Final Results for the Period to 30 June 2018

RNS Number : 2171W

Mineral & Financial Invest. Limited

31 July 2018

 

MINERAL & FINANCIAL INVESTMENTS LIMITED

Year End Results And Net Asset Value Update

HIGHLIGHTS:

·     Year end Net Asset Value up 19.8% to 7.49p per share, totalling £2,623,000 (audited)

·     Investment Portfolio now totals £2,269,000 up 78.1% from year-end 2016.

·     TH Crestgate's Lagoa Salgada's LS-1 resource tonnage increased by 114% to 9.65Mt

·     TH Crestgate seeking a partner to partly monetize the investment in Lagoa Salgada.

·     Appointing James Lesser the MAFL Board of Directors

George Town, Cayman Island - July 31, 2018 - Mineral & Financial Investments is very pleased to announce MAFL, the AIM quoted resources investment company, today announces its Net Asset value and audited fiscal year update on its activities for the period ended June 30, 2018.

The Company also confirms that is has today printed and posted its annual accounts to shareholders, and that a copy is available from the Company's website at http://www.mineralandfinancial.com/.

Following, the confirmation of printing and posting, the Company confirms that the suspension in trading in the Company's shares on AIM, a market of the London Stock Exchange, will be lifted with effect from 7.30am today (31 July 2018).

CHAIRMAN'S STATEMENT:

Mineral & Financial Investments Limited M&FI is an investing company with the invest 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. We will provide advisory services when possible and will be willing to make follow-on investments when appropriate.

During the fiscal period ending 30 June 2018 your company generated net trading income of £315,000 that translated into a net profit of £55,000 or 0.3p per share. At the period end of 30 June 2018, our Net Asset Value (NAV) was £2,623,000, an increase of 75.5% from the 31 December 2016 NAV of £1,495,000.  The Net Asset Value per Share (NAVPS) as at 30 June 2018 was 7.49p per share, up 19.8% from the previous year's NAVPS of 6.25p. We continue to be effectively debt free with working capital of £2.63 million.

	31 Dec. 2015	31 Dec. 2016	31 Dec. 2017	30 June 2018	CAGR (%)
Working Capital	£918,376	£1,507,360	£2,546,875	£2,623,000	52.4%
Net Asset Value P/S	6.47p	6.25p	7.25p	7.49p	6.0%

The world's economic performance improved in 2017, and the outlook continues to be positive. The IMF's World Economic Outlook (Update July 16, 2018) forecasts that global growth will reach 3.9% in 2018 and 2019. This follows growth of 3.2% in 2016 and 3.7% in 2017. Advanced economies are expected to see their growth slow a little from a peak of 2.2% this year, while emerging markets should see their growth rates continue to rise, reaching 4.9% this year, and 5.1% in 2019. I note this, and the difference in the growth rates between the advanced economies and the emerging economies, as the importance of metal and mineral demand from emerging markets is more important in determining metal demand and ultimately pricing than the advanced economies.

Also worth noting is the rising expectation of inflation. Advanced Economies inflation was 0.8% in 2016, and expected to average 2.2% in 2018, while emerging and developing economies should experience average inflation of 4.4% in 2018. Moderate economic expansion and growing inflationary pressures for the Advanced Economies set an additional grappling hook over the balustrade that should help metal prices pull themselves up from their current levels over the next 18 months (all data from IMF).

IMF - World Economic Outlook (July 2018)	2016	2017	2018 Est.	2019 Est.
World Output	3.2%	3.7%	3.9%	3.9%
Advanced Economies	1.7%	2.4%	2.4%	2.2%
Emerging Markets and Developing Economies	4.4%	4.7%	4.9%	5.1%
Consumer Prices
Advanced Economies	0.8%	1.7%	2.2%	2.2%
Emerging Markets and Developing Economies	4.3%	4.0%	4.4%	4.4%

We have observed that following echo from the Global Credit Crisis of 2007-2008 there has been a rise in political populism. We believe that when the electorate fears the absence of control, they will vote for candidates that promise strength and decisiveness over the status quo. We have observed that the result has seen increased turbulence, reduced levels of trust and diminished levels of predictability in international commercial and diplomatic relations dealings as a growing number of strong men, and a few straw men wish to satisfy their electoral bases.

