REG - Mineral & Financial - Audited Results for Year Ended 30 June 2023
20/12/2023 17:30
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RNS Number : 5256X Mineral & Financial Invest. Limited 20 December 2023
Mineral and Financial Investments Limited
Audited Full Year Financial Results and NAV for Period ended 30 June 2023
HIGHLIGHTS
· Fiscal Year-end Net Asset Value £ 9.4M (FYE: 30/6/23) up 26.5%,
from £7.5M (FYE: 30/6/22)
· Net Asset Value Per Share ("NAVPS") fully diluted 24.27p, up 21.1%,
from 20.04p (FYE: 30/6/22)
· Net Asset Value has increased at Compound Annual Growth Rate of
29.1% since 30 June 2018
· Investment Portfolio now totals £9.1m, up 18.7%, Year/Year from
£7.7M (FY: 30/6/22).
· NAVPS growth has exceeded that of the FTSE 350 Mining index and of
the S&P GSCI since 2017
Camana Bay, Cayman Island - 20 December 2023 - Mineral & Financial
Investments (LSE-AIM: MAFL) ("M&F" or the "Company")) is very pleased to
announce its audited Net Asset value and fiscal year results on its
activities for the 12 months ended 30 June 2023.
CHAIRMAN'S COMMENTS
During the 12-month fiscal period ending 30 June 2023 your company generated
Gross Income of £2.394 million which translated into an Operating Profit of
£1.806 million. Net Profit for the full year was £1.550 million or 4.35p per
share basic or 4.03p per share on a Fully Diluted ("FD") basis for the period.
At the year-end of 30 June 2023, our Net Asset Value (NAV) was £9.423M an
increase of 26.4% from the 30 June 2022 NAV of £7.454M. The NAV per share -
fully diluted (NAVPS-FD) as of 30 June 2023 was 24.27p, up 21.1% from the 30
June 2022 was 20.04p. Since 30 June 2018, our NAV FD has appreciated on
average by 26.5% annually. We continue to be effectively debt free, with
working capital of £9.542M.
Summary of Financial Performance (Fig. 1)
30 June 2018 30 June 2019 30 June 2020 June 30 2021 June 30 2022 June 30 2023 CAGR (%)
Net Asset Value ('000) £2,623 £5,114 £5,474 £6,438 £7,454 £9,423 29.1%
Fully diluted NAV per share 7.49p 14.50p 15.50p 18.22p 20.04p 24.27p 26.5%
In a series of challenging years for the metals and mining sector, we believe
2023 has been the most challenging year since 2013. The industry has
experienced slowing total World output (Fig. 3) from a COVID recovery high of
6% in 2021 to an estimated 3% in 2023. In 2022 total World Consumer Prices
(Fig. 3) peaked at an 8.7% increase for the full year 2022. We believe cost
inflation coupled with rising interest rates, mediocre metal price performance
and "peak apathy" for the sector by investment markets has created a brutal
environment for the sector and general investment performance. The FTSE 350
Mining Index was up 5.2% Yr/Yr. for the period ending 30 June 2023 (Fig.6). As
we write this statement the month over month performance has been down for the
major equity markets indices we follow, but the FTSE 350 Mining Index was up
3.9% in October 2023 over September 2023. We consider this might be a turning
point. The Directors noted that US 10-year Treasuries rose 27.2% during the
Company's fiscal year, ending 30 June 2023 to 3.84%, and today stand at 4.86%.
US treasuries, which we believe is the reference point for most interest rate
markets, have guided global rates upwards. We also have observed the Western
Central Banks, to mitigate inflationary pressures, have increased their rates
up along with the US Federal Reserve. We believe a secondary objective, of the
central banks is a return to more historically consistent levels of treasury
yields ending the prolonged period of depressed interest rates. The Directors
note that according to Yale University's Professor Schiller, long term
Interest Rates, although volatile over time, have averaged 4.49%.
The regular readers of our Annual Report to shareholders will note that we
regularly refer to the International Monetary Fund ("IMF") bi-annual economic
forecasts as a yardstick for global economic performance. Additionally, we
include the IMF's economic forecast which we believe provide a sense of what
the best-informed consensus estimates are for near term economic performance.
The IMF is forecasting slowing economic performance from the so-called
"Advanced Economies" while forecasting that "Emerging and Developing"
economies should continue to generate constant growth through 2024.
IMF - WORLD ECONOMIC OUTLOOK 1 (#_ftn1) (Fig. 2)
October 2023 2018 2019 2020 2021 2022 2023(e) 2024(f)
World Output 3.6% 2.8% -3.1% 6.0% 3.5% 3.0% 2.9%
World Output - Advanced Economies 2.3% 1.7% -4.5% 5.2% 2.6% 1.5% 1.4%
Emerging Markets and Developing Economies 4.5% 3.7% -2.1% 6.6% 4.1% 4.0% 4.0%
World Consumer Prices 3.6% 3.5% 3.2% 4.7% 8.7% 6.9% 5.8%
Consumer Prices - Advanced Economies 2.0% 1.4% 0.7% 3.1% 7.3% 4.6% 3.0%
Emerging Markets and Developing Economies 4.9% 5.1% 5.1% 5.9% 9.8% 8.5% 7.8%
The US dollar, as measured by the DXY Index, which is a trade weighted index
of the US dollar (composed of USD vs six foreign currencies), was up 6.0%
during our fiscal year, appreciating currencies in that index. This rise
exceeds the DXY's compounded growth rate of 3.2% (fig. 5) since 2018 -we
believe that a mean reversion will occur at some point should aid the US
dollar pricing commodities.
