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Cadence Minerals #KDNC – Project Updates, Corporate Update and Company Presentation and Q&A
Cadence Minerals (AIM/AQX: KDNC; OTC: KDNCY) is pleased to provide a series of project updates, and details of a new presentation and Q&A session.
Amapa Project
On 29 December 2021, Cadence announced the execution of the binding settlement agreement with the secured bank creditors, which allows us to vest our 20% interest in the large-scale Amapa iron ore mine, beneficiation plant, railway and private port (“Amapa Project”, “Amapa”).
We are pleased to announce that the completion and filing of the required contractual and regulatory documentation is proceeding as planned and we currently expect to finalise this in the first two weeks of next month.
Cadence has already begun work on the next investment phase to earn an additional 7% of Amapa for US$3.5 million. These funds will be primarily used to progress the pre-feasibility studies on the asset.
The pre-feasibility study (“PFS”) is progressing as expected, with the consulting engineers for the mine operations, ore reserve estimation, metallurgy, processing and shipping identified and in the process of being appointed. The rail logistic study has been completed in draft form, and is being reviewed.
In addition, to supplement the technical team at the Amapa, Tony Cau has been appointed as the pre-feasibility project director. Tony is a Civil Engineer with 40 years of global experience in the metals processing and engineering industry. Tony has worked for internationally recognised consulting and operational firms, including SNC-Lavalin, Bateman Engineering, BHP Billiton and Ausenco.
Litchfield and Picasso Projects
On 29 September 2021, Cadence announced that Castillo Copper (ASX/LON: CCZ) (“Castillo”) had entered into a 90-day option agreement with Lithium Technologies Pty Ltd (“LT”) and Lithium Supplies Pty Ltd (“LS”) in which Cadence owns a 31% shareholding, to acquire the Litchfield and Picasso Lithium Projects in the Northern Territory (NT) and Western Australia (WA) respectively.
LT and LS have informed us that the board of CCZ and LT & LS have mutually agreed to unwind the Option Agreement. As part of the break agreement terms, the A$50,000 deposit has been returned to CCZ.
Cadence CEO, Kiran Morzaria, commented: “On behalf of the board, I am pleased to advise shareholders that the filing of the contractual and regulatory documentation pertaining to the Amapa bank settlement agreement is proceeding as planned. Work has already started on the next investment phase to take Cadence up to 27% ownership of Amapa.
“I would also like to take this opportunity to welcome Tony Cau to the Amapa Project. Tony’s experience will be invaluable to us as Amapa undergoes recommissioning, and he joins the asset at an exciting phase of its development.”
“In regard to the Litchfield and Picasso option with Castillo, given the recent increases in lithium compound pricing to over US$40,000 per tonne of battery grade lithium carbonate, and the pending analysis of the assay results, we see the unwinding of this option agreement as an opportunity for Cadence to extract a higher valuation for these prospective assets”
Presentation and Q&A Session
Further to the announcement on the 5 January 2020, the online presentation and Q&A session is available here.
In addition, an updated PowerPoint presentation is available on the Company’ website, https://www.cadenceminerals.com/
Share Incentive Vesting
On the 2 November 2020, the Company announced that, under the share incentive plan established in September 2014, it had conditionally granted up to 240,000 Ordinary Shares to each of the directors. These share awards were conditional on meeting performance conditions during the award period (“2021 SIP Awards”). 2021 SIP Awards would be transferred from the Employee Benefit Trust (“EBT”), with no New Ordinary Shares being issued to satisfy the 2021 SIP Awards.
The award period ran from November 2020 to December 2021 (“Award Period”). The 2021 SIP Awards were subject to the board achieving performance conditions which were in line with market practice. One of the conditions was met by the end of 2021 entitling each director to be awarded 80,000 shares from EBT. With this award two of the three performance conditions were met during the period and no further awards will be made in relation 2021 SIP Awards. Once the shares have been transferred from the EBT to the board the Company will make a Director / PDMR disclosure.
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For further information:
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Qualified Person
Kiran Morzaria B.Eng. (ACSM), MBA, has reviewed and approved the information contained in this announcement. Kiran holds a Bachelor of Engineering (Industrial Geology) from the Camborne School of Mines and an MBA (Finance) from CASS Business School.
Forward-Looking Statements:
Certain statements in this announcement are or may be deemed to be forward-looking statements. Forward-looking statements are identified by their use of terms and phrases such as ”believe” ”could” “should” ”envisage” ”estimate” ”intend” ”may” ”plan” ”will” or the negative of those variations or comparable expressions including references to assumptions. These forward-looking statements are not based on historical facts but rather on the Directors’ current expectations and assumptions regarding Cadence Minerals Plc’s future growth results of operations performance future capital and other expenditures (including the amount. nature and sources of funding thereof) competitive advantages business prospects and opportunities. Such forward-looking statements reflect the Directors’ current beliefs and assumptions and are based on information currently available to the Directors. Many factors could cause actual results to differ materially from the results discussed in the forward-looking statements including risks associated with vulnerability to general economic and business conditions competition environmental and other regulatory changes actions by governmental authorities the availability of capital markets reliance on key personnel uninsured and underinsured losses and other factors many of which are beyond the control of Cadence Minerals Plc. Although any forward-looking statements contained in this announcement are based upon what the Directors believe to be reasonable assumptions. Cadence Minerals Plc cannot assure investors that actual results will be consistent with such forward-looking statements.
Vox Markets – Cadence CEO Kiran Morzaria discusses a big milestone achievement at the Amapa Iron Ore Project
Kiran Morzaria, CEO of Cadence Minerals #KDNC discusses a big milestone achievement at the Amapa Iron Ore Project
He talks about the execution of the settlement agreement and vesting of Cadence Minerals’ initial $2.5m for 20% of the Amapa Iron Ore Project.
UK Investor Magazine – Cadence Minerals: A Small Company making a Big Difference in Amapa, Brazil
By Alan Green
On December 29, Cadence Minerals (AIM: KDNC), a mining investment company listed in London, announced that it had completed all the preconditions to invest into and acquire an initial 20% of the integrated Amapa iron mine, railway and port in North Eastern Brazil.
When we talked to Cadence CEO, Kiran Morzaria, via zoom on Christmas Eve just after the settlement agreement had been signed, he was understandably in good spirits. His home office is dominated by two framed pictures, one of the head gear at a mine and the second of the three miners drilling a narrow-vein ore body. Kiran relates that these pictures are from a mine that he helped restart and rehabilitate in 2008, and which remains in production, further extending its 100-year history. Morzaria relates the story:
“These images remind me of two key things; the first is that the right asset, proper jurisdiction, and right people make all the difference. The second is that however hard I am working here, there others working in far tougher conditions, so the least I can do is put in that extra mile and ensure we can move the asset forward for all our stakeholders.”
There is no doubt that the team involved in the Amapa transaction have put in the hard yards. The process started back in September 2018, when Cadence partnered with commodity trading firm Indo Sino to form a joint venture. Cadence and Indo Sino then engaged with thelocal authorities and commercial courts to acquire Amapa mine owner in administration, DEV Mineração S.A.
A plan was put forward by Cadence to bring the former Anglo American owned Amapa mine,railway and wholly owned port at Santana (complete with 1.39 Mt of iron ore in three stockpiles) out of administration and ultimately back into production. Naturally the process came with some unique challenges. Morzaria explains:
“The judicial restructuring plan was a tough process. Not only did it set some key legal precedents, it also faced challenges from competing investors. This delayed the creditors meeting by one week, and yet despite this, we got over 90% of the creditors, by value to approve our restructuring plan.”
