In its 1H21 results, Cadence Minerals (KDNC ) told investors that its equity investments have performed ‘very well’, primarily driven by the performance of European Metals Holdings.
For the six months to 31 June 2021, its equity investments generated a total income of £3.54m resulting in profit before taxation of £2.84m for the six months ended June 2021.
‘At a macro-economic level, the first half of 2021 saw the continued global recovery from the physical demand shock from COVID-19 experienced in 2020,’ the mineral firm noted.
During the period, Cadence made a profit before taxation of £2.84m (six months ended 30 June 2020: loss of £1.40 million, the year ended 31 December 2020: profit of £7.82 million).
The Company stated that there was a weighted basic profit per share of 1.914p (six months ended 30 June 2020: loss of 1.521p, the year ended 31 December 2020: profit of 6.705p).
The total assets of Cadence rose from £22.61m as of 31 December 2020 to £25.37m while borrowings were reduced from £0.22 million at 31 December 2020 to zero at 30 June 2021.
During the period, the Company’s net cash outflow from operating activities was reported at £1.15 million, and its net cash position increased by £0.78 million to £1.39 million.
Cadence said ongoing monetary easing programmes, particularly those in the US, continued to support commodity prices and, in particular, iron ore prices in the first half of this year.
It said the accelerated transition and electrification of vehicles has increased lithium compound pricing, with the Benchmark Lithium Price Index up 85.3% on a year-to-date basis.
Operationally, the focus of the Company since the beginning of the year has been its investment into the Amapa Iron Ore Project, an investment which continues to be a priority.
The mineral exploration firm DEV Mineração S.A., working alongside Cadence and Indo Sino Pty Ltd, has been progressing with the redevelopment of Amapa in several key areas.
Despite delays in crystallising its investment in Amapa, which it said was as a result of the secured bank creditors' ‘internal bureaucratic process’, the Company has continued to move the Amapa Project forward which has included, amongst other things, the iron ore stockpile shipments commencing in March and the pre-feasibility studies starting soon after that.
By the end of June 2021, DEV Mineração S.A. ("DEV") had shipped three of the estimated four shipments of 58% iron ore required to net $10m profit at Amapa. It had also contracted to carry out logistical and shipping activities for third parties who have stockpiles held at its port.
To date, Cadence, alongside its partners at Amapa, Indo Sino Pte Ltd ("Indo Sino") and DEV, have completed an updated mineral resource statement increasing the total mineral resources by 21%. It is now advancing towards completing a pre-feasibility study at Amapa.
Addressing shareholders, Cadence Minerals said it believes The Amapa Project will give the business ‘an exceptional return on investment’ in the run-up to full production as well as an opportunity to become ‘a significant shareholder in a mid-tier iron ore producer.’
Cadence is also in the process of reviewing its privately held assets, in particular, its early-stage lithium prospects in north Australia. It believes these assets could be of ‘strategic importance’ given their proximity to the Finniss Project, owned by ASX listed Core Lithium.
The Company said it expects the demand-supply balance to remain ‘relatively tight for iron ore and lithium compounds in the medium term although there is still some residual uncertainty about how vaccine deployment and the policy and behavioural response to the newer, more infectious strains of COVID-19 will interact over the coming quarters.’
Reasons to KDNC
In September 2020, DEV, Cadence and Indo Sino Pty ("the Investors") agreed in principle to the settlement terms proposed by the secured bank creditors ("Bank Creditors").
The execution of a settlement agreement with the Bank Creditors would represent the satisfaction of Cadence's remaining major precondition to make its initial 20% investment in Amapa. On completion of the conditions and the release of the Cadence escrow monies, it will become a 20% shareholder in Amapa via its JV company, which will own 99.9% of DEV.
Amapá – 30% (once final agreement with bank creditors has been completed)
Candece plans to rehabilitate Amapá, including commissioning the studies required of bank finance, shipping of the iron ore from the stockpile and the restarting of full operations.
The historic mine plan would mean that Amapá would produce at steady-state production an estimated 4.4 Mt of 65% iron and 0.9 Mt of 62% iron per annum for approximately 14 years.
Cinovec – 16%
Cadence holds around 12% of the equity in European Metals, which, through its subsidiary, Geomet, controls the exploration licences awarded for the Czeach Cinovec Lithium Project.
Cinovec, which is the largest hard rock lithium deposit in Europe, is strategically located to produce lithium for Europe with the goal of contributing to a sustainable supply chain for a world leading centre for electric vehicle development and manufacture in Europe.
Diego Pavia, CEO of EIT InnoEnergy, said he views Cinovec as “critical” to the development of Europe's energy storage industry and in meeting the EU's climate goals of electrification of mobility and large-scale development of renewable energy storage.
Last week, the ongoing nineteen-hole resource drilling programme at the Cinovec Project returned strong drilling results. Cadence’s Chief Executive, Kiran Morzaria told investors that the encouraging results ‘serve to highlight the overall quality of the Cinovec project.’
Yangibana – 30%
Last year, Cadence unveiled ‘outstanding’ rare earth oxide grades in a report which highlighted positive drilling results at the Yangibana rare earth project in Australia, exceeding its expectations for its planned 20,000 metre 2020 exploration drill program.
Cadence, which owns 30% of three mining leases and six exploration licences which form part of the Yangibana Rare Earth Deposit, expects to advance the programme until Q420.
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