REG - Mineral & Financial - Audited Results for Year Ended 30 June 2021
21/12/2021 15:15
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RNS Number : 3911W Mineral & Financial Invest. Limited 21 December 2021
Mineral and Financial Investments Limited
Audited Full Year Financial Results for Period ended 30 June 2021
and Net Asset Value Update 1 (#_ftn1)
HIGHLIGHTS
· Audited year-end Net Asset Value £6,438,000 up 17.6%, from
£5,474,000 for the same period last year
· Net Asset Value Per Share ("NAVPS") fully diluted (FD)
18.22p, up 17.5%, from 15.5p in FY 2020
· NAVPS FD has increased at compound annual growth rate (CAGR)
of 26.8% since 30 June 2017
· Net Asset Value has increased at CAGR of 27.4% since 30 June
2017
· Investment Portfolio now totals £5,822,000 up 9.5% during
past 12 months, from £5,315,000.
· NAVPS performance exceeds that of the FTSE 350 Mining and
Goldman Sachs Commodity Indices since 2017
Camana Bay, Cayman Island - 21 December 2021 - Mineral & Financial
Investments ("M&FI" or the "Company")), the AIM quoted resources
investment company, is very pleased to announce its Net Asset value and
audited fiscal year update on its activities for the 12 months ended 30 June
2021
NET ASSET VALUE
Net Asset Value ('000) £2,443 £2,623 £5,114 £5,474 £6,438 27.4%
Fully diluted NAV per share 7.05p 7.49p 14.50p 15.50p 18.22p 26.8%
Goldman Sachs Commodity Index 2 (#_ftn2) 373.4 487.4 425.4 325.5 535.9 9.5%
FTSE 350 Mining Index(2) 14,671 18,877 20,688 17,714 22,207 10.9%
CHAIRMAN'S STATEMENT
In this, my first Statement to you as Chairman of M&FI, I would like to
thank the board and management for the work, cooperation and results achieved
during a challenging year. Mineral & Financial Investments Limited
("M&FI") is an active investing company working to provide our
shareholders with significant returns by leveraging our in-house expertise to
provide investment capital to finance modern, responsible mining companies and
exploration projects globally. We focus on global metals market trends to take
advantage of changes in metal markets and only invest in favourable
jurisdictions with proven management teams. We will seek to provide financing
and act as a good partner in exchange for meaningful ownership levels in
public or private companies, and board representation or active oversight, if
needed and appropriate. We will provide advisory services to add value when
possible and will be willing to make follow-on investments in the investee
companies if milestones are achieved. The full details of our investing policy
are set out in the Directors' Report on page 13 of the M&FI 2021 Annual
Report.
During the twelve-month fiscal period ending 30 June 2021 the Company
generated net trading income of £1,362,000 which translated into a net profit
of £964,000 or 2.72p Fully Diluted (FD) per share for the period. At the
period end of 30 June 2021, the Company's Net Asset Value (NAV) was
£6,438,000, an increase of 17.6% from the 30 June 2020, NAV of £5,474,000.
The Net Asset Value per Share - fully diluted (NAVPS-FD) as of 30 June 2021
was 18.22p up from the 15.5p NAVPS FD achieved in the previous fiscal
period. Since 30 June 2016, the Company's NAV has increased on average by
43% annually. We continue to be effectively debt free, with working capital of
£6.5M.
I believe M&FI's investment performance during this extraordinary and
challenging year was satisfying in absolute terms, but also in relative terms.
We continue to outperform the relevant internal Key Performance Indicators
that we measure our performance against. Since 30 June 2017 the NAV per share
of M&FI has grown at compound annual growth rate (CAGR) of 26.8% per year.
The FTSE 350 Mining Index has grown by a CAGR of 10.9% during the comparable
period, while the Goldman Sachs Commodity Index appreciated by a CAGR of 10.9%
for the comparable period. We believe that the next 12 months will no less
challenging, we believe that we are well positioned for the upcoming year and
will do all within our abilities to meet our internal expectations, and those
of our shareholders.
M&FI continues seek suitable strategic investment opportunities that we
believe will generate above average returns while adhering to our standards of
diligence. We thank you for your support and we will continue work diligently,
thoroughly and with prudence to advance your company's assets.
FINANCIAL AND OPERATIONAL REPORT
The Company generated gross profit of £1,362,000 during the fiscal year, an
increase of 87.6% from the previous financial year's gross profit of
£726,000. The operating profit for the full year, ending 30 June 2021 was
£1,021,000, an increase of 152% over the previous full year operating profit
of £405,000. The full year net income was £964,000, an increase of 173% from
the previous full year's profit of £353,000. M&FI's NAV per share
increased 17.4% year over year to 18.22p. The overall cash and investment
portfolios increased by 19.4% year over year to £6,680,000.
We believe the key to creating shareholder value for Mineral & Financial
Investments is, as with any investment company is to generate positive
investment returns and maintain low operating costs. More specifically
operating costs which grow at a slower rate than the accretion in the Net
Asset Value. Our full year total administrative costs totalled £341,000, a
7.9% increase over the previous year's costs of £321,000 which further aided
in improving our results.
