TIDMMAFL
RNS Number : 0915B
Mineral & Financial Invest. Limited
08 June 2021
MINERAL AND FINANCIAL INVESTMENTS LIMITED
Quarterly Net Asset Value and Operational Update
HIGHLIGHTS:
-- Net Asset Value Per Share (FD) at 31 March 2020 was 17.1p, up 13% vs. 15.1p a yr. ago.
-- Q3 Net Asset Value (1) of GBP6,028,884, up 6.1% vs. Q2 Net Asset Value of GBP5,681,023
-- Increased our overweighted holdings of precious metals sector in Q3 period
-- Cerrado Gold investment is now publicly listed and generated excellent performance.
-- Follow-on Investment in Ideon Technologies made after a 267% rise in value in 9 months.
George Town, Cayman Islands - 8 June 2020 - Mineral and
Financial Investments Limited (LSE-AIM: MAFL) ("M&FI" "MAFL" or
the "Company") is delighted to provide an unaudited quarterly
update of its Net Asset Value and also give an operational update
for the quarterly period ending 31 March 2021. At the end of the
third quarter, the NAV was GBP6,028,884, up 13.0%, from
GBP5,333,187 one year ago. The Net Asset Value Per Share was 17.1p,
up 13.0% from one year ago. Unaudited net earnings for the first
nine months of our fiscal year are GBP555,052, or 1.58p. The
Company's working capital was GBP6,099,884 [1] .
The following is a summary of the NAV, updated to include this
unaudited NAV calculation:
NAV SUMMARY OF HISTORICAL PERFORMANCE
(Table 1)
31 March 31 March 31 March 31 March 31 March 31 March 2021/ 2020 /
2016 2017 2018 2021 2020 2016
2019 2020 % Change CAGR (%)
Net Asset
Value GBP912,938 GBP2,509,774 GBP2,536,875 GBP4,832,434 GBP5,333,187 GBP6,028,884 13.0% 49.0%
----------- ------------- ------------- ------------- ------------- ------------- ---------- ----------
NAVPS (FD) 6.50p 7.22p 7.24p 13.65p 15.11p 17.1p 13.0% 21.1%
----------- ------------- ------------- ------------- ------------- ------------- ---------- ----------
FTSE 350
Mining
Index 8,931 15,562 17,259 20,000 13,373 21,911 62.2% 19.7%
----------- ------------- ------------- ------------- ------------- ------------- ---------- ----------
GS
Commodity
Index 316.40 388.22 452.13 434.13 261.54 467.41 82.8% 7.6%
----------- ------------- ------------- ------------- ------------- ------------- ---------- ----------
The global sentiment and expectations have been on a roller
coaster since February 2020. One year ago, we entered the first
phase of the COVID-19 crisis, whose impact expanded thereafter.
Fiscal and monetary policies became highly "accommodative" to avert
an even greater economic crisis than the one felt. The reaction by
governments to the COVID crisis forced an abandonment of financial
discipline that had selectively initiated after the financial
ravages of the Global Credit Crisis of 2007-2008. Today, at the
beginning of June 2021, we believe that the market sentiment is
highly euphoric. We also believe that equity markets seem to want
to move beyond the economic damage caused over the last 18 months
by COVID restrictions and focus solely on the potential, and still
entirely hypothetical, growth in its aftermath. By the end of March
2021, the S&P 500 is up 53.7% year-over-year, while the
Shanghai CSI 300 Index who's underpinneing economy was less
impacted by COVID, is up 37% in the same timeframe. Interest rates,
as measured by the 10-year government bond yields, during the 12
months beginning March 31, 2020, 10 year gov't bond yields' were up
159.4% in the UK, up 155.8% in the USA, up 139.2% in Australia, and
these similar rates were up 129.4% in Canada. This "extreme
exuberance" is fuelled by the government's various economic
stimulants, all of which, we believe, will need to be paid for with
higher tax revenues. However, we are of the view that rising equity
markets coupled with rising interest rates are incompatible over
the long-term. One will, in our opinion, need to give way to the
other.
NET ASSET VALUE [2]
As of 31 March 2021, the unaudited Net Asset Value was
GBP6,028,884, equating to 17.1p per share on a fully diluted basis.
The Company's overall performance continues to be held back by the
strength of the GBP versus the US Dollar. The GBP is up, year over
year, by 10.3% vs the USD. The DXY Index, which measures the
performance of the USD versus other currencies, on a trade-weighted
basis, was down 6.4%. Our Precious metals weighting has increased
to 41.7% of our invested assets due to the performance of our gold
equity holdings, notably Cerrado Gold.
