- -
(i) The tax rate used in the above reconciliation is the
corporate tax rate of 10% payable by Mongolian corporate entities on taxable
profits up to 6 billion MNT under Mongolian tax law.
(ii) Petromatad Invest Limited and Capcorp are exempt of
Mongolian corporate tax on profits derived from the sale of oil under their
PSCs once production commences and are subject to Cayman Islands income tax at
a rate of 0%. As a consequence, no provision for Mongolian corporate tax or
Cayman Islands current tax or deferred tax has been made in the Company's
accounts in relation to them.
Petro Matad Limited is subject to Isle of Man income tax at a rate of 0%. As a
consequence, no provision for Isle of Man current tax or deferred tax has been
made in the Company's accounts.
6 (Loss) per share
The following reflects the loss and share data used in the total operations
basic and diluted (loss)/earnings per share computations:
31 Dec 2021 31 Dec 2020
cents per share cents per share
Basic (loss) per share (0.3) (0.5)
Diluted (loss) per share (0.3) (0.5)
$'000's $'000's
The loss and weighted average number of ordinary shares used in the
calculation of basic and diluted (loss)/earnings per share are as follows:
Net (loss)/profit attributable to owners of the parent (2,116) (3,245)
Weighted average number of ordinary shares for the purposes of diluted 776,419 675,284
(loss)/earnings per share (in thousands)
Weighted average number of ordinary shares for the purposes of basic 776,419 675,284
(loss)/earnings per share (in thousands)
31 Dec 2021 31 Dec 2020
$'000 $'000
7 Cash and cash equivalents
Cash at bank and in hand 1,162 939
1,162 939
Cash at bank and in hand earns interest at fixed and floating rates based on
prevailing bank rates, and the fair value of the above cash and cash
equivalents is $1,162,000 (2020: $939,000) due to the short-term nature of the
instruments.
Reconciliation from the net gain/(loss) after tax to the net cash flows from
operations:
Net (loss)/gain after tax (2,116) (3,245)
Adjustments for:
Depreciation and amortisation 181 224
Consultancy fee - 161
Share based payments (469) (220)
Unrealised foreign exchange (gains)/ losses - 7
Changes in assets and liabilities
Decrease/(increase) in trade and other receivables (11) 13
Decrease/(increase) in prepayments 46 (67)
Decrease/(increase) in inventory 3 2
Increase/(decrease) in trade and other payables (12) (138)
Net cash flows used in operating activities (2,378) (3,263)
Non-cash investing and financing activities
There were no non-cash investing or financing activities undertaken in the
2021 financial year or prior year, other than the exercise of Conditional
Share Awards of $0.003 million (2020: $0.838).
8 Trade and other receivables
Current
Other debtors 21 10
21 10
All amounts are recoverable and are not considered past due or impaired.
9 Prepayments
Prepayments 176 222
176 222
10 Financial assets
Long Term Deposits 7,045 11
7,045 11
The Group holds term deposits with an average weighted interest rate of 3.1%.
The deposits have maturity dates greater than 3 months. None of these assets
had been past due or impaired at the end of the reporting period.
31 Dec 2021 31 Dec 2020
$'000 $'000
11 Inventory
Raw materials 221 224
221 224
Inventory are mainly consumables, including casing, mud and drilling materials
purchased for Block XX.
12 Exploration and evaluation assets
Exploration and evaluation assets 15,275 15,275
15,275 15,275
The exploration and evaluation asset arose following the initial acquisition
in February 2007 of 50% of Petromatad Invest Limited, together with
acquisition on 12 November 2007 of the remaining 50% not already held by the
Group, for a consideration of 23,340,000 ordinary shares credited as fully
paid up and with an estimated fair value of $0.50 per share, taking into
account assets and liabilities acquired on acquisition. This relates to the
exploration and evaluation of PSC Block XX.
