REG - Cadence Minerals PLC - Interim Results
29/09/2023 10:00
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RNS Number : 1736O Cadence Minerals PLC 29 September 2023
29 September 2023
Cadence Minerals plc
Interim Results for the Six Months Ended 30 June 2023
Cadence Minerals plc (AIM/AQX: KDNC) is pleased to announce its interim
results for the six months ended 30 June 2023.
HIGHLIGHTS
· Amapá Pre-Feasibility Study ("PFS") completed. The study established
that the Amapá mine has potential to deliver a robust 5.28 Mtpa (dry) iron
ore operation & excellent cash flow including a post-tax NPV of US$949
million.
· Amapá Mineral Resource Estimate (MRE) increased and upgraded. Total
Measured, Indicated and Inferred MRE increased to 276.24 million tonnes
grading 38.33% Fe and a maiden Measured Resource of 55.33 Mt grading 39.26%
Fe.
· Scoping study identified changes and cost savings in Santana Port
layout & refurbishment of US$28m.
· Progress with equity investments including ASX listed Evergreen
Lithium (ASX: EG1), Hastings Technology Metals (ASX: HAS) and AIM listed
European Metals Holdings (AIM: EMH).
· Reduced LBT of £1.95m (6 months ended 30 June 2022: £5.05m, Y/E
31 Dec 2022: £5.50m)
· Total group assets increased from £21.64m at 31 December 2022 to
£25.79m at 30 June 2023.
CEO Kiran Morzaria commented: "Faced with unprecedented geopolitical
challenges and challenging global markets, your Board are pleased to deliver
reduced losses and an increase in group assets at the half year. Our flagship
Amapá project is developing at pace, and we have seen the MRE increase
combine with costs savings at the Santana port to deliver material growth in
our investment. Our considered opinion, and that of several analysts during
the first half of 2023 is that these developments, along with our investments
in Evergreen, Hastings Tech Metals, European Metals and Sonora have yet to be
reflected in our market valuation. We hope that our progress will be in some
way reflected during the second half of the year."
"I look forward to reporting back on further progress."
INVESTMENT REVIEW
Our public portfolio was bolstered during the period as our private
investments Evergreen Lithium and in the Yangibana Rare Earth deposit were
converted into equity in public listed entities. However, the performance of
our equity in stake in Hastings Technology Metals (converted from our stake in
the Yangibana Rare Earth Deposit) weighed down the overall performance of our
public portfolio and is detailed in the review of our public listed portfolio.
As stated in our annual report and accounts the overall ambition of the
portfolio is capital growth of the assets under management which should be
reflected in Cadence's share price. We intend to fund this growth, where
possible, by investing in undervalued assets, selling these investments at
higher valuations, and reinvesting the proceeds. Once we reach critical mass
in terms of assets under management, this investment cycle will mitigate the
need for outside capital, either in new equity or debt.
As stated in our annual report, the overall ambition of the portfolio is
capital growth of the assets under management, which should then be reflected
in Cadence's share price. We intend to fund this growth, where possible, by
investing in undervalued assets, selling these investments at higher
valuations, and reinvesting the proceeds. Once we reach critical mass in terms
of assets under management, this investment cycle will mitigate the need for
outside capital, either in new equity or debt.
PRIVATE INVESTMENTS, ACTIVE
The Amapá Iron Ore Project, Brazil
Interest - 30% at 30/06/2022 and 29/09/2023
The Amapá Project is a large-scale iron ore mine with associated rail, port
and beneficiation facilities that commenced operations in December 2007. The
project ceased operations in 2014 after the port facility suffered a
geotechnical failure, which limited iron ore export. Before the cessation of
operations, the project generated an underlying profit of US$54 million in
2012 and US$120 million in 2011. Operations commenced in December 2007, and in
2008, the project produced 712 thousand tonnes of iron ore concentrate.
Production steadily increased, producing 4.8 Mt and 6.1 Mt of iron ore
concentrate products in 2011 and 2012, respectively.
Investment
In 2019, Cadence entered into a binding investment agreement to invest in and
acquire up to 27% of the Amapá iron ore mine, beneficiation plant, railway
and private port owned by a Brazilian company DEV Mineração S.A. The
agreement also gave Cadence the first right of refusal to increase its stake
to 49%. To acquire its 27% interest, Cadence invested US$6 million over two
stages in a joint venture company; this was completed in the first quarter of
2022. In October 2022, we increased this stake to 30%. At the end of the
reporting period, the total investment was US$11.02 million, which, once fully
converted to equity, will represent some 31.6% of the Amapá Project.
Operations Review
During the reporting period our we made considerable progress at the Amapá
Project. The PFS was completed early in the year, this was followed by the
port optimisation study. Post period end it was agreed that the following
completion of the Amapá PFS, the remaining operational focus for the year
should include progressing the permitting pathway and the completion of the
regulatory requirements for the mining concessions, tailing storage facilities
and the environmental permits.
Pre-Feasibility Study & Optimisation Studies
As part of the PFS, we upgraded and increased the Amapá Project Mineral
Resource Estimate. This resulted in a substantial increase in total Measured,
Indicated and Inferred Mineral Resources to 276.24 million tonnes grading
38.33% Fe and a maiden Measured Resource of 55.33 Mt grading 39.26% Fe.
The PFS results were announced in early January 2023. The PFS confirmed the
potential for the Amapá Iron Ore Project to produce a high-grade iron ore
concentrate and generate strong returns over the life of mine. It delivered a
robust 5.28 Mtpa (dry) operation, which can provide excellent cash flows and a
post-tax NPV of US$949 million.
