REG - Mineral & Financial - Audited Results for Year Ended 30 June 2022
23/12/2022 12:45
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RNS Number : 9480K Mineral & Financial Invest. Limited 23 December 2022
Mineral and Financial Investments Limited
Audited Full Year Financial Results and NAV for Period ended 30 June 2022
HIGHLIGHTS
· Fiscal Year-end Net Asset Value £ 7.454M (FYE: June 30,
2022) up 16%, from £6.438M (FYE: 30 June 2021)
· Net Asset Value Per Share ("NAVPS") fully diluted (FD)
20.04p, up 10%, from 18.22p (FYE: 30 June 2021)
· NAVPS FD has increased at compound annual growth rate (CAGR)
of 23.2% since 30 June 2017
· Net Asset Value has increased at CAGR of 24.1% since 30 June
2017
· Investment Portfolio now totals £7.183M up 23%, from
£5.822M (FY: 30 June 2021).
· NAVPS growth has exceeded that of the FTSE 350 Mining index
and of the S&P GSCI since 2017
Camana Bay, Cayman Island - 23 December 2022 - 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 2022
Net Asset Value Performance 30 June 2017 30 June 2018 30 June 2019 30 June 2020 June 30 2021 June 30 2022 CAGR (%)
Net Asset Value ('000) £2,443 £2,623 £5,114 £5,474 £6,438 £7,454 24.1%
Fully diluted NAV per share 7.05p 7.49p 14.50p 15.50p 18.22p 20.04p 23.2%
CHAIRMAN'S STATEMENT:
Mineral & Financial Investments Limited ("M&FI") is an investing
company that approaches its business as a mining finance house, which includes
providing investment in and capital to finance mining and mineral exploration
companies, and/or projects, while aiming to provide our M&FI shareholders
with superior returns. We will seek to provide financing and act as a good
partner in exchange for meaningful ownership levels, and board representation
if needed and appropriate. We will provide advisory services when possible and
will be willing to make follow-on investments in the investee companies if,
and when, appropriate. The full details of our investing policy are set out
in the Directors' Report on p.8 of the Company's Annual Report and Accounts
which are available on the Company's website.
During the 12-month fiscal period ending 30 June 2022 your company generated
net trading income of £1,297,000 which translated into a net profit of
£899,000 or 2.5p per share on a Fully Diluted ("FD") basis for the period. At
the period end of 30 June 2022, our Net Asset Value (NAV) was £7,454,000 an
increase of 15.8% from 30 June 2021 NAV of £6,438,000. The Net Asset Value
per share - fully diluted (NAVPS-FD) as of 30 June 2022 was 20.04p, up 10%
from the 30 June 2021 NAVPS FD of 18.22p. Since 30 June 2016, our NAV FD has
appreciated on average by 38.6% annually. We continue to be effectively debt
free, with working capital of £7.55 million.
It is our view that the world recovered strongly from the economic effects of
the Covid 19 Pandemic. Global economic output increased by 6.0% in calendar
2021(1), a turnaround from the 3.1% decline of output in 2020(1). We believe
the recovery was driven by pent-up demand, low interest rates, fiscal support
policies from virtually all governments and very loose monetary policies. We
also observe that this economic broth when combined with logistic frictions
generated a significant lift in global inflation from the 3.2% in 2020 to 8.8%
estimated by the IMF in 2022. We note that the return of inflationary
pressures has caused most central bankers to initiate rate increases to dampen
inflationary pressures. Global Output for 2022 is estimated to have grown by
32%(1), half the growth rate of the previous year(1). Global economic growth
is expected to slow even further in 2023 and only expand by 2.7%. Inflation's
return has been a global phenomenon and is estimated to reach an average of
8.8% in 2022(1).
(1)International Monetary Fund, "Countering the Cost of Living Crisis",
October 11, 2022
In our last annual report, we included the Shiller S&P 500 Cyclically
Adjusted Price Earning (CAPE) chart to underscore relatively high P/E
valuation of the S&P 500 a year ago. We believe that the overvaluation
extends to most major equity markets. There are a couple of major drivers for
equity valuations - firstly and importantly, profits and their expected
growth; the second, are the major valuation inputs: growth expectations,
interest rates, and inflation. We believe that above average inflation and
rising interest rates will prevail in 2023.
