REG - Mineral & Financial - Interim Results for Six Months Ended 31 Dec 23
27/03/2024 07:00
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RNS Number : 4186I Mineral & Financial Invest. Limited 26 March 2024
Mineral & Financial Investments Limited
Interim Results (unaudited) for the Six Months Ended 31 December 2023
HIGHLIGHTS:
· NAV(1) per share ("NAVPS") on 31 December 2023 was 25.8p, +17.0%,
from 22.0p, Year on Year (YoY).
· H1-2024 NAV(1) was £10,020,000 +22.0% from £8,214,000 YoY.
· H1-2024 Net earnings 1 (#_ftn1) were £589,000 (EPS-FD 1.5p) vs.
H1-2023 Net earnings £703,000 (EPS-FD: 1.8p)
· Investable capital was £10,388,000 (+22.2% YoY) vs £8,500,000 one
year ago.
· M&F continues to deliver good Net Asset Value (NAV)(1) CAGR
+25.6% and NAVPS +23.0% compounded over 6yrs.
· M&F remains debt free, with a strong liquidity and a NAV growth
performance outperforming our internal benchmarks.
CAMANA BAY, GRAND CAYMAN ISLANDS, 27 March 2024 - 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 2023 ("H1-2024").
The Company generated a H1-2024 after-tax profit of £589,000 and a fully
diluted earnings per share ("EPS-FD") of 1.5p per share, this compares with
H1-2023 net earnings of £702,000 or 1.8p per share. The NAVPS for the
quarter ending 31 December 2023, was 25.8p +17.0% on 22.0p in 2022. The Net
Asset Value for the period ending December 31, 2023 was £10,019,987. Working
capital as of 31 December 2023, was £10,145,000 2 (#_ftn2) . The basic NAV
has grown at an average of rate of 31.2% per year on a compounded basis since
31December 2016 (7 years).
M&F NAVPS vs. Comparable Benchmarks
Indexed Performance
(Fig. 1) (Dec 31, 2016 = 1.0)
CHIEF EXECUTIVE'S STATEMENT:
The Company ended the first half of the year with a cash position of
£316,000.
Our NAV growth YoY was 17.1% despite extraordinarily challenging and times
that defy rational assessment. The past 12 months has been characterized by
some extreme performances in the commodity sectors. As at 31 December 2023, US
10 Yr. Treasury yields 3 (#_ftn3) had risen to 3.88% (+6.9% YoY), while 10
yr. government yields in Canada, Mexico and Brazil were all down during the
same period. Similarly, 10 yr. government yields in Europe and Asia were also
down YoY. in the same period, with Japan as the standout exception. Despite
rising rates, underperforming US treasury bonds versus other major bond
markets, an inverted yield curve, US equity markets as measured by the S&P
500(3) were up 24.2% YoY to 31 December 2023. Simultaneously, China(3) (CSI
300) and Hong Kong(3) (Hang Seng) were down 11.4% and 13.8% respectively.
Closer to home the Euro-Stoxx(3) index was up 17.3% YoY to 31 December 2023,
while the London FTSE 100(3) was up a more modest 3.8%.
The following is a summary of the Company's NAV Performance for the 6 years to
31 December 2023:
M&F - Financial Performance Summary vs Comparable Yardsticks (Fig.2)
31 Dec H1 31 Dec H1 31 Dec H1 31 Dec 31 Dec 31 Dec H1- '24 / H1-'23 5 Yr. CAGR
2018 2019 2020 H1 H1 H1 % Ch. '23 /'18
2021 2022 2023
Net Asset Value (NAV) (,000) £4,393 £5,361 £5,681 £6,580 £8,214 £10,020 22.0% 17.9%
Net Asset Value Per Share (FD) 12.4p 15.2p 16.1p 18.6p 22.0p 25.8p 17.0% 15.7%
FTSE 350 Mining Index 17,705 19,049 21,699 16,679 11,154 9,904 (11.2%) (10.3%)
Goldman Sachs Commodity Index 374.33 439.58 409.46 561.18 610.07 535.64 (12.2%) 7.4%
The US Dollar as measured by the DXY Index(3) (Trade weighted measure of the
USD) was down 2.1% YoY. The US dollar is currently the accepted reference
currency for most commodities. A rising USD will, all things being equal,
result in lower US dollar denominated commodity prices, and conversely a
declining USD will result in higher USD commodity prices. Uranium(3) was up
72.4%, gold(3) +13.1%, copper(3) +0.76%, while silver(3) -0.7%, Platinum(3)
-7.6%, Palladium(3) -36.8%, Rhodium(3) -61.9%, Nickel(3) -44.4%, Aluminium(3)
-16.2%, Zinc(3) -18.1%, Lead(3) -12.8%. Energy prices were also down YoY.
