MAFL Mineral & Financial Investments Limited

Mineral and Financial Investments Limited

Audited Full Year Financial Results and NAV for Period ended 30 June 2024

HIGHLIGHTS

·     Fiscal Year-end Net Asset Value £11.45M (FYE: 30/6/24) up 21.5%, from £9.42M (FYE: 30/6/23)

·     Net Asset Value Per Share ("NAVPS") FD 29.1p, up 19.8%, from 24.3p (FYE: 30/6/23)

·     Net Asset Value has increased at Compound Annual Growth Rate of 27.8% since 30 June 2018

·     Investment Portfolio now totals £11.6m, up 30.5%, Year/Year from £8.9M (FY: 30/6/23)

·     NAVPS growth has exceeded that of the FTSE 350 Mining index and of the S&P GSCI since 2018

Camana Bay, Cayman Island - 19 November 2024 - Mineral & Financial Investments (LSE-AIM: MAFL) ("M&F" or the "Company") is very pleased to announce its audited Net Asset value and audited results on its activities for the 12 months ended 30 June 2024.

CHAIRMAN'S COMMENTS

During the 12-month period ending 30 June 2024, your company generated Gross Income of £2.567 million which translated into a Pre-Tax Profit of £2.053 million. Net Profit after tax for the full year was £2.005 million or 5.4p per share basic, or 5.3p per share on a Fully Diluted ("FD") basis for the period. At the year-end of 30 June 2024, our Net Asset Value (NAV) was £11.445 million an increase of 21.5% from the 30 June 2023 NAV of £9.423 million.  The NAV per share - fully diluted (NAVPS-FD) as of 30 June 2024 was 29.1p, up 19.9% from the 30 June 2023 NAVPS-FD of 24.3p. Since 30 June 2018, our NAV has appreciated on average by 27.8% annually. We continue to be effectively debt free, with working capital of £11.6 million.

Summary of Financial Performance (Fig. 1)

After a series of challenging years for the metals and mining sector, we believe 2024 to have been the turning point. No longer are US dollar denominated commodities fighting the headwinds of a rising US dollar, as measured by the DXY Index. The DXY Index, a trade weighted index of the US dollar composed of USD vs. six foreign currencies, was up 2.9% during our reported fiscal year, and has since given up that gain, declining by more than 3% since our year end. This nominally favours US denominated commodities. Cost inflation coupled with rising interest rates; mediocre metal price performance resulted in "peak apathy" for the sector by investment markets in 2023. Under-capitalized junior exploration companies will take some time to recapitalize themselves and, we believe, take some time to recover. However, we are beginning to see the "green shoots" of a recovery for the sector, we noted in last year's Annual Report to shareholders that we believed that some encouraging signs were manifesting themselves. The FTSE 350 Mining Index was up 2.1% Yr./Yr. for the period ending 30 June  2024 (Fig.4).  The S&P / Goldman Sachs Commodity Index (see Fig.4) was also up by 7% during our fiscal period.

Regular readers of our Annual Report to shareholders will be aware that we normally refer to the International Monetary Fund's ("IMF") bi-annual economic forecasts as a yardstick for global economic performance. It is a consistent, not necessarily more accurate, attempt to measure and estimate global economic performance. We believe that the IMF's economic forecast provides a clear picture of the best-informed consensus estimates there are for global economic performance.

Using this forecast, the industry has experienced slowing World growth (Fig. 2) from a COVID stimulus recovery high of 6% in 2021 to an estimated 3.3% in 2024 and 3.2% in 2025. A level of stable global growth forecasted by the IMF is a good foundation for the mining sector. In 2022 World Consumer Prices (Fig. 4) peaked at an 8.7% increase and is currently expected to gradually decline to 4.2% globally in 2025 - However, it should be noted that "Advanced Economies" ("AE") have been more successful in reducing its inflationary pressures than the "Emerging Markets and Developing Economies" ("EM&DE"). The IMF forecasts that consumer prices growth for the AE's in 2025 will be down 72.6% to 2.0% from 2022 levels. The EM&DE are expected by the IMF to have consumer price growth of 5.9% in 2025, a reduction of 39.8% form the post COVID peak of 9.8%. We believe that this could impact their currency's values. Offsetting their lingering inflation is that EM&DE are expected to continue to grow steadily by 4.2% in each of 2024 and 2025, 133% fast than "Advanced Economies".