We have increased our weighting to precious metal investments
and this represents significant overweighting to the sector. In the
12-month period ending 31 March 2021, the price of gold bullion
appreciated by only 6%, while silver by a disproportionate 73.2%.
We believe that the economic setting will result in gold performing
significantly better over the next 12 to 24 months. Base metals
holdings in our portfolios have declined slightly, more as a
function of not adding to positions. The base metal sector has been
rising at a torrid pace - led by copper being up 83.4% during the
period. We continue to seek a strategic investment in the copper
sector which will provide our shareholders an attractive platform
to participate in this key metal within a world whose commitment of
green energy transition. This will require new sources of a variety
of metals, most likely copper will be the net winner.
PORTFOLIO COMPOSITION
(Table 2)
COMMODITY CLASS Q3-2021 Q3-2020 Change (%)
Cash 4.5% 2.0% +127%
------------- ------------- -----------
Precious Metals 41.7% 37.1% +12%
------------- ------------- -----------
Base Metals 45.2% 46.1% -2%
------------- ------------- -----------
Energy 5.1% 14.9% -65%
------------- ------------- -----------
Tech. & Financial Derivatives 3.5% 0.0% n/m
------------- ------------- -----------
GBP6,228,832 GBP5,380,021 +15.8%
------------- ------------- -----------
The IMF's April 2021 World Economic Outlook, which we regularly
turn to as a reliable measure of global economic activity, measured
the global economic activity decline in 2020 to have been 3.3%. Our
belief last year that the IMF's estimates at the time
underestimated the negative impact proved to be correct, the IMF's
forecasted performance for global economic activity in 2020 to be
down -3.0%, it was 10% worse than that at -3.3%. Although we
believe in and rely upon the quality and thoroughness of the IMF's
work, we believe that the economic rebound will be less robust than
the IMF currently estimates. That said, the recent marginal growth
for commodities generally, and metals has explicitly come from
Emerging and Developing economies, and we believe should continue
to do. Base metals should continue to be strong, however we believe
that precious metals will catch up as the DXY should continue to
soften.
IMF - WORLD ECONOMIC OUTLOOK (April 2021)
(Table 3)
2021
2019 2020 (E) 2022 (E)
Actual Actual Current Current
World Output 2.0% (3.3%) 6.0% 4.4%
-------- -------- --------- ---------
Advanced Economies 1.7% (4.7%) 5.1% 3.6%
-------- -------- --------- ---------
Emerging & Developing
Economies 3.7% (2.2%) 6.7% 5.0%
-------- -------- --------- ---------
The impact of the global COVID lockdown has not been limited to
the economic slowdown. There have been structural and behavioural
changes that will impact economic activity for years to come, not
the least its impact on "bricks and mortar" businesses. We believe
that the mining and metals sector will have an important a role to
play in the changed economic setting ahead and are seeking the best
opportunities for our shareholders.
TACTICAL PORTFOLIO
The Tactical Portfolio grew by 33% on a YoY basis to
GBP1,065,372, and now represents 17.1% of our investment portfolio.
M&FI initiated a few new positions in the quarter. As a
reminder, the Tactical Portfolio's purpose is to protect our
capital and generate positive gains for the Company. It's possible
range of investments is broader than the Strategic Portfolio's
exclusive focus on natural resource investments.
We have also acquired a position in Endeavour Gold (i.e. 1.9% of
the investment portfolio), which has evolved into a consolidator of
West African gold mining assets with a current market
capitalization of C$7.25 Billion. The Company has six producing
mines, has a 2021 production target of 1.4 -1.5 million ounces of
gold from its Measured and Indicated resource base of 28 million
ounces . In late 2020 Endeavour announced that it was to acquire
Teranga Gold Corp in a share exchange. The announcement of the
acquisition resulted in arbitrage selling of Endeavour shares which
created a buying opportunity for M&FI of the temporarily
depressed shares of Endeavour.
We did close out a short copper derivative position that was
initiated as a hedge against a possible overall market correction.
The trade was overwhelmed by the market optimism, and we recognized
that the market and economic assumptions had not evolved as, and
when, we had expected and thus we flattened the position. The
realized loss was GBP25,000 and offset with gain from the sale of
the Bloomberg CMCI Food Index investment.
