Anglo Pacific Group plc (LON:APF) Chief Executive Officer Julien Treger caught up with DirectorsTalk for an exclusive interview to discuss the purchase of the 4.25% shareholding in Labrador Ore Royalty Corp, what they are looking to add next and why people should invest in APF.
Q1: Can you give us a little bit more detail on this morning’s announcement and the rationale behind it?
A1: This morning, we announced that we’ve invested $50 million to buy 4.75% stake in a royalty company in Canada which should then payout their royalties to us and those royalties will be over a high-quality iron ore operation in Canada which is operated by Rio Tinto.
The rationale behind it is partly to expand, to diversify and to get more income as well as moving into new commodities like iron ore.
Q2: Why iron ore then?
A2: Iron ore, we believe has been unfairly written-off to some degree by commentators for the last year or 2 and we think the prospects for iron ore are actually better given the fact that there’s quite a lot of market discipline.
In particular, the product of this mine are low-polluting, with low impurities and high percentages of concentrate iron ore and those, together with pellets which is something else they produce, are fetching very high premier over the benchmark pricing for iron ore. We think those premier will remain for longer so we effectively betting on prices being higher for longer.
Q3: As you mentioned, you clearly have quite a diverse portfolio now, what are you looking to add next?
A3: Well, with this transaction, we’ll have made our second significant investment this year, we’re certainly intending to make another one or two before the end of the year and then carry on that process going forward. We are looking to possibly add more copper, more vanadium but we are also looking at some other iron ore opportunities.
Ultimately, we’re opportunistic and we just want situations in safe jurisdictions with good operators that provide attractive returns.
Q4: Just for those who are looking at your stock, could you give us three reasons why you’d invest in Anglo Pacific Group?
A4: I think the first is that we are experiencing quite a lot of growth in our income this year and looks like for the next year or two at least. This means our trajectory is different to the mining sector and we should be seeing strong income growth and hopefully that will translate into dividend growth.
Secondly, the mining sector itself is seeing cost pressures but when you invest in APF, you are insulated from those because we only get our income from revenues so if costs go up it doesn’t affect our income.
Thirdly, we’re just incredibly cheap on any metric whether it be cash flow, dividend yield, Earnings per Share, PE ratio or cash flow multiple so there are many financial reasons to invest but also differentiated reasons compared to the rest of the mining sector.