IMF - WORLD ECONOMIC OUTLOOK[1]

(Fig. 2)

In 2024, after M&F's FYE, we finally saw the US Federal Reserve Board (the "Fed") reduce the Fed Fund rate by 50 basis points on 18 September 2024. The cut was later in the year than many had expected, and the size of this singular rate cut to date in 2024 was at the high end of the 25bp to 50 bp expectations. However, since this Fed cut was announced, 10 yr. US Treasury yields are up 86bp (4.47% vs 3.61%) providing us with a sense that another rate cut in 2024 is less likely. US Inflation in September, as measured by the CPI was +2.4% (down from +2.5% in August 2024), continuing its slowing decline. The September CPI increase was slightly higher than expectations. Moreover, CPI remains above the Fed.'s target level of 2.0%.  As 75% of the September CPI rise was food and housing costs, there is still a risk of secondary upwards pressure in wage demands to offset these cost rises. Moreover, inflation has echoes, in as much as after a period of inflation there are secondary and tertiary waves of inflation as there are efforts for wages to catch-up to cost inflation. Our view, though not popular, is that rates are unlikely to be returning to the historically low levels seen in the past 5 years. We base our planning on rates remaining in this current range. It is noteworthy to recall that since 1871 US long rates have averaged 4.49%. Additionally, the US federal government's deficit as a percent of GDP is expected to be 7.0%[2] in 2024. This deficit, and the Fed's slow unwinding of the various stimulus initiatives since 2007, must be funded in the global bond markets. Barring any unexpected social-military-economic events, the so-called "black swan" events, we will adhere to the belief that a reversion to this long-term average interest rate for US long rates is a prudent assumption. The net result is that we believe that the US dollar is not likely to outperform other currencies and be positive for commodity prices in 2024.

There has been diminished correlation in equity market performance during the period. Chinese markets have declined reflecting the slower economic growth of China during the past decade. However, since our 30 June 2024 year end the Chinese government has initiated some economic stimulus policies that have propelled the CSI 300 and the Hang Seng indices upwards. Underperforming Asian equity markets have outperformed the other major indices we follow (Fig. 3) after our year-end. Asian economic growth is necessary to aid metal prices out of their doldrums. The US Equity market valuation, as measured by the S&P 500 P/E Index, had another strong year, rising 22.7% Yr./Yr. during our fiscal period, despite US interest rates rising during the period by about 14.5% (e.g. 10 yr. US Treasuries were yielding 4.4.% vs 3.84% one year prior).

Global Stock Index performance (Fig.3)

          Source:  Bloomberg LLP

CHIEF EXECUTIVE'S OFFICER'S REPORT

Your company generated gross profit of £2.568 million during the year the fiscal year ending 30 June 2024, a 7.3% improvement from the previous year's gross profit of £2.394 million. The pre-tax profit for the full fiscal year, was improved by 30.3% to £2.054 million versus last year's operating profit of £1.576 million. Net Income after tax for the full year period ending 30 June 2024, was £2.005 million as compared to £1.550 million for the previous fiscal year. The per share earnings for the full year were 5.4p (basic) or 5.3p (FD), from 2.6p (basic) and 2.4p (FD) for the 2023 fiscal year. The overall cash and investment portfolios increased to £11.8 million or by 21.2% on a year over year basis from £9.7 million.

Indexed Performance of M&F NAV and NAVPS

vs. Various Performance Yardsticks (Fig. 4)

During our fiscal year global commodity price performances (Fig. 5) were broadly up. Precious metals were up with gold rising 21.1%, while silver was up 27.8% and platinum was up 10.1%. Base metals were also generally up, the notable exception being nickel, declining 13.7% during our fiscal year, ending 30 June  2024. Indonesia is now the world's largest producer of nickel, producing 1.8Mt in 2023 from 345K in 2017 (+422%). The entirety of the world's oversupply in 2023/24 is wholly accountable from the leap in Indonesian production.

Price Performance of Various Commodities & Indices (Fig.5)

In FY 2024 zinc reversed its FY 2023 price decline, by rising 24% in the period. Zinc markets were impacted by supply chain issues. The International Lead and Zinc Study Group (ILZSG) expects a 164,000-ton deficit in Zinc supply in 2024. Aluminium was up 20% during our fiscal period due in large part to curtailment of Russian supplies associated with export sanctions against Russia. Although we suspect there is some Russian Aluminium making its way through sanctions, nevertheless any lifting of sanctions would increase global supplies.  Uranium pricing benefited from the creation of several physical U₃O₈ investment funds, and ETF's as well as from increased energy insecurity resulting from energy shortfalls caused by the Russian/Ukrainian conflict. We admit to having missed the boom in the Lithium market and chose not to chase the sector. Lithium prices have declined. We have purchased the shares of a lithium explorer and post FYE 2024 we acquired shares in a lithium producer. The share price of the latter has benefitted from Rio Tinto announcing the US$6.7B acquisition of Arcadium Lithium.

