REG - Petro Matad Ltd - US$16 million Fundraising <Origin Href="QuoteRef">MATD.L</Origin> - Part 3

Petro MatadAnnouncement

19/01/2018 12:35

- Part 3: For the preceding part double click  ID:nRSS4175Cb 

including any rights to
waive or vary any conditions or exercise any termination right; 
 
27           acknowledges and accepts that the Joint Bookrunners may, in
accordance with applicable legal and regulatory provisions, engage in
transactions in relation to the Placing Shares and/or related instruments for
their own account for the purpose of hedging their underwriting exposure or
otherwise and, except as required by applicable law or regulation, the Joint
Bookrunners will not make any public disclosure in relation to such
transactions; 
 
28           The Joint Bookrunners and each of their respective affiliates,
each acting as an investor for its or their own account(s), may bid or
subscribe for and/or purchase Placing Shares and, in that capacity, may
retain, purchase, offer to sell or otherwise deal for its or their own
account(s) in the Placing Shares, any other securities of the Company or other
related investments in connection with the Placing or otherwise. Accordingly,
references in this Announcement to the Placing Shares being offered,
subscribed, acquired or otherwise dealt with should be read as including any
offer to, or subscription, acquisition or dealing by the Joint Bookrunners
and/or any of their respective affiliates, acting as an investor for its or
their own account(s). Neither the Joint Bookrunners nor the Company intend to
disclose the extent of any such investment or transaction otherwise than in
accordance with any legal or regulatory obligation to do so; 
 
29           it has not offered or sold and will not offer or sell any Placing
Shares to persons in the EEA prior to the expiry of a period of six months
from Admission except to persons whose ordinary activities involve them in
acquiring, holding, managing or disposing of investments (as principal or
agent) for the purpose of their business or otherwise in circumstances which
have not resulted and which will not result in an offer to the public in any
member state of the EEA within the meaning of the Prospectus Directive; 
 
30           it has complied with its obligations in connection with money
laundering and terrorist financing under the Proceeds of Crime Act 2002, the
Terrorism Act 2000, the Terrorism Act 2006 and the Money Laundering
Regulations 2007 (together, the "Regulations") and, if making payment on
behalf of a third party, that satisfactory evidence has been obtained and
recorded by it to verify the identity of the third party as required by the
Regulations; 
 
31           it is aware of the obligations regarding insider dealing in the
Criminal Justice Act 1993, FSMA, the EU Market Abuse Regulation No. 596 of
2014 and the Proceeds of Crime Act 2002 and confirms that it has and will
continue to comply with those obligations; 
 
32           in order to ensure compliance with the Money Laundering
Regulations 2007, the Joint Bookrunners (for itself and as agent on behalf of
the Company) or the Company's registrars may, in their absolute discretion,
require verification of its identity. Pending the provision to the Joint
Bookrunners or the Company's registrars, as applicable, of evidence of
identity, definitive certificates in respect of the Placing Shares may be
retained at the Joint Bookrunners' absolute discretion or, where appropriate,
delivery of the Placing Shares to it in uncertificated form may be delayed at
the Joint Bookrunners' or the Company's registrars', as the case may be,
absolute discretion. If within a reasonable time after a request for
verification of identity the Joint Bookrunners (for themselves and as agent on
behalf of the Company) or the Company's registrars have not received evidence
satisfactory to them, the Joint Bookrunners and/or the Company may, at its
absolute discretion, terminate its commitment in respect of the Placing, in
which event the monies payable on acceptance of allotment will, if already
paid, be returned without interest to the account of the drawee's bank from
which they were originally debited; 
 
33           acknowledges that its commitment to acquire Placing Shares on the
terms set out in this Announcement and in the form of confirmation will
continue notwithstanding any amendment that may in future be made to the terms
and conditions of the Placing and that Placees will have no right to be
consulted or require that their consent be obtained with respect to the
Company's or the Joint Bookrunners' conduct of the Placing; 
 
34           it irrevocably appoints any duly authorised officer of the Joint
Bookrunners as its agent for the purpose of executing and delivering to the
Company and/or its registrars any documents on its behalf necessary to enable
it to be registered as the holder of any of the Placing Shares for which it
agrees to subscribe or purchase upon the terms of this Announcement; 
 
