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REG - Mineral & Financial - Final Results for the Period Ended 30 Jun 20




 



RNS Number : 8363G
Mineral & Financial Invest. Limited
30 November 2020
 

MINERAL & FINANCIAL INVESTMENTS LIMITED

Audited Full Year Financial Results for Period ended 30 June 2020

and Net Asset Value Update

 

HIGHLIGHTS

·    Year-end Net Asset Value £5,474,000, up 7.0%, from £5,114,000 in past 12 months

Net Asset Value Per Share fully diluted (FD) 15.5p, up 6.9%, from 14.5p, in past 12 months

·    NAVPS FD has increased at compound annual growth rate (CAGR) of 21.1% since 2015

·    Net Asset Value has increased at CAGR of 57.4% since 31 December 2015

·    Investment Portfolio now totals £5,315,000 up 7.3%, from £4,952,000 in past 12 months.

Our performance has consistently exceeded that of the FTSE 350 Mining index and of the CRB Commodity Index since 2015.

 

George Town, Cayman Island - 26 November 2019 - 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 2020

 

CHAIRMAN'S STATEMENT

Mineral & Financial Investments Limited M&FI is an investing company with the investment approach and objectives of a mining finance house, which includes providing investment in and capital to finance mining companies and/or projects while providing our 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, all of which with the intention of outperforming mining indices. 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 page 10.

During the twelve-month fiscal period ending 30 June 2020 your company generated net trading income of £726,000 which translated into a net profit of £353,000 or 1.0p (FD) per share for the period. At the period end of 30 June 2020, our Net Asset Value (NAV) was £5,474,000 an increase of 7.0% from the June 30, 2020 NAV of £5,114,000.  The Net Asset Value per Share - fully diluted (NAVPS-FD) as at 30 June 2020 was 15.5p, a 6.9% increase from the 14.5p NAVPS FD. We continue to be effectively debt free, with working capital of £5.5million.

 

YEAR END NET ASSET VALUES

 

31 Dec. 2016

31 Dec. 2017

30 June 2018

30 June 2019

30 June 2020

CAGR (%)

Net Asset Value ('000)

£1,495

£2,603

£2,623

£5,114

£5,474

50.4%

Fully diluted NAV per share

6.25p

7.43p

7.49p

14.50p

15.50p

29.9%

The world is a very different place since our last Annual Report to shareholders. Global economic performance was devastated in 2020 by the outbreak of Coronavirus. Its origins appear to be from within Hunan province, China, but its spread has been global and its impact near total.  The IMF's forecast for world output in 2020 declined by 7.80%, from +3.40% to -4.40%. Put another way, if these forecasts are correct, it will take all of 2020 and 2021 for the global economy to end up where it was as at the end of 2019. The world will have lost 2 years of growth. These very dark clouds do, as the adage goes, have a (faint) silver lining - Expected inflationary pressures will be lower over the course of the next few years. It is noteworthy that the IMF estimates that China will have positive economic growth in 2020 (and 2021). The larger question is what structural changes to behaviour and consumption will ensue from these extended lockdowns, and what economic impact will this cause? Our sense is that there will be more economic dislocation than is currently anticipated. A return to what was once deemed to be normal is unlikely before sometime in 2021

IMF - World Economic Outlook[1]

October 2020

2016

2017

2018

2019

2020 [2] 

Old (E)

2020

New (E)

2021 (F)

World Output

3.20%

3.70%

3.60%

2.80%

3.40%

-4.40%

5.20%

Advanced Economies

1.70%

2.40%

2.30%

1.70%

1.70%

-5.80%

3.90%

Emerging Markets and Developing Economies

4.40%

4.70%

4.50%

3.70%

4.60%

-3.30%

6.00%

Consumer Prices

 

 

 

 

 

 

 

Advanced Economies

0.80%

1.70%

2.00%

1.40%

2.00%

0.80%

1.60%

Emerging Markets and Developing Economies

4.30%

4.00%

4.80%

5.10%

4.80%

5.00%

4.70%

 

Despite an obvious need for liquidity and stimulus to confront the economic hardship caused by the Pandemic, rates in the US for 10-year US treasuries are up 11.1% year on year (June 30, 2020: 0.70% vs June 30, 2019: 0.63%). The acknowledged economic necessity and central bank objectives are not resulting in a decline in interest rates as would be expected. For several years cynical observers have assumed that Central Banks were keeping yields low to reduce governmental borrowing costs as opposed to the traditional objective of creating a stable economic and low inflationary outlook. Are we at the crossroads where Central Banks are no longer able to bend the markets to their will? Have Central Banks' tools become increasingly ineffective? Will markets, rather than Central Banks, dictate the interest rates at which governments can borrow?