The Key Highlights of the PFS are below:
· Annual average production of 5.28 million dry metric tonnes per
annum ("Mtpa") of Fe concentrate, consisting of 4.36 Mtpa at 65.4% Fe and 0.92
Mtpa at 62% Fe concentrate.
· Post-tax Net Present Value ("NPV") of US$949 million ("M") at
a discount rate of 10%.
· Post-tax Internal Rate of Return of 34%, with an average
annual life of mine EBITDA of US$235 M annually
· Maiden Ore Reserve of 195.8 million tonnes ("Mt") at 39.34% Fe
demonstrates an 85% Mineral Resource conversion.
· Free on Board ("FOB") C1 Cash Costs of US$35.53/dmt at the port
of Santana. Cost and Freight ("CFR") C1 Cash Costs US$64.23/dmt in China.
· Pre-production capital cost estimate of US$399 million,
including the improvement and rehabilitation of the processing facility and
the restoration of the railway and the wholly owned port export facility
Based on the positive outcome of the PFS and subsequent consultations with the
key contractors, three areas of possible improvement to the Amapá Project
were identified. The first was to review the historical drilling and
geological data north of the Amapá mining concessions. The data was acquired,
and work began; however, the owner of these mining concessions filed for
judicial recovery, so the timing of this is likely to be delayed. We are
investigating other ways to progress this work, including conducting a
topography survey of the areas.
The second area of potential improvement is a change in the layout of the port
at Santana by moving the railway loop further from the shore. A scoping study
regarding this option was completed during the period and identified a
potential net capital saving to the port refurbishment costs of US$28 million.
The last area of potential improvement is to investigate and review the
flowsheet to improve the final product quality over and above the current 65%
iron ore concentrate or reduce the operating costs. From initial reviews, it
appears that the most viable option will be to reduce the operational costs.
We are looking to appoint an engineer to complete this work in the coming
months.
Once these studies are completed, work on a Definitive Feasibility Study
("DFS") can begin. The DFS is required to seek project debt and equity
finance, which will be sought once the DFS is complete.
Permitting Pathway & Tailings Storage Facility
While the Amapá Project was operating, it held all the necessary permissions
to mine, process, transport and ship some six million tonnes of iron ore
annually. However, many of these licenses lapsed after it ceased operations in
2014. Cadence has been working alongside the team at the Amapá Project to
obtain these licenses and permissions. To date, we have reinstated and
extended the railway concession to 2046 (completed in December 2019) and been
granted a change of control over the wholly owned port in November 2021, which
ensured the federal licenses could be maintained.
The Amapá Project owns the required Mining Concessions; however, it must
obtain a Mine Extraction and Processing Permit ("Mining Permit") to begin
operation. To get this permit, the Amapá Project must obtain an L.I. and,
when constructed, an Operational License L.O. from the Amapá State
Environmental Agency.
Before the suspension of mining, the project had numerous L.O.s across the
mining, rail, and port operations. These L.O.s expired between 2013 and 2018.
In 2022, the Amapá Project began regularising the expired environmental
permits and started consultation with the Amapá State Environmental Agency
and the relevant state authorities. The Amapá Project requested that the
requirement for a full environmental impact study be waived. This request for
a waiver was on the basis that the previous L.O.s were granted on an operation
that is substantially the same as is currently planned and remains applicable
to future operations.
As a result of the discussions between the various state authorities and the
Amapá Project, we agreed with the Amapá State Environmental Agency that on
the mine and railway, we will be able to submit an Environmental Control Plan
- "PCA" (Plano de Controle Ambiental) and an Environmental Control Report -
"RCA" (Relatório de Controle Ambiental). However, we will need to complete a
full environmental assessment on the port. Still, given that the Amapá
Project has already begun some background studies, we also anticipate that the
timeline for the grant of the port L.I. will be shortened.
The fieldwork for the L.I. will begin as soon as possible with current
expectations that we will be able to submit the required reports for the mine
and rail in the second quarter of 2024 and the reports for the port in the
third quarter of 2024. The Amapá State Environmental Agency will then review
the application for the L.I., and we anticipate that these licenses will be
granted in 2024.
This timeline is substantially shorter than expected on a greenfield site,
where the impact study and associated approval can typically take between 24
and 36 months. The Amapá Project could achieve this in 12 to 16 months.
One of Cadence's initial investment criteria into the Amapá Project was the
safety and stability of the TSF. As such, before entering into the investment
agreement with our joint venture partners, we carried out a TSF review by an
internationally recognised consultant group and were satisfied with the
structure and stability of the T.S. Nonetheless, given the lack of reporting
and maintenance from 2014 onwards, the TSF at the Amapá Project was
considered high risk. The work carried out since 2019, including maintenance,
reporting, drilling and compliance, has meant that the Amapá Project TSF is
approaching the lowest risk rating for operating TSF. The intent is that the
TSF will continue to improve its risk rating. This will be achieved by
completing a dam break study, installing video monitoring on the TSF, and
ongoing inspection and remediation of various TSF-associated infrastructure.
Secured Bank Settlement Iron Ore Shipments
As per the settlement agreement announced in December 2021 here
(http://irservices.netbuilder.com/ir/cadence/newsArticle.php?ST=REM&id=31142821540789137)
, the net proceeds of the one shipment carried out in 2022, along with
approximately half of the net proceeds from the shipments in 2021, have been
used to pay the secured bank creditors.
As previously disclosed, given these unprecedented macroeconomic conditions in
2022, DEV could not meet the 2022 payment schedule per the settlement deed.
