MINERAL & FINANCIAL INVESTMENTS LIMITED
Annual Report and Financial Statements
for the year ended 31 December 2014
1
Mineral & Financial Investments Limited
CONTENTS
REPORTS
Company Information
Chairman’s Statement
Chief Investment Officer’s Review
Strategic Report
Directors' Report
Corporate Governance Report
Report on Remuneration
Report of the Independent Auditor
FINANCIAL STATEMENTS
Statement of Comprehensive Income
Statement of Financial Position
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
page
2
3
4
6
7
9
10
11
12
13
14
15
16
2
Mineral & Financial Investments Limited
COMPANY INFORMATION
DIRECTORS:
REGISTERED OFFICE:
COMPANY NUMBER:
SECRETARY:
NOMINATED ADVISER:
BROKER:
REGISTRARS:
SOLICITORS:
AUDITORS:
Jacques Vaillancourt ( Chairman)
Alastair Ford (Chief Investment Officer)
Laurence Read
190 Elgin Avenue
George Town
Grand Cayman
KY1-9005
Cayman Islands
Incorporated in the Cayman Islands with registered
number 141920
Walkers SPV Limited
W H Ireland
24 Martin Lane
London
EC4R 0DR
W H Ireland
24 Martin Lane
London
EC4R 0DR
Capita Registrars (Jersey) Limited
12 Castle Street
St Helier
Jersey JE2 3RT
Charles Russell Speechlys
5 Fleet Place
London
EC4M 7RD
Welbeck Associates
Registered Auditor
Chartered Accountants
30 Percy Street
London
W1T 2DB
3
Mineral & Financial Investments Limited
CHAIRMAN’S STATEMENT
FOR THE YEAR ENDED 31 December 2014
Dear Shareholders,
I am pleased to present the results of your Company for the year ended 31 December 2014.
Mineral & Financial Investments’ NAV increased to 10.06 pence during 2014, up 29.5% year-on year. Although this
is a good appreciation in our NAV we are, nonetheless, dissatisfied not to have succeeded in completing our first
strategic investment. It is not a shortage of opportunities that has slowed us, but it has been a shortage of
acceptable opportunities.
M&FI intends to be a mining finance house. Our strategic investments business will provide capital to finance mining
companies. We will seek to provide financing in return for meaningful ownership levels, and board representation.
We will act as a good partner and provide value-additive advisory services and make follow-on investments, if, and
when appropriate.
Until we have made strategic investments, our capital will be cautiously exposed to metal and mineral investments
so that our shareholders can prudently benefit from mining sector performance. We continue to address legacy
investments and, when appropriate, liberate value from these holdings.
Meanwhile, the lack of new significant mineral discoveries, production cutbacks and continued slow, but positive
global economic growth brings us, in my opinion, one year closer to the inflection point for metal prices and the
mining industry.
We believe that the mining super cycle remains intact, and that the period of correction in the mining sector is
approaching its conclusion. We do not expect an explosive reversal in the short term. However, the absence of
grassroots exploration in virtually all metal and mineral segments will result in tighter metal markets, despite slower
growth from China. Global economic growth has been positive despite a significant increase in foreign exchange
volatility and the long expected increase in US rates, which remain an important reference point for global interest
rates. We anticipate that demand growth for metals will continue to exceed supply growth. This should lead to a
gradual and sustained tightening of metal markets.
2014 was a very difficult year for commodities due to the slowing growth of China and, in the second half of the year,
very rapidly rising US dollar. We take heart in the positive changes occurring in India, and elsewhere in emerging
markets. However, there were a few select areas of positive performance within the metal markets. While silver was
down 34%, zinc was up 13%. We were fortunate to have purchased zinc earlier in the year to benefit from the
positive price movement. We continue to believe that zinc’s fundamentals are very attractive for the next several
years.
During the year we were successful in trading an investment in the uranium sector. This is another commodity that
we believe has been oversold and deserves our attention. However, we continue to be more positive towards
precious metals than base metals. Our least favoured segment of the mining sector continues to be the bulk
commodities. Although we recognize that bulk commodity miners will benefit from lower oil prices, they remain
plagued by slowed demand growth and excess supply.
The current environment continues to be fraught with risks, but we are optimistic as we face the future and see the
opportunities before us. Nevertheless, we will continue to be cautious and vigilant on behalf of our shareholders.
Jacques Vaillancourt
Executive Chairman
4 June 2015
www.mineralandfinancial.com
4
Mineral & Financial Investments Limited
CHIEF INVESTMENT OFFICER’S REVIEW
FOR THE YEAR ENDED 31 December 2014
During the period mining equity markets remained under severe pressure as commodity prices continued to be
depressed, albeit with some notable exceptions, and as capital remained scarce. The majors continued significant
programmes of rationalisation and at the more junior end of the market new projects were thinner on the ground,
liquidity was constrained and share prices weak.
In that context, Mineral & Financial adopted a cautious approach, limiting exposure to larger companies and preferring
to look for upside in direct exposure to certain favoured commodities. In addition the Company continued the process of
streamlining the assets inherited from the previous investment manager.
At the end of the period a significant part of the Company’s stake in Tern PLC was sold into the market, and post the
period end the rest of the stake was divested. Mineral & Financial continues to consider options for its two remaining
non-core stakes, Sutherland Health and Milamber.
A summary of the current major positions follows.
Gold
As at the last NAV update, released on 5th May 2015, Mineral & Financial held around four per cent of its assets via a
physical-backed gold ETF run by Zuercher Bank. Although the gold price has been fluctuating somewhat in the past
couple of months, the Company continues to believe in the long-term strength of gold. The increasing global reliance on
fiat money, a tendency by all governments to devalue, ongoing global political instability in the Middle East and
economic uncertainty in Europe and elsewhere all tend towards this view. Recent US dollar strength has, admittedly,
pared back gains that would otherwise have been made, but the US economic recovery remains fragile at best.
