REG - Mineral & Financial - Interim Results for Six Months Ended 31 Dec 22
30/03/2023 07:00
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RNS Number : 6936U Mineral & Financial Invest. Limited 30 March 2023
Mineral & Financial Investments Limited
Interim Results (unaudited) for the Six Months Ended 31 December 2022
HIGHLIGHTS:
· Net Asset Value per share ("NAVPS") on 31 Dec. 2022 was 22.03p, up
18.3% from 18.62p year/year.
· H1-2023 NAV was £8,214,458, up 24.8% from £6,580,017 year over year
· Net earnings 1 for H1-2023 were £702,824 (EPS-FD 1.84p) vs. H1-
2022 Net earnings £141,740 (EPS-FD: 0.37 p/s FD)
· The 6-year Compound Annual Growth rate for NAV was +32.9% and for
NAVPS +23.4%
· Cash position increased by 883.5% yr/yr to £2,284,667 as of December
31, 2022 while invested capital was £6,214,891 (down by 5.32% yr/yr).
· M&F remains debt free, with a very strong cash position and a NAV
growth performance outperforming a number of relevant benchmarks.
CAMANA BAY, GRAND CAYMAN ISLANDS, 30 March 2023 - Mineral and Financial
Investments Limited (LSE-AIM: MAFL) ("M&F" or the "Company") is very
pleased to announce its unaudited interim results for the six months ended 31
December 2022.
The Company generated a H1-2023 after-tax profit of £702,208 and a fully
diluted earnings per share Fully Diluted ("EPS-FD) of 1.84p per share, this
compares with H1-2022 net earnings of £141,740 or 0.37p per share. The
NAVPS as at the end of the December 31, 2022, quarter was 22.03p an increase
18.3% from last year's NAVPS for the same period of 18.62p. Working capital as
of 31 December 2022 was £8,354,458 2 . The Net Asset Value (basic) has grown
at an average of rate of 32.9% per year on a compounded basis since 31(st)
December 2016 (6 years).
M&F NAVPS vs. Comparable Benchmarks
Indexed Performance (Fig. 1)
(Dec 31 2016 = 1.0)
CHIEF EXECUTIVE'S STATEMENT:
The Company had a very strong cash position of £2,284,667. M&F received a
US$2.5M cash payment from Ascendant Resources in the final quarter of 2022, as
part of their earn-in agreement on the Lagoa Salgada's copper project in
Portugal. During the period, we also monetized some of our smaller
investments. Our NAV growth Year on Year was 24.8% despite the continued
strength in the USD. The US dollar, as measured by the DXY was up 6.7% year
over year. Virtually all the reference prices for commodities are in USD and
it caused a headwind to commodity price appreciation in US dollars. Moreover,
the period was defined by the military action by Russia upon Ukraine.
Since our June 30, 2022 financial year end, we have observed that the interest
rate hikes experienced in virtually every western economy slowed from a rapid
rise to a moderate pace of increase. US 10yr Government Bond yields rose
+124.1% (3.63% vs. 1.62%) during the 12-month period from 31 December 2021 to
31 December 2022 period 3 . However, the rise of US 10Yr Government Bond
yields from 30 June 2022 to 31 December 2022 moderated to +20.2% (3.63% vs.
3.02%)(3). The generally understood purpose of these rate rises has been to
subdue inflationary pressures caused, amongst other things, by the logistical
bottlenecks resulting from COVID lockdowns and further pushed by the invasion
of Ukraine. We consider these frictional causes of inflation were exacerbated
by stimulative monetary policies by most of the world's central banks. There
is evidence 4 of slowing rates of inflation, but we believe the path to
containing the inflationary pressure will be longer and more difficult than
currently believed. We believe rising rates will have a constricting effect on
consumption and ultimately economic performance which we have yet to fully
witness.
Our performance in the period was muted somewhat by the rise in the US dollar.
