Rose Petroleum plc

Operational Update

13-January-2015

Rose provides a detailed operational update on the current activities taking place within both its oil and gas and mining divisions.

Rose Petroleum plc, the AIM-listed (Ticker: ROSE) natural resources company, is pleased to provide a detailed operational update on the current activities taking place within both its oil and gas and mining divisions.

Overview

  • On-going drilling programmes in both oil and gas basins of the prospective Mancos and Paradox plays in Utah - current project resource base of 1.8 billion barrels of oil and 6.45 trillion cubic feet of gas (mean gross un-risked prospective recoverable resource)
  • Highly competitive breakeven cost of below US$20 per barrel of oil equivalent due to excellent infrastructure and low entry cost, as well as low well costs relative to produced volumes of oil and gas
  • Revenue generation from gas production following recent acquisition in the Cisco Dome field - updated Competent Person's Report expected in Q1 2015
  • Further revenues from commencement of additional gold-silver production in Mexico with added exploration upside from porphyry copper and molybdenum projects
  • News flow in 2015 will include: drilling results; updated resource figures; and production updates


Matthew Idiens, CEO, commented:
"We continue to make excellent progress across our diverse multi-commodity portfolio. With regard to our oil and gas assets, our low breakeven costs of below US$20 per barrel of oil equivalent for both licence areas ensures that the fundamentals remain positive as we look to bring these assets into production in spite of the current low oil price environment.

"In tandem with the advances in the Mancos and Paradox projects, we have recently moved into the production phase at our additional gold/silver asset in Mexico which will generate cash flow for the business. Cash remains key, and, notwithstanding the challenging market conditions, we recently raised £3.5 million, which is being further supplemented by revenues from the Cisco Dome gas project and the sale of our interest in the Wate uranium project.

"The next few months will see high impact news flow with: drilling results; an updated CPR which is expected to add Proven Reserve estimates from our Cisco Dome Field to our already significant Resource Estimates; as well as production and exploration updates from our mining assets.

"Finally, we will be keeping a close eye on how market conditions develop and are looking to conserve cash and increase operational efficiencies as far as we can to ensure that we are optimally positioned to deliver on our strategy to create value for shareholders. I look forward to providing further updates across our portfolio in the coming weeks."

US Oil and Gas Operations

Rose has a 75% working interest in over 245,000 gross acres in two oil producing basins in Grand and Emery Counties, Utah, the Paradox Basin and the adjacent Uinta Basin Mancos play. On-going activity is currently taking place in both basins.

State 1-34 Mancos Well - Uinta Basin
The State 1-34 Mancos Well was spudded at the end of December 2014, as announced on 31 December 2014. The larger rig has since been moved onto the site and erected and will begin drilling out from under the surface casing, with a projected total depth of approximately 3,200 feet.

As previously outlined, Rose initially used a smaller rig to spud the well in order to reduce costs but the larger rig will now be used to drill the balance of the well to total depth. The Company plans to take two whole cores across the Mancos formation to be analysed in Q1 2015, in order to gather data to optimise the horizontal well and fracture stimulation designs, which are planned for Q2 2015. It is also planned to test potential conventional targets below the Mancos Shale during this vertical programme, at minimal additional cost.

State 16-42 Paradox Well - Paradox Basin
In late December 2014, the Company announced that it had perforated the first interval of a planned seven-interval programme, covering a total of 19 individual potential pay zones in the State 16-42 Paradox well in the Gunnison Valley Federal Unit.

Each of the seven intervals, consisting of one or more zones, will be perforated separately and then isolated with retrievable bridge plugs. Once all of the intervals have been perforated and the individual data collected, the retrievable bridge plugs will be removed and the collective intervals will be tested together. The entire completion process for the well is estimated to take the majority of Q1 2015 to finalise, which is in line with the Company's original timetable.

One of the primary goals of the completion of the 16-42 vertical well is to collect as much reservoir data as possible from each interval. The completion process on all the intervals is expected to be finalised by the end of Q1 2015. The reservoir data collected will assist Rose in the planning and design of its first horizontal Paradox well which will take place after a 3-D seismic survey has been shot and interpreted. The 3-D seismic survey is currently being permitted and shooting is planned to begin in late Q3 or early Q4 of 2015. Using the 3-D seismic data, a location will then be selected for a horizontal well with the permitting process taking approximately six months. The completion of the 16-42 vertical well is expected to enable Rose to achieve its twin goals of increased production and reserves.

