Audited Results for Year Ended 30 June 2021

RNS Number : 3911W

Mineral & Financial Invest. Limited

21 December 2021

 

Mineral and Financial Investments Limited

Audited Full Year Financial Results for Period ended 30 June 2021

and Net Asset Value Update [1]

HIGHLIGHTS

· Audited year-end Net Asset Value £6,438,000 up 17.6%, from £5,474,000 for the same period last year

· Net Asset Value Per Share ("NAVPS") fully diluted (FD) 18.22p, up 17.5%, from 15.5p in FY 2020

· NAVPS FD has increased at compound annual growth rate (CAGR) of 26.8% since 30 June 2017

· Net Asset Value has increased at CAGR of 27.4% since 30 June 2017

· Investment Portfolio now totals £5,822,000 up 9.5% during past 12 months, from £5,315,000.

· NAVPS performance exceeds that of the FTSE 350 Mining and Goldman Sachs Commodity Indices since 2017

Camana Bay, Cayman Island - 21 December 2021 - 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 2021

NET ASSET VALUE

Net Asset Value ('000)	£2,443	£2,623	£5,114	£5,474	£6,438	27.4%
Fully diluted NAV per share	7.05p	7.49p	14.50p	15.50p	18.22p	26.8%
Goldman Sachs Commodity Index[2]	373.4	487.4	425.4	325.5	535.9	9.5%
FTSE 350 Mining Index2	14,671	18,877	20,688	17,714	22,207	10.9%

CHAIRMAN'S STATEMENT

In this, my first Statement to you as Chairman of M&FI, I would like to thank the board and management for the work, cooperation and results achieved during a challenging year.  Mineral & Financial Investments Limited ("M&FI") is an active investing company working to provide our shareholders with significant returns by leveraging our in-house expertise to provide investment capital to finance modern, responsible mining companies and exploration projects globally. We focus on global metals market trends to take advantage of changes in metal markets and only invest in favourable jurisdictions with proven management teams. We will seek to provide financing and act as a good partner in exchange for meaningful ownership levels in public or private companies, and board representation or active oversight, if needed and appropriate. We will provide advisory services to add value when possible and will be willing to make follow-on investments in the investee companies if milestones are achieved. The full details of our investing policy are set out in the Directors' Report on page 13 of the M&FI 2021 Annual Report.

During the twelve-month fiscal period ending 30 June 2021 the Company generated net trading income of £1,362,000 which translated into a net profit of £964,000 or 2.72p Fully Diluted (FD) per share for the period. At the period end of 30 June 2021, the Company's Net Asset Value (NAV) was £6,438,000, an increase of 17.6% from the 30 June 2020, NAV of £5,474,000.  The Net Asset Value per Share - fully diluted (NAVPS-FD) as of 30 June 2021 was 18.22p up from the 15.5p NAVPS FD achieved in the previous fiscal period.  Since 30 June 2016, the Company's NAV has increased on average by 43% annually. We continue to be effectively debt free, with working capital of £6.5M.

I believe M&FI's investment performance during this extraordinary and challenging year was satisfying in absolute terms, but also in relative terms. We continue to outperform the relevant internal Key Performance Indicators that we measure our performance against. Since 30 June 2017 the NAV per share of M&FI has grown at compound annual growth rate (CAGR) of 26.8% per year. The FTSE 350 Mining Index has grown by a CAGR of 10.9% during the comparable period, while the Goldman Sachs Commodity Index appreciated by a CAGR of 10.9% for the comparable period.  We believe that the next 12 months will no less challenging, we believe that we are well positioned for the upcoming year and will do all within our abilities to meet our internal expectations, and those of our shareholders.

M&FI continues seek suitable strategic investment opportunities that we believe will generate above average returns while adhering to our standards of diligence. We thank you for your support and we will continue work diligently, thoroughly and with prudence to advance your company's assets.

FINANCIAL AND OPERATIONAL REPORT

The Company generated gross profit of £1,362,000 during the fiscal year, an increase of 87.6% from the previous financial year's gross profit of £726,000. The operating profit for the full year, ending 30 June 2021 was £1,021,000, an increase of 152% over the previous full year operating profit of £405,000. The full year net income was £964,000, an increase of 173% from the previous full year's profit of £353,000. M&FI's NAV per share increased 17.4% year over year to 18.22p. The overall cash and investment portfolios increased by 19.4% year over year to £6,680,000.

We believe the key to creating shareholder value for Mineral & Financial Investments is, as with any investment company is to generate positive investment returns and maintain low operating costs. More specifically operating costs which grow at a slower rate than the accretion in the Net Asset Value. Our full year total administrative costs totalled £341,000, a 7.9% increase over the previous year's costs of £321,000 which further aided in improving our results.

