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Mineral & Financial Investments exposed to a growing zinc resource

Snapshot

  • Mineral & Financial Investments invests in junior mining companies
  • Owns 75% share of Portugal's Lagoa Salgada project
  • Also runs a 'tactical portfolio' for short-term investments
zinc

Quick facts: Mineral & Financial Investment Limited

Price: 11 GBX

AIM:MAFL
Market: AIM
Market Cap: £3.85 m
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​​​​​​Focus on Portugal zinc project

In the space of six months the mineral resource at the Lagoa Salgada zinc project in Portugal has doubled from around 10mln tonnes to nearly 21mln tonnes.

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

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

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

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

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

World-class location

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

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

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

Resource upgrade

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

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

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

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

What the boss says: Chairman Jacques Vaillancourt

: “The north zone represents the vast majority of the current mineral resource estimate, yet Ascendant's management is highly confident it can expand and upgrade this deposit as well as the central and south zones."

Ascendant are, Vaillancourt said, “very optimistic” with the exploration potential on the 8 km gravity anomaly in the northern portion of the property and are applying the same diligence and strategy as successfully applied elsewhere.

“With the 2019 program exceeding our expectations thus far, we look forward to additional results to come over the summer months as well as providing an updated Mineral Resource in the third quarter."

Exposure to gold 

In the meantime, the Mineral and Financial investment portfolio has been boosted by the addition of new exposure to gold, and Vaillancourt and his chief operating officer Jamie Lessor continue to seek out new opportunities.

One of several ongoing projects is the evaluation of a potential opportunity in Latin America which may allow for Mineral and Financial to hold a secured short-term convertible bond with a “double-digit” coupon on a potential gold producer. Additionally, the company is evaluating some base metal opportunities in South America and Africa.

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

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

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

Inflexion points

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

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