Despite continued economic expansion, interest rates are essentially unchanged from where they were on January 1, 2016. How much longer will rates remain low, as inflationary pressures are returning and economic performance has been competently positive? The Chairman of the US Federal Reserve Board, Jerome Powell, has indicated that we should expect three rate hikes in 2018, with one already put into effect. US 10-year treasury rates have evolved from being the baseline interest rate for western economies, to being the 16^th highest interest rate level of the 20 largest world economies, just ahead of Greece, but behind New Zealand. What does this say? A great deal, but mostly, we believe, that the defence of the US dollar has begun, and that the era of the US dollar being the "world's currency" is drawing to an end..

Unsurprisingly, Global equity markets are up for the most part over the past 18 months supported by global economic growth and low administered rates. The S&P 500 Index rising 22.8% to 2,718.37 as at our year-end. European indices unfortunately, struggled a little more - during the same period the EuroStoxx 50 is up 3.2% to 3395.60 and the FTSE 100 is up 6.9% to 7,696.93.  In China the CSI 300 was up 6.1% to 3,510,99, while Japan and Hong Kong did better, rising 16.7% and 31.6% respectively.

Commodities appear to have risen healthily, when measured by the Reuters-CRB Index, which rose 6%. However this needs to be viewed in the context of a 39.8% increase in oil prices (Brent) and that this masks the wide disparity in price performances within the various commodity sectors. By contrast, during the same period, corn is down 8%, as were cattle prices. We believe that the current correction is the product of a rally in the US dollar coupled with concerns about the impact, depth and duration of the trade war recently initiated by President Trump. The stark reality is that there have been very few, if any, significant metal discoveries in the past decade. We believe the sector continues to be starved of exploration capital. The continued growth in economic activity, notably from the emerging markets that consume far more metals as they transform themselves into increasingly industrialized economies and the dearth of exploration will cause, we believe, a leap in metal prices.

Our investment in TH Crestgate progressed as we had hoped and expected, although perhaps exogenous factors moved a little more slowly than we had planned. Our investment in TH Crestgate had as its primary purpose to create value for our shareholders by exposing the company to zinc, lead and copper market appreciation. During the year THC completed a resource update meant to quantify the resource expansion achieved through the exploration activity it initiated. The resource, when acquired, was 4.5Mt of zinc and lead rich ore. TH Crestgate succeeded in expanding it to a 9.65Mt deposit while maintaining zinc equivalent grades. We believe that with more exploration on the project that the resource can be expanded further. For the past 12 months TH Crestgate has been in various discussions to secure a partner for the Lagoa Salgada project with Mineral & Financial guidance.

Our Investment in Cap Energy ("Cap") is valued at its last financing in 2015. The company, which is 76% controlled by its board and management, is progressing three West African offshore blocks in which it has a significant ownership interest. These three blocks are located off western Africa - Two (Block 1 and Block 5B) are located offshore Guinea Bissau, and the third (Djifferé) is located offshore Senegal. Cap is working closely with its partners to bring a large partner to operate the exploration programs. Significant progress has been made since we last reported and we expect that this will begin to bear fruit over the next year.

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 will continue to advance your company with prudence and common sense in 2018-19.

CHIEF OPERATING OFFICER'S STATEMENT

The key to creating shareholder value is to keep costs low, and more particularly lower than the average accretion in the Net Asset Value. We have succeeded in reducing our average quarterly operating costs as a percentage of our NAV to 1.19%. Put another way, all we have to do is increase our NAV by more than 1.19% and we have created net value for our shareholders. During the period we have remained debt free and have not raised any additional capital.

	31/12/15	31/03/16	30/06/16	30/09/16	31/12/16	31/03/17	30/06/17	30/09/17	31/12/17	31/03/18	30/06/18
Op Costs as % of NAV	4.72%	4.06%	4.05%	3.77%	3.88%	1.67%	2.51%	1.76%	1.76%	1.62%	1.21%

INVESTMENT PORTFOLIO

There has been a very tepid recovery in the mining sector. Investment Portfolio now totals £2,312,733, up 147.4%% from year-end 2016. During the 18 month period captured and described in the report to shareholders the FTSE 350 Mining index rose 6%, the S&P Metals & Mining Select Industry index rose by 8.9% and the VanEck Vectors Gold Miners index rose by 6.6%. Metal prices performed much better, on average, than did the underlying mining companies.

