MINERAL & FINANCIAL INVESTMENTS LIMITED
Annual Report and Financial Statements
for the year ended 31 December 2015
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 2015
Dear Shareholders,
I am pleased to present the results of your Company for the year ended 31 December 2015.
It was a disappointing year for Mineral and Financial’s net asset value, which ended the calendar year at 6.5p per
share. This masks some very significant advances made laying the foundation for your company’s next steps
forward. The strategy that your board has put in place calls for Mineral and Financial to be an investor and financier
of natural resource companies, with a particular emphasis on mining companies.
The decline in the NAV is due in part to weakness in the metals and mining sector, which I will touch on briefly later,
but most significantly to our largest current investment, CAP Energy. This investment is an energy exploration
company with assets offshore West Africa. Cap Energy chose to re-list itself on a less liquid and more opaque stock
market as its strategy no longer required access to capital markets. This caused investors to sell down the stock
from 155p to 80p. This decline represents 2.3p of the 3.5p (i.e. 65%) of the decline in our NAV. We are keeping
very close to the situation and, in our opinion, this investment’s fundamentals have significantly improved due to
enormous hydrocarbon discoveries on the neighboring blocks and the Company completing 3D seismic surveys and
advancing various joint venture partnership discussions. Although weaker oil prices and the re-listing on a tertiary
exchange have overshadowed these improvements, we nevertheless expect that there should be short to mid-term
developments that would catalyse the value of this investment.
The metals and mining sector underperformed in 2015 due to continued concerns that demand from important
economies, such as China, will be insufficient to drive metal prices higher. We contend that the driver to most metal
prices in the upcoming years will be constrained supply, due to insufficient capital and thus exploration for the past
several years.
We have made our first strategic investment in TH Crestgate GmbH, a Swiss holding Company that has acquired
three attractive prospects from a financially challenged Company. Two of these projects have already been optioned
out to Ferrum Crescent. TH Crestgate is currently evaluating various options for the third polymetalic project located
in Portugal.
During this past year we have strengthened the Company’s balance sheet by retiring £159,000 of convertible notes,
leaving the company essentially debt free, and thus financially stronger. We continue to work with the management
of certain legacy investments with the intention of ensuring that we can exit these investments with gains.
We believe that 2016 will be a year that will begin the clear definition of Mineral and Financial Investments’ new
direction. This path will lead to the kind of returns we expect from the Company’s assets for its shareholders.
Jacques Vaillancourt, CFA
Executive Chairman
21 June 2016
www.mineralandfinancial.com
4
Mineral & Financial Investments Limited
CHIEF INVESTMENT OFFICER’S REVIEW
FOR THE YEAR ENDED 31 December 2015
Although we are now beginning to see an improvement in sentiment in the mining and commodities sectors, during
the period in question - the year to the end of December - activity on the markets remained decidedly muted.
For that reason the company continued to keep a significant portion of its portfolio in cash over the course of 2015,
varying the proportions throughout the year but never reducing the cash position to less than 25% of net assets.
With that backstop in place the company adopted a cautious approach to the management of the tactical portfolio,
although there was a significant advance in our strategic portfolio as we conducted our first transaction and took a
significant stake in TH Crestgate, an unlisted vehicle with base metals assets in the Iberian peninsula.
Post the period end there has been a revival of activity in mining and commodities, and it was gratifying to see gold
push back through US$1,300 an ounce on 16 June 2016.
Accordingly the company has made some adjustments to its equity portfolio, and where applicable these are noted in
the commentary below.
TH Crestgate GmbH
The cornerstone of the strategic investment portfolio is currently TH Crestgate, which holds the Toral zinc-lead asset
in Spain and the Lagoa Salgado zinc-lead asset in Portugal. Work on these projects has been continuing on a small
scale on the ground as Crestgate has looked to add value with a minimum of outlay while markets remained hostile to
junior mining projects. In addition, Crestgate has signed an option agreement with Ferrum Crescent over the Toral
property, and Ferrum Crescent is currently conducting detailed due diligence. The company awaits the outcome with
interest.
