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

Snapshot

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

coal

Quick facts: Anglo Pacific Group PLC

Price: 109.6 GBX

LSE:APF
Market: LSE
Market Cap: £196.54 m
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  • 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.

Royalty income from Kestrel hit £8.4mln in the first quarter of 2020, up 24% quarter-on-quarter. Royalty income from Narrabri was up 33%.

The company proposed a 7.7% increase in the quarterly dividend to 1.75p

 

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 has been minimal
  • Royalty acquisitions proving their worth 
  • Significant volume increases at the Kestrel mine in Australia
  • Mantos copper royalty now paying out 

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:

"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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