The world is recovering from the unexpected and difficult challenges resulting from the global pandemic caused by the spread of the Covid 19 virus. Global economic output declined by 3.1% (Fig. 3), as measured by the International Monetary Fund (IMF). In the IMF's most recent global economic analysis¹, Global Output for 2021 is estimated to have grown by 5.9%, which is forecasted to be followed in 2022 by a further output increase of +4.9%. We believe the recovery has been propelled by both fiscal and monetary intervention by most governments globally, acting as both a mitigant to the economic damage of the pandemic, and secondarily as a propellant as we exit the lockdowns imposed around the world. Inflationary pressures were initially expected to be contained due to diminished economic activity. However, due to the afore-mentioned stimulus and global supply-chain bottlenecks, we have noted inflationary pressures increasing significantly.  The IMF's forecast estimates that global inflation should increase from 3.2% in 2020 to 4.3% (+34%) in 2021. We anticipate the largest rise in inflation will be in Advanced Economies, which benefitted from more fiscal and monetary stimulus, seeing inflation quadrupling from 0.7% to 2.8% in 2021.

IMF - WORLD ECONOMIC OUTLOOK[3]   (Fig. 3)

	3.3%	3.8%	3.6%	2.8%	-3.1%	5.9%	4.9%
Advanced Economies	1.8%	2.5%	2.3%	1.7%	-4.5%	5.2%	4.5%
Emerging Markets and Developing Economies	4.5%	4.7%	4.5%	3.7%	-2.1%	6.4%	5.1%
	2.7%	3.2%	3.6%	3.5%	3.2%	4.3%	3.8%
Advanced Economies	0.7%	1.7%	2.0%	1.4%	0.7%	2.8%	2.3%
Emerging Markets and Developing Economies	4.3%	4.4%	4.9%	5.1%	5.1%	5.5%	4.9%

The growth in supply of US dollars, as measured by the US Federal Reserve Bank, M1 is up from US$4.0T, as of January 2020, to the Fed's latest revelation of M1 reaching US$20.0T - is a 400% increase in 20 month. At the same time, for a few years prior to the pandemic we believe the natural resource sectors had experienced years of constrained access to capital markets, resulting in diminished levels of exploration to satisfy future demand. The combination of these two macro-factors along with positive economic growth will, we believe, be positive for commodity pricing in 2021 and 2022. Moreover, we believe that inflation will be longer lasting than is inferred and that precious metals should benefit disproportionately from this economic setting.

GLOBAL STOCK INDEX PERFORMANCE² (Fig. 4)

Standard & Poor 500	3,106.7	4,291.8	38.1%
Nikkei 225	22,288.1	28,791.5	29.2%
Euro Stoxx 50	3,234.1	4,064.3	25.7%
Shanghai Shenzhen CSI 300	4,163.9	5,224.0	25.5%
Hang Seng	24,301.6	28,994.1	19.3%
FTSE 100	6,169.7	7,037.5	14.1%

We believe the Fiscal and Monetary responses by most "advanced economy" governments have created fertile ground for equity markets to advance this year. We note that key equity markets (Fig. 4) benefited from strong positive advances in the period that coincides with our fiscal year. The strongest market gains were experienced by the S&P 500 rising by 38.1%, while the FTSE 100 was up 14.1% during the same 12-month period.

World commodity price performances during our fiscal year was positive (Fig. 6) for all but one of the commodities that we follow: Uranium (-1.5%). All other commodities have had positive price performance during the period. However, the notable laggard amongst the performances has been gold. We have committed to an overweight position in precious metals, particularly gold. We remain committed to the belief that metals, and more specifically precious metals will outperform overall equity markets in the upcoming period.

PRICE PERFORMANCE FOR VARIOUS COMMODITIES²

(US$, Fig 6)

METALS		30/06/18		30/06/19		30/06/20		30/06/21	30/11/21	% Ch. 30/6/20 to 30/6/21
Gold	$1,255		$1,389		$1,782		$1,835		$1,788	3.0%
Silver	$16.20		$15.30		$17.85		$26.19		$22.92	46.7%
Platinum	$853		$837		$804		$1,065		$51	32.5%
Palladium	$945		$1,535		$1,835		$2,709		$1,707	47.6%
Rhodium	$2,080		$3,150		$5,800		$18,200		$12,850	213.8%
Copper	$6,525		$5,969		$6,013		$9,319		$9,652	55.0%
Nickel	$14,740		$12,670		$12,748		$18,254		$20,284	43.2%
Aluminum	$2,238		$1,779		$1,594		$2,504		$2,641	57.1%
Zinc	$3,089		$2,575		$2,057		$2,951		$3,351	43.5%
Lead	$2,436		$1,913		$1,786		$2,289		$2,343	28.2%
Uranium	$59,730		$54,454		$72,312		$71,209		$101,964	-1.5%

INVESTMENT PORTFOLIOS

The performance of various indices, commodities and share prices appear to have been strong during our fiscal year ending June 30, 2021. We note that the mining indices appear to have generated strong gains during this period. We believe that this performance is somewhat misleading, as it is our belief that markets were still mostly depressed in June 2020, and most appreciated sharply from the Q1-Q2 lows. However, some of these indices, as at our 30 June 2021 year end were still below the pre-COVID levels. For example, the FTSE 350 Mining Index is up 25.4% June 2020 to June 2021, however, if we measure its performance as of 1 January 2020 (i.e., prior to the COVID related market correction) to 30 June 2021, the FTSE 350 Mining Index was up 2.34%, while the Company's NAV rose from 15.19p to 18.22p (+20.0%) during the comparable period.

