Operating Result for the year
The after tax operating result, including unrealised losses on the share-trading portfolio, was a loss of $2,765,000 (2011 profit of $2,783,000). An analysis of the trading result is provided in the table below:
Disregarding unrealised gains and losses, the operating outcome for the year was a pre-tax loss of $728,000 (2011 profit of $3.134 million)
Issued capital of 23,490,449 shares was unchanged during the period.
Shareholders’ Funds decreased during the period from $7,925,000 to $5,160,000.
It was another quiet but positive year for Widespread Portfolios.
Asian Minerals is experiencing something of a renaissance with the recent installation of Pala Investments (a Swiss investment fund actively involved in the minerals sector) as the controlling shareholder. Pala brings cash and management expertise to the table and the future for AMR is now very much brighter.
King Solomon Mines is again in the middle of its field season in Inner Mongolia and is presently drilling at Bu Dun Hua.
However, the shining star in the portfolio has again been Chatham Rock Phosphate (CRP). The market capitalisation of this company has risen from $1.7 million in March 2009 to $16.7 million at the time of writing. This is 4.5 times greater than the market value of Widespread Portfolios.
CRP Operating highlights
CRP has achieved another year of major milestones progressing the Chatham Rise rock phosphate development project.
The Company achieved considerable success in raising further equity to finance the work programme and made enormous advances towards the key objective of starting to mine the deposit in 2014.
The two main focuses this year have been the significant interaction with Boskalis on their detailed designs of the phosphate recovery system, and preliminary work required before application is made for a mining licence and a marine consent.
Very detailed information is required for these two approvals and it involves highly technical scientific and engineering evaluation as well as widespread on-going consultation with a range of government and non-government organisations including the trade, resource, primary industry, environmental, conservation, iwi and community sectors.
In addition CRP has been building its public profile in the investment and industry sectors, both in New Zealand and internationally.
The progress achieved demonstrates the determination and enthusiasm of a highly skilled project team with a wealth of technical and commercial experience.
In June 2011 CRP raised a further $1.6 million from the exercise of all the June 2011 options.
In late 2011 a decision was made to delay an Initial Public Offering on an international stock exchange (because of poor market conditions) and to fund on-going activities by seeking existing shareholder support by means of a share purchase plan. This raised approximately $325,000 and in addition placements of 986,110 shares were made to qualified investors at 20c per share.
In February 2012 agreement was reached with United States-based private equity fund Subsea Investments that they would progressively invest $USD 6 million in the company. At the time of writing US$5.3 million of this had been invested.
As part of that investment, Subsea also holds 30 million options which, if all exercised, would generate an additional $US9 million in new capital for CRP.
Although it remains a priority to secure full funding for the project, CRP is considering alternative ways of financing this progressively through to the start of mining. These options still include an IPO on an international market when market conditions improve. Whichever option is selected, CRP can act quickly because the documentation is well advanced, having prepared a draft prospectus and a project technical report.
As part of building the company’s presence in international capital markets, CRP has entered an arrangement with Edison Investment Research to produce independent research over the next year. Edison is one of the largest companies of its type worldwide with more than 300 corporate clients, including a big focus on mining research with nine dedicated analysts and coverage of 75 mining companies on major exchanges around the world.
CRP decided to invest in the research as investors and share brokers often ignore the Company as an investment opportunity. This is because regulations governing financial advisers tend to discourage them from making recommendations as if third party research on the company exists.
Oil and Gas Interests
PEP 38526 - Kotuku
PEP 38526 is located north of Lake Brunner, on the West Coast, South Island. The permit covers the northern half of the Kotuku Structure and a significant portion of the associated Grey Valley Trough.
As part of the work programme previous holder Widespread Energy drilled a stratigraphic exploration bore in mid-March 2010. The aims of the bore were to confirm the shape of the Kotuku anticline, recover samples of the rock strata and determine the nature of any fluids contained within it.
While the target depth of 250 metres was not reached, the persistent oil shows that occurred between 21 metres and 90 metres were of considerable interest.