Although the bank creditors have reserved their rights, the settlement deed
remains in full effect. All parties are in discussions to agree on a new
timetable to rephase payments or to reach a one-time payment to settle all
outstanding amounts.
With the current iron ore prices and shipping costs, selling the 58% iron ore
concentrate stockpile is economically viable. Although DEV can recommend
material shipment, the secured bank creditors must approve it as they will
receive the net proceeds of the stockpile sale. As a result of the ongoing
discussions, no material shipments are scheduled to be made.
Development Plan for the Amapá Project
The goal is to bring this project back into production. With the PFS
completed, a project would typically directly proceed to DFS, funding, and
construction. Cadence and Its joint venture partners have agreed that the
lowest risk and currently best commercial approach to developing this project
is to bring on a highly experienced mining operator or EPCM contractor as a
joint venture partner. We are making good progress in this regard. While we
develop this further, we will continue with the optimisation studies,
licensing pathway, and community engagement, which should further improve the
project's economics while reducing its risks.
PRIVATE INVESTMENTS, PASSIVE
Ferro Verde Iron Ore, Brazil
Interest - 1% at 30/06/2022 and at 29/09/2023
During the previous year, Cadence invested a small (£0.21 million) in an
advanced iron ore deposit in Brazil. The Ferro Verde Deposit is located in the
southern portion of the state of Bahia, in the northeastern region of Brazil,
next to the town of Urandi, some 700 km southwest of Salvador, the capital of
the state of Bahia.
The project is currently progressing with its DFS. It has a historic inferred
resource of 284 million tonnes of iron ore at 31% Fe. The intent is to produce
4.5 Mtpa of 67% Fe. Our intended exit strategy is either when the asset is
listed or the owners carry out a trade sale.
PRIVATE INVESTMENTS, PASSIVE
Sonora Lithium Project, Mexico
Interest - 30% at 30/06/2022 and at 29/09/2023
Cadence holds an interest in the Sonora Lithium Project via a 30% stake in the
joint venture interests in each of Mexalit S.A. de CV ("Mexalit") and Megalit
S.A. de CV ("Megalit").
Mexilit and Megalit form part of the Sonora Lithium Project (the "Project").
The Sonora Lithium Project consists of nine granted concessions. Two of the
concessions (La Ventana, La Ventana 1) are owned 100% by subsidiaries of
Ganfeng Lithium Group Co., Ltd ("Ganfeng"). El Sauz, El Sauz 1, El Sauz 2,
Fleur and Fleur 1 concessions are owned by Mexilit S.A. de C.V. ("Mexilit"),
which is owned 70% by Ganfeng and 30% by Cadence. The Buenavista and San
Gabriel concessions are owned by Megalit, which is owned 70% by Ganfeng and
30% by Cadence.
Ganfeng Lithium has been developing the project, consisting of an open pit
mine and a lithium chemical product processing facility. The principal planned
lithium product for the project is lithium hydroxide.
As previously announced, In April 2022 and May 2023, the Mexican Government
approved amendments to its Mining Law (the "Mining Law Reform"), which
prohibited lithium concessions, declared lithium as a strategic sector and
granted the exclusive right to engage in lithium mining operations to a
state-owned entity. The Mining Law Reform is not supposed to apply to
pre-existing concessions, including those held by the Mexilit and Megalit.
Ganfeng's and Cadence's position is that these reforms cannot impact the
project's concessions because they were granted before the enactment of the
Mining Law Reform. This is consistent with the terms of the Constitution of
Mexico, which, among other principles and rights, recognises the principles of
legality and non-retroactivity of laws.
Guided by the principles of good faith, cooperation, and mutual benefit,
Ganfeng has been proactively engaging with the Mexican Government in general
and with the Secretary of Economy in particular, regarding a potential
collaboration on the Sonora Project while respecting Ganfeng and its
subsidiaries rights (including those subsidiaries 30% owned by Cadence).
Ganfeng continues to seek a mutually beneficial resolution. No agreement has
been reached among the Company, Ganfeng and the Mexican Government concerning
this potential collaboration.
While Ganfeng was holding discussions with the Secretary of Economy, the
General Directorate of Mines ("DGM") initiated a review of nine of the lithium
concessions held by the Mexican Subsidiaries, including the lithium
concessions including the concessions owned by Mexilit and Megalit.
According to the DGM, if the Mexican Subsidiaries failed to submit sufficient
evidence within the specified timeframe to prove that they had complied with
minimum investment obligations for the development of lithium concessions in
2017-2021, there was a risk of cancellation of the above-mentioned lithium
concessions.
As of May 2023, Mexlait and Megalit had submitted extensive evidence of their
compliance with the minimum investment obligations of the above-mentioned
lithium concessions in a timely manner. However, the DGM issued a formal
decision notice to the Mexican Subsidiaries in August 2023, indicating that
nine lithium concessions were cancelled, which include those owned by Mexilit
and Megalit.
The lithium concessions' cancellations issued by the DGM are not final and are
subject to ongoing appeals. Ganfeng and Cadence believe that the Mexican
Subsidiaries have complied with their minimum investment obligations, as
required by Mexican law. Indeed, the mine development investment by the
Mexican Subsidiaries has significantly exceeded the minimum investment
obligations, and the Mexican Subsidiaries regularly submitted to the DGM
annual reports for the 2017-2021 periods detailing their operations within the
prescribed period annually.