ETF Portfolio
Gold
The company’s gold ETF maintained its value throughout the latter part of 2015 as gold steadied at around US$1,200
after a shaky start to the year. During that time the gold ETF continued to represent between 4% and 5% of the
company’s investment portfolio, depending on market fluctuations, but at the last net asset value update, for the
quarter to March 2016, that had risen to around 5.5% on renewed strength in the gold price. We expect this price
strength to continue, at least in the short-to-medium term, as uncertainties surrounding the Fed’s plans to raise rates
continues, although some of the market uncertainty that has given rise to the recent rally is now past, with the
conclusion of the Brexit debate.
Zinc
It was interesting to see that at a recent conference in Miami hosted by Bank of America Merill Lynch analysts came
out strongly in support of zinc. The thinking is straightforward enough: out of all the major commodities, zinc has had
the lowest production growth in recent years. This means that supply is more limited and that demand is likely to rise.
We are already seeing some evidence of this in the market. While 2015 was largely flat for our zinc ETF, there was a
sharp uptick post the period end, in the first quarter to March 2016. At present the zinc ETF comprises around 5% of
our portfolio and we remain long-term zinc bulls, albeit that we already have significant exposure through our TH
Crestgate investment.
Platinum
According to analysis by SFA Oxford, the platinum market is likely to be in deficit to the tune of 455,000 ounces this
year. This forecast deficit is higher than had been previously anticipated as supply continues to fall short of
expectations, while demand is increasing. During the first quarter of this year, platinum supply fell by 11% when
compared to output a year ago. Meanwhile, global demand rose by 10% quarter-on-quarter, according to SFA Oxford.
Nonetheless, it has taken time for the platinum price to respond as producer inventories have built and demand from
specific sectors like automobiles and jewellery has remained flat. Our exposure to platinum is slightly lower than to
zinc and gold, representing about 3.5% of the portfolio.
Rhodium
The Company traded out of its position in rhodium during the first quarter of 2016 and no longer holds a significant
interest in this commodity
Cap Energy
We continue to be encouraged by the levels of oil industry activity off-shore West Africa in the vicinity of Cap Energy’s
Guinea-Bissau assets, albeit that the oil price has weakened over the past couple of years. Cap Energy has some
extremely promising acreage and we look forward to receiving further updates as to progress in due course.
5
Mineral & Financial Investments Limited
CHIEF INVESTMENT OFFICER’S REVIEW
FOR THE YEAR ENDED 31 December 2015
Glencore
Glencore’s share price suffered in 2015 on a negative turn in sentiment towards the copper price. In 2016, however,
that process has gone into reverse as the impact of asset sales and refinancing have rebuilt investor confidence.
Accordingly the value of our Glencore holding has almost doubled since the start of the year, albeit that it had fallen
pretty sharply the year before. Glencore continues to be one of the dominant players in the mining sector and poised
for further recovery as the outlook for the sector continues to improve. The holding accounts for around 2% of the
Company’s portfolio.
Anglo Pacific
In many ways Anglo Pacific is a counter-intuitive mining investment, wedded as it is to the idea of mining coal for sale
to the power generation industry. But while that idea might be out of fashion in the West, it still has a lot of traction in
the Middle East, the Far East, and Africa. Anglo Pacific’s coal royalties continue to generate cash for the company.
The shares enjoyed mixed fortunes during 2015, but since the start of the year have risen by more than 25%.
Toro Gold
Toro Gold is currently raising funds for the development and construction of its Mako Gold project in Senegal, after
several years of development work as a private company. A listing on a recognised market is contemplated in due
course, although the precise timing of that has yet to be nailed down. Mineral & Financial is encouraged to see Toro
continuing to make progress through what have been some very tricky market conditions.
Sutherland Health
The Company’s stake in Sutherland Health remains non-core, and discussions are ongoing in regard to its ability to
secure an orderly exit.
UMC Energy
The Company disposed of its position in UMC during the first quarter of 2016.
Milamber
The Company continues to view its investment in Milamber Ventures as non-core and will seek an exit at an
appropriate juncture.
Alastair Ford
Chief Investment Officer
21 June 2016
6
Mineral & Financial Investments Limited
STRATEGIC REPORT
FOR THE YEAR ENDED 31 December 2015
The Directors present their Strategic Report on the Company for the year ended 31 December 2015.