The world is recovering from the unexpected and difficult challenges resulting
from the global pandemic caused by the spread of the Covid 19 virus. Global
economic output declined by 3.1% (Fig. 3), as measured by the International
Monetary Fund (IMF). In the IMF's most recent global economic analysis(1),
Global Output for 2021 is estimated to have grown by 5.9%, which is forecasted
to be followed in 2022 by a further output increase of +4.9%. We believe the
recovery has been propelled by both fiscal and monetary intervention by most
governments globally, acting as both a mitigant to the economic damage of the
pandemic, and secondarily as a propellant as we exit the lockdowns imposed
around the world. Inflationary pressures were initially expected to be
contained due to diminished economic activity. However, due to the
afore-mentioned stimulus and global supply-chain bottlenecks, we have noted
inflationary pressures increasing significantly. The IMF's forecast
estimates that global inflation should increase from 3.2% in 2020 to 4.3%
(+34%) in 2021. We anticipate the largest rise in inflation will be in
Advanced Economies, which benefitted from more fiscal and monetary stimulus,
seeing inflation quadrupling from 0.7% to 2.8% in 2021.
IMF - WORLD ECONOMIC OUTLOOK 3 (#_ftn3) (Fig. 3)
3.3% 3.8% 3.6% 2.8% -3.1% 5.9% 4.9%
Advanced Economies 1.8% 2.5% 2.3% 1.7% -4.5% 5.2% 4.5%
Emerging Markets and Developing Economies 4.5% 4.7% 4.5% 3.7% -2.1% 6.4% 5.1%
2.7% 3.2% 3.6% 3.5% 3.2% 4.3% 3.8%
Advanced Economies 0.7% 1.7% 2.0% 1.4% 0.7% 2.8% 2.3%
Emerging Markets and Developing Economies 4.3% 4.4% 4.9% 5.1% 5.1% 5.5% 4.9%
The growth in supply of US dollars, as measured by the US Federal Reserve
Bank, M1 is up from US$4.0T, as of January 2020, to the Fed's latest
revelation of M1 reaching US$20.0T - is a 400% increase in 20 month. At the
same time, for a few years prior to the pandemic we believe the natural
resource sectors had experienced years of constrained access to capital
markets, resulting in diminished levels of exploration to satisfy future
demand. The combination of these two macro-factors along with positive
economic growth will, we believe, be positive for commodity pricing in 2021
and 2022. Moreover, we believe that inflation will be longer lasting than is
inferred and that precious metals should benefit disproportionately from this
economic setting.
GLOBAL STOCK INDEX PERFORMANCE(2) (Fig. 4)
Standard & Poor 500 3,106.7 4,291.8 38.1%
Nikkei 225 22,288.1 28,791.5 29.2%
Euro Stoxx 50 3,234.1 4,064.3 25.7%
Shanghai Shenzhen CSI 300 4,163.9 5,224.0 25.5%
Hang Seng 24,301.6 28,994.1 19.3%
FTSE 100 6,169.7 7,037.5 14.1%
We believe the Fiscal and Monetary responses by most "advanced economy"
governments have created fertile ground for equity markets to advance this
year. We note that key equity markets (Fig. 4) benefited from strong positive
advances in the period that coincides with our fiscal year. The strongest
market gains were experienced by the S&P 500 rising by 38.1%, while the
FTSE 100 was up 14.1% during the same 12-month period.
World commodity price performances during our fiscal year was positive (Fig.
6) for all but one of the commodities that we follow: Uranium (-1.5%). All
other commodities have had positive price performance during the period.
However, the notable laggard amongst the performances has been gold. We have
committed to an overweight position in precious metals, particularly gold. We
remain committed to the belief that metals, and more specifically precious
metals will outperform overall equity markets in the upcoming period.
PRICE PERFORMANCE FOR VARIOUS COMMODITIES(2)
(US$, Fig 6)
METALS 30/06/18 30/06/19 30/06/20 30/06/21 30/11/21 % Ch.
30/6/20 to 30/6/21
Gold $1,255 $1,389 $1,782 $1,835 $1,788 3.0%
Silver $16.20 $15.30 $17.85 $26.19 $22.92 46.7%
Platinum $853 $837 $804 $1,065 $51 32.5%
Palladium $945 $1,535 $1,835 $2,709 $1,707 47.6%
Rhodium $2,080 $3,150 $5,800 $18,200 $12,850 213.8%
Copper $6,525 $5,969 $6,013 $9,319 $9,652 55.0%
Nickel $14,740 $12,670 $12,748 $18,254 $20,284 43.2%
Aluminum $2,238 $1,779 $1,594 $2,504 $2,641 57.1%
Zinc $3,089 $2,575 $2,057 $2,951 $3,351 43.5%
Lead $2,436 $1,913 $1,786 $2,289 $2,343 28.2%
Uranium $59,730 $54,454 $72,312 $71,209 $101,964 -1.5%
INVESTMENT PORTFOLIOS
The performance of various indices, commodities and share prices appear to
have been strong during our fiscal year ending June 30, 2021. We note that the
mining indices appear to have generated strong gains during this period. We
believe that this performance is somewhat misleading, as it is our belief that
markets were still mostly depressed in June 2020, and most appreciated sharply
from the Q1-Q2 lows. However, some of these indices, as at our 30 June 2021
year end were still below the pre-COVID levels. For example, the FTSE 350
Mining Index is up 25.4% June 2020 to June 2021, however, if we measure its
performance as of 1 January 2020 (i.e., prior to the COVID related market
correction) to 30 June 2021, the FTSE 350 Mining Index was up 2.34%, while the
Company's NAV rose from 15.19p to 18.22p (+20.0%) during the comparable
period.