ETF Portfolio

Gold ETF

During the past 12 months the Company's gold ETF value, despite the correction in the waning months of the period ending June 30, 2018, is still up 15.6% from our purchase price. The position has been an excellent hedge against the weakening of the British Pound, our reporting currency. The issue of Brexit, which most, including ourselves, would have expected to be more advanced in defining its path towards a resolution looks as uncertain as it did 2 years ago. A physical gold position is a core holding in our portfolio. We believe gold to be undervalued at current prices and are considering adding to our position during the price weakness of this summer.

Platinum ETF

Platinum continues to be a perplexing metal. It is our smallest metal investment in GBP value. Platinum supplies are principally from two countries, South Africa primarily, and Russia. Both of these countries currencies are depressed and resulting in high prices for platinum in their home currencies. These high prices are drawing marginal sources of supply into the markets. Demand is principally from automotive production (37% to 41% of total demand). The arrival of Electric Vehicles (EV) to the market place is casting a distant cloud on long-term platinum demand. The second source of demand is from jewellery production (31% to 38% of total demand), of which in excess of 60% of jewellery demand originates from China.  Current sources of demand are emerging while the historical sources of demand are flat to down. The election of a new leader in South Africa will slowly reset the economy on a more stable footing, and very slowly result in stabilization in the SA Rand. However, until a more mining investment friendly environment is clearly apparent, little new capital will be attracted to South Africa in general, and platinum mines specifically. The Company is cautiously optimistic about its platinum investment.

Silver ETF

Silver has a higher degree of price leverage in a rising market for precious metals than other precious metals such as gold and platinum. Silver production and overall supply declined in 2017 to 991.7M ounces, down 1.8% from 2016. Physical demand was down 2.3% during the same period. The company maintained its silver position, but is down 9.4%. Electronics demand for silver is the fastest growing source of new demand for silver. We believe that demand will resume its growth in the near future and that silver supply will struggle to grow at the same pace. Going forward our silver position will be a trading position.

No other metal positions were initiated during the period.

Equity Portfolio

Cap Energy

We believe Cap has made forward strides in de-risking its assets through negotiating improved terms in both Senegal and Guinea. Additionally, the company has advanced the geological attractions of all three of its West African off shore oil and gas assets. Cap has, in conjunction with its partners, initiated discussions and signed confidentiality agreements with several global energy companies considering partnering with Cap on their highly prospective projects off the west coast of Africa.

TH Crestgate

Your company owns 49% of TH Crestgate. TH Crestgate owns 100% of Redcorp Empreedimentos Mineiros Lda. 100%. Redcorp is a Portuguese company whose main asset is the Lagoa Salgada Project. The Lagoa Salgada project was acquired when zinc and lead prices were at cycle lows. The asset, at the time of its acquisition, had a historical resource, compliant with the Canadian National Instrument 43-101 rules, of 4.5Mt on indicated and inferred resources. Thanks to the diligent work of the teams at TH Crestgate and the Redcorp in Portugal, the asset was increased to 9.65Mt resource, also indicated and inferred.  TH Crestgate has been very actively seeking a financial and operational partner.

The value of the Company's stake in Anglo Pacific more than doubled during the previous annual reporting period, which created a good point to exit the investment. The value of the Company's stake in Glencore more than tripled, during the course of 2017-18 and we used this strength to exit the position, well ahead of the company's share price fall as a result of the allegations from US Department of Justice. The Company has acquired a shareholding in Ascendant Resources, a Toronto Stock Exchange listed producer of zinc. Ascendant's main asset is the El Mochito mine in Honduras. We believe that the shares of Ascendant are undervalued relative to its earnings and cash flow prospects. The Company has a market value of USD47.0 million and has given guidance for 2018 of Free Cash Flow of USD14.0M to USD20.0M this year. During the period we also initiated positions in Imperial Metals (TSX) and Artemis Resources (ASX), which in the context of the current weakness in virtually all metal stocks, have performed in line with their comparable peers.

