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M&FI positioned for precious metals rally and boosted by ETF

Published: 07:43 05 Mar 2020 GMT

Mineral & Financial Investment Limited - M&FI positioned for precious metals rally and boosted by ETF

Mineral & Financial Investments Ltd (LON:MAFL) expects that its portfolio could benefit from the gold price rally, as it is overweight precious metals.

The company noted also that it has taken a position in ProShares UltraPro Short ETF.

“The position cost us some performance in Q2, but in February 2020 they have rallied from US$16 to US$23.76, as at the writing of this statement,” the company said, in its interim results.

In its results, the investor reported a profit of £247,000 compared to £722,000 in the comparative period of the previous year, while it marked an earnings per share gain of 0.71p versus a comparative of 2p per share.

WATCH: Mineral & Financial Investments cashed up and growing assets by 34% a year

Net asset value per share however increased by 22.2% to 15.19p.

“This continued NAV growth was in spite of market headwinds in the areas in which we invest, particularly from the weak zinc prices and the strengthening of the British pound,” the company said.

“The British pound appreciated markedly during the quarter (+7.3% against the US dollar and 5.6% against the Canadian dollar), which we believe was in part due to Brexit negotiations and in part due to the Conservative Party's strong majority achieved in the December 2019 election in the UK.

“As we report in GBP, but invest mostly in USD, this has had a negative effect on our results.”

The company ended December with a £364,000 cash position.

Lagoa Salgada project

In terms of highlights, the company noted it was “delighted” with results from a Preliminary Economic Assessment for the Lagoa Salgada project. It is 85% owned by the Redcorp Empreedimentos Mineiros, which is in turn 75% owned by M&FI - though a joint venture agreement with Ascendant sees the partner acquire up to 80% of Redcorp.

The PEA 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.

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.

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