The Board of Alba Mineral Resources plc (the “Company” or “Alba”, and collectively with its Subsidiary Companies, the “Group”) is pleased to report the results for the year ended 30 November 2017.
This has been an exceedingly busy year for Alba. We have consolidated our interests in the UK onshore oil and gas sector by increasing our interests at the Horse Hill exploration project and at the same time completing the acquisition of a 5 per cent interest in the Brockham production licence. Significant strides forward have been taken at both those projects, not only as regards work on the ground but also in terms of the pursuit of key regulatory approvals as we and our partners seek to push those projects forward to production.
On the mining side, which of course is where Alba started out and which remains a key focus of our business, during the year we carried out a two-phase exploration programme at our high-grade Amitsoq graphite project in southern Greenland, and were able to report a significant new discovery. It is one of the most exciting and rewarding aspects of exploration work when you unearth a new find through exploration work. Sometimes that can be as a result of painstaking desktop reviews of historical and in-house technical data, but sometimes, as here, it can also be the result of having good people in your exploration team who keep an open mind when out in the field and have the skill to spot the signs of a potential new zone of mineralisation. That is how we made the Kalaaq graphite discovery.
Aside from Amitsoq, and given our positive experience in the Greenland mining sector, during the year we undertook a widespread review of mining opportunities in Greenland and this led us to apply for – and to be granted – three new projects, all in the north-west of Greenland. Most immediately exciting, I would say, is our 100 per cent owned Thule Black Sands project (“TBS”). This encompasses approximately 30 kilometres of coastline which is now known to host high-grade ilmenite mineralisation. I say “now known” because the TBS exploration licence was granted to us only last August, and just a month later, in September, having received of the support of the Mines Department in Greenland (the MLSA) to expedite our field application, we were out in the field working so that we could collect as many samples as possible to send to independent laboratories for analysis. The results of this initial testwork have very much confirmed that we were right to stake this ground in north-west Greenland.
Our strategy at Alba, where possible, is to target assets that have a production history, such as our high- grade Amitsoq graphite project, and also the Clogau gold project, the 49 per cent stake in which we acquired after the year end. Clogau has a long and illustrious production history; indeed most of the United Kingdom’s gold production has come from there. On the oil and gas side, when acquiring from Angus Energy a five per cent interest in the Horse Hill exploration licence back in 2015, we were attracted by the nearby Brockham production licence which Angus were majority owners of, and were able to negotiate, as part of the transaction with Angus, an option to farm in for 5 per cent of Brockham. I am very pleased to say that Brockham is now back in production – modestly to start with but we hope, in due course, in much greater volumes, and so at Alba we are now able to say that we are a participant in a producing natural resources project.
Now we are working to bring some of our other key assets through the exploration and development phase and into the mining and production phases in the years ahead. This is what we were formed to do as a company, and it remains a key objective for Alba as we seek to create real value for our shareholders.
I set out below my thoughts on the outlook for Alba in the year ahead, followed by a detailed review of activities.
Our objectives at Alba over the past few years have been to strengthen our asset portfolio by identifying assets with real potential to be brought into commercial production. This began within a few months of my appointment in 2014, when we made our first foray into the UK oil and gas sector with the acquisition of an initial five per cent interest in the Horse Hill consortium. Some four years later, having amassed an 18.1 per cent stake in the Horse Hill consortium, we are now the second largest shareholder in that consortium, as well owning as a five per cent interest in the Brockham Oil Field which has post financial year end brought the first production revenues since Alba was formed as a company. And on the mining side, we have strengthened our portfolio greatly, in particular as we now own 90 per cent of the high grade Amitsoq graphite project, and 100 per cent of the high grade Thule Black Sands ilmenite project, both in Greenland.
Having now developed what we consider to be a strong asset base, with a diversified mix of commodities in stable jurisdictions, we enter a year at Alba when we expect to see key development milestones reached at some of our key projects. At Horse Hill, once the final regulatory approvals are forthcoming, the Operator will commence long-term flow testing of the HH-1 well, which we hope will lead to a declaration of commerciality and, therefore, to an application for a production licence. At Brockham, as I write we await final approvals for Angus Energy, the operator at Brockham, to commence production at the key BR-X4Z well. In Greenland, we enter our first full field season at Thule Black Sands with the objective of building on the successful field and testwork programme we have undertaken to date.
In terms of market sentiment for the key commodities in which we are involved, the oil price has more than doubled from its 2015 lows and graphite is a key component of lithium-ion batteries demand for which is projected to increase with the forecast growth of the Electric Vehicle sector in the coming years. Ilmenite, meanwhile, is the primary source of titanium dioxide which is a multi-billion dollar market the growth in which is expected to be fuelled by demand from India, China and the Asia Pacific region.