Moreover, Ganfeng and Cadence's position is that the resolutions cancelling
the concessions violate both Mexican law and international law as they are
arbitrary, unsubstantiated in both fact and law and infringe upon Cadence's,
Ganfeng's and its Subsidiaries' fundamental due process rights. Therefore,
Ganfeng and the Mexican Subsidiaries have filed administrative review
recourses before the Secretary of Economy against the aforementioned
resolutions.
The lithium concessions' cancellations issued by the DGM are not final.
Depending on the progress of Ganfeng's further actions and the outcome of the
above-mentioned matters, whether cancellations will be revoked or maintained
in place and the scope of the concessions affected are still uncertain.
Ganfeng's interim results announcement published on 29 August 2023 discussed
these developments as part of their post-balance sheet analysis. Therefore,
there is still uncertainty about the impact on Cadence's investment. Ganfeng
is pursuing various remedies, including administrative review recourses, to
challenge the DGM's resolutions. If necessary, Ganfeng will resort to
additional remedies under Mexican or international law.
Cadence will continue to liaise with our joint venture partners regularly and
ensure within the limits of the joint venture agreement that the matter is
given the utmost attention and that regulatory requirements are fulfilled
promptly.
PUBLIC EQUITY
The public equity investment segment includes active and passive investments
in our trading portfolio.
The trading portfolio consists of investments in listed mining entities that
the board believes possess attractive underlying assets. The focus is to
invest in mining companies that are significantly undervalued by the market
and where there is substantial upside potential through exploration success
and/or the development of mining projects for commercial production.
Ultimately, the aim is to make capital gains in the short to medium term.
Investments are considered individually based on various criteria and are
typically traded on the TSX, ASX, AIM or LSE.
During the period, our public equity investments generated an unrealised and
realised loss of £1.53million (2022: loss of £4.15 million). These
unrealised losses are a reflection of the transfer of the receipt of Hastings
Technology Metals Ltd's ("HAS") equity at the market value (£ 5.15 million)
and then the subsequent reduction in share price in HAS by circa 66%. However,
the treatment of the mineral license swap of the Yangibana Rare Earth Deposit
into the equity of HAS is due to Cadence reporting on an unconsolidated basis.
Assuming the returns were reported on a consolidated basis, we would have
reported an unrelaised / realised profit of £2.17 million, with roughly
£0.93 million gain being attributed to improvements in the price and profits
from sales of European Metals Holdings share price ("EMH"), £0.93 million is
attributed to the net improvement in the Evergreen Lithium Share Price
("E.G.") and £0.75 million being attributed to the gain in price associated
with the Yagibana Rare Earth License swap into HAS.
If we look at the cumulative share performance of this portfolio at the end of
the period, the realised return on historical costs is circa 143%, and the
unrealised return is 149%. Our investment in EMH is the only active investment
in the public equity portfolio.
The movement in public portfolio values during the year is summarised below.
We have reported for clarity the unconsolidated and consolidated values and
movements. Our disposals in our pubic equity were invested in the Amapá
Project.
£,000 £,000
(Unconsolidated) (Consolidated)
Portfolio value at the beginning of period of 2023 5,244 5,244
Addition of HAS shares at market value 5,152 NA
Transfer of HAS from private to public portfolio NA 905
Transfer of E.G. from private to public portfolio 1,810 1,810
Disposal of public Investments during the year (935) (935)
Realised and Unrealised (loss) / profit on portfolio value for the period (1,532) 2,715
Portfolio value at the end of the period 9,740 9,740
As of 30 June 2023, our public equity stakes consisted of the following:
Company 30-Jun-23 £,000 31-Dec-22 £,000 30-Jun-22 £,000 31-Dec-21 £,000 30-Jun-21 £,000
European Metals Holding Ltd 5,207 4,882 5,357 11,287 14,180
Evergreen Lithium Ltd 2,738 - - - -
Hastings Technology Metals Ltd 1,570 - - - -
Charger Metals NL 187 301 196 342 109
Macarthur Minerals Ltd - - 103 181 327
Eagle Mountain Mining Ltd 20 37 47 122 153
Mont-Royal Resources Ltd 12 19 39 35 -
Celsius Resources Ltd - - - - 103
Miscellaneous 5 5 5 7 6
Total 9,740 5,244 5,747 11,974 14,878
PUBLIC EQUITY, ACTIVE
European Metals Holdings Limited ("EMH"), Czech Republic
Interest - 6.2% at 30/06/2022 and 5.8% at 29/09/2023
EMH owns 49% of Geomet s.r.o. with 51% owned by CEZ. CEZ is a significant
energy group listed on various European Exchanges. Geomet s.r.o. owns 100% of
Cinovec, which hosts a globally substantial hard-rock lithium deposit with a
total Measured, Indicated and Inferred Mineral Resource of 708.2Mt at 0.43%
Li2O and 0.05% Sn containing a combined 7.39 million tonnes of Lithium
Carbonate Equivalent.
This followed previous reports on 28 November 2017 (Further Increase in
Indicated Resource at Cinovec South). An initial Probable Ore Reserve of
34.5Mt at 0.65% Li2O and 0.09% Sn reported on 4 July 2017 (Cinovec Maiden Ore
Reserve - Further Information) has been declared to cover the first 20 years'
mining at an output of 22,500tpa of battery-grade lithium carbonate reported
on 11 July 2018 (Cinovec Production Modelled to Increase to 22,500tpa of
Lithium Carbonate). This makes Cinovec the largest hard-rock lithium deposit
in Europe, the fourth largest non-brine deposit globally, and a globally
significant tin resource.
