Cadence Minerals (AIM/NEX: KDNC) , has released its Half Year Report for the six months to 30 June 2020.
Operating Highlights
Whilst there was little by way of new news in the announcement, the report did highlight many of the achievements made during the period with an insightful overview of the macroeconomic backdrop facing the Company.
Iron Ore - Amapa
DEV, Cadence and Indo Sino Pty Ltd have continued a constructive dialogue with the secured the Bank Creditors of the Amapa iron ore mine, and the parties are currently negotiating the settlement terms as proposed by the Bank Creditors.
The remaining major precondition for Cadence to make its initial investment into Amapa requires DEV Mineração S.A's ("DEV") to reach a settlement agreement with the secured bank creditors ("Bank Creditors"). On completion of the conditions and the release of the Cadence escrow monies, Cadence will become a 20% shareholder in Amapa via its joint venture company which will own 99.9% of DEV.
Lithium - Bancora
Bancora Lithium (30% stake) was placed in lockdown in late March 2020 and the Company expects the pilot plant will remain closed until conditions are considered safe, and the Sonora Government lifts its restrictions.
Yangibana Rare Earths Project
The company highlights the progress made at the Yangibana Rare Earth Project (30% of 3 Mining Leases, 6 Exploration Licences) now includes an offtake agreement with a German Automotive Tier 1 supplier, Schaeffler technologies AG, with an obligation to supply a substantial volume of MREC over an initial period of 10 years and that CAPEX estimates for the project have reduced significantly to A$449m from A$517 based on the relocation of the Hydrometallurgical Plant to Pilbara.
European Metals Holdings
In June 2020, EMH European Metals advised that the Czech Ministry of the Environment had granted an updated Preliminary Mining Permit which is a necessary legal pre-qualification before obtaining a Final Mining Permit and guarantees EMH the priority right to apply for and obtain a Final Mining Area and a Final Mining Permit.
Financial Highlights
The Company reported a loss before taxation of £1.26m (1H19 : £0.29m) with a weighted basic loss per share of 1.336p (1H19: 0.331p).
As a result of unrealised FX differences, comprehensive loss for the period was £1.42 million (1H19: £0.24 million).
From a balance Sheet perspective, total assets of the group decreased from £18.77m on 31 December 2019 to £17.89m oas at 30 June 2020. Of this £17.89m, £0.37 million represent the market value of the investments at the period end.
However, overall borrowings were reduced from £2.98m at 31 December 2019 to £2.08m at 30 June 2020.
Importantly, the Balance Sheet remained strong with cash and cash equivalents of £2.38m as at the period end post the net cash outflow from operating activities of £0.67m.
Furthermore, the Company also raised £1.25 million of new funds (before expenses) from new and existing investors post period end on 21st August. These funds were raised for general working capital and to provide flexibility to the Company to repay loan notes from cash reserves rather than from its holdings in quoted investments.
Shares in Cadence have traded strongly over the past there months from lows of 9.85p in June to trading up 3% today to 12.63p following the release of first half results.
Outlook
The Company remarks that the impact of COVID-19 have been deep and fundamental to the operations of the business and that it finds the long-terms effects difficult to predict.
However, the various national and international stimulus packages have been beneficial to the Group.
In particular, the Company notes the stimulus packages in China have been particularly beneficial to the portfolio, particularly as the rapid increase in Iron Ore prices due to the worlds biggest consumer of industrial commodities running Blast Furnaces across China’s steel industry at 92% of capacity, which is above the 80-85% rates considered normal.
Currently, indicators of construction activity look strong remarked the Company and a pipeline of orders had already been building before the pandemic struck.
With this macroeconomic background, the directors of Cadence believe that the Company's investments have performed well.