The US Equity market valuation, as measured by the S&P 500 P/E Index,
peaked this cycle at 4,766 in December 2022. Our June 30 fiscal period saw the
S&P 500 open at 3785, peak at 4,766, but end on 30 June 2023 at 4,450,
resulting in a 17.6% yr./yr. gain. The composite measure for the European big
cap stocks, the Euro Stoxx 50, appreciated by 27.3% in the period ending 30
June 2023. The Shanghai and Hong Kong equity market indices were down 14.3%
and 13.5%, respectively. The Hang Seng (Hong Kong) index today is at 17,101,
down 24.6% from its 27 January 2023 peak of 22,701 - Technically it is now in
a "bear" market, while the Shanghai exchange is down 16.3% from its January
2023, approaching bear market territory.
Global Stock Index performance (Fig.3)
30/6/2023 30/06/2022 % Ch.
Shanghai Shenzhen CSI 300 3842 4485 -14.3%
Standard & Poor 500 4450 3785 17.6%
Euro Stoxx 50 4399 3455 27.3%
Hang Seng 18916 21870 -13.5%
FTSE 100 7532 7169 5.1%
Nikkei 225 33189 26393 25.7%
Source: Bloomberg LLP
M&FI continues to seek suitable strategic investment opportunities that we
believe will generate above average returns while adhering to our standards of
prudence while seeking above average investment returns. We thank you for your
support and we will continue to work diligently and thoroughly to advance your
company's assets and market position.
CHIEF EXECUTIVE'S OFFICER'S REPORT
The Company generated gross income of £2.394M during the year, an 84.5%
improvement from the previous year's gross profit of £1.297M. The operating
profit for the full year, ending 30 June 2023, improved by 135.7% to £1.806M
versus last year's operating profit of £766,000.
The rise in profits is mainly due to the improved valuation of Redcorp.
Previously we used historical cost accounting to value the investment, but
since the publication of the feasibility study in July 2023 it was resolved
that the value of the investment should be based on the estimated discounted
cash flows from the Feasibility Study of the project, applying an annual
discount rate of 20%. This has resulted in a £624,000 uplift in its carried
value. The improvement in M&F's profits is principally linked to our
investment portfolio performance and administrative costs that rose by 10.6%,
less than the rise in M&F's investment performance. Per share earnings
were 4.35p (basic) or 4.03p (FD), up 71% from 2.55p (basic) and 2.35p (FD) for
the 2022 fiscal year. Foreign exchange rates negatively impacted our pre-tax
income by £230,000. as the British Pound rose by about 5% versus the US
dollar. The after-tax Net Income for the 2023 fiscal year was £1.550,000 vs.
£899,000 achieved during the 2022 fiscal year. M&FI's NAVPS (FD)
increased 21.1% year over year to 24.27p. The overall cash and investment
portfolios increased to £9.720M or by 26.8% on a year over year basis from
£7.665M.
Summary of Financial Performance (Fig.4)
Net Asset Value Performance 30 June 30 June 30 June June 30 June 30 June 30 CAGR (%)
2018 2019 2020 2021 2022 2023
Net Asset Value ('000) £2,623 £5,114 £5,474 £6,438 £7,454 £9,423 29.2%
Fully diluted NAV per share 7.49p 14.50p 15.50p 18.22p 20.04p 24.27p 26.5%
The Directors believe the key to creating shareholder value for Mineral &
Financial Investments is attempting to achieve positive risk adjusted
investment returns while keeping operating costs low. More specifically,
operating costs which grow at a slower rate than the accretion in the Net
Asset Value. Our full year administrative costs totalled £588,000, an
increase of 10.6% versus the previous year's costs of £531,000. General &
Administrative ("G&A") costs were up nominally but declined as a
percentage of year/year total assets (6.2% vs. 7.1%). The increase in yr./yr.
costs were principally associated with increased share-based payments and
higher operating costs for our Swiss subsidiary M&F AG.
Price Performance of Various Commodities & Indices (Fig.5)
Commodity 2019 2020 2021 2022 2023 % Ch. 2023 vs. 2022 CAGR
(June 30) (June 30) (June 30) (June 30) (June 30) 2018 - 2023
Gold (US$/oz) 1,389 1,784 1,784 1,809 1,920 5.7% 8.4%
Silver (US$/oz) 15.30 18.30 26.15 19.80 22.76 11.3% 10.4%
Platinum (US$/oz) 837 828 1083 881 903 0.6% 1.9%
Copper (US$/t) 5,969 6,120 9,279 7,901 8,257 (1.1%) 8.5%
Nickel (US$/t) 12,670 13,240 18,172 23,229 19,869 (16.4%) 11.9%
Aluminium (US$/t) 1,779 1,598 2,514 2,659 2,104 (20.3%) 4.3%
Zinc (US$/t) 2,575 2,043 2,899 3,147 2,369 (27.5%) (2.1%)
Lead (US$/t) 1,913 1,770 2,301 1,899 2,126 10.6% 2.7%
Uranium (US$/t) 54,454 71,871 70,768 108,027 124,561 15.3% 23.0%
WTI (US$/Bbl.) 60.06 40.39 75.25 107.86 70.64 6.1% 4.1%
Trade Weighted US$ (DXY) 96.56 96.68 92.66 105.09 102.91 6.0% 3.2%
FTSE 350 Mining Index 20,080 17,714 22,585 9,810 10,161 5.2% (15.7%)
Global Food Price Index 2 (#_ftn2) 100.272 97.636 129.448 144.224 136.674 (5.2%) 8.1%
Source: Bloomberg LLP
During our fiscal year global commodity price performances were mixed.