 

Global Stock Index performance

July 1, 2019 to June 30, 2020

01/07/2019

30/06/2020

% change

Shanghai Shenzhen CSI 300 Index

3825.6

4163.9

8.8%

Standard & Poor 500 Index

2941.7

3106.7

5.6%

Euro Stoxx 50 Index

3473.7

3234.1

-6.9%

Hang Seng

28542.6

24301.6

-14.9%

FTSE 100

7425.6

6169.7

-16.9%

Nikkei 225

21275.9

22288.1

4.8%

 

Global equity markets, during our fiscal year ending June 30, 2020 were mixed. Of the six equity markets we use as yardsticks, the worst performing was the FTSE 100, declining 16.9%, due in part to the pandemic coupled with the uncertainty of what trade relationships with the EU will emerge from the on and off negotiations. The best performing equity market we track was the Shanghai CSI 300 Index, which rose 8.8%. There appears to be an alignment of equity market performance, economic performance and economic risk - but not of the financial damage being wreaked on government budgets due to lower takings and increased subsidies. We expect an environment of very modestly rising interest rates, due to capital markets demanding higher rates to compensate for the economic risks associated with exploding governmental debt and rapidly increasing money supply, pointing towards inflationary pressures devaluing currency values. We expect equity markets to be highly challenged in 2021 when confronted with slow economic recovery, inflationary pressures, interest rates which are flat to rising very slightly and the prospect of increased taxation to fund the economic safety nets extended by virtually all of the governments of the G7.

Commodities generally struggled during the period framed by our fiscal year. As measured by the Reuters CRB Total Commodity Index, commodities overall declined 22.9% during the period.  As is usual, within a broad index such as the CRB Index, variances between commodity performances were wide. Energy prices were down - WTI was down (-26.4%), while precious metals performed very strongly, Gold (+28.4%), Silver (+19.6%), Palladium (+45.8%) and Rhodium (+108.6%). Base metals mixed with Copper (+7.0%) and Aluminium (+23.8%) up, while Nickel (-4.6%), Zinc (-9.7%) and Lead (-13.6%) declined during our fiscal year. We believe commodity prices will be buoyed in 2021 by a growing shift from financial assets to hard assets and a weakening US dollar.

During the year our emphasis has been to continue diversification while increasing exposure to precious metals. The Strategic Portfolio has sought advanced stage exploration or early stage development precious metal investment opportunities. During the period we increased our investments in Cerrado Gold and Golden Sun Resources.  Cerrado will be completing a listing in November 2020 on the Toronto Stock Exchange. We have decided to write down our CAP Energy investment by 60% as a matter of prudence in light of the decline in oil prices. CAP has succeeded in making important changes that have resulted in its increased ownership of all three of its offshore oil fields by buying out its partners during the period of weak oil prices.

M&FI continues to be seeking 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, thoroughly and with prudence to advance your company's assets and market position.

 

OPERATING REPORT AND INVESTMENT REVIEW

OPERATIONS

We believe the key to creating shareholder value is sound investment performance and low operating costs. More specifically operating costs which grow at a slower rate than the accretion in the Net Asset Value. M&FI's full year realised/Unrealised gains in fiscal 2020 totalled £726,000. Our full year Administrative costs totalled £338,000, a 20.4% increase over the previous period. The increased costs are largely associated with the integration and 100% ownership of TH Crestgate and the associated operating costs of a Swiss corporate entity. We are very attentive to our operating costs and remain focused on keeping them as low as possible while toiling to increase our net asset value.

 

INVESTMENT PORTFOLIO

The fiscal period remained challenging for the natural resource sector. The Goldman Sachs (spot) Commodity Index declined by 14.4%, while the FTSE 350 Mining Index declined 23.5% during the 12-month period ending June 30, 2020. Our Investment portfolios outperformed the FTSE 350 Mining Index by 30.8%, rising 7.3% year on year to £5,315,000, largely due to the increased weighting in precious metals. We increased our overall weighting to precious metals during the period to 49% of our Investment Assets. The result of our efforts during the year was to increase the Net Asset Value per share (NAVPS) as of June 30, 2020 by 6.6% to 15.46p from 14.50p a year prior.

