viewMineral & Financial Investment Limited

Mineral & Financial Investments exposed to a growing zinc resource


  • 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

Quick facts: Mineral & Financial Investment Limited

Price: 10.501 GBX

Market: AIM
Market Cap: £3.68 m

​​​​​​Focus on Portugal zinc project

In the space of six months the mineral resource at the Lagoa Salgada zinc project in Portugal has doubled from around 10mln tonnes to nearly 21mln tonnes, with an initial study indicating a “low cost, high-margin” mine could be developed.

It's been a rapid rate of progress in anyone’s book, and testament to the way Mineral & Financial Investments Ltd (LON:MAFL) has been able to get things moving thereby cutting a deal that is favourable for both MAFL and project partner Ascendant Resources Inc (TSE:ASND).

Under the terms of that deal Ascendant can earn into up to 80% of Lagoa Salgada if it successfully takes the project through the end of the feasibility study stage and makes staged payments to Mineral and Financial of US$6mln, of which US$250,000 has already been received. What’s more, Mineral & Financial will have a free carry into production.

Along the way, Ascendant will have made cash payments to Mineral & Financial totalling US$6.9mln in cash plus US$1.65mln in Ascendant shares.

The share payment results in MAFL owning 2.9% of Ascendant. It should be noted that Ascendant’s production increased 38% in 2018 to 91.4 million pounds of zinc-equivalent metal in 2018 and that it is guiding towards 2019 production of between 90mln pounds and 110mln pounds of zinc equivalent, at an all-in sustaining cost of US$0.97 per pound of zinc equivalent production.

It’s a nice position to be in, given that the resource is likely to grow and grow, and the capital outlay required from Mineral & Financial is zero.


World-class location

The project is certainly in the right address to encourage belief in such an outcome. The Iberian Pyrite Belt hosts several world-class mines already, including Lundin Mining’s (TSE:LUN) Neves-Corvo mine, and Aljustrel, a major producer of base metals owned by local Portuguese company MTO SGPS.

The nearby Aljustrel mine is representative of a mineralised system which can host ore bodies exceeding 200ln tonnes. With even a fraction of that size of deposit very possible within Lagoa Salgada, it would be quite something for Mineral and Financial to hold a stake with a free-carry to production.

“The last drilling program left the geological team with indications that an additional massive sulphide deposit zone may be located to the east of the LS-1 South sector, The next drill program will likely attempt to confirm this hypothesis” explains chairman Jacques Vaillancourt.


Resource upgrade

In July, as part of plans to spend US$5.2mln drilling just over 15,000 metres, Ascendant said it had drilled 15 holes and anticipated updating the resource estimate by the end of the third quarter this year.

In November, MAFL converted a sizeable chunk of the zinc resource at Lagoa Salgada in Portugal to Measured & Indicated from Inferred.

Most of the resource is situated within the North Zone and here the M&I resource rose by 71% to 10.3Mt and at a grade of 9.1% zinc equivalent.

Within that, resources in the most certain or measured category rose by 57% to 2.8 Mt at 10.7% ZnEq.

In January 2020, a maiden preliminary economic assessment (PEA) of 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 per day.

The PEA calculated that the mine would have a pre-tax net present value of US$137mln and a 37% internal rate of return, with an average annual underlying profit (EBITDA) of US$54.2mln meaning it would be a four-year payback period to cover the initial capex.


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,” said chairman Jacques Vaillancourt in January. 

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”. 


Exposure to gold 

Elsewhere, the M&FI portfolio has been boosted by the addition of new exposure to gold, and 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.

In June, M&FI took an interest in Golden Sun Resources Ltd, a group that’s advancing Costa Rica based Bellavista mine into production later this year, with loan notes bought that mature in April 2024 and they carry 20% interest per year.

Watch for news on that, for updates from other investee companies like Cap Energy and Cerrado Gold, and in particular for further news from Lagoa Salgada, where the potential for further upside remains significant.

In November, gold mineralisation at Lagoa Salgada was upgraded to 1.7Mt at 4.6g/t.


Inflexion points

  • PEA published
  • Drilling in Central and South zones expands the resource
  • More gold mineralisation defined

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on 29/11/19

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