WTI(3) declined 10.7% and Henry Hub natural gas(3) prices fell 43.8%. In
summary, the USA is experiencing rising rates, a rising equity market and
declining commodity prices - an inconsistent set of market cornerstone
results. In Asia, matters are also challenge normal investment tenets, with
declining interest rates, commodity prices and also equity markets. "May you
live in interesting times" is in the Anglo-Saxon world believed to be a
blessing, but in China is believed to be a curse. These are indeed
"interesting times" for our sector.
The following is a summary of the Company's Commodity Allocation H1-2024 vs.
H1-2023:
Portfolio Allocation by Commodity Grouping (Fig. 3)
(£'000) H1-2024 H1-2023 % Change As a % of Total
Cash £315.9 £2,284.7 -86.2% 3.1%
Precious Metals £5,484.8 £3,482.1 57.5% 53.0%
Base Metals £3,449.5 £1,760.4 95.9% 33.3%
Diamonds £11.1 £60.9 -81.8% 0.1%
Food, Energy, & Tech. £1,090.7 £911.5 19.7% 10.5%
Total Investable Funds £10,352.0 £8,499.6 21.8% 100.0%
M&F's investable funds, £10,388,000 at the end of H1-2024 period, showed
an increase of 21.8% YoY. Our cash levels are at 3.1% of our investable funds.
This cash holding is lower than is normal, but we are firmly of the mind that
commodity prices will rise imminently for several reasons, but notably we
believe the industry is suffering through rising factor input pricing while
commodity prices have grown by less than inflation. - supplies are
tightening, and mineral commodity price moves will be the next leg. We wish to
be as fully and soundly invested as possible. Secondly, the rise and
strength in the USD is, in our opinion, driven by its higher rates. These
rates are due, in our opinion, to the Fed's slow unwinding of the various QE
programs created over the past 17 years, resulting in significant sales from
its portfolios by the Fed every day of every week of every month. Investing in
US treasuries has been seen for the past century as a "Safe Harbour". But
currently, despite its unique status as the reserve currency of the world, the
USD offers a carry trade. A carry trade is when one can borrow in one
currency, the Euro for example, and buy USD treasuries and benefit from a 150
to 190 basis point positive carry (i.e. higher yield) along with a credit
rating pickup.
Our Precious metal position has increased by 57.5%, as we have categorized our
recent Luca Mining investment as a precious metal investment. Until Luca's
Tahuehueto mine comes into full production in the next 3 months, it is still
more of a base metal mine. We will in future reports find a more accurate way
of reflecting our investments by metal category. Our base metal investments
have increased due to the increased valuation of our Redcorp Investments
resulting from the Put Agreement we have with our project partner.
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.
Our current weighting of the Tactical fund is low at 19.4%, but its weighting
should be considered in conjunction with our cash holdings. The collective
holding of cash and the Tactical portfolio is 22.4%. We noted in the H1-2023
report that the Tactical weighting would increase. We chose to invest in Luca
Mining as part of our Strategic Portfolio, increasing our Strategic Holdings
as a result.