Platinum
The outlook for platinum has been decidedly mixed of late, as structural problems within the industry have been
compounded by weaker demand. Indeed, the World Platinum Investment Council recently downgraded its forecast
demand projections for 2015 on the back of lower than expected economic activity in China. Nonetheless, the Council
continues to predict that the platinum supply deficit will run at around 190,000 ounces this year, and as stockpiles get
more and more run down that dynamic should feed through into a longer-term strengthening in the price.
Zinc
Zinc is one of the metals that Mineral & Financial is most bullish on in the current market. The fundamentals are simple:
major zinc mines like Century and Lisheen are set to close, following on from the recent closure of some of the world’s
largest suppliers like Perserverence and Brunswick. Meanwhile, demand continues to rise, as the Chinese car market
grows and China shuts its own high-polluting mines. Glencore, the world’s number one supplier, has forecast that an
additional one million tonnes of zinc will be needed to satisfy demand in 2016. With no new major mines set to open, it’s
hard to see where that metal is likely to come from. The Company holds just over four per cent of its portfolio in zinc via
an ETF.
Rhodium
Mineral & Financial holds slightly less than three per cent of its assets in rhodium. The Company believes that recent
declines in production in South Africa will lead to a further tightening of a market that looks to have bottomed out some
time in 2013. Around 80 per cent of rhodium is consumed in autocatalysts and demand is likely to mirror increased
growth in global automobile sales, particularly in China and the USA.
Glencore
The Company’s position in Glencore has not performed as well as we had anticipated, primary due to selling pressure
generated by a significant recent fall in the copper price. That said, the company’s view is that Glencore remains the
best positioned of the majors at the current time, partly because copper is likely to come back, partly because it is the
world’s largest producer of zinc, a commodity which the company is very bullish on, and partly because unlike the other
majors it lacks significant exposure to iron ore, the pricing of which looks set to continue to be weak.
Cap Energy
A recent re-interpretation of seismic data from Cap’s exploration off-shore Guinea-Bissau has highlighted the presence
of several large prospective structures in water depths ranging from 1,000 to 3,500 metres and at depths below the
seabed of between 800 metres to 2,650 metres. This is highly encouraging and the Company looks forward to further
updates on exploration progress and on Cap’s plans for listing on AIM.
5
Mineral & Financial Investments Limited
CHIEF INVESTMENT OFFICER’S REVIEW
FOR THE YEAR ENDED 31 December 2014
UMC
UMC’s joint venture with the Chinese oil giant CNOOC continues to investigate the potential of licenses both onshore
and offshore Papua New Guinea, with CNOOC providing the funds for the geological work on the understanding that it
will be repaid from future cashflows from production.
Toro Gold
Toro Gold continues to progress with work on the definitive feasibility study for its two million ounce Mako gold project in
Senegal. The latest infill drilling results continue to show good grades over long intersections either from surface or from
near surface.
Anglo Pacific
Anglo Pacific provides Mineral & Financial exposure to royalty interests on gold, vanadium, coal, iron ore and uranium
projects. The Company is encouraged to note that Julian Treger, Anglo Pacific’s chief executive has recently increased
his shareholding to 3.18%
Sutherland Healthcare
Sutherland was recently recognised as one of the most ambitious companies in the South of England when it won an
award from an independent panel comprising judges from Baker Tilly, Rawlison Butler and Endgame Insight. Mineral &
Financial continues to regard this investment as non-core.
Milamber
The Company retains a residual stake in Milamber, a media and conferencing business with a growing investment
portfolio. This investment is not in resources and remains non-core for Mineral & Financial, and we continue to explore
options for a potential exit.
Alastair Ford
Chief Investment Officer
4 June 2015
6
Mineral & Financial Investments Limited
STRATEGIC REPORT
FOR THE YEAR ENDED 31 December 2014
The Directors present their Strategic Report on the Company for the year ended 31 December 2014.
RESULTS
The Group made a profit after taxation of £302,000 (2013: Loss of £663,000). The Directors do not propose a
dividend (2013: £nil).
BUSINESS REVIEW AND FUTURE DEVELOPMENTS
A review of the business in the period and of future developments is set out in the Chief Investment Officer’s review,
which should be read as part of the strategic review.
KEY PERFORMANCE INDICATORS
The key performance indicators are set out below:
COMPANY STATISTICS
31 December
2014
31 December
2013
Change %
Net asset value
£1,380,000
£1,066,000
Net asset value – fully diluted per share
Closing share price
Share price discount to net asset value –
fully diluted
10.0p
7.7p
(23%)
Market capitalisation
£1,063,000
7.8p
4.3p
(45%)
£583,000
+29%
+29%
+82%
+82%
PRINCIPAL RISKS AND UNCERTAINTIES
The key risk facing shareholders is that the value of the investments falls and that future returns to shareholders are
therefore lower than they could have been.
Details of the financial risk management objectives and policies are provided in Note 14 to the financial statements.
GOING CONCERN
The Directors have prepared cash flow forecasts through to 30 June 2016 which assume no significant investment
activity is undertaken unless sufficient funding is in place to undertake the investment activity and the forecasts
demonstrate that the Company is able to meet its obligations as they fall due. On this basis, the Directors have a
reasonable expectation that the Company has adequate resources to continue operating for the foreseeable future.
For this reason they continue to adopt the going concern basis in preparing the Company’s financial statements.
For and on behalf of the Board
Jacques Vaillancourt
Director
4 June 2015
7
Mineral & Financial Investments Limited
DIRECTORS’ REPORT
FOR THE YEAR ENDED 31 December 2014
The Directors present their annual report together with the audited financial statements for the year ended 31
December 2014.
PRINCIPAL ACTIVITY
During the year the Company continued to act as an investment company.