 

ETF Portfolio

Gold ETF: During the 12-month fiscal period the Company's gold ETF position (Zuercher Kantonal Bank Gold ETF and UBS Gold (CH) ETF) rose in value by 29.4%. We believe the position has been an excellent hedge against the weakening of the US dollar, our reporting currency is GBP. According to the World Gold Council in 2019, global total gold demand was flat year on year. The World Gold Council during the same period noted that demand for ETF's and similar products increased by 328.6 tonnes year on year. Additionally, the Gold Council noted that Central Banks and other Financial Institutions gold purchases were up 2%, year on year to 667.7 tonnes. The annual supply of gold from mines, according the World Gold Council, was down 1% in 2019 to 3,530.9 tonnes. The key appeal of our gold position is as a liquid proxy for gold investments and as hedge against weakening currencies resulting from the widespread monetary stimulus from Central Banks. A physical gold position is a core holding in our portfolio, its weighting will vary according to our market perspective.

Silver ETF: During the 12-month fiscal period the Company's silver ETF (Zuercher Kantonal Bank Silver ETF) exposure rose in value by 22.4%. The appreciation in Silver has lagged behind that of gold. According to data from the Silver Institute, mine supply of silver is down 1.3% during the past year and overall supplies (including recycling) are up 0.4% year on year. Silver's uses have been undergoing a massive evolution. Since 2011, Photography has seen Compound Annual Growth Rate (CAGR) of negative 7.3%, while photovoltaic demand has experienced a positive CAGR of 4.7% and investment demand for Silver has increased by 100 million ounces. We view silver as a levered complement to our gold investment.

Copper ETF: Lately copper has been the "tomorrow" metal. Copper is viewed as being critical to the portable power and electrification. We have not re-purchased a copper position. The economic slowdown has kept all base metals at the bottom of the performance tables for the first six months of 2020. We believe in the future prospects of copper demand; however, the issue has long been the constant trickle of new copper mines entering the market.

 

Equity portfolio

Amongst the equity portfolio the following investments are noteworthy.

Redcorp Empreedimentos Mineiros Lda.: Your company owns 100% of TH Crestgate ("THC"). which owns 75% of Redcorp Empreedimentos Mineiros Lda. Redcorp is a Portuguese company whose main asset is the Lagoa Salgada Project. In June 2018, THC entered into a sale and earn-in agreement with the Canadian listed company, Ascendant Resources. The sale of 25% of Redcorp to Ascendant was completed for cash and shares valued at US$2,600,000. Thereafter, Ascendant can earn into 80% ownership by completing US$9,000,000 of exploration work on the project. Additionally, Ascendant must make payments totalling US$6,000,000 to THC, of which US$1,500,000 has been received. The project has been advanced from approximately 9.67Mt with Zinc Equivalent grade of 6.7% when Ascendant took leadership of the project to approximately 23Mt with Zinc Equivalent grade of 8.24% on the measured and indicated component of the resource. A Preliminary Economic Assessment (PEA) was completed during the period on the North Zone of the Lagoa Salgada Project which indicated a pre-tax NPV of US$137M and IRR of 37% at an 8% discount rate, using US$1.20/lb Zinc price and 80% recoveries.

CAP Energy:  CAP has used the weak markets for oil and gas to great effect. CAP successfully bought out its operating partner in all three of its West African offshore properties. CAP now owns 90% (up from 44.1%) of the offshore Senegal Djiféré block. Additionally, CAP successfully acquired a 52% interest in Block 1 offshore Guinea-Bissau raising their interest to 76%. CAP also acquired 58.5% of the important and valuable Block 5-B license offshore Guinea Bissau, raising its interest to 85.5% of the license.  These transactions were non-cash, for which payments will be owed if and when the blocks are sold. In 2019 CAP completed a small private placement at 200p per share. Despite the improved net ownership of the potential resources in these fields, we felt that the decline in the price of oil, the decline of publicly listed comparable companies and the absence of any objective valuation from a financing that the most prudent path was to reduce our carrying value by 60% to 80p. The expansion in global oil supply between 2010 and 2020 was in large part from US oil fields which employed enhanced oil recovery techniques. These wells have higher operating costs that result in poor to negative returns at current prices. We believe that demand for hydrocarbons has peaked. Additionally, we believe that supply levels in time will slowly decline, partly due to reduced exploration activity, field depletion and high cost production is gradually being shut-in. Therefore, we are mildly optimistic for oil prices to creep up to the US$50/bbl level over the next year.  CAP's projects are potentially enormous projects which should attract potential partners to advance them. Until then we will maintain a prudent approach on the valuation of this investment.

