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Anglo Pacific Group enjoys robust business model with multiple income streams

Snapshot

  • Royalties generated through investments in mining and exploration assets
  • Portfolio primarily in Australia, North and South America, and Europe
  • Acquired cobalt production stream at Voisey's Bay mine for US$205mln
coal

Quick facts: Anglo Pacific Group PLC

Price: 134.8 GBX

LSE:APF
Market: LSE
Market Cap: £2.9 m
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What Anglo Pacific does:

Anglo Pacific Group PLC (LON:APF) (TSE:APY) 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.

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.

 

How is it doing:

In late February, Anglo Pacific struck a deal to acquire a 70% net interest in a stream on cobalt production from the Voisey's Bay mine in Canada.

The company, in a statement, highlighted that it will provide a significant long-life revenue stream from an established, world class operation. At the same time, it provides exposure to a market that’s fuelled by the fast rising demand for electric vehicles.

Earlier in the month, Anglo Pacific revealed that a softer market for coal had resulted in a lower portfolio contribution in 2020, although the drop was set against the context of a record year in 2019.

The 2020 portfolio contribution rebounded strongly in the final quarter of 2020 as commodity markets started to recover, particularly iron ore and copper which rallied during the second half of 2020 and coking coal prices which continue to recover in 2021, currently trading at around US$156 per tonne.

Net debt at the year end stood at £24.4mln. Total dividends for 2020 will amount to 9p.

In an investment review in early 2020, Anglo decided it will not invest in any more thermal coal projects to focus on commodities that support a more sustainable world.

 

Inflection points:

  • Started a £5mln share buy-back programme in September
  • Royalty acquisitions proving their worth
  • Significant volume increases at the Kestrel mine in Australia
  • Mantos copper royalty now paying out 

 

What the broker says:

In February, broker Peel Hunt reiterated its 'buy' recommendation and upped its target price for Anglo Pacific to 170p on the announced acquisition of the Voisey’s Bay cobalt stream that analysts said will kick-start a significant transition for the company in years to come.

“Not only do we now view Voisey’s Bay as the most significant asset in the APF portfolio, we believe its Tier 1 profile will give APF visibility on streams and royalties with larger scale, helping to increase its exposure to battery metals sooner rather than later. Growth momentum has returned to APF sooner in 2021 than we anticipated.”

 

What the boss says:

On the Voisey’s Bay deal, chief executive Julian Treger said: “It will provide a significant long-life income source for Anglo Pacific and materially progresses our ambition to focus on 21st century commodities that support a more sustainable world.

“We believe that this transaction largely solves Anglo Pacific's two major strategic challenges: it addresses the medium-term declining income at Kestrel and significantly repositions the company's portfolio away from coal.

“We are delivering on our promise to recycle our short-term coal cash flow into clean commodities whose use is largely in facilitating cleaner energy and technology.”

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Anglo Pacific Group makes a transformational move by acquiring stream on the...

Anglo Pacific Group (TSE: APY- LSE: APF) CEO Julian Treger joined Steve Darling from Proactive with news the company has just announced the biggest deal the company has ever done, acquiring a stream on Vale’s Voisey’s Bay Nickel and Cobalt project in Newfoundland and Labrador for 205...

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