35           the Company, the Joint Bookrunners and others (including each of
their respective affiliates, agents, directors, officers or employees) will
rely upon the truth and accuracy of the representations, warranties,
acknowledgements and agreements, which are given to the Joint Bookrunners, on
their own behalf and on behalf of the Company and are irrevocable; 
 
36           if it is acquiring the Placing Shares as a fiduciary or agent for
one or more investor accounts, it has full power and authority to make, and
does make, the foregoing representations, warranties, acknowledgements,
agreements and undertakings on behalf of each such accounts; 
 
37           time is of the essence as regards its obligations under this
Appendix; 
 
38           any document that is to be sent to it in connection with the
Placing will be sent at its risk and may be sent to it at any address provided
by it to the Joint Bookrunners; 
 
39           the Placing Shares will be issued subject to the terms and
conditions of this Announcement; and 
 
40           these terms and conditions in this Announcement and all documents
into which this Announcement is incorporated by reference or otherwise validly
forms a part and/or any agreements entered into pursuant to these terms and
conditions and all agreements to acquire shares pursuant to the Placing will
be governed by and construed in accordance with English law and it submits to
the exclusive jurisdiction of the English courts in relation to any claim,
dispute or matter arising out of any such contract, except that enforcement
proceedings in respect of the obligation to make payment for the Placing
Shares (together with any interest chargeable thereon) may be taken by the
Company or the Joint Bookrunners in any jurisdiction in which the relevant
Placee is incorporated or in which any of its securities have a quotation on a
recognised stock exchange. 
 
By participating in the Placing, each Placee (and any person acting on such
Placee's behalf) agrees to indemnify and hold the Company, the Joint
Bookrunners and each of their respective affiliates, agents, directors,
officers and employees harmless from any and all costs, claims, liabilities
and expenses (including legal fees and expenses) arising out of or in
connection with any breach of the representations, warranties,
acknowledgements, agreements and undertakings given by the Placee (and any
person acting on such Placee's behalf) in this Announcement or incurred by the
Joint Bookrunners, the Company or each of their respective affiliates, agents,
directors, officers or employees arising from the performance of the Placee's
obligations as set out in this Announcement, and further agrees that the
provisions of this Announcement shall survive after the completion of the
Placing. 
 
The agreement to allot and issue Placing Shares to Placees (or the persons for
whom Placees are contracting as agent) free of stamp duty and stamp duty
reserve tax in the United Kingdom relates only to their allotment and issue to
Placees, or such persons as they nominate as their agents, direct by the
Company.  Such agreement assumes that the Placing Shares are not being
acquired in connection with arrangements to issue depositary receipts or to
transfer the Placing Shares into a clearance service.  If there are any such
arrangements, or the settlement related to any other dealings in the Placing
Shares, stamp duty or stamp duty reserve tax may be payable.  In that event,
the Placee agrees that it shall be responsible for such stamp duty or stamp
duty reserve tax and neither the Company nor the Joint Bookrunners shall be
responsible for such stamp duty or stamp duty reserve tax.  If this is the
case, each Placee should seek its own advice and they should notify the Joint
Bookrunners accordingly.  In addition, Placees should note that they will be
liable for any capital duty, stamp duty and all other stamp, issue,
securities, transfer, registration, documentary or other duties or taxes
(including any interest, fines or penalties relating thereto) payable outside
the United Kingdom by them or any other person on the acquisition by them of
any Placing Shares or the agreement by them to acquire any Placing Shares and
each Placee, or the Placee's nominee, in respect of whom (or in respect of the
person for whom it is participating in the Placing as an agent or nominee) the
allocation, allotment, issue or delivery of Placing Shares has given rise to
such non-United Kingdom stamp, registration, documentary, transfer or similar
taxes or duties undertakes to pay such taxes and duties, including any
interest and penalties (if applicable), forthwith and to indemnify on an
after-tax basis and to hold harmless the Company and the Joint Bookrunners in
the event that either the Company and/or the Joint Bookrunners has incurred
any such liability to such taxes or duties. 
 
The representations, warranties, acknowledgements and undertakings contained
in this Announcement are given to the Joint Bookrunners for itself and on
behalf of the Company and are irrevocable. 
 