The ultimate recoupment of exploration and evaluation expenditure is dependent
upon successful development and commercial exploitation or alternatively the
sale of the respective areas of interest at an amount at least equal to book
value.
Management have reviewed for impairment indicators on Block XX and no
impairment has been noted.
During 2020, the Company was focused on providing all necessary documentation
to the Mongolian regulator in an effort to obtain approval for its
Exploitation Licence application, which would then enable development of its
2019 Heron discovery in the northern area of Block XX. The Exploitation
Licence was approved on 5 July 2021, which allows the Company to be able to
appraise, develop and produce oil from the area for a 25-year term,
extendable by up to 10-years (two times 5-years)
13 Property, plant and equipment and Right-of-Use asset
Plant and equipment at cost 816 831
Accumulated depreciation and impairment (717) (686)
99 145
Right-of-Use asset 176 139
Accumulated depreciation - Right-of-Use asset (83) (103)
93 36
Reconciliation of carrying amounts at the beginning and end of the year:
Plant and equipment Right-of-Use asset Total
Total Total Total
$'000 $'000 $'000
As at 1 January 2020 (net of accumulated depreciation) 260 - 260
Additions 13 139 152
Disposals - - -
Foreign exchange (7) - (7)
Depreciation charge for the year (121) (103) (224)
As at 31 December 2020 (net of accumulated depreciation) 145 36 181
Additions 16 176 192
Foreign exchange - - -
Depreciation charge for the year (62) (119) (181)
As at 31 December 2021 (net of accumulated depreciation) 99 93 192
The following useful lives are used in the calculation of depreciation:
Plant and equipment - 2 to 10 years
31 Dec 2021 31 Dec 2020
$'000 $'000
14 Trade and other payables (current)
Trade payables 371 364
Lease liability 6 25
377 389
Trade payables are non-interest bearing and are normally settled within 60 day
terms.
15 Issued capital
Ordinary Shares
898,761,649 shares issued and fully paid 154,057 144,011
(2020: 681,422,306)
154,057 144,011
Movements in ordinary shares on issue:
Number of Shares Issue $'000
Price $
As at 1 January 2020 662,196,306 143,174
Exercise of Conditional Share Awards on 3 January 2020 (note (a)) 7,954,000 $0.010 80
Exercise of Conditional Share Awards on 12 February 2020 (note (b)) 3,039,000 $0.010 30
Exercise of Conditional Share Awards on 17 June 2020 (note (c)) 1,100,000 $0.010 11
Exercise of Conditional Share Awards on 2 July 2020 (note (d)) 3,200,000 $0.010 32
Exercise of Conditional Share Awards on 24 August 2020 (note (e)) 616,000 $0.010 6
Exercise of Conditional Share Awards on 24 December 2020 (note (f)) 3,317,000 $0.010 33
Capital raising cost -
Exercise of Awards 645
As at 31 December 2020 681,422,306 144,011
Placement shares through Shore Capital on 22 July 2021 (note (g)) 89,988,470 $0.048 4,332
Placement shares through Arden on 22 July 2021 (note (h)) 65,252,142 $0.048 3,163
Placement shares through Primary Bid on 22 July 2021 (note (i)) 14,285,714 $0.048 689
Direct subscription shares on 6 August 2021 (note (j)) 45,384,218 $0.048 2,200
Open Offer shares on 6 August 2021 (note (k)) 2,169,649 $0.048 104
Exercise of Conditional Share Awards on 20 December 2021 (note (l)) 259,150 $0.010 3
Capital raising cost (664)
Exercise of Awards 219
As at 31 December 2021 898,761,649 154,057
(a) On 3 January 2020, 7,954,000 shares were allotted to Directors and an
employee upon exercise of Conditional Share Awards under the Group's Long Term
Equity Incentive Plan (Plan), with an exercise price per share of $0.01.
(b) On 12 February 2020, 3,039,000 shares were allotted to employees upon
exercise of Conditional Share Awards under the Group's Plan, with an exercise
price per share of $0.01.
