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Anglo Pacific Group PLC enjoys robust business model with multiple income streams

Snapshot

  • Royalties generated through investments in mining and exploration assets
  • Portfolio primarily in Australia, North and South America, and Europe
  • The Kestrel mine is Anglo’s biggest income contributor
coal

Quick facts: Anglo Pacific Group PLC

Price: 100.4 GBX

LSE:APF
Market: LSE
Market Cap: £177.84 m
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What Anglo Pacific does:

Anglo Pacific Group PLC (LON:APF) (TSE:APY) gathers royalties through investments in mining and exploration assets.

The group has built its presence in the mining royalty space on the back of its coal royalty at the Kestrel mine in Australia but in the past few years, it has branched out into new areas and invested in new commodities to diversify its portfolio.

Its royalty portfolio is primarily in Australia, North and South America, and Europe.

The Kestrel mine is Anglo’s biggest income contributor but the company’s portfolio also includes a royalty held over the Maracas Menchen vanadium mine in Brazil and over licences in the Pilbara iron ore district in Australia.

Others include the El Valle-Boinas/Carles gold, silver and copper mine in Spain, the Amapa & Tucano iron ore mine in Brazil, the Ring of Fire cobalt mine in Canada, the Narrabi coal mine in Australia and the Dugbe mine in Liberia.

It has been included in the London Stock Exchange's ‘1,000 Companies to Inspire Britain 2020’ report,  an annual celebration of some of the fastest-growing and most dynamic enterprises in the UK. 

 

How is it doing:

For the third quarter of 2020, a total of £6.4mln was generated from the portfolio, compared to £6.5mln in the second quarter.

Mines have continued to function without material disruption due to the coronavirus (COVID-19) pandemic, though there was a one-off dip in volumes at Kestrel due to a longwall changeout and that the mine is expected to increase output in the fourth quarter.

A 1.75p per share quarterly dividend is due to be paid to shareholders on November 13, followed by a further 1.75p per share interim dividend in February 2021, and the company expects to recommend a final dividend payment for 2020 in the first quarter of 2021.

After an investment review in February, Anglo Pacific decided it will not invest in any more thermal coal projects to focus on commodities that support a more sustainable world.

 

Inflection points:

  • Started a £5mln share buy-back programme in September
  • Royalty acquisitions proving their worth
  • Significant volume increases at the Kestrel mine in Australia
  • Mantos copper royalty now paying out 

 

What the broker says:

In August, analysts at Berenberg, set a target price for Anglo Pacific of 160p and reiterated a 'buy' rating.

In a note to clients, they said the shares are “cheap” at less than 0.7 times net asset value.

What the boss says:

"We are pleased to report resilient royalty revenue for Q1 2020, in-line with that of the immediately preceding quarter," said chief executive Julian Treger.

"This is largely due to the underlying operations from which we derive most of our revenue experiencing limited COVID-19 related disruption to-date. Overall, we saw a higher pricing environment during the first quarter of 2020 compared to Q4 2019, but we are still some way off the pricing levels seen twelve months ago.

The two noticeable variances in the quarter were the increase in Kestrel revenue compared to Q4 2019 due to underlying pricing, and the decrease in the dividends receivable from LIORC due to planned capital expenditure in the year ahead."

 

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