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viewMineral & Financial Investment Limited

Mineral & Financial Investments exposed to growing zinc and gold resource

Snapshot

  • Mineral & Financial Investments invests in junior mining companies
  • Owns 75% share of Portugal's Lagoa Salgada project
  • Also runs a 'tactical portfolio' for short-term investments
zinc

Quick facts: Mineral & Financial Investment Limited

Price: 8.5 GBX

AIM:MAFL
Market: AIM
Market Cap: £2.99 m
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​​Focus on Portugal zinc project

Mineral and Financial Investments Limited (LON:MAFL) saw its net asset value (NAV) rise 10.4% to £5.3mln in the first quarter of 2020 from a year earlier, while NAV per share jumped 10.6% to 15.1p at the end of March 2020.

A gradual increasing of the company's weighting in precious metals in its 'tactical portfolio' since late 2018 has been a net positive for performance.

In the 'strategic portfolio', the mineral resource at the Lagoa Salgada zinc project in Portugal has increased to around 23mln tonnes, having more than doubled in roughly a year, with an initial study indicating a low cost, high-margin mine could be developed.

Lagoa Salgada is 85% owned by the Redcorp Empreedimentos Mineiros, which is in turn 75% owned by Mineral and Financial, though a joint venture agreement with Ascendant sees the partner acquire up to 80% of Redcorp.

The agreement has been amended so that Ascendant’s next payment of US$500,000 will be increased to US$600,000 and satisfied by six monthly payments of US$100,000 and an additional security pledge.

A Preliminary Economic Assessment for the project suggested that an initial capital expenditure of US$162.7mln could develop a mine in the North Zone of Lagoa Salgada, with a nine-year life at 2,700 tons of zinc per day.

Assuming annual production of 12.5kt of zinc, 13.7kt of lead, 1.1mln oz of silver and 13k oz of gold, plus some copper and other metals, this mine would have a pre-tax net present value of US$137mln and a 37% internal rate of return

Average annual underlying profit (EBITDA) of US$54.2mln would see a four-year payback period to cover the initial capex.

Exposure to gold 

The M&FI portfolio has been boosted by the addition of new exposure to gold, and chairman Jacques Vaillancourt and his chief operating officer Jamie Lessor continue to seek out new opportunities.

One of several ongoing projects is the evaluation of a potential opportunity in Latin America which may allow for Mineral and Financial to hold a secured short-term convertible bond with a “double-digit” coupon on a potential gold producer. Additionally, the company is evaluating some base metal opportunities in South America and Africa.

M&FI has an interest in Golden Sun Resources Ltd, a cash flow-generating group that’s advancing Costa Rica based Bellavista mine into production, with loan notes bought that mature in April 2024 and they carry 20% interest per year.

In March, investee firm Cerrado Gold Inc made a new acquisition, picking up the Don Nicolas mine in the Santa Cruz province of Argentina.

The move is described as the first step in Cerrado’s goal of becoming an ‘intermediate producer’.

Mineral & Financial holds 625,000 shares, about 1.5%, in presently unlisted Cerrado.

What the boss says: Chairman Jacques Vaillancourt

“Over the short period that we have partnered with Ascendant they have advanced the Lagoa Salgada project, we have demonstrated a long-life mine with a modest initial capital and very low operating costs while also having a rapid timeline to production”.

He said the PEA study “outlines a low cost, high-margin mining operation which the company intends to improve through continued resource growth and ore quality expected at the project”.

Vaillancourt added that the companies see “many further opportunities” in the project and he expects Lagoa Salgada to “increasingly become a major focus and priority for Ascendant over the coming years”.

Inflexion points

  • Investee firm Cerrado makes first acquisition in Argentina
  • Further resource expansion at Lagoa Salgada
  • More gold mineralisation defined

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