The US dollar, as measured by the DXY Index was up 13.7% during our fiscal
year, appreciating versus virtually all currencies. The US dollar's strength
during the past year had the single greatest impact on most aspects of our
business. Virtually all global commodities are priced in US dollars. When the
US dollar rises in value, the usual reaction is that the price of commodities
is weighted downwards (ceteris paribus). We believe the US dollar's rise is in
part because it has been the world's default currency. Further enhancing its
natural appeal, US interest rates are higher than most advanced economies'
interest rates for similar terms, and the US Fed have claimed an unshakeable
resolve to address inflationary pressures. We consider that the direction of
movement in money supply is consistent with the rhetoric, however, the
amplitude of the moves is less dramatic. US M3(2) peaked at $21.74 Trillion
March 2022 and has been reduced to $21.5 Trillion by September 2022(2). We
believe that what has been significant has been the rise in interest rates -
during our fiscal period (July 1, 2021, to June 30, 2022) US 10-year treasury
yields rose 129%, from 1.46% to 3.02%. They currently are 3.81% as of November
15, 2022(2). We believe that in isolation this is meaningful. However, we have
also observed that worldwide interest rates implicitly reference US rates, and
this has impacted most national interest rates. Nevertheless, we believe that
the inflationary pressures unleashed by monetary and fiscal policies to manage
the devastating economic impact of the COVID 19 lockdowns in 2020 and 2021
will result in longer lasting inflation, though less acute than seen in 2022.
(2)US Federal Reserve Board - Economic Research, Federal Reserve Bank of
St.Louis
We consider that the Fiscal and Monetary responses by most "advanced economy"
governments and central banks to the rise in inflation have negatively
impacted equity markets. As can be seen in Figure 3 all major equity markets
declined, with the FTSE 100 being the positive exception recording a modest
1.9% appreciation. The Chinese markets were the weakest combined markets,
which we believe should be a source of global concern.
Global Stock Index performance (Fig.3)
June 30, 2021, to June 30, 2022 30/06/2021 30/06/2022 % Ch.
Shanghai Shenzhen CSI 300 5224 4485 -14.1%
Standard & Poor 500 4292 3785 -11.8%
Euro Stoxx 50 4064 3455 -15.0%
Hang Seng 28994 21870 -24.6%
FTSE 100 7037 7169 1.9%
Nikkei 225 28791 26393 -8.3%
The US Equity market valuation, as measured by the S&P 500 P/E Index, is
declining both absolutely and relatively from its peak at the beginning of
2022. As can be seen in the Shiller S&P 500 index, as composed by Prof.
Robert Schiller of Yale University, shows that the S&P 500's Index current
level for Price/Earnings (P/E) is 27.4x, which is down from the 39.6x p/e
which we pointed to in last year's M&FI annual report, and which we
believe was priced for a flawless exit from the economic life support offered
by governments around the world during the Covid Pandemic economic crisis. We
remain cautious and, although optimistic for metal prices, we believe that
markets remain richly priced relative to the historical valuations, as shown
by Prof. Shiller. We also see that interest rates are beginning to rise from
the lows reached after a 40-year decline from the 1981 highs. Rising interest
rates are an unfamiliar market feature for a generation of market
participants. We believe the financial turmoil that rising rates can create
should be a cause of concern.
M&FI continues to seek suitable strategic investment opportunities that we
believe will generate above average returns while adhering to our standards of
prudence. We thank you for your support and we will continue to work
diligently and thoroughly to advance your company's assets and market
position.
CHIEF EXECUTIVE'S REPORT:
Your company generated gross profit of £1,297,000 during the year, a slight
decline from the previous year's gross profit of £1,362,000. The operating
profit for the full year, ending 30 June 2022, was £899,000 versus last
year's operating profit of £998,000. The decline is linked to slightly lower
yr./yr. gross profits and higher administrative costs. Specifically, the
issuance of equity incentives, higher legal fees and an increase to the CEO's
salary, these represent 94.6% of the SG&A variance from FY 2021. The
post-tax income for the year was £899,000 vs. £964,000 achieved last year.
M&FI's NAVPS (basic) increased 15.8% year over year to 20.04p. The overall
cash and investment portfolios increased by 14.8% year over year to
£7,664,000.
The key to creating shareholder value for Mineral & Financial Investments
is attempting to achieve positive risk adjusted investment returns while
keeping operating costs low. More specifically, operating costs which grow at
a slower rate than the accretion in the Net Asset Value. Our full year
administrative costs totalled £439,000, 5.88% of net assets, an increase over
the previous year's costs of £341,000 (5.33% of net assets). General &
Administrative ("G&A") costs were higher.. The increase was partly due to
"Legal and Professional fees" increasing by £51,000 year over year in the
period due to some extraordinary legal costs associated with a unsuccessful
financing attempt by an investee company (financing was secured later from a
different source). Excluding that increase in legal fees our G&A would
have been within our expectations rising by 13.6%. Also, there was a
£92,000 charge to the income statement in respect of the grant of options and
Restricted Share Units. M&FI's policy is that management and directors
will benefit and prosper along with shareholders, not despite shareholder
performance.