In January 2022, EMH completed an updated PFS, which indicated a return
post-tax NPV8 of USD1.94B and a post-tax IRR of 36.3%. The study confirmed
that the Cinovec Project is a potential low-operating-cost producer of
battery-grade lithium hydroxide or battery-grade lithium carbonate as markets
demand. It confirmed that the deposit is amenable to bulk underground mining.
Metallurgical test work has produced battery-grade lithium hydroxide and
lithium carbonate in addition to high-grade tin concentrate. A DFS for the
Cinovec Project is currently underway.
For the reporting period, EMH continued to manage the advancement of the
Cinovec Lithium/Tin Project in the Czech Republic. The Cinovec project was
awarded pre-approval for an ~ EUR 49 million grant under the E.U.'s Just
Transition Fund scheme in January 2023 and was formally classified as a
"Strategic Project" as part of this grant scheme. The final application and
approval process is due to be completed in early 2024.
Other key milestones achieved during the year included the appointment of DRA
Global to complete the DFS, the continuation of outstanding results from the
final test work, and securing the land necessary to build the proposed lithium
processing plant at Dukla, approximately 6.2km from the proposed portal site.
Post-period end, EMH received an investment from a significant strategic
investor, the European Bank for Reconstruction and Development ("EBRD"). The
EBRD is an International Financial Institution owned by the European Union,
the European Investment Bank and 71 countries, including the Czech Republic.
The EBRD investment aims to fund the project's predevelopment work.
PUBLIC EQUITY, PASSIVE
Evergreen Lithium Limited ("EG"), Australia
Interest - 13.2% at 30/06/2022 and 8.7% at 29/09/2023
In July 2022, Cadence Minerals received approximately 15.8 million shares in
EG when Cadence sold its 31.5% stake in Lithium Technologies and Lithium
Supplies ("L.T. and L.S.") to EG as announced on 27 June 2022. EG was listed
on the Australian Stock Exchange ("ASX") during the reporting period.
Before listing, Cadence's equity stake in Evergreen was 13.16%; due to the IPO
and associated fundraising, this was reduced to 8.74%. At the time of writing,
the value of this stake was approximately £3.3 million; our initial
investment into this asset was £0.83 million.
A further AS$ 6.63 million (£3.80 million) shares in Evergreen are due to
Cadence on achieving certain performance milestones by Evergreen. Further
details of these milestones can be found in the Evergreen prospectus.
Cadence's shares are subject to a 2-year escrow agreement as determined by the
listing rules of the ASX.
Evergreen is the 100% owner of three exploration tenements. The Bynoe Lithium
Project and Fortune Lithium Project (awaiting grant of exploration permit) are
in the Northern Territory, and the Kenny Lithium Project is in Western
Australia.
The Bynoe Lithium Project is Evergreen's flagship prospect. Evergreen's
primary focus is to explore and discover an economically viable lithium
resource for development. The Bynoe Lithium Project is located south of Darwin
in the Northern Territory, Australia. It covers the northeastern strike extent
of the lithium- and tantalum-endowed Bynoe Pegmatite Field. The Bynoe
Pegmatite Field is host to Core Lithium Ltd's (ASX: CXO) ("Core Lithium" or
"Core") high-grade Finniss lithium deposit, which is adjacent to Core
Lithium's producing lithium mine. Core Lithium's deposit is just 1.2km from
the Bynoe Lithium Project. Soil sampling conducted on the Bynoe Lithium
Project has returned geochemical anomalies that indicate the lithium
mineralisation continues along the trend into the Company's
Bynoe Lithium Project. Based on the initial stages of soil sampling alone
(which only covers approximately 10- 20% of the Bynoe Lithium Project area, an
initial five target zones have been identified that contain lithium
mineralisation. The Bynoe Lithium Project covers an area of 231 km2, making
Evergreen one of the largest tenement holders within the central Bynoe
Pegmatite Field after Core Lithium.
The Kenny Lithium Project is located within the Dundas Mineral Field of
Western Australia and 50km East of Norseman in the Eastern Goldfields. It is
near the Mt Dean and Mt Belches-Bald Hill pegmatite fields, and multiple
significant lithium discoveries have been made near the Kenny Lithium Project.
Initial field mapping on the Kenny Lithium Project has confirmed the presence
of substantial outcropping pegmatites, whereby an approximate 10km zone of
pegmatite outcropping has been established in the North- Eastern section of
the Kenny Lithium Project, which significantly exceeds what has already been
identified by the Government Survey of Western Australia (GSWA).
Evergreen aims to explore and discover an economic lithium resource for
subsequent development. As with the Company's Bynoe Lithium Project, minimal
geochemical work has been undertaken within the tenure; however, historical
results have proven encouraging. During the reporting period, EG has continued
to progress with the development of these assets, with some initial positive
results from the geochemical and geophysical results on both the Byone and
Kenny lithium prospects.
PUBLIC EQUITY, PASSIVE
Hastings Technology Metals Ltd ("HAS"), Australia
Interest - 1.4% at 30/06/2022 and 1.4% on 29/09/2023
In June 2022, Cadence entered into a binding agreement to sell its working
interest in the leases in the Yangibana Project to HAS, the current owner and
operator of the Yangibana Rare Project. Cadence sold its 30% working interest
in the Yangibana Project tenements, to Hastings, for A$9 million (£5.1
million), which has been satisfied via the issue of 2,452,650 new ordinary
shares in Hastings to Cadence. These shares represented approximately 1.9% of
the issued share capital of Hastings Technology and are subject to a 12-month
voluntary escrow. Cadence has disposed of some of this investment to fund our
investment in the Amapá Iron Ore Project, holding circa 1.4% of HAS. Amapa.