RESULTS
The Group made a loss after taxation of £496,000 (2014: Profit of £302,000). The Directors do not propose a
dividend (2014: £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
31 December
31 December
31 December
2012012012015555
31 December
31 December
31 December
31 December
2012012012014444
Change %
Change %
Change %
Change %
Net asset value
£909,000
£1,380,000
Net asset value – fully diluted per share
Closing share price
Share price discount to net asset value –
fully diluted
Market capitalisation
6.5p
5.7p
(11%)
£807,000
-34%
-35%
-26%
10.0p
7.7p
(23%)
£1,063,000
-24%
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 2017 which assumes 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, CFA
Director
21 June 2016
7
Mineral & Financial Investments Limited
DIRECTORS’ REPORT
FOR THE YEAR ENDED 31 December 2015
The Directors present their annual report together with the audited financial statements for the year ended 31
December 2015.
PRINCIPAL ACTIVITY
During the year the Company continued to act as an investment company.
The Company's 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 focuses on providing new capital for mining companies that require finance for their
projects.
Investments may be 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 has 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 17 June 2016 were as follows:
Vidacos Nominees Limited
*Mount Everest Finance SA
Barclayshare Nominees Limited
Hargreaves Lansdown (Nominees)
TD Direct Investing Nominees (Europe) Limited
Share Nominees Ltd
*Jacques Vaillancourt is the sole shareholder of Mount Everest Finance SA
Ordinary shares of
1p each
number
3,750,000
3,107,000
625,995
599,845
467,894
454,257
Percentage
of capital
%
26.5%
22.6%
4.5%
4.3%
3.3%
3.2%
8
Mineral & Financial Investments Limited
DIRECTORS’ REPORT
FOR THE YEAR ENDED 31 December 2015
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 has 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 judgments 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, CFA
Director
21 June 2016
9
Mineral & Financial Investments Limited
CORPORATE GOVERNANCE REPORT
FOR THE YEAR ENDED 31 December 2015
The requirements of the combined code of corporate governance are not mandatory for companies traded on AIM.
However, the Directors recognize 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 2015
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 2015555
Year ending 31 December 201
31 December 201
31 December 201
Year ending
Year ending
Salary
and fees
£'000
Pension
£’000
Total
£'000
Year ending
31 December 2014444
Year ending 31 December 201
31 December 201
31 December 201
Year ending
Year ending
Salary
and fees
£'000
Pension
£'000
Total
£’000
Jacques Vaillancourt
Alastair Ford
Laurence Read
25
24
18
67
-
-
-
-
25
24
18
67
25
26
18
69
-
-
-
-
25
26
18
69
PENSIONS
No pension contributions were paid in respect of the directors for the year ended 31 December 2015, or for the year
ended 31 December 2014.
BENEFITS IN KIND
The Directors did not receive any benefits in kind, either in the year ended 31 December 2015, or in the year ended 31
December 2014.
BONUSES
There were no bonuses payable either for the year ended 31 December 2015, or for the year ended 31 December 2014.
SHARE OPTION INCENTIVES
Directors held options as follows. Further details of options are disclosed in note 13.