World commodity price performances were broadly negative in FY 2022 due to
rise of the US dollar vs. most world currencies and a recognition that global
economic growth has slowed from the post Pandemic demand spurt. Uranium was a
strong performer, rising 52.6% during our fiscal year. Energy insecurity led
to a renewed optimism for Uranium (U(3)O(8)), as its principal use is for
nuclear power generation. Additionally, there were several new uranium ETF
funds created which amplifies demand. The Nickel (Ni) price was up 27.8%
during our fiscal year and is benefitting from LME inventories being at 5-year
lows (c. 49,470t in Nov 2022 vs 380,000t in November of 2017) due to slowing
supply growth. Nickel now, in addition to its historic dominant use in
combination with iron to create stainless steel, which still represent 69% of
global Ni demand, is part of the revolution in battery technologies. Battery
production currently represents 11% of Ni global demand. Zinc (Zn) was also
one of the few metals which ended the period with year over year gains, rising
8.6% during our fiscal period. Several years ago, we recognized that Zn was
being supplied by several large-scale mines which were approaching the end of
their mine life. Like Ni, Zn LME inventories are at 5-year lows of 40,800t,
which represent less than 2 days of global demand (in 2021: 14,047,000t). Our
investments in Zinc via Ascendant and more importantly our investment in
Redcorp, benefitted slightly from Zinc's outperformance versus other metals.
Price Performance of Various Commodities & Indices (Fig.5)
Commodity 2018 2019 2020 2021 2022 % Ch. 2022 vs. 2021 CAGR 2018 to 2022
(June 30) (June 30) (June 30) (June 30) (June 30)
Gold (US$/oz) 1,187 1,389 1,784 1,784 1,809 -1.3% +11.1%
Silver (US$/oz) 14.30 15.30 18.30 26.15 19.80 -24.3% +8.5%
Platinum (US$/oz) 824 837 828 1083 881 -18.8% +1.7%
Copper (US$/t) 6,171 5,969 6,120 9,279 7,901 -14.9% +6.4%
Nickel (US$/t) 12,540 12,670 13,240 18,172 23,229 +27.8% +16.7%
Aluminium (US$/t) 2,024 1,779 1,598 2,514 2,659 +5.8% +7.1%
Zinc (US$/t) 2,612 2,575 2,043 2,899 3,147 +8.6% +4.8%
Lead (US$/t) 2,017 1,913 1,770 2,301 1,899 -17.5% -1.5%
Uranium (US$/t) 60,250 54,454 71,871 70,768 108,027 +52.6% +15.7
WTI (US$/Bbl.) 73.25 60.06 40.39 75.25 107.86 +43.3% +10.2%
DXY 95.13 96.56 96.68 92.66 105.09 +13.7% +2.7%
FTSE 350 Mining Index 18,877 20,688 17,714 22,585 9,810 -55.6% -15.1%
We made a conscious decision to be overweight in precious metals, notably gold
and to a lesser extent silver. This has been a very difficult year for gold,
which was down 1.3%, while silver was down 24.3% during our fiscal year. We
remain confident that our allocation will bear fruit. We consider that
inflation is once again a global concern, central bankers are tightening
monetary policies, economic growth has slowed and we believe that the most
recent fashionable alternative to gold as a defensive store of value, crypto
currencies, are suffering yet another existential crisis with the bankruptcy
of FTX.
We believe the equity markets are afflicted by a disconnect between metal
prices and the performance of the shares of the companies that explore and
produce these metals. We believe the market is, understandably, plagued with
anxiety about the weak metal price performances and the increases in
production costs, led upwards by energy costs and soon to be followed by
labour costs. We also believe that inflation above Central banks' inflation
targets will be a fact of life for a few more years. The US dollar's
out-performance is, we believe, unlikely to continue as it did in 2022.
Lastly, operating costs will have to rise, or capacity will have to close,
which will lead to metal price rises. Although not the most robust setting for
mining companies, there is, we believe, good cause for bullishness that more
broadly based metal price rises will define 2023 and that the inflationary
pressures of 2022 will moderate, but not return to 2019 levels for some time.
INVESTMENT PORTFOLIOS
We have high expectations. Our performance in 2022 was relatively strong, but
below our expectations for the year. Our NAVPS by 10% during 2022 but was
significantly better than the yardsticks by which we measure our performance.
The broader equity markets were down during our fiscal year, the S&P 500
was down 11.8%, the CSI 300 (Shanghai) was down 14.1%, while the FTSE 100 did
manage a gain of 1.9%. The more specific comparables, such as - the
S&P/TSX Global Mining Index was down 11.5% during our fiscal period, while
FTSE 350 Mining Index, was down 55.2% - although it must be noted that the
FTSE 350 Mining Index was dragged down by the Ukrainian conflict and the
sanctions imposed on Russian companies, which are part of the Index.