The history of the Amapa iron ore mine goes back to its discovery and ownership by a Brazilian conglomerate, which it then packaged with the massive 6 billion tonne Minas-Rio iron ore deposit and sold on to Anglo American for US$5.5 billion. For Anglo, Amapa was a relatively small transaction, and was certainly not part of the company’s long term strategic focus and plan. As a result, Amapa was sold to Brazilian company Zamin Ferrous in 2013, but during the finalisation of this sale, the company’s wholly owned port suffered a landslide which curtailed exports. Zamin Ferrous then negotiated a lower price, but the absence of a port prevented any meaningful product export and consequently DEV went into administration.
Before its sale in 2013, Anglo American valued its 70% stake in Amapá at US$866 million (100% US$1.2 billion). Anglo impaired the asset in its 2012 Annual Accounts to US$462 million (100% US$660 million).
Given its history, to most smaller listed companies, the challenge of bringing Amapa back to life would in most cases have represented a bridge too far. However, Cadence saw an opportunity, as outlined by Morzaria:
“Once we understood the legal process in Brazil, we saw an opportunity for significant upside for our shareholders. The not inconsiderable technical and existential risks typically associated with developing a mineral resource asset were largely mitigated. The mineral resource was auditable, the mining and processing technology are established, the product mix is well known, and there is a well-trodden path to obtain the required operating licenses, with several key licenses being granted before our investment.”
“Moreover, and critically, although the asset is not a large one in terms of global production, it is very significant for the state of Amapa. Our estimates suggest that once we reach our production targets, it will represent some 3.5% of the state GDP and could contribute some 4,200 jobs to the local and national economy. These facts helped to focus support at local and governmental levels and ensured our efforts didn’t become ensnared in in red tape. A government working committee has also been set up to work with us to troubleshoot any critical issues along our path to production.”
The investment proposition to bring Amapa out of administration sees Cadence acquire a 27% interest by investing US$6 million over two stages in the JV company. The first stage is for20% of the JV, the consideration for which is US$2.5 million. The second stage of investment is for a further 7% of the JV for a consideration of US$3.5million. The funds for the first stage of investment are currently held in a judicial trust account of the commercial court of Sao Paulo.The agreement also gives Cadence a first right of refusal to increase its stake to 49%.
As the various pre-conditions set out by the commercial court of Sao Paulo were met, in 2020, DEV received permission to start shipping the iron ore stockpiled at Santana port, which immediately started generating cash. By the end of August 2021, DEV had shipped three cargoes of approximately 143,000 wet tonnes of iron ore. The net proceeds from shipment went to pay labour and small creditors, while also providing funds to invest into the recommissioning of the assets, the upgrading of the Mineral Resource Estimate and commencement of the pre-feasibility Study.
Move forward to December 2021, and with the preconditions set out by the courts met and satisfied, the final hurdle was to agree a settlement with the banks – no easy task giventhat the team were negotiating with different state owned and private banks, in two jurisdictions, with varying degrees of organizational complexity and internal compliance hurdles. Nonetheless,with Credit Committee approval announced in October 2021, the final settlement with the banks was agreed and signed in December, triggering the initial US $2.5 million investment and a 20% stake for Cadence in the Amapa project.
The final settlement is a remarkable achievement by any standards: in combination with the other unsecured creditors the settlement terms meant that DEV was now only paying 45 cents in the dollar.
After the completion of the feasibility study and project financing, the rehabilitation of the mine,railway and port is expected to take between one and half to two years, following which the mine plans to produce over 5 million tonnes of 65% iron ore. From an investor and shareholder perspective, the financials really highlight and put into perspective what Cadence has achieved here. Assuming that the targets are hit and a current 65% iron ore price (US$ 145 / tonne in Dec 2021) is achieved, gross revenues could be circa US$725 million per annum. With solid demand for iron ore showing little sign of slowing as we go into 2022, quite rightly Cadence shares should see a re rating as investors run the slide rule over the Amapa numbers.
While there is no doubt Amapa is a landmark achievement, the rest of the Cadence portfolio also continues to deliver impressive returns. Cornerstone stakes in projects such as the Cinovec Lithium and Tin Project via AIM listed European Metals Holdings (AIM: EMH) in the Czech republic generated a £3.54 million return in the first 6 months of the year, with pre- tax profits of £2.84 million.
In particular, Cinovec, owned by European Metals Holdings and Eastern European utility giant CEZ is set to become a major European and Global lithium supply hub to meet the boom in batteries and electric vehicles, with demand anticipated to grow exponentially in the coming years.
Cadence also has a range of other ‘passive’ investments, including several ASX listed lithium assets, plus joint ventures at the Yangibana Rare Earths project in Australia, the Sonora Lithium project in Mexico and a hard rock lithium exploration assets 2 km away from Core Lithium’s (ASX:CXO) mining projects in the Northern territories of Australia.
Despite this exceptionally impressive asset portfolio, along with other micro-cap investors and explorers, the sector malaise has seen Cadence shares drift during the second half of 2021, currently rating the company on a modest £32m market cap.
Nonetheless CEO Morzaria remains enthused by the opportunities he expects to materialise in 2022.
“Our shareholders have stuck with us over what has been a hugely frustrating period”
“The completion of the first phase at Amapa marks a huge achievement for everyone involved, and we are really excited about the possibilities in Brazil in 2022”
A recent visit to Amapá left a deep impression on Morzaria, who reported back to the markets in a live interview from the port at Santana.
“I was delighted to see the rapid progress on the ground, driven by a highly motivated local management team and staff. The rate of reconstruction and recommissioning work already completed gives our board huge confidence in what can be achieved next year.”
There is no doubt that bringing Amapá back to life has in cycling parlance represented a Tour de Brazil equivalent for Cadence. Regardless, Morzaria and his team have now completed the mountain section, and with several stage victories, look set for a great team result as they transition from micro-cap explorer and investor to mid-tier iron ore producer. Solid Cadence!
Cadence Minerals #KDNC – Interim Results
Cadence Minerals plc (AIM/NEX: KDNC) is pleased to announce its interim results for the six months ended 30 June 2021.
Highlights
The focus of the Company since the beginning of the year has been its investment into the Amapa Iron Ore Project (‘Amapa Project’). This investment continues to be our top priority which has involved finalising the settlement agreement with the secured bank creditors and the advancement of the pre-feasibility study on the asset. The delays in crystallising our investment are a result of the secured bank creditors’ internal bureaucratic process, which is required when settling a loan of this value and under the terms agreed. Nonetheless we have 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.
We are also in the process of reviewing our privately held assets, in particular, our early-stage lithium prospects in north Australia. We believe that these could be of some strategic importance given their proximity to the Finniss Project, owned by ASX listed Core Lithium.
During the period our equity investments have performed very well, primarily driven by the performance of European Metals Holdings. Our equity investments generated a total income of £3.54 million resulting in profit before taxation of £2.84 million 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. According to the World Bank Group, the global economy is set to expand some 5.6% in 2021, its most robust post-recession pace in 80 years. However, this recovery is expected to be uneven and primarily reflects sharp rebounds in some major economies – most notably the United States – driven by substantial fiscal support. These ongoing monetary easing programmes have continued to support commodity prices and, in particular iron ore in the first half of this year. In addition, 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.
After the period end, we saw a softening of iron ore and other commodities (although lithium compound pricing remains strong). We believe this is primarily driven by China’s protectionist policies, including the possible imposition of steel quotas, crackdowns on speculative trading and the potential spread of the COVID-19 Delta variant. We expect 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.