The commodity markets performed very similarly to most equity markets - declining sharply from Mid-February 2020 to Mid-March 2020². During this 5-week period the S&P 500 declined from 3,382 to 2300 (-32%)².  Since that March low the S&P 500 has risen 105%². The FTSE 100 Index, in contrast, remains 6.9% below where it was in mid-February 2020². M&FI's performance during this period compares very favourably to the FTSE 100, outperforming the FTSE 100 by 26.9% during the 1 January 2020 to 30 June 2021, period.

It is our belief that commodity price performances were consistent with the overall performance of equity markets, inasmuch that the best performing metal commodities during the 12 and 18-month periods were the base metals our belief is that any economic recovery will lead us promptly to levels of economic prosperity that exceeded our levels prior to the "COVID-Crash". The best performing metal from 30 June 2020 (Fig.6), is Rhodium (+214%), which we note also remains below its pre-covid highs, while the worst performance was Uranium (-1.5%), and closely followed by gold (+3.0%). We believe that the inflationary pressures caused by the greatest increase in US money supply in history, along with the fiscal stimuli in most advanced economies, coupled with the supply-chain bottlenecks caused by the COVID related shutdowns and slow-downs will, in our opinion, not be "transitory". We also believe that equity markets appear to have broadly concluded that the economic impact of COVID will be over soon and that the impact of the pandemic will also be "transitory". We hope that COVID 19 is near its end, but we believe its effects will be with us for a long time to come as we believe it has caused not only short-term changes to our behaviour, but longer-term structural changes in economic activity. Equity markets, as mentioned earlier, are trading at a higher valuation to their net earnings (fig. 4). If our belief is correct and inflation is more durable than expected, we believe valuations will come under pressure. We note that the valuation of many of the senior gold producers we own have, by our own internal calculations, valuations and/or yields that are below their historical averages and that of the overall markets. We do not believe that an increased inflationary environment will be as easily subdued as pundits are proposing and that we will be well served by being overweighted in precious metal investments in addition to our other investments.

CASH

Our liquidity as measured by our cash holdings as of 30 June 2021, was £855,000, up 211.2% from last year. The increase was due to the receipt of US$1.0M from Ascendant on June 22, 2021.  Our intention is to keep our cash and tactical portfolio's combined value to be between 25% and 60%. They currently represent 38% of our total NAV, which is within our internal targets. As this mining cycle evolves our objective is to maintain a higher cash & Tactical Portfolio holding, so we are well placed to avail ourselves of investment opportunities further along in the economic and market cycles.

TACTICAL PORTFOLIO

The Tactical Portfolio gained 21.8% year over year. Amongst the equity portfolio the following investments are noteworthy:

UBS Gold ETF (CHF):  Our investments in precious metal bullion peaked at 5.2% of our portfolio values. We reduced our bullion, and gold equity holdings as gold exceeded $2000/oz in August 2020. Gold prices performed well in 2020-21, reaching an all- time high spot price of $2,075/oz during the global economic uncertainties. We believe this was due to concerns primarily resulting from the impact of the spread of Covid-19, reductions in short-   and long-term interest rates and large-scale fiscal stimulus measures in major economies, a weakening of the trade-weighted US dollar, and a search for safe-haven assets. We understand that investor demand from gold was exceptionally strong in 2020, with the World Gold Council (WGC) reporting that collective ETF gold holdings grew by a record 877 tonnes during the year and reached an all-time high of approximately 3,752 tonnes in the fourth quarter of 2020. COMEX net long positions also reached all-time highs during 2020, a significant reversal of sentiment from the net short position that existed in late 2018⁴.

While we understand there was strong appetite for gold from the investment community, overall demand for gold in ounce terms fell in 2020 ⁴ , as the global pandemic and rising prices that reached all-time highs in US dollars, as well as in many non-US currencies, including in Euro, Pound sterling, Japanese yen, Indian rupee, and Chinese yuan, reduced both consumer demand for jewellery and net purchases by central banks ⁴ . Global jewellery demand was down 34% versus 2019, with China and India - responsible for over half of jewellery demand - down 35% and 42%, respectively ⁴ . Gold demand for electronics and other industrial uses fell by 7% in 2020 as the spread of Covid-19 reduced manufacturing activity and demand for electronics ⁴ . Central bank purchases of gold slowed in 2020 after 2018 and 2019 represented the two highest years of net purchases in the last 50 years ⁴ . The WGC reports that central banks still added 273 tonnes to their reserves during 2020, even after experiencing a quarter of negative net accumulation in Q3 2020 ⁴ . Some Central Banks looked to their holdings of gold as a source of liquidity in difficult economic times because of the global pandemic - with their ability to do so providing a strong statement as to why gold is a valuable reserve asset ⁴ . Russia suspended its purchases of gold in March 2020, taking a significant buyer out of the market during the remainder of the year ⁴ . Overall, though, central banks have now been net purchasers of gold for 11 straight years as they look to gold as a source of reserve diversification ⁴ .