Each Placee and any person acting on behalf of the Placee acknowledges that
the Joint Bookrunners do not owe any fiduciary or other duties to any Placee
in respect of any representations, warranties, undertakings, acknowledgements,
agreements or indemnities in the Placing Agreement. 
 
Each Placee and any person acting on behalf of the Placee acknowledges and
agrees that the Joint Bookrunners may (at their absolute discretion) satisfy
their obligations to procure Placees by itself agreeing to become a Placee in
respect of some or all of the Placing Shares or by nominating any connected or
associated person to do so. 
 
When a Placee or any person acting on behalf of the Placee is dealing with any
of the Joint Bookrunners, any money held in an account with the relevant Joint
Bookrunner on behalf of the Placee and/or any person acting on behalf of the
Placee will not be treated as client money within the meaning of the relevant
rules and regulations of the FCA made under FSMA.  Each Placee acknowledges
that the money will not be subject to the protections conferred by the client
money rules: as a consequence this money will not be segregated from the Joint
Bookrunners' money (as applicable) in accordance with the client money rules
and will be held by it under a banking relationship and not as trustee. 
 
References to time in this Announcement are to London time, unless otherwise
stated. 
 
All times and dates in this Announcement may be subject to amendment. 
 
No statement in this Announcement is intended to be a profit forecast, and no
statement in this Announcement should be interpreted to mean that earnings per
share of the Company for the current or future financial years would
necessarily match or exceed the historical published earnings per share of the
Company. 
 
The price of shares and any income expected from them may go down as well as
up and investors may not get back the full amount invested upon disposal of
the shares.  Past performance is no guide to future performance, and persons
needing advice should consult an independent financial adviser. 
 
The Placing Shares to be issued or sold pursuant to the Placing will not be
admitted to trading on any stock exchange other than the London Stock
Exchange. 
 
Neither the content of the Company's website nor any website accessible by
hyperlinks on the Company's website is incorporated in, or forms part of, this
Announcement. 
 
Appendix 2 - Certain Risks 
 
Any investment in the Company is subject to a number of risks. Accordingly,
prospective investors should carefully consider the risks set out below as
well as the other information contained in this Announcement and any other
publicly available information about the Company before making a decision
whether to invest in the Company. The risks described below are not the only
risks that the Company faces. Additional risks and uncertainties that the
Directors are not aware of or that the Directors currently believe are
immaterial may also impair the Company's operations. Any of these risks may
have a material adverse effect on the Company's business, financial condition,
results of operations and prospects. In that case, the price of the Ordinary
Shares could decline and investors may lose all or part of their investment.
Prospective investors should consider carefully whether an investment in the
Company is suitable for them in light of the information in this document and
their personal circumstances. 
 
Before making an investment, prospective investors are strongly advised to
consult an investment adviser authorised under FSMA who specialises in
investments of this kind. A prospective investor should consider carefully
whether an investment in the Company is suitable in the light of his or her
personal circumstances, the financial resources available to him or her and
his or her ability to bear any loss which might result from such investment. 
 
The following factors, which are not presented in any order of priority, do
not purport to be a complete list or explanation of all the risks involved in
investing in the Company. In particular, the Company's performance may be
affected by changes in the market and/or economic conditions and in legal,
regulatory, tax and operational requirements. 
 
1.   Risks relating to the Company and its operations 
 
Ability to exploit successful discoveries 
 
The general industry risks described below apply to the Company and there is
no certainty that the Company will locate hydrocarbons which are economically
exploitable. It may not always be possible for the Company to participate in
the exploitation of any successful discoveries which may be made in any areas
in which it has an interest. Such exploitation will involve the need to obtain
further licences or clearances from the relevant authorities, which may
require conditions to be satisfied and/or the exercise of discretion by such
authorities. It may or may not be possible for such conditions to be
satisfied. 
 
In addition, the decision to proceed with further exploitation may require the
participation of other companies whose interests and objectives may not be the
same as the Company. Such further work may require the Company to meet or
commit to financing obligations for which it may not have adequately planned. 
 
Access to major infrastructure such as pipelines or rail links for the
transport of crude oil may require the participation of other companies whose
interests and objectives may not be the same as those of the Company. 
 