The commodity markets performed very similarly to most equity markets -
declining sharply from Mid-February 2020 to Mid-March 2020(2). During this
5-week period the S&P 500 declined from 3,382 to 2300 (-32%)(2). Since
that March low the S&P 500 has risen 105%(2). The FTSE 100 Index, in
contrast, remains 6.9% below where it was in mid-February 2020(2). M&FI's
performance during this period compares very favourably to the FTSE 100,
outperforming the FTSE 100 by 26.9% during the 1 January 2020 to 30 June 2021,
period.
It is our belief that commodity price performances were consistent with the
overall performance of equity markets, inasmuch that the best performing metal
commodities during the 12 and 18-month periods were the base metals our belief
is that any economic recovery will lead us promptly to levels of economic
prosperity that exceeded our levels prior to the "COVID-Crash". The best
performing metal from 30 June 2020 (Fig.6), is Rhodium (+214%), which we note
also remains below its pre-covid highs, while the worst performance was
Uranium (-1.5%), and closely followed by gold (+3.0%). We believe that the
inflationary pressures caused by the greatest increase in US money supply in
history, along with the fiscal stimuli in most advanced economies, coupled
with the supply-chain bottlenecks caused by the COVID related shutdowns and
slow-downs will, in our opinion, not be "transitory". We also believe that
equity markets appear to have broadly concluded that the economic impact of
COVID will be over soon and that the impact of the pandemic will also be
"transitory". We hope that COVID 19 is near its end, but we believe its
effects will be with us for a long time to come as we believe it has caused
not only short-term changes to our behaviour, but longer-term structural
changes in economic activity. Equity markets, as mentioned earlier, are
trading at a higher valuation to their net earnings (fig. 4). If our belief is
correct and inflation is more durable than expected, we believe valuations
will come under pressure. We note that the valuation of many of the senior
gold producers we own have, by our own internal calculations, valuations
and/or yields that are below their historical averages and that of the overall
markets. We do not believe that an increased inflationary environment will be
as easily subdued as pundits are proposing and that we will be well served by
being overweighted in precious metal investments in addition to our other
investments.
CASH
Our liquidity as measured by our cash holdings as of 30 June 2021, was
£855,000, up 211.2% from last year. The increase was due to the receipt of
US$1.0M from Ascendant on June 22, 2021. Our intention is to keep our cash
and tactical portfolio's combined value to be between 25% and 60%. They
currently represent 38% of our total NAV, which is within our internal
targets. As this mining cycle evolves our objective is to maintain a higher
cash & Tactical Portfolio holding, so we are well placed to avail
ourselves of investment opportunities further along in the economic and market
cycles.
TACTICAL PORTFOLIO
The Tactical Portfolio gained 21.8% year over year. Amongst the equity
portfolio the following investments are noteworthy:
UBS Gold ETF (CHF): Our investments in precious metal bullion peaked at 5.2%
of our portfolio values. We reduced our bullion, and gold equity holdings as
gold exceeded $2000/oz in August 2020. Gold prices performed well in 2020-21,
reaching an all- time high spot price of $2,075/oz during the global economic
uncertainties. We believe this was due to concerns primarily resulting from
the impact of the spread of Covid-19, reductions in short- and long-term
interest rates and large-scale fiscal stimulus measures in major economies, a
weakening of the trade-weighted US dollar, and a search for safe-haven assets.
We understand that investor demand from gold was exceptionally strong in 2020,
with the World Gold Council (WGC) reporting that collective ETF gold holdings
grew by a record 877 tonnes during the year and reached an all-time high of
approximately 3,752 tonnes in the fourth quarter of 2020. COMEX net long
positions also reached all-time highs during 2020, a significant reversal of
sentiment from the net short position that existed in late 2018(4).
While we understand there was strong appetite for gold from the investment
community, overall demand for gold in ounce terms fell in 2020(4), as the
global pandemic and rising prices that reached all-time highs in US dollars,
as well as in many non-US currencies, including in Euro, Pound sterling,
Japanese yen, Indian rupee, and Chinese yuan, reduced both consumer demand for
jewellery and net purchases by central banks(4). Global jewellery demand was
down 34% versus 2019, with China and India - responsible for over half of
jewellery demand - down 35% and 42%, respectively(4). Gold demand for
electronics and other industrial uses fell by 7% in 2020 as the spread of
Covid-19 reduced manufacturing activity and demand for electronics(4). Central
bank purchases of gold slowed in 2020 after 2018 and 2019 represented the two
highest years of net purchases in the last 50 years(4). The WGC reports that
central banks still added 273 tonnes to their reserves during 2020, even after
experiencing a quarter of negative net accumulation in Q3 2020(4). Some
Central Banks looked to their holdings of gold as a source of liquidity in
difficult economic times because of the global pandemic - with their ability
to do so providing a strong statement as to why gold is a valuable reserve
asset(4). Russia suspended its purchases of gold in March 2020, taking a
significant buyer out of the market during the remainder of the year(4).
Overall, though, central banks have now been net purchasers of gold for 11
straight years as they look to gold as a source of reserve diversification(4).
Overall supply of gold in 2020 decreased by 4%, the first annual decline since
2017, mainly attributable to a 4% reduction 4 (#_ftn4) in global mine
production tempered by a modest rise in recycled gold and net de-hedging by
producers(4). Global mine production fell for the second straight year in
2020, further confirming that the mining industry may have reached peak gold
production for the foreseeable future(4). Gold production recovered in the
first half of 2021 but remains 1.6%(4) below production levels achieved in the
12 months leading up to Q1-2020, the start of the pandemic. The supply of
recycled gold, which is historically positively correlated with the gold
price, only increased by 1% in 2020 despite record high gold prices and
remains down 2% in Q2-2021(4) as the pandemic likely limited the ability of
potential sellers to access the market.