As outlined in our annual report and accounts, Cadence operates an investment strategy that includes both investments in private projects via a private equity model and investments in public equity. In both investment classes, we take either an active or passive role. We have reported on each class below.
Private Investments (Active)
The Amapa Iron Ore Project, Brazil
The Amapa Project is a large-scale open-pit iron ore mine with associated rail, port and beneficiation facilities that commenced operations in December 2007. In 2019, Cadence entered into a binding investment agreement to invest in and acquire up to 27% of the Amapa iron ore mine, beneficiation plant, railway and private port owned by DEV Mineração S.A (‘DEV’) (‘The Agreement’). The Agreement also gave Cadence a first right of refusal to increase its stake to 49%.
To acquire its 27% interest, Cadence will invest US$6 million over two stages in a joint venture (‘JV’) company. The first stage is for 20% of the JV, the consideration for which is US$2.5 million. The second stage of investment is for a further 7% of the JV for a consideration of US$3.5 million. The investments are wholly contingent on DEV delivering several key preconditions. The funds for the first stage of investment are currently held in a judicial trust account of the commercial court of Sao Paulo.
All of our shareholders are aware that the remaining major precondition for Cadence to make its first stage investment in the Amapa Project requires DEV and the investors (Cadence and Indo Sino via our JV company) to reach a settlement agreement with the secured bank creditors. As of the date of the publication of these interims, the investors, DEV, and the secured bank creditors have agreed on the principal terms of the settlement agreement, which include the quantum, timing and all other material terms. The final settlement agreement is in near-final form, and the secured bank creditors have either had credit committee approval or are awaiting it.
We understand that this process has been frustrating, given that we agreed on the principal terms of the settlement in September 2020, but this matter has been outside of our control. The alternative to the current agreed (in principle) settlement would be hugely detrimental to the secured bank creditors, nonetheless. We have a high degree of confidence that we will execute a settlement agreement and will be announced as soon as it is completed.
As of the end of August 2021, DEV had shipped three cargoes totalling approximately 143,000 wet tonnes of 58% iron ore. DEV is also contracted to carry out logistical and shipping activities for third parties who have stockpiles held at DEV’s port, which it has been doing since it completed its third shipment in May of this year. These third-party stockpiles are separate from the 1.25 million tonnes of 58% iron ore (+/- 10%) owned by DEV. At this point, DEV intends to continue to carry out these shipping activities for these third parties. This is because current shipping rates have increased dramatically (US$80–90 per tonne), which is reducing the profitability of shipping DEV’s material. We believe that these rates should normalise over the medium term; therefore, the shipping of DEV’s material will recommence at a later stage.
The first portion of the net revenues has been used to pay historic small and employee creditors. Approximately US$6 million of the net revenues will be used to begin recommissioning studies on the Amapa Project and to start maintenance and monitoring of the current tailing dam facilities. The remaining net revenues will provide working capital for the operations and will be used as payment against the outstanding amount due to the secured bank creditors.
After the period end, DEV was permitted to export a further US$10 million (after the deductions of all logistical, regulatory, shipping and sales costs) of iron ore from its stockpiles situated at its port in Santana, Amapa, Brazil. This authority is in addition to the first permission granted to DEV on 10 February 2021, in which it was permitted to ship an initial US$10 million (net of costs) of iron ore.
Work on the started earlier in the year on the Pre-feasibility Study (‘PFS’). DEV has appointed internationally accredited engineering and consulting firms to carry out the engineering and conditioning study on the beneficiation and processing plant. These firms will also review the power supply options for the mine and plant, particularly the possibility of connecting to the grid network, enabling the mine and the plant to be predominantly powered by low-cost renewable energy. In addition, PFS work has started on the railway with the inspection of some 193km of rail and associated infrastructure. Both of these studies, once complete, will form part of the PFS. In the coming months, we expect DEV to appoint a consulting and engineering firm to start work on the port studies and conduct a geotechnical investigation of the mine.
As previously announced in May of this year, DEV began tailing dam maintenance. DEV has now employed a civil engineer and two geotechnical consulting firms to advance the work programme, including monitoring, geotechnical stability testing and statutory reporting. The end goal is to ensure that the current dams will be suitable for future operations amid Brazil’s more stringent regulatory environment.
In addition to the PFS work, DEV has worked with Companhia Docas de Santana (‘CDSA’) to increase loading capacity at the public port. Together with CDSA, DEV has established and tested a process at CDSA’s port in Santana for loading a 45,000-tonne vessel with iron ore at Pier Two from the berth side. This operation was the first of its kind and will allow shipment of the DEV stockpile at a faster rate if required.
Lithium Technologies Pty Ltd and Lithium Suppliers Pty Ltd (‘LT’ and ‘LS’)
Cadence owns 25.85% of LT and LS, which owns or has applied for three prospective hard rock lithium assets in Australia and six exploration applications in Argentina.
With the increase in lithium compound pricing, we have seen renewed interest in hard rock lithium projects in Australia. Our assets are prospective for pegmatites and especially our Litchfield exploration licence, which is adjacent to Core Lithium’s Finniss Project. A feasibility study was completed on the Finniss Project, which shows a pre-tax net present value of AU$384 million.
Given the progress being made at the Finniss Project, we will be reviewing the targeting and fieldwork studies carried out in 2019 to determine if it is worth pursuing further exploration in our joint venture areas.
Private Investments (Passive)
Our two passive private investments consist of our 30% equity stake in five lithium concessions that form part of the Sonora Lithium Project and our 30% interest in three mining leases, six exploration licences and two general-purpose licences that form part of the Yangibana Rare Earth Project. Our joint venture partners for these assets are Bacanora Lithium and Hastings Technology Metals, respectively. Further details on the Sonora Lithium and Yangibana Rare Earth Projects can be found here and here, respectively.
Although Hastings Technology Minerals has progressed the development of the Yangibana Rare Earth project, most of this has been in relation to its wholly owned assets, with the only a change being reassessment of our joint venture mineral resources and reserves occurring in July 2021. There was no material difference in the recalculation of our portion of the resource and reserves; an updated summary can be found on our website here.
In May 2021, Bacanora Lithium and Ganfeng International Trading (Shanghai) Limited (‘Ganfeng’) entered into an agreement regarding the terms of a possible cash offer by Ganfeng for the entire issued share capital of Bacanora Lithium, other than that which it already owns, for 67.5 pence per Bacanora Lithium share (the ‘Possible Offer’). The preconditions to the Possible Offer are progressing, with the latest update provided here on 29 July 2021. The Possible Offer remains subject to certain other preconditions, including the Due Diligence Precondition. The satisfaction or waiver of the Due Diligence Precondition is at the sole discretion of Ganfeng’ s board.
As far as the Company is aware, the Possible Offer has no direct effect on our joint ventures. Should the cash offer be successful, it will be highly encouraging for the development of the project, given Ganfeng’s involvement in the development of the asset to date, their extensive experience in the lithium market and the fact that their holding company is the world’s third-largest (and China’s largest) lithium compounds producer.
Public Equity
The public equity investment segment includes both active and passive investments as part of our trading portfolio. The trading portfolio consists of investments in listed mining entities that the board believes possess attractive underlying assets. The focus is to invest in mining companies that are significantly undervalued by the market and where there is substantial upside potential through exploration success and/or the development of mining projects for commercial production. Ultimately, the aim is to make capital gains in the short to medium term. Investments are considered individually based on various criteria and are typically traded on the TSX, ASX, AIM or LSE.
During the period, our public equity investments generated an unrealised gain of £3.12 million and a realised gain of £0.42 million. The majority of these profits were derived from the sale of European Metals Holdings shares.