Precious metals were up modestly, base metals were down with zinc being down
27.5%, which led to reduced mine production from several mines. We also
believe that temporary mine closures are critical, and often needed, market
reactions to return markets to more favourable supply demand balances. Lead,
the standout exception amongst base metals, was up 10.6%. Oil (WTI) prices was
up 6.1%, above its 5-year growth trend. Uranium surprised with the creation of
several physical U(3)O(8) investment funds, and or ETF's and the growth in
energy insecurity caused by the energy shortfalls caused by the
Russian/Ukrainian conflict. We admit to not having missed the boom in the
Lithium market and chose not to chase the sector. Lithium, carbonate prices
peaked late in 2022 at US$82.00/kg and are now US$23.00/kg. It is our
considered belief that Lithium will be an important part of energy storage as
we transition away from hydrocarbon usage. However, we believed that the
market was "over exuberant" for Lithium which is the 25(th) most abundant
mineral on the planet. The US Geological Survey estimated in 2021 that there
was 88M/t of Lithium, and total global Lithium consumption in 2023 was 134,000
tonnes (i.e. 0.15% of currently estimated reserves). It should be noted that
current estimates are that 80% to 90% of Lithium in EV's will be recycled. The
Directors understand that a little-publicized clause in the U.S. Inflation
Reduction Act ("IRA") has had US companies scrambling to recycle electric
vehicle batteries in North America, which they also believe will put the
region at the forefront of a global race to undermine China's dominance of the
field. The Directors also understand that IRA includes a clause that
automatically qualifies EV battery materials recycled in the U.S. as
American-made for subsidies, regardless of their origin. The Directors
consider that, if this is correct, it is important because it could
potentially qualify automakers using U.S.-recycled battery materials for EV
production incentives, although there is no guarantee that this will be the
case. In summary, we take the view that it is unlikely that we will experience
a shortage of Lithium, however, much like oil, we consider we may run out of
very cheap Lithium sometime in the future.
We have been overweight in precious metals, notably gold and to a lesser
extent silver as well as platinum group metals ("PGM"). We remain confident
that the decision was correct, and the relative performance of precious metals
to date supports this. Gold is up 5.7% yr/yr, while silver has appreciated
11.3% for the period ended June 30, 2023. However, the share performance of
the underlying mining companies has been below our expectations due to cost
inflation exceeding metal price appreciation. We believe that this will
reverse itself and the underlying companies will outperform metal prices. It
is also our considered view that when a sector has been out of favour, but its
fundamentals are improving - the larger cap companies will receive the first
wave of investments attention, followed by mid-caps and the small caps are
last to benefit from the markets' attention. We continue to look for that
change in trend across our portfolios.
Precious metals represent 39.2% of our asset allocation, down from 44.9% of
our assets in 2022, however, the overall value of the investment in the sector
is up 10.9% yr/yr. Base metals now represent 39.5% of our asset allocation
and, as of our YE were up 35.8% to £3.844M. Food, Energy and Technology
increased as a percentage of our total investable assets to 12.5% , but also
on an absolute dollar amount (+12.1%), due to increased investment into food
and fertilizer stocks, a graphite producer as well as a small new Strategic
investment in the Environmental, Social and Governance ("ESG") auditing as
well as digitizing global project data.
Commodity Class Investment Allocation
2023-Q4 vs. 2022-Q4 (Fig. 6)
INVESTMENT COMMODITY CLASSES Q4-2023 (£) Q4-2023 (%) Q4-2022 (£) Q4-2022 (%) FYE 2023/
2022 % Ch
Cash £795,560 8.2% £481,401 6.3% 65.3%
Precious Metal £3,814,916 39.2% £3,441,285 44.9% 10.9%
Base Metals £3,843,664 39.5% £2,743,970 35.8% 40.1%
Food, Energy, Tech & Misc. £1,212,451 12.5% £926,120 12.1% 30.9%
Diamonds £53,775 0.6% £72,163 0.9% -25.5%
Total investments £9,720,366 100.0% £7,664,939 100.0% 26.8%
For the past year we have seen and experienced mining indices underperforming
commodity indices. Equity markets have been afflicted with a disconnect
between metal prices and the performance of the shares of the companies that
explore and produce these metals. For the first time in many years, we are
seeing the FTSE 350 mining index outperform average commodity prices. The
market is anxious about the mediocre metal price performances and the
increases in production costs, led upwards by energy costs and soon to be
followed by labour costs. We also believe that inflation above Central banks'
inflation targets will be a fact of life for a few more years. The US dollar's
out-performance is, we believe, unlikely to continue as it did in 2023.
Lastly, we continue to maintain the view that commodity prices will have to
rise, or capacity will have to close, which will lead to metal price rises.
Although not the most robust setting for mining companies, there is, we
believe, good cause for bullishness that more broadly based metal price rises
will define 2024 and that the inflationary pressures of 2022 will moderate,
but nevertheless remain stubbornly higher than desirable.
INVESTMENT PORTFOLIOS
We have high expectations and rarely exceed those expectations. However, FYE
2023 has been challenging for the whole of the metals and mining sector. Our
performance in 2023 was relatively strong, but below our expectations for the
year. Our NAV rose 26.5% year over year while NAVPS rose by 21.2%. The
variance was mostly due to the issuance of 1.44 million shares via a small
capital raise at 21.0p (see announcement dated 24/5/2023). These results
exceed the performance yardsticks by which we measure our performance as can
be seen in Fig. 1.
The broader equity markets rose during our fiscal year: The Euro Stoxx 50 was
up strongly by 27.3%; The S&P 500 was up 17.6%, the CSI 300 (Shanghai) was
down 14.3%, while the FTSE 100 did manage a gain of 5.1%. The more specific
comparable measures, such as - the S&P/TSX Global Mining Index was down
11.5% during our fiscal period, while FTSE 350 Mining Index, was down 55.2% -
although it must be noted that we believe the FTSE 350 Mining Index was
dragged down by the Ukrainian conflict and the sanctions imposed on Russian
companies, which are part of the Index.