For all these reasons, Alba is well placed for growth.
REVIEW OF ACTIVITIES
Horse Hill (Oil and Gas, United Kingdom)
The Horse Hill-1 well (“HH-1”) is located within onshore exploration licence PEDL 137, on the northern side of the Weald Basin near Gatwick Airport. Alba owns a 18.1% direct interest in Horse Hill Developments Limited (“HHDL”). HHDL is a special purpose company that owns a 65% participating interest and operatorship of Licence PEDL137 and the adjacent Licence PEDL246 in the UK Weald Basin. The remaining 35% participating interests in the PEDL137 and PEDL246 licences are held by a subsidiary of US-based Tellurian Inc. (formerly known as Magellan Petroleum Corporation). Alba’s effective interest in the licences is therefore 11.765%.
The key development at Horse Hill during the reporting year was the decision by Surrey County Council’s planning committee in October 2017 to grant planning permission to enable HHDL to carry out extended well tests (“EWTs”) at HH-1 as well as to drill and test both a sidetrack from the existing HH-1 well and a new well HH-2. With regulatory approval having also been received from the Environment Agency, the objective, once approval is granted by the Oil and Gas Authority (“OGA”), is to carry out a 150 day EWT programme comprising 30-40 days of testing at the Portland sandstone reservoir and 30-40 days of further testing at each of Kimmeridge limestone reservoirs KL-3 and KL-4.
As commercially viable initial flow rates were established by the 2016 flow tests (equating to 1,688 barrels of oil per day (“bopd”) in total, the 2018 testing programme’s goal is to confirm that HH-1’s reservoirs are each connected to a commercially viable oil volume, thereby enabling a declaration of commerciality to be made. Testing will commence with the Portland reservoir which, given the 323 bopd stable pumped rate achieved in 2016 and the 32 million barrels most likely OIP calculated by Xodus in 2017, is considered a strong candidate for commercial viability.
At the end of the reporting year, we announced that we had completed the acquisition of a 3.1 per cent shareholding interest in HHDL held by Regency Mines Plc. This has cemented Alba’s position as the second largest shareholder in HHDL with 18.1 per cent.
In prior years, the directors considered that it was not possible to determine a reliable value for the Group’s investment in HHDL as the range of reasonable fair value measurements was significant. However, by reference to recent HHDL share transactions where there has been no substantial variation in the range of values applied to those transactions, the directors judge that it is possible to estimate a reliable fair value for the investment (see note 9). This change in estimation technique has resulted in a gain on investments in the year of £700,000. Estimates are inherently subjective, as is the determination as to whether a valuation can be reliably made, and hence whether the investment should be held at cost or at valuation. The position will be kept under review.
Brockham (Oil and Gas, United Kingdom)
Alba holds a 5% interest in Production Licence 235 (“PL 235”), which comprises the onshore Brockham Oil Field, which is located just to the north-west of the Horse Hill licences in the Weald Basin in Surrey, southern England.
The key development at Brockham during the reporting year was the completion of drilling at the BR-X4Z well, following which the Operator, Angus Energy, announced that, following extensive analysis of the results from the well, its intention was to bring the Kimmeridge into production at the existing Brockham production facility as soon as the necessary OGA approval was in place. The BR-X4Z well, drilled to a total depth of 1,391m, was planned to evaluate the Portland, Corallian and Kimmeridge formations at Brockham, including an evaluation of the Kimmeridge reservoir that had been demonstrated by the Horse Hill discovery 8 km to the south.
The Operator confirmed that the preliminary results from the BR-X4Z well confirm very similar thickness of reservoir and properties to those reported at Horse Hill, with the gross thickness of the Kimmeridge formation in BR-X4Z being some 385m. The information obtained has confirmed not only evidence of natural fractures in the two main limestones intervals previously tested at Horse Hill, but also confirmed abundant natural fractures in sections of interbedded shales and limestones between and below the two main limestones. Around 200m of the reservoir has this potential.
As reported below, in March 2018 production was resumed from well BR-X2Y and we await the receipt of planning permission for the continued surface activities of the production plant which is required to enable production to commence from well BR-X4Z.
Greenland Mining Projects (Amitsoq, Thule Black Sands, Inglefield Land, Melville Bay)
The principal activities in Greenland during the year have been focused on further exploration work at our high grade Amitsoq graphite project in southern Greenland, as well as undertaking a maiden field programme at our new Thule Black Sands project in north-west Greenland.