On 28 November 2013 the Company adopted a New Investing Policy. The Company's New Investing Policy is to
invest in the natural resources sector through investments in companies or other assets, which it considers to
represent good value and offer scope for significant returns to shareholders over the long term. In particular, the
Company will focus on providing new capital for mining companies that require finance for their projects.
Investments will be made in the securities of quoted and un-quoted companies and their assets, units in open-ended
investment companies, exchange traded funds, physical commodities, derivatives, and other hybrid securities. As the
Company's assets grow the intention is to diversify company, geographic, and commodity risks.
The Company will have a blend of passive and active investments and, if and when appropriate, it may seek to gain
control of an investee company. Returns to shareholders are expected to be by way of growth in the value of the
Company's ordinary shares.
POST BALANCE SHEET EVENTS
There have been no material post balance sheet events.
DIRECTORS
The Directors of the Company during the year and subsequently are set out below.
Jacques Vaillancourt
Alastair Ford
Laurence Read
SUBSTANTIAL SHAREHOLDINGS
The only interests in excess of 3% of the issued share capital of the Company which have been notified to the
Company as at 1 May 2015 were as follows:
Vidacos Nominees Limited
*Mount Everest Finance SA
Barclayshare Nominees Limited
TD Direct Investing Nominees Limited
HSDL Nominees Limited
*Jacques Vaillancourt is the sole shareholder of Mount Everest Finance SA
Ordinary shares of
0.25p each
number
3,404,478
3,107,000
928,391
599,367
425,353
Percentage
of capital
%
24.8%
22.6%
6.8%
4.4%
3.1%
8
Mineral & Financial Investments Limited
DIRECTORS’ REPORT
FOR THE YEAR ENDED 31 December 2014
DIRECTORS’ RESPONSIBILITIES FOR THE FINANCIAL STATEMENTS
The Company was incorporated as a corporation in the Cayman Islands, which does not prescribe the adoption of
any particular accounting framework. Accordingly, the Board have resolved that the Company will follow applicable
law and International Financial Reporting Standards as adopted by the European Union (IFRSs) when preparing its
annual financial statements.
The Directors are responsible for the preparation of the Company’s financial statements which give a true and fair
view of the state of affairs of the Company and of the profit or loss of the Company for the period. In preparing the
financial statements, the directors are required to:
•
•
•
•
select suitable accounting policies and then apply them consistently;
make judgements and estimates that are reasonable and prudent;
state whether IFRSs as adopted by the European Union have been followed, subject to any material
departures disclosed and explained in the financial statements; and
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the
Company will continue in business.
The Directors are responsible for keeping adequate accounting records, for safeguarding the assets of the Company
and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
In so far as the Directors are aware:
•
•
there is no relevant audit information of which the Company's auditor is unaware; and
the Directors have taken all steps that they ought to have taken to make themselves aware of any relevant
audit information and to establish that the auditors are aware of that information.
The Directors are responsible for the maintenance and integrity of the corporate and financial information held on the
Company's website.
AUDITORS
The auditors Welbeck Associates have indicated their willingness to continue in office and a resolution that they be
reappointed will be proposed at the Annual General Meeting.
For and on behalf of the Board
Jacques Vaillancourt
Director
4 June 2015
9
Mineral & Financial Investments Limited
CORPORATE GOVERNANCE REPORT
FOR THE YEAR ENDED 31 December 2014
The requirements of the combined code of corporate governance are not mandatory for companies traded on AIM.
However, the Directors recognise the importance of sound corporate governance and have adopted corporate
governance principles that the Directors consider are appropriate for a company of its size.
BOARD OF DIRECTORS
The Board of Directors is responsible for the Company’s system of corporate governance. It comprises an executive
chairman, the Chief Investment Officer and one other executive director. The Chairman of the Board is Jacques
Vaillancourt.
The Board met regularly throughout the year. It has a schedule of matters referred to it for decision, which includes
strategy and future developments, allocation of financial resources, investments, annual and interim results, and risk
management. Matters which would normally be referred to appointed committees, such as the audit and remuneration
committees, are dealt with by the full Board.
INTERNAL CONTROL
The Board is responsible for maintaining a strong system of internal control to safeguard shareholders’ investment and
the Company’s assets and for reviewing its effectiveness. The system of internal financial control is designed to provide
reasonable, but not absolute, assurance against material misstatement or loss.
10 Mineral & Financial Investments Limited
REPORT ON REMUNERATION
FOR THE YEAR ENDED 31 December 2014
DIRECTORS' REMUNERATION
The Board recognises that Directors' remuneration is of legitimate concern to the shareholders and it is committed to
following current best practice. The Company operates within a competitive environment and its performance depends
on the effective contributions of the Directors and employees who are compensated accordingly.
DIRECTORS' REMUNERATION
The remuneration of the Directors was as follows:
Year ending 31 December 2014
Salary
and fees
£'000
Pension
£’000
Total
£'000
Jacques Vaillancourt
Alastair Ford
Laurence Read
Jennifer Allsop
25
26
18
-
69
-
-
-
-
-
25
26
18
-
69
Year ending 31 December 2013
Salary
and fees
£'000
Pension
£'000
Total
£’000
4
26
12
21
63
-
-
-
-
-
4
26
12
21
63
PENSIONS
No pension contributions were paid in respect of the directors for the year ended 31 December 2014, or for the year
ended 31 December 2013.
BENEFITS IN KIND
The Directors did not receive any benefits in kind, either in the year ended 31 December 2014, or in the year ended 31
December 2013.
BONUSES
There were no bonuses payable either for the year ended 31 December 2014, or for the year ended 31 December 2013.
SHARE OPTION INCENTIVES
Directors held options as follows. Further details of options are disclosed in note 13.