At beginning
of year
Granted
in period
Lapsed
in period
At end
of period
Exercise
price
Jacques Vaillancourt
Laurence Read
Alastair Ford
Alastair Ford
105,000
185,000
210,000
18,292
-
-
-
-
-
-
-
(18,292)
105,000
185,000
210,000
-
7.89p
7.89p
7.89p
-
For and on behalf of the Board
Jacques Vaillancourt, CFA
Director
21 June 2016
11 Mineral & Financial Investments Limited
REPORT OF THE INDEPENDENT AUDITOR
TO THE MEMBERS OF MINERAL & FINANCIAL INVESTMENTS LIMITED
FOR THE YEAR ENDED 31 December 2015
We have audited the financial statements of Mineral & Financial Investments Limited for the year ended 31 December
2015 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:
(cid:1) give a true and fair view of the state of the Company's affairs as at 31 December 2015 and of the Company's loss for
the year then ended; and
(cid:1) 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
21 June 2016
30 Percy Street
London
W1T 2DB
12 Mineral & Financial Investments Limited
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 December 2015
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
2015
£’000
2014
£’000
2
(131)
(186)
(315)
(181)
(496)
-
(496)
-
2
(513)
991
480
(170)
310
(8)
302
-
3
10
5
Profit/(loss) for the year from continuing operations and total
comprehensive income, attributable to owners of the Company
(496)
302
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)
(3.6)
(3.6)
2.2
2.1
The accompanying notes form an integral part of these financial statements
13 Mineral & Financial Investments Limited
STATEMENT OF FINANCIAL POSITION
AS AT 31 December 2015
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
2015
£’000
2014
£’000
7
8
9
10
11
12
691
6
263
960
41
41
990
3
596
1,589
40
40
919
1,549
10
10
169
169
909
1,380
2,885
4,559
6
12
15,736
(22,289)
2,882
4,537
85
12
15,736
(21,872)
Equity attributable to owners of the Company and total equity
909
1,380
The financial statements were approved by the Board and authorised for issue on 21 June 2016
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 2015
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 2014
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
Loss for the year
Total comprehensive
expense for the year
Repayment of loan notes
Share issues
−−−−
−−−−
−−−−
3
−−−−
−−−−
−−−−
22
−−−−
−−−−
−−−−
12
12
−−−−
−−−−
−−−−
−
At 31 December 2015
2,885
4,559
12
85
15,736
(22,174)
1,066
−−−−
−−−−
−−−−
−−−−
−−−−
−−−−
302
302
302
−−−−
302
12
85
15,736
(21,872)
1,380
−−−−
−−−−
(79)
−−−−
6
−−−−
−−−−
−−−−
−−−−
(496)
(496)
(496)
(496)
79
−−−−
−−−−
25
15,736
(22,289)
909
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 2015
OPERATING ACTIVITIES
Profit/(loss) before taxation
Adjustments for:
Share based payment expense
Loss on disposal of trading investments
Fair value loss/(gain) on trading investments
Investment income
Finance costs
Operating cash flow before working capital changes
(Increase)/decrease in trade and other receivables
Increase/(decrease) 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 outflow from investing activities
FINANCING ACTIVITIES
Continuing operations:
Redemption of convertible loan notes
Net cash outflow from financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents as at 1 January
2015
£’000
(496)
−−−−
131
186
(2)
−−−−
(181)
(3)
1
(183)
(151)
133
2
(16)
(134)
(134)
(333)
596
2014
£’000
302
12
513
(991)
(2)
8
(158)
13
(15)
(160)
(398)
355
2
(41)
−
−
(201)
797
Cash and cash equivalents as at 31 December
263
596
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 2015
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 2017 which assumes 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 judgments 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 recognize 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 realized immediately.
17 Mineral & Financial Investments Limited
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 December 2015
2
PRINCIPAL ACCOUNTING POLICIES (continued)
STATEMENT OF COMPLIANCE
The financial statements comply with IFRS as adopted by the European Union. The following new and revised
Standards and Interpretations have been adopted in the current period by the Group for the first time and do not
have a material impact on the group.
IFRS 12
Disclosures of interests in other entities
A number of new standards and amendments to standards and interpretations have been issued but are not yet
effective and not early adopted. None of these are expected to have a significant effect on the Company’s
financial statements.
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 recognized 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.
18 Mineral & Financial Investments Limited
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 December 2015
2
PRINCIPAL ACCOUNTING POLICIES (continued)
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.
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 represent 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.
19 Mineral & Financial Investments Limited
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 December 2015
2
PRINCIPAL ACCOUNTING POLICIES (continued)
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.
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.
20 Mineral & Financial Investments Limited
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 December 2015
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
4
EMPLOYEE REMUNERATION
The expense recognised for employee benefits is analysed below:
Wages and salaries
2015
£’000
−−−−
2014
£’000
6
10
10
2015
£’000
67
67
2014
£’000
69
69
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
5
TAXATION
2015
£’000
67
67
2014
£’000
69
69
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.
21 Mineral & Financial Investments Limited
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 December 2015
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.
(Loss)/profit 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*
(Loss)/profit per share from continuing and total operations
- Basic (pence per share)
- Fully diluted (pence per share)*
2015
£’000
(496)
2015
2014
£’000
302
2014
13,874,459
13,722,062
13,874,459
14,240,354
2015
pence
(3.6)
(3.6)
2014
pence
2.2
2.1
* The weighted average number of shares used for calculating the diluted loss per share for 2015 is the same as
that used for calculating the basic loss per share as the effect of exercise of the outstanding share options would
be anti-dilutive.