Portfolio Performance 2017 - 2022 (Fig.6)
(£,000) 2017 2018 2019 2020 2021 2022 2022 vs. 2021 CAGR '17 to 2022
Strategic £746.0 £766.9 £3,655.3 £3,909.7 £4,110.3 £4,946.5 20.3% 46.0%
Tactical £983.6 £1,319.2 £226.3 £430.4 £1,711.9 £2,237.0 30.7% 17.9%
Cash £273.5 £422.3 £224.4 £274.6 £854.7 £481.4 -43.7% 12.0%
Total £2,003.2 £2,508.3 £4,106.0 £4,614.8 £6,677.0 £7,664.9 14.8% 30.8%
CASH
Our liquidity as of 30 June 2022, was £481,000 a decline of 43.7% from the
£855,000 as at the end of fiscal 2021. In 2021 we had received the funds from
Ascendant on 22 June 2021 and had not fully deployed the funds. In 2022 we
received a US$1.0M payment from Ascendant, as part of their earn-in on the
Lagoa Salgada Project, earlier in the period, and some of the funds were
invested in what we felt were attractive values. The intention is to keep the
cash and tactical holdings' combined value to be between 25 and 60 percent.
For the past 2 years we have been at 38.4% as of the end of 2021 and ended
2022 at 35.5% of NAV. As this mining cycle moves ahead, we would like to
gradually evolve to a higher cash & tactical holding, to allow us to
exploit strategic investment opportunities along the economic cycle.
TACTICAL HOLDINGS
The Tactical portfolios grew by 30.7% to end the year at £2,237,004. As we
advance through the mining cycle the tactical portfolio should grow more
quickly than the strategic portfolio, as we monetize the some of our strategic
investments and convert them into either cash or tactical investments. The
tactical portfolio now comprises 22 distinct investments, the following are
some of the most noteworthy.
Cerrado Gold: We initiated an investment in common shares of Cerrado Gold in
2019. It now represents 5.4% in the allocated investments. Cerrado is a South
American gold producer with a mine, Minera Don Nicolas, in Argentina. Which
mined 44,000 oz in 2021 and should mine 50,000 oz of gold. Based comparable
valuations presented by Cerrado trades at around US$26 of EV per oz of Au
equivalent resource, the comparable producers trade at approximately US$99
p/Oz of Au equivalent resource. Production is expected to grow by 322% over
the next 4 years. In the second half of 2022 Cerrado has funded and begun
development of a heap leach operation which should amplify its production and
lower its all-in sustaining costs (AISC). Additionally, it is infill drilling
with an aim of expanding the resource base, defining underground mining
potential, while continuously working on optimizing production levels.
Cerrado's second, and perhaps more exciting asset is the Monte do Carmo
exploration asset located in the state of Tocantins in Brazil. The current
project economic indicate, using a US$1,600/oz gold price, an after-tax
NPV(@5% DR) of US$617M, and IRR of 99% while requiring US$126M of CAPEX. The
resulting project is estimated to produce gold an average of 131,000 oz per
year of gold with an all-in sustaining cost (AISC) life of mine of
US$612/oz. Whilst these numbers are providing for guidance only and there is
no guarantee that either these production levels or the valuations will be
achieved, the Directors consider this is an exciting opportunity that they
will continue to provide updates on as it progresses. Most independent
analysts covering the stock have a share price target of between $2.50 and
$5.50 per share.
Ascendant Resources Inc.: We have held our position in Ascendant for several
years. The holding, despite its performance represent 4.3% of our investment
portfolios; and is held by one of our subsidiaries. It was part of the payment
made by Ascendant for its original acquisition of a 25% interest in Redcorp
from TH Crestgate; and part of the earn-in agreement with Ascendant for the
Lagoa Salgada Project located on the well-known Iberian Pyrite Belt (IPB) in
South Central Portugal. The IPB is home to several of the world's largest zinc
mines and hosts the original mine that became the cornerstone of Rio Tinto
Mines. We consider Ascendant suffered significantly during the early stages as
the price of Zinc plummeted. In 2019 Zinc was as high as US$2,950/t and by
March of 2020 Zinc had fallen to US$1750/t, a 40% decline that pushed its El
Mochito Mine, located in Honduras into significant monthly losses, forcing
Ascendant to dispose of the operations at the cycle bottom. We consider that
Ascendant have rebounded by advancing the Lagoa Salgada Project, meeting all
earn-in obligations and being a good partner. They are currently advancing a
Feasibility Study which it is hoped will meet, or exceed, the results in the
Preliminary Economic Assessment (PEA) which indicated an after-tax NPV(@8%DR)
of US$246.7M, an IRR of 55% and a payback period of 1.5years - all based on
lower than current metals price assumptions. Whilst there can be no guarantee
that any of these results can be achieved and acknowledging this is no-longer
a core holding, we remain optimistic that this investment will outperform from
the current levels.