(c) On 17 June 2020, 1,100,000 shares were allotted to an employee upon
exercise of Conditional Share Awards under the Group's Plan, with an exercise
price per share of $0.01.
(d) On 2 July 2020, 3,200,000 shares were allotted to an employee upon
exercise of Conditional Share Awards under the Group's Plan, with an exercise
price per share of $0.01.
(e) On 24 August 2020, 616,000 shares were allotted to an employee upon
exercise of Conditional Share Awards under the Group's Plan, with an exercise
price per share of $0.01.
(f) On 24 December 2020, 3,317,000 shares were allotted to Directors and
an employee upon exercise of Conditional Share Awards under the Group's Plan,
with an exercise price per share of $0.01.
(g) On 22 July 2021, the Company concluded a placing by issuing 89,988,470
shares at a price of GBP0.035 per share arranged through its nominated adviser
and joint book runner and broker for the purposes of the Placing, Shore
Capital.
(h) On 22 July 2021, the Company concluded a placing by issuing 65,252,142
shares at a price of GBP0.035 per share arranged through its joint book runner
for the purposes of the Placing, Arden.
(i) On 22 July 2021, the Company concluded a placing by issuing
14,285,714 shares at a price of GBP0.035 per share through a retail offering
via Primary Bid.
(j) On 6 August 2021, the Company issued 45,384,218 shares through direct
subscriptions at a price of GBP0.035 per share.
(k) On 6 August 2021, the Company issued 2,169,649 shares through Open
Offer to shareholders at a price of GBP0.035 per share.
(l) On 20 December 2021, 259,150 shares were allotted to Director and
employees upon exercise of Conditional Share Awards under the Group's Plan,
with an exercise price per share of USD0.01.
16 Reserves
A detailed breakdown of the reserves of the Group is as follows:
Equity benefits reserve Foreign currency translation Total
Merger reserve
$'000 $'000 $'000 $'000
As at 1 January 2020 831 3,434 (1,203) 3,062
Currency translation differences - - (16) (16)
Expiry of Options - (789) - (789)
Exercise of Awards - (645) - (645)
Share based payments - (220) - (220)
As at 31 December 2020 831 1,780 (1,219) 1,392
Currency translation differences - - - -
Expiry of Options - (522) - (522)
Exercise of Awards - (219) - (219)
Share based payments - (469) - (469)
As at 31 December 2021 831 570 (1,219) 182
Nature and purpose of reserves
Merger reserve
The merger reserve arose from the Company's acquisition of Capcorp on 12
November 2007. This transaction is outside the scope of IFRS 3 'Business
Combinations' and as such Directors have elected to use UK Accounting
Standards FRS 6 'Acquisitions and Mergers'. The difference, if any, between
the nominal value of the shares issued plus the fair value of any other
consideration, and the nominal value of the shares received in exchange are
recorded as a movement on other reserves in the consolidated financial
statements.
Equity benefits reserve
The equity benefits reserve is used to record the value of Options and
Conditional Share Awards provided to employees and Directors as part of their
remuneration, pursuant to the Group's Long-Term Equity Incentive Plan (Plan or
Group's Plan). Refer to Note 17 for further details of these plans.
Foreign currency translation reserve
The foreign currency translation reserve is used to record exchange
differences arising from the translation of the financial statements of
foreign subsidiaries.
17 Share based payments
(a) Long Term Equity Incentive Plan (Plan or Group's Plan)
The Group provides long term incentives to employees (including Executive
Directors), Non-Executive Directors and consultants through the Group's Plan
based on the achievement of certain performance criteria. The Plan provides
for share awards in the form of Options and Conditional Share Awards. The
incentives are awarded at the discretion of the Board, or in the case of
Executive Directors, the Remuneration Committee of the Board, who determine
the level of award and appropriate vesting, service and performance conditions
taking into account market practice and the need to recruit and retain the
best people.