Annual General Meeting

Mineral and Financial will hold its Annual General Meeting August 30, 2018 at 10:00AM at W.H. Ireland's offices - 24 Martin Lane, London, EC4R 0DR, United Kingdom

INDEPENDENT AUDITOR'S REPORT

TO THE MEMBERS OF MINERAL & FINANCIAL INVESTMENTS LIMITED

FOR THE 18 MONTH PERIOD TO 30 June 2018

			18 months to 30 June 2018	12 months to  31 December 2016
		Notes	£'000	£'000
	Investment income		2	-
	Net losses on disposal of investments		(12)	(169)
	Net change in fair value of investments		325	455
			315	286
	Operating expenses		(260)	(175)
	Operating profit	3	55	111
	Profit before taxation		55	111
	Taxation expense	5	-	-
	Profit for the year from continuing operations and total comprehensive income, attributable to owners of the Company		55	111
	Profit per share attributable to owners of the Company during the year from continuing and total operations:	6	Pence	Pence
	Basic (pence per share)		0.2	0.6
	Diluted (pence per share)		0.2	0.6

STATEMENT OF FINANCIAL POSITION

AS AT 30 June 2018

		30 June 2018	31 December 2016
	Notes	£'000	£'000
CURRENT ASSETS
Financial assets held at fair value through profit or loss	7	2,269	1,274
Trade and other receivables	8	10	7
Cash and cash equivalents		422	274
		2,701	1,555
CURRENT LIABILITIES
Trade and other payables	9	68	50
Convertible unsecured loan notes	10	10	10
		78	60
NET CURRENT ASSETS		2,623	1,495
NET ASSETS		2,623	1,495
EQUITY
Share capital	12	3,095	2,985
Share premium		5,886	4,934
Loan note equity reserve	13	6	6
Share option reserve		23	12
Capital reserve		15,736	15,736
Retained earnings		(22,123)	(22,178)
Equity attributable to owners of the Company and total equity		2,623	1,495

STATEMENT OF CHANGES IN EQUITY

FOR THE 18 MONTH PERIOD TO 30 June 2018

	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 January 2016	2,885	4,559	12	6	15,736	(22,289)	909
Total comprehensive income for the year	-	-	-	-	-	111	111
Share issues	100	375	-	-	-	-	475
At 31 December 2016	2,985	4,934	12	6	15,736	(22,178)	1,495
Total comprehensive income for the period	-	-	-	-	-	55	55
Share based payment expense	-	-	11	-	-	-	11
Share issues	110	952	-	-	-	-	1,062
At 30 June 2018	3,095	5,886	23	6	15,736	(22,123)	2,623

STATEMENT OF CASH FLOWS

FOR THE 18 MONTH PERIOD TO 30 June 2018

		18 months to 30 June 2018	12 months to  31 December 2016
		£'000	£'000
OPERATING ACTIVITIES
Profit before taxation		55	111
Adjustments for:
Share based payment expense		11	-
Loss on disposal of trading investments		12	169
Fair value (gain)/loss on trading investments		(325)	(455)
Investment income		(2)	-
Operating cash flow before working capital changes		(249)	(175)
(Increase) in trade and other receivables		(3)	(1)
Increase in trade and other payables		18	9
Net cash outflow from operating activities		(234)	(167)
INVESTING ACTIVITIES
Purchase of financial assets		(1,806)	(392)
Disposals of investments		1,124	95
Investment income		2	-
Net cash outflow from investing activities		(680)	(297)
FINANCING ACTIVITIES
Proceeds of share issues		1,062	475
Net cash outflow from financing activities		1,062	475
Net increase in cash and cash equivalents		148	11
Cash and cash equivalents as at 1 January		274	263
Cash and cash equivalents as at 30 June/ 31 December		422	274