We have been overweight in precious metals relative to overall industry weightings. Since last year in our internal calculation of commodity weightings we have chosen to split the Luca Mining, a polymetallic producer, between precious metals and base metals, as it produces zinc, copper, lead, silver and gold. Secondly, we also concluded that as so much damage has been inflicted on the balance sheets of exploration companies, that they will lag the sector. Thirdly we have concluded that the commodity prices will move before the underlying producer will, therefore we have seized the opportunity to invest in 660 oz gold bullion at US$1,750/oz of gold. Lastly, we are actively attempting to increase our Copper weighting by adding producers to our portfolio.

As can be seen in Fig. 7, our cash holdings would appear to be below our desired range of 10% of NAV. However, if you include the deferred gold delivery contracts to our £140K of actual cash, our "cash and bullion" would be £1.354 Million (i.e. 3.5p per share).  The spot gold price on 30 June 2024, was US$2,325/oz, today gold's spot price is 14% higher at US$2,650. This would mean that our June 30 "cash and bullion" holding, if valued at today's gold price, would be worth £1.523 Million (i.e. 4.1p per share). Our over-weighting of precious metals, specifically bullion, significantly aided our NAV performance. I expect that our cash holdings will return to a ratio closer to our target range around 10% of NAV by this time next year and that our gold bullion holdings will have been monetized.

If our expectations are correct and we are entering into a gentle, but long term, corrective period for the US dollar and US markets. On this basis, we believe this should see gold performing well from its current $2,650/oz spot price, followed by the large gold producers, thereafter by the smaller producers, and lastly by the exploration companies. When a sector has been out of favour, but its fundamentals are improving - the larger cap companies will receive the first wave of investments attention, followed by mid-caps and the small caps are last to benefit from the markets' attention.  We are increasingly confident that copper firstly, and base metals secondarily will provide metal price performance in 2025. However, the share performance of the underlying mining companies has been very volatile, but on an upward trend.

Commodity Class Investment Allocation as at FYE 2024 vs. 2023

(Fig. 6)

Precious metals represent 53.7% of our asset allocation as of 30 June 2024, up significantly from 48.2% of our NAV in 2023. However, if our deferred gold bullion investment is excluded from the Precious Metals and considered to be part of our cash and near cash - The Precious Metal commodity class would be 44.1%, a slight decline from last year's 48.2% of total investments. Additionally, if our Cash category included the deferred gold bullion contracts, then our "cash" holding would be 11.2% of total investments. Base metals now represent 36.0% versus 31.6% of our investable assets. Food Energy and Technology declined as a percentage of our total investable assets to 9.2%, but also on an absolute dollar amount, due to selling some energy investments.  This year we saw a reversal of the underperformance of mining share indices relative to the underlying commodity prices. Between 30 June 2024, and 30 September 2024, the FTSE 350 Mining Index rose 9.97%, while the S&P Goldman Sachs Commodity Index was up 2.98%. 

INVESTMENT PORTFOLIOS

We always have high expectations, and we have yet to exceed these expectations. Nevertheless, FYE 2024 has been a year of improving performance for many mining investment funds, including our own. Our performance in 2024 was both absolutely and relatively good. Our NAV rose 21.5% year over year, while NAVPS rose by 19.9% Yr./Yr. These results exceed the performance yardsticks by which we measure our performance as can be seen in Fig. 10.

The broader equity markets rose during our fiscal year: The Euro Stoxx 50 was up a second year in a row, rising by 11.2%; The S&P 500, also rising a second year in a row, being up 22.7% yr./yr. as of 30 June 2024, the CSI 300 (Shanghai) was down 9.9%, while the FTSE 100 did earn a gain of 7.9%. The more specific comparable measures, such as - the S&P/TSX Global Mining Index was up 11.0% during our fiscal period, while FTSE 350 Mining Index, comprised of smaller market mining companies, was up 2.2%.