At beginning
of year
Granted
in period
Cancelled
in period
At end
of period
Exercise
price
Jacques Vaillancourt
Laurence Read
Alastair Ford
Alastair Ford
-
-
-
18,292
105,000
185,000
210,000
-
-
-
-
-
105,000
185,000
210,000
18,292
7.89p
7.89p
7.89p
82.00p
For and on behalf of the Board
Jacques Vaillancourt
Director
4 June 2015
11 Mineral & Financial Investments Limited
REPORT OF THE INDEPENDENT AUDITOR
TO THE MEMBERS OF MINERAL & FINANCIAL INVESTMENTS LIMITED
FOR THE YEAR ENDED 31 December 2014
We have audited the financial statements of Mineral & Financial Investments Limited for the year ended 31 December
2014 which comprise the statement of comprehensive income, the statement of financial position, the statement of
changes in equity, the statement of cash flows and the related notes. The financial reporting framework that has been
applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the
European Union.
This report is made solely to the Company’s members, as a body. Our audit work has been undertaken so that we might
state to the Company’s members those matters we are required to state to them in an auditor's report and for no other
purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the
Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS
As explained more fully in the Directors’ Responsibilities Statement set out on page 8, the directors are responsible for
the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is
to audit and express an opinion on the financial statements in accordance with applicable law and International
Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s
(APB’s) Ethical Standards for Auditors.
SCOPE OF THE AUDIT OF THE FINANCIAL STATEMENTS
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give
reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or
error. This includes an assessment of: whether the accounting policies are appropriate to the company's circumstances
and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates
made by the directors; and the overall presentation of the financial statements. In addition, we read all the financial and
non-financial information in the annual report to identify material inconsistencies with the audited financial statements. If
we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.
OPINION ON FINANCIAL STATEMENTS
In our opinion the financial statements:
give a true and fair view of the state of the Company's affairs as at 31 December 2014 and of the Company's profit for
the year then ended; and
the financial statements have been properly prepared in accordance with IFRS as adopted by the European Union.
Jonathan Bradley-Hoare
Senior Statutory Auditor
for and on behalf of Welbeck Associates
Statutory Auditor, Chartered Accountants
4 June 2015
30 Percy Street
London
W1T 2DB
12 Mineral & Financial Investments Limited
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 December 2014
Investment income
Net losses on disposal of investments
Net change in fair value of investments
Operating expenses
Operating profit/(loss)
Finance cost
Profit/(loss) before taxation
Taxation expense
Notes
2014
£’000
2013
£’000
2
(513)
991
480
(170)
310
(8)
302
-
3
(450)
22
(425)
(225)
(650)
(13)
(663)
-
3
10
5
Profit/(loss) for the year from continuing operations and total
comprehensive income, attributable to owners of the Company
302
(663)
Profit/(Loss) per share attributable to owners of the Company during
the year from continuing and total operations:
6
Pence
Pence
Basic (pence per share)
Diluted (pence per share)
2.2
2.1
(5.3)
(5.3)
The accompanying notes form an integral part of these financial statements
13 Mineral & Financial Investments Limited
STATEMENT OF FINANCIAL POSITION
AS AT 31 December 2014
CURRENT ASSETS
Investments held at fair value through profit or loss
Trade and other receivables
Cash and cash equivalents
CURRENT LIABILITIES
Trade and other payables
NET CURRENT ASSETS
NON-CURRENT LIABILITIES
Convertible unsecured loan notes
NET ASSETS
EQUITY
Share capital
Share premium
Loan note equity reserve
Share option reserve
Capital reserve
Retained earnings
Notes
7
8
9
10
11
12
2014
£’000
990
3
596
2013
£’000
469
16
797
1,589
1,282
40
40
55
55
1,549
1,227
169
169
161
161
1,380
1,066
2,882
4,537
85
12
15,736
(21,872)
2,882
4,537
85
-
15,736
(22,174)
Equity attributable to owners of the Company and total equity
1,380
1,066
The financial statements were approved by the Board and authorised for issue on 4 June 2015.
Jacques Vaillancourt
Director
Alastair Ford
Director
The accompanying notes form an integral part of these financial statements
14 Mineral & Financial Investments Limited
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 December 2014
Share
capital
£'000
Share
premium
£'000
Share option
reserve
£'000
Loan note
reserve
£'000
Capital
reserve
£'000
Accumulated
losses
£'000
Total
equity
£'000
At 1 January 2013
2,859
4,423
Loss for the year
Total comprehensive
expense for the year
Repayment of loan notes
−
−
−
−
−
−
Share issues
23
114
At 31 December 2013
2,882
4,537
Profit for the year
Total comprehensive
income for the year
Share options granted
−
−
−
−
−
−
At 31 December 2014
2,882
4,537
−
−
−
−
−
−
−
−
12
12
104
15,736
(21,511)
1,611
−
−
(19)
−
−
−
−
−
(663)
(663)
(663)
(663)
−
−
(19)
137
85
15,736
(22,174)
1,066
−
−
−
−
−
−
302
302
−
302
302
12
85
15,736
(21,872)
1,380
The accompanying notes form an integral part of these financial statements
15 Mineral & Financial Investments Limited
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 December 2014
OPERATING ACTIVITIES
Profit/(loss) before taxation
Adjustments for:
Share based payment expense
Loss on disposal of trading investments
Fair value gain on trading investments
Investment income
Finance costs
Operating cash flow before working capital changes
Decrease in trade and other receivables
(Decrease)/increase in trade and other payables
Net cash outflow from operating activities
INVESTING ACTIVITIES
Continuing operations:
Purchases of investments
Disposals of investments
Investment income
Net cash inflow from investing activities
FINANCING ACTIVITIES
Continuing operations:
Proceeds from share issues
Redemption of convertible loan notes
Net cash outflow from financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents as at 1 January
Cash and cash equivalents as at 31 December
2014
£’000
302
12
513
(991)
(2)
8
(158)
13
(15)
(160)
(398)
355
2
(41)
−
−
−
(201)
797
596
2013
£’000
(663)
−
450
(22)
(3)
13
(225)
1
26
(198)
(215)
743
3
531
137
(306)
(169)
164
633
797
The accompanying notes form an integral part of these financial statements
16 Mineral & Financial Investments Limited
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 December 2014
1
GENERAL INFORMATION
The Company was incorporated as a Corporation in the Cayman Islands which does not prescribe the adoption of
any particular accounting framework. The Board has therefore adopted International Financial Reporting
Standards as adopted by the European Union (IFRSs). The Company's shares are listed on the AIM market of
the London Stock Exchange.