Options may be exercised, subject only to continuing service, during such
period as the Board may determine. Options have a term of 10 years.
Conditional Share Awards shall vest subject to continuing service and
appropriate and challenging service and performance conditions determined by
the Remuneration Committee relating to the overall performance of the Group.
Conditional Share Awards based on performance conditions will vest on
achievement of the following performance conditions:
· 25% vest on the first discovery of oil on a
commercial scale, estimated by management as being 5 July 2021 upon the award
of the Exploitation License;
· 25% vest on the first production of oil on a
commercial scale, estimated by management as to be achieved prior to 31
December 2022; and
· 50% vest on the Company achieving the sale of 1
million barrels of oil, estimated by management as being by 31 December 2024.
Other Conditional Share Awards have service conditions tied to employment
continuity and are available for vesting in three equal annual instalments on
various dates.
(b) Option pricing model
The fair value of Options granted is estimated as at the date of grant using
the Black Scholes model, taking into account the terms and conditions upon
which the Options were granted.
No Options have been issued during 2020 and 2021.
(c) Movement in Share Options
The weighted average fair value for all Options in existence as at 31 December
2021 is 0.19 (2020: 0.91).
Granted during the year Forfeited during the year Closing balance as at 31 December 2020
Opening balance at 1 January 2020
Exercisable as at 31 December 2020
Exercised during the year
Grant of Options on 9 July 2010 251,400 - (251,400) - - -
Grant of Options on 6 April 2011 75,000 - - - 75,000 75,000
Grant of Options on 5 July 2011 150,000 - - - 150,000 150,000
Grant of Options on 22 Nov 2011 120,000 - - - 120,000 120,000
Grant of Options on 5 Dec 2011 23,600 - - - 23,600 23,600
Grant of Options on 25 Apr 2012 100,000 - - - 100,000 100,000
Grant of Options on 16 Jul 2012 24,000 - - - 24,000 24,000
Grant of Options on 4 Dec 2012 6,000 - - - 6,000 6,000
Grant of options on 9 July 2013 50,000 - - - 50,000 50,000
800,000 - (251,400) - 548,600 548,600
Weighted Average Exercise Price (cents per option) 96.52 - 70.00 - 108.67 108.67
Granted during the year Lapsed during the year Closing balance as at 31 December 2021
Opening balance at 1 January 2021
Exercisable as at 31 December 2021
Exercised during the year
Grant of Options on 6 April 2011 75,000 - (75,000) - - -
Grant of Options on 5 July 2011 150,000 - (150,000) - - -
Grant of Options on 22 Nov 2011 120,000 - (120,000) - - -
Grant of Options on 5 Dec 2011 23,600 - (23,600) - - -
Grant of Options on 25 Apr 2012 100,000 - - - 100,000 100,000
Grant of Options on 16 Jul 2012 24,000 - - - 24,000 24,000
Grant of Options on 4 Dec 2012 6,000 - - - 6,000 6,000
Grant of options on 9 July 2013 50,000 - - - 50,000 50,000
548,600 - (368,600) - 180,000 180,000
Weighted Average Exercise Price (cents per option) 108.67 - 149.92 - 24.2 24.2
(d) Share Options Contractual Life
The weighted average remaining contractual life of outstanding share Options
is 0.7 year (2020: 1 years).
(e) Conditional Share Awards pricing model
The fair value of Conditional Share Awards granted is estimated as at the date
of grant using the Black Scholes model, taking into account the terms and
conditions upon which the Awards were granted.
The following Table summarizes Conditional Share Awards granted during 2020,
along with relevant details in relation to the grant.
No awards were granted in 2021.
(1)
4 May 2020
Conditional Share Awards granted 4,300,000
Share price at grant date $0.0300
Expected Volatility (%) 51
Risk-free interest rates (%) 0.10
Expected life (years) 10
Exercise Price $0.01
Estimated fair value of each Conditional Share Award at the grant date
$0.0237
Items (1) and (2): Conditional Share Awards vested immediately.