Overall supply of gold in 2020 decreased by 4%, the first annual decline since 2017, mainly attributable to a 4% reduction[4] in global mine production tempered by a modest rise in recycled gold and net de-hedging by producers ⁴ . Global mine production fell for the second straight year in 2020, further confirming that the mining industry may have reached peak gold production for the foreseeable future ⁴ . Gold production recovered in the first half of 2021 but remains 1.6% ⁴ below production levels achieved in the 12 months leading up to Q1-2020, the start of the pandemic. The supply of recycled gold, which is historically positively correlated with the gold price, only increased by 1% in 2020 despite record high gold prices and remains down 2% in Q2-2021 ⁴   as the pandemic likely limited the ability of potential sellers to access the market.

Barrick Gold Corp.:   Barrick Gold is the second largest gold producer in the world, the result of the merger of Barrick Gold and Randgold Exploration. Barrick represents 2.7% of our investment portfolios. The merged company is led by Barrick's CEO, Mark Bristow, formerly Randgold's CEO. The Company acquired our initial investment in Barrick in response to the merger with Randgold, causing a technical sell-off as it relinquished its primary listing on the FTSE. This meant that it was no longer eligible to be held by European/UK funds, which we believed resulted in some temporary selling pressure. Since 31 December 2018, Barrick has increased its cash holding to >US$5.2B, a 330% increase in cash holdings. Simultaneously, Barrick has reduced its debt-to-equity ratio from 0.61:1.0 to 0.16:1.0. Barrick has solidly re-focused on profits rather than scale. We believe that Barrick will be a "go-to" gold stock when the broader markets become more attentive to the gold sector. Barrick has historically traded at valuations that were higher than the overall markets, and now trades at a Price/Earnings ratio which is 41% below that of the S&P 500 and offers a yield that is 47% higher than the yield of the S&P 500 Index.

Cerrado Gold:   We initiated our investment in common shares of Cerrado Gold in 2019 when it was a private exploration company, and it currently represents 6.3% of our investment portfolio. It is now a gold producer with an Argentinian mine (Mineiras Don Nicolas (MDN)) and expects to produce 50,000 oz of gold in the current year. During the year Cerrado published a Preliminary Economic Assessment (PEA) on its Brazilian exploration project, Monte do Carmo (MDC).  Monte do Carmo's PEA indicates an after tax NPV^@5% of US$617M along with an IRR of 94.8% based on an All in Sustaining Cost (AISC) over the Life of Mine (LOM) of US$612/Oz of Gold. Further details of this are set out in the Cerrado's announcement dated August 23, 2021. The overall resource base of MDC has expanded to an Indicated Resource of 541,000/oz, and an Inferred resource of 780,000/oz. (i.e., Total resource to date of 1,321,000/oz); MDN, which is in production, and La Calandria (nearby Don Nicolas) has expansion potential, and has a Measured and Indicated Resource of 566,609/oz and inferred of 399,709 oz. The total resource (Measured, Indicated & Inferred) for Cerrado has grown from 813,000 oz in 2019 to 2,232,701 oz of gold, a 175% increase in 2 yrs. We believe that Cerrado will continue to expand the resource base and succeed in getting MDC into production by 2025, by which time Cerrado could be producing as much as 215,000/oz to 285,000[5]/oz of gold p/year.

Northern Star Resources Limited: Northern Star is an A$11.0B Australian Gold producer. Our investment in Northern Star represents 1.82% of our investment portfolios. Northern Star has buys established mines within what it terms "Production Centres". Northern Star has three Production Centres: Kalgoorlie, Yandal, both in Australia and Pogo in Alaska. Their Production Centres are meant to use capital more efficiently and to operate with greater efficiencies of scale. The company's guidance is towards increasing its production from the current 1.48M oz to achieving production of 2.0M oz of gold per year by 2026

Equinox Gold: Equinox Gold is a Canadian mining company with a market cap of US$2.2B, 30.3M oz of M&I gold resources and has been executing a strategy of consolidating single mine producing companies. Guidance from Equinox suggests gold production of 600,000 oz. will be achieved in 2021. Equinox now produces from seven operating gold mines and plans to increase production by advancing a pipeline of growth projects. This investment represents 1.75% of our investment portfolio. This company is delivering on its growth and diversification strategy, growing from a single-asset developer to a multi-mine producer and is advancing toward its vision of producing one million ounces of gold annually.

Fresnillo Plc:   Fresnillo is a £6.7B Mexican mining company listed in London (as well as on Mexican and US stock exchanges) and is the largest silver producer in the world. Fresnillo trades at 14.5x p/e and offers a 2.65% yield. We acquired our shares after an earnings disappointment and have added to our investment since 30 June 2021.  The Juanicipio Mine, of which Fresnillo owns 56%, is entering into production in Q4 2021. We believe that Fresnillo is undervalued and will benefit from the completion of Juanicipio which should lead to a revaluation of its shares.

