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Anglo Pacific Group PLC

Anglo Pacific's income climbs again thanks to vanadium and coking coal

Vanadium miner Maracas Menchen's contribution almost trebled to £5.9mln

steel
Soaring vanadium prices have been a huge bonus for Anglo Pacific

Mining royalty group Anglo Pacific Group PLC (LON:APF) saw a hefty uplift to revenues in 2018 from its investments in coking coal and vanadium.

Total royalty income rose 16% to £46.1mln, driven by a 13% rise to £32.6mln in the contribution from Australian coking coal mine Kestrel.

Vanadium group Maracas Menchen did even better with its contribution almost trebling to £5.9mln as prices for the battery metal and steel additive rocketed.

There was also the first contribution of £1.9mln from Anglo’s new Labrador Iron Ore investment.

Operating profits rose 21% to £37.1mln and as a result of the strong performance, Anglo Pacific raised its final dividend by 25% to make 8p for the year, an overall 14% annual increase.

Diversifying

Julian Treger, chief executive, said the plan for 2019 is to use its cash to diversify, especially as the new owner of Kestrel is relying heavily on its portion of the royalty.

While that will mean a 40% volume uplift this year from Kestrel, it will also exhaust its reserves quicker and bring forward the point when mining switches off the land under its royalty.

“As such, the imperative is now firmly on reinvesting this cash flow to replace Kestrel's income in the medium-term, and this is our firm focus for the year ahead,” said Treger.

Anglo has £78mln to invest using its own balance sheet before the benefit of the substantially higher volumes expected at Kestrel.

“We reported record income in 2018 and, absent significant volatility in commodity prices, we expect 2019 to show further organic growth from the portfolio,” he added.

Broker Peel Hunt maintained its price target at 205p, adding that at this point in the commodity price cycle, its focus is on reinvestment in the portfolio rather than aggressive dividend growth.

“With a US$100mln warchest, management’s deal capacity is growing steadily with its cash generation.

“On our current estimates, we expect a £34m cash surplus during 2019. This is yet to reflect the full ramp up of the Kestrel royalty, which the new owners are targeting.”

Pre-tax profits in 2018 rose to £44.5mln (£11.8mln) which reflected a £22mln positive swing in the value of Kestrel.

Quick facts: Anglo Pacific Group PLC

Price: £1.85

Market: LSE
Market Cap: £334.81 m
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