(f) Movement in Conditional Share Awards
The weighted average fair value for all Awards in existence as
at 31 December 2021 is 0.84 (2020: 0.85)
Consolidated Granted during the year Exercised during the year Forfeited during the year Closing balance Exercisable as at 31 December 2020
Opening balance at 1 January 2020 as at 31 December 2020
Grant of Conditional Share Awards on 3 Jun 2008 515,000 - - (250,000) 265,000 -
Grant of Conditional Share Awards on 8 Apr 2009 80,000 - - - 80,000 -
Grant of Conditional Share Awards on 9 Jul 2010 647,000 - - (225,000) 422,000 -
Grant of Conditional Share Awards on 6 Apr 2011 144,000 - - - 144,000 -
Grant of Conditional Share Awards on 5 Jul 2011 180,000 - - - 180,000 -
Grant of Conditional Share Awards on 22 Nov 2011 50,000 - - - 50,000 -
Grant of Conditional Share Awards on 5 Dec 2011 39,600 - - - 39,600 -
Grant of Conditional Share Awards on 25 Apr 2012 550,000 - - (150,000) 400,000 -
Grant of Conditional Share Awards on 5 Oct 2012 150,000 - - - 150,000 -
Grant of Conditional Share Awards on 4 Dec 2012 3,000 - - - 3,000 -
Grant of Conditional Share Awards on 9 Jul 2013 120,000 - - - 120,000 -
Grant of Conditional Share Awards on 18 Dec 2019 14,926,000 - (14,926,000) - - -
Grant of Conditional Share Awards on 4 May 2020 - 4,300,000 (4,300,000) - - -
17,404,600 4,300,000 (19,226,000) (625,000) 1,853,600 -
Weighted Average Exercise Price (cents per award) 1.00 1.00 1.00 1.00 1.00 -
Consolidated Granted during the year Exercised during the year Lapsed during the year Closing balance Exercisable as at 31 December 2021
Opening balance at 1 January 2021 as at 31 December 2021
Grant of Conditional Share Awards on 3 Jun 2008 265,000 - (41,250) (100,000) 123,750 -
Grant of Conditional Share Awards on 8 Apr 2009 80,000 - (20,000) - 60,000 -
Grant of Conditional Share Awards on 9 Jul 2010 422,000 - (71,500) (136,000) 214,500 -
Grant of Conditional Share Awards on 6 Apr 2011 144,000 - (6,000) (120,000) 18,000 -
Grant of Conditional Share Awards on 5 Jul 2011 180,000 - (45,000) - 135,000 -
Grant of Conditional Share Awards on 22 Nov 2011 50,000 - (12,500) - 37,500 -
Grant of Conditional Share Awards on 5 Dec 2011 39,600 - (7,150) (11,000) 21,450 -
Grant of Conditional Share Awards on 25 Apr 2012 400,000 - (25,000) (300,000) 75,000 -
Grant of Conditional Share Awards on 5 Oct 2012 150,000 - - (150,000) - -
Grant of Conditional Share Awards on 4 Dec 2012 3,000 - (750) - 2,250 -
Grant of Conditional Share Awards on 9 Jul 2013 120,000 - (30,000) - 90,000 -
1,853,600 - (259,150) (817,000) 777,450 -
Weighted Average Exercise Price (cents per award) 1.00 - 1.00 1.00 1.00 -
(g) Conditional Share Awards Contractual Life
The weighted average remaining contractual life of outstanding
Conditional Share Awards is 6.5 years (2020: 7.5 years).