As of 30 June 2021, our public equity stakes consisted of the following:
| Company | Listing | Value £’000 | Type of Investment |
| European Metals Holdings Limited | (ASX & AIM: EMH) (NASDAQ: EMHXY) | 14,180 | Active |
| MacArthur Minerals Limited | (ASX: MIO) (TSX-V: MMS) | 327 | Passive |
| Celsius Resources | (ASX: CLA) | 103 | Passive |
| Eagle Mountain Mining Limited | (ASX: EM2) | 153 | Passive |
| Charger Metals NL | (ASX: CHR) | 109 | Passive |
| Miscellaneous | Various | 6 | Passive |
| Total | 14,878 |
European Metals Holdings Limited (‘European Metals’)
Cadence has held an investment in European Metals since June 2015. As of the period end, Cadence held approximately 9.7% of the Cinovec deposit in the Czech Republic through a direct holding in the share capital of European Metals that owns 100% of the exploration rights to the Cinovec lithium/tin deposit.
Cinovec hosts a globally significant hard rock lithium deposit with a total Indicated Mineral Resource of 372.4Mt at 0.45% Li2O and 0.04% Sn, and an Inferred Mineral Resource of 323.5Mt at 0.39% Li2O and 0.04% Sn, containing a combined 7.18 million tonnes of lithium carbonate equivalent and 263kt of tin (as reported on 28 November 2017). An initial Probable Ore Reserve of 34.5Mt at 0.65% Li2O and 0.09% Sn (as reported on 4 July 2017) had been declared to cover the first 20 years of mining. A projected output of 22,500tpa of lithium carbonate was reported on 11 July 2018.
The project has been significantly de-risked and is moving towards a final investment decision. European Metals has continued to progress the development of the assets across all the critical areas of the project. This includes further resource drilling to upgrade areas into measured resources and the completion of the locked cycle testing, which further supports the project’s credentials to produce battery-grade lithium carbonate and convert it to lithium hydroxide.
Trading Portfolio Public Equity (Passive)
Cadence’s passive investments are typically direct purchases of listed mining equities but may include other investment structures. The aim is to make capital gains in the short to medium term. Investments are considered individually based on a variety of criteria. Investments are typically traded on the TSX, ASX, AIM or LSE. During the period, we invested in a broader range of publicly listed investments and retained our stake in MacArthur Minerals Limited. Our trading portfolio generated a realised gain of £0.02 million over the period. A summary of our holdings is detailed in the table above.
Given that none of our trading portfolio investments represent more than 10% of our net assets and are below the relevant reporting thresholds in the applicable jurisdiction, we have determined that going forward, we will not republish regulatory announcements associated with these investments unless, of course, they become material. We will report on the performance of the trading portfolio investments via our annual and interim financial statements.
Financial Results
During the period, the Company made a profit before taxation of £2.84 million (six months ended 30 June 2020: loss of £1.40 million, the year ended 31 December 2020: profit of £7.82 million). 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 the Company increased from £22.61 million as of 31 December 2020 to £25.37 million. Borrowings were reduced from £0.22 million at 31 December 2020 to zero at 30 June 2021.
During the period, our net cash outflow from operating activities was £1.15 million, and our net cash position increased by £0.78 million to £1.39 million.
This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014.
For further information:
| Cadence Minerals plc | +44 (0) 7879 584153 |
| Andrew Suckling | |
| Kiran Morzaria | |
| WH Ireland Limited (NOMAD & Joint Broker) | +44 (0) 207 220 1666 |
| James Joyce | |
| Darshan Patel | |
| Novum Securities Limited (Joint Broker) | +44 (0) 207 399 9400 |
| Jon Belliss |
CADENCE MINERALS PLC
STATEMENT OF COMPREHENSIVE INCOME
FOR THE PERIOD ENDED 30 JUNE 2021
| Notes | Unaudited Period ended 30 June 2021 | Unaudited Period ended 30 June 2020 (restated) | Audited Year ended 31 December 2020 | |||
| £’000 | £’000 | £’000 | ||||
| Income | – | |||||
| Unrealised profit/(loss) on financial investments | 3,116 | (383) | 10,252 | |||
| Realised profit/(loss) on financial investments | 423 | (34) | 65 | |||
| Other income | – | – | 54 | |||
| 3,539 | (417) | 10,371 | ||||
| Share based payments | (197) | – | (57) | |||
| Other administrative expenses | (505) | (599) | (1,379) | |||
| Total administrative expenses | (702) | (599) | (1,436) | |||
| Operating profit/(loss) | 2,837 | (1,016) | 8,935 | |||
| Foreign exchange gains/(losses) | (21) | (181) | (820) | |||
| Finance income | 29 | 6 | ||||
| Finance cost | (4) | (199) | (298) | |||
| Profit/(loss) before taxation | 2,841 | (1,396) | 7,823 | |||
| Taxation | – | – | – | |||
| Profit/(loss) attributable to the equity holders of the Company | 2,841 | (1,396) | 7,823 | |||
| Total comprehensive profit/(loss) for the Period, attributable to the equity holders of the Company | 2,841 | (1,396) | 7,823 | |||
| Loss per share | ||||||
| Basic (pence per share) | 3 | 1.914 | (1.521) | 6.705 | ||
| Diluted (pence per share) | 3 | 1.814 | n/a | 6.609 |
CADENCE MINERALS PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE PERIOD ENDED 30 JUNE 2021
| Share capital | Share premium account | Share-based payment reserve | Retained earnings | Total equity | |
| £’000 | £’000 | £’000 | £’000 | £’000 | |
| Balance at 1 January 2020 (restated) | 1,471 | 30,357 | 1,383 | (22,225) | 10,986 |
| Transfer on lapse of warrants | – | – | (203) | 203 | – |
| Issue of share capital | 238 | 1,471 | – | – | 1,709 |
| Costs of share issue | – | (81) | – | – | (81) |
| Transactions with owners | 238 | 1,390 | (203) | 203 | 1,628 |
| Loss for the Period | – | – | – | (1,396) | (1,396) |
| Total comprehensive loss for the Period | – | – | – | (1,396) | (1,396) |
| Balance at 30 June 2020 (unaudited and restated) | 1,709 | 31,747 | 1,180 | (23,418) | 11,218 |
| Share based payments | – | – | 57 | – | 57 |
| Transfer on lapse of warrants | – | – | (1,166) | 1,166 | – |
| Transfer on exercise of warrants | – | – | (32) | 32 | – |
| Issue of share capital | 187 | 1,522 | – | – | 1,709 |
| Costs of share issue | – | (110) | – | – | (110) |
| Transactions with owners | 187 | 1,412 | (1,141) | 1,198 | 1,656 |
| Profit for the Period | – | – | – | 9,219 | 9,219 |
| Total comprehensive loss for the Period | – | – | – | 9,219 | 9,219 |
| Balance at 31 December 2020 | 1,896 | 33,159 | 39 | (13,001) | 22,093 |
| Share based payments | – | – | 197 | – | 197 |
| Transfer on exercise of warrants | – | – | (9) | 9 | – |
| Issue of share capital | 7 | 50 | – | – | 57 |
| Costs of share issue | – | (1) | – | – | (1) |
| Transactions with owners | 7 | 49 | 188 | 9 | 253 |
| Profit for the Period | – | – | – | 2,841 | 2,841 |
| Total comprehensive loss for the Period | – | – | – | 2,841 | 2,841 |
| Balance at 30 June 2020 (unaudited) | 1,903 | 33,208 | 227 | (10,151) | 25,187 |
CADENCE MINERALS PLC
STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2021
| Unaudited | Unaudited | Audited | ||||
| 30 June 2021 | 30 June 2020 (restated) | 31 December 2020 | ||||
| Assets | Notes | £’000 | £’000 | £’000 | ||
| Non-current | ||||||
| Financial Assets | 3,203 | 2,837 | 2,885 | |||
| Investment in associate | ||||||
| 3,203 | 2,837 | 2,885 | ||||
| Current assets | ||||||
| Trade and other receivables | 5,901 | 6,033 | 5,365 | |||
| Financial Assets | 14,878 | 4,222 | 13,761 | |||
| Cash and cash equivalents | 1,387 | 362 | 596 | |||
| Total current assets | 22,166 | 10,617 | 19,722 | |||
| Total assets | 25,369 | 13,454 | 22,607 | |||
| EQUITY AND LIABILITIES | ||||||
| Current liabilities | ||||||
| Trade and other payables | 182 | 158 | 295 | |||
| Borrowings | – | 2,078 | 219 | |||
| Total current liabilities and total liabilities | 182 | 2,236 | 514 | |||
| Equity | ||||||
| Share capital | 4 | 1,903 | 1,709 | 1,896 | ||
| Share premium | 33,208 | 31,747 | 33,159 | |||
| Share based payment reserve | 227 | 1,180 | 39 | |||
| Retained earnings | (10,151) | (23,418) | (13,001) | |||
| Total equity and liabilities | ||||||
| to owners of the Company | 25,187 | 11,218 | 22,093 | |||
| Total equity and liabilities | 25,369 | 13,454 | 22,607 | |||
CADENCE MINERALS PLC
CONSOLIDATED CASH FLOW STATEMENT
FOR THE PERIOD 30 JUNE 2021
| Unaudited Period ended | Unaudited Period ended | Audited Year ended | ||||
| 30 June 2021 | 30 June 2020 (restated) | 31 December 2020 | ||||
| £’000 | £’000 | £’000 | ||||
| Cash flows from operating activities | ||||||
| Operating profit/(loss) | 2,837 | (1,016) | 8,935 | |||
| Net realised/unrealised (profit)/loss on financial investments | (3,539) | 417 | (10,317) | |||
| Equity settled share-based payments | 197 | – | 57 | |||
| (Increase)/decrease in trade and other receivables | (536) | 111 | 32 | |||
| (Decrease) in trade and other payables | (113) | (185) | (68) | |||
| Net cash outflow from operating activities | (1,154) | (673) | (1,361) | |||
| Taxation | – | – | – | |||
| Cash flows from investing activities | ||||||
| Payments for current financial investments | (473) | – | (50) | |||
| Receipts on sale of current investments | 2,895 | 806 | 2,052 | |||
| Payments for non-current financial investments | (318) | (624) | (645) | |||
| Net cash inflow from investing activities | 2,104 | 182 | 1,357 | |||
| Cash flows from financing activities | ||||||
| Proceeds from issue of share capital | 57 | 1,295 | 2,723 | |||
| Share issue costs | (1) | (81) | (191) | |||
| Net loan repayments | (219) | (643) | (2,120) | |||
| Finance cost | (3) | (199) | (292) | |||
| Net cash (outflow)/inflow from financing activities | (166) | 372 | 120 | |||
| Net increase/(decrease) in cash and cash equivalents | 784 | (119) | 116 | |||
| Foreign exchange movements on cash and cash equivalents | 7 | – | (1) | |||
| Cash and cash equivalents at beginning of Period | 596 | 481 | 481 | |||
| Cash and cash equivalents at end of Period | 1,387 | 362 | 596 |
NOTES TO THE INTERIM REPORT
FOR THE PERIOD ENDED 30 JUNE 2021
1 BASIS OF PREPARATION
The interim financial statements have been prepared in accordance with applicable accounting standards and under the historical cost convention. The financial information set out in this interim report does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. The Group’s statutory financial statements for the year ended 31 December 2020 have been delivered to the Registrar of Companies. The auditor’s report on those financial statements was unqualified.
The principal accounting policies of the Group are consistent with those detailed in the 31 December 2020 financial statements, which are prepared in accordance with International Financial Reporting Standards as adopted by the European Union (adopted IFRSs).
PRIOR PERIOD RESTATEMENT
Cadence Minerals plc is an investment entity and its interests are held exclusively with a view to subsequent resale. Historically the Company adopted a consolidation policy which didn’t reflect the nature, purpose and cashflows of the entity. This policy has been amended and the periods prior to 31 December 2020 have been restated in recognition of the change in accounting policy in line with IAS 8.
All investments preciously wrongly classified have been reclassified as Financial Assets held at Fair Value through Profit and Loss (“FVPTL”). The prior year accounts have been restated as a result. Additionally, deposits have been reclassified from cash and cash equivalent to other debtors as it is not considered to be readily available. Full details of the restatement are included in the financial statements for the year ended 31 December 2020.
GOING CONCERN
The Directors have prepared cash flow forecasts for the Period ending 30 September 2022. The forecasts demonstrate that the Group has sufficient funds to allow it to continue in business for a period of at least twelve months from the date of approval of these financial statements. Accordingly, the accounts have been prepared on a going concern basis.
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results.
2 SEGMENTAL REPORTING
The Company operates a single primary activity to invest in businesses so as to generate a return for the shareholders.
3 PROFIT PER SHARE
The calculation of the loss per share is based on the loss attributable to ordinary shareholders divided by the weighted average number of shares in issue during the Period.
| Unaudited | Unaudited | Audited | |||
| six months ended | six months ended | year ended | |||
| 30 June 2021 | 30 June 2020 (restated) | 31 December 2020 | |||
| £’000 | £’000 | £’000 | |||
| Profit/(loss) on ordinary activities after tax (£’000) | 2,841 | (1,396) | 7,823 | ||
| Weighted average number of shares for calculating basic profit/loss per share | 148,420,359 | 91,777,913 | 116,675,272 | ||
| Share options and warrants exercisable | 8,198,405 | n/a | 1,698,405 | ||
| Weighted average number of shares for calculating diluted profit per share | 156,618,764 | n/a | 118,373,677 | ||
| Basic profit/(loss) per share (pence) | 1.914 | (1.521) | 6.705 | ||
| Diluted profit per share (pence) | 1.814 | n/a | 6.609 |
4 SHARE CAPITAL
| Unaudited | Unaudited | Audited | |||
| 30 June 2021 | 30 June 2020 | 31 December 2020 | |||
| £’000 | £’000 | £’000 | |||
| Allotted, issued and fully paid | |||||
| 173,619,050 deferred shares of 0.24p (30 June and 31 December 2020: 173,619,050) | 417 | 417 | 417 | ||
| 148,649,098 ordinary shares of 1p (30 June 2020 129,264,891, 31 December 2020: 147,949,098) | 1,486 | 1,292 | 1,479 | ||
| 1,903 | 1,709 | 1,896 |
Cadence Minerals #KDNC – Results for the year ended 31 December 2020
Cadence Minerals (AIM/NEX: KDNC; OTC: KDNCY) is pleased to announce its final results for the year ended 31 December 2020. A copy of the full results will be made available on the Company’s website at https://www.cadenceminerals.com/ and will be posted to shareholders today.
– Ends –
The information contained within this announcement is deemed by the Company to constitute inside information under the Market Abuse Regulation (EU) No. 596/2014.
