Cadence Minerals delivers profitability for FY20
(KDNC ) said its strategic efforts to drive the value of its assets bore fruit in the year ended 31 December 2020 as the company turned over a net profit of £7.8 million.
The London-listed firm said it has continued to pursue its strategic objectives despite 2020 being ‘a year of turbulence’, resulting in the Company delivering both a net profit of £7.8m (2019: loss of £1.9m) and reporting considerable progress across its key investments.
As a result, the Company was able to repay all outstanding convertible debt by April 2021. The Group’s net assets at the end of the period was £22.09 million (FY19: £10.99 million) - this increase of approximately £11.1m reflects the profits and shares issued in the year.
Cadence said the specific commodities and minerals assets that it has invested in are undergoing a significant global resurgence due to factors such as the accelerated global vaccine rollout and the move towards electric vehicles (EVs) which are driving the cost of battery metals and component commodities such as lithium, nickel, cobalt and graphite.
CEO of Cadence Minerals, Kiran Morzaria, said he beleives the Company’s ‘diverse and complementary nature of investments is uniquely positioned, with downside risk protection and several potential scenarios which could create substantial value to the Company.’
Currently, Cadence is focused on its investments in the Amapa Iron Ore Project in Brazil which saw its first iron ore sale and shipment since 2015 in April, and in European Metals Holdings ("EMH"), whose strategy is to become a Czech based lithium and tin producer.
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 has 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.’
During the year, EMH’s Cinovec Project, which hosts the largest lithium Resource in Europe, has been significantly de-risked and is moving rapidly towards a final investment decision.
Cadence said the past financial year was marked primarily by the completion of an agreement with CEZ a.s., the Czech national power utility, by which CEZ became a 51% shareholder of the Project Company, Geomet and injected around €29 million into Cinovec.
Andrew Suckling, Cadence’s Non-Executive Chairman, said he envisions strong demand growth for the underlying commodities at the heart of the Cadence portfolio if legislated clean energy goals, EV production and infrastructure spending is executed and adopted globally.
“We continue to deliver on identifying opportunities in line with our investment strategy, and we believe the concentration of risk across a few key assets and commodities will bear fruit. Our investments have some downside protection, optionality and exposure to potentially significant upside. We look forward to continuing to actively assess investment opportunities as well as managing them actively and diligently,” added Kiran Morzaria.
In addition to its final results, Cadence also released a late morning statement in which it announced that Macarthur Minerals had made an application for additional tenure adjacent to the company’s flagship Lake Giles Iron Project in the Yilgarn region of Western Australia.
The tenure, which is adjacent to the Snark deposit of the Ularring Hematite Project, will support Macarthur's non-process infrastructure for its planned direct-shipping iron ore ("DSO") campaign, initially targeting mining of the Snark and Drabble Downs deposits at Lake Giles.
Addressing shareholders, CEO of Macarthur Minerals, Andrew Bruton commented: "Macarthur continues to advance mine and transport planning for a DSO mining operation at Ularring. This tenure application is another important step towards that objective.”
Cadence holds c.1% of the issued equity interest in Macarthur, which is an Australian mining exploration firm focused primarily on iron ore, nickel, lithium and gold in Western Australia.
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Cadence announced its first iron ore sale and shipment from Amapa since 2015 in April 2021.
Both this and the resultant earnings represent “a milestone of huge significance”. Looking ahead, Cadence said it believes that all parties are aligned ‘to complete and execute’ the agreement which will see Cadence Minerals become a 20% shareholder in Amapa.
The company said its sale from the unnamed customer, which is said to be one of the world's largest globally diversified natural resource companies, is a “clear signal” that the Amapa project in Brazil is very much back in business, with keen demand for its product.
Shares in Cadence Minerals have nearly doubled in value since the beginning of 2021. The stock was trading 2.61% higher at 29.5p during late morning trading following the news.
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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