(h) Summary of Share Based Payments
A reconciliation of all share-based payments made during the year is as
follows:
31 Dec 2021 31 Dec 2020
Note $'000 $'000
Vesting of Options and Awards 17 (469) (220)
(469) (220)
31 Dec 2021 31 Dec 2020
Note $'000 $'000
Lapsed Options 17 (522) (789)
(522) (789)
18 Commitments and contingencies
(a) Operating lease commitments
Operating leases relate to premises used by the Group in its operations,
generally with terms between 2 and 5 years. Some of the operating leases
contain options to extend for further periods and an adjustment to bring the
lease payments into line with market rates prevailing at that time. The leases
do not contain an option to purchase the leased property.
The Group has committed to warehouse lease in Mongolia in the amount of $6,000
for 2021.
31 Dec 2021 31 Dec 2020
$'000 $'000
Operating Leases:
Within one year 6 58
After one year but not more than five years - -
Greater than five years - -
6 58
(b) Exploration expenditure commitments
Petromatad Invest Limited and Capcorp have minimum spending obligations, under
the terms of their PSCs on Blocks V and XX with MRPAM.
The amounts set out below do not include general and administrative expenses.
31 Dec 2021 31 Dec 2020
$'000 $'000
Production Sharing Contract Fees:
Within one year 286 184
After one year but not more than five years 548 112
Greater than five years 1,606 -
2,439 296
Minimum Exploration Work Obligations:
Within one year
Greater than one year but no more than five years - -
Greater than five years 6,499 6,956
6,499 6,956
(c) Contingencies
On 5 August 2016, Shell through its Affiliate company announced it would be
withdrawing from Blocks IV and V in West/Central Mongolia. As part of the
negotiations leading to formal Mongolian Government approval of the
reassignment of interest from Shell's Affiliate to the Company's Affiliate,
Shell agreed to a payment of $5 million to be remitted to the Company's
Affiliate upon such government approval being received. A condition to the
payment by Shell is that the proceeds are required to be repaid to Shell by
the Company in the event a farmout is concluded in future prior to the
development of either Block IV or V (Block IV has since been relinquished by
the Company in its entirety). There is no certainty that such farmout will be
concluded in future in which case funds would not be repaid. The $5 million
payment was received on 1 February 2017.
19 Related party disclosures
The immediate parent and ultimate controlling party of the Group is Petro
Matad Limited.
The consolidated financial statements include the financial statements of
Petro Matad Limited and the subsidiaries listed in the following table:
Equity Interest
Country of 2021 2020
Incorporation % %
Central Asian Petroleum Corporation Limited Cayman Islands 100 100
Capcorp Mongolia LLC Mongolia 100 100
Petromatad Invest Limited Cayman Islands 100 100
Petro Matad LLC Mongolia 100 100
Petro Matad Singapore Pte Ltd Singapore 100 100
Subsidiary Details
Central Asian Petroleum Corporation Limited (Capcorp) was acquired on 12
November 2007. Petro Matad Limited holds 43,340,000 ordinary shares of $0.01
each.
Capcorp Mongolia LLC is 100% owned by Capcorp. Capcorp holds 1,000,000
ordinary shares of MNT150 each.
Petromatad Invest Limited was acquired on 12 November 2007. 25,000 shares of
$1 each held by Capcorp was transferred to Petro Matad Limited on 25 November
2019 resulting in Petro Matad Limited holding 50,000 shares of $1 each.
Petro Matad LLC is 100% owned by Petromatad Invest Limited. Petromatad Invest
Limited holds 15,000 ordinary shares of MNT10,000 each.
Balances and transactions between the Company and its subsidiaries, which are
related parties of the Company, have been eliminated on consolidation and are
not disclosed in this note.
Petrovis Matad Inc. (Petrovis) is a major shareholder of the Company, holding
approximately 21.08% of the shareholding at year end of 2021.
20 Key management personnel
(a) Details of Directors
The names of the Company's Directors, having authority and responsibility for
planning, directing and controlling the activities of the Group, in office
during 2020 and 2021, are as below:
The Directors were in office until the date of this report and for this entire
period unless otherwise stated.