UBS Gold ETF (CHF): Our investments in precious metal bullion is 2.66% of
total investments. We will almost always have some physical gold holdings as
an "insurance policy", the size of the holding will fluctuate as our
investment outlook evolves. We maintained the core of this holding, although
took some profits when bullion exceeded US$2,000/oz. We expect that gold will
perform its historical role of providing protection against weakening
currencies and economic turmoil. In the third quarter of 2022 global gold mine
production (i.e. supply) was up 2% year/year and recycling was down 6% y/y.
The World Gold Council announced that Q3-2022 gold demand trends were up 28%
year on year, reaching 1,181 tonnes. Retail investors demand increased by 36%
y/y as they sought to purchase bullion and coins as inflation hedges.
Jewellery demand was also up in 10% y/y the third quarter. Central Banks
purchased a record 400 tonnes in the quarter. In a survey of Central banks,
25% of the respondents stated that they expected to increase their holdings
further in the next 12 months. These positives outweighed the Q3 47% y/y
decline in demand from ETF, in large part due to the strength of the US
dollar.
Zuercher KTBK Silver ETF (CHF): We consider that silver is occasionally, and
unfairly, described as the "poor man's" gold. Physical Silver holdings
represent 2.31% of our investment holdings. Silver is a precious metal with
dominant and growing industrial applications. Silver plays a critical role in
the advancement of electronics. In the past century silver demand was
initially dominated by jewellery and silverware demand, then photographic and
X-ray usage were its key users(3). It is now a metal used primarily in various
technologies that will be critical in the world's advancement. Industrial and
electronic applications represent 81.0% of total demand, giving it distinctly
different fundamental drivers that other precious metals(3). Silver is now
used in solar technology, medical applications (e.g. coating body implants
made of polymers), automotive and electric vehicles, 5G devices, water
purification. Silver demand in 2021 was up 19% to 1.05B/oz. Mine production
grew by 5.3% in 2021 to 822.6m/oz. Scrap supply rose 173m/oz. Considering all
sources of supply, the industry was in a deficit of 71.5M/ oz in 2021(3). Much
like gold, we believe that for the foreseeable future a silver holding is a
sensible default investment in a commodity that has strong demand fundamentals
and supply which is struggling to keep pace at current prices.
(3)The Silver Institute
Agnico Eagle Mines: Agnico is a Canadian Gold mining company founded by a
colourful industry legend, Paul Penna, in 1957. Agnico represents 2.3% of our
portfolio's holdings. Agnico has evolved from its original Joutel Mine in
Quebec, to now being an international mining organisation ranking as the third
largest, by gold production, gold mining company in the world. We believe that
Agnico is an exemplary operator and has developed a reputation of swimming
against conventions. As a testimony to the wisdom of its strategy - it now has
more than 50M oz of gold reserves and is expected to produce 3.3 million
ounces in 2022. We consider its mines are well run and note that its total
cash costs are US$769/oz and AISC is US$1,067/oz. and it pays a US$0.40 per
share quarterly dividend. In addition, we note that these operations are
underpinned by strong financial footings and US$2.0B of liquidity. We believe
that the shares were depressed by the share acquisition of Kirkland Lake Gold,
which we used as an opportunity to initiate a position
STRATEGIC PORTFOLIO
Our Strategic Portfolio are longer term holdings, that we strongly believe
will outperform. At the bottom of the cycle, we made investments in
out-of-favour assets that we considered had high potential but were, we
acknowledge, higher risk and less liquid. We believe our competitive advantage
was that we were capable and willing to invest when others would, or could,
not invest. We believe that the best return to risk ratio is to invest in
good assets when these are out of favour. The next phase of our strategy is to
gradually monetize these investments when and where it makes sense and
redeploy these funds into more liquid investments that are out of favour but
have strong long term investment merits.
Redcorp Empreedimentos Mineiros Lda.: Redcorp is a Portuguese company whose
main asset is 85% ownership of the Lagoa Salgada project. Our investment in
Redcorp, held through our subsidiary, represents 47% of our investment
portfolios. In 2018 our subsidiary entered into a sale and earn-in option
agreement with a Canadian listed company, Ascendant Resources. Ascendant has
met all its financial and operational obligations to date. We consider they
have been good partners, running the exploration program for which, we are
appreciative. On May 25, 2022, Ascendant increased its ownership of Redcorp to
50% by completing US$9,000,000 of exploration work on the project and making a
US$1.0M payment to M&FI's subsidiary (in accordance with the terms of the
agreement between the parties). Ascendant can now earn up to 80% of the
overall project by completing a Definitive Feasibility Study and making a
final US$2.5M payment to M&FI. The payment has been made, and the
Feasibility Study must be completed on, or before June 22, 2023.
