Interim Results for Six Months Ended 31 Dec 2019

Mineral & Financial Investments Limited

Interim Results (unaudited) for the Six Months Ended 31 December 2019

 

HIGHLIGHTS:

·    Unaudited net earnings for the first 6 months of the fiscal 2020 period were £247K or 0.7p per share

·    NAV per share at Dec 31, 2019 up 22.2% vs. same period last year, to 15.19p

·    The 3 Year Compound Annual Growth rate of the NAV per share is 34.4%

·    Strong Improvement in Pound Sterling neutralized most NAV gains vs Q1 achieved in the period

·    The Company is debt free, with a good cash balance and a strong Working Capital position

·    Post period end publication of the Preliminary Economic Assessment of Lagoa Salgada indicates a Pre-tax NPV^@8%of US$137m (details below)

 

GEORGE TOWN CAYMAN ISLANDS, March 5, 2020 - Mineral and Financial Investments Limited (LSE-AIM: MAFL) ("M&FI" or the "Company") is very pleased to announce its unaudited interim results for the six months ended 31 December 2019.

 

Chairman's Statement:

The Company generated a profit after-tax of £247K and a fully diluted EPS gain of 0.71p per share compared to a profit after-tax of £722K and a fully diluted EPS gain of 2.0p per share in the same period last year.  The NAV per share increased 22.2% from 31^st December 2018 to 15.19p or £5,361K, a new high for M&FI. 

The Company retains a cash position of £364K. This continued NAV growth was in spite of market headwinds in the areas in which we invest, particularly from the weak zinc prices and the strengthening of the British pound. The British pound appreciated markedly during the quarter (+7.3% against the US dollar and 5.6% against the Canadian dollar), which we believe was in part due to Brexit negotiations and in part due to the Conservative Party's strong majority achieved in the December 2019 election in the UK. As we report in GBP, but invest mostly in USD, this has had a negative effect on our results. We also believe our investment in Ascendant Resources Inc. ("Ascendant") is adversely affected by the weak performance of Zinc prices. Although recently LME zinc inventories have increased to about 75,000 tonnes, they remain significantly below the 600,000 tonnes inventory levels of 2016 (see www.lme.com). We believe that the long-term fundamentals to zinc remain positive and, as such, we remain committed to and optimistic about our investment stance.

We were also delighted to announce the results of the Preliminary Economic Assessment ("PEA") for the Lagoa Salgada project, after the period end. The project is 85% owned by Redcorp Empreedimentos Mineiros Lda ("Redcorp"), of which M&FI currently owns 75%. M&FI has an earn-in agreement with Ascendant, for Ascendant to acquire up to 80% of Redcorp subject to milestones and payments (see RNS dated 2 August 2018).  The PEA, completed only on LS North, concludes that the project could achieve a pre-tax Internal Rate of Return, using an 8% discount rate, of 37% over its mine life of 9.0 years. The estimate Life of Mine Cash Flow (pre-tax) is US$250 million. Further details of this PEA including the key highlights and sensitivities are set out in the announcement dated 14 January 2020. It is important to note that LS North deposit is but part of the mineralization zone at Lagoa Salgada. We believe that the overall tonnage of the project will increase with further exploration drilling and all or part of LS Central and LS South will ultimately be converted in the Measured and Indicated category, although there can be no guarantee that this will occur.

Your company's portfolio is overweight in precious metals and therefore could benefit from the rally in their prices since the end of Q2. Additionally, as our concerns about general market valuations have grown we have acquired a position in ProShares UltraPro Short ETF. The position cost us some performance in Q2, but in February 2020 they have rallied from $16 to $23.76, as at the writing of this statement.

The following is a summary of the NAV, updated to include the unaudited NAV calculation:

	31 Dec 2016 FYE	31 Dec 2017 FYE	30 Jun 2018 FYE	30 Jun 2019 FYE	31 Dec 2018 Q2	31 Dec 2019 Q2	CAGR (%) 2019/2016
NET ASSET VALUE (NAV) (,000)	£1,494	£2,603	£2,623	£5,114	£4,393	£5,361	53.1%
NET ASSET VALUE PER SHARE (NAVPS FD)	6.25p	7.43p	7.49p	14.50p	12.54p	15.19p	34.4%

 

Tactical Portfolio:

The purpose of the Tactical Portfolio is to allow M&FI 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.  We took a view on gold in early 2018 which we continue to reflect in the more recent portfolio additions of Newmont and VanEck Vectors Gold Miners during the period. During the period under review, gold rose 3.3% and silver 5% again outperforming base metals, which with the exception of copper +7%, suffered a 17% slump in Nickel prices after a sharp rally and Indonesia lifted some export restrictions. We believe our addition of a Copper ETF to the portfolio in the previous quarter has been validated and that our gold exposure is rewarding. Whilst we sold a couple of smaller positions, we expect some strength to return to the junior end of the market over time.  Barrick shares performed well but were eclipsed by Teranga Gold rising 33% in the quarter.  Teranga has continued to deliver on plan, declaring commercial production at Wahgnion and at the upper end of expectations for 2019 production.  This performance was balanced by our position in Ascendant as mentioned above and the strengthening British pound against the Canadian dollar which also had a negative effect on the value of our holding in Trevali Mining.