Our Net Asset Value as at the end of the Q2-2023 period was £8,214,000. The
DXY (US dollar Trade Weighted Currency Index), was up 7.3% on a year over year
basis. As most commodities are denominated in US dollars, a rising US dollar,
all things being equal, has a depressing effect on dollar denominated
commodities. Despite this, the price of gold ended the period (31 Dec. 2022)
up 5.5%, at US $1825/oz(3). The best performing of the metal we follow during
this period was nickel, up 38.3% to US$28,824/t(3). We believe Nickel has
"benefitted" from tightening supply and from being increasingly embraced as a
battery technology metal. The surprizing performance of the year was from
copper, which declined 4.4% as at the end of 2022 to US$9,338/t(3). We
consider Copper to be the "original" electrification metal. We believe that
copper supply will grow more slowly than demand and that the outlook for
copper is better than it has been for some time.
The following is a summary of the Company's NAV Performance for the 6 years to
31 December 31 2022:
M&F - Financial Performance Summary (Fig.2)
31 Dec 2016 5 31 Dec 2017(1) 31 Dec 2018 31 Dec 2019 31 Dec 2020 31 Dec 31 Dec H1-2023 / H1-2022 CAGR
FYE FYE H1 H1 H1 2021 2022 % Ch. 2022 / 2016
H1 H1
NET ASSET VALUE (NAV) (,000) £1,494 £2,603 £4,393 £5,361 £5,681 £6,580 £8,214 24.8% 32.9%
Net Asset Value Per Share (FD) 6.25p 7.43p 12.43p 15.19p 16.11p 18.62p 22.03p 18.2% 23.4%
FTSE 350 Mining Index 14,799 18,719 17,705 19,049 21,699 16,679 11,154 -42.1% -4.6%
Goldman Sachs Commodity Index 398.20 442.44 374.33 439.58 409.46 561.18 610.07 17.0% 7.4%
For the 12-month period ending 31 December 2022, many of the largest equity
markets closed down - notably: Shanghai's CSI 300 Index (closed down 21.3% on
the year) and the Hong Kong's Hang Seng Index (closed down15.1% on the year).
The US equity markets were also weak, as measured by the S&P500 (-19.9%
down on the year) and closer to home the FTSE 100 (closed 0.7% down of the
year) nearly ended the period as a rising market. Despite commodities rising
sharply in the period, the Reuters/Jefferies CRB Index rose 22.0% and the
S&P Goldman Sachs Commodity Index was up 26.0% while the FTSE 350 Mining
Index underperformed the overall market in the UK declining 42.1% on a yr./yr.
basis, exacerbated, by the embargo on Russian companies listed on the London
Stock Exchange.
Portfolio Allocation by Commodity Grouping (Fig. 3)
H1-2023 H1-2022 % Change As a % of Total
Cash £2,284,667 £232,303 883.49% 26.9%
Precious Metals £3,482,094 £3,193,920 9.02% 41.0%
Base Metals £1,760,403 £2,889,722 -39.08% 20.7%
Diamonds £60,878 - - 0.7%
Food, Energy, & Tech. £911,516 £480,527 89.69% 10.7%
Total £8,499,558 £6,796,472 25.06% 100.0%
M&F's investable funds, as at the end of Q2 period, are broken down as
follows: cash is currently at a temporarily high level of 26.9% of our
investable capital; precious metals represent 41%, and; base metals represent
20.7% of our investments; while food, energy, tech and miscellaneous
investments represent 10.7% of investable funds. We expect the decline of the
relative weighting of base metals within the overall portfolio to be short
term and explained in part by Ascendant increasing its ownership of Redcorp to
50% as part of their Earn-in Agreement.