CASH
As a percentage of Total Investments: 8.2%
Our cash as of 30 June 2023, was £796,000 a rise of 65.3% from the £481,000
as at the end of fiscal 2022. We view Cash as an investment. In FY 2023 we
received the final US$2.5M payment from Ascendant as part of their earn-in on
the Lagoa Salgada project. The intention is to keep the cash somewhere between
5% and 20% of our NAV so that we may take advantage of investment
opportunities quickly when they present themselves. Since 2017 our average
cash holding has been around 10%. Moreover, as a rule of thumb we like to have
a combined value of our cash and the Tactical portfolio to range between 25
and 60 percent depending on our market perspective. For the past 3 years we
have been at 35% as of the end of 2021 and ended 2022 at 35% of NAV and as at
FYE 2023 we were at 31%. At the current time we believe that our greatest
performance risk is under investment to the mining sector. As the mining cycle
evolves, we would like to gradually evolve to a higher cash & tactical
holding as we monetise our strategic investments and marshal our cash holdings
to protect our overall performance record.
M&F Portfolio Performance 2017 - 2023 (Fig.7)
(£,000) 2018 2019 2020 2021 2022 2023 2023 vs. 2022 CAGR '18 to 2023
Strategic £766.9 £3,655.3 £3,909.7 £4,110.3 £4,946.5 £6,721.3 35.9% 54.4%
Tactical £1,319.2 £226.3 £430.4 £1,711.9 £2,237.0 £2,203.5 -1.5% 10.8%
Cash £422.3 £224.4 £274.6 £854.7 £481.4 £795.6 65.3% 13.5%
Total £2,508.3 £4,106.0 £4,614.8 £6,677.0 £7,664.9 £9,720.4 26.8% 31.1%
TACTICAL
HOLDINGS
As a percentage of Total Investments: 22.7%
The Tactical portfolios declined by 1.5% to end the year at £2.203M. We have
seen a compression of public company valuations which we believe is due to
higher interest rates, increased inflation, and commodity price movements
largely below the rate of inflation. As we advance through the mining cycle,
we believe the tactical portfolio should grow more quickly than the strategic
portfolio, as we monetise some of our strategic investments and convert them
into either cash or tactical investments. The tactical portfolio now comprises
22 distinct investments of our total portfolio of 29 investments.
STRATEGIC PORTFOLIO
As a percentage of Total Investments: 69.1%
Our Strategic Portfolio are longer term holdings, that we strongly believe
will outperform given sufficient time and capital. We believe we made these
"Strategic" investments at the bottom of the cycle. These investments were in
out-of-favour assets that we considered had high potential but were, we
acknowledge, higher risk and less liquid. We believe our competitive advantage
was that we were capable and willing to invest when others would, or could,
not invest in what we believe are good geologic assets. We believe that the
best return to risk ratio is to invest in good assets when these are out of
favour. Our Strategic Portfolio now totals £6.097M and represents 67% of our
Net Investable funds. The Strategic Portfolio was up 23.3% yr./yr. in FY 2023
and has grown by 41.9% compounded annually since 2017. The next phase of our
strategy is to gradually "harvest" these investments when and where it makes
sense and redeploy these funds into more liquid investments that are out of
favour but have strong long term investment merits. The following are some of
the most noteworthy holdings in our Strategic Portfolio. All values are as of
June 30, 2023
Redcorp Empreedimentos Mineiros
Lda.:
As a percentage of Total Investments: 24.4%
Redcorp is a Portuguese company whose main asset is 85% ownership of the Lagoa
Salgada project. Our investment in Redcorp, held through our subsidiary,
represents 19.2% of our investment portfolios. In 2018 our subsidiary entered
into a sale and earn-in option agreement with a Canadian listed company,
Ascendant Resources ("Ascendant"). Ascendant has met all its financial and
operational obligations to date. The Board consider that they have been good
partners, running the exploration program for which, we are appreciative. On
25 May 2022, Ascendant increased its ownership of Redcorp to 50% by completing
US$9,000,000 of exploration work on the project and making a US$1.0M payment
to M&FI's subsidiary (in accordance with the terms of the agreement
between the parties). Ascendant has now earned 80% of the overall project by
making a final US$2.5M payment to M&FI in June 2023 and completing a
Definitive Feasibility Study post year end in July 2023.
The project has advanced from an initial resource of approximately 4.4Mt with
Zinc Equivalent grade of 6.0% in 2015 to a resource totalling 27.5Mt with a
≧7.5% Zinc Equivalent grade today. On November 8, 2021 Redcorp and Ascendant
announced that they have secured a mine development licence from the
Portuguese government. As announced on 26 July 2023 Redcorp and Ascendant
completed a Feasibility Study after our year end indicating that the Lagoa
Salgada Project has, based on 100% ownership, a pre-tax NPV(@8%) of US$188.8.M
resulting in a pre-tax IRR of 47% with a 2-year pre-tax payback based on its
planned 14-year life of mine. After tax NPV(@8%) is US$147.1M with a 39% IRR
and should generate a Life of Mine Cash Flow of US$261M.