The Tactical Portfolio, as at December 31, 2019, includes:

Company	Development Stage	Type of Security	Primary Commodity	Geographic Area of Activities
Artemis Resources	Exploration	Common Equity	Gold	Australia
Ascendant Resources	Production	Common Equity	Zinc & Lead	Honduras & Portugal
Barrick Gold	Production	Common Equity	Gold	Global
Cabral Gold	Exploration	Common Equity	Gold	Brazil
Cerrado Gold	Exploration	Common Equity	Gold	Brazil
Fresnillo PLC	Production	Common Equity	Silver	Latin America
Newmont Goldcorp	Production	Common Equity	Gold	Global
Resolute Mining	Production	Common Equity	Gold	Australia, W.Africa
ProShares UltraPro Short ETF	N/A	ETF	3x Short S&P 500	USA
Teranga Gold	Production	Common Equity	Gold	West Africa
Trevali Mining	Production	Common Equity	Zinc & Lead	Global
VanEck Vectors Gold Miners	N/A	ETF	Gold	Global
Victoria Gold Corp	Production	Common Equity	Gold	Canada
Gold	N/A	ETF	Gold	Global
Silver	N/A	ETF	Silver	Global
Copper	N/A	ETF	Copper	Global

 

 

 

Strategic Portfolio:

After the period end, we were pleased to announce the Preliminary Economic Assessment of the Lagoa Salgada project completed by AMC Mining Consultants on behalf of Ascendant, this assessment specifically only focused on the north zone.  The PEA reports the project is economic estimating a pre-tax IRR of 37% using 8% NAV, and $250m cash flow during its estimated 9 year life (more details of this assessment are set out in the announcement of 14 January 2020).  During the period under review we continued to support two other holdings, Golden Sun Resources and Cerrado Gold.  We supported Cerrado Gold in its latest financing valuing the company at $0.50 per share vs $0.45 per share previously.  We hold 1.5% of Cerrado whose Monte do Carmo project in Brazil has an early stage estimated IRR in excess of 30% and an NPV at 10% in excess of $140m (NPV at 5% is $195m) according to the independent scoping study completed by PEK (details available on Cerrado's website (www.cerradogold.com)), NPV's and IRR's are based on specific assumptions which are indicative of the project's potential but may or may not be achieved.

The Strategic Portfolio allows M&FI to assess the three key fundamentals to a successful investment in the sector: management, finance and geology.  We can change the first two of these and so we exercise in depth due diligence on geology.  As such we are constantly reviewing potential investments filtering through the many underfunded projects left struggling by 10yrs of underperformance.  The Board continues to like zinc and gold which is well represented in both portfolios and is reviewing investments in other commodities with the potential to outperform.

M&FI are currently reviewing several other investment opportunities. The directors look forward to providing shareholders with more information on all the investments, in due course if they progress. Several of these opportunities are private.

The Strategic Portfolio, as at December 31, 2019, includes:

Company	Development Stage	Type of Security	Primary Commodity	Geographic Area of Activities
Redcorp Empreedimentos Mineiros Lda.	Exploration	Common Equity	Zn, Pb, Cu, Au, Ag	Portugal
Cap Energy	Exploration	Common Equity	Oil & Gas	Senegal & Guinea Bis.
Cerrado Gold	Exploration	Common Equity	Gold	Brazil
Golden Sun Mining	Production	Convertible loan	Gold	Costa Rica

 

On behalf of the Board

Jacques Vaillancourt, Executive Chairman

 

 

FOR MORE INFORMATION:

Katy Mitchell and Matthew Chan, WH Ireland Limited                    +44 207 220 1666

Jon Belliss, Novum Securities Limited                                           +44 207 399 9400

James Lesser, Mineral & Financial Investments Ltd.                      +44 777 957 7216