The Company is an investment company, mainly investing in natural resources, minerals, metals, and oil and gas
projects. The registered office of the Company is as detailed in the Company Information on page 2.
2
PRINCIPAL ACCOUNTING POLICIES
BASIS OF PREPARATION
The financial statements have been prepared under the historical cost convention, and in accordance with
International Financial Reporting Standards (“IFRS”), and International Financial Reporting Interpretations
Committee (“IFRIC”) interpretations. All accounting standards and interpretations issued by the International
Accounting Standards Board and IFRIC effective for the periods covered by these financial statements have been
applied.
The principal accounting policies of the Company are set out below.
GOING CONCERN
The Directors have prepared cash flow forecasts through to 30 June 2016 which assume no significant
investment activity is undertaken unless sufficient funding is in place to undertake the investment activity. The
expenses of the Company's continuing operations are minimal and the cash flow forecasts demonstrate that the
Company is able to meet these liabilities as they fall due. On this basis, the Directors have a reasonable
expectation that the Company has adequate resources to continue operating for the foreseeable future. For this
reason they continue to adopt the going concern basis in preparing the Company’s financial statements.
KEY ESTIMATES AND ASSUMPTIONS
Estimates and assumptions used in preparing the financial statements are reviewed on an ongoing basis and are
based on historical experience and various other factors that are believed to be reasonable under the
circumstances. The results of these estimates and assumptions form the basis of making judgements about
carrying values of assets and liabilities that are not readily apparent from other sources:
SHARE BASED PAYMENTS
The calculation of the fair value of equity-settled share based awards and the resulting charge to the statement of
comprehensive income requires assumptions to be made regarding future events and market conditions. These
assumptions include the future volatility of the Company’s share price. These assumptions are then applied to a
recognised valuation model in order to calculate the fair value of the awards.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Group holds investments that have been designated as held at fair value through profit or loss on initial
recognition. Where practicable the Group determines the fair value of these financial instruments that are not
quoted (Level 3) using the most recent bid price at which a transaction has been carried out. These techniques
are significantly affected by certain key assumptions, such as market liquidity. Other valuation methodologies
such as discounted cash flow analysis assess estimates of future cash flows and it is important to recognise that
in that regard, the derived fair value estimates cannot always be substantiated by comparison with independent
markets and, in many cases, may not be capable of being realised immediately.
17 Mineral & Financial Investments Limited
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 December 2014
2
PRINCIPAL ACCOUNTING POLICIES (continued)
STATEMENT OF COMPLIANCE
The financial statements comply with IFRS as adopted by the European Union. At the date of authorisation of
these financial statements the following Standards and Interpretations affecting the Group, which have not been
applied in these financial statements, were in issue, but not yet effective. The company does not plan to adopt
these standards early.
• IFRS 9 Financial Instruments
• IFRS 15 Revenue from Contracts with Customers
• IFRS 11 (amendments) Accounting for Acquisitions of Interests in Joint Operations
• IAS 16 and IAS 38 (amendments) Clarification of Acceptable Methods of Depreciation and Amortisation
• IAS 19 (amendments) Defined Benefit Plans: Employee Contributions
• IAS 27 (amendments) Equity Method in Separate Financial Statements
• IFRS 10 and IAS 28 (amendments) Sale or Contribution of Assets between an Investor and its Associate or
Joint Venture
• Annual Improvements to IFRSs: 2010-2012 Amendments to: IFRS 2 Share-based Payment, IFRS 3 Business
Combinations, IFRS 8 Operating Segments, IFRS 13 Fair Value Measurement, IAS 16 Property, Plant and
Equipment, IAS 24 Related Party Disclosures and IAS 38 Intangible Assets
• Annual Improvements to IFRSs: 2011-2013 Amendments to: IFRS 3 Business Combinations, IFRS 13 Fair
Value Measurement and IAS 40 Investment Property
• Annual Improvements to IFRSs: 2012-2014 Cycle Amendments to: IFRS 5 Non-current Assets Held for Sale and
Discontinued Operations, IFRS 7 Financial Instruments: Disclosures, IAS 19 Employee Benefits and IAS 34
Interim Financial Reporting
The Directors anticipate that the adoption of the above Standards and Interpretations in future periods will have
little or no impact on the financial statements of the Company when the relevant Standards come into effect for
periods commencing on or after 1 January 2015.
18 Mineral & Financial Investments Limited
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 December 2014
2
PRINCIPAL ACCOUNTING POLICIES (continued)
INVESTMENT INCOME
Dividend income from financial assets at fair value through profit or loss is recognised in the statement of
comprehensive income on an ex-dividend basis. Interest on fixed interest debt securities is recognised using the
effective interest rate method.
TAXATION
Current income tax assets and/or liabilities comprise those obligations to, or claims from, fiscal authorities relating
to the current or prior reporting period, that are unpaid at the balance sheet date. They are calculated according to
the tax rates and tax laws applicable to the fiscal periods to which they relate, based on the taxable result for the
year. All changes to current tax assets or liabilities are recognised as a component of tax expense in the income
statement.
