Anglo Pacific Group PLC (LON:APF, TSX: APY) said it completed the purchase of a 70% net interest in a stream on cobalt production from the Voisey's Bay mine in Canada for US$205mln (£147mln) in cash.
The company, which announced the acquisition last month, may pay a further US$27mln to the private equity sellers.
The acquisition was financed through an oversubscribed equity placing and retail offer of US$66mln, the previously announced profitable monetisation of a portion of the group's Labrador Iron Ore Royalty Corp (LIORC) investment, and the completion of the new US$180mln credit facility from a syndicate of leading Canadian banks, comprising Scotiabank, RBC Capital Markets, and Canadian Imperial Bank of Commerce.
The transaction means that about 61% of Anglo Pacific's pro-forma royalty portfolio will be attributable to battery related materials and it significantly reduces the company's exposure to coal.
"This transaction is not only the largest in our company's history, but it also marks the start of a fundamental transformation, as we reposition the business towards 21st century commodities and become an increasingly battery metals focused royalty and streaming company," said Anglo Pacific chief executive Julian Treger.
"This is the ideal time to proactively redeploy capital from the iron ore sector and invest in cobalt," he added. "Since the start of 2021, the cobalt price has increased about 60% reaching two-year highs at US$24.95/lb; and has increased about 4% since Anglo Pacific announced the acquisition, whilst the iron ore price has fallen about 4%. The increase has been driven by continued demand from the lithium-ion battery sector as electric vehicle (EV) sales reached record highs in 2020, with projected EV battery demand growth of 17% per annum forecast over the period to 2040.
"Fundamentals of the cobalt market and future outlook for the commodity are firmly backed by the financial stimulus and policy frameworks adopted by western governments in order to aid the green revolution through emissions free transport, as well as the ambitious goals set out by individual automakers to become fully electric; most recently joined by Volvo and Jaguar."