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Anglo Pacific Group looks "well-positioned" to weather the coronavirus storm


The firm is operating as normal with minimal disruption during the coronavirus pandemic


Quick facts: Anglo Pacific Group PLC

Price: 131.19 GBX

Market: LSE
Market Cap: £238.45 m
  • 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

What Anglo Pacific does:

Anglo Pacific Group PLC (LON:APF) (TSE:APY) is a London and Toronto-listed company that 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.

How is it doing:

Following stress tests under downside scenarios, Anglo Pacific found it is well-positioned to withstand the challenges ahead, thanks to its financial position and the diversity of the royalty portfolio.

In the year to December 31, 2019, Anglo Pacific's royalty-related revenue hit a record £55.7mln, an increase of 21% on the previous record of £46.1mln returned in 2018, driven by a strong performance at the Kestrel coal mine in Australia.

There was also a 21% increase in operating profit to £44.8mln, despite continued investment in the business which saw operating expenses rise to £7.1mln.

The final dividend was increased by 32% to 4.125p, bringing the total distribution to 9p per share, up 12% on 2018.

Net debt at the year-end stood at £28.8m, reflecting the £62.6mln worth of acquisitions made during the year along with £14.4m of dividend payments.

The company recently announced the refinancing of its borrowing facility to increase commitments from US$60mln to US$90mln, plus the retention of a US$30mln accordion option and a twelve-month extension.

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:

  • Disruption due to coronavirus pandemic remains minimal
  • Royalty acquisitions proving their worth 
  • Significant volume increases at the Kestrel mine in Australia
  • Mantos copper delivers maiden royalty

What the broker says:

On April 20, analysts at German broker Berenberg, upped their target price for Anglo Pacific Group to 200p from 195p and reiterated a 'buy' rating on the stock

In a note to clients, they said: "Yield support under bear-case scenarios: Anglo Pacific’s shares offer a 7% yield and now that the 2019 dividend has been maintained, we think that focus will turn to the 2020 dividend. We think the dividend is likely to remain and that the shares are attractively valued."

What the boss says:

With the group's results, Julian Treger, chief executive commented:  "Anglo Pacific enjoyed a very successful 2019, with a record level of investment and portfolio contribution. We are pleased to recommend a full-year dividend for the year of 9p, consistent with our previous statement that it would not be less than this level despite the ongoing and ever-evolving market turmoil."

"The most material mines from which we generate the majority of our revenue remain in production and are able to ship and sell. We have seen some instances of COVID-19 related shutdowns at EVBC and McClean Lake which are currently expected to last for between two to four weeks. We would expect to see production volume growth in the year ahead absent any further shutdowns," he added.

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on 27/4/20

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