The project has advanced from an initial resource of approximately 4.4Mt with
Zinc Equivalent grade of 6.0% to a resource totalling 27.5Mt with a ≧7.5%
Zinc Equivalent grade. Redcorp and Ascendant have recently announced that they
have secured a mine development licence from the Portuguese government.
Redcorp and Ascendant have also completed a second a PEA that 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.
Ideon Technologies Inc.: Ideon Technologies Inc. is Canadian based company
which is a world pioneer in the application of cosmic-ray muon tomography.
Ideon now represents 11.64% of our investment portfolios. M&FI made its
initial investment in 2019 and since then has participated in three follow-on
investments. The initial equity investment was priced at C$0.37 per share.
This spring a term sheet and pricing was tabled by Ideon with a Silicon Valley
VC called Playground LLC with an exciting track record committed to investing
in Ideon. Their investment was made at a higher price than our average
investment cost. The revaluation to the latest financing price has resulted in
an uplift to Ideon's value in our portfolio.
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, we map the intensity of cosmic-ray
muons underground and construct 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. The environmental impact from such a
technological change would be meaningful. Since last year Ideon's commercial
advances have continued and now they have several of the world's largest
mining companies as revenue generating clients.
Golden Sun Resources: In 2019, MAFL participated in a round of financing of
Golden Sun Resources (GSR) by acquiring convertible notes of GSR. As of the
date of writing GSR represents 9.6% of the investment portfolios. The GSR
notes represent a 5.5% net ownership in Golden Sun. Our increased investment
is largely due to acquisition of a fractional ownership of a 2% Net Smelter
Royalty on the BellaVista Mine as well as on the other exploration projects in
Costa Rica and a bridge loan to advance the engineering work to build the
mill. The GSR notes mature on 30 April 2024, interest is charged and accrues
at the rate of 20% per annum, calculated monthly in arrears on the outstanding
Loan Amount and shall become payable upon maturity. GSR 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
small leach pad production to a 450 tonnes per day CIL plant, which could
result in production exceeding 35,000/oz of gold per year. We believe that GSR
could receive the project expansion funding via a streaming agreement with a
well-known North American mining financier in the near term, although there is
no guarantee this will occur. Additionally, GSR has applied for and secured
several other Costa Rican exploration project licenses from the Costa Rican
government, many with historical resources. We believe GSR is evolving to
become a leading and respected mining company in Costa Rica. We believe it has
done so by exhibiting market leading Environmental and Social practices. GSR
is progressing more slowly than planned but has not deviated from the agreed
principal course and we believe it continues to offer a distinctive investment
opportunity and should over the next 24 months. We believe that GSR is
progressing towards a monetization event.
Cap Energy PLC: CAP Energy PLC (CAP) is an offshore oil and gas exploration
company focused on West Africa. We have decided to write-down our investment
in CAP to nil due to unresolved liquidity issues. We proposed to CAP several
financial solutions, which were declined. During a period, that was
establishing the foundations for an explosion in oil prices due to
insufficient exploration, CAP's management was unable to secure funding.
Although there may be an opportunity to recover some value, at this juncture
we believe it more prudent to take this action. Moreover, we are considering
our next steps with the Company and management to seek a solution to the
situation.
Notice of AGM and Dispatch of Report and Accounts
Mineral & Financial's Audited Financial Statements for the year ended 30
June 2022 will be available on the Company's website
(http://www.mineralandfinancial.com/ (http://www.mineralandfinancial.com/)
) on 30 December 2022 and will be posted to shareholders together with the
notice of the AGM on or before 30 December 2022. 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, Sarah Mather, 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 2022 30 June 2021
Notes £'000 £'000
Investment income 128 96
Fee revenue - 3
Net gains on disposal of investments 861 1,244
Net change in fair value of investments 308 19
1,297 1,362
Operating expenses 3 (439) (341)
Share based payment expense (92)
Other gains and losses 5 133 (24)
Profit before taxation 899 997
Taxation expense 6 - (33)
Profit for the year from continuing operations and total comprehensive income, 899 964
attributable to owners of the Company
Profit per share attributable to owners of the Company during the year from
continuing and total operations:
7 Pence Pence
Basic (pence per share) 2.5 2.7
Fully diluted (pence per share) 2.5 2.7
Consolidated Statement of Financial Position
2022 2021
Notes £'000 £'000
CURRENT ASSETS
Financial assets held at fair value through profit or loss 8 7,183 5,822