NOTES TO THE FINANCIAL STATEMENTS

FOR THE 18 MONTH PERIOD TO 30 June 2018

1	general information
	The Company was incorporated as a Corporation in the Cayman Islands which does not prescribe the adoption of any particular accounting framework. The Board has therefore adopted International Financial Reporting Standards as adopted by the European Union (IFRSs). The Company's shares are listed on the AIM market of the London Stock Exchange.  The Company is an investment company, mainly investing in natural resources, minerals, metals, and oil and gas projects.  The registered office of the Company is as detailed in the Company Information on page 2. These financial statements are prepared in pounds sterling and rounded to the nearest £'000.
2	PRINCIPAL ACCOUNTING POLICIES
	BASIS OF PREPARATION The financial statements have been prepared under the historical cost convention, and in accordance with International Financial Reporting Standards ("IFRS"), and International Financial Reporting Interpretations Committee ("IFRIC") interpretations.  All accounting standards and interpretations issued by the International Accounting Standards Board and IFRIC effective for the periods covered by these financial statements have been applied. CHANGE IN ACCOUNTING REFERENCE DATE On 15 June 2018, the Directors agreed to extend the accounting year from 31 December 2017 to 30 June 2018.  As a result all the 2018 figures in the accounts refer to the 18 month period to 30 June 2018 and the comparative figures refer to the 12 month period to 31 December 2016. The principal accounting policies of the Company are set out below, and have been consistently applied to all periods.
	GOING CONCERN The Directors have prepared cash flow forecasts through to 31 December 2019 which assumes no significant investment activity is undertaken unless sufficient funding is in place to undertake the investment activity.  The expenses of the Company's continuing operations are minimal and the cash flow forecasts demonstrate that the Company is able to meet these liabilities as they fall due.  On this basis, the Directors have a reasonable expectation that the Company has adequate resources to continue operating for the foreseeable future.  For this reason they continue to adopt the going concern basis in preparing the Company's financial statements.
	KEY ESTIMATES AND ASSUMPTIONS Estimates and assumptions used in preparing the financial statements are reviewed on an on-going basis and are based on historical experience and various other factors that are believed to be reasonable under the circumstances.  The results of these estimates and assumptions form the basis of making judgments about  carrying values of assets and liabilities that are not readily apparent from other sources: SHARE BASED PAYMENTS The calculation of the fair value of equity-settled share based awards and the resulting charge to the statement of comprehensive income requires assumptions to be made regarding future events and market conditions. These assumptions include the future volatility of the Company's share price. These assumptions are then applied to a recognised valuation model in order to calculate the fair value of the awards. FAIR VALUE OF FINANCIAL INSTRUMENTS The Company holds investments that have been designated as held at fair value through profit or loss on initial recognition. Where practicable the Company determines the fair value of these financial instruments that are not quoted (Level 3) using the most recent bid price at which a transaction has been carried out. These techniques are significantly affected by certain key assumptions, such as market liquidity.  Other valuation methodologies such as discounted cash flow analysis assess estimates of future cash flows and it is important to recognize that in that regard, the derived fair value estimates cannot always be substantiated by comparison with independent markets and, in many cases, may not be capable of being realized immediately.