Statement of comprehensive Income

for the 6 months ended 31 December 2019

		UNAUDITED	UNAUDITED	AUDITED
		6 months to 31 December 2019	6 months to 31 December 2018	12 months to 30 June  2019
	Note	£'000	£'000	£'000
Continuing operations:
Investment income		1	-	28
Fee revenue		-	-	212
Net gains on investments		399	838	2,414
Total income		400	838	2,654
Operating expenses		(144)	(116)	(280)
Other gains and losses		(9)	-	161
Profit before taxation		247	722	2,535
Taxation expense		-	-	(44)
Profit for the period attributable to owners of the Company		247	722	2,491
Earnings per share attributable to owners of the Company during the period	3	pence	pence	pence
Basic:		0.7	2.1	7.1
Diluted:		0.7	2.0	7.1

 

 

Statement of Financial Position

as at 31 December 2019

 

		UNAUDITED	UNAUDITED	AUDITED
		31 December 2019	31 December 2018	30 June 2019
		£'000	£'000	£'000
CURRENT ASSETS
Financial assets		5,105	3,679	4,952
Trade and other receivables		70	19	78
Cash and cash equivalents		364	750	224
		5,539	4,448	5,254
CURRENT LIABILITIES
Trade and other payables		126	45	88
Convertible unsecured loan notes		10	10	10
		55	55	98
NET CURRENT ASSETS		5,413	4,393	5,156
NON-CURRENT LIABILITIES
Deferred tax provision		(42)	-	(42)
NET ASSETS		5,361	4,393	5,114
EQUITY
Share capital		3,095	3,095	3,095
Share premium		5,886	5,886	5,886
Loan note equity reserve		6	6	6
Share option reserve		23	23	23
Other reserves		15,736	15,736	15,736
Retained earnings		(19,385)	(20,353)	(19,632)
SHAREHOLDERS' EQUITY		5,361	4,393	5,114

 

 

Statement of Changes in equity

for the 6 months ended 31 December 2019

 

	Share capital	Share premium	Loan note reserve	Share option reserve	Other reserves	Accumulated losses	Total equity
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 30 June 2018	3,092	5,866	6	23	15,736	(22,123)	2,623
Profit for the 6 months to 31 December 2018	-	-	-	-	-	722	722
Acquisition of TH Crestgate	-	-	-	-	-	1,048	1,048
At 31 December 2018	3,095	5,886	6	23	15,736	(20,353)	4,393
Profit for the 6 months to 30 June 2019	-	-	-	-	-	721	721
At 30 June 2019	3,095	5,886	6	23	15,736	(19,632)	5,114
Profit for the 6 months to 31 December 2019	-	-	-	-	-	247	247
At 31 December 2019	3,095	5,886	6	23	15,736	(19,385)	5,361

                                                                               

Statement of Cash flow

for the 6 months ended 31 December 2019

 

		UNAUDITED	UNAUDITED	AUDITED
		6 months to 31 December 2019	6 months to 31 December 2018	12 months to 30 June  2019
		£'000	£'000	£'000
OPERATING ACTIVITIES
Profit/(loss) before taxation		247	722	2,535
Adjustments for:
Net gains on investments		(399)	(838)	(2,414)
Other gains and losses		-	-	(178)
Investment income		(1)	-	(28)
Tax paid		-	-	(2)
Operating cashflow before working capital changes		(153)	(116)	(87)
(Increase)/decrease in trade and other receivables		8	(9)	(58)
Increase/(decrease) in trade and other payables		38	(23)	7
Net cash outflow from operating activities		(107)	(148)	(138)
INVESTING ACTIVITIES
Purchase of financial assets		(474)	(188)	(865)
Disposal of financial assets		720	664	587
Acquisition of subsidiary		-	-	(97)
Cash balance of subsidiary acquired		-	-	287
Investment income		1	-	28
Net cash (outflow)/inflow from investing activities		247	476	(60)
Net increase/(decrease) in cash and cash equivalents		140	328	(198)
Cash and cash equivalents at start of period		224	422	422
Cash and cash equivalents at end of period		364	750	224

 

Notes to the unaudited interim statement

for the 6 months ended 31 December 2019

 

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 190 Elgin Avenue, George Town, 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 2019.

This interim financial information for the 6 months to 31 December 2019 was approved by the board on 4 March 2019.

The unaudited interim financial information for the 6 months to 31 December 2019 does not constitute statutory accounts. The comparative figures for the year ended 30 June 2019 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 31 December 2019	6 months to 31 December 2018	12 months to 30 June  2019
		£'000	£'000	£'000
	Weighted average number of shares for calculating basic earnings per share	35,037,895	35,037,895	35,037,895
	Weighted average number of shares for calculating fully diluted earnings per share	35,527,895	35,842,895	35,527,895

 

4. The interim report is available to view and download from the Company's website: www.mineralandfinancial.com