Net Asset Value Update

RNS Number : 7764E

Mineral & Financial Invest. Limited

15 April 2014

 



MINERAL & FINANCIAL LIMITED

("Mineral & Financial", "MAFL", or the "Company")

NET ASSET VALUE UPDATE

MAFL, the AIM quoted resources investment specialist, today announces an NAV and operations update on its activities for the period ended 31^st March 2014.

Highlights

·    Net assets of £1.082 million, or 7.89p per share (unaudited)

·    Third consecutive quarter of increased NAV 

·    Double digit percentage growth from Canadian uranium investments

·    New investments in platinum, nickel and gold

·    Continued focus on liquid stocks

·    Tern PLC emerges from CVA, significant stake secured

·    Total cash at period end: £760,000, or 5.5p per share

Post period end

·     Continuing to evaluate strategic assets for MAFL to take active participation in with potential co-investors, with MAFL to help deliver asset value

·     Further signs of recovery in global mining equities

Commenting today Alastair Ford, CIO of MAFL said: "Looking at the mining sector over the last quarter we believe we are beginning to see value growth as companies are once again able to progress their assets through equity financings. We think the mining sector is in an extremely interesting state at this time and MAFL has already created value from investments in gold and platinum vehicles. In addition to our trading portfolio the Board continues to explore opportunities to secure strategic assets into MAFL."

For more information:

Laurence Read, Director                                   [phone]

Katy Mitchell, WH Ireland                                [phone]

Chairman's Statement

As Chairman of a Company that invests in commodities, the building blocks of basic human civilisation, I would like to start this update with my observations on global economic activity, which continues to follow a slow but positive trend upwards.

The International Monetary Fund has just scaled back its forecast for world economic growth this year to 3.6%, from January's 3.7%. The IMF predicts that a strong recovery in the U.S. will drive growth, but that that will be hampered by a cooling off of emerging-market expansion and weakness in Japan.

Interest rates should rise in 2015, as indicated by the new Federal Reserve Chairman. In advance of this, we are seeing some economies breaking ranks with the vast majority of Central Banks by suddenly increasing their interest rates. We have seen sudden rate rises in Turkey where, in January, overnight interest rates rose from 7.75% to 12%, and in Brazil where the Central Bank increased the benchmark Selic rate for the 9^th consecutive time to 11%.

I believe competition for international capital is beginning to heat up and that central bankers of non G-7 economies cannot afford to have rates at levels that attract global bond investors. More rapidly growing economies require more capital to achieve their needed objectives. I believe that a growing number of economies will increase their interest rates in 2014. This will negatively impact bond markets. But it should improve the ability of the economies in question to attract capital, which will fuel their economic activity and, should improve demand for commodities.

Commodity prices have felt the recent chill of a slight slowing of emerging economies, none the more discussed than China's slowed progress. The Chinese economy will grow by about 7.5% in 2014, according to official figures, off a GDP base which is more than double what it was when China was growing by more than 12% per annum. The composition of Chinese growth has changed, but the quantum of new demand originating from China has changed very little.

Accordingly, in the short term (0 to 12 months) the Company broadly prefers precious metals, while in the mid-term (12 to 36 months) the Company prefers base metals. The Company will continue to stay away from bulk commodities.

I believe equity markets have experienced a rise largely as a result of artificially suppressed interest rates. When rates do begin to rise in some of these economies, I believe their equity markets are likely to experience corrections.

When assessing assets our team has a structured approach to resources investment, based on our long experience in the sector. We look at all elements of a company, including management, asset quality, likely funding needs, development timescale, infrastructure, environmental and permitting status, in addition to the economic conditions mentioned above.

We believe our structured approach ensures we do not take unnecessary tactical risks with our shareholders' capital but deploy funds into assets that have a realistic chance of building value.

In addition to our trading portfolio we are also working towards bringing "strategic assets" into the MAFL portfolio. These assets will likely be in companies that MAFL will take significant investment in, and that will benefit from a high level of active support from the MAFL board.  

Our guiding principles are to ensure liquidity and, paramount, to preserve our capital. Despite our cautious approach we have again increased MAFL net asset value per share this quarter to 7.89 pence

Jacques Vaillancourt, CFA

Chief Investment Officer's Statement

The Company's Net Asset Value (NAV) as of March 31^st 2014, has risen from 7.7 pence to 7.9 pence, the third consecutive quarterly rise after a prolonged period of falls. 

The Directors believe these recent increases in NAV will be the precursor to significant value creation in the coming months and years as the mining equity markets and commodity markets recover following a period of weakness.

Signs of recovery are now apparent, as several new fundaisings have got away in the previous quarter, and investors appear to be more willing to buy into the sector on good news than they were throughout last year.

With that in mind, the Company began to move tentatively back into the market during the period, and traded actively in gold, uranium and platinum. As I predicted in January, the uranium price did indeed increase during the period, and the Company duly turned a double digit profit in percentage terms by trading in Canadian-listed uranium equities.

At the period end, the Company was also showing a modest gain on its other commodity investments, and we continue to evaluate the potential for broadening the portfolio further.

In terms of equities, we continue our stated policy of focussing primarily on the more liquid mid-tier and larger companies, and are currently holding investments in two mid-tier companies with exposure to base metals. The first is First Quantum, which has an extensive portfolio comprising principally of producing copper and nickel mines. The second is ASX-listed Independence Group, which has nickel and gold in Western Australia.

We also note with satisfaction further positive developments at one of our legacy investments, Cap Energy, an ISDX-listed vehicle, in which the Company holds 400,000 shares. During the period Cap Energy acquired new licenses in Senegal, and the Company looks forward to further updates on progress there and across the wider Cap portfolio.

During the period we took delivery of our shares in Tern PLC, the new vehicle that has emerged out of the defunct Silvermere shell. MAFL now holds 1,867,996 shares, representing 17.15% of the current issued shares. It's early days for Tern, which is currently seeking funds to build a portfolio of technology assets, but we await developments with interest.

Finally, the Company currently holds £760,000 in cash, slightly down from the previous period as more of our resources are deployed into the market. As the outlook for mining improves we would expect the cash position to reduce further and our equity and commodity exposure correspondingly to increase. We look forward to the coming quarters with cautious optimism.

Alastair Ford

Notes: The net asset value calculation is subject to audit and is made on the basis that the Company has 13,722,062 shares in issue. All listed investments, including investments on ISDX, are valued at the closing bid price as at 31^st March 2014. The Company has an investment in one unquoted gold Company, which is currently valued at the price at which the gold Company in question last raised money, although this is subject to review.

 

END

 

 

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