Reliance on key personnel 
 
As is normal with other similar companies in the oil and gas sector, the
Company's business is in part dependent on recruiting and retaining the
services of a small number of key personnel of the appropriate industry
experience and expertise. The success of the Company is, and will continue to
be, to a significant extent, dependent on the expertise and experience of the
Directors and the loss of one or more could have a material adverse effect on
the Company. 
 
Retention of key business relationships 
 
The Company relies on strategic relationships with other entities such as
Petrovis. 
 
While the Directors have no reason to believe otherwise, there can be no
assurance that its existing relationships will continue to be maintained or
that new ones will be successfully formed. The Company could be adversely
affected by changes to such relationships or difficulties in forming new ones.
Any circumstance which causes the early termination or non-renewal of one or
more of the Company's key business alliances or contracts, could adversely
impact the Company, its business, operating results and prospects. 
 
Partner and contractor risks 
 
While not a part of the current business strategy the Directors may resolve in
the future for the Company to participate with other companies, in the
acquisition, exploration, development and production of oil assets, thereby
allowing for its participation in larger programmes, permitting involvement in
a greater number of programmes and reducing financial exposure in respect of
any one particular programme. It may also occur that a particular partner
company will assign all or a portion of its interest in a particular programme
to another company due to the financial position of the company making the
assignment. In determining whether or not the Company will participate in a
particular programme and the interest therein to be acquired by it, the
Directors will primarily consider the degree of risk to which the Company may
be exposed and its financial position at that time. In addition, the Company
is exposed to various risks related to its partners and contractors that may
adversely affect its proposed activities and licence interests, including: 
 
(i)         financial failure, non-compliance with obligations or default by a
participant in any joint venture arrangement to which it is, or may become, a
party; 
 
(ii)         insolvency or other managerial failure by any of the contractors
used by any joint venture partner in its exploration and production
activities; and 
 
(iii)        insolvency or other managerial failure by any of the other
service providers used by any joint venture or farm-in party for any
activity. 
 
Insurance 
 
Although the Company believes that it will carry adequate insurance with
respect to its operations in accordance with industry practice, in certain
circumstances the Company's insurance may not cover or be adequate to cover
the consequences of all its operations. The occurrence of an event that is not
covered or fully covered by insurance could have a material adverse effect on
the business, financial condition and results of operations of the Company. 
 
There is a risk that insurance premiums may increase to a level where the
Company considers it is unreasonable, or not in its interests, to maintain
insurance cover, or not to a level of coverage which is in accordance with
industry practice. In addition, the Company may, following a cost-benefit
analysis, elect not to insure certain risks on the grounds that the amount of
premium payable for that risk is excessive when compared to the potential
benefit to the Company of the insurance cover. However, the Company will
endeavour to ensure adequate insurance is in place to provide cover for
blow-outs, underground blow-outs and resulting pollution or environmental
damage. 
 
Potential requirement for further investment 
 
The Company is likely to remain cash flow negative for some time and, although
the Directors have confidence in the future revenue earning potential of the
Company, subject to its exploration activities being successful, there can be
no certainty that the Company will achieve or sustain profitability or
positive cash flow from its operating activities. The Company may require
additional capital in the future for the exploitation of any discoveries, the
exploration and (if applicable) exploitation of additional blocks which it is
successful in acquiring and/or otherwise for its growth strategy and any
unforeseeable events, whether from equity or debt sources. There can be no
guarantee that the necessary funds will be available on a timely basis, on
favourable terms, or at all, or that such funds if raised, would be
sufficient. If additional funds are raised by issuing equity securities,
dilution to the then existing shareholdings may result. Debt finance providers
may impose onerous covenants on the Company. The level and timing of future
expenditure will depend on a number of factors, many of which are outside of
the Company's control. If the Company is not able to obtain additional capital
on acceptable terms, or at all, it may be forced to curtail or abandon its
growth strategy and intended operations. 
 
Risks relating to the Group's PSCs 
 
The Group has breached certain terms of its PSCs which give rise to a right
for MRPAM to terminate the relevant PSC and the Company is in discussions with
MRPAM as to the quantum of outstanding historic work programme obligations in
respect of Block XX. However, given that MRPAM have not exercised their right
to terminate the relevant PSC to date and the Group has recently been granted
extensions to its PSCs by MRPAM in relation to Blocks IV and V and Block XX,
the Company does not believe, based on this recent extension process, the
Company's experience of dealing with MRPAM and having taken legal advice from
Mongolian counsel that the risks of termination is material. 
 
