Anglo Pacific Group PLC Record £46.1m in royalty related revenue, an increase of 16%

Anglo Pacific Group PLC  (LON: APF) (TSX: APY) is pleased to announce its full year results for the year ended 31 December 2018 and the publication of its audited 2018 Annual Report and Accounts. These are available on the Group’s website at www.anglopacificgroup.com and on SEDAR at www.SEDAR.com. The following statement should be read in conjunction with the audited financial statements.

Julian Treger, Chief Executive Officer of Anglo Pacific, commented:

“2018 was the second year in a row in which we reported record contribution from our royalty portfolio, and the recent announcement from Adaro suggests that there is a significant increase in volume to come at Kestrel in 2019. This led us to propose a 14% increase in the total dividend for 2018 to 8p.

I am particularly pleased to highlight the contribution from Maracás, now our second largest royalty, and LIORC, our most recent addition, which demonstrates the progress we have been making in building a diversified portfolio whilst reducing our dependence on the Kestrel royalty. LIORC generated £1.9m in royalty related income since its acquisition in H2 2018, implying an annualised yield of ~10%.

Based on 2018 revenue, we have now successfully increased revenues by approximately £15m annually over the last four years. We have also systematically strengthened the balance sheet, senior management and the Board which together provides the Company with added firepower to grow and execute accretive transactions. This is good progress, but we have more to do and our target for 2019 is accelerating the rate of our growth.

Growth will not, however, come at the expense of quality, diligence and prudence in the projects we choose to support. To this extent, we will continue to focus on projects which produce premium materials, which we believe will continue to command a higher premium over time.

In addition to product quality, we will also maintain a strict focus on how the projects are operated and managed from an ESG perspective and we will only support those projects which are being run ethically and responsibly. Our annual report contains further information in relation to our initiatives in this area during 2018 and how we see this evolving in the years ahead. Although Anglo Pacific is not an operator, our investments are in natural resources projects, and we continue to believe in the ongoing need for high-quality, low polluting products which are operated in a responsible manner by experienced management teams.

The backdrop for raising capital for natural resources companies continues to be challenging given the scarcity of capital in the sector, however we feel confident that we can continue to make investments and grow our portfolio in a meaningful way in 2019. With the owners of Kestrel targeting a 40% increase in volume in 2019, along with having access to ~£78m (~US$100m) of liquidity on our balance sheet for making additional quality investments, we are in a very strong position from which to grow in the year ahead.”

Portfolio Highlights

  2018£m YOY %2017£m2016£m2015£m
Kestrel 32.613%28.813.13.6
Maracás Menchen 5.9195%2.00.80.6
Narrabri 3.5(29%)4.94.33.2
Four Mile 0.1 0.3
EVBC*  1.71.21.3
Royalty income 42.113%37.419.7 
       
LIORC dividends 1.9 
Interest – McClean Lake & Jogjakarta 2.1(4%)2.20.20.2
       
Royalty related revenue 46.116%39.619.98.9
       
EVBC* 2.0 
Principal repayment – McClean Lake** 1.3 3.0
Total portfolio contribution 49.416%42.619.78.9

* Following the application of IFRS 9, the royalties received from EVBC are reflected in the fair value movement of the underlying royalty rather than recorded as royalty income.

** The McClean Lake principal repayment in 2017 included £1.8m relating to tolling receipts from H2 2016

Financial Highlights

§ Record £46.1m in royalty related revenue, an increase of 16% on the previous record of £39.6m earned in 2017

§ Overheads (excluding share-based payments) in line with 2017

§ 21% increase in operating profit to £37.1m (2017: £30.6m)

§ Tax losses utilised in full during H1 2018 resulting in an effective tax rate for the year of 25% (2017: 9%) based on adjusted earnings

§ 7% increase in adjusted earnings1 per share to 18.02p (2017: 16.82p)

§ 14% increase in proposed total dividend for the year to 8p per share (2017: 7p)

§ Dividend cover of 2.25x (2017: 2.4x) – reflecting the higher dividend for 2018

§ Free cash flow2 per share of 22.28p, largely in line with the 23.62p generated in 2017

§ Net assets largely unchanged at £218m (2017: £219m)

§ Net debt at the year-end of £3.1m (2017: net cash £8.1m) reflecting the £38.4m LIORC acquisition completed in H2 2018 and £12.9m dividends paid

§ Returned to a net cash position at the end of January 2019

Operating Highlights

§ 13% increase in royalty income from Kestrel reflected strength of coal prices as volumes attributable to our private royalty land were stable at 4.8Mt

§ Maracás Menchen became the Group’s second largest source of revenue in 2018, following a significant increase in the vanadium price during H2 2018

§ Maiden contribution of £1.9m from Labrador Iron Ore Royalty Corp (“LIORC”) which was acquired in H2 2018, implies a yield of ~10%

§ £38.4m LIORC acquisition undertaken in H2 2018, financed through available bank facilities

§ Refinanced and upsized the previous US$30m borrowing facility with a new US$60m facility which includes a further US$30m accordion feature providing the Group with bank facilities of up to US$90m for acquisitions

Growth

§ Significant volume growth expected from Kestrel following the recent announcement by Adaro indicating a target increase in volume of 40% in 2019

§ Further £1m investment in LIORC in January 2019, taking our total ownership in LIORC to 4.4%, total investment to C$67.9m with a current market value of C$82.1m

§ Q1 2019 dividend from LIORC of C$1.05 per share, which included a C$0.80 per share special dividend, following the distribution of excess cash retained during H2 2018

§ ~£78m (~US$100m) of available bank facilities and cash available to finance growth

1 Adjusted earnings/(loss) represents the Group’s underlying operating performance from core activities. Adjusted earnings/(loss) is the profit/(loss) attributable to equity holders less all valuation movements, non-cash impairments and amortisation charges (which are non-cash IFRS adjustments that arise primarily due to changes in commodity prices), finance costs, any associated deferred tax and any profit or loss on non-core asset disposals as these are not expected to be ongoing.