In November 2022 Ascendant entered into a streaming agreement to fund the
completion of the feasibility study for Redcorp's Lagoa Salgada project and
for general corporate and working capital purposes. In connection with this
agreement M&FI and Ascendant amended the terms of their shareholders
agreement in respect of Redcorp on November 28, 2022. It was agreed that
M&FI should have the right and option, but not the obligation, to exercise
an option within 6 months (plus 10 business days) of the Stage Two Option
Exercise Date (being the date when Ascendant has earned 80% of Redcorp and
being no later than 22 June 2023) to require Ascendant to purchase all, but
not less than all, of the shares in Redcorp at a defined price. The price
would be an amount in US dollars, payable in cash, equal to 5% of the post-tax
net present value of the Project provided in the feasibility study completed
prior to the date of exercise using a 10.5% discount rate (the "Put Option").
On 23 June 2023 M&FI and Ascendant announced that they had agreed to an
extension to the final delivery date of the feasibility study, pursuant to the
Earn-in Option Agreement for the Lagoa Salgada project. As a result of the
extension, the final delivery date of the feasibility study would be on or
before 3 August 2023. In consideration for the extension, Ascendant agreed to
grant M&FI 500,000 common share purchase warrants. Each Warrant is
exercisable into one common share in Ascendant at any time for a period of 30
months at a price of $0.20 per share. On 26 July 2023 (after the M&FI's
year end) Ascendant announced the results of the feasibility study and with
its completion Ascendant completed the option earn-in requirements to move its
ownership of Redcorp to 80%.
FINANCIAL STATEMENTS
Consolidated Income Statement
Year ended Year ended
30 June 2023 30 June 2022
Notes £'000 £'000
Investment income 119 128
Fee revenue - -
Net gains on disposal of investments 2,108 861
Net change in fair value of investments 167 308
2,394 1,297
Operating expenses 3 (452) (439)
Share based payment expense (136) (92)
Other gains and losses 5 (230) 133
Profit before taxation 1,576 899
Taxation expense 6 (26) -
Profit for the year from continuing operations and total comprehensive income, 1,550 899
attributable to owners of the Company
Profit per share attributable to owners of the Company during the year from
continuing and total operations:
7 Pence Pence
Basic (pence per share) 4.4 2.5
Fully diluted (pence per share) 4.0 2.5
Consolidated Statement of Financial Position
2023 2022
Notes £'000 £'000
CURRENT ASSETS
Financial assets held at fair value through profit or loss 8 8,925 7,183
Trade and other receivables 10 25 18
Cash and cash equivalents 796 481
9,746 7,682
CURRENT LIABILITIES
Trade and other payables 11 194 125
Convertible unsecured loan notes 12 10 10
204 135
NET CURRENT ASSETS 9,542 7,547
NON-CURRENT LIABILITIES
Deferred tax provision 13 (119) (93)
NET ASSETS 9,423 7,454
EQUITY
Share capital 15 3,114 3,099
Share premium 15 6,182 5,914
Loan note equity reserve 16 6 6
Reserve for employee share schemes 17 228 92
Capital reserve 15,736 15,736
Retained earnings (15,843) (17,393)
Equity attributable to owners of the Company and total equity 9,423 7,454
Consolidated Statement of Changes in Equity
Share Share Reserve for employee Loan note Capital Accumulated Total
capital premium share schemes reserve reserve losses equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1 July 2021 3,096 5,892 23 6 15,736 (18,315) 6,438
Total comprehensive income for the year - - - - - 899 899
Share based payment expense - - 92 - - - 92
Exercise of options 3 22 (23) - - 23 25
At 30 June 2022 3,099 5,914 92 6 15,736 (17, 393) 7,454
Total comprehensive income for the year - - - - - 1,550 1,550
Share based payment expense - - 136 - - - 136
Issues of equity 15 268 - - - - 283
At 30 June 2023 3,114 6,182 228 6 15,736 (15,843) 9,423
Consolidated Statement of Cash Flows
Year ended Year ended
30 June 2023 30 June 2022
Notes £'000 £'000
OPERATING ACTIVITIES
Profit before taxation 1,576 899
Adjustments for:
Profit on disposal of trading investments (2,108) (861)
Fair value loss/(gain) on trading investments (167) (308)
Investment income (119) (128)
Share based payment expense 136 92
Operating cash flow before working capital changes (682) (306)
(Increase)/decrease in trade and other receivables (7) 9
Increase/(decrease) in trade and other payables 69 (52)
Net cash outflow from operating activities (620) (348)
INVESTING ACTIVITIES
Purchase of financial assets (3,783) (2,177)
Disposal of financial assets 4,396 2,098
Investment income 39 29
Net cash (outflow)/inflow from investing activities 652 (50)
FINANCING ACTIVITIES
Proceeds of share issues 282 25
Net cash inflow from financing activities 282 25
Net (decrease)/increase in cash and cash equivalents 315 (374)
Cash and cash equivalents as at 1 July 481 855
Cash and cash equivalents as at 30 June 796 481
Notes to the Financial Statements
1. Operating Profit
2023 2022
£'000 £'000
Profit from operations is arrived at after charging:
Directors fees 105 105
Other salary costs 23 20
Share based payment expense 136 92
Registrars fees 36 31
Corporate adviser and broking fees 37 39
Other professional fees 197 180
Foreign exchange differences 230 (133)
Other administrative expenses 34 44
Fees payable to the Group's auditor:
For the audit of the Group's consolidated financial statements 20 20
818 398
2. Other Gains and Losses
2023 2022
£'000 £'000
Foreign currency exchange differences (230) 133
(230) 133
3. Income Tax Expenses
2023 2022
£'000 £'000
Deferred tax charge relating to unrealised gains on investments 26 -
Other tax payable - -
26 -
The tax on the Group's profit before tax differs from the theoretical amount
that would arise using the weighted average rate applicable to the results of
the Consolidated entities as follows:
2023 2022
£'000 £'000
Profit before tax from continuing operations 1,576 899
Profit before tax multiplied by rate of federal and cantonal tax in 230 131
Switzerland of 14.6% (2021: 14.6%)
Less abatement in respect of long term investment holdings (207) (118)
Unrelieved tax losses - -
Overprovided in previous period 3 (13)
Total tax 26 -
4. Earnings Per Share
The basic and diluted earnings per share are calculated by dividing the profit
attributable to owners of the Company by the weighted average number of
ordinary shares in issue during the year.