Ascendant Resources: The Group has acquired a shareholding in Ascendant Resources (ASND), a Toronto Stock Exchange listed zinc explorer, through an earn-in partnership agreement. Zinc prices declined 50% from February of 2018 levels, when zinc reached US$1.65/lb and to a 2020 nadir of US$0.82/lb. The decline was partly caused by the economic impact of Coronavirus. Ascendant's El Mochito mine in Honduras was an unhedged lead and zinc producer with a declining break-even cost of around US$1.08/lb which they sold,  allowing them to focus on the Lagoa Salgada project which is subject to an earn-in agreement with M&FI. To date, ASND have met all of their operational and financial commitments which are part of the earn-in agreement.

Barrick Gold: Our largest listed gold investment is Barrick Gold (ABX), it has appreciated by 109.5% since our purchase of the position. Barrick is the second largest gold producer in the world, after Newmont. ABX produces 5.5M oz, has proven and probable reserves of 71M oz of Gold. ABX stated objective is to be the most valuable gold company in the world. We believe that under the leadership of the CEO Mark Bristow it has a very good chance of succeeding in this mission. The ABX position was established shortly after ABX announced the acquisition by way of a share exchange of Randgold. The opportunity lay in the fact that Barrick needed some costs controls and was not going to list the shares of the combined company on the LSE, Randgold was a FTSE 100 company.

Cerrado Gold: We initiated an investment in common shares of Cerrado Gold in 2019 and made a follow-on investment in 2020. During the period it acquired 100% of the Minera Don Nicolas (MDN) mine located on a 272,598-hectare (ha) concession on the prolific gold producing area known as Deseado Massif Argentina's in Santa Cruz state. MDN is targeted to produce 50,000 oz of gold with a current resource of 968,501 oz of gold. MDN's epithermal deposit is located between AngloGold's 8.6M oz Cerro Vanguardia mine and Yamana's 1.3M oz Cerro Morro project. Cerrado's lead exploration project is Monte do Carmo, located in Toncantin State in Brazil. Gold was originally discovered in the Monte do Carmo (MDC) area during the 17th century by the Portuguese.  The Serra Alta deposit is the main focus of the exploration of the project.  The 52,213ha MDC project has a maiden resource of 813,000 oz@ 1.8g/t. The initial PEA on the Maiden Resource indicates a Net Present Value (NPV) of US$432M, using a 5% discount rate and an assumed gold price of US$1,550/oz. In June 2020 Cerrado announced a financing at US$0.80. Additionally, it has initiated a reverse takeover of a publicly listed entity on the TSX called BB1 Acquisitions Corp., which is expected to be completed in November 2020, with the key result being that Cerrado will become a publicly listed gold company.

Golden Sun Resources: We invested in Golden Sun by acquiring a secured convertible loan note of Golden Sun. The notes mature on 3 April 2024. Interest shall be charged at the rate of 20% per annum, calculated monthly in arrears, and accrue on the outstanding Loan Amount and shall become payable upon maturity. We made a follow-on investment in identically featured convertible notes during the past fiscal year. Golden Sun has brought the Bella Vista project, located in Costa Rica, back into production. It is now cash flow positive and steadily making operational progress, from 2 leach pads, it now has 3 pads in production. It is now diligently working towards installing Carbon in Leach (CIL) capacity which will increase recoveries to the ~90% range. The progress is gauged to Golden Sun's self-financing abilities to ensure minimal dilution. Our investment rationale is that if, and when the mine achieves production near 40,000 to 50,000oz of gold per year it will be a very attractive acquisition for a gold company seeking production from a stable jurisdiction in Central or South America.