Ascendant Resources shares have risen sharply to their current
level of C$0.31 per share, after touching a low of C$0.08. It has,
in the past 9 months, secured 3 tranches of financing, the only
equity component which was an issue the sale of Units (1 share
& 1/2 warrant) at C$0.10 per unit. ASND has recently secured
debt financing of C$3.9 Mln. and sold a capped royalty it held on
the El Mochito Mine in Honduras. This most recent capital raise
provides sufficient funding to continue advancing the Lagoa Salgada
project. (n.b. M&FI is Ascendant's partner in the ownership of
Redcorp Empreedimentos Mineiros Lda. Ascendant has an earn-in
agreement with M&FI, which began in June 2018, to earn-in to
the project by completing US$9.0 Mln. of geological work on the
project, deliver a feasibility study and make payments to M&FI
totalling US$6.0 Mln. over 54 months)
STRATEGIC PORTFOLIO
Our Strategic Portfolio represents 78.4% of our total
investments, or GBP4,470,600. The strategic portfolio generated a
gain of 9% year over year, which reflects the GBP480,000 provision
on our Cap Energy investment. Strategic Investments as a percentage
of our total investments have declined slightly from 83.1% last
year due to the stong performance of the Tactical Portfolio.
Ascendant, the operator of the Lagoa Salgada project, has
informed us that they plan to complete a Resource update in 2021 as
well as a Preliminary Economic Assessment (PEA) on Lagoa Salgada
South (LSS) sometime this year. Additionally, a metallurgical
report on LSS should be completed during the summer period. The PEA
on LSS will be in addition to the completed PEA on Lagoa Salgada
North (LSN). The PEA on LSN which was completed in January 2020
(Please refer to our RNS of 14 January 2020) indicated a Pre-Tax
NPV (@8% discount Rate) of US$137 Mln. with a 9-year mine life .
Current metal prices are higher than the prices assumed in the LSN
PEA of January 2020, suggesting the potential for better returns
than those indicated in the PEA. A spring drill program was
completed, and the assay results are awaited.
Ideon Technologies, in which we have a 2% stake, has completed a
second equity capital raise at one Canadian Dollar per share, 268%
higher than our initial investment. We have participated in this
second fundraise, which closed in May 2021. The level of interest
in their sub-surface exploration technology has exceeded their
expectations. Their paying clients are growing and include BHP.
Our investment in Golden Sun Resources continues to progress on
its lead asset, the Bellavista Mine. It has successfully reinstated
its mining license allowing it to move from its current pilot heap
leaching processing plant to more traditional mining and
processing. The heap leach process was an intermediary stage of the
mine development that was intended to ensure the self-financing of
the operations. Heap leach pad recoveries had been below target for
some time, resulting in increased budget constraints. Technical
solutions have recently be applied and gold recoveries appear on
track to exceed targeted levels and will exceed 70% (vs. 62%).
Additionally, Golden Sun has secured several new exploration
projects in Costa Rica, many of which are within trucking distance
of the Bellavista site. Several of these exploration projects have
historical resources. Golden Sun, if all of its applications are
accepted by the Costa Rican government will become the largest
owner of mineral assets in the country .
Cerrado Gold finally listed its shares on the TSXV exchange. The
IPO was priced at C$1.25 CAD lower than we had hoped for, but in
recent trading the share price has touched C$1.76. We believe that
the Mineira Don Mario (MDM) mine in Argentina will continue to
improve its productivity and increase the gold output. Cerrado's
management has guided a production range of 45,000 to 55,000 ounces
of gold for 2021. More importantly, exploration within the Don
Mario property are yielding very good results that should lead in
an increase of the resource base, which currently consists of
Measured and Indicated resources of 578,000 oz of gold and 391,000
oz of Inferred gold. Additionally the Monte do Carmo (MDC)
exploration project in Brazil generates some excellent exploration
results. Cerrado is also indicating that MDC's 813,000 oz of
Indicated gold could reach 2.0 to 2.5 million ounces by Q4-2021.
Cerrado's management is stating that it believes it can increase
production by 2024 to 215,000 to 285,000 oz/gold. These are very
ambitious targets that, even if partially achieved, make us believe
that Cerrado remains an attractive holding for M&FI.
M&FI is currently reviewing several new investment
opportunities.Further updates will be provided in due course as
appropriate .
FOR MORE INFORMATION:
Jacques Vaillancourt, Mineral & Financial Investments Ltd. +44 780 226 8247
Katy Mitchell and Matt Chan, WH Ireland Limited +44 207 220
1666
Jon Belliss, Novum Securities Limited +44 207 382 8300
[1] Current Assets of GBP6,254,901 less Current Liabilities of
GBP155,017 = Working Capital of GBP6,099,884.
[2] The NAV calculation is subject to audit and is made on the
basis that the Company has 35,135,395 shares. O/S (basic) and
35,465,395 shares. O/S (FD) in issue.
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