At the period end, the value of this stake was approximately £1.6 million;
our initial investment in this asset was £0.91 million.
Hastings is a well-managed Perth-based rare earth company primed to become the
world's next producer of neodymium and praseodymium concentrate ("NdPr"). NdPr
is vital in manufacturing permanent magnets used daily in advanced technology
products ranging from electric vehicles to wind turbines, robotics, medical
applications and digital devices.
Hasting's flagship Yangibana project, in the Gascoyne region of Western
Australia, contains a highly valued NdPr deposit with an NdPr: TREO ratio of
up to 52%. The site is permitted for long-life production and with offtake
contracts signed and debt finance in an advanced stage.
During the period Hastings announced it had introduced a staged development
programme to the Yangibana asset. This strategy will reduce upfront capital
requirements and project execution risks and provide a faster pathway to cash
flow by Q1 2025. Hastings will initially focus on constructing the Yangibana
mine and beneficiation plant to produce rare earths concentrate (Stage 1),
followed by developing a hydrometallurgical plant to produce mixed rare earth
carbonate (Stage 2). This has resulted in the total project capital cost being
estimated at $948m, with the Stage 1 component being $470m. The beneficiation
plant construction will commence in Q3 2023, supporting the Stage 1
concentrate delivery target date of Q1 2025.
As a result of this staged development programme, Stage 1 will have a post-tax
NPV11 of $538m, an IRR of 27.54% and an average annual EBITDA of $174m,
providing a funding source for Stage 2.
FINANCIAL RESULTS:
During the period, the Group made a loss before taxation of £1.95 million (6
months ended 30 June 2022: £5.05 million, year ended 31 December 2022:
£5.50 million). There was a weighted basic loss per share of 1.163p (30 June
2022: 3.136p, 31 December 2022: 3.355p). During the period, the Group disposed
of its Yangibana Joint Venture Interest. This interest was held in the
Company's wholly owned subsidiary, Mojito Resources "Mojito" which acquired
2,452,650 shares in Hastings Technology Metals Ltd in return valued at AUD
$9m. Therefore, the sale's profit is reflected in the subsidiary, not the
Company's accounts. Mojito, in turn, sold these shares to the Company for $9m,
which resulted in an amount owing to the subsidiary of £4.75m at the period
end in the Company's accounts. This transaction constitutes a related party
transaction. The Company currently holds an investment in Mojito of £0.96m,
supported by the intercompany balance of £4.75m. Should the intercompany loan
be waived this would result in a profit of approximately £3.79m, based on the
balances at 30 June 2023, for the Company.
The total assets of the Group increased from £21.64 million at 31 December
2022 to £25.79 million. During the period, our net cash outflow from
operating activities was £0.76 million, gross proceeds of £1.31m were raised
through the issue of loans and new shares, and our net cash position was up
£0.47 million at £0.58 million.
Kiran Morzaria
Director
29 September 2023
This announcement contains inside information for the purposes of Article 7 of
E.U. Regulation 596/2014.
For further information:
Cadence Minerals plc +44 (0) 20 3582 6636
Andrew Suckling
Kiran Morzaria
WH Ireland Limited (NOMAD & Broker) +44 (0) 207 220 1666
James Joyce
Darshan Patel
Brand Communications +44 (0) 7976 431608
Public & Investor Relations
Alan Green
CADENCE MINERALS PLC
STATEMENT OF COMPREHENSIVE INCOME
FOR THE PERIOD ENDED 30 JUNE 2023
Notes Unaudited period ended 30 June 2023 Unaudited period ended 30 June 2022 Audited year ended 31 December 2022
£'000 £'000 £'000
Income -
Unrealised loss on financial investments (1,319) (5,259) (4,593)
Realised (loss)/profit on financial investments (213) 1,110 552
(1,532) (4,149) (4,041)
Share based payments (25) - (13)
Other administrative expenses (768) (906) (1,443)
Total administrative expenses (793) (906) (1,456)
Operating profit/(loss) (2,325) (5,055) (5,497)
Foreign exchange gains/(losses) 407 10 3
Finance cost (36) - (3)
Profit/(loss) before taxation (1,954) (5,045) (5,497)
Taxation - - -
Profit/(loss) attributable to the equity holders of the Company (1,954) (5,045) (5,497)
Total comprehensive profit/(loss) for the period, attributable to the equity (1,954) (5,045) (5,497)
holders of the Company
Loss per share
Basic (pence per share) 3 (1.163) (3.136) (3.355)
Diluted (pence per share) 3 n/a n/a n/a
CADENCE MINERALS PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE PERIOD ENDED 30 JUNE 2023
Share capital Share premium account Share-based payment reserve Investment in own shares Retained earnings Total equity
£'000 £'000 £'000 £'000 £'000
Balance at 1 January 2022 1,903 33,207 249 (70) (13,136) 22,153
Transfer on exercise of warrants - - (10) - 10 -
Issue of share capital 241 4,670 - - 4,911
Issue of shares held in Trust - 111 - 6 - 117
Costs of share issue - (376) - - (376)
Transactions with owners 241 4,405 (10) 6 10 4,652
Loss for the period - - - (5,045) (5,045)
Total comprehensive loss for the period - - - (5,045) (5,045)
Balance at 30 June 2022 (unaudited) 2,144 37,612 239 (64) (18,171) 21,760
Share based payments - - 13 - 13
Transactions with owners - - 13 - - 13
Loss for the period - - - (452) (452)
Total comprehensive loss for the period - - - - (452) (452)
Balance at 31 December 2022 2,144 37,612 252 (64) (18,623) 21,321