Portfolio Allocation by Portfolio Category (Fig. 4)
(£,000) H1-2024 H1-2023 % Change As a % of Total
Cash £315.9 £2,284.7 -86.2% 3.1%
Tactical Portfolio £2,007.1 £2,229.1 -10.0% 19.4%
Strategic Portfolio £8,029.0 £3,985.8 101.4% 77.6%
Total £10,352.0 £8,499.6 21.8% 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 decreased by 10% YoY. compared to H1-2023, This is due to a
challenging public market performance. We are beginning to increase our
exposure to the non-precious metal investments, notably: Capstone Copper, a
copper producer with assets in the USA, Mexico and Chile, producing 164,000
tonnes of copper in 2023; Azimut Exploration a gold and Lithium exploration
development company located in Canada; HudBay Minerals, a copper producer with
assets located in Peru and Canada.
As at the period ending 31 December 31, 2024 the Company held tactical
holdings in 24 investments. Our investments in the Tactical portfolio, include
the following: Azimut Exploration; Agnico Eagle Mines; Barrick Gold; Calibre
Gold: Camellia Plc; Capstone Copper; Centerra Gold; Fortuna Silver Mines;
GoldTerra Resources; Hudbay Minerals; K&S AG; Newmont Corporation;
Northern Graphite; Orla Mining; Pan American Silver; Sibanye Stillwater; UBS
GOLD ETF; Zuercher Kantonal Bank Silver ETF, and Gemdale Gold.
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.
Redcorp and Ascendant have had a challenging year. In Portugal, the Prime
Minister resigned, and parliament was dissolved due to alleged corruption
resulting in a political scandal. As a result of this our partner EDM
requested and was granted an extension to the time window to decide how it
wishes to proceed with its option on 15% of the Lagoa Salgada Project ("LS
Project"). We remain hopeful to come to an agreement with EDM, however, there
is no certainty that this will be achieved. If EDM does not take-up its
option, M&F is left with a 20% carried interest ("CI") on the LS Project.
If it opts to take up its full interest then M&F would be diluted down to
a 5% CI. The Feasibility Study (FS) was completed and the agreement with
Ascendant that grants M&F the right to sell its interest to Ascendant for
5% of the Feasibility Study's NPV using a 10.5% Discount Rate. This Put's term
lapses 4 months after EDM's Option exercise decision. Ascendant accessed
additional funding from Sprott and completed an equity raise in the period.
Redcorp has filed its Environmental Impact Study (EIS). Feedback is expected
from the government relatively quickly as Lagoa Salgada has been determined to
be a project of National Importance by the Portuguese government.
Golden Sun Resources (GSR) has achieved yet another very important watershed.
It has (March 2024) completed the construction of the 400tpd mill at its
BellaVista mine in Costa Rica. Additionally, GSR has spun-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.
Until these transactions are finalized, they have not been included in the
NAV.
Luca Mining is our most recent Strategic investment. Luca own 100% of two
producing mines located in Mexico, each with a mine life exceeding 10 years.
Campo Morado, located in Guerrero State and Tahuehueto, located in Durango
State. Luca's guidance indicates that it will produce 65,000 of gold
equivalent ounces (AuEq oz") in 2024. We invested as part of a
re-capitalization of the company which we believe had been previously
mis-managed and under-capitalized. In the past year it converted $24 million
of debt, introduced a project optimization plan at Campo Morado which should
increase recoveries by almost 10% and is nearing the ramp-up of Tahuehueto
from a 300 tonnes per day ("TPD") mill to a 1,000 TPD operation. Additionally,
the ranks of management have been reinforced through the addition of five
former Lundin Mining senior executives joining the Luca management team. In
H2-2024 Luca will begin to initiate exploration programs at both Tahuehueto
and Campo Morado which should ensure a longer production horizon at both
mines. In 2025 planning will begin to double the productive capacity of
Tahuehueto to 100,000 AuEq oz per year.