Pretium Resources Inc: Pretium Resources is a Canadian Gold Producer with a single very high grade mine called Brucejack, located in British Columbia. Our investment in Pretium, as at our 2021-year end, represented 1.1% of our investment portfolios. Newcrest has since announced its intention to acquire Pretium at a 23% purchase premium after our year-end. The features which Newcrest explain motivated it to acquire Pretium are similar to those which attracted M&FI to invest in Pretium: The Brucejack Mine is a high-grade gold mine, in production, in a safe jurisdiction (British Columbia (BC), Canada) with state-of-the-art operations and environmental features (i.e., no-tailings dam) with, what we believe are, relatively simple logistics (i.e., near roads and a port as well as being connected to the power grid). Pretium's production guidance for 2021 is production of 325,000 to 365,000oz of gold at an All-In Sustaining Cost (AISC) of $1,060/oz to $1,190/oz

STRATEGIC PORTFOLIO

The Strategic portfolio was up to £4.11M, or a 5.1% year on year increase (Fig. 6) at 30 June 2021. The Portfolio performance was however impacted by the additional provision of £120,000 taken on CAP Energy Plc. This provision reduced the portfolio's performance by 3.1%.

Redcorp Empreedimentos Mineiros Lda.:   The Company owns 100% of TH Crestgate GmbH, which in turn owns 75% of Redcorp Empreedimentos Mineiros Lda. (Redcorp). Redcorp is a Portuguese company whose main asset is the Lagoa Salgada Project. In 2018 we entered into a sale and earn-in option agreement with Canadian listed company, Ascendant Resources. Ascendant can earn into 80% ownership of the Lagoa Salgada Project by completing US$9.0M of exploration work on the project, completing a Feasibility Study and completing its payments commitments to M&FI. Based on the Earn-in Agreement we have with Ascendant, by June 22, 2022, Ascendant is expected to have earned into 50% ownership of Redcorp. During this upcoming calendar year of 2022, we expect to receive two further cash payments from Ascendant totalling US$3.5M as part of their earn-in to a net interest of 80% into the Lagoa Salgada Project. The value of our investment in Redcorp is based on the conservatively discounted value of the expected payments to be received from Ascendant in accordance with the 2018 agreement and the residual interest in Redcorp. The value of the residual interest in Redcorp is based on the discounted value of Ascendant's historical and estimated future investment for it to reach 80% ownership of the project. On this basis, Redcorp represents 48% of our NAV. The project has advanced from an initial resource of approximately 4.4Mt with Zinc Equivalent grade of 6.0% when, our now wholly owned subsidiary, TH Crestgate GmbH acquired Redcorp, to today - where it is a project led by Redcorp and Ascendant with a resource totalling 27.5Mt with a ~ 7% Zinc Equivalent grade. After the end of the period under review, Redcorp and Ascendant secured a mine development permit agreement from the Portuguese government. In addition, on [date[ Redcorp and Ascendant also completed a second PEA 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 (see announcement dated November 8, 2021).

Golden Sun Resources: The Company made its initial investment in Golden Sun Resources (GSR) in 2019 by acquiring convertible notes of GSR.  The Company have made two small follow-on investments in Notes with identical terms.  As of the date of writing, these GSR notes represent a 4.7% net ownership in Golden Sun, which by the time the notes mature should represent approximatively 7.5% net ownership of Golden Sun. Golden Sun currently represents 7.5% of our investment portfolios. The GSR notes will mature on 30 April 2024. Interest is chargeable and accrues at the rate of 20% per annum, calculated monthly in arrears on the outstanding Loan Amount and will become payable upon maturity, or the notes and interest can be converted into GSR shares at US$1.25 p/s.  Golden Sun has 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 pilot plant leach pad production to a 400 Tonnes per day Carbon in Leach (CIL) plant. The next phase, if successful, could result in production exceeding 30,000/oz of gold per year. Additionally, Golden Sun has applied for and secured several other Costa Rican exploration project licenses from the government. Most of these licenses are former production or exploration projects with historical resources that were re-possessed by the government when the owners failed to meet their commitments. We understand that Golden Sun has evolved to become a respected mining company by the Costa Rican Government. We also understand that this has been achieved by the company exhibiting market leading Environmental and Social practices. Golden Sun has progressed a little more slowly than we had hoped but has not deviated from the plan upon which we invested. We continue to believe this is a distinctive investment opportunity that should, over the next 24 months, be an attractive IPO listing and/or partner or acquisition target for a larger mining company seeking a significant foothold in a stable and advanced economy in Central America.

Ascendant Resources: The Company owns 2.2M shares in Ascendant Resources, a Toronto Stock Exchange listed company. Ascendant's focus is the Lagoa Salgada Project. Ascendant owns 25% of Redcorp, which owns 85% of the Lagoa Salgada Project.  Ascendant is subject to an earn-in option on M&FI's 75% owned Redcorp Empreedimentos Mineiros Lda. LDA and its Lagoa Salgada Polymetallic project located on Iberian Pyrite Belt in South Central Portugal. The shares of Ascendant have performed well during the Company's fiscal year, rising 28.7% and now represent 5.8% of our portfolio investments. Ascendant has achieved important operational milestones during the fiscal period. During the twelve months ended 30 June 2021 Ascendant has completed two financings allowing it to progress the Lagoa Salgada Project to where it currently stands. In 2021 it plans to drill 15,000m to support the completion of a definitive Feasibility Plan in late 2022. We continue to maintain our positive outlook for zinc prices and believe that Ascendant's higher leverage to an improvement in the price of zinc should have a positive impact on its share price.