	STATEMENT OF COMPLIANCE The financial statements comply with IFRS as adopted by the European Union.  The following new and revised Standards and Interpretations have been adopted in the current period by the Company for the first time and do not have a material impact on the Company.
	IFRS 5, IFRS 7, IAS 19	Amendments resulting from September 2014 Annual Improvements to IFRSs
	IAS 1	Amendments resulting from the disclosure initiative
	A number of new standards and amendments to standards and interpretations have been issued but are not yet effective and not early adopted. None of these are expected to have a significant effect on the Company's financial statements.
	INVESTMENT INCOME Dividend income from financial assets at fair value through profit or loss is recognised in the statement of comprehensive income on an ex-dividend basis. Interest on fixed interest debt securities is recognised using the effective interest rate method.
	TAXATION Current income tax assets and/or liabilities comprise those obligations to, or claims from, fiscal authorities relating to the current or prior reporting period, that are unpaid at the balance sheet date. They are calculated according to the tax rates and tax laws applicable to the fiscal periods to which they relate, based on the taxable result for the year. All changes to current tax assets or liabilities are recognized as a component of tax expense in the income statement. Deferred income taxes are calculated using the liability method on temporary differences. This involves the comparison of the carrying amounts of assets and liabilities in the consolidated financial statements with their respective tax bases.  However, deferred tax is not provided on the initial recognition of goodwill, nor on the initial recognition of an asset or liability, unless the related transaction is a business combination or affects tax or accounting profit.  In addition, tax losses available to be carried forward as well as other income tax credits to the Company are assessed for recognition as deferred tax assets. Deferred tax liabilities are always provided for in full. Deferred tax assets are recognised to the extent that it is probable that they will be able to be offset against future taxable income. Deferred tax assets and liabilities are calculated, without discounting, at tax rates that are expected to apply to their respective period of realisation, provided they are enacted or substantively enacted at the balance sheet date. Most changes in deferred tax assets or liabilities are recognised as a component of tax expense in the income statement. Only changes in deferred tax assets or liabilities that relate to a change in value of assets or liabilities that is charged directly to equity are charged or credited directly to equity.
	FINANCIAL ASSETS The Company's financial assets comprise investments held for trading, cash and cash equivalents and receivables, and are recognised in the Company's statement of financial position when the Company becomes a party to the contractual provisions of the instrument.
	INVESTMENTS HELD AT FAIR VALUE THROUGH PROFIT OR LOSS All investments are designated upon initial recognition as held at fair value through profit or loss (FVTPL). Investment transactions are accounted for on a trade date basis. Assets are de-recognised at the trade date of the disposal. Investments are initially measured at fair value plus incidental acquisition costs. Subsequently, they are measured at fair value in accordance with IFRS 9. This is either the bid price or the last traded price, depending on the convention of the exchange on which the investment is quoted. The fair value of the financial instruments in the balance sheet is based on the quoted bid price at the balance sheet date, with no deduction for any estimated future selling cost.  Where practicable unquoted investments are valued by the directors using primary valuation techniques such as recent transactions, last price and net asset value.  Changes in the fair value of investments held at fair value through profit or loss and gains and losses on disposal are recognised in the Statement of Comprehensive Income as "Net change in fair value of investments"
	ASSOCIATED UNDERTAKINGS Associated undertakings are those entities in which the Company has significant influence, but not control, over the financial and operating policies.  Investments that are held as part of the Company's investment portfolio are carried in the statement of financial position at fair value even though the Company may have significant influence over those companies. This treatment is permitted by IAS 28 "Investment in Associates", which requires investments held by a company as a venture capital provider to be excluded from its scope where those investments are designated, upon initial recognition, as at fair value through profit or loss and accounted for in accordance with IAS 39, with changes in fair value recognised in the statement of comprehensive income in the period of the change.  The Company has no interests in associates through which it carries on its business.
	CASH AND CASH EQUIVALENTS Cash and cash equivalents comprise cash on hand and demand deposits, together with other short-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value.
	LOANS AND RECEIVABLES Loans and receivable from third parties are initially recognised at fair value and subsequently carried at amortised cost using the effective interest rate method. A provision for impairment is made when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. Impaired debts are derecognised when they are assessed as uncollectible.
	EQUITY An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities. Equity instruments issued by the Company are recorded at the proceeds received net of direct issue costs. The share premium account represents premiums received on the initial issuing of the share capital. Any transaction costs associated with the issuing of shares are deducted from share premium, net of any related income tax benefits. Shares to be issued represent the equity which the Company has committed to issue and which has been issued subsequent to the year end. The loan note reserve represents the value of the equity component of the nominal value of the loan notes issued. The capital reserve represents amounts arising in connection with reverse acquisitions. Retained earnings include all current and prior period results as disclosed in the statement of comprehensive income together with the cumulative amount of share based expenses transferred to equity.
	FINANCIAL LIABILITIES Financial liabilities are recognised in the Company's balance sheet when the Company becomes a party to the contractual provisions of the instrument.  All interest related charges are recognised as an expense in finance cost in the income statement using the effective interest rate method.  The Company's financial liabilities comprise convertible loan notes, and trade and other payables.  The fair value of the liability portion of the convertible loan notes is determined using a market interest rate for an equivalent non-convertible loan note.  This amount is recorded as a liability on an amortised cost basis until extinguished on conversion or maturity of the loan notes.  The remainder of the proceeds is allocated to the conversion option, which is recognised and included in shareholders' equity, net of tax effects. Trade payables are recognised initially at their fair value and subsequently measured at amortised cost less settlement payments.
	SHARE BASED PAYMENTS The Company operates equity settled share based remuneration plans for the remuneration of its employees. All services received in exchange for the grant of any share based remuneration are measured at their fair values. These are indirectly determined by reference to the fair value of the share options awarded. Their value is appraised at the grant date and excludes the impact of any non-market vesting conditions (for example, profitability and sales growth targets). Share based payments are ultimately recognised as an expense in the income statement with a corresponding credit to retained earnings in equity, net of deferred tax where applicable. If vesting periods or other vesting conditions apply, the expense is allocated over the vesting period, based on the best available estimate of the number of share options expected to vest. Non-market vesting conditions are included in assumptions about the number of options that are expected to become exercisable. Estimates are subsequently revised, if there is any indication that the number of share options expected to vest differs from previous estimates. No adjustment is made to the expense or share issue cost recognized in prior periods if fewer share options ultimately are exercised than originally estimated. Upon exercise of share options, the proceeds received net of any directly attributable transaction costs up to the nominal value of the shares issued are allocated to share capital with any excess being recorded as share premium. Where share options are cancelled, this is treated as an acceleration of the vesting period of the options.  The amount that otherwise would have been recognised for services received over the remainder of the vesting period is recognised immediately within profit or loss.
	FOREIGN CURRENCIES The Directors consider Sterling to be the currency that most faithfully represents the economic effects of the underlying transactions, events and conditions.  The financial statements are presented in Sterling, which is the Company's functional and presentation currency. Foreign currency transactions are translated into Sterling using the exchange rates prevailing at the date of the transactions. Foreign currency exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rates are recognised in the income statement.  Non-monetary items that are measured at historical costs in a foreign currency are translated at the exchange rate at the date of the transaction.  Non-monetary items that are measured at fair value in a foreign currency are translated into the functional currency using the exchange rates at the date when the fair value was determined.
2	PRINCIPAL ACCOUNTING POLICIES (continued)
	SEGMENTAL REPORTING A segment is a distinguishable component of the Company's activities from which it may earn revenues and incur expenses, whose operating results are regularly reviewed by the Company's chief operating decision maker to make decisions about the allocation of resources and assessment of performance and about which discrete financial information is available. As the chief operating decision maker reviews financial information for and makes decisions about the Company's investment activities as a whole, the directors have identified a single operating segment, that of holding and trading in investments in natural resources, minerals, metals, and oil and gas projects.  The directors consider that it would not be appropriate to disclose any geographical analysis of the Company's investments.