Deferred income taxes are calculated using the liability method on temporary differences. This involves the
comparison of the carrying amounts of assets and liabilities in the consolidated financial statements with their
respective tax bases. However, deferred tax is not provided on the initial recognition of goodwill, nor on the initial
recognition of an asset or liability, unless the related transaction is a business combination or affects tax or
accounting profit. In addition, tax losses available to be carried forward as well as other income tax credits to the
Company are assessed for recognition as deferred tax assets.
Deferred tax liabilities are always provided for in full. Deferred tax assets are recognised to the extent that it is
probable that they will be able to be offset against future taxable income. Deferred tax assets and liabilities are
calculated, without discounting, at tax rates that are expected to apply to their respective period of realisation,
provided they are enacted or substantively enacted at the balance sheet date.
Most changes in deferred tax assets or liabilities are recognised as a component of tax expense in the income
statement. Only changes in deferred tax assets or liabilities that relate to a change in value of assets or liabilities
that is charged directly to equity are charged or credited directly to equity.
FINANCIAL ASSETS
The Group's financial assets comprise investments held for trading, cash and cash equivalents and loans and
receivables, and are recognised in the Company’s statement of financial position when the Company becomes a
party to the contractual provisions of the instrument.
INVESTMENTS HELD AT FAIR VALUE THROUGH PROFIT OR LOSS
All short term investments are designated upon initial recognition as held at fair value through profit or loss
(FVTPL). Investment transactions are accounted for on a trade date basis. Assets are de-recognised at the trade
date of the disposal. Investments are initially measured at fair value plus incidental acquisition costs.
Subsequently, they are measured at fair value in accordance with IAS 39. This is either the bid price or the last
traded price, depending on the convention of the exchange on which the investment is quoted. The fair value of
the financial instruments in the balance sheet is based on the quoted bid price at the balance sheet date, with no
deduction for any estimated future selling cost. Unquoted investments are valued by the directors using primary
valuation techniques such as recent transactions, last price and net asset value. Changes in the fair value of
investments held at fair value through profit or loss and gains and losses on disposal are recognised in the
Statement of Comprehensive Income as “Net change in fair value of investments”.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise cash on hand and demand deposits, together with other short-term, highly
liquid investments that are readily convertible into known amounts of cash and which are subject to an
insignificant risk of changes in value.
LOANS AND RECEIVABLES
Loans and receivable from third parties are initially recognised at fair value and subsequently carried at amortised
cost using the effective interest rate method.
19 Mineral & Financial Investments Limited
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 December 2014
2
PRINCIPAL ACCOUNTING POLICIES (continued)
EQUITY
An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting
all of its liabilities. Equity instruments issued by the Company are recorded at the proceeds received net of direct
issue costs.
The share premium account represents premiums received on the initial issuing of the share capital. Any
transaction costs associated with the issuing of shares are deducted from share premium, net of any related
income tax benefits.
Shares to be issued represents the equity which the Company has committed to issue and which has been issued
subsequent to the year end.
The loan note reserve represents the value of the equity component of the nominal value of the loan notes issued.
The capital reserve represents amounts arising in connection with reverse acquisitions.
Retained earnings include all current and prior period results as disclosed in the statement of comprehensive
income together with the cumulative amount of share based expenses transferred to equity.
FINANCIAL LIABILITIES
Financial liabilities are recognised in the Company’s balance sheet when the Company becomes a party to the
contractual provisions of the instrument. All interest related charges are recognised as an expense in finance cost
in the income statement using the effective interest rate method.
The Company's financial liabilities comprise convertible loan notes, and trade and other payables.
The fair value of the liability portion of the convertible loan notes is determined using a market interest rate for an
equivalent non-convertible loan note. This amount is recorded as a liability on an amortised cost basis until
extinguished on conversion or maturity of the loan notes. The remainder of the proceeds is allocated to the
conversion option, which is recognised and included in shareholders’ equity, net of tax effects.
Trade payables are recognised initially at their fair value and subsequently measured at amortised cost less
settlement payments.
SHARE BASED PAYMENTS
The Company operates equity settled share based remuneration plans for the remuneration of its employees.
All services received in exchange for the grant of any share based remuneration are measured at their fair values.
These are indirectly determined by reference to the fair value of the share options awarded. Their value is
appraised at the grant date and excludes the impact of any non-market vesting conditions (for example,
profitability and sales growth targets).
Share based payments are ultimately recognised as an expense in the income statement with a corresponding
credit to retained earnings in equity, net of deferred tax where applicable. If vesting periods or other vesting
conditions apply, the expense is allocated over the vesting period, based on the best available estimate of the
number of share options expected to vest. Non-market vesting conditions are included in assumptions about the
number of options that are expected to become exercisable. Estimates are subsequently revised, if there is any
indication that the number of share options expected to vest differs from previous estimates. No adjustment is
made to the expense or share issue cost recognized in prior periods if fewer share options ultimately are exercised
than originally estimated.
Upon exercise of share options, the proceeds received net of any directly attributable transaction costs up to the
nominal value of the shares issued are allocated to share capital with any excess being recorded as share
premium.
Where share options are cancelled, this is treated as an acceleration of the vesting period of the options. The
amount that otherwise would have been recognised for services received over the remainder of the vesting period
is recognised immediately within profit or loss.
20 Mineral & Financial Investments Limited
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 December 2014
2
PRINCIPAL ACCOUNTING POLICIES (continued)
FOREIGN CURRENCIES
The Directors consider Sterling to be the currency that most faithfully represents the economic effects of the
underlying transactions, events and conditions. The financial statements are presented in Sterling, which is the
Company’s functional and presentation currency.