2023 2022
£'000 £'000
Profit attributable to owners of the Company
- Continuing and total operations 1,550 899
2023 2022
Weighted average number of shares for calculating basic earnings per share 35,611,416 35,271,011
Weighted average number of shares for calculating fully diluted earnings per 38,511,416 35,271,011
share
Earnings per share from continuing and total operations
- Basic (pence per share) 4.4 2.5
- Fully diluted (pence per share) 4.0 2.5
5. Investments Held at Fair Value Through Profit or Loss
2023 2022
£'000 £'000
1 July - Investments at fair value 7,183 5,822
Cost of investment purchases 3,783 2,177
Proceeds of investment disposals (4,396) (2,098)
Profit on disposal of investments 2,108 861
Fair value adjustment 167 308
Accrued interest on loan notes 80 113
30 June - Investments at fair value 8,925 7,183
Categorised as:
Level 1 - Quoted investments 3,835 2,237
Level 3 - Unquoted investments 5,090 4,946
8,925 7,183
The Group has adopted fair value measurements using the IFRS 7 fair value
hierarchy
Categorisation within the hierarchy has been determined on the basis of the
lowest level of input that is significant to the fair value measurement of the
relevant asset as follows:
Level 1 - valued using quoted prices in active markets for identical assets
Level 2 - valued by reference to valuation techniques using observable inputs
other than quoted prices included in Level 1.
Level 3 - valued by reference to valuation techniques using inputs that are
not based on observable market criteria.
LEVEL 3 investments
Reconciliation of Level 3 fair value measurement of investments
2023 2022
£'000 £'000
Brought forward 4,946 4,110
Purchases 307 152
Proceeds of investment disposals (238) -
Profit on disposal of investments 90 -
Fair value adjustment (639) 684
Carried forward 4,466 4,946
Level 3, unquoted investments are valued on the basis of the last fund raise,
except for Redcorp where the value has been based on the net present value of
the cash flows from the project.
The Group's largest Level 3 investment is Redcorp Empreendimentos Mineiros LDA
("Redcorp").
REDCORP EMPREENDIMENTOS MINEIROS LDA
Redcorp is a Portuguese exploration development and mining company whose main
asset is the Polymetallic) Lagoa Salgada Volcanogenic Massive Sulphide (VMS)
Project, which has resources of zinc, lead, copper, gold, silver, tin and
indium.
In June 2018, TH Crestgate entered into an agreement with Ascendant Resources
Inc ("Ascendant") under which Ascendant initially acquired 25% of the equity
in Redcorp for a consideration of US$2.45 million, composed of US$1.65 million
in Ascendant shares and US$800,000 in cash.
The second part of the Agreement was an Earn-in Option under which Ascendant
had the right to earn a further effective 25% interest via staged payments
amounting to US$3.5 million. In addition Ascendant was required to spend a
minimum of US$9.0 million directly on the Lagoa Salgada Project within 48
months of the closing date, to fund exploration drilling, metallurgical test
work, economic studies and other customary activities for exploration and
development.
Under the last part of the agreement Ascendant was able to acquire an
additional 30% taking its total interest to 80% by the payment of US$2,500,000
on or before 22 Dec 2022 This date was amended so that the cash payment had to
be received on/or before 22 June 2023. In addition a feasibility study was to
be delivered by 22 August 2023.
To date the payments due from Ascendant under the agreement have all been
fulfilled. The Group's investment in Redcorp has been valued on a discounted
cash flow basis using a 20% discount rate from the from the Feasibility Study
completed in July 2023. As at 30 June 2023, Mineral and Financial Investments
AG owned 50% of Redcorp (2022: 50%).
Redcorp currently owns 85% of the Lagoa Salgada project. M&F agreed in
June 2017 with Empresa Desenvolvimento Mineiro SA (EDM), a Portuguese
State-owned company, to re-acquire EDM's 15% rights on the project resulting
in Redcorp holding a 100% ownership of the project. The 2017 agreement was
subject to the Portuguese Secretary of State's approval which was not
received. Redcorp and M&F continue to explore ways and means to complete
the purchase. EDM's right is an option, if exercised, to receive a 15% working
interest ("WI") in the Lagoa Salgada Project ("LSP"). This 15% WI is subject
to a Right of First Refusal ("ROFR") if EDM exercises the Option and choses to
sell its interest. The WI is subject to standard dilution features if
financial obligations are unsatisfied. This option expires 120 days after the
delivery of a Feasibility Study. M&F has granted Ascendant conditional
options that would, if exercised, result in Ascendant owning (net) 80%
interest in the Project if M&F is unsuccessful in re-acquiring EDM's
rights/interest. Within 6 months & 10 days after the delivery of the
Feasibility Study. If EDM opt to not exercise its Option, M&F would retain
its 20% Carried Interest and the adjusting call options held by Ascendant
would be nullified. If EDM exercises its option to the 15% WI then M&F
would retain a (net) 5% CI. M&F has the right to sell its (net) 5% CI to
Ascendant at a price representing M&F's 5% share of the NPV of the LSP as
estimated in the Feasibility Study (using a 10.5% Discount Rate). We currently
estimate that this value would be significantly higher than the year end
value.