Our belief is that the underperformance of mining and exploration companies,
despite stable commodity pricing, is due to inflation exceeding metal price
rises resulting in shrinking margins for most mining companies. We do not
believe this can be sustained and furthermore, commodities are traditionally
viewed as a hedge against inflation. The world needs metals and only a
profitable mining industry can satisfy this need. We expect to see improving
metal prices over the next 18 to 24 months. Moreover, we see the greater
investment values in public markets, rather than private markets. We are
currently cash rich and have invested in short term fixed income instruments
from an S&P AA- rated global bank. It should be noted that we expect to
conclude several investments in the next quarter.
Our current weighting of the Tactical fund is low at 26.2%, but its weighting
should be considered in conjunction with our cash holdings. The collective
holding of cash and the Tactical portfolio is 53.1%. Investors should expect
that the weighting of the Tactical and Strategic portfolio should increase
over the next 6 months at the expense of our cash holding.
Portfolio Allocation by Portfolio Category (Fig. 4)
H1-2022 H1-2021 % Change As a % of Total
Cash £2,284,667 £230,303 883.49% 26.9%
Tactical Portfolio £2,229,129 £2,106,760 5.81% 26.2%
Strategic Portfolio £3,985,762 £4,457,409 -10.58% 46.9%
Total £8,499,558 £6,796,472 25.06% 100.0%
Tactical Portfolio:
The purpose of the Tactical Portfolio is to protect our performance by
generating "excess returns" to offset our cash holdings and by positioning
itself to hedge, if deemed appropriate, against market circumstance that would
negatively affect our Strategic Portfolio. Additionally, the Tactical
Portfolio allows M&F the flexibility to take advantage of short-term
opportunities across asset classes in high quality names, whilst remaining
liquid enough to deploy working capital elsewhere when needed. The Tactical
portfolio increased by 5.81% compared to Q2-2022, despite selling several
investments and reducing the number of holdings.
During the year we reduced the number of tactical holdings from 22 companies
to 18 by selling holdings in the following companies: Aclara Resources; Coeur
Mining; Equinox Gold; Fiore Gold; Fortuna Silver; Fresnillo Plc; Hecla Mining
Company; Hochschild Plc; Kinross Gold; VanEck Vectors Gold Miners; VanEck
Junior Gold Miners. We added the following equity investments: Agnico Eagle
Mines; Calibre Mining; Camellia Plc; Mountain Province Diamonds; Lucara
Diamonds; Newcrest Mining; Sabina Gold & Silver; and, Victoria Gold Corp.
We initiated an Agnico-Eagle (AEM) position after it announced the merger of
equals with Kirkland Lake Gold that resulted in Agnico shareholders owning 54%
of the combined company, while the Kirkland shareholders owning 46% of the
"new' Agnico. When share based acquisitions occur, we believe there can be a
temporary decline in the combined companies market value. This can be due to
selling by some shareholders which often ensues before any of the corporate
combination's benefits manifest themselves in improved financial performance.
Additionally, during this very busy year for AEM, it acquired the outstanding
50% interest in the Canadian Malartic mine (CMM) from Yamana Gold as part of
the Yamana takeover by Pan American Silver. AEM acquired CMM for US$1.0B and
36.89M Agnico shares. In 2022 CMM produced 714,794 ounces of gold at a total
cash cost of US$663/oz of gold and 580,000 oz. of silver making it the 9(th)
largest gold mine in the world 6 . AEM also acquired a 50% interest in the
San Nicolas Mine from Teck Resources Limited for US$580 million. 2022 was a
very active year for Agnico. We expect the company and its shares to benefit
from improved results in 2023.
Our Fiore Gold position benefitted from a takeover bid by Calibre Mining Corp.
during the period. Fiore, a Canadian domiciled company with Nevada gold mining
assets, and gold resources totalling 3.0M/oz at a grade of 0.79g/t. It was
acquired by Calibre Mining, also a Canadian Mining company, with mining assets
in Central America. We also added to our Ascendant position after it
announced that it successfully secured US$15.0M of financing allowing it to
advance the Lagoa Salgada project. Newcrest was added to the Tactical
Portfolio during the 12-month period after it announced the acquisition of
Pretium. After the end of the period Newmont announced an indicative and
non-binding offer to acquire Newcrest for 0.38 shares of Newmont for each
share of Newcrest.