The Company is currently finalising with MRPAM the re-issue of its technical
permit in connection with Block XX which is required in addition to the PSCs
in Mongolia to allow for exploration to take place. The relevant application
and payments have been made to MRPAM by the Company.  This has been confirmed
by MRPAM and the Company awaits issue of the relevant technical permit. Based
on the Company's experience of petroleum law in Mongolia and previous dealings
with MRPAM and having taken advice from Mongolian legal counsel, the Company
considers that the risk of MRPAM refusing to issue the relevant technical
permit is not material.  However, if the Company were to undertake exploration
work without a current technical permit for Block XX this may provide MRPAM
with a right to terminate the particular PSC. The Company has no intention to
undertake such work without the technical permit 
 
2. General industry-related risks 
 
Exploration risks 
 
The business of exploration for oil and gas involves a high degree of risk.
Drilling may result in unprofitable efforts, not only with respect to dry
wells, but also with respect to wells which, though yielding some
hydrocarbons, are not sufficiently productive to justify commercial
development. Furthermore, the successful completion of a well does not assure
a profit on investment or recovery of drilling, completion and operating
costs. 
 
Resource and reserve estimates and lack of an independent prospective
resources or reserves report 
 
Hydrocarbon resource and reserve estimates are expressions of judgement based
on knowledge, experience and industry practice. They are therefore imprecise
and depend to some extent on interpretations, which may prove to be
inaccurate. Estimates that were reasonable when made may change significantly
when new information from additional drilling and analysis becomes available.
This may result in alterations to development and production plans which may,
in turn, adversely affect operations.  The reserves and resources estimates
and the economic valuations of the Company's prospects on an NPV basis
contained in this Announcement are based on sources and information generated
by the Company and are not based on an independent prospective resources or
reserves report or any other independent source. 
 
Estimates of the possible hydrocarbon resources that might be hosted on the
licence areas where the Company has, or may in the future have, interests
should not be taken to imply that any hydrocarbon resources are present in
these structures. 
 
Title and other regulatory obligations 
 
The Company's exploration rights will be subject to applications for renewal
or grant or for an extension of the activities it covers, including to enable
exploitation in the event of a commercial discovery, (as the case may be). The
renewal or grant of the term of each PSC, or extension of its scope, is, or
may be, at the discretion of the relevant government authority. If a contract
is not renewed or granted, or if its scope is not extended, the Company may
suffer significant damage through loss of the opportunity to develop and
discover any hydrocarbon resources on that licence area. 
 
Under the contractual agreements to which the Company is or may in the future
become party, the Company is or may become subject to material payment and
other obligations. 
 
Moreover, as has historically been the case, if the Company does not meet its
work and/or expenditure obligations under the PSCs or any future permits
and/or licences in which it has a participating interest this may lead to
dilution of its interest in, or the loss of, the particular PSC, or other
permits or licences. 
 
The conduct of petroleum operations and the steps involved in the Company
acquiring its current interests involve or have involved the need to comply
with numerous procedures and formalities. It may not in all cases be possible
to comply with or obtain waivers of all such formalities. 
 
Reliance on Third Party Service Providers 
 
Oil and gas companies require third party service providers in order to
conduct operational activities. The Company has already contracted a rig for
two wells in Blocks IV and V. As the Mongolian oil and gas industry is small
and at a relatively early stage, there is a limited availability of oil and
gas services providers in Country, and there is no certainty that the Company
will be able to obtain service providers in a timeframe and at a cost that is
acceptable. 
 
Operating risks 
 
Exploration and development activities may be delayed or adversely affected by
factors outside the control of the Company. These include adverse climatic
conditions (including drought preventing the access to sufficient water for
drilling and other operations), the performance of joint venture or farm-in
partners on whom the Company may become reliant, compliance with governmental
requirements, shortage or delays in installing and commissioning plant and
equipment or import or customs delays. Problems may also arise due to the
quality or failure of locally obtained equipment or interruptions to services
(such as power, water, fuel or transport or processing capacity) or technical
support which result in failure to achieve expected target dates for
exploration or production and/or result in a requirement for greater
expenditure. Drilling may involve unprofitable efforts, not only with respect
to dry wells, but also with respect to wells which, though yielding some oil
or gas, are not sufficiently productive to justify commercial development or
cover operating and other costs. Completion of a well does not ensure a profit
on the investment or recovery of drilling, completion and operating costs. 
 
