Anglo Pacific should get a strong tailwind from changes to Queensland’s royalty rate on coal, according to broker Berenberg.
The royalty specialist's ownership of the Kestrel metallurgical coal mine in Australia (it owns 50% of certain substratum lands) means that it is entitled to coal royalty receipts from the mine, which makes It a major beneficiary of the changes.
As a result, Berenberg has lifted its Kestrel revenue forecasts by 86% for the second half of this year and by 65% for 2023.
All told it estimates an extra US$49mln of revenue over 2022-24 and an extra US$37mln in free cash flow will result and help the group’s business development activities and enable accelerated deployment of capital into new royalties.
At spot prices, the 2022-24E revenue and FCF accretion are US$201mln and US$130mln respectively.
Coal is no longer a priority for the group and it is winding down its exposure with revenues from Kestrel to deplete over time due to mining moving out of the royalty area.
"The attractiveness of the royalty business model is highlighted here, with meaningful earnings accretion in a period when cost pressure is a major negative risk for traditional miners near term."
'Buy' is the investment view with a new price target of 300p per share (against a previous target of 260p) and a market price of 157.4p.