M&F Investable Capital 2024-2023

(Fig.7)

CASH                                                                                                                      As a percentage of Total Investments: 1.2%

Our liquidity as of 30 June 2024, was £140,000, a decline of 82.4% from the £796,000 as at the end of fiscal 2023. During the period we provided finance for an investee company (Golden Sun Resources) that had nearly completed its mill (now completed and in production) but was capital constrained and required some additional capital to complete and commission the mill. Additionally, we were bullish on the gold bullion. As a solution, we agreed to acquire gold bullion, to be delivered 6 months later either the physical gold bullion or the financial equivalent, once the mill was in production. As security for these deferred Gold Delivery Contracts, we were provided the pledge of 143 hectares (i.e. 359 acres) of land overlooking the Pacific Ocean as security if GSR defaults on the obligation. Our normal objective is to keep the cash somewhere between 5% and 20% of our "Investable Capital" so that we may take advantage of investment opportunities quickly when they present themselves. Since 2017 our cash holding has averaged around 10%. Moreover, as a rule of thumb we like to have a combined value of our Cash and the Tactical portfolio to range between 25% and 60% depending on our level of market conviction.  For the past 3 years that Tactical Portfolio and cash have been at 38.4% as of the end of 2021, we ended 2022 at 35.5% of Investable Capital and as at FYE 2023 we were at 33%. On 30 June  2024 our cash and Tactical Portfolio totalled 35.7% of Investable Capital. On 30 June  2024 our Tactical and Cash holdings were 35.7% of Investable Capital. Our current stance is that the greatest performance risk is underexposure to the mining sector. As the mining cycle evolves, our objective will be to gradually advance to a higher cash & tactical holding as we monetize our strategic investments and marshal our cash holdings to protect our overall performance record.

TACTICAL PORTFOLIO                                                                                         As a percentage of Total Investments: 34.9%

The Tactical portfolios increased by 13.4% to end the year at £4,118.3M. Tactical Investments increased in part because of performance and the deployment of cash into deferred gold delivery agreements. We are finally experiencing an abatement of the market's bearish sentiment towards mining companies, and selectively there have been some rises in valuations.  Our early commitment to gold bullion has been timely. Elsewhere mining stocks have performed better than in the past several years, but that is not a very high bar. Inflation, and more specifically mining cost inflation has pushed metal prices upwards as the industry's breakeven levels have increased. The immediate impact has been on commodity prices. Latterly, as companies attempted to manage cost inflation we have begun to see some positive share price movement.  With regards to gold, several factors are aiding its performance: 1. A weaker US dollar. 2. Increased global socio-political risk in the Middle east, and the nearly three-year-old Ukrainian-Russia conflict persisting long beyond the initially expected resolution. 3. Continued economic anxiety. The tactical portfolio now comprises 17 distinct investments of our total portfolio.  

STRATEGIC PORTFOLIO                                                                                       As a percentage of Total Investments: 63.9%

Our Strategic Portfolio are longer term holdings, that we strongly believe will outperform given sufficient time and capital. We believe we made these "Strategic" investments at the bottom of the cycle. These investments were in out-of-favour assets that we considered to have high return potential but were, we acknowledge, higher risk and less liquid. We believe our competitive advantage was that we were capable and willing to invest where and when others would, or could, not invest in what we believe are good geologic assets.  We believe that the best return to risk ratio is to invest in good assets when these are out of favour. Our Strategic Portfolio now totals £7,777.1M and represents 64.4% of our Net Investable funds. The Strategic Portfolio was up 52.8% yr/yr in FY 2024.  The next phase of our strategy is to gradually monetize these investments when and where it makes sense and redeploy these funds into more liquid investments that are out of favour but have strong long term investment merits.

A more detailed description of the investment holdings and their performance is available in the annual report, which will be available on the M&F Internet site within a day of this Press release

Posting of Annual Report and Notice of AGM

The Company will be posting the Annual Report and Accounts, including the Notice of Annual General Meeting ("AGM") on or around 22 November 2024 and will be made available on the Company's website: www.mineralandfinancial.com.

The AGM will be held at 11:00 a.m. on 18 December 2024 at Stockley Park, The Square, 6-9 The Square, Stockley Park, Heathrow, Uxbridge London, UB11 1FW, UK

FINANCIAL STATEMENTS

Consolidated Income Statement

Consolidated Statement of Financial Position

The financial statements were approved by the Board and authorised for issue on 19 November 2024

Consolidated Statement of Changes in Equity

Consolidated Statement of Cash Flows

Notes to the Financial Statements

All intergroup transactions and balances are eliminated on consolidation.

FOR MORE INFORMATION:

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

Katy Mitchell and Sarah Mather, Zeus Capital Limited                   +44 203 829 5000

Jon Belliss, Novum Securities Limited                                            +44 207 382 8300

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 (MAR) as in force in the United Kingdom pursuant to the European Union (Withdrawal) Act 2018. Upon the publication of this announcement via Regulatory Information Service (RIS), this inside information is now considered to be in the public domain.