6. Subsidiary companies
The Group's subsidiary companies are as follows:
Name Principal activity Country of incorporation Proportion of ownership
and principal interest and voting rights
place of business held by the Group
Mineral & Financial Investments AG Investment Steinengraben 18 100%
company 4051 Basel, Switzerland
M&FI Services Ltd Service company 5 Bath Road, London, 100%
United Kingdom, W4 1LL
All intergroup transactions and balances are eliminated on consolidation.
7. Trade and other receivables
2023 2022
£'000 £'000
Other receivables 10 12
Prepayments 15 6
Total 25 18
The fair value of trade and other receivables is considered by the Directors
not to be materially different to the carrying amounts.
At the balance sheet date in 2023 and 2022 there were no trade and other
receivables past due
1
8. Trade and other payables
2023 2022
£'000 £'000
Trade payables 12 50
Other payables 114 21
Accrued charges 68 54
Total 194 125
The fair value of trade and other payables is considered by the Directors not
to be materially different to carrying amounts.
9. Convertible unsecured loan notes
The outstanding convertible loan notes are zero coupon, unsecured and unless
previously purchased or converted they are redeemable at their principal
amount at any time on or after 31 December 2014.
The net proceeds from the issue of the loan notes have been split between the
liability element and an equity component, representing the fair value of the
embedded option to convert the liability into equity of the Company as
follows:
2023 2022
£'000 £'000
Liability component at beginning and end of period 10 10
The Directors estimate the fair value of the liability component of the loan
notes at 30 June 2023 to be approximately £10,000 (2022: £10,000)
10. Deferred taxation provision
2023 2022
£'000 £'000
As at 1 July 93 93
Provision relating to unrealised gains on investments 26 -
As at 30 June 119 93
11. Employee share schemes
SHARE OPTIONS
On 10 June 2022 the Company granted 2,350,000 options to directors, advisers
and consultants, exercisable at 13.5p per share, representing a 15% premium to
the closing mid-market price on 9 June 2022. The options vest in three
tranches, one third on the date of grant, one third on the anniversary of the
date of grant, and one third on the second anniversary of the date of grant.
The options can be exercised at any time from the date of vesting for a period
of 5 years whilst the recipient is employed or engaged by the Company.
The fair value of the options granted during the year was determined using the
Black-Scholes pricing model. The significant inputs to the model in respect
of the options were as follows:
Date of grant 10 June 2022
Share price at date of grant 11.75p
Exercise price per share 13.50p
No. of options 2,350,000
Risk free rate 1.0%
Expected volatility 50%
Life of option 5 years
Calculated fair value per share 4.6797p
The share-based payment charge for the year was £52,000 (2022: £41,000).
The share options movements and their weighted average exercise price are as
follows:
2023 2022
Weighted average Weighted average
exercise price exercise price
Number (pence) Number (pence)
Outstanding at 1 July 2,350,000 13.50 330,000 7.50
Granted - - 2,350,000 13.50
Exercised - - (330,000) 7.50
Lapsed - - - -
Outstanding at 30 June 2,350,000 13.50 2,350,000 13.50
RESTRICTED SHARE UNITS ("RSUs")
On 10 June 2022 the Company granted 1,150,000 RSUs to directors. The RSUs
vest in three tranches, one third on the date of grant, one third on the
anniversary of the date of grant, and one third on the second anniversary of
the date of grant. They can be exercised at any time from the date of
vesting for a period of 5 years whilst the recipient is employed or engaged by
the Company, with a reference price of 11.75p being the closing mid-market
price on 9 June 2022.
The fair value of the RSUs granted during the year was determined to be the
reference price of 11.75p per share, and the share-based payment charge for
the year in respect of the RSUs was £84,000 (2022: £51,000).
The RSU movements and their weighted average reference price are as follows:
2023 2022
Weighted average Weighted average
Reference price Reference price
Number (pence) Number (pence)
Outstanding at 1 July 1,150,000 11.75 - -
Granted - - 1,150,000 11.75
Exercised - - - -
Lapsed - - - -
Outstanding at 30 June 1,150,000 11.75 1,150,000 11.75
12. Share capital
Number of Nominal Share
shares Value premium
£'000 £'000
AUTHORISED
At 30 June 2022 and 30 June 2023
Ordinary shares of 1p each 160,000,000 1,600
Deferred shares of 24p each 35,000,000 8,400
10,000
ISSUED AND FULLY PAID
At 30 June 2022
Ordinary shares of 1p each 35,465,395 354
Deferred shares of 24p each 11,435,062 2,745
3,099 5,914
Ordinary shares issued in year to 30 June 2023 1,440,476 15 268
At 30 June 2023
Ordinary shares of 1p each 36,905,871 369
Deferred shares of 24p each 11,435,062 2,745
3,114 6,182
The ordinary shares carry no rights to fixed income but entitle the holders to
participate in dividends and vote at Annual and General meetings of the
Company.
The restricted rights of the deferred shares are such that they have no
economic value.
13. Loan note equity reserve
2023 2022
£'000 £'000
Equity component of convertible loan notes at 1 July 6 6
Equity component of convertible loan notes at 30 June 6 6
14. Reserve for employee share schemes
2023 2022
£'000 £'000
Brought forward at 1 July 92 23
Transfer to retained earnings on exercise of options - (23)
Share based payment charge 136 92
Carried forward at 30 June 228 92
15. Risk management objectives and policies
The Company is exposed to a variety of financial risks which result from both
its operating and investing activities. The Company's risk management is
coordinated by the board of directors and focuses on actively securing the
Company's short to medium term cash flows by minimising the exposure to
financial markets.