Share based payments - - 25 - - 25
Issue of share capital 83 41 - - 124
Transactions with owners 83 41 25 - - 149
Loss for the period - - - - (1,954) (1,954)
Total comprehensive loss for the period - - - - (1,954) (1,954)
Balance at 30 June 2023 (unaudited) 2,227 37,653 277 (64) (20,577) 19,516
CADENCE MINERALS PLC
STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2023
Unaudited Unaudited Audited
30 June 2023 30 June 2022 31 December 2022
Assets Notes £'000 £'000 £'000
Non-current
Financial Assets 4 10,530 8,963 11,365
Investment in associate
10,530 8,963 11,365
Current assets
Trade and other receivables 3,978 5,222 3,957
Financial Assets 4 10,702 5,747 6,206
Cash and cash equivalents 577 1,994 110
Total current assets 15,257 12,963 10,273
Total assets 25,787 21,926 21,638
EQUITY AND LIABILITIES
Current liabilities
Trade and other payables 348 166 317
Borrowings 6 565 - -
Total current liabilities 913 166 317
Liabilities due after one year
Borrowings 6 611 - -
Amounts owed to subsidiaries 4,747 - -
Total liabilities 6,271 166 317
Equity
Share capital 5 2,227 2,144 2,144
Share premium 37,653 37,612 37,612
Share based payment reserve 277 239 252
Investment in own shares (64) (64) (64)
Retained earnings (20,577) (18,171) (18,623)
Total equity attributable
to owners of the company 19,516 21,760 21,321
Total equity and liabilities 25,787 21,926 21,638
CADENCE MINERALS PLC
CONSOLIDATED CASH FLOW STATEMENT
FOR THE PERIOD 30 JUNE 2023
Unaudited period ended Unaudited period ended Audited year ended
30 June 2023 30 June 2022 31 December 2022
£'000 £'000 £'000
Cash flows from operating activities
Operating loss (2,325) (5,055) (5,497)
Net realised/unrealised loss on financial investments 1,532 4,149 4,041
Equity settled share-based payments 25 - 13
Adjustment for issue of own shares - 117 -
(Increase)/decrease in trade and other receivables (21) (170) 24
Increase/(decrease) in trade and other payables 31 (687) (536)
Net cash outflow from operating activities (758) (1,646) (1,955)
Taxation - - -
Cash flows from investing activities
Payments for current financial investments - (176) (235)
Receipts on sale of current investments 935 1,256 1,926
Payments for non-current financial investments (975) (2,305) (4,600)
Net cash inflow from investing activities (40) (1,225) (2,909)
Cash flows from financing activities
Proceeds from issue of share capital 124 4,911 5,016
Share issue costs - (376) (376)
Borrowings 1,187 - -
Finance cost (12) - (3)
Net cash (outflow)/inflow from financing activities 1,299 4,535 4,637
Net increase/(decrease) in cash and cash equivalents 501 1,664 (227)
Foreign exchange movements on cash and cash equivalents (34) 6 13
Cash and cash equivalents at beginning of period 110 324 324
Cash and cash equivalents at end of period 577 1,994 110
Material non-cash transactions
During the period the Company acquired 2,452,650 shares in Hastings Technology
Metals Ltd from its wholly owned subsidiary Mojito Resources, at a cost of
AUD$ 9m (£5.152m). This amount was not paid in cash but treated as a
intercompany loan from Mojito Resources. This has been treated as a
non-current liability.
During the year ended 31 December 2022 the Company disposed of its 31.5% stake
in in Lithium Technologies and Lithium Supplies, (non-current financial
investments) for initial proceeds of £1,810,000 which were settled in shares
of Evergreen PTY Ltd (non-current investment). Additionally, at 31 December
2021 the Company had a loan outstanding of £514,000 from Amapá and a balance
of £554,000 held in a trust account (trade and other receivables) which were
converted into its investment in Amapá (non-current investment). There were
no material non-cash transactions in the year ended 31 December 2021.
NOTES TO THE INTERIM REPORT
FOR THE PERIOD ENDED 30 JUNE 2023
1 BASIS OF PREPARATION
The interim financial statements have been prepared in accordance with
applicable accounting standards and under the historical cost convention. The
financial information set out in this interim report does not constitute
statutory accounts as defined in section 434 of the Companies Act 2006. The
Group's statutory financial statements for the year ended 31 December 2022
have been delivered to the Registrar of Companies. The auditor's report on
those financial statements was unqualified.
The principal accounting policies of the Group are consistent with those
detailed in the 31 December 2022 financial statements, which are prepared
under the historical cost convention and in accordance with U.K. adopted
International Accounting Standards (IAS).
GOING CONCERN
The Directors have prepared cash flow forecasts for the period ending 30
September 2024. The forecasts demonstrate that the Group has sufficient funds
to allow it to continue in business for a period of at least twelve months
from the date of approval of these financial statements. Accordingly, the
accounts have been prepared on a going concern basis.
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
Estimates and judgements are continually evaluated and are based on historical
experience and other factors, including expectations of future events that are
believed to be reasonable under the circumstances.
The Group makes estimates and assumptions concerning the future. The resulting
accounting estimates will, by definition, seldom equal the related actual
results
2 SEGMENTAL REPORTING
The Company operates a single primary activity to invest in businesses so as
to generate a return for the shareholders.