Ideon Technologies : M&FI made its initial investment in 2019 and has since made a follow-on investment in 2021. Our initial investment was made at CA$0.37, and in its second, oversubscribed financing Ideon's capital raise was completed at CA$1.00 per share. Ideon now represents 3.7% of our portfolio values. We are advised that this company is within a quarter or two from reaching break-even financial results (although there can be no guarantee).  Ideon Technologies Inc. is Canadian based company which we believe is a 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, it maps the intensity of cosmic-ray muons underground and constructs 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. Whilst still at an early stage, the environmental impact from such a technological change would be meaningful.

Cap Energy PLC:   CAP is an offshore oil and gas exploration company focused on West Africa. We are advised that the management and largest shareholders of CAP are ultra-high net worth businesspeople with deep and wide-ranging contacts in the various countries in West Africa and the energy industry. CAP is making slower progress than we would have expected after buying out its partners on its three offshore oil exploration projects. Additionally, Covid 19 issues have significantly slowed CAP's progress at finding financial partners. During the fiscal year M&FI proposed two separate financing terms to CAP's management, both were declined. CAP has chosen to approach its shareholders to complete a financing at 50p. We reduced our carrying value by 37.5% or £120,000. Our investment in CAP currently represents 2.9% of our NAV.  CAP is the controlling shareholder and the operator of three exploration blocks: 1. Djiféré Block, offshore Senegal, which CAP now holds a 90% interest in the project; 2. Block 5B licence, located offshore Guinea-Bissau, of which CAP owns 85.5%, and; 3. Block 1, also offshore Guinea Bissau, which CAP now owns 76% of the licence. The most prospective licence is "Block 5B"- It is in deep water, but the 3D seismic analysis suggests that it is structurally analogous to the neighbouring SNE oil field which was the largest oil discovery in 2014 and is currently producing.  We continue to closely monitor CAP's progress.

Notice of AGM and Dispatch of Report and Accounts

Mineral & Financial Investments Ltd.'s Audited Financial Statements for the year ended 30 June 2021 will be available on the Company's website ( http://www.mineralandfinancial.com/ )  on Wednesday, 23 December 2021 and will be posted to shareholders together with the notice of the AGM on or before 23 December 2021. 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.    [phone]

Katy Mitchell, Ben Good - WH Ireland Limited    [phone]

Jon Belliss - Novum Securities Limited    [phone]

 

Consolidated Income Statement			Year ended 30 June 2021	Year ended 30 June 2020
		Notes	£'000	£'000
	Investment income		96	3
	Fee revenue		3	-
	Net gains on disposal of investments		1,244	497
	Net change in fair value of investments		19	226
			1,362	726
	Operating expenses	1	(341)	(321)
	Other gains and losses	3	(24)	(24)
	Profit before taxation		997	381
	Taxation expense	4	(33)	(28)
	Profit for the year from continuing operations and total comprehensive income, attributable to owners of the Company		964	353
	Profit per share attributable to owners of the Company during the year from continuing and total operations:	5	Pence	Pence
	Basic (pence per share)		2.7	1.0
	Fully diluted (pence per share)		2.7	1.0

Consolidated Statement of Financial Position

		2021	2020
	Notes	£'000	£'000
CURRENT ASSETS
Financial assets held at fair value through profit or loss	6	5,822	5,315
Trade and other receivables		27	81
Cash and cash equivalents		855	275
		6,704	5,671
CURRENT LIABILITIES
Trade and other payables		163	127
Convertible unsecured loan notes		10	10
		173	137
NET CURRENT ASSETS		6,531	5,534
NON-CURRENT LIABILITIES
Deferred tax provision		(93)	(60)
NET ASSETS		6,438	5,474
EQUITY
Share capital	13	3,096	3,096
Share premium	13	5,892	5,892
Loan note equity reserve	14	6	6
Share option reserve	15	23	23
Capital reserve		15,736	15,736
Retained earnings		(18,315)	(19,279)
Equity attributable to owners of the Company and total equity		6,438	5,474

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 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
Total comprehensive income for the year	-	-	-	-	-	964	964
At 30 June 2021	3,096	5,892	23	6	15,736	(18,315)	6,438

 

Consolidated Statement of Cash Flows

		Year ended 30 June 2021	Year ended 30 June 2020
	Notes	£'000	£'000
OPERATING ACTIVITIES
Profit before taxation		997	381
Adjustments for:
Profit on disposal of trading investments		(1,244)	(497)
Fair value gain on trading investments		(19)	(226)
Other gains and losses		-	-
Investment income		(96)	(3)
Tax paid		-	(10)
Operating cash flow before working capital changes		(362)	(355)
(Increase) in trade and other receivables		54	(3)
Increase in trade and other payables		36	39
Net cash outflow from operating activities		(272)	(319)
INVESTING ACTIVITIES
Purchase of financial assets		(2,269)	(1,279)
Disposal of financial assets		3,116	1,639
Acquisition of subsidiary		-	-
Cash balance of subsidiary acquired		-	-
Investment income		5	3
Net cash inflow/(outflow) from investing activities		852	363
FINANCING ACTIVITIES
Proceeds of share issues		-	7
Net cash inflow from financing activities		-	7
Net (decrease)/increase in cash and cash equivalents		580	51
Cash and cash equivalents as at 1 July		275	224
Cash and cash equivalents as at 30 June		855	275