An investment which has yet to meet our expectations has been our foray into
diamond miners. In 2022 economic sanctions were introduced against Russia, the
world's largest producer of diamonds. In 2021 Russia is believed to have
produced 39.12M carats 7 . According to DeBeers 8 the start of Russia's
invasion of Ukraine and the imposition of related formal sanctions, as well as
self-sanctioning, of Russian diamonds created uncertainty in the sector. De
Beers also believed that healthy consumer demand, particularly in the US, led
to polished price growth and robust demand for rough diamonds in the first
half of the year. By June 2022, the economic outlook had changed and De Beers
observed that consumer demand for diamond jewellery in the US softened for the
second half of 2022, although it remained above pre-Covid-19 levels. Amid this
economic uncertainty, De Beers also observed that retailers restocked more
cautiously, causing midstream polished diamond inventories to build up through
the second half of the year, putting downward pressure on polished prices and
softening demand for rough diamonds. Furthermore, De Beers noted that in
China, the heightened Covid-19 restrictions from the second quarter onwards
impacted diamond jewellery retail sales, resulting in negative demand growth
for the year. We remain confident that this investment will yield fruit, but
will take additional time.
Strategic Portfolio:
The Strategic Portfolio holds investments which are longer term in nature and
which we believe had unique investment characteristics at the time we
invested. These longer-lived investments require M&F to assess the four
keystone foundations to a successful investment in the natural resource
sectors: 1. Management; 2. Finance; 3. Location, and 4. Geology. We can
assist in the improvement of the first two, however, we cannot affect the
location (i.e.jurisdiction and logistics) or the geology of the asset, and
therefore must evaluate these investments more cautiously on the latter two
keystones. As such, we are constantly reviewing potential investments
filtering through the many underfunded projects left struggling, we believe,
by 10 years of sector neglect, underfunding and underperformance.
Ascendant continues to make progress on the Lagoa Salgada project and is
working diligently to advance towards completing a Feasibility Study (FS).
Redcorp Empreedimentos Mineiros Lda. (funded by Ascendant Resources as part of
the Earn-In agreement of June 2018) and Ascendant are currently completing a
FS expected to be delivered on, or before, 22 June 2023. The FS delivery
date was extended from 22 December 2022 to 22 June 2023 in exchange for
Ascendant agreeing to some additional terms. These additional terms include
granting M&F the right to exercise a put option with Ascendant for 6
months after the delivery of the FS. The put price would be based on the
estimated Net Present Value of the Project (NPV) after applying a 10.5%
discount rate of the estimated cash flows in the FS.
Golden Sun Resources (GSR) has achieved another very important watershed in
the past 6 months by securing financing from a specialist finance house
("Lender") to build a 400tpd mill at its BellaVista mine in Costa Rica.
Construction planning began in Q4-2022, equipment has been ordered and is
beginning to arrive at site. Construction should start in earnest by June 2023
and should be completed by Q3-2024. To facilitate the execution of the
Financing Package M&F agreed to convert its existing secured convertible
loan notes (known as the Series B Notes (issued on 30 June 2019), the Series C
Notes (issued on 31 January 2020) and the Series D Notes (issued on 26 May
2021) (together the "Secured Convertible Notes") into common shares of Golden
Sun Resources. All the Secured Convertible Notes accrued interest at 20% per
annum and had a maturity date of 30 April 2024. The agreement reached with
GSR, and the Lender meant that the Secured Convertible Notes have been
converted into common shares in GSR with immediate effect. However, the
accrued value utilised was at a 30% premium to the accrued face value as of 18
December 2022. The share conversion price of US$1.2677 per GSR share, this
premium reflects the loss of the interest accruals up to the maturity date of
each note. Accordingly, M&F now holds 922,955 common shares in GSR
representing 5.2% of the issued common shares of GSR. We value these shares at
US$1.45 in our NAV. However, there has since been a transaction valuing GSR
shares at US$1.75. Additionally, GSR will dividend out to GSR shareholders its
exploration company, Terrasun Resources SA (Terrasun). Terrasun has 17
distinct exploration permits covering 202km(2) of which with 7 projects have
either historical resources and / or had historical production. Terrasun also
owns a new 500TPD CVL gold processing plant and six drill rigs. M&F is
finalizing its ownership of a portion of a 2% NSR royalty on BellaVista. Until
these transactions are finalized, they have not been included in the NAV.