2 Free cash flow is the net increase/(decrease) in cash and cash equivalents prior to core acquisitions, equity raising and changes in the level of borrowings.

Outlook

Anglo Pacific made significant progress in 2018, which lays the foundations to fund further growth. In 2019, we have a firm expectation to generate organic growth from the Company’s royalty portfolio which should, subject to prevailing commodity prices, result in strong earnings and cash generation. We continue to see traditional capital finance for new mining projects remaining constrained in current markets, and, whilst this presents challenges for small to medium sized miners, this conversely presents increasing opportunities and demand for royalties. This should provide Anglo Pacific with opportunities to add attractive assets to its portfolio. Growth and delivering value remain a focus for the Company in 2019 and the years following.

Analyst and Investor presentation

There will be an analyst and investor presentation via conference call and webcast at 9:30am (GMT) on 27 March 2018. The presentation will be hosted by Julian Treger (CEO), Kevin Flynn (CFO) and Juan Alvarez (Head of Investments).

Click to view all articles for the EPIC:
Or click to view the full company profile:
    Facebook
    Twitter
    LinkedIn
    anglo pacific group plc

    More articles like this

    anglo pacific group plc

    Silver price ‘set to top $20’

    Silver prices rose on Monday while gold edged higher and European stock markets bounced, shrugging off concerns about a further acceleration of the global Coronavirus pandemic despite mixed economic news, writes Atsuko Whitehouse at BullionVault.  Shares in

    anglo pacific group plc

    Can copper protect against the new coronavirus?

    Over the past few months, there has been a surge in the market for materials laced with copper—including face masks, bedsheets, and socks—with manufacturers touting the metal’s germ-killing ability. But experts say consumers should be cautious,

    anglo pacific group plc

    Emerging technologies to drive silver demand

    The price of silver soared in May, jumping more than 19% on safe haven demand as well as increased expectations of a swift economic recovery, given its many industrial applications. Not only was this silver’s best month since

    anglo pacific group plc

    EVs will drive demand for nickel sulfate over the next decade

    In a newly-released report on the nickel sulfate industry, Roskill forecasts that the expanding EV industry will become the key driver of growth in nickel demand. In the past, the market for nickel sulfate was largely driven by the plating

    anglo pacific group plc

    Gold prices settle 1% higher

    Gold prices settled higher Tuesday as global equities staged a modest retreat after being buoyant for weeks on the back of the reopening of economies stricken by the coronavirus pandemic. Prices for the precious metals found

    anglo pacific group plc

    Silver on the cusp of a huge breakout

    Next to gold, silver is the most malleable and ductile metal. Throughout history, this has made it an ideal tool for artisans to create symbols of wealth and prestige, forging it to fit any shape or

    anglo pacific group plc

    Here’s Why Silver is a Unique Investment Hedge in 2020

    Max Greb, a Shanghai-based portfolio manager at Olivar & Greb Capital Management, has extensive experience in professional investment and wealth management consulting for individuals and families. When time permits, he shares his insight in this column

    anglo pacific group plc

    Gold gains as U.S.-China tensions lift safe-haven demand

    Gold prices rose on Friday, following a sharp decline in the previous session, as escalating trade tensions between the United States and China lifted bullion’s safe-haven appeal, though a stronger dollar kept gains in check. Spot

    anglo pacific group plc

    The history and value of gold

    Gold has emerged as one of the best performing asset class in 2020, gaining 15% year to date with prices hitting all time high in India. These gains are special as it has come after a

    anglo pacific group plc

    Silver futures rise on spot demand

    Silver prices on Monday rose 0.42 per cent to Rs 41,410 per kg in futures trade as participants widened their bets on firm spot demand. On the Multi Commodity Exchange, silver contracts for May delivery gained

    anglo pacific group plc

    Silver futures rise on spot demand

    Silver prices on Monday rose 0.42 per cent to Rs 42,227 per kg in futures trade as participants widened their bets on firm spot demand. On the Multi Commodity Exchange, silver contracts for May delivery gained

    anglo pacific group plc

    Silver futures up 2.46%

    Silver prices touched Rs 42,710 per kg on April 23 as participants increased their long positions. According to Silver Institute’s World Silver Survey 2020 report, rising demand for bar and coin from investors will offset the

    anglo pacific group plc

    Anglo Pacific mines a stream of dividends

    Anglo Pacific is a one-off in this country. It is the only listed business focused on mining royalties – which means the group provides cash to miners in return for a slice of their revenues.  Some