Barrick Gold Corp.: Barrick Gold is the second largest gold producer in the
world, the result of the merger of Barrick Gold and Randgold Exploration.
Barrick represents 2.7% of our investment portfolios. The merged company is
led by Barrick's CEO, Mark Bristow, formerly Randgold's CEO. The Company
acquired our initial investment in Barrick in response to the merger with
Randgold, causing a technical sell-off as it relinquished its primary listing
on the FTSE. This meant that it was no longer eligible to be held by
European/UK funds, which we believed resulted in some temporary selling
pressure. Since 31 December 2018, Barrick has increased its cash holding to
>US$5.2B, a 330% increase in cash holdings. Simultaneously, Barrick has
reduced its debt-to-equity ratio from 0.61:1.0 to 0.16:1.0. Barrick has
solidly re-focused on profits rather than scale. We believe that Barrick will
be a "go-to" gold stock when the broader markets become more attentive to the
gold sector. Barrick has historically traded at valuations that were higher
than the overall markets, and now trades at a Price/Earnings ratio which is
41% below that of the S&P 500 and offers a yield that is 47% higher than
the yield of the S&P 500 Index.
Cerrado Gold: We initiated our investment in common shares of Cerrado Gold
in 2019 when it was a private exploration company, and it currently represents
6.3% of our investment portfolio. It is now a gold producer with an
Argentinian mine (Mineiras Don Nicolas (MDN)) and expects to produce 50,000 oz
of gold in the current year. During the year Cerrado published a Preliminary
Economic Assessment (PEA) on its Brazilian exploration project, Monte do Carmo
(MDC). Monte do Carmo's PEA indicates an after tax NPV(@5%) of US$617M along
with an IRR of 94.8% based on an All in Sustaining Cost (AISC) over the Life
of Mine (LOM) of US$612/Oz of Gold. Further details of this are set out in the
Cerrado's announcement dated August 23, 2021. The overall resource base of MDC
has expanded to an Indicated Resource of 541,000/oz, and an Inferred resource
of 780,000/oz. (i.e., Total resource to date of 1,321,000/oz); MDN, which is
in production, and La Calandria (nearby Don Nicolas) has expansion potential,
and has a Measured and Indicated Resource of 566,609/oz and inferred of
399,709 oz. The total resource (Measured, Indicated & Inferred) for
Cerrado has grown from 813,000 oz in 2019 to 2,232,701 oz of gold, a 175%
increase in 2 yrs. We believe that Cerrado will continue to expand the
resource base and succeed in getting MDC into production by 2025, by which
time Cerrado could be producing as much as 215,000/oz to 285,000 5 (#_ftn5)
/oz of gold p/year.
Northern Star Resources Limited: Northern Star is an A$11.0B Australian Gold
producer. Our investment in Northern Star represents 1.82% of our investment
portfolios. Northern Star has buys established mines within what it terms
"Production Centres". Northern Star has three Production Centres: Kalgoorlie,
Yandal, both in Australia and Pogo in Alaska. Their Production Centres are
meant to use capital more efficiently and to operate with greater efficiencies
of scale. The company's guidance is towards increasing its production from the
current 1.48M oz to achieving production of 2.0M oz of gold per year by 2026
Equinox Gold: Equinox Gold is a Canadian mining company with a market cap of
US$2.2B, 30.3M oz of M&I gold resources and has been executing a strategy
of consolidating single mine producing companies. Guidance from Equinox
suggests gold production of 600,000 oz. will be achieved in 2021. Equinox now
produces from seven operating gold mines and plans to increase production by
advancing a pipeline of growth projects. This investment represents 1.75% of
our investment portfolio. This company is delivering on its growth and
diversification strategy, growing from a single-asset developer to a
multi-mine producer and is advancing toward its vision of producing one
million ounces of gold annually.
Fresnillo Plc: Fresnillo is a £6.7B Mexican mining company listed in London
(as well as on Mexican and US stock exchanges) and is the largest silver
producer in the world. Fresnillo trades at 14.5x p/e and offers a 2.65% yield.
We acquired our shares after an earnings disappointment and have added to our
investment since 30 June 2021. The Juanicipio Mine, of which Fresnillo owns
56%, is entering into production in Q4 2021. We believe that Fresnillo is
undervalued and will benefit from the completion of Juanicipio which should
lead to a revaluation of its shares.
Pretium Resources Inc: Pretium Resources is a Canadian Gold Producer with a
single very high grade mine called Brucejack, located in British Columbia. Our
investment in Pretium, as at our 2021-year end, represented 1.1% of our
investment portfolios. Newcrest has since announced its intention to acquire
Pretium at a 23% purchase premium after our year-end. The features which
Newcrest explain motivated it to acquire Pretium are similar to those which
attracted M&FI to invest in Pretium: The Brucejack Mine is a high-grade
gold mine, in production, in a safe jurisdiction (British Columbia (BC),
Canada) with state-of-the-art operations and environmental features (i.e.,
no-tailings dam) with, what we believe are, relatively simple logistics (i.e.,
near roads and a port as well as being connected to the power grid). Pretium's
production guidance for 2021 is production of 325,000 to 365,000oz of gold at
an All-In Sustaining Cost (AISC) of $1,060/oz to $1,190/oz
STRATEGIC PORTFOLIO
The Strategic portfolio was up to £4.11M, or a 5.1% year on year increase
(Fig. 6) at 30 June 2021. The Portfolio performance was however impacted by
the additional provision of £120,000 taken on CAP Energy Plc. This provision
reduced the portfolio's performance by 3.1%.