Foreign currency transactions are translated into Sterling using the exchange rates prevailing at the date of the
transactions. Foreign currency exchange gains and losses resulting from the settlement of such transactions and
from the translation of monetary assets and liabilities denominated in foreign currencies at year end exchange
rates are recognised in the income statement. Non-monetary items that are measured at historical costs in a
foreign currency are translated at the exchange rate at the date of the transaction. Non-monetary items that are
measured at fair value in a foreign currency are translated into the functional currency using the exchange rates at
the date when the fair value was determined.
SEGMENTAL REPORTING
A segment is a distinguishable component of the Company's activities from which it may earn revenues and incur
expenses, whose operating results are regularly reviewed by the Company's chief operating decision maker to
make decisions about the allocation of resources and assessment of performance and about which discrete
financial information is available.
As the chief operating decision maker reviews financial information for and makes decisions about the Company's
investment activities as a whole, the directors have identified a single operating segment, that of holding and
trading in investments in natural resources, minerals, metals, and oil and gas projects. The directors consider that
it would not be appropriate to disclose any geographical analysis of the Company’s investments.
3
OPERATING PROFIT/(LOSS)
Profit/(loss) from operations is arrived at after charging:
Investment management fee
Auditors' remuneration:
- fees payable to the Company's auditors and its
associates for the audit of the Company's financial
statements
2014
£’000
2013
£’000
6
13
11
13
21 Mineral & Financial Investments Limited
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 December 2014
4
EMPLOYEE REMUNERATION
The expense recognised for employee benefits is analysed below:
Wages and salaries
2014
£’000
69
69
2013
£’000
63
63
Details of Directors’ employee benefits expense are included in the Report on Remuneration on page 10.
Remuneration for key management of the Company, including amounts paid to Directors of the Company, is as
follows:
Short-term employee benefits
2014
£’000
69
69
2013
£’000
63
63
5
TAXATION
No provision has been made in respect of current taxation or deferred taxation as the Company is domiciled in the
Cayman Islands and no corporation tax is applicable.
6
EARNINGS PER SHARE
The basic and diluted earnings per share is calculated by dividing the profit/(loss) attributable to owners of the
Company by the weighted average number of ordinary shares in issue during the year.
Profit/(loss) attributable to owners of the Company
- Continuing and total operations
Weighted average number of shares for calculating basic
earnings per share
Weighted average number of shares for calculating fully diluted
earnings per share*
Profit/(loss) per share from continuing and total operations
- Basic (pence per share)
- Fully diluted (pence per share)
2014
£’000
302
2014
2013
£’000
(663)
2013
13,722,062
12,393,723
14,240,354
12,393,723
2014
pence
2.2
2.1
2013
pence
(5.3)
(5.3)
* The weighted average number of shares used for calculating the diluted loss per share for 2013 was the same
as that used for calculating the basic loss per share as the effect of exercise of the outstanding share options was
anti-dilutive.
22 Mineral & Financial Investments Limited
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 December 2014
7
INVESTMENTS HELD AT FAIR VALUE THROUGH PROFIT OR LOSS
1 January – Investments at fair value
Cost of investment purchases
Proceeds of investment disposals
Loss on disposal of investments
Fair value adjustment
31 December – Investments at fair value
Categorised as:
Level 1 - Quoted investments
Level 3 - Unquoted investments
2014
£’000
469
398
(355)
(513)
991
990
976
14
990
2013
£’000
1,425
215
(743)
(450)
22
469
381
88
469
The Company has adopted fair value measurements using the IFRS 7 fair value hierarchy
Categorisation within the hierarchy has been determined on the basis of the lowest level of input that is significant
to the fair value measurement of the relevant asset as follows:
Level 1 – valued using quoted prices in active markets for identical assets
Level 2 – valued by reference to valuation techniques using observable inputs other than quoted prices included
in Level 1.
Level 3 – valued by reference to valuation techniques using inputs that are not based on observable market
criteria.
LEVEL 3 investments
Reconciliation of Level 3 fair value measurement of investments
Brought forward
Purchases
Reclassified to Level 1
Fair value adjustment
Carried forward
2014
£’000
88
−
(60)
(14)
14
2013
£’000
444
−
−
(356)
88
Level 3 valuation techniques used by the Group are explained on page 18 (Fair value of financial instruments)
8
TRADE AND OTHER RECEIVABLES
Other receivables
Prepayments
Total
2014
£’000
−
3
3
2013
£’000
8
8
16
The fair value of trade and other receivables is considered by the Directors not to be materially different to
carrying amounts.
At the balance sheet date in 2014 and 2013 there were no trade receivables past due.
23 Mineral & Financial Investments Limited
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 December 2014
9
TRADE AND OTHER PAYABLES
Trade payables
Other payables
Accrued charges
Total
2014
£’000
12
5
23
40
2013
£’000
23
7
25
55
The fair value of trade and other payables is considered by the Directors not to be materially different to carrying
amounts.
10
CONVERTIBLE UNSECURED LOAN NOTES
The outstanding convertible loan notes are zero coupon, unsecured and unless previously purchased, redeemed
or converted they are redeemable at their principal amount between 31 December 2014 and 31 October 2015.
The net proceeds from the issue of the loan notes have been split between the liability element and an equity
component, representing the fair value of the embedded option to convert the liability into equity of the Company
as follows:
Liability component at 1 January
Repayment of loan notes
Equity component of loan notes repaid or converted
Interest charged
Liability component at 31 December
2014
£’000
161
−
−
161
8
169
2013
£’000
435
(306)
19
148
13
161
The interest charged during the period is calculated by applying an effective average interest rate of 10% to the
liability component for the period since the loan notes were issued.
The Directors estimate the fair value of the liability component of the loan notes at 31 December 2014 to be
approximately £169,000 (2013: £161,000). This fair value has been calculated by discounting the future cash
flows at the market rate of 10%.