For further information:
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Cadence Minerals plc |
+44 (0) 207 440 0647 |
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Andrew Suckling |
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Kiran Morzaria |
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WH Ireland Limited (NOMAD & Broker) |
+44 (0) 207 220 1666 |
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James Joyce |
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James Sinclair-Ford |
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CHAIRMAN’S STATEMENT
I am pleased to present the Company’s Annual Report and Audited Financial Statements for the year ended 31 December 2020.
In my previous statement to you as Chairman, I surmised that the economic contraction, whilst severe and turbulent, would hopefully recover rapidly due to global stimulus measures. Today, despite the persistent dislocations and disruptions of the global pandemic, this view is supported by several key metrics, including higher commodity prices.
On behalf of the Board of Directors (“Board”) and management, I wish to express our thanks and gratitude to all our service providers, consultants, advisors and most importantly to our shareholders for their support throughout a difficult year. Despite the unpredictable nature of the pandemic, the Board and the Company have been able to operate efficiently and successfully. We are well-positioned to transition back to our regular pre-COVID work schedule as and when that is permitted. Our sincere hope that all within our community have kept themselves and their families safe and well.
Without any specific order or priority, our Board wishes to congratulate the successes and achievements of our portfolio companies. Bacanora has successfully negotiated agreements with one of the Worlds biggest Lithium producers, European Metal Holdings has continued to develop Cinovec, the largest hard rock Lithium deposit in Europe, Macarthur Minerals has taken great strides forward with the Lake Giles Iron project and its respective BFS, and Hastings Technology Metals has been at the front and centre of the global focus on rare earth metals. While remaining as supportive shareholders to these companies, our Board remains focused on unlocking and accelerating the value across our entire portfolio. To this extent, despite the challenges thrown up by COVID in conducting thorough due diligence, we have continued to look for new investment opportunities to complement our geographic and geological spread.
The pandemic has provided new perspectives on developing our portfolio, none more so than at our key pending investment – the Amapa Iron Ore (“Amapa Project”) project in Brazil. The main priority for the Board has been following the processes and protocols outlined in the Judicial Review Procedure, which have been meticulously and publicly disclosed at every step of the journey. Our management team have maintained a patient and persistent approach, following what was always expected to be a protracted route to bring the mine and community back to life. Today, supported by a 21% increase in total mineral resources compared to the equivalent MRE published by Anglo American 2012 and with the global supply of iron ore still falling short of predicted global demand, the Amapa opportunity looks better than ever.
The unprecedented levels of global economic stimulus, combined with a focus on infrastructure and an overarching need for strategic supply chains for metals and minerals, suggests our portfolio is well-positioned to benefit. Commodity prices have responded to a rapid economic recovery, especially in China. If legislated clean energy goals, electric vehicle production and infrastructure spending is executed and adopted as announced by the incumbent administrations around the globe. In that case, we envisage strong demand growth for the underlying commodities at the heart of the Cadence portfolio. We do not predict prices, but it is worth noting that peak predictions often come at peak prices. As such, our focus on the long-term fundamentals of each commodity allows for a more sustainable and longer-term investment thesis.
While the challenges of the pandemic remain in focus, I would like to conclude by personally thanking our Cadence Community, management, fellow Board members, staff and partners and of course, all Shareholders for their continued support and confidence in the Company.
Andrew Suckling
Non-Executive Chairman, 29 June 2021
CHIEF EXECUTIVE OFFICER’S COMMENTARY
I am pleased to present the audited results for the year ended 31 December 2020. Alongside the financial statements and supporting notes, a full review of business activities during the year is provided within the Strategic Report.
Given the results presented for the period ended 31 December 20, they reflect a historical position in terms of the Company progress and its financial position, so we have included within the Strategic Report further information on key events post year-end.
Despite 2020 being a year of turbulence, Cadence has continued to pursue its strategic objectives because we believe that assets that are undervalued, de-risked, or have strategic advantages will outperform their peers in the long term. During 2020 this strategy bore fruit with the Company delivering both a net profit of £7.8 million (2019 loss of £1.9 million) and reporting considerable progress across its key investments. Furthermore, in 2020, the Company repaid the vast majority of its outstanding convertible debt and in April 2021 repaid it entirely.
The challenges faced with the onset of the COVID-19 pandemic earlier in 2020 presented the Company with some potentially large risks to its concentration of investments. In October 2020, the IMF stated that the total bill for the global pandemic would reach some $28tn (£21.5tn) in lost output. The rapid intervention by global governments with rate cuts, looser monetary policies and fiscal stimulus has certainly avoided a financial catastrophe, but at the same, increased demand for commodities. Historically the consequences of such events invariably see a strong recovery in commodity markets. This factor was clearly in evidence as 2020 progressed. Prices of commodities such as Iron Ore and Nickel and precious metals including Gold and Silver all increased in value.
In the wake of the sharp economic contractions in 2020, the IMF forecast that only China was expected to emerge with any economic growth during the year. 2021 is set to be a different story, however, and with the vaccine rollout accelerating globally, there are expectations for sharp recoveries across most leading economies. Added to this, the new $1.9tn stimulus package in the US from the Biden administration will see heavy investment into ageing US infrastructure. These factors should ensure sustained demand and pricing for iron ore and base metals.
There is also the revolution taking place within the automotive industry to consider. The move towards EV’s is accelerating rapidly, with a plethora of commitments from key automotive manufacturers such as Ford, Volvo, BMW and Jaguar to switch to electric-only production in the next few years. This move, of course, sounds the death knell for the internal combustion engine, but at the same time is driving the cost of battery metals and component commodities such as lithium, nickel, cobalt and graphite.
The net effect is that specific commodities and minerals assets that we have invested in are undergoing a significant global resurgence. I believe that our 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
Our portfolio has been focused on two main investments, and the first is the private Amapa Project. The terms of our investment and the judicial recovery plan were finalised in 2019. The key outstanding item for Cadence to complete its initial US$2 million (20%) investment in the Amapa Project is the execution of a settlement agreement with the secured bank creditors. During the year, we reached an agreement in principle with secured banks creditors. At the time of writing, we understand the secured creditors either have credit committee approval or are awaiting it. The final settlement agreement has been circulated and is with the respective legal teams for review.
Given the time it had taken for the secured bank creditors to obtain internal approval for the settlement agreement in February 2021, the Commercial Court of São Paulo (“the Court”) ruled that DEV Mineração S.A’s (“DEV”) the owner of the Amapa Project could commence the shipment of the iron ore stockpiles situated at DEV’s wholly-owned port in Santana, Amapa, Brazil. DEV was permitted to export sufficient iron ore to realise a US$10 million profit from the Amapa stockpiles at the port. As of the end of June 2021, DEV had shipped three of the estimated four shipments of 58% iron ore required to net US$ 10 million profit. DEV is also contracted to carry out logistical and shipping activities for third parties who have stockpiles held at DEV’s port.
Despite the lack of a settlement agreement, Cadence, our joint venture partners, Indo Sino Pte Ltd (“Indo Sino”), and DEV determined that it was essential to progress the Amapa Project. In this vein, we completed an updated mineral resource statement increasing the total mineral resources by 21%. In addition, we have commenced various other work streams which will enable us to complete and a pre-feasibility study.
As we have mentioned on numerous occasions, the opportunity to invest in such a project is rare within our industry, and we believe this project provides us with a potentially transformative asset for our Company. The Amapa Project gives Cadence the potential for an exceptional return on investment in the run-up to full production and an opportunity to become a significant shareholder in a mid-tier iron ore producer.
The second of our key investments is European Metals Holdings (“EMH”), whose strategy is to become a Czech based lithium and tin producer. During the year, EMH’s Cinovec Project has been significantly de-risked and is moving rapidly towards a final investment decision. The 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 approximately EUR 29 million into Cinovec. This agreement not only provides all necessary funding to move the Project to the final investment decision, but it also provides strong business and management support within the Czech Republic.