Redcorp Empreedimentos Mineiros Lda.: The Company owns 100% of TH Crestgate
GmbH, which in turn owns 75% of Redcorp Empreedimentos Mineiros Lda.
(Redcorp). Redcorp is a Portuguese company whose main asset is the Lagoa
Salgada Project. In 2018 we entered into a sale and earn-in option agreement
with Canadian listed company, Ascendant Resources. Ascendant can earn into 80%
ownership of the Lagoa Salgada Project by completing US$9.0M of exploration
work on the project, completing a Feasibility Study and completing its
payments commitments to M&FI. Based on the Earn-in Agreement we have with
Ascendant, by June 22, 2022, Ascendant is expected to have earned into 50%
ownership of Redcorp. During this upcoming calendar year of 2022, we expect to
receive two further cash payments from Ascendant totalling US$3.5M as part of
their earn-in to a net interest of 80% into the Lagoa Salgada Project. The
value of our investment in Redcorp is based on the conservatively discounted
value of the expected payments to be received from Ascendant in accordance
with the 2018 agreement and the residual interest in Redcorp. The value of the
residual interest in Redcorp is based on the discounted value of Ascendant's
historical and estimated future investment for it to reach 80% ownership of
the project. On this basis, Redcorp represents 48% of our NAV. The project has
advanced from an initial resource of approximately 4.4Mt with Zinc Equivalent
grade of 6.0% when, our now wholly owned subsidiary, TH Crestgate GmbH
acquired Redcorp, to today - where it is a project led by Redcorp and
Ascendant with a resource totalling 27.5Mt with a ~7% Zinc Equivalent grade.
After the end of the period under review, Redcorp and Ascendant secured a mine
development permit agreement from the Portuguese government. In addition, on
[date[ Redcorp and Ascendant also completed a second PEA indicating that the
Lagoa Salgada Project has, based on 100% ownership, a pre-tax NPV(@8%) of
US$341.6M resulting in a pre-tax IRR of 68.2%, with a 1.3-year pre-tax payback
based on its planned 14-year life of mine (see announcement dated November 8,
2021).
Golden Sun Resources: The Company made its initial investment in Golden Sun
Resources (GSR) in 2019 by acquiring convertible notes of GSR. The Company
have made two small follow-on investments in Notes with identical terms. As
of the date of writing, these GSR notes represent a 4.7% net ownership in
Golden Sun, which by the time the notes mature should represent
approximatively 7.5% net ownership of Golden Sun. Golden Sun currently
represents 7.5% of our investment portfolios. The GSR notes will mature on 30
April 2024. Interest is chargeable and accrues at the rate of 20% per annum,
calculated monthly in arrears on the outstanding Loan Amount and will become
payable upon maturity, or the notes and interest can be converted into GSR
shares at US$1.25 p/s. Golden Sun has brought the Bellavista project back
into production. Its business plan is to expand the project in small,
financially self-sustaining phases. The next phase is to progress from pilot
plant leach pad production to a 400 Tonnes per day Carbon in Leach (CIL)
plant. The next phase, if successful, could result in production exceeding
30,000/oz of gold per year. Additionally, Golden Sun has applied for and
secured several other Costa Rican exploration project licenses from the
government. Most of these licenses are former production or exploration
projects with historical resources that were re-possessed by the government
when the owners failed to meet their commitments. We understand that Golden
Sun has evolved to become a respected mining company by the Costa Rican
Government. We also understand that this has been achieved by the company
exhibiting market leading Environmental and Social practices. Golden Sun has
progressed a little more slowly than we had hoped but has not deviated from
the plan upon which we invested. We continue to believe this is a distinctive
investment opportunity that should, over the next 24 months, be an attractive
IPO listing and/or partner or acquisition target for a larger mining company
seeking a significant foothold in a stable and advanced economy in Central
America.
Ascendant Resources: The Company owns 2.2M shares in Ascendant Resources, a
Toronto Stock Exchange listed company. Ascendant's focus is the Lagoa Salgada
Project. Ascendant owns 25% of Redcorp, which owns 85% of the Lagoa Salgada
Project. Ascendant is subject to an earn-in option on M&FI's 75% owned
Redcorp Empreedimentos Mineiros Lda. LDA and its Lagoa Salgada Polymetallic
project located on Iberian Pyrite Belt in South Central Portugal. The shares
of Ascendant have performed well during the Company's fiscal year, rising
28.7% and now represent 5.8% of our portfolio investments. Ascendant has
achieved important operational milestones during the fiscal period. During the
twelve months ended 30 June 2021 Ascendant has completed two financings
allowing it to progress the Lagoa Salgada Project to where it currently
stands. In 2021 it plans to drill 15,000m to support the completion of a
definitive Feasibility Plan in late 2022. We continue to maintain our positive
outlook for zinc prices and believe that Ascendant's higher leverage to an
improvement in the price of zinc should have a positive impact on its share
price.
Ideon Technologies: M&FI made its initial investment in 2019 and has since
made a follow-on investment in 2021. Our initial investment was made at
CA$0.37, and in its second, oversubscribed financing Ideon's capital raise was
completed at CA$1.00 per share. Ideon now represents 3.7% of our portfolio
values. We are advised that this company is within a quarter or two from
reaching break-even financial results (although there can be no guarantee).