24 Mineral & Financial Investments Limited
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 December 2014
11
SHARE CAPITAL
AUTHORISED
At 31 December 2013 and 31 December 2014
Ordinary shares of 1p each
Deferred shares of 24p each
ISSUED AND FULLY PAID
At 31 December 2012
Ordinary shares of 0.25p each
Share reorganisation:
Ordinary shares of 1p each
Deferred shares of 24p each
Ordinary shares issued in year
At 31 December 2013 and 31 December 2014:
Ordinary shares of 1p each
Deferred shares of 24p each
Number of
shares
Nominal
Value
£’000
160,000,000
35,000,000
1,600
8,400
10,000
1,143,506,254
2,859
11,435,062
11,435,062
2,287,000
13,722,062
11,435,062
114
2,745
23
137
2,745
2,882
On 12 April 2013 the share capital was reorganised with the effect that the shares were consolidated on a one
for one hundred basis into ordinary shares of 1p and deferred shares of 24p. The restricted rights of the
deferred shares are such that they have no economic value.
12
LOAN NOTE EQUITY RESERVE
Equity component of convertible loan notes at 1 January
Equity component of loan notes repaid or converted
Equity component of convertible loan notes at 31 December
2014
£’000
85
−
85
2013
£’000
104
(19)
85
25 Mineral & Financial Investments Limited
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 December 2014
13
SHARE OPTIONS
In November 2010 the Company granted 54,878 options to directors and employees. At the year end all these
options had vested and are exercisable at any time prior to the fifth anniversary of the date of grant.
On 26 June 2014 the Company granted 500,000 options to directors and employees, exercisable at 7.89p per
share. At the year end all these options had vested and are exercisable at any time prior to the fifth
anniversary of the date of grant.
The fair value of the options granted during the year was determined using the Black-Scholes pricing model.
The significant inputs to the model in respect of the options were as follows:
Date of grant
Share price at date of grant
Exercise price per share
No. of options
Risk free rate
Expected volatility
Life of option
Calculated fair value per share
26 June 2014
6.00p
7.89p
500,000
3.0%
50%
5 years
2.3264p
The share based payment charge for the year was £12,000 (2013: nil).
The movements on share options and their weighted average exercise price are as follows:
2014
2013
Weighted
average
exercise price
(pence)
82.00
7.89
−
15.22
Weighted
average
exercise price
(pence)
82.0
−
−
82.0
Number
54,878
−
−
54,878
Number
54,878
500,000
−
554,878
Outstanding at 1 January
Granted
Lapsed
Outstanding at 31 December
14
RISK MANAGEMENT OBJECTIVES AND POLICIES
The Company is exposed to a variety of financial risks which result from both its operating and investing
activities. The Company’s risk management is coordinated by the board of directors, and focuses on actively
securing the Company’s short to medium term cash flows by minimising the exposure to financial markets.
MARKET PRICE RISK
The Company’s exposure to market price risk mainly arises from potential movements in the fair value of its
investments. The Company manages this price risk within its long-term investment strategy to manage a
diversified exposure to the market. If each of the Company’s equity investments were to experience a rise or
fall of 5% in their fair value, this would result in the Company’s net asset value and statement of
comprehensive income increasing or decreasing by £49,000 ( 2013: £23,000).
FOREIGN CURRENCY RISK
The Company’s exposure to foreign currencies is limited to its investments which are quoted on overseas
stock markets in currencies other than Pounds Sterling and is not material.
26 Mineral & Financial Investments Limited
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 December 2014
14
RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)
CREDIT RISK
The Company's financial instruments, which are exposed to credit risk, are considered to be mainly cash and
cash equivalents and the Company’s receivables are not material. The credit risk for cash and cash
equivalents is not considered material since the counterparties are reputable banks.
The Company's exposure to credit risk is limited to the carrying amount of the financial assets recognised at
the balance sheet date, as summarised below:
Cash and cash equivalents
Other receivables
2014
£’000
596
−
596
2013
£’000
797
8
805
LIQUIDITY RISK
Liquidity risk is managed by means of ensuring sufficient cash and cash equivalents are held to meet the
Company’s payment obligations arising from administrative expenses.
CAPITAL RISK MANAGEMENT
The Company's objectives when managing capital are:
•
to safeguard the Company 's ability to continue as a going concern, so that it continues to provide
returns and benefits for shareholders;
to support the Company 's growth; and
to provide capital for the purpose of strengthening the Company 's risk management capability.
•
•
The Company actively and regularly reviews and manages its capital structure to ensure an optimal capital
structure and equity holder returns, taking into consideration the future capital requirements of the Company
and capital efficiency, prevailing and projected profitability, projected operating cash flows, projected capital
expenditures and projected strategic investment opportunities. Management regards total equity as capital
and reserves, for capital management purposes.
27 Mineral & Financial Investments Limited
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 December 2014
15
FINANCIAL INSTRUMENTS
FINANCIAL ASSETS BY CATEGORY
The IAS 39 categories of financial assets included in the balance sheet and the headings in which they are
included are as follows:
Financial assets:
Cash and cash equivalents
Investments held at fair value through profit and loss
2014
£'000
596
990
1,586
2013
£'000
797
469
1,266
FINANCIAL LIABILITIES BY CATEGORY
The IAS 39 categories of financial liability included in the balance sheet and the headings in which they are
included are as follows:
Financial liabilities at amortised cost:
Convertible unsecured loan notes
Trade and other payables
2014
£'000
169
12
181
2013
£’000
161
23
184
16
CONTINGENT LIABILITIES AND CAPITAL COMMITMENTS
There were no contingent liabilities or capital commitments at 31 December 2014 or 31 December 2013.
17
POST YEAR END EVENTS
There have been no material events since the year end.
18
RELATED PARTY TRANSACTIONS
Details of the directors’ remuneration and the options granted to directors are disclosed in the remuneration
report on page 10.
19
ULTIMATE CONTROLLING PARTY
The Directors do not consider there to be a single ultimate controlling party.