Ideon Technologies Inc. successfully secured a US$15M Venture Capital
investment during the period. Ideon is a world 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, Ideon's technology maps the intensity of cosmic-ray muons
underground and construct detailed 3D density profiles of subsurface
anomalies. Ideon is working with several world leading mining companies, such
as BHP, Orano, Teck Corp, Glencore, and several others, in applying Ideon's
technology to their exploration programs.
The directors look forward to providing shareholders with an update on
investments in due course.
On behalf of the Board
Mark T. Brown, CA
CPA
Jacques Vaillancourt CFA
Chairman
President, CEO and Director
FOR MORE INFORMATION:
Katy Mitchell and Sarah Mather, WH Ireland
Limited +44 207
220 1666
Jon Belliss, Novum Securities
Limited
+44 207 399 9400
Jacques Vaillancourt, Mineral & Financial Investments
Ltd. +44 777 957 7216
Statement of comprehensive Income
for the 6 months ended 31 December 2022
UNAUDITED UNAUDITED AUDITED
6 months to 6 months to 12 months to
31 December 31 December 30 June
2022 2021 2022
Note £'000 £'000 £'000
Continuing operations:
Investment income 110 50 128
Fee revenue - - -
Net gains on investments 899 233 1,169
Total income 1,009 283 1,297
Operating expenses (225) (198) (439)
Share based payment expense (58) - (92)
Other gains and losses 24 57 133
Profit before taxation 750 142 899
Taxation expense (47) - -
Profit for the period attributable to owners of the Company 703 142 899
Earnings per share attributable to owners of the Company during the period 3
pence pence pence
Basic: 2.0 0.4 2.5
Diluted: 1.8 0.4 2.5
Statement of Financial Position
as at 31 December 2022
UNAUDITED UNAUDITED AUDITED
31 December 31 December 30 June
2022 2021 2022
£'000 £'000 £'000
CURRENT ASSETS
Financial assets 6,215 6,564 7,183
Trade and other receivables 15 14 17
Cash and cash equivalents 2,284 233 481
8,514 6,811 7,682
CURRENT LIABILITIES
Trade and other payables 149 128 125
Convertible unsecured loan notes 10 10 10
159 138 135
NET CURRENT ASSETS 8,355 6,683 7,547
NON-CURRENT LIABILITIES
Deferred tax provision (140) (93) (93)
NET ASSETS 8,215 6,580 7,454
EQUITY
Share capital 3,099 3,096 3,099
Share premium 5,914 5,892 5,914
Loan note equity reserve 6 6 6
Reserve for employee share option schemes 150 23 92
Other reserves 15,736 15,736 15,736
Retained earnings (16,690) (18,173) (17,393)
SHAREHOLDERS' EQUITY 8,215 6,580 7,454
Statement of Changes in equity
for the 6 months ended 31 December 2022
Share Share Loan note Reserve for Other reserves Accumulated Total
capital Premium reserve Employee losses equity
Share schemes
£'000 £'000 £'000 £'000 £'000 £'000 £'000
At 30 June 2021 3,096 5,892 6 23 15,736 (18,315) 6,438
Profit for the 6 months to - - - - - 142 142
31 December 2021
At 31 December 2021 3,096 5,892 6 23 15,736 (18,173) 6,580
Profit for the 6 months to - - - - - 757 757
30 June 2022
Share based payment expense - - - 92 - - 92
Exercise of options 3 22 - (23) - 23 25
At 30 June 2022 3,099 5,914 6 92 15,736 (17,393) 7,454
Profit for the 6 months to - - - - - 703 703
31 December 2022
Share based payment expense - - - 58 - - 92
At 31 December 2022 3,096 5,892 6 150 15,736 (16,690) 8,215
Statement of Cash flows
for the 6 months ended 31 December 2022
UNAUDITED UNAUDITED AUDITED
6 months to 6 months to 12 months to