Ideon Technologies Inc. is Canadian based company which we believe is a
pioneer in the application of cosmic-ray muon tomography. Ideon's discovery
platform provides x-ray-like visibility up to 1 km beneath the Earth's
surface, much like medical tomography images the interior of the body using
x-rays. Using proprietary detectors, imaging systems, inversion technologies,
and artificial intelligence, it maps the intensity of cosmic-ray muons
underground and constructs detailed 3D density profiles of subsurface
anomalies. Ideon's discovery platform can identify and image anomalies such as
mineral and metal deposits, air voids, caves, and other structures with
density properties that contrast with the surrounding earth. The potential
result is a new exploration paradigm that could result in a 90% reduction in
core drilling, while increasing exploration certainty by 95% in the geological
settings suited by tomography. Whilst still at an early stage, the
environmental impact from such a technological change would be meaningful.
Cap Energy PLC: CAP is an offshore oil and gas exploration company focused
on West Africa. We are advised that the management and largest shareholders of
CAP are ultra-high net worth businesspeople with deep and wide-ranging
contacts in the various countries in West Africa and the energy industry. CAP
is making slower progress than we would have expected after buying out its
partners on its three offshore oil exploration projects. Additionally, Covid
19 issues have significantly slowed CAP's progress at finding financial
partners. During the fiscal year M&FI proposed two separate financing
terms to CAP's management, both were declined. CAP has chosen to approach its
shareholders to complete a financing at 50p. We reduced our carrying value by
37.5% or £120,000. Our investment in CAP currently represents 2.9% of our
NAV. CAP is the controlling shareholder and the operator of three
exploration blocks: 1. Djiféré Block, offshore Senegal, which CAP now holds
a 90% interest in the project; 2. Block 5B licence, located offshore
Guinea-Bissau, of which CAP owns 85.5%, and; 3. Block 1, also offshore Guinea
Bissau, which CAP now owns 76% of the licence. The most prospective licence is
"Block 5B"- It is in deep water, but the 3D seismic analysis suggests that it
is structurally analogous to the neighbouring SNE oil field which was the
largest oil discovery in 2014 and is currently producing. We continue to
closely monitor CAP's progress.
Notice of AGM and Dispatch of Report and Accounts
Mineral & Financial Investments Ltd.'s Audited Financial Statements for
the year ended 30 June 2021 will be available on the Company's website
(http://www.mineralandfinancial.com/ (http://www.mineralandfinancial.com/)
) on Wednesday, 23 December 2021 and will be posted to shareholders together
with the notice of the AGM on or before 23 December 2021. A further
announcement confirming the dispatch and providing the details of the AGM will
be made at that time.
FOR MORE INFORMATION:
Jacques Vaillancourt - Mineral & Financial Investments Ltd.
+44 7802 268 247
Katy Mitchell, Ben Good - WH Ireland
Limited
+44 207 220 1666
Jon Belliss - Novum Securities
Limited
+44 207 399 9400
Consolidated Income Statement Year ended Year ended
30 June 2021 30 June 2020
Notes £'000 £'000
Investment income 96 3
Fee revenue 3 -
Net gains on disposal of investments 1,244 497
Net change in fair value of investments 19 226
1,362 726
Operating expenses 1 (341) (321)
Other gains and losses 3 (24) (24)
Profit before taxation 997 381
Taxation expense 4 (33) (28)
Profit for the year from continuing operations and total comprehensive income, 964 353
attributable to owners of the Company
Profit per share attributable to owners of the Company during the year from
continuing and total operations:
5 Pence Pence
Basic (pence per share) 2.7 1.0
Fully diluted (pence per share) 2.7 1.0
Consolidated Statement of Financial Position
2021 2020
Notes £'000 £'000
CURRENT ASSETS
Financial assets held at fair value through profit or loss 6 5,822 5,315
Trade and other receivables 27 81
Cash and cash equivalents 855 275
6,704 5,671
CURRENT LIABILITIES
Trade and other payables 163 127
Convertible unsecured loan notes 10 10
173 137
NET CURRENT ASSETS 6,531 5,534
NON-CURRENT LIABILITIES
Deferred tax provision (93) (60)
NET ASSETS 6,438 5,474
EQUITY
Share capital 13 3,096 3,096
Share premium 13 5,892 5,892
Loan note equity reserve 14 6 6
Share option reserve 15 23 23
Capital reserve 15,736 15,736
Retained earnings (18,315) (19,279)
Equity attributable to owners of the Company and total equity 6,438 5,474
Consolidated Statement of Changes in Equity
Share Share Share option reserve Loan note Capital Accumulated Total
capital premium reserve reserve losses equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1 July 2019 3,095 5,886 23 6 15,736 (19,632) 5,114
Total comprehensive income for the year - - - - - 353 353
Share issues 1 6 - - - - 7
At 30 June 2020 3,096 5,892 23 6 15,736 (19,279) 5,474
Total comprehensive income for the year - - - - - 964 964
At 30 June 2021 3,096 5,892 23 6 15,736 (18,315) 6,438
Consolidated Statement of Cash Flows
Year ended Year ended
30 June 2021 30 June 2020
Notes £'000 £'000
OPERATING ACTIVITIES
Profit before taxation 997 381