3	OPERATING PROFIT
		2018	2016
		£'000	£'000
	Profit from operations is arrived at after charging:
	Auditors' remuneration:
	- fees payable to the Company's auditors and its   associates for the audit of the Company's financial   statements	12	10

4	EMPLOYEE REMUNERATION
	The expense recognised for employee benefits is analysed below:
		2018 £'000	2016 £'000
	Wages and salaries	89	67
		89	67
	Details of Directors' employee benefits expense are included in the Report on Remuneration on page 11.
	Remuneration for key management of the Company, including amounts paid to Directors of the Company, is as follows:
		2018 £'000	2016 £'000
	Short-term employee benefits	89	67
		89	67

5	TAXATION
	No provision has been made in respect of current taxation or deferred taxation as the Company is domiciled in the Cayman Islands and no corporation tax is applicable.

6	EARNINGS PER SHARE
	The basic and diluted earnings per share are 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.
			2018	2016
			£'000	£'000
	Profit attributable to owners of the Company
	- Continuing and total operations		55	111
			2018	2016
	Weighted average number of shares for calculating basic and fully diluted earnings per share*		33,661,491	17,941,666
	Profit per share from continuing and total operations
	- Basic (pence per share)		0.2	0.6
	- Fully diluted (pence per share)*		0.2	0.6

* The weighted average number of shares used for calculating the diluted loss per share is the same as that used for calculating the basic loss per share as the effect of exercise of the outstanding share options would be anti-dilutive.

7	INVESTMENTS HELD AT FAIR VALUE THROUGH PROFIT OR LOSS
		2018	2016
		£'000	£'000
	1 January  - Investments at fair value	1,274	691
	Cost of investment purchases	1,806	392
	Proceeds of investment disposals	(1,124)	(95)
	Loss on disposal of investments	(12)	(169)
	Fair value adjustment	325	455
	31 December  - Investments at fair value	2,269	1,274
	Categorised as:
	Level 1 - Quoted investments	1,342	189
	Level 3 - Unquoted investments	927	1,085
		2,269	1,274

	The Company 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
		2018	2016
		£'000	£'000
	Brought forward	1,085	515
	Purchases	683	339
	Disposals	(1,022)	-
	Fair value adjustment	181	231
	Carried forward	927	1,085
	Level 3 valuation techniques used by the Company are explained on page 21 (Fair value of financial instruments) The Company's  two largest Level 3 investments are Cap Energy plc. and TH Crestgate GmbH. CAP ENERGY PLC The Company has a 1.3% interest in Cap Energy which has been valued at the issue price of shares in Cap Energy's last fund raise in March 2016.  TH CRESTGATE GMBH ("THC") Investments in THC include both debt and equity instruments which are carried at cost. The Company has a 49% interest in THC.  While the directors consider that the fair value of the Company's interest in THC is in excess of cost its underlying assets are at an early stage of development and so a fair value is difficult to determine.