At Amitsoq, we were very pleased to have discovered a new graphite zone during the summer 2017 field season. This new discovery, which we have called Kalaaq, consists of multiple thick graphite layers covering a distance of at least 460 metres. The structural mapping our technical team carried out in the field last summer has been used to help predict the thickness and distribution of graphite at depth, which has enabled us to refine the location of proposed drilling sites. The logical next steps at Amitsoq will include carrying out a maiden drilling campaign to confirm structure and thereafter to seek to define a maiden JORC resource.
During the reporting year, Alba was awarded new exploration licences at Thule Black Sands (ilmenite), Inglefield Land (multi-commodity) and Melville Bay (iron ore). All the licences are situated in north-west Greenland, meaning the Company can benefit from logistical economies in its exploration work in that part of Greenland. Our focus this coming field season in north-west Greenland will be on pushing forward with our prospective Thule Black Sands project, while at the same time undertaking a maiden field campaign at Inglefield Land, targeting copper, cobalt and gold, among other minerals and metals.
At Thule Black Sands, a maiden exploration programme was completed towards the end of the reporting year. This work confirmed the presence of active beach environments with heavy mineral sands being actively deposited, along with raised beach terraces containing heavy mineral sand. Following laboratory testwork, it was confirmed that the samples taken from the project showed a weighted average Total Heavy Mineral (“THM”) content of 46.7%. Seven composite samples which were generated of the Heavy Mineral Concentrate from the project showed an in-situ ilmenite content averaging 10.0% and ranging from 5.7% to 14.9%. Ilmenite-bearing sands were found to occur over a combined sampled strike length of approximately 8.5 km. Mapping and aerial photography of the project coastline showed the potential for ilmenite-bearing sands over the full length of the project coastline, being approximately 22 km in length.
Other mining projects (Ireland, Mauritania)
The exploration licence in the Limerick Basin is highly prospective for zinc, lead and silver and is only 10 km away from and part of the same target unit as the Pallas Green zinc discovery. During the reporting year, we reported the results of a microgravity study and portable XRF shallow soil sampling programme at our Limerick project. The assay results confirmed four main areas of anomalism. The most pronounced anomalism for copper-silver-arsenic (Cu-Ag-As) is similar to that found at former Gortdrum copper-silver (Cu-Ag) mine 25 km due east. Gortdrum was mined for copper-silver-mercury (Cu-Ag-Hg) between 1967 and 1975, producing 3.8 million tonnes containing 1.19% Cu and 25.1 g/t Ag.
In relation to Mauritania, prior to the reporting year Alba submitted an application to the Mauritanian authorities to take out a new uranium exploration licence over a reduced area within the original licence area. This new application area includes the centre of the previously discovered and announced high-tenor uranium anomalies. The application is currently being processed by the Mauritanian authorities. If a new licence is issued, Alba and its joint venture partner will then consider their options regarding funding the next stage of exploration. The continued development of the Mauritania exploration activities is dependent on the grant of a new licence. Because of the continuing uncertainty regarding precisely when the new licence will be granted and, given the length of time that has elapsed to date, the Directors have decided that it is prudent to impair the Company’s investment in the Mauritania project. This gives rise to a non-cash charge in the year of £569,218 (2016 – £nil) bringing the carrying value of the assets associated with the Mauritania uranium project to nil.
Our corporate activities in the year have been primarily focused on securing the Company’s interests in its projects, notably moving to a 90 per cent holding at Amitsoq and exercising the Company’s option to earn 5 per cent of the Brockham Oil Field. In addition, the Company undertook a single capital raising round during the reporting year, raising just over £1 million.
The auditor’s report for the year ended 30 November 2017 includes a paragraph relating to a material uncertainty as to whether further funding can be obtained to enable the Group to continue as a going concern and to continue its exploration activities. However we have a reasonable expectation that the Group will continue to be able to meet its commitments for the foreseeable future, in particular by raising funds when required from the equity capital markets.
The Company announced at the Annual General Meeting on 30 May 2017 that Michael Nott was to step down as CEO effective 1 June 2017. Mike has remained on the Board as a non-executive director and continues to give Alba the benefit of his considerable experience and wise counsel. The Company also strengthened its team with the appointment in October 2017 of senior geologist Howard Baker as Alba’s Technical Director.
EVENTS AFTER THE REPORTING PERIOD
Acquisition of Stake in Clogau Gold Project
On 4 December 2017 Alba announced that it has acquired a 49 per cent interest in Gold Mines of Wales Limited (“GMOW”), the ultimate owner of the Clogau Gold Project situated within the Dolgellau Gold Belt in Wales, United Kingdom (the “Clogau Project”). The Clogau Project comprises the Clogau Gold Mine and includes a large number of highly prospective gold targets and former gold workings within a total option area of 106.94 km².