Adjustments for:
Profit on disposal of trading investments (1,244) (497)
Fair value gain on trading investments (19) (226)
Other gains and losses - -
Investment income (96) (3)
Tax paid - (10)
Operating cash flow before working capital changes (362) (355)
(Increase) in trade and other receivables 54 (3)
Increase in trade and other payables 36 39
Net cash outflow from operating activities (272) (319)
INVESTING ACTIVITIES
Purchase of financial assets (2,269) (1,279)
Disposal of financial assets 3,116 1,639
Acquisition of subsidiary - -
Cash balance of subsidiary acquired - -
Investment income 5 3
Net cash inflow/(outflow) from investing activities 852 363
FINANCING ACTIVITIES
Proceeds of share issues - 7
Net cash inflow from financing activities - 7
Net (decrease)/increase in cash and cash equivalents 580 51
Cash and cash equivalents as at 1 July 275 224
Cash and cash equivalents as at 30 June 855 275
NOTES TO THE FINANCIAL STATEMENTS
1 OPERATING PROFIT
2021 2020
£'000 £'000
Profit from operations is arrived at after charging:
Directors fees 67 59
Other salary costs 19 18
Registrars fees 31 31
Corporate adviser and broking fees 42 45
Other professional fees 124 107
Foreign exchange differences 24 24
Other administrative expenses 39 43
Fees payable to the Group's auditor:
For the audit of the Group's consolidated financial statements 19 18
365 345
2 EMPLOYEE REMUNERATION
The expense recognised for employee benefits is analysed below; the Group has
no employees other than the directors of the parent company and its
subsidiary; average number of employees, including executive directors, 2
(2019, 2):
2021 2020
£'000 £'000
Wages and salaries 86 77
86 77
Details of Directors' employee benefits expense are included in the Report on
Remuneration.
Remuneration for key management of the Company, including amounts paid to
Directors of the Company, is as follows:
2021 2020
£'000 £'000
Short-term employee benefits 67 59
67 59
3 OTHER GAINS AND LOSSES
2021 2020
£'000 £'000
Foreign currency exchange differences (24) (24)
(24) (24)
4 INCOME TAX EXPENSE
2021 2020
£'000 £'000
Deferred tax charge relating to unrealised gains on investments 33 18
Other tax payable - 10
33 28
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:
2021 2020
£'000 £'000
Profit before tax from continuing operations 1,004 381
Profit before tax multiplied by rate of federal and cantonal tax in 146 56
Switzerland of 14.6% (2020: 14.6%)
Less abatement in respect of long term investment holdings (131) (50)
Unrelieved tax losses 18 22
Total tax 33 28
5 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.
2021 2020
£'000 £'000
Profit attributable to owners of the Company
- Continuing and total operations 964 353
2021 2020
Weighted average number of shares for calculating basic earnings per share 35,135,395 35,080,784
Weighted average number of shares for calculating fully diluted earnings per 35,204,897 35,146,295
share
Earnings per share from continuing and total operations
- Basic (pence per share) 2.7 1.0
- Fully diluted (pence per share) 2.7 1.0
6 INVESTMENTS HELD AT FAIR VALUE THROUGH PROFIT OR LOSS
2021 2020
£'000 £'000
1 July - Investments at fair value 5,315 4,952
Cost of investment purchases 2,269 1,279
Proceeds of investment disposals (3,116) (1,639)
Profit on disposal of investments 1.244 497
Fair value adjustment 19 226
Accrued interest on loan notes 91 -
30 June - Investments at fair value 5,822 5,315
Categorised as:
Level 1 - Quoted investments 1,712 1,001
Level 3 - Unquoted investments 4,110 4,314
5,822 5,315
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
2021 2020
£'000 £'000
Brought forward 4,314 3,835
Reclassified to Level 1 (404) -
Purchases 207 122
Disposals - (16)
Fair value adjustment (7) 373
Carried forward 4,110 4,314
Level 3 valuation techniques used by the Group are explained on page 32 (Fair
value of financial instruments)
The Group's largest Level 3 investment is Redcorp Empreendimentos Mineiros LDA
("Redcorp").
REDCORP EMPREENDIMENTOS MINEIROS LDA
Redcorp is a Portuguese company whose main asset is the Lagoa Salgada Project,
which has resources of zinc, lead and copper.
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 is an Earn-in Option under which Ascendant
has the right to earn a further effective 25% interest via staged payments and
funding obligations as outlined below:
Ascendant is 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, and to make stage
payments totalling US$3.5 million to TH Crestgate according to the following
schedule or earlier:
22 Dec 2018 US$250,000
22 Jun 2019 US$250,000
22 Dec 2019 US$500,000
22 Jun 2020 US$500,000 (amended to 5 monthly payments of $100,000, June to October plus an
additional payment of $100,000 in November 2020)
US$1,000,000
22 Jun 2021
US$1,000,000
22 Jun 2022
Under the last part of the agreement Ascendant can acquire an additional 30%
taking its total interest to 80% by the payment of US$2,500,000 on or before
22 Dec 2022.
To date the payments due by Ascendant under the agreement have been paid on
time and the Group's investment in Redcorp has been valued on a discounted
cash flow basis of the remaining payments due under the agreement plus an
additional amount for the discounted value of the Group's residual investment
in the project.