 

NOTES TO THE FINANCIAL STATEMENTS

1	OPERATING PROFIT
		2021	2020
		£'000	£'000
	Profit from operations is arrived at after charging:
	Directors fees	67	59
	Other salary costs	19	18
	Registrars fees	31	31
	Corporate adviser and broking fees	42	45
	Other professional fees	124	107
	Foreign exchange differences	24	24
	Other administrative expenses	39	43
	Fees payable to the Group's auditor:
	For the audit of the Group's consolidated financial statements	19	18
		365	345

2	EMPLOYEE REMUNERATION
	The expense recognised for employee benefits is analysed below; the Group has no employees other than the directors of the parent company and its subsidiary; average number of employees, including executive directors, 2 (2019, 2):
		2021 £'000	2020 £'000
	Wages and salaries	86	77
		86	77
	Details of Directors' employee benefits expense are included in the Report on Remuneration.
	Remuneration for key management of the Company, including amounts paid to Directors of the Company, is as follows:
		2021 £'000	2020 £'000
	Short-term employee benefits	67	59
		67	59

3	OTHER GAINS AND LOSSES
		2021	2020
		£'000	£'000
	Foreign currency exchange differences	(24)	(24)
		(24)	(24)

4	INCOME TAX EXPENSE
		2021	2020
		£'000	£'000
	Deferred tax charge relating to unrealised gains on investments	33	18
	Other tax payable	-	10
		33	28
	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:
		2021	2020
		£'000	£'000
	Profit before tax from continuing operations	1,004	381
	Profit before tax multiplied by rate of federal and cantonal tax in Switzerland of 14.6% (2020: 14.6%)	146	56
	Less abatement in respect of long term investment holdings	(131)	(50)
	Unrelieved tax losses	18	22
	Total tax	33	28

5	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.
			2021	2020
			£'000	£'000
	Profit attributable to owners of the Company
	- Continuing and total operations		964	353
			2021	2020
	Weighted average number of shares for calculating basic earnings per share		35,135,395	35,080,784
	Weighted average number of shares for calculating fully diluted earnings per share		35,204,897	35,146,295
	Earnings per share from continuing and total operations
	- Basic (pence per share)		2.7	1.0
	- Fully diluted (pence per share)		2.7	1.0

6	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
	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 22 Jun 2019 22 Dec 2019 22 Jun 2020 22 Jun 2021 22 Jun 2022	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 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. 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.

 

7	SUBSIDIARY COMPANIES
	The Group's subsidiary companies are as follows:
	Name	Principal activity	Country of incorporation  and principal place of business	Proportion of ownership  interest and voting rights held by the Group
	TH Crestgate GmbH	Investment  company	Steinengraben 18 4051 Basel, Switzerland	100%
	M&FI Services Ltd	Service company	5 Bath Road, London, United Kingdom, W4 1LL	100%

On 5 February 2021 M&FI Services Ltd was incorporated and became a subsidiary of the Company

All intergroup transactions and balances are eliminated on consolidation.

8	TRADE AND OTHER RECEIVABLES
		2021	2020
		£'000	£'000
	Other receivables	9	69
	Prepayments	18	12
	Total	27	81
	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 2021 and 2020 there were no trade and other receivables past due.

9	TRADE AND OTHER PAYABLES
		2021	2020
		£'000	£'000
	Trade payables	36	18
	Other payables	82	70
	Accrued charges	45	39
	Total	163	127
	The fair value of trade and other payables is considered by the Directors not to be materially different to carrying amounts.

10	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:
		2021	2020
		£'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 2021 to be approximately £10,000 (2020: £10,000)

 

11	DEFERRED TAX PROVISION
		2021	2020
		£'000	£'000
	As at 1 July	60	42
	Provision relating to unrealised gains on investments	33	18
	As at 30 June	93	60

12	SHARE OPTIONS
	On 31 January 2017 the Company granted 600,000 options to directors and employees, exercisable at 7.50p per share.  At the year end all these options had vested and are exercisable at any time prior to the fifth anniversary of the date of grant. 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	31 January 2017
	Share price at date of grant	5.50p
	Exercise price per share	7.50p
	No. of options	600,000
	Risk free rate	1.0%
	Expected volatility	50%
	Life of option	5 years
	Calculated fair value per share	1.9245p
	The share-based payment charge for the year was £Nil (2020: £Nil).
	The share options movements and their weighted average exercise price are as follows:
		2021		2020
			Weighted average exercise price		Weighted average exercise price
		Number	(pence)	Number	(pence)
	Outstanding at 1 July	330,000	7.50	490,000	7.50
	Granted	-	-	-	-
	Exercised	-	-	(160,000)	-
	Lapsed	-	-	-	-
	Outstanding at 30 June	330,000	7.50	330,000	7.50

 

13	SHARE CAPITAL
		Number of  shares	Nominal Value	Share  premium
			£'000	£'000
	AUTHORISED
	At 30 June 2020 and 30 June 2021
	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 2020 and 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
	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.