Trade and other receivables 10 17 27
Cash and cash equivalents 481 855
7,682 6,704
CURRENT LIABILITIES
Trade and other payables 11 125 163
Convertible unsecured loan notes 12 10 10
135 173
NET CURRENT ASSETS 7,547 6,531
NON-CURRENT LIABILITIES
Deferred tax provision 13 (93) (93)
NET ASSETS 7,454 6,438
EQUITY
Share capital 15 3,099 3,096
Share premium 15 5,914 5,892
Loan note equity reserve 16 6 6
Reserve for employee share schemes 17 92 23
Capital reserve 15,736 15,736
Retained earnings (17,393) (18,315)
Equity attributable to owners of the Company and total equity 7,454 6,438
Consolidated Statement of Changes in Equity
Share Share Reserve for employee Loan note Capital Accumulated Total
capital premium share schemes reserve reserve losses equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1 July 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
Total comprehensive income for the year - - - - - 899 899
Share based payment expense - - 92 - - - 92
Exercise of options 3 22 (23) - - 23 25
At 30 June 2022 3,099 5,914 92 6 15,736 (17, 393) 7,454
Consolidated Statement of Cash Flows
Year ended Year ended
30 June 2022 30 June 2021
Notes £'000 £'000
OPERATING ACTIVITIES
Profit before taxation 899 997
Adjustments for:
Profit on disposal of trading investments (861) (1,244)
Fair value gain on trading investments (308) (19)
Investment income (128) (96)
Share based payment expense 92 -
Operating cash flow before working capital changes (306) (362)
Decrease in trade and other receivables 9 54
(Decrease)/increase in trade and other payables (52) 36
Net cash outflow from operating activities (348) (272)
INVESTING ACTIVITIES
Purchase of financial assets (2,177) (2,269)
Disposal of financial assets 2,098 3,116
Investment income 29 5
Net cash (outflow)/inflow from investing activities (50) 852
FINANCING ACTIVITIES
Proceeds of share issues 25 -
Net cash inflow from financing activities 25 -
Net (decrease)/increase in cash and cash equivalents (374) 580
Cash and cash equivalents as at 1 July 855 275
Cash and cash equivalents as at 30 June 481 855
Notes to the Financial Statements
1. Operating Profit
2022 2021
£'000 £'000
Profit from operations is arrived at after charging:
Directors fees 104 67
Other salary costs 20 19
Share based payment expense 92 -
Registrars fees 31 31
Corporate adviser and broking fees 39 42
Other professional fees 180 124
Foreign exchange differences (133) 24
Other administrative expenses 45 39
Fees payable to the Group's auditor:
For the audit of the Group's consolidated financial statements 20 19
398 365
2. Other Gains and Losses
2022 2021
£'000 £'000
Foreign currency exchange differences 133 (24)
133 (24)
3. Income Tax Expenses
2022 2021
£'000 £'000
Deferred tax charge relating to unrealised gains on investments - 33
Other tax payable - -
- 33
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:
2022 2021
£'000 £'000
Profit before tax from continuing operations 899 1,004
Profit before tax multiplied by rate of federal and cantonal tax in 131 146
Switzerland of 14.6% (2021: 14.6%)
Less abatement in respect of long term investment holdings (118) (131)
Unrelieved tax losses - 18
Overprovided in previous period (13)
Total tax - 33
4. Earnings Per Share
The basic and diluted earnings per share are calculated by dividing the profit
attributable to owners of the Company by the weighted average number of
ordinary shares in issue during the year.
2022 2021
£'000 £'000
Profit attributable to owners of the Company
- Continuing and total operations 899 964
2022 2021
Weighted average number of shares for calculating basic earnings per share 35,271,011 35,135,395
Weighted average number of shares for calculating fully diluted earnings per 35,271,011 35,204,897
share
Earnings per share from continuing and total operations
- Basic (pence per share) 2.5 2.7
- Fully diluted (pence per share) 2.5 2.7
5. 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
INVESTMENTS HELD AT FAIR VALUE THROUGH PROFIT OR LOSS (continued)
LEVEL 3 investments
Reconciliation of Level 3 fair value measurement of investments
2022 2021
£'000 £'000
Brought forward 4,110 4,314
Reclassified to Level 1 - (404)
Purchases 152 207
Fair value adjustment 684 (7)
Carried forward 4,946 4,110
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 (Received)
22 Jun 2019 US$250,000 (Received)
22 Dec 2019 US$500,000 (Received)
22 Jun 2020 US$500,000 (Received)
22 Jun 2021 US$1,000,000 (Received)
22 Jun 2022 US$1,000,000 (Received)
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. As at 30 June 2022, Mineral and Financial Investments AG owns
50% of Redcorp (2021: 75%). Ascendent increased its ownership of Redcorp from
25% to 50% as a result of making the payments on time under the agreement
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.
6. Subsidiary Companies
The Group's subsidiary companies are as follows:
Name Principal activity Country of incorporation Proportion of ownership
and principal interest and voting rights
place of business held by the Group
Mineral & Financial Investments AG Investment Steinengraben 18 100%
(Formerly TH Crestgate GmbH) company 4051 Basel, Switzerland
M&FI Services Ltd Service company 5 Bath Road, London, 100%
United Kingdom, W4 1LL
All intergroup transactions and balances are eliminated on consolidation.