Redcorp currently owns 85% of the Lagoa Salgada project and signed an
agreement in June 2017 with Empresa Desenvolvimento Mineiro SA (EDM), a
Portuguese State-owned company to re-purchase the remaining 15% of the project
resulting in a 100% ownership of the project. The 2017 agreement was subject
to the Portuguese Secretary of State's approval which has not yet been
received. Redcorp and Mineral & Financial continue to explore ways and
means to complete the purchase. M&FI has granted Ascendant conditional
options that would enable Ascendant to have a net 80% interest in the Project
if the company is unsuccessful in re-acquiring EDM's interest within a still
to be determined period after the completion of the Feasibility Study.
7 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
TH Crestgate GmbH Investment Steinengraben 18 100%
company 4051 Basel, Switzerland
M&FI Services Ltd Service company 5 Bath Road, London, 100%
United Kingdom, W4 1LL
On 5 February 2021 M&FI Services Ltd was incorporated and became a
subsidiary of the Company
All intergroup transactions and balances are eliminated on consolidation.
8 TRADE AND OTHER RECEIVABLES
2021 2020
£'000 £'000
Other receivables 9 69
Prepayments 18 12
Total 27 81
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 2021 and 2020 there were no trade and other
receivables past due.
9 TRADE AND OTHER PAYABLES
2021 2020
£'000 £'000
Trade payables 36 18
Other payables 82 70
Accrued charges 45 39
Total 163 127
The fair value of trade and other payables is considered by the Directors not
to be materially different to carrying amounts.
10 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:
2021 2020
£'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 2021 to be approximately £10,000 (2020: £10,000)
11 DEFERRED TAX PROVISION
2021 2020
£'000 £'000
As at 1 July 60 42
Provision relating to unrealised gains on investments 33 18
As at 30 June 93 60
12 SHARE OPTIONS
On 31 January 2017 the Company granted 600,000 options to directors and
employees, exercisable at 7.50p per share. At the year end all these options
had vested and are exercisable at any time prior to the fifth anniversary of
the date of grant.
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 31 January 2017
Share price at date of grant 5.50p
Exercise price per share 7.50p
No. of options 600,000
Risk free rate 1.0%
Expected volatility 50%
Life of option 5 years
Calculated fair value per share 1.9245p
The share-based payment charge for the year was £Nil (2020: £Nil).
The share options movements and their weighted average exercise price are as
follows:
2021 2020
Weighted average Weighted average
exercise price exercise price
Number (pence) Number (pence)
Outstanding at 1 July 330,000 7.50 490,000 7.50
Granted - - - -
Exercised - - (160,000) -
Lapsed - - - -
Outstanding at 30 June 330,000 7.50 330,000 7.50
13 SHARE CAPITAL
Number of Nominal Share
shares Value premium
£'000 £'000
AUTHORISED
At 30 June 2020 and 30 June 2021
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 2020 and 30 June 2021:
Ordinary shares of 1p each 35,135,395 351
Deferred shares of 24p each 11,435,062 2,745
3,096 5,892
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.
14 LOAN NOTE EQUITY RESERVE
2021 2020
£'000 £'000
Equity component of convertible loan notes at 1 July 6 6
Equity component of convertible loan notes at 30 June 6 6
15 SHARE OPTION RESERVE
2021 2020
£'000 £'000
Brought forward at 1 July 23 23
Share based payment charge - -
Carried forward at 30 June 23 23
16 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 £583,000 (2020: £516,000).
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 TH Crestgate which are not material.
The carrying amounts of the Group's foreign currency denominated monetary
assets at the reporting date are as follows:
2021 2020
£'000 £'000
US Dollar 4,512 4,423
Canadian Dollar 1,537 615
Swiss franc 48 94
Australian Dollar 122 -
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.
2021 2020
£'000 £'000
US Dollar 5% increase in exchange rate against GBP 226 221
5% decrease in exchange rate against GBP (226) (221)
Canadian Dollar 5% increase in exchange rate against GBP 77 31
5% decrease in exchange rate against GBP (77) (31)
Swiss franc 5% increase in exchange rate against GBP 2 5
5% decrease in exchange rate against GBP (2) (5)
Australian Dollar 5% increase in exchange rate against GBP 6 -
5% decrease in exchange rate against GBP (6) -
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:
2021 2020
£'000 £'000
Cash and cash equivalents 855 275
Other receivables 9 69
864 344
No impairment provision was required against other receivables which are
secured and 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.
17 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:
2021 2020
£'000 £'000
Financial assets:
Cash and cash equivalents 855 275
Loans and receivables 9 69
Investments held at fair value through profit and loss 5,822 5,315
6,686 5,659
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:
2021 2020
£'000 £'000
Financial liabilities at amortised cost:
Convertible unsecured loan notes 10 10
Trade and other payables 118 88
128 98
18 Contingent LIABILITIES AND CAPITAL COMMITMENTS
There were no contingent liabilities or capital commitments at 30 June 2021 or
30 June 2020.
19 POST YEAR END EVENTS
There have been no material post year end events.
20 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 granted to
directors are disclosed in the remuneration report.
21 ULTIMATE CONTROLLING PARTY
1.1 The Directors do not consider there to be a single ultimate controlling party.
1 (#_ftnref1) No comment or fact stated in this update should be taken as
investment advice.
2 (#_ftnref2) Source: Bloomberg LLC
3 (#_ftnref3) International Monetary Fund, "World Economic Outlook: Recovery
During a Pandemic", October 7, 2021
4 (#_ftnref4) World Gold Council - Gold Demand Trends Annual Reviews, 2019,
2020 and Q2-2021
5 (#_ftnref5) Cerrado's production public stated guidance as of November
2021
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