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
2015
£’000
990
151
(133)
(131)
(186)
691
176
515
691
2014
£’000
469
398
(355)
(513)
991
990
976
14
990
22 Mineral & Financial Investments Limited
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 December 2015
7
INVESTMENTS HELD AT FAIR VALUE THROUGH PROFIT OR LOSS (continued)
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
Reclassified to Level 3
Fair value adjustment
Carried forward
2015
£’000
14
151
−−−−
563
(213)
515
2014
£’000
88
−−−−
(60)
(14)
14
Level 3 valuation techniques used by the Group are explained on page 18 (Fair value of financial instruments)
8
TRADE AND OTHER RECEIVABLES
Prepayments
Total
2015
£’000
6
6
2014
£’000
3
3
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 2015 and 2014 there were no trade receivables past due.
9
TRADE AND OTHER PAYABLES
Trade payables
Other payables
Accrued charges
Total
2015
£’000
16
3
22
41
2014
£’000
12
5
23
40
The fair value of trade and other payables is considered by the Directors not to be materially different to carrying
amounts.
23 Mineral & Financial Investments Limited
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 December 2015
10
CONVERTIBLE UNSECURED LOAN NOTES
The outstanding convertible loan notes are zero coupon, unsecured and unless previously purchased or
converted they are redeemable at their principal amount at any time on or after 31 December 2014.
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
Conversion of loan notes
Interest charged
Liability component at 31 December
2015
£’000
169
(134)
(25)
10
−−−−
10
2014
£’000
161
−−−−
−−−−
161
8
169
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 2015 to be
approximately £10,000 (2014: £169,000). This fair value has been calculated by discounting the future cash
flows at the market rate of 10%.
11
SHARE CAPITAL
AUTHORISED
At 31 December 2014 and 31 December 2015
Ordinary shares of 1p each
Deferred shares of 24p each
ISSUED AND FULLY PAID
At 31 December 2013 and 31 December 2014
Ordinary shares of 1p each
Deferred shares of 24p each
Ordinary shares issued in year
At 31 December 2014 and 31 December 2015:
Ordinary shares of 1p each
Deferred shares of 24p each
Number of
shares
Nominal
Value
£’000
160,000,000
35,000,000
13,722,062
11,435,062
312,500
14,034,562
11,435,062
1,600
8,400
10,000
137
2,745
2,882
3
140
2,745
2,885
The restricted rights of the deferred shares are such that they have no economic value.
On 6 July 2015, 312,500 new ordinary shares were issued at 8p per share on the conversion of loan notes.
24 Mineral & Financial Investments Limited
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 December 2015
12
LOAN NOTE EQUITY RESERVE
Equity component of convertible loan notes at 1 January
Transfer to retained earnings on repayment of loan notes
Equity component of convertible loan notes at 31 December
2015
£’000
85
(79)
6
2014
£’000
85
−−−−
85
13
SHARE OPTIONS
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 £Nil (2014: 12,000).
The movements on share options and their weighted average exercise price are as follows:
2015
2014
Weighted
average
exercise price
(pence)
15.22
−−−−
82.00
Number
54,878
500,000
−
7.89
554,878
Weighted
average
exercise price
(pence)
82.00
7.89
−−−−
15.22
Number
554,878
−−−−
(54,878)
500,000
Outstanding at 1 January
Granted
Lapsed
Outstanding at 31 December
25 Mineral & Financial Investments Limited
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 December 2015
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 10% in their fair value, this would result in the Company’s net asset value and statement of
comprehensive income increasing or decreasing by £69,000 ( 2014: £99,000).
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.
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
2015
£’000
263
−−−−
263
2014
£’000
596
−−−−
596
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.
26 Mineral & Financial Investments Limited
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 December 2015
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
2015
£'000
263
691
954
2014
£'000
596
990
1,586
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
2015
£'000
10
19
29
2014
£'000
169
17
186
16
CONTINGENT LIABILITIES AND CAPITAL COMMITMENTS
There were no contingent liabilities or capital commitments at 31 December 2015 or 31 December 2014.
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.