Industry operating risks include the risk of fire, explosions, blow-outs, pipe
failure, abnormally pressured formations and environmental hazards such as
accidental spills or leakage of petroleum liquids, gas leaks, ruptures or
discharges of toxic gases, the occurrence of any of which could result in
substantial losses to the Company due to injury or loss of life, severe damage
to or destruction of property, natural resources and equipment, pollution or
other environmental damage, clean-up responsibilities, regulatory
investigation and penalties and suspension of operations. Damages occurring as
a result of such risks may give rise to claims against the Company and its
partners which may not be covered, in whole or part, by insurance. 
 
Commercial risks 
 
Even if the assets in which the Company holds interests recover quantities of
oil or gas, there is a risk it will not achieve a commercial return. The
Company may not be able to transport the oil or gas to commercially viable
markets at a reasonable cost or may not be able to sell the oil or gas to
customers at a price and quantity which would cover its operating and other
costs. 
 
Environmental risks 
 
The operations in which the Company has interests are subject to the
environmental risks inherent in the oil and gas exploration and production
industry. The Company is subject to environmental laws and regulations in
connection with all of its operations. Although the Company intends to be in
compliance in all material respects with all applicable environmental laws and
regulations, there are certain risks inherent to its activities, such as
accidental spills, leakages or other circumstances, which could potentially
subject the Company to extensive liability. 
 
Further, any operator or contractor in relation to oil and gas operations may
require approval from the relevant authorities before it can undertake
activities which are likely to impact the environment. Failure to obtain such
approvals or failure to satisfy regular inspections may prevent the Company or
the operator from undertaking or continuing its desired activities. The
Company is unable to predict the effect of additional environmental laws and
regulations which may be adopted in the future, including whether any such
laws or regulations would adversely affect the Company's operations. 
 
Economic and price risks 
 
Changes in the general economic climate in which the Company operates may
adversely affect its financial performance and the value of its assets. In
particular, the current and expected future price of oil and gas can change
rapidly and significantly and this can have a substantial effect on the value
of the Company's assets and the potential future revenue and profits that
might be earned from the successful development of those assets. The
marketability of any oil and gas discovered will be affected by numerous
factors beyond the control of the Company. These factors include market
fluctuations, capacity of oil and gas pipelines and processing equipment and
government regulations including regulations relating to taxation, royalties,
allowable production, importing and exporting of oil and gas and environmental
protection. 
 
The demand for, and price of, oil and natural gas is highly dependent on a
variety of factors including international supply and demand, the level of
consumer product demand, weather conditions, the price and availability of
alternative fuels, actions taken by governments and international cartels, and
global economic and political developments. International oil prices have
fluctuated widely in recent years and may continue to fluctuate significantly
in the future. Fluctuations in oil and natural gas prices and, in particular,
a material decline in the price of oil or natural gas may have a materially
adverse effect on the Company's business, financial condition and results of
operations. Oil and gas prices could affect the viability of exploring and/or
developing the Company's interests. 
 
Development costs 
 
Estimated future development expenditure is based on certain assumptions with
respect to the method and timing of development. By their nature, these
estimates and assumptions are subject to significant uncertainties and,
accordingly, the actual costs may materially differ from these estimates and
assumptions. Accordingly, no assurance can be given that the cost estimates
and the underlying assumptions will be realised in practice, which may
materially and adversely affect the Company. 
 
Changes in law could materially prejudice the Company 
 
There have been examples in the past, which had a material adverse effect on
certain companies operating in Mongolia, of changes in laws at short notice
and with no or little public consultation. There is no certainty that
equivalent actions may not happen in the future in relation to laws or
regulations applicable to the Company. 
 
Lack of clarity of law and regulations 
 
Much of the legislation and regulations applicable to the Company's operations
is relatively new and untested by judicial process or otherwise. There can be
no certainty that interpretations or rulings of government bodies on which the
Company has relied may not be challenged by government agencies or others in
the future. If any such challenges were successful, this could materially
adversely affect the Company. 
 