MARKET PRICE RISK
The Company's exposure to market price risk mainly arises from potential
movements in the fair value of its investments. The Company manages this
price risk within its long-term investment strategy to manage a diversified
exposure to the market. If each of the Company's equity investments were to
experience a rise or fall of 10% in their fair value, this would result in the
Company's net asset value and statement of comprehensive income increasing or
decreasing by £893,000 (2022: £718,000).
FOREIGN CURRENCY RISK
The Group holds investments and cash balances denominated in foreign
currencies and investments quoted on overseas exchanges; consequently,
exposures to exchange rate fluctuations arise. The Group does not hedge its
foreign currency exposure and its liabilities in foreign currencies are
limited to the trade payables of Mineral & Financial Investments AG which
are not material.
The carrying amounts of the Group's foreign currency denominated monetary
assets at the reporting date are as follows:
2023 2022
£'000 £'000
US Dollar 5,740 5,913
Canadian Dollar 3,142 1,402
Swiss franc 201 28
Euro 115 -
Australian Dollar - 208
FOREIGN CURRENCY SENSITIVITY ANALYSIS
The Group is mainly exposed to the US Dollar and the Canadian Dollar in
respect of investments which are either denominated in or valued in terms of
those currencies. The following table details the Group's sensitivity to a 5
per cent increase and decrease in pounds sterling against the US Dollar,
Canadian Dollar and Swiss franc. The Group's exposure to the Australian Dollar
and the Euro are not considered material.
2023 2022
£'000 £'000
US Dollar 5% increase in exchange rate against GBP 287 296
5% decrease in exchange rate against GBP (287) (296)
Canadian Dollar 5% increase in exchange rate against GBP 157 70
5% decrease in exchange rate against GBP (157) (70)
Swiss franc 5% increase in exchange rate against GBP 10 1
5% decrease in exchange rate against GBP (10) (1)
Euro 5% increase in exchange rate against GBP 6 -
5% decrease in exchange rate against GBP (6) -
Australian Dollar 5% increase in exchange rate against GBP - 10
5% decrease in exchange rate against GBP - (10)
CREDIT RISK
The Company's financial instruments, which are exposed to credit risk, are
considered to be mainly cash and cash equivalents and the Company's
receivables are not material. The credit risk for cash and cash equivalents
is not considered material since the counterparties are reputable banks.
The Company's exposure to credit risk is limited to the carrying amount of the
financial assets recognised at the balance sheet date, as summarised below:
15. Risk management and objectives
2023 2022
£'000 £'000
Cash and cash equivalents 796 481
Other receivables 10 12
806 493
No impairment provision was required against other receivables which are not
past due.
LIQUIDITY RISK
Liquidity risk is managed by means of ensuring sufficient cash and cash
equivalents are held to meet the Company's payment obligations arising from
administrative expenses.
CAPITAL RISK MANAGEMENT
The Company's objectives when managing capital are:
· to safeguard the Company's ability to continue as a going concern, so
that it continues to provide returns and benefits for shareholders;
· to support the Company's growth; and
· to provide capital for the purpose of strengthening the Company's
risk management capability.
The Company actively and regularly reviews and manages its capital structure
to ensure an optimal capital structure and equity holder returns, taking into
consideration the future capital requirements of the Company and capital
efficiency, prevailing and projected profitability, projected operating cash
flows, projected capital expenditures and projected strategic investment
opportunities. Management regards total equity as capital and reserves, for
capital management purposes.
16. Financial instruments
FINANCIAL ASSETS BY CATEGORY
The IFRS 9 categories of financial assets included in the balance sheet and
the headings in which they are included are as follows:
2023 2022
£'000 £'000
Financial assets:
Cash and cash equivalents 796 481
Loans and receivables 10 12
Investments held at fair value through profit and loss 8,925 7,183
9,731 7,675
FINANCIAL LIABILITIES BY CATEGORY
The IFRS 9 categories of financial liability included in the balance sheet and
the headings in which they are included are as follows:
2023 2022
£'000 £'000
Financial liabilities at amortised cost:
Convertible unsecured loan notes 10 10
Trade and other payables 126 71
136 81
17. Contingent liabilities and capital commitments
There were no contingent liabilities or capital commitments at 30 June 2023 or
30 June 2022.
18. Post year end events
On 26 July 2023 the Company announced that Ascendant had completed the
feasibility study for the Lagoa Salgada project and thus had completed its
earn in to 80% of Redcorp.
19. Related party transactions
Key management personnel, as defined by IAS 24 'Related Party Disclosures'
have been identified as the Board of Directors, as the controls operated by
the Group ensure that all key decisions are reserved for the Board of
Directors. Details of the directors' remuneration and the options and RSUs
granted to directors are disclosed in the remuneration report.
20. Ultimate controlling party
The Directors do not consider there to be a single ultimate controlling party.
FOR MORE INFORMATION:
Jacques Vaillancourt, Mineral & Financial Investments
Ltd. +44 780 226 8247
Katy Mitchell and Sarah Mather, WH Ireland Limited
+44 207 220 1666
Jon Belliss, Novum Securities
Limited
+44 207 382 8300
The information contained within this announcement is deemed by the Company to
constitute inside information as stipulated under the Market Abuse Regulations
(EU) No. 596/2014 (MAR) as in force in the United Kingdom pursuant to the
European Union (Withdrawal) Act 2018. Upon the publication of this
announcement via Regulatory Information Service (RIS), this inside information
is now considered to be in the public domain.
1 (#_ftnref1) International Monetary Fund, "World Economic Outlook: Recovery
- Navigating Global Divergences" - October, 2023
2 (#_ftnref2) International Monetary Fund / Monthly / 2016 = 100 / Not
seasonally adjusted
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AnnouncementREG - Mineral & Financial - Investment Update: Ascendant / Redcorp
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