3 EARNINGS PER SHARE
The calculation of the earnings per share is based on the loss attributable to
ordinary shareholders divided by the weighted average number of shares in
issue during the period.
Unaudited Unaudited Audited
six months ended six months ended year ended
30 June 2023 30 June 2022 31 December 2022
£'000 £'000 £'000
Profit/(loss) on ordinary activities after tax (£'000) (1,954) (5,045) (5,497)
Weighted average number of shares for calculating basic profit/loss per share 174,360,940 167,656,144 170,208,788
Less: shares held by the Employee Benefit Trust (weighted average) (6,380,000) (6,804,309) (6,380,000)
Weighted average number of shares for calculating basic (loss)/profit per 167,980,940 160,851,835 163,828,788
share
Share options and warrants exercisable n/a n/a n/a
Weighted average number of shares for calculating diluted profit per share n/a n/a n/a
Basic profit/(loss) per share (pence) (1.163) (3.136) (3.355)
Diluted profit per share (pence) n/a n/a n/a
4 FINANCIAL INVESTMENTS
Financial assets at fair value through profit or loss:
£'000 £'000 £'000 £'000
Level 1 Level 2 Level 3 Total
Fair value at 31 December 2021 11,974 - 5,660 17,634
Additions 235 - 7,479 7,714
Fair value changes (4,593) - - (4,593)
(Loss)/Gains on disposals (446) - 998 552
Disposal (1,926) - (1,810) (3,736)
Fair value at 31 December 2022 5,244 - 12,327 17,571
Additions 5,152 - 975 6,127
Transfers on listings 1,810 - (1,810) -
Fair value changes (1,319) - - (1,319)
(Loss)/Gains on disposals (213) - - (213)
Disposal (934) - - (934)
Fair value at 30 June 2023 9,740 - 11,492 21,232
Losses on investments held at fair value through profit or loss
Fair value loss on investments (1,319) - - (1,319)
Realised loss on disposal of investments (213) - - (213)
Net loss on investments held at fair value through profit or loss (1,532) - - (1,532)
Non-current - - 10,530 10,530
Current 9,740 - 962 10,702
9,740 - 11,492 21,232
5 SHARE CAPITAL
Unaudited Unaudited Audited
30 June 2023 30 June 2022 31 December 2022
£'000 £'000 £'000
Allotted, issued and fully paid
173,619,050 deferred shares of 0.24p (30 June and 31 December 2022: 417 417 417
173,619,050)
180,971,037 ordinary shares of 1p (30 June 2022 and 31 December 2022 1,810 1,727 1,727
172,719,813 ordinary shares of 1p)
2,227 2,144 2,144
6 LOANS
On 25 May 2023 the Company secured a Mezzanine Loan Facility ("Loan Facility")
This comprised an unconditional and committed initial tranche by the Investors
of US$ 2 million, received during the period (net of costs) and a further
conditional Loan Facility amount of US$ 8 million, subject to agreement by
the Investors. The Loan Facility is valid for three years.
The First Tranche of US$ 2 million has a 24-month term ("Maturity Date"). It
has a six-month principal repayment holiday, followed by 18 equal monthly
cash repayments thereafter to the Maturity Date. The Loan Facility has an
effective annual interest rate of 9.5% and has a 5% implementation on the
value of the First Tranche. After accounting for the costs, the Effective
Interest Rate applied is 31.3%.
If the Company elects not to settle a monthly payment in cash (each being a
"Missed Payment"), they will automatically grant a right for the Missed
Payment to be settled in shares as per the non-cash repayment terms contained
in the Loan Facility Agreement ("Non-Cash Repayment"). Following a Non-Cash
Repayment, the Investors will be automatically granted conversion rights over
such principal and interest balances due concerning the Missed Payment. The
Investors will then have the right for 12 months to convert such amounts
either at a price equal to 12.7 pence (representing a 30% premium to the
closing price on 25/05/2023) or at a 7% discount to the average of the five
daily VWAPs chosen by the Investors in the 20 trading days preceding its
conversion notice or at the price the Company issues further equity if lower
than the existing conversion price. As the Investors have no automatic
conversion rights, management have concluded that there is no equity or
derivative value.
Cadence has provided a security package to the Investors as part of the Loan
Facility. This package includes a floating charge over the Company's
investments, placing its holding in European Metals Holdings into escrow and
the issue of new ordinary shares to the Investors ("Initial Issued Shares").
The Initial Issued Shares represent 50% of the value of the First Tranche, or
8,251,224 new ordinary shares. These initial Issued Shares will be used as
part of any Non-Cash Repayments if applicable. On the Maturity Date, the
Initial Issued Shares may be sold and provided all amounts due have been
settled in cash the profits on the sale revert to the Company. Of the gross
proceeds of US$2m (£1,622,000), $350,000 (£284,000) were deducted in fees,
$153,000 (£124,000) was allocated as payment for the Initial Issued Shares,
and $33,000 (£27,000) were paid in legal and escrow fees.
As part of the Loan Facility, the Company has agreed to grant 8,251,224
warrants to subscribe for ordinary shares in the Company at an exercise price
of 13.2 pence (representing roughly a 35% per cent premium to the prevailing
share price of the Company's Shares) with a 48-month term.
The movements in the loans are summarised below.
30 June 2023 31 December 2022
£'000 £'000
Balance at beginning of period - -
Net loans received 1,187 -
Interest charged 36 -
Repaid in cash (12) -
Foreign exchange (35) -
Balance at end of period 1,176 -
Due within one year 565 -
Due after one year 611 -
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