I would like to record my thanks to the team members at Cadence and our investee companies who have all worked incredibly hard to bring the Company and its investment to its present strong position. 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.
Kiran Morzaria
Chief Executive Officer, 29 June 2021
Link here for the full review and financial statements
Cadence Minerals CEO Kiran Morzaria talks to Directors Talk about the huge significance of the first Amapa iron ore shipment
Cadence Minerals #KDNC CEO Kiran Morzaria talks to Directors Talk about the huge significance of the first Amapa iron ore shipment
Cadence Minerals and the next Commodity Supercycle
There is little doubt that historians will conclude that the global impact of COVID-19 represents the worst crisis since the Great Depression. The pandemic is leaving deep and enduring scars on the global economy, taxing health and medical services to the limit, depriving children of education, while decimating sectors of commerce and industry and in particular leisure and travel.
But history has shown on numerous occasions that the indomitable human spirit has a remarkable capacity for survival and evolution amidst existential crises. As areas such as traditional High St retail and seem to be drawing to a close, sectors such as commodities and mining are booming thanks to a near perfect storm created in part by the COVID crisis.
In October 2020, the IMF stated that the total bill for the global pandemic would reach some $28tn (£21.5tn) in lost output. The rapid intervention by global Governments with rate cuts, looser monetary policies and fiscal stimulus have certainly avoided a financial catastrophe, but at the same time these actions have effectively weakened fiat currencies and increased demand for commodities.
Historically the consequences of such events invariably see a strong recovery in commodity markets. This factor was clearly in evidence as 2020 progressed, and as the COVID noose tightened, prices of commodities such as Iron Ore, Copper and Nickel, along with precious metals including Gold and Silver, all increased in value.
As a consequence, as 2020 progressed prices of commodities such as Iron Ore, Copper and Nickel, along with precious metals including Gold and Silver, all increased in value.
In the wake of the sharp economic contractions in 2020, the IMF forecast that only China was expected to emerge with any economic growth during the year. 2021 is set to be a different story however, and with the vaccine rollout accelerating globally, there are expectations for sharp recoveries across most of the leading economies. Added to this, the new $1.9tn stimulus package in the US from the Biden administration will see heavy investment into ageing US infrastructure. These factors should ensure sustained demand and pricing for iron ore and base metals.
There is also the revolution taking place within the automotive industry to consider. The move towards EV’s is accelerating rapidly, with a plethora of commitments from key automotive manufacturers such as Ford, Volvo, BMW and Jaguar to switch to electric only production in the next few years. This move of course sounds the death knell for the internal combustion engine, but at the same time is driving the cost of battery metals and component commodities such as lithium, nickel, cobalt and graphite
The net effect is that mining, specific commodities and minerals, along with the sector’s nebulous support service industries are undergoing a significant global resurgence. Projects considered uneconomical to develop, and that have remained dormant for years are returning to life, newly financed and fast tracked thanks to the array of modern desktop technologies, data and modelling tools.
Iron Ore
In a note published last December, Goldman Sachs outlined their expectations for another substantial deficit next year (27Mt, GSe), supported by a combination of gradually decelerating China steel demand growth, sharply re-accelerating demand for Western steel and tepid supply growth. GS added that the weighting of the 2021 deficit to the front half of the year points to fundamental support for a sustained price path higher over Q1 and Q2, revising near-term targets for the benchmark 62% iron ore price to 3M $140/t and 6M $150/t.
These numbers of course imply material upside longer term, and GS have also upgraded full year forecasts for 2021 to $120/t ($90/t previously) and for 2022 to $95/t ($75/t previously).
GS sees four core drivers supporting this bullish view:
- Chinese steel production has remained strong & production in 2021 remains supported by a healthy infrastructure and property project pipeline, alongside a resurgence in China’s manufacturing capex cycle and steel exports.
- With construction and heavy industry remaining relatively less affected by second-wave lockdowns, Western steel demand is also recovering ahead of expectations. Significant regional price strength in the US and Europe is likely to spur further blast furnace restarts (and hence iron demand) after an aggressive suspensions phase in 2020 contributed to the current steel supply shortfalls as demand recovers.
- Iron ore supply growth is likely to stagnate in 2021. The limited growth that exists next year is concentrated with Vale Brazil operations, which is why their recent substantive downgrade to production guidance has had such an outsized positive impact on price.
- Chinese mill iron ore inventories remain low, raising the prospect of restocking bursts through the year.
For Cadence Minerals, this bullish outlook for iron ore puts two very firm ticks in the box, firstly for what is widely regarded as the company’s flagship Amapa Iron Ore project in Brazil, and secondly the investment in ASX and TSX listed Macarthur Minerals, with whom Amapa shares numerous infrastructural and evolutionary similarities.
Amapa Project
Bringing a project the size and scale of Amapa back to life has as expected proved to be a complex and challenging process. Nonetheless, DEV Mineração, Cadence and Indo Sino Pty Ltd are reaching a legal settlement with the project creditors, and with the ruling in February by the Commercial Court of São Paulo that port operations and the shipment of iron ore stockpiles can begin, the company is set to take the first practical step towards bringing the project back to life, which will in turn bring benefits to the Amapa region in terms of employment, health and education.
Once the creditor settlement agreement has been signed, an initial $2.5m investment will be released from escrow, meaning that the Pedra Branca Alliance (Cadence & Indo Sino JV co) will own 99.9% of DEV, the owner of the entire Amapa mining and processing assets,. At this point Cadence will proportionately own 20% of Amapa. The next step will involve a further $3.5m investment following the granting of the necessary environmental licenses required to operate the mine, which will see Cadence move to a 27% stake, with an option to increase to 49% once project financing has been raised to complete recommissioning and commence production.
Last November Cadence completed an updated Mineral Resource Estimate for Amapa, which increased the 2012 Anglo American MRE estimate by 21% to 176.7 million tonnes (“Mt”) grading 39.7% Fe in the Indicated category. With a production capacity of 5.3Mt per annum, the survey also noted there was significant potential to increase the resource base after the completion of metallurgical and optimisation studies.
Lake Giles Iron Project
Cadence also has a stake (c1%) in ASX and TSX listed Macarthur Minerals, owner of the Lake Giles Iron Project near Kalgoorlie in Western Australia. The Lake Giles project consists of the Moonshine magnetite deposit and the Ularring hematite deposit, which together have an indicated Mineral Resource Estimate of 218Mt grading 27.5% Fe in the Indicated category.
Lake Giles and Amapa share many similarities in regard to facilities and production routes, and with the Feasibility Study already underway, Lake Giles has a 3.4 Mt per annum production target with potential to scale-up operations.
Lithium
A recent paper published by commodities expert Fastmarkets FB noted that global lithium supply was developing at accelerating pace due to strong and continually growing demand. In particular the demand for compounds used in lithium-ion (li-ion) batteries such as lithium carbonate and lithium hydroxide has prompted lithium producers to expand total production while diversifying their investments in different lithium operations to ramp up production and diminish asset risk.
Despite an effective over supply in 2018-2019 that saw a price moratorium and a 50% fall in the price of battery-grade lithium carbonate in China, the subsequent seismic shift to bring forward EV production and commitments from major automotive manufacturers around the world saw the price of Lithium in China surge to an 18 month high of $9450 per tonne in January 2021.