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 2023
UNAUDITED UNAUDITED AUDITED
6 months to 6 months to 12 months to
31 December 31 December 30 June
2023 2022 2023
Note £'000 £'000 £'000
Continuing operations:
Investment income 11 110 119
Net gains on investments 888 899 2,275
Total income 899 1,009 2,394
Operating expenses (229) (225) (452)
Share based payment expense (8) (58) (136)
Other gains and losses (67) 24 (230)
Profit before taxation 595 750 1,576
Taxation expense (6) (47) (26)
Profit for the period attributable to owners of the Company 589 703 1,550
Earnings per share attributable to owners of the Company during the period 3
pence pence pence
Basic: 1.6 2.0 4.4
Diluted: 1.5 1.8 4.0
Statement of Financial Position
as at 31 December 2023
UNAUDITED UNAUDITED AUDITED
31 December 31 December 30 June
2023 2022 2023
£'000 £'000 £'000
CURRENT ASSETS
Financial assets 10,072 6,215 8,925
Trade and other receivables 6 15 25
Cash and cash equivalents 315 2,284 796
10,393 8,514 9,746
CURRENT LIABILITIES
Trade and other payables 238 149 125
Convertible unsecured loan notes 10 10 10
248 159 135
NET CURRENT ASSETS 10,145 8,355 7,547
NON-CURRENT LIABILITIES
Deferred tax provision (125) (140) (93)
NET ASSETS 10,020 8,215 7,454
EQUITY
Share capital 3,116 3,099 3,099
Share premium 6,203 5,914 5,914
Loan note equity reserve 6 6 6
Reserve for employee share option schemes 213 150 92
Other reserves 15,736 15,736 15,736
Retained earnings (15,254) (16,690) (17,393)
SHAREHOLDERS' EQUITY 10,020 8,215 7,454
Statement of Changes in equity
for the 6 months ended 31 December 2023
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 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 - - 58
At 31 December 2022 3,099 5,914 6 150 15,736 (16,690) 8,215
Profit for the 6 months to - - - - - 847 847
30 June 2023
Share based payment expense - - - 78 - - 78
Issues of equity 15 268 - - - - 283
At 30 June 2023 3,114 6,182 6 228 15,736 (15,843) 9,423
Profit for the 6 months to - - - - - 589 570
31 December 2023
Exercise of Restricted Stock Units 2 21 - (23) - - -
Share based payment expense - - - 8 - - 8
At 31 December 2023 3,116 6,203 6 213 15,736 (15,254) 10,020
Statement of Cash flows
for the 6 months ended 31 December 2023
UNAUDITED UNAUDITED AUDITED
6 months to 6 months to 12 months to
31 December 31 December 30 June
2023 2022 2023
£'000 £'000 £'000
OPERATING ACTIVITIES
Profit/(loss) before taxation 595 750 1,576
Adjustments for:
Net gains on investments (888) (899) (2,275)
Investment income (11) (110) (119)
Share based payment expense 8 58 136
Operating cashflow before working capital changes (296) (201) (682)
(Increase)/decrease in trade and other receivables 19 3 (7)
Increase/(decrease) in trade and other payables 41 21 69
Net cash outflow from operating activities (236) (177) (620)
INVESTING ACTIVITIES
Purchase of financial assets (470) (1,110) (3,783)
Disposal of financial assets 214 3,060 4,396
Investment income 11 30 39
Net cash (outflow)/inflow from investing activities (245) 1,980 652
FINANCING ACTIVITIES
Proceeds of share issues - - 282
Net cash inflow from financing activities - - 282
Net (decrease)/increase in cash and cash equivalents (481) 1,803 315
Cash and cash equivalents at start of period 796 481 481
Cash and cash equivalents at end of period 315 2,284 796
Notes to the unaudited interim statement
for the 6 months ended 31 December 2023
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 2023 was
approved by the board on 26 March 2023.
The unaudited interim financial information for the 6 months to 31 December
2023 does not constitute statutory accounts. The comparative figures for the
year ended 30 June 2023 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
2023 2022 2023
£'000 £'000 £'000
Weighted average number of shares for calculating basic earnings per share 35,465,395 35,465,395 35,611,416
Weighted average number of shares for calculating fully diluted earnings per 38,365,395 38,365,395 38,511,416
share
4. The interim report is available to view and download from the Company's
website: www.mineralandfinancial.com (http://www.mineralandfinancial.com/)
1 (#_ftnref1) Unaudited
2 (#_ftnref2) Current Assets of £10,392,621 less Current Liabilities of
£247,810 = Working Capital of £10,144,987
3 (#_ftnref3) Bloomberg LLC
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