Mining Operations

Rose continues to make considerable progress on its mining portfolio which is operated under its wholly owned subsidiaries Minerales VANE S.A. de C.V. ('MV'), which operates in Mexico, AVEN Associates LLC ('AVEN'), which operates the US base and precious metals projects, and VANE Minerals (US) LLC ('VANE'), in which the uranium assets are held.

Mina Charay gold-silver project, Mexico
Since the commencement of production on 18 December 2014, activity has continued seamlessly. An estimated total of 400 tonnes of ore have now been mined, which will be transported to MV's San Dieguito de Arriba Mill ('SDA') at Acaponeta in the State of Nayarit. MV plans to process a pilot run of approximately 350 tonnes through SDA scheduled by the end of January, to optimise recovery rates. Mining is currently on-going in a portion of the vein measuring 2.2 metres in width, which is consistent with expectations. MV plans to mine three faces simultaneously at Mina Charay to provide ore to run the SDA at full capacity, which is anticipated by the end of Q1 2015.

MV's in-house estimate of mineable grade (including dilution) at Mina Charay is 10 grams per tonne ('g/T') gold and 60g/T silver, with a planned mining rate of approximately 100 tonnes per day by the end of Q1 2015. Total resources based on an in-house re-evaluation at current metals prices, are 29,000 ounces ('oz') gold and 173,000 oz silver contained in 90,000 tonnes. The forecast production cash cost is US$699 gold equivalent based on US$1,200 gold for a projected minimum mine life of three years. It is also planned that the production from Mina Charay will fund the exploration programme of the Tango porphyry targets as outlined below.

The Mina Charay project is operated under a joint venture agreement (the "JV") with Minera Pafex S.A. de C.V. ("Pafex"). The terms of the JV specify a 60:40 (MV:Pafex) profit split on production.

Tango concessions porphyry copper-molybdenum and narrow-vein precious metals project, Mexico
The application process for permits to drill exploration holes is underway on the porphyry copper and porphyry molybdenum ("moly") targets as well as on the gold-silver vein of the San Agustin Mine on the Tango concessions located in southern Sinaloa, Mexico. MV is targeting having the permits in place and to complete the drilling prior to the upcoming rainy season in July 2015. A two-hole diamond drilling programme is planned for the porphyry copper target, a three-hole programme on the porphyry moly target and up to 10 holes on the San Agustin vein. The drilling planned by MV is the first drilling to be conducted on these porphyry targets. The drilling programme planned for the San Agustin vein is for the purpose of identifying additional mineable resource for SDA.

The Tango project is operated under the terms of a joint venture and option agreement (the 'Agreement') with Minera Camargo S.A. de C.V. ('Camargo') in connection with Camargo's Tango, Tango 2, Tango 3 and Tango 5 concessions (as announced on 10 September 2014). The concessions host two 'drill-ready' porphyries, one containing copper and the other molybdenum mineralisation as well as several historic high-grade, narrow-vein gold and silver mines on the margin of and associated with the porphyries.

The Agreement with Camargo is to further explore the two copper and molybdenum-bearing porphyries (base metals) and separately to seek to develop production on the high-grade gold and silver veins (precious metals) to provide ore to the MV's SDA. The terms of the Agreement include a 75% earn-in option for US$5 million spent over five years on the porphyry targets (base metals) and a 50:50 profit split on gold/silver production from mines within the property (precious metals). The concession area covers a 3,954 hectares (39.54 km²) land position on which two previously undrilled, but drill-ready porphyry targets as well as near-term production potential from the surrounding gold and silver veins are identified. The Tango project also offers additional exploration potential to be evaluated further.

VANE Minerals (US) LLC, ("VANE") USA - Uranium

As announced on 2 January 2015, Rose's wholly owned subsidiary VANE has entered into an agreement with Energy Fuels Resources whereby VANE will sell its 50% interest in Wate Mining Company LLC which holds the Wate breccia pipe uranium project in northern Arizona. Under the terms of the agreement Rose will receive consideration of US$1.5 million consisting of US$750,000 in cash on closing and a 2% contractual royalty capped at US$750,000. Closing is set for 16 January 2015. The transaction is consistent with the Group's previously announced decision to divest its uranium assets. Rose continues to seek opportunities to divest its remaining uranium assets, notably the 50% interest in the VANE-U1 exploration joint venture in northern Arizona and the North Wash project and Section 32 State Lease in Utah, all held in the VANE subsidiary.