7. Trade and Other Payables
2022 2021
£'000 £'000
Other receivables 11 9
Prepayments 6 18
Total 17 27
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 2022 and 2021 there were no trade and other
receivables past due
8. 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:
2022 2021
£'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 2022 to be approximately £10,000 (2021: £10,000)
9. Deferred Tax Provisions
2022 2021
£'000 £'000
As at 1 July 93 60
Provision relating to unrealised gains on investments - 33
As at 30 June 93 93
10. Employee Share Schemes
SHARE OPTIONS
On 10 June 2022 the Company granted 2,350,000 options to directors, advisers
and consultants, exercisable at 13.5p per share, representing a 15% premium to
the closing mid-market price on 9 June 2022. The options vest in three
tranches, one third on the date of grant, one third on the anniversary of the
date of grant, and one third on the second anniversary of the date of grant.
The options can be exercised at any time from the date of vesting for a period
of 5 years whilst the recipient is employed or engaged by the Company.
The fair value of the options granted during the year was determined using the
Black-Scholes pricing model. The significant inputs to the model in respect
of the options were as follows:
Date of grant 10 June 2022
Share price at date of grant 11.75p
Exercise price per share 13.50p
No. of options 2,350,000
Risk free rate 1.0%
Expected volatility 50%
Life of option 5 years
Calculated fair value per share 4.6797p
The share-based payment charge for the year was £41,000 (2021: £Nil).
The share options movements and their weighted average exercise price are as
follows:
2022 2021
Weighted average Weighted average
exercise price exercise price
Number (pence) Number (pence)
Outstanding at 1 July 330,000 7.50 330,000 7.50
Granted 2,350,000 13.50 - -
Exercised (330,000) 7.50 - -
Lapsed - - - -
Outstanding at 30 June 2,350,000 13.50 330,000 7.50
RESTRICTED SHARE UNITS ("RSUs")
On 10 June 2022 the Company granted 1,150,000 RSUs to directors. The RSUs
vest in three tranches, one third on the date of grant, one third on the
anniversary of the date of grant, and one third on the second anniversary of
the date of grant. They can be exercised at any time from the date of
vesting for a period of 5 years whilst the recipient is employed or engaged by
the Company, with a reference price of 11.75p being the closing mid-market
price on 9 June 2022.
The fair value of the RSUs granted during the year was determined to be the
reference price of 11.75p per share, and the share-based payment charge for
the year in respect of the RSUs was £51,000 (2021: £Nil).
The RSU movements and their weighted average reference price are as follows:
2022 2021
Weighted average Weighted average
Reference price Reference price
Number (pence) Number (pence)
Outstanding at 1 July - - - -
Granted 1,150,000 11.75 - -
Exercised - - - -
Lapsed - - - -
Outstanding at 30 June 1,150,000 11.75 - -
11. Share Capital
Number of Nominal Share
shares Value premium
£'000 £'000
AUTHORISED
At 30 June 2021 and 30 June 2022
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 2021
Ordinary shares of 1p each 35,135,395 351
Deferred shares of 24p each 11,435,062 2,745
3,096 5,892
Ordinary shares issued in year to 30 June 2022 330,000 3 22
At 30 June 2022
Ordinary shares of 1p each 35,465,395 354
Deferred shares of 24p each 11,435,062 2,745
3,099 5,914
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.
12. Loan Note Equity Reserve
2022 2021
£'000 £'000
Equity component of convertible loan notes at 1 July 6 6
Equity component of convertible loan notes at 30 June 6 6
13. Reserve For Employee Share Schemes
RESERVE FOR EMPLOYEE SHARE SCHEMES
2022 2021
£'000 £'000
Brought forward at 1 July 23 23
Transfer to retained earnings on exercise of options (23) -
Share based payment charge 92 -
Carried forward at 30 June 92 23
14. 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:
2022 2021
£'000 £'000
Financial assets:
Cash and cash equivalents 481 855
Loans and receivables 11 9
Investments held at fair value through profit and loss 7,183 5,822
7,675 6,686
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:
2022 2021
£'000 £'000
Financial liabilities at amortised cost:
Convertible unsecured loan notes 10 10
Trade and other payables 71 118
81 128
15. Contingent LIABILITIES AND CAPITAL COMMITMENTS
There were no contingent liabilities or capital commitments at 30 June 2022 or
30 June 2021.
16. POST YEAR END EVENTS
There have been no material post year end events.
17. 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.
18. ULTIMATE CONTROLLING PARTY
1.1 The Directors do not consider there to be a single ultimate controlling party.
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