The Dolgellau Gold Belt has produced about 131,000 oz of gold, by far the most of any region within the United Kingdom. Most of this gold (81,000 oz) has been exploited from the historic Clogau-St David’s mine that lies within the Clogau Project area. Alba’s review of the Clogau Project concludes that there is high potential to find unworked veins containing gold mineralisation of similar grade to that known in historic mines in the area. The focus will be on bringing the Clogau Gold Mine back into production and also making a push into the regional exploration of the wider Project area.
Very little contemporary gold-focused exploration has been undertaken in the region. Based on the outcome of its review, Alba has concluded that there is a high potential within the Clogau Project area to find unworked veins containing gold mineralisation of similar style and grade to that known in historic mines in the area. This includes near-mine exploration targets and new regional targets.
Significant work initiated and/or completed by Alba at Clogau since acquisition includes a 3D geological model being constructed for the entire licence area and existing mine workings, detailed underground surveying being completed by means of 3D scanning, a preliminary mine plan being generated and primary targets for regional gold exploration being refined for the forthcoming field programme.
Horse Hill (Oil and Gas, United Kingdom)
In March 2018 Alba announced that it had been informed by HHDL, the operator of Horse Hill licenses PEDL137 and PEDL246, containing the Horse Hill-1 (“HH-1”) oil discovery, that Surrey County Council had confirmed the discharge by HHDL of all of pre-commencement planning conditions.
At the date of publication of these accounts, HHDL has received the necessary permission from the Environment Agency and, to our knowledge, is awaiting approval from the Oil and Gas Authority, following which it will be able to commence the planned 150 day EWT programme at Horse Hill.
Brockham (Oil and Gas, United Kingdom
In March 2018 Alba announced that the Operator, Angus Energy, had confirmed the resumption of continuous production from the Portland Reservoir of the BR-X2Y well at Brockham, at a production rate of 21 bopd but that it expected this flow rate to increase to roughly 35 bopd, albeit that a natural decline in production rates is expected over time.
In addition, the Operator advised that it had submitted a normalisation planning application to Surrey County Council (“SCC”) for the continued surface activities of the production plant required for well BR-X4 (and its inclusive component BR-X4Z). The Operator further advised that it was awaiting SCC’s completion of its process. As at the date of publication of these accounts, we await a further update from the Operator.
Greenland Mining Projects (Amitsoq, Thule Black Sands, Inglefield Land, Melville Bay)
After the end of the reporting year, we reported the geochemical assays from the Amitsoq project in southern Greenland. This included graphitic carbon content at the new Kalaaq discovery averaging 25.62% carbon, with a maximum content of 29.0% carbon.
In March 2018 we announced that Alba’s Amitsoq graphite licence had been renewed to Alba for a further five-year period and that the Government of Greenland had granted a 12 month moratorium on the exploration expenditure commitment attaching to the Amitsoq licence. Further metallurgical testwork confirmed the ability to produce a marketable grade concentrate from Amitsoq graphite.
At Thule Black Sands, Alba announced the completion of the compilation by GEUS, the Geological Survey of Denmark and Greenland, of a georeferenced orthophoto and digital elevation model across the project area.
Alba announced after the end of the reporting year that it had been granted a mineral exploration licence in Inglefield Land, north-west Greenland, close to Alba’s existing Inglefield licence area. Extensive exploration has been carried out across Inglefield Land by previous operators in the region as well as by GEUS, and the historical data on Alba’s combined Inglefield Land ground includes assay results confirming the presence of copper, gold, cobalt, vanadium and nickel. GEUS has identified that Inglefield Land has the potential for copper-zinc volcanogenic massive sulphide (VMS) deposits, which are associated with and created by volcanic-associated hydrothermal events in submarine environments. Previous extensive surface sampling has reported anomalous copper (up to 1.39%), gold (up to 1.7g/t), cobalt (up to 0.16%), vanadium and nickel.
In March 2018, Alba announced two senior oil and gas appointments. Sue Corrigan joined as Alba’s Technical Consultant – Oil & Gas. Ms Corrigan is a Geologist and Geoscientist with 40 years’ industry experience in both Exploration and Development geology. In addition, Feroz Sultan was appointed as Alba’s Special Adviser – Oil & Gas. Mr Feroz Sultan is a petroleum geologist with over 40 years of diverse experience in the management, exploration, development and production of oil and gas.
Also in March 2018, the Company announced that it had raised £750,000 (before expenses) in a share placing.
I would like to thank all our shareholders for their continued support.
This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014.
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