Widespread Portfolios became the new permit holder on 31 March 2011 and subsequently undertook a detailed analysis of the permit data.
It has now been determined and finally agreed with NZ Petroleum & Minerals that the next logical steps in an exploration programme are:
- An ERT (resistivity) survey
- Reprocessing of existing seismic data
Electrical Resistivity Tomography (ERT) survey
Measuring the resistivity of hydrocarbon bearing rocks is well documented and is one of the most common and sensitive geophysical methods applied when exploring for hydrocarbons.
Relative to water saturated rocks, hydrocarbon rocks show an increase in resistivity and as such a zone of high resistivity may indicate the presence of hydrocarbons.
Resistivity surveys are used when exploring for oil and gas and have been applied in both on and offshore environments for oil and gas.
A resistivity survey will complement existing well and seismic data and provide an indication of the extent and persistence of any shallow oil accumulation at Kotuku.
Compared with drilling a well, a 2D resistivity survey will explore a larger area.
Worley-Parsons Canada has recently been contracted to undertake the ERT survey. The company has extensive experience in land based ERT methods and has worked in various locations around the world acquiring resistivity data for the oil and gas industry.
The survey is expected to commence before the end of June.
Output of the programme & the way forward
A successful outcome of the survey and the seismic re-processing would be the identification of drilling targets that could offer a much greater certainty of success than has been the case in the past. With these potential targets in hand, Widespread would seek to extend the exploration licence and undertake an active drilling programme early in the new term.
Financing of the exploration programme
The exploration programme can be financed from existing cash resources and the sale of existing investments. However, depending on the level of interest displayed by our shareholders, some consideration is being given to a share purchase plan or other forms of equity finance.
Widespread holds approximately 8.5 % of Akura Limited, a Fijian-based petroleum exploration company.
Akura was granted three Oil Exploration Licences (OELs) totalling ~17,000 km2 in August, 2009 and has carried out a detailed petroleum data recovery exercise, reprocessing, digitising and reinterpretation of previous seismic data and a review of past oil and gas exploration data, including the drilled wells and reported seeps.
As a direct result of Akura research the hydrocarbon soil gas (HSG) sampling by Royal Oak of 1,000 samples around Fiji in 1998 was purchased and imbedded into the Akura Fiji petroleum data base.
In late 2011 Akura collected 1006 HSG samples mainly from around Nadi (914) and some (92) around Nausori.
Results from Nadi were spectacular, with very high butane, pentane and hexane values indicative of significant oil reservoirs. Results from Nausori area were more subdued, but also indicative of reservoired oil. The reservoirs are at an unknown depth, but probably less than 1,000m and, in Nadi, some could be as shallow as 300m.
As a result, Akura will re-focus its attention to the onshore oil potential of Viti Levu and has applied for part of the reportedly revoked OEL 2/2008 as CX 788 and CX 790.
These applications cover a number of oil indicative HSG anomalies and a large sedimentary basin suitable for oil generation.
Trading since Balance Date
Once again the new financial year has opened on a very quiet note. The pre-tax operating result for the first two months is a small loss.
The milestones we would like to achieve in the next 12 months include:
- The listing and successful IPO of Chatham Rock Phosphate Limited on an overseas market and continued progress of project objectives
- Advances for the Akura, and Kotuku oil and gas prospects
- Exploration success for King Solomon Mines in Inner Mongolia
- An increase of at least 50% in the Widespread net asset backing per share
- A positive trading result for the year.
The Annual General Meeting of shareholders will be held at 5pm, 29 July at Mac’s Function Centre (Odlin’s Building), Taranaki Street Wharf, Wellington
Auditors & Dividend
WHK have confirmed their willingness to continue in office as Auditors to the Company.
The directors do not propose to recommend a dividend in respect of the period under review. This is in accordance with the Company’s stated core philosophy concerning dividends.
For and on behalf of the Board,
Linda J Sanders
Chris D Castle