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Anglo Pacific Group set to reap rewards from Kestrel mine ramp-up


Chief executive Julian Treger said: "We’re looking forward to a strong finish in Q4. Last year we had income of around £48mln, and hopefully we can get close to £60mln this year, depending on commodity pricing”


Quick facts: Anglo Pacific Group PLC

Price: 113 GBX

Market: LSE
Market Cap: £205.06 m
  • Royalty acquisitions proving their worth 

  • Income set to rise by up to 20% to between £57mln and £59mln for 2019 fiscal year 

  • Significant volume increases at the Kestrel coal mine in Australia

  • Mantos copper delivers maiden royalty


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.

Royalty portfolio:

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.

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Recent performance has been strong

Anglo Pacific said in early January 2020 that revenues generated by the royalty portfolio are likely to come in at between £57mln and £59mln. Kestrel remains key, but Mantos and Labrador Iron Ore Company are now also making significant contributions.


What the boss says:

"We are pleased to report yet another record year of income for Anglo Pacific, the second year in a row in which we have done so. Including the cash received from the Denison financing arrangement, total portfolio contribution for the year is expected to be £57-59m, which represents growth of ~20% on the £49.3m generated in 2018. 

"Our income benefitted mainly from volume increases in the year, somewhat offset by the softening in commodity prices, particularly coal and vanadium, during H2 2019. We anticipate further volume growth to come in 2020, with increases expected at Kestrel, Narrabri and Maracas.  

"The strong levels of cash generated in 2019 enabled us to use our balance sheet to acquire £62.5m (US$75m) in income generating royalties. In the same period, we paid out £14.4m (US$18.5m) in dividends. Our balance sheet remains in a very strong position and we continue to operate with appropriately conservative levels of operational leverage."

Inflection points:

  • The operator of the Kestrel mine, Adaro Energy, has implemented changes at the project that are increasing production in 2019 
  • Adaro expects any increase in production to be well absorbed by the market due to the high demand for Kestrel's premium quality coal
  • A dividend of 9p minimum forecast for 2019


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