 

 

 

 

Consolidated Income Statement

 

 

Year ended

30 June 2020

Year ended

30 June 2019

 

Notes

£'000

£'000

 

 

 

 

 

Investment income

 

3

28

 

Fee revenue

 

-

212

 

Net gains/(losses) on disposal of investments

 

497

405

 

Net change in fair value of investments

 

226

2,009

 

 

 

 

 

 

 

 

726

2,654

 

 

 

 

 

 

Operating expenses

1

(321)

(280)

 

Other gains and losses

2

(24)

161

 

Profit before taxation

 

381

2,535

 

 

 

 

 

 

Taxation expense

3

(28)

(44)

 

 

 

 

 

 

Profit for the year from continuing operations and total comprehensive income, attributable to owners of the Company

 

353

2,491

 

 

 

 

 

 

 

 

 

 

 

Profit per share attributable to owners of the Company during the year from continuing and total operations:

 

4

 

Pence

 

Pence

 

 

 

 

 

 

Basic (pence per share)

 

1.0

7.1

 

Fully diluted (pence per share)

 

1.0

7.1

 

 

 

 

 

         

 

 

 

Consolidated Statement of Financial Position

 

 

2020

2019

Notes

£'000

£'000

 

 

 

 

CURRENT ASSETS

 

 

 

Financial assets held at fair value through profit or loss

5

5,315

4,952

Trade and other receivables

 

81

78

Cash and cash equivalents

 

275

224

 

 

5,671

5,254

 

 

 

 

CURRENT LIABILITIES

 

 

 

Trade and other payables

 

127

88

Convertible unsecured loan notes

 

10

10

 

 

137

98

NET CURRENT ASSETS

 

5,534

5,156

 

 

 

 

NON-CURRENT LIABILITIES

 

 

 

Deferred tax provision

 

(60)

(42)

 

 

 

 

 

 

 

 

NET ASSETS

 

5,474

5,114

 

 

 

 

EQUITY

 

 

 

Share capital

 

3,096

3,095

Share premium

 

5,892

5,886

Loan note equity reserve

 

6

6

Share option reserve

 

23

23

Capital reserve

 

15,736

15,736

Retained earnings

 

(19,279)

(19,632)

Equity attributable to owners of the Company and total equity

 

5,474

5,114

 

 

 

Consolidated Statement of Changes in Equity

 

Share

capital

Share

premium

Share option reserve

Loan note

reserve

Capital

 reserve

Accumulated

losses

Total

equity

 

£'000

£'000

£'000

£'000

£'000

£'000

£'000

 

 

 

 

 

 

 

 

At 1 July 2018

3,095

5,886

23

6

15,736

(22,123)

2,623

 

 

 

 

 

 

 

 

Total comprehensive income for the year

-

-

-

-

-

2,491

2,491

 

 

 

 

 

 

 

 

At 30 June 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

                                                                               

 

 

 

Consolidated Statement of Cash Flows

 

 

Year ended

30 June 2020

Year ended

30 June 2019

 

Notes

£'000

£'000

 

 

 

 

OPERATING ACTIVITIES

 

 

 

Profit before taxation

 

 381    

2,535   

Adjustments for:

 

 

 

(Profit)/loss on disposal of trading investments

 

(497)

(405)   

Fair value (gain)/loss on trading investments

 

(226)

 (2,009)

Other gains and losses

 

-    

(178)   

Investment income

 

(3)

(28)

Tax paid

 

(10)

(2)   

Operating cash flow before working capital changes

 

(355)

(87)

(Increase) in trade and other receivables

 

(3)

(58)

Increase in trade and other payables

 

39   

7   

Net cash outflow from operating activities

 

(319)

(138)

INVESTING ACTIVITIES

 

 

 

Purchase of financial assets

 

(1,279)

(865)

Disposal of financial assets

 

1,639    

587   

Acquisition of subsidiary

 

-    

(97)   

Cash balance of subsidiary acquired

 

-    

287   

Investment income

 

3   

28   

Net cash inflow/(outflow) from investing activities

 

363   

(60)

FINANCING ACTIVITIES

 

 

 

Proceeds of share issues

 

7  

-   

Net cash inflow from financing activities

 

7  

-   

 

 

 

 

Net (decrease)/increase in cash and cash equivalents

 

51

(198)

Cash and cash equivalents as at 1 July

 

224

422

 

 

 

 

Cash and cash equivalents as at 30 June

 

275

224

 

 

 

 

NOTES TO THE FINANCIAL STATEMENTS

 

 

1.

OPERATING PROFIT

 

 

2020

2019

 

 

 

£'000

 

 

Profit from operations is arrived at after charging:

 

 

 

 

Directors fees

59

59

 

 

Other salary costs

18

14

 

 

Registrars fees

31

30

 

 

Corporate adviser and broking fees

45

23

 

 

Other professional fees

107

75

 

 

Foreign exchange differences

24

17

 

 

Other administrative expenses

43

61

 

 

Fees payable to the Group's auditor:

 

 

 

 

For the audit of the Group's consolidated financial statements

18

18

 

 

 

345

297

 

           

 

 

 

2.