Directors
Enkhmaa Davaanyam Non-Executive
Chairperson
John Rene Henriksen Chief Financial
Officer (Retired 31 December 2020)
Timothy Paul Bushell Non-Executive
Director
Michael James Buck Chief Executive
Officer
Shinezaya Batbold Non-Executive
Director
(b) Compensation of Directors
Consolidated
31 Dec 2021 31 Dec 2020
$'000 $'000
Short-term employee benefits 478 681
Post-employment benefits - -
Share based payment expense 23 6
501 687
(c) Other key management personnel transactions
There were no other key management personnel transactions during the year
(2020: Nil).
21 Financial risk management objectives and policies
The Group's principal financial instruments comprise cash and short-term
deposits classified as loans and receivables financial assets.
The main purpose of these financial instruments is to raise capital for the
Group's operations.
The Group also has various other financial instruments such as trade debtors
and trade creditors, which arise directly from its operations. It is, and has
been throughout the year under review, the Group's policy that no trading in
financial instruments shall be undertaken.
The main risks arising from the Group's financial instruments are interest
rate risk, foreign currency risk, credit risk and liquidity risk.
The Board is responsible for identification and control of financial risks.
The Board reviews and agrees policies for managing each of these risks as
summarised below.
Risk Exposures and Responses
Interest rate risk
Interest rate risk is the risk that the value of a financial instrument or
cash flow associated with the instrument will fluctuate due to changes in
market interest rate. Interest rate risk arises from fluctuations in interest
bearing financial assets and liabilities that the Group uses. Interest bearing
assets comprise cash and cash equivalents which are considered to be
short-term liquid assets. It is the Group's policy to settle trade payables
within the credit terms allowed and the Group does therefore not incur
interest on overdue balances.
The following table sets out the carrying amount of the financial instruments
that are exposed to interest rate risk:
31 Dec 2021 31 Dec 2020
Weighted Average Int. rate $'000 $'000
Financial Assets
Cash and cash equivalents 0.17% 1,162 939
*Other financial assets 2.90% 7,045 11
8,207 950
Trade and other receivables 0% 21 10
8,228 960
Financial Liabilities
Trade and other payables 0% 371 364
371 364
Net exposure 7,857 596
*Other financial assets are comprised of cash deposits placed in the banks for
terms exceeding 90 days.
Sensitivity Analysis
If the interest rate on cash balances at 31 December 2020 and 2021
weakened/strengthened by 1%, there would be no material impact on profit or
loss. There would be no effect on the equity reserves other than those
directly related to other comprehensive income movements.
Foreign currency risk
As a result of operations overseas, the Group's statement of financial
position can be affected by movements in various exchange rates.
The functional currency of Petro Matad Limited and presentational currency of
the Group is deemed to be USD because the future revenue from the sale of oil
will be denominated in USD and the costs of the Group are likewise
predominately in USD. Some transactions are however dominated in currencies
other than USD. These transactions comprise operating costs and capital
expenditure in the local currencies of the countries where the Group operates.
These currencies have a close relationship to the USD and management believes
that changes in the exchange rates will not have a significant effect on the
Group's financial statements.
The Group does not use forward currency contracts to eliminate the currency
exposures on any individual transactions.
The following significant exchange rates applied during the year:
Average rate Spot rate at the balance date
USD 2021 2020 2021 2020
Mongolian Tugrug (MNT) 1 2,849.26 2,813.05 2,848.80 2,849.51
Australian Dollar (AUD) 1 1.332058 1.466224 1.378034 1.305016
Great British Pound (GBP) 1 0.727108 0.780108 0.741266 0.736474
Sensitivity Analysis
A 5% strengthening/weakening of the MNT against USD at 31 December 2020 and
2021 would not have a material effect on profit and loss or on equity.
Price risk
The Group's exposure to price risk is minimal as the Group is currently not
revenue producing other than from interest income.