31 December 31 December 30 June
2022 2021 2022
£'000 £'000 £'000
OPERATING ACTIVITIES
Profit/(loss) before taxation 750 142 899
Adjustments for:
Net gains on investments (899) (233) (1,169)
Investment income (110) (50) (128)
Share based payment expense 58 - 92
Operating cashflow before working capital changes (201) (141) (306)
(Increase)/decrease in trade and other receivables 3 13 9
Increase/(decrease) in trade and other payables 21 (35) (52)
Net cash outflow from operating activities (177) (163) (348)
INVESTING ACTIVITIES
Purchase of financial assets (1,110) (811) (2,177)
Disposal of financial assets 3,060 343 2,098
Investment income 30 9 29
Net cash (outflow)/inflow from investing activities 1,980 (459) (50)
FINANCING ACTIVITIES
Proceeds of share issues - - 25
Net cash inflow from financing activities - - 25
Net (decrease)/increase in cash and cash equivalents 1,803 (622) (374)
Cash and cash equivalents at start of period 481 855 855
Cash and cash equivalents at end of period 2,284 233 481
Notes to the unaudited interim statement
for the 6 months ended 31 December 2022
1. General information
The Company is a limited company quoted on AIM, a market of the London Stock
Exchange, and is registered in the Cayman Islands.
The address of its registered office is One Nexus Way, Camana Bay, Grand
Cayman, KY1-9005, Cayman Islands. The financial statements are presented
in Pounds Sterling which is the Company's functional and presentational
currency.
2. Basis of preparation
The interim financial statements of Mineral & Financial Investments
Limited have been prepared in accordance with International Financial
Reporting Standards (IFRS) as adopted by the European Union (EU) and on the
historical cost basis using the accounting policies which are consistent with
those set out in the Company's Annual Report and Accounts for the year ended
30 June 2022.
This interim financial information for the 6 months to 31 December 2022 was
approved by the board on 30 March 2023.
The unaudited interim financial information for the 6 months to 31 December
2022 does not constitute statutory accounts. The comparative figures for the
year ended 30 June 2022 are extracted from the statutory financial statements
which contain an unqualified audit report.
3. Earnings per share
The basic and diluted earnings per share is calculated by dividing the
profit/(loss) attributable to owners of the Company by the weighted average
number of ordinary shares in issue during the year.
6 months to 6 months to 12 months to
31 December 31 December 30 June
2022 2021 2022
£'000 £'000 £'000
Weighted average number of shares for calculating basic earnings per share 35,465,395 35,135,395 35,271,011
Weighted average number of shares for calculating fully diluted earnings per 38,365,395 35,465,395 35,271,011
share
4. The interim report is available to view and download from the Company's
website: www.mineralandfinancial.com (http://www.mineralandfinancial.com/)
1 Unaudited
2 Current Assets of £8,514,147 less Current Liabilities of £159,689 =
Working Capital of £8,354,458
3 Bloomberg LLC
4 Federal Reserve Board Economic Data (St. Louis Fed) - PPI: Final Demand
Finished Consumer Goods (March 15, 2023)
5 Audited Fiscal Year end results.
6 Mining.com and the World Gold Council
7 Statista 2023
8 DeBeers Preliminary financial results 2022
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