3. Risks relating to the jurisdictions in which the Company operates or with
which it trades 
 
Emerging markets such as Mongolia are subject to greater risks than more
developed markets, and fluctuations in the global economy, particularly
emerging market countries, could disrupt the Company's business, as well as
cause the value of investments in Mongolia to decline 
 
The Mongolian market and the Mongolian economy are influenced by economic and
market conditions in other countries. Moreover, financial turmoil in any
emerging market country tends to adversely affect prices in capital markets of
all emerging market countries, including Mongolia, as investors move their
money to more stable, developed markets. As has happened in the past,
financial problems or an increase in the perceived risks associated with
investing in emerging economies could dampen foreign investment in Mongolia
and adversely affect the Mongolian economy and the Company. A loss of investor
confidence in the financial systems of other emerging markets may cause
volatility in Mongolian financial markets and indirectly, in the Mongolian
economy in general. Any worldwide financial instability could also have a
negative impact on the Mongolian economy. 
 
Selective or other government action may have an adverse effect on the
Company's business and the value of investments in Mongolia 
 
Governmental authorities have a degree of discretion in Mongolia and at times
appear to act arbitrarily. Government entities may also use common or minor
defects in official or other documentation to delay or invalidate the issue or
registrations of rights or licences or to void transactions. Competitors of
the Company may receive preferential treatment from the government and
government action, if directed at the Company's operations, could have a
material adverse effect on the Company's business, results of operations and
prospects and on the value of investments in Mongolia. 
 
Any such selective action relating to activities of the Company, for example
in relation to its proposed export route following any successful discovery,
could adversely affect the Company. In addition, in accordance with Mongolian
law, the Mongolian Government may prohibit, restrict or requisition production
of petroleum in any part of the territory of Mongolia for reasons of national
security, prevention of damage to natural oil reserves, and environment, or
protection of relics of historical and cultural importance. 
 
The government of Mongolia has traditionally exercised and continues to
exercise a dominant influence 
 
The Mongolia government has traditionally exercised and continues to exercise
a more dominant influence over many aspects of the economy than is the case in
some other countries. Its economic policies have had and could continue to
have a significant effect on the Company, and on market conditions and prices
of Mongolian securities, including securities issued by the Company. 
 
Corruption could materially prejudice the Company 
 
The Mongolian government campaigns regularly against crime and corruption,
however, the effectiveness of such campaigns is uncertain. While the Company
is not aware of unethical or criminal or corrupt activities affecting the
Company, nevertheless, surveys have indicated that there may be some
corruption in Mongolia. Corruption could potentially adversely affect the
Company, including, for example, if as a result a competitor to the Company
was able to achieve a benefit which the Company was not. Another example could
be false accusations of corruption or other alleged wrongdoing by the Company
or its officers, by news outlets, competitors or others in order to gain a
competitive advantage or for other reasons. 
 
Currency and foreign exchange risk 
 
The Company's principal operations are located in Mongolia, but the registered
office of the Company is in the Isle of Man. Both the Company's revenues and
the majority of its operational costs are denominated in US Dollars and so
exchange rate fluctuations between the Mongolian Tugrik and the US Dollar have
little impact on the Company. 
 
While most of the Company's financial obligations are denominated in US
dollars, a number of foreign currency effects may arise from exchange rate
movements. The Company does not engage in active hedging to minimise exchange
rate risk. 
 
Legal systems 
 
Mongolia and other jurisdictions in which the Company might operate in the
future may have less developed legal systems than more established economies
which could result in risks such as (i) effective legal redress in the courts
of such jurisdictions, whether in respect of a breach of law or regulation, or
in an ownership dispute, being more difficult to obtain; (ii) a degree of
discretion on the part of governmental authorities; (iii) the lack of judicial
or administrative guidance on interpreting applicable rules and regulations;
(iv) inconsistencies or conflicts between and within various laws,
regulations, decrees, orders and resolutions; or (v) relative inexperience of
the judiciary and courts in modern commercial matters. In certain
jurisdictions, the commitment of local business people, government officials
and agencies and the judicial system to abide by legal requirements and
negotiated agreements may be more uncertain, creating particular concerns with
respect to the Company's licences and agreements for business. These may be
susceptible to revision or cancellation and legal redress may be uncertain or
delayed. There can be no assurance that the PSC, joint ventures, licences,
licence applications or other legal arrangements will not be adversely
affected by the actions of government authorities or others and the
effectiveness of and enforcement of such arrangements in these jurisdictions
cannot be assured. 
 