14	LOAN NOTE EQUITY RESERVE
		2021	2020
		£'000	£'000
	Equity component of convertible loan notes at 1 July	6	6
	Equity component of convertible loan notes at 30 June	6	6

15	SHARE OPTION RESERVE
		2021	2020
		£'000	£'000
	Brought forward at 1 July	23	23
	Share based payment charge	-	-
	Carried forward at 30 June	23	23

16	RISK MANAGEMENT OBJECTIVES AND POLICIES
	The Company is exposed to a variety of financial risks which result from both its operating and investing activities.  The Company's risk management is coordinated by the board of directors and focuses on actively securing the Company's short to medium term cash flows by minimising the exposure to financial markets.
	MARKET PRICE RISK The Company's exposure to market price risk mainly arises from potential movements in the fair value of its investments.  The Company manages this price risk within its long-term investment strategy to manage a diversified exposure to the market.  If each of the Company's equity investments were to experience a rise or fall of 10% in their fair value, this would result in the Company's net asset value and statement of comprehensive income increasing or decreasing by £583,000 (2020:  £516,000).
	FOREIGN CURRENCY RISK The Group holds investments and cash balances denominated in foreign currencies and investments quoted on overseas exchanges; consequently, exposures to exchange rate fluctuations arise.  The Group does not hedge its foreign currency exposure and its liabilities in foreign currencies are limited to the trade payables of TH Crestgate which are not material. The carrying amounts of the Group's foreign currency denominated monetary assets at the reporting date are as follows:
			2021 £'000	2020 £'000
	US Dollar		4,512	4,423
	Canadian Dollar		1,537	615
	Swiss franc		48	94
	Australian Dollar		122	-
	FOREIGN CURRENCY SENSITIVITY ANALYSIS The Group is mainly exposed to the US Dollar and the Canadian Dollar in respect of investments which are either denominated in or valued in terms of those currencies. The following table details the Group's sensitivity to a 5 per cent increase and decrease in pounds sterling against the US Dollar, Canadian Dollar and Swiss franc. The Group's exposure to the Australian Dollar and the Euro are not considered material.
			2021 £'000	2020 £'000
	US Dollar	5% increase in exchange rate against GBP 5% decrease in exchange rate against GBP	226 (226)	221 (221)
	Canadian Dollar	5% increase in exchange rate against GBP 5% decrease in exchange rate against GBP	77 (77)	31 (31)
	Swiss franc	5% increase in exchange rate against GBP 5% decrease in exchange rate against GBP	2 (2)	5 (5)
	Australian Dollar	5% increase in exchange rate against GBP 5% decrease in exchange rate against GBP	6 (6)	- -
	CREDIT RISK The Company's financial instruments, which are exposed to credit risk, are considered to be mainly cash and cash equivalents and the Company's receivables are not material.  The credit risk for cash and cash equivalents is not considered material since the counterparties are reputable banks. The Company's exposure to credit risk is limited to the carrying amount of the financial assets recognised at the balance sheet date, as summarised below:
			2021 £'000	2020 £'000
	Cash and cash equivalents		855	275
	Other receivables		9	69
			864	344
	No impairment provision was required against other receivables which are secured and not past due. LIQUIDITY RISK Liquidity risk is managed by means of ensuring sufficient cash and cash equivalents are held to meet the Company's payment obligations arising from administrative expenses.
	CAPITAL RISK MANAGEMENT The Company's objectives when managing capital are: · to safeguard the Company's ability to continue as a going concern, so that it continues to provide returns and benefits for shareholders; · to support the Company's growth; and · to provide capital for the purpose of strengthening the Company's risk management capability. The Company actively and regularly reviews and manages its capital structure to ensure an optimal capital structure and equity holder returns, taking into consideration the future capital requirements of the Company and capital efficiency, prevailing and projected profitability, projected operating cash flows, projected capital expenditures and projected strategic investment opportunities.  Management regards total equity as capital and reserves, for capital management purposes.

 

17	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:
			2021	2020
			£'000	£'000
	Financial assets:
	Cash and cash equivalents		855	275
	Loans and receivables		9	69
	Investments held at fair value through profit and loss		5,822	5,315
			6,686	5,659
	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:
			2021	2020
			£'000	£'000
	Financial liabilities at amortised cost:
	Convertible unsecured loan notes		10	10
	Trade and other payables		118	88
			128	98

18	Contingent LIABILITIES AND CAPITAL COMMITMENTS
	There were no contingent liabilities or capital commitments at 30 June 2021 or 30 June 2020.

19	POST YEAR END EVENTS
	There have been no material post year end events.

20	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.

21	ULTIMATE CONTROLLING PARTY
1.1	The Directors do not consider there to be a single ultimate controlling party.

 

---

[1] No comment or fact stated in this update should be taken as investment advice.

[2] Source: Bloomberg LLC

[3] International Monetary Fund, "World Economic Outlook: Recovery During a Pandemic", October 7, 2021

[4] World Gold Council - Gold Demand Trends Annual Reviews, 2019, 2020 and Q2-2021

[5] Cerrado's production public stated guidance as of November 2021

 

END

 

 

FR DKDBDPBDDDBB