The Fastmarkets’ research team expects global lithium demand to grow to at least 1.1 million tonnes per year of lithium-carbonate equivalent (LCE) by 2025 from an expected 300,000 tonnes of LCE in 2019, with Global lithium producers set to boost output year on year to maintain pace with growing demand. Despite this, as can be seen from the table above the numbers still don’t add up, with massive shortfalls projected by Benchmark Intelligence in lithium and other key constituent metals by 2030.
Over 2018, China emerged as the world’s leading lithium-processing hub with the rapid growth of companies like Ganfeng Lithium, which specialise in converting lithium concentrate from hard rock.
Cinovec – European Metals Holdings
The Cinovec project is the largest hard rock lithium resource in Europe and 4th largest non-brine resource in the world. Perfectly located to become the central lithium supply hub for the European EV industry, Cadence owns a 12% stake in AIM listed European Metals Holdings (EMH), which in turn owns 49% of the Cinovec project, (51% owned by utilities giant CEZ Group).
Cinovec is a potential low-cost producer at the bottom of the cost curve, and will sustainably supply 25,267 tpa lithium hydroxide or 22,500 tpa lithium carbonate into the European battery market.
Sonora Lithium Project
Cadence is a 30% joint venture partner with Bacanora Lithium (BCN) on the Fleur Lease (Mexalit & Megalit) at the Sonora Lithium Project in Mexico. A completed feasibility study values Sonora Mexico at US$1.25bn NPV, with some of the lowest production costs at $4,000/t in the industry.
AIM listed Bacanora is focused on building a 35,000 tpa lithium carbonate operation at Sonora with 50% owner and take off partner Ganfeng Lithium.
Australia Hard Rock Lithium Projects
Cadence owns three dormant hard rock lithium assets in Australia. These are Picasso (Western Australia – WA), Litchfield (Northern Territories – NT) and Alcoota (NT) all of which are in regions with proven lithium mineralisation and supportive mining infrastructure.
The Litchfield project, located near Darwin (NT), has an exploration license granted and is contiguous to Core Lithium’s (ASX: CXO) territory. Core has a JORC compliant mineral resource of 8.55Mt @ 1.33% Li2O for its Finnis project (for all six deposits).
Yangibana Rare Earths Project
Operated by ASX listed Hastings Technology Metals, Yangibana is a substantial Rare Earths deposit near Gascoyne in Western Australia. Drilling and sampling have revealed high concentrations of Neodymium and Praseodymium (NdPr), essential components in permanent magnets used in electric vehicles.
Cadence is a 30% joint venture partner with Hastings on part of the Yangibana Rare Earth Element Project. Probable Ore Reserves within the tenements held by Cadence are just over 2m tonnes with TREO of 1.66%.
The current mine plan anticipates production to start from the joint venture areas (Yangibana) in year 6.
A Key Role?
Around the world today there are countless mining exploration companies, commodity investors and mine operators with projects offering scope for development and potential for investment. The challenge with any project of this nature is matching the opportunity with the macro backdrop, projected demand for the commodity alongside capex vs. return, production routes, shipping and completion of cycle to bring the product to the customer.
Rarely if ever has the industry been presented with so compelling a backdrop for the commodity market as a whole. The significant global resurgence seen in the mining sector at present given is entirely sustainable given the level of asset purchases and spending by Governments to rejuvenate damaged economies and the inevitable resulting erosion in fiat currency value.
As economies emerge from the havoc wrought by the COVID virus and restrictions on spending are lifted, it is clear that in many cases demand will outstrip availability. This will apply almost without exception across the commodity spectrum – iron ore for steel to fund reconstruction – lithium, nickel, cobalt, graphite and rare earths to address the burgeoning demand for lithium-ion battery production.
There is no doubt that the recovering global economy is embarking on the next great Commodity Supercycle. Many mining groups and commodity project investors will benefit from this phenomenon by owning the right projects, at the right stage of evolution at the right time. On the evidence available today, Cadence Minerals is certainly one of them.
Cadence CEO Kiran Morzaria talks to Justin Waite on the Vox Markets podcast
Cadence CEO Kiran Morzaria discusses the latest developments with Macarthur Minerals, the Yangibana project and Amapa with Justin Waite on the Vox Markets podcast
Progress at Yangibana Rare Earths project reflects well on Cadence Minerals Joint Venture
Shares in Cadence Minerals (AIM/NEX: KDNC; OTC: KDNCY), the AIM listed investor into mineral resources discovery and development, have enjoyed a solid start to the start of 2021. Buoyed by the progress of the company’s flagship Amapa project in Brazil, the growth in Cadence value can also be attributed to the portfolio of strategic investments, including a 15% stake in European Metals (AIM: EMH), owner of Cinovec lithium and tin project, soon to be a cornerstone lithium supply hub for the electric vehicle (EV) industry.
In addition to this, progress has been reported this week at the Australian Rare Earths Project at Yangibana, one of the early stage investments made by Cadence which is owned and operated by ASX listed Hastings Technology Metals (ASX:HAS). Located in the Gascoyne region of Western Australia and covering some 650 sq km, the project contains substantial Neodymium and Praseodymium resources, vital components in the manufacture of permanent magnets. These of course are used in a wide and expanding range of advanced and high-tech products including EV’s, wind turbines, robotics, medical applications and others.
Hastings announced drill results from the Bald Hill deposit as part of its drilling programme across Yangibana. Bald Hill is the largest Yangibana deposit in terms of estimated Mineral Resources and calculated Ore Reserves and forms a key component to the overall Yangibana project. As a result, key project infrastructure, including the beneficiation plant and tailings storage facilities, have been placed in close proximity to this deposit.
Results from the extension drilling program at Bald Hill, the largest deposit at the Yangibana Rare Earths Project, confirm continuation of mineralisation along strike to the south connecting to the 4km long Simon’s Find – Frasers trend, with a best 3.26% total rare earth oxides (TREO) occurring across a 4m sample from a 63m shallow intersection.
The Bald Hill Resource Estimate will be updated during Q1 2021. Hastings COO Andrew Reid said the results provided “further confirmation that the unique geology at Yangibana is capable of underpinning a high-quality, long-life operation.”
“These drilling results continue to demonstrate the potential scale and quality not just of Bald Hill but other Yangibana deposits and we estimate that the project has additional growth potential..” he added.
Hastings has signed a long term binding Master Agreement with German Automotive Tier 1 supplier, Schaeffler Technologies AG, with obligation to supply a substantial volume of MREC over an initial period of 10 years
At Yangibana, Cadence owns 30% of 3 Mining Leases, 6 Exploration Licences while operator Hastings Technology Metals owns the remaining 70% of the joint venture areas, and the rest of the project.
While the Bald Hill deposit doesn’t form part of the Yangibana joint venture area, there is nonetheless a positive read-over for the Cadence JV territories. Of course any yield from the Cadence JV areas will be processed at the beneficiation plant and tailings storage facilities, located in close proximity to the Bald Hill deposit.
Cadence CEO Kiran Morzaria emphasised this point: “Bald Hill is key to the Yangibana project, and as Andrew points out the drilling results continue to demonstrate the potential scale and quality not just of Bald Hill but the other deposits and overall project growth potential.”
“While our interests lie to the west of Bald Hill, for Cadence there is a really positive read-over into the value and future potential of our joint venture with Hastings,” Morzaria added.
Probable Ore Reserves within the tenements 30% held by Cadence are just over 2m tonnes with TREO of 1.66%. The current mine plan anticipates production to start from the joint venture areas (Yangibana and Yangibana North) in year 6 and continue to the end of mine life (year 13).
More info, including a breakdown of the probable ore reserves can be found here: https://www.cadenceminerals.com/projects/yangibana-rare-earth-project-2/