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or
counterparty to a financial instrument fails to meet its contractual
obligations. The Group is exposed to credit risk on its cash and cash
equivalents and other receivables as set out in Notes 7 and 8 which also
represent the maximum exposure to credit risk. The Group only deposits surplus
cash with well-established financial institutions of high quality credit
standing.
In addition, receivable balances are monitored on an ongoing basis with the
result that the Group's exposure to bad debts is not significant.
There are no significant concentrations of credit risk within the Group.
Maximum exposure to credit risk at reporting date:
31 Dec 2021 31 Dec 2020
Note $'000 $'000
Financial Assets
Trade and other receivables 8 21 10
Net exposure 21 10
Impairment Losses:
None of the Group's receivables are past due at 31 December 2021 (2020: Nil)
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its
financial obligations as they fall due.
The Group's approach to managing liquidity is to ensure, as far as possible,
that it will always have sufficient liquidity to meet its liabilities when
due, under both normal and stressed conditions, without incurring unacceptable
losses or risking damage to the Group's reputation.
The Group's objective is to ensure that sufficient funds are available to
allow it to continue its exploration and development activities.
The following table details the Group's expected maturity for its
non-derivative financial assets. The table has been drawn up based on the
undiscounted maturities of the financial assets including interest that will
be earned on those assets.
Weighted average interest rate 6-12 months 1-5 over 5 years Total
6 months or less years
$'000 $'000 $'000 $'000 $'000
Cash and cash equivalents 0.17% 1,162 - - - 1,162
Trade and other receivables - 21 - - - 21
Financial Assets 2.90% 7,045 - - - 7,045
As at 31 December 2021 8,225 - - - 8,225
Cash and cash equivalents 0.33% 939 - - - 939
Trade and other receivables - 10 - - - 10
Financial Assets 1.51% 11 - - - 11
As at 31 December 2020 960 - - - 960
The remaining contractual maturities of the Group's and parent entity's
financial liabilities are:
31 Dec 2021 31 Dec 2020
$'000 $'000
6 months or less 371 364
6-12 months - -
1-5 years - -
over 5 years - -
371 364
All of the Group's amounts payable and receivable are current.
Further, the Group has exploration expenditure commitments on its PSCs as
disclosed in Note 18(b).
Fair Value of Financial Assets and Liabilities
The fair value of cash and cash equivalents and non-interest bearing financial
assets and financial liabilities of the Group approximate their carrying value
due to their short term duration.
Fair Value Hierarchy as at 31 December 2021
Level 1 Level 2 Level 3 Total
Financial Assets
Trade and other receivables - 21 - 21
Total - 21 - 21
Financial Liabilities
Trade and other payables - 371 - 371
Total - 371 - 371
Fair Value Hierarchy as at 31 December 2020
Level 1 Level 2 Level 3 Total
Financial Assets
Trade and other receivables - 10 - 10
Total - 10 - 10
Financial Liabilities
Trade and other payables - 364 - 364
Total - 364 - 364
The fair values of the financial assets and financial liabilities included in
the level 2 category above have been determined in accordance with generally
accepted pricing models based on a discounted cash flow analysis, with the
most significant inputs being the discount rate that reflects the credit risk
of counterparties.
22 Capital management
The Group's objectives when managing capital are to safeguard the Group's
ability to continue as a going concern in order to provide returns for
shareholders and benefits for other stakeholders and to maintain an optimal
capital structure to reduce the cost of capital. The management of the Group
and the Group's capital is regularly reviewed by the Board. The capital
structure of the Group consists of cash and bank balances (Note 7) and equity
of the Group (comprising issued capital, reserves and retained earnings as
detailed in Notes 15 and 16). This is reviewed by the Board of Directors as
part of their regular Board meetings.
The Group monitors its capital requirements based on the funding required for
its exploration and development activities in Mongolia and operations of the
Company.
The Group is not subject to externally imposed capital requirements.
23 Events after the reporting date
None.
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