OTHER GAINS AND LOSSES

 

 

2020

2019

 

 

 

£'000

£'000

 

 

Gain on acquisition of subsidiary

-

178

 

 

Foreign currency exchange differences

(24)

(17)

 

 

 

(24)

161

 

             

 

 

 

3.

INCOME TAX EXPENSE

 

 

2020

2019

 

 

 

£'000

£'000

 

 

Deferred tax charge relating to unrealised gains on investments

18

42

 

 

Other tax payable

10

2

 

 

 

28

44

 

 

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:

 

 

 

2020

2019

 

 

 

£'000

£'000

 

 

Profit before tax from continuing operations

381

2,535

 

 

Profit before tax multiplied by rate of federal and cantonal tax in Switzerland of 14.6% (2019: N/A)

56

370

 

 

Less abatement in respect of long term investment holdings

(50)

(333)

 

 

Unrelieved tax losses

22

7

 

 

Total tax

28

44

 

             

 

 

 

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.

 

 

 

 

2020

2019

 

 

 

 

£'000

£'000

 

 

Profit attributable to owners of the Company

 

 

 

 

 

- Continuing and total operations

 

353

2,491

 

 

 

 

2020

2019

 

 

Weighted average number of shares for calculating basic earnings per share

 

35,080,784

35,037,895

 

 

Weighted average number of shares for calculating fully diluted earnings per share

 

35,146,295

35,064,391

 

 

Earnings per share from continuing and total operations

 

 

 

 

 

- Basic (pence per share)

 

1.0

7.1

 

 

- Fully diluted (pence per share)

 

1.0

7.1

 

             

 

 

 

5.

INVESTMENTS HELD AT FAIR VALUE THROUGH PROFIT OR LOSS

 

 

2020

2019

 

 

 

£'000

£'000

 

 

 

 

 

 

 

1 July - Investments at fair value

4,952

2,269

 

 

Investments held by subsidiary on acquisition

-

142

 

 

Reclassified to subsidiary undertaking

-

(151)

 

 

Cost of investment purchases

1,279

865

 

 

Proceeds of investment disposals

(1,639)

(587)

 

 

Profit/(loss) on disposal of investments

497

405

 

 

Fair value adjustment

226

2,009

 

 

30 June  - Investments at fair value

5,315

4,952

 

 

Categorised as:

 

 

 

 

Level 1 - Quoted investments

1,001

1,117

 

 

Level 3 - Unquoted investments

4,314

3,835

 

 

 

5,315

4,952

 

 

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

 

 

 

2020     

2019    

 

 

 

£'000    

£'000   

 

 

Brought forward

3,835    

927    

 

 

  Investments held by subsidiary on acquisition

-    

14    

 

 

  Reclassified to subsidiary undertaking

-    

(150)

 

 

Purchases

122    

350    

 

 

Disposals

(16)

-    

 

 

Fair value adjustment

373   

2,694   

 

 

Carried forward

4,314  

3,835   

 

 

 

Level 3 valuation techniques used by the Group are explained on page 26 (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

22 Jun 2019

22 Dec 2019

22 Jun 2020

 

22 Dec 2020

22 Jun 2021

US$250,000

US$250,000

US$500,000

  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

US$1,000,000

 

 

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 2021. 

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. Redcorp 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.  

 

               

 

 

Mineral & Financial's Audited Financial Statements for the year ended 30 June 2020 will be available on the Company's website (http://www.mineralandfinancial.com/) on Wednesday, 2 December 2020 and will be posted to shareholders together with the notice of the AGM on or before 22 December 2020.

 

FOR MORE INFORMATION:

Jacques Vaillancourt, Mineral & Financial Investments Ltd.    +44 780 226 8247 

Katy Mitchell, WH Ireland Group Limited                                   +44 161 832 2174

Jon Belliss, Novum Securities Limited                                          +44 207 399 9400

 

 

[1] International Monetary Fund, "World Economic Outlook: A long and Difficult Ascent", 7 October 2020

[2] International Monetary Fund, "World Economic Outlook: Global Manufacturing Downturn, Rising Trade Barriers", October 15, 2019

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