Economic, political, judicial, administrative, taxation or other regulatory
factors 
 
The Company's current interests are in Mongolia where there may be a number of
associated risks over which it will have no, or limited, control. These may
include contract renegotiation, contract cancellation, economic, social, or
political instability or change, hyperinflation, currency non-convertibility
or instability and changes of laws affecting foreign ownership, government
participation, taxation, working conditions, rates of exchange, exchange
control, exploration licensing, petroleum export licensing and export duties
as well as government control over domestic oil and gas pricing. 
 
Foreign jurisdiction taxation 
 
The operations and activities of the Company in jurisdictions outside the Isle
of Man could expose the Company to income and/or capital taxes in
jurisdictions outside the Isle of Man which may have a substantial adverse
effect on the Company's business, financial condition and prospects. This will
depend, in part, on: 
 
·      the nature of the Company's income and operations in these
jurisdictions (carried on by employees of the Company or service providers on
behalf of the Company), including intra-group transactions; 
 
·      the attitude of the tax authorities in these jurisdictions; and 
 
·      the ability of the Company to claim treaty benefits under any
applicable income tax treaties between jurisdictions other than the Isle of
Man in which it carries on operations and activities. 
 
Anticipated dependence on Chinese exports 
 
A significant proportion of the Company's revenues in the event of a
successful development of its discoveries are expected to be generated by
exports to China. Any significant decline in the condition of the Chinese
economy, any import or export controls and/or the imposition of any import or
export duties could adversely affect any such exports and/or the financial
return which the Company would derive there from. 
 
4. Risks relating to the Placing 
 
Conditional nature of the Placing and Placing not underwritten 
 
The Placing is conditional on shareholder approval being granted at the
Extraordinary General Meeting and there is no guarantee that the conditions of
any element of the Placing will be satisfied. The Placing is not underwritten.
If any element of the Placing does not proceed then the Company will not
receive the proceeds in respect of that element of the Placing. 
 
Valuation of shares 
 
The Placing Price has been determined by the Company and may not relate to the
Company's net asset value, net worth or any established criteria or value.
There can be no guarantee that the Ordinary Shares will be able to achieve
higher valuations or, if they do so, that such higher valuations can be
maintained. 
 
Investment in AIM securities 
 
An investment in shares traded on AIM may be less liquid and is perceived to
involve a higher degree of risk than an investment in a company whose shares
are listed on the Official List. Prospective investors should be aware that
the value of the Ordinary Shares may go down as well as up and that the market
price of the Ordinary Shares may not reflect the underlying value of the
Group. Investors may therefore realise less than, or lose all of, their
investment. 
 
AIM Rules 
 
The AIM Rules are less onerous than those of the Official List. Neither the
FCA nor the London Stock Exchange has examined or approved the contents of
this document. Shareholders and prospective investors (as appropriate) should
be aware of the risks of investing in AIM quoted shares and should make the
decision to invest only after careful consideration and, if appropriate,
consultation with an independent financial adviser. 
 
Dilution of ownership of Ordinary Shares 
 
Shareholders' proportionate ownership and voting interest in the Company may
be reduced pursuant to the Placing. Subject to certain exceptions. 
 
Share price volatility 
 
The market price for the Company's Ordinary Shares is likely to fluctuate in
response to a variety of factors, many of which are outside the Company's
control. 
 
Potential investors should be aware that the value of securities and the
income from them can go down as well as up. 
 
The price which investors may realise for their holding of Ordinary Shares,
and when they are able to do so, may be influenced by a large number of
factors, some of which are specific to the Company and others of which are
extraneous. 
 
Investors should therefore consider carefully whether investment in the
Company is suitable for them, in light of the risk factors outlined above,
their personal circumstances and the financial resources available to them. 
 
This information is provided by RNS
The company news service from the London Stock Exchange