Anglo Pacific Group PLC (LSE: APF, TSX: APY), the London and Toronto listed royalty company, gave DirectorsTalk the following trading update for the period October 1 to February 7, 2018, which includes certain information for the year ended December 31, 2017. This update is ahead of the release of the full year results on March 28, 2018. Unless otherwise stated, all unaudited financial information is for the quarter or year ended December 31, 2017.
Highlights
— 90% increase in royalty income year-on-year to GBP37.0m – GBP37.5m (2016: GBP19.7m); a record for the Company
— Cash received from Denison/McClean Lake of GBP4.7m – GBP5.0m in addition to the above royalty income (GBP1.8m of which relates to H2 2016)
— Royalty income for Q4 2017 in the range of GBP12.0m – GBP12.6m (Q3 2017: GBP8.9m, Q4 2016: GBP12.3m)
— 93% of Kestrel’s saleable tonnes in 2017 mined from within the Group’s private royalty land, a significant increase on the 67% earned in 2016
— 90%+ of Kestrel’s saleable tonnes expected to be derived from Anglo Pacific’s private royalty lands for the immediate future
— Royalty income from Maracás Menchen more than doubled in the year, reflecting significant production improvements and a strong vanadium price
— Higher thermal coal prices resulted in an overall increase in royalty revenue for the year from Narrabri of 15%, despite lower sales volumes
— Cash of GBP8.1m at December 31, 2017 compared to net debt of GBP1.0m at the same time in 2016
— Expansion of the Group’s borrowing facility by US$10m to US$40m, which is undrawn and fully available providing significant internal resources to fund future acquisitions
— Non-cash fair value reductions of up to GBP7.0m on royalty assets (2016: GBP5.0m)
— Recommended increase in the final dividend from 1.5p to 2.5p, which would result in a total dividend of 7p for 2017, a 16.67% increase on the 6p in 2016 with dividend cover for 2017 expected to be in excess of 2.0x
— 8.3% increase in quarterly dividend instalments from 1.5p to 1.625p commencing with the Q1 2018 interim dividend
Julian Treger, Chief Executive Officer of the Company, commented: “2017 has been a record year for Anglo Pacific with headline royalty income up 90% to GBP37.0m – GBP37.5m. Adding the Denison financing receipts, the Group’s portfolio made a total contribution of GBP41.7m – GBP42.5m.
This significant increase in royalty income is a result of a substantial rise in sale volumes coming from within the Group’s private royalty land at Kestrel, combined with higher sales prices. The average price realised at Kestrel was 40% higher in 2017 vs. the previous year which meant that the weighted average royalty rate also increased from 8.5% to 10.5%. The Group’s other producing royalties also performed strongly during the year, with a record year of royalty income from Maracás Menchen being particularly noteworthy.
The outlook for the year ahead, assuming consistent volumes, remains positive, with 90%+ of production at Kestrel expected to come from within our lands, and with commodity prices remaining resilient. Prices for both coking and thermal coal are being buoyed by Chinese environmental restrictions on low quality coal. It has long been our view that, over time, high quality lower polluting coal would start to become more desirable. It appears that this is now happening.
On the back of this strong performance, and taking into account our view for the year ahead, we are recommending an increase in the final dividend of 1p to bring the full year dividend for 2017 to 7p from 6p. If approved by shareholders, the final will be paid on May 15, 2018. We have also decided to increase the level of our interim dividends from 1.5p to 1.625p during 2018, with any changes to the total dividend being reflected in the last quarter.
The significant increase in our revenue in 2017 directly translated to cash flow, and we ended the year with GBP8.1m (over US$10m) in cash – even after paying over GBP15.8m in dividends and investing over GBP29m. With an undrawn US$40m bank facility and a fully covered dividend, the Group has immediate access to over US$50m for royalty acquisitions.
With a strong cash generative portfolio and no debt, we feel we are now well placed to accelerate growth through further value enhancing acquisitions, whilst continuing to reward our shareholders with an attractive dividend yield.”
Dividend
The Board is proposing a final dividend for the year of 2.5p per share, which will bring the total dividend for 2017 to 7p per share compared to 6p per share for 2016. This dividend will be subject to shareholder approval at the 2018 AGM. Subject to shareholder approval, the dividend will be paid on May 15, 2018 to shareholders on the register on April 6, 2018. The shares will be quoted ex-dividend on the London Stock Exchange on April 5, 2018 and on the Toronto Stock Exchange on April 4, 2018.
The Board is also announcing an increase in the level of the quarterly interim dividend from 1.5p to 1.625p. The first such instalment will be the Q1 2018 dividend which is intended to be paid on or around August 15, 2018. The following table outlines the forthcoming dividend schedule.
Q3 2017 Q4 2017 * Q1 2018 Q2 2018
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Amount (pence) 1.50p 2.50p 1.625p 1.625p
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Payment date 15-Feb-18 15-May-18 15-Aug-18 15-Nov-18
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Record date 05-Jan-18 06-Apr-18 06-Jul-18 05-Oct-18
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Ex-div date 04-Jan-18 05-Apr-18 05-Jul-18 04-Oct-18
(LSE)
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Ex-div date 03-Jan-18 04-Apr-18 04-Jul-18 03-Oct-18
(TSX)
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* subject to shareholder approval at the 2018 AGM