8	TRADE AND OTHER RECEIVABLES
		2018	2016
		£'000	£'000
	Prepayments	10	7
	Total	10	7
	The fair value of trade and other receivables is considered by the Directors not to be materially different to carrying amounts. At the balance sheet date in 2018 and 2016 there were no trade and other receivables past due.

9	TRADE AND OTHER PAYABLES
		2018	2016
		£'000	£'000
	Trade payables	18	25
	Other payables	18	7
	Accrued charges	32	18
	Total	68	50
	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:
		2018	2016
		£'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 2018 to be approximately £10,000 (2016: £10,000)

11	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 £11,000 (2016: £Nil).
	The movements on share options and their weighted average exercise price are as follows:
		2018			2016
				Weighted average exercise price		Weighted average exercise price
		Number		(pence)	Number	(pence)
	Outstanding at 1 January	500,000		7.89	500,000	7.89
	Granted	600,000		7.50	-	-
	Exercised	(295,000)		7.45	-	-
	Outstanding at  30 June/ 31 December	805,000		7.65	500,000	7.89

 

12	SHARE CAPITAL
		Number of  shares	Nominal Value	Share  premium
			£'000	£'000
	AUTHORISED
	At 31 December 2016 and 30 June 2018
	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 31 December 2015:
	Ordinary shares of 1p each	14,034,562	140
	Deferred shares of 24p each	11,435,062	2,745
			2,885	4,559
	Ordinary shares issued in year	10,000,000	100	375
	At 31 December 2016:
	Ordinary shares of 1p each	24,034,562	240
	Deferred shares of 24p each	11,435,062	2,745
			2,985	4,934
	Ordinary shares issued in period	11,003,333	110	952
	At 30 June 2018:
	Ordinary shares of 1p each	35,037,895	350
	Deferred shares of 24p each	11,435,062	2,745
			3,095	5,886
	The restricted rights of the deferred shares are such that they have no economic value. On 20 February 2017, 4,375,000 new ordinary shares were issued for cash at 8p per share as the result of a private placing. On 28 February 2017, 3,000,000 new ordinary shares were issued for cash at 10p per share as the result of a private placing. On 17 March 2017, 3,333,333 new ordinary shares were issued for cash at 15p per share as the result of a private placing. On 21 December 2017, 110,000 shares and 185,000 shares were issued for cash at 7.5p and 7.89p respectively as the result of the exercise of options.

13	LOAN NOTE EQUITY RESERVE
			2018		2016
			£'000		£'000
	Equity component of convertible loan notes at 1 January		6		6
	Equity component of convertible loan notes at 30 June/ 31 December		6		6
14	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 £228,000 ( 2016:  £127,000).
	FOREIGN CURRENCY RISK The Company's exposure to foreign currencies is limited to its investments which are quoted on overseas stock markets in currencies other than Pounds Sterling and is not material.
	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:
		2018 £'000		2016 £'000
	Cash and cash equivalents	422		274
	Other receivables	-		-
		422		274
	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.

15	FINANCIAL INSTRUMENTS
	FINANCIAL ASSETS BY CATEGORY The IAS 39 categories of financial assets included in the balance sheet and the headings in which they are included are as follows:
			2018	2016
			£'000	£'000
	Financial assets:
	Cash and cash equivalents		422	274
	Investments held at fair value through profit and loss		2,269	1,274
			2,691	1,548
	FINANCIAL LIABILITIES BY CATEGORY The IAS 39 categories of financial liability included in the balance sheet and the headings in which they are included are as follows:
			2018	2016
			£'000	£'000
	Financial liabilities at amortised cost:
	Convertible unsecured loan notes		10	10
	Trade and other payables		36	32
			46	42

16	Contingent LIABILITIES AND CAPITAL COMMITMENTS
	There were no contingent liabilities or capital commitments at 30 June 2018 or 31 December 2016.

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

18	RELATED PARTY TRANSACTIONS
	Details of the directors' remuneration and the options granted to directors are disclosed in the remuneration report on page 11.

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

FOR MORE INFORMATION:       

Katy Mitchell, WH Ireland Group Limited                                   [phone]

Jon Belliss, Novum Securities Limited                                         [phone]

James Lesser, Mineral & Financial Investments Ltd.                   [phone]

 

END

 

 

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