PEP-11 Legal Risks Loom as MEC Resources Launches Director-Backed Option Placement

Background and Offer Details

MEC Resources Ltd (ASX – MMR) has issued a prospectus dated 2 December 2025, inviting eligible Australian holders of its expired MMRO options to participate in a placement of up to 359,162,152 new options. Priced at $0.001 each, this placement aims to raise approximately $359,162 before expenses. The new options will be exercisable at $0.03 each and will expire 12 months from their issue date.

In addition to the public offer, the company will issue 14,373,453 new options to directors David Breeze and Peter Richards to offset outstanding director fees totaling $14,373. This director participation was approved by shareholders at the recent Annual General Meeting.

Capital Structure and Use of Funds

The offer will significantly increase the number of options on issue from approximately 8.5 million to over 382 million, although no new shares will be issued immediately. The funds raised, net of estimated expenses of around $30,000, will be allocated to general working capital to support ongoing operations and development activities.

Importantly, the offer is not underwritten, and any unsubscribed options will be available under a shortfall offer for up to three months following the closing date. The company intends to list the new options on the ASX, provided there are at least 50 holders.

Operational and Legal Risks

MEC Resources continues to face significant operational risks, primarily stemming from its investment in Advent Energy Ltd and its subsidiary Asset Energy Pty Ltd, which holds an 85% interest in the PEP-11 offshore natural gas exploration permit in the Sydney Basin. The permit's future is uncertain due to ongoing legal proceedings challenging the refusal of permit extension and work program suspension applications by the National Offshore Petroleum Title Authority and the NSW Offshore Petroleum Joint Authority.

The Federal Court has temporarily suspended the authorities’ decision pending a judicial review hearing scheduled for February 2026. The outcome of this litigation could materially affect MEC’s investment value and future prospects.

Governance and Director Participation

Directors David Breeze and Peter Richards will participate in the option placement on the same terms as other eligible participants, with their entitlements satisfied by offsetting outstanding fees. The company maintains protocols to manage potential conflicts of interest, given some directors’ roles in related entities.

The company remains a registered Pooled Development Fund, which provides certain tax advantages but also subjects MEC to regulatory compliance risks. Continuous disclosure obligations require MEC to keep the market informed of material developments, including the progress of the PEP-11 litigation and any changes in its financial position.

Market Context and Outlook

Shares in MEC Resources have traded between $0.004 and $0.008 over the past three months, with the last price at $0.005 as of 2 December 2025. The new options offer a low-cost entry point for investors to maintain exposure to MEC’s portfolio, albeit with the inherent risks of exploration and legal uncertainty.

Investors should consider the speculative nature of the offer, the company’s reliance on the outcome of the PEP-11 permit judicial review, and the potential dilution effects if options are exercised. The company’s ability to secure additional funding and manage operational risks will be critical to its future performance.