Anglo Pacific Group PLC (LSE:APF, TSX:APY, OTC:AGPIF) has today announced the acquisition of a US$185 million copper and nickel royalty portfolio acquisition from mining major, South32.
The portfolio of royalties includes:
- a 2.0% net smelter return (NSR) royalty on OZ Minerals Limited (ASX:OZL)’s West Musgrave Copper-Nickel Project, located in Western Australia. Production is anticipated to commence at the project in 2024 and Anglo Pacific expect the project to generate annual average returns of between US$10-15 million.
- a 2.0% NSR royalty on Capstone Copper Corp.’s Santo Domingo Copper-Iron-Cobalt Project, located in Chile. Capstone is guiding to initial production between 2024 and 2026 and at steady-state production, Anglo Pacific expect the project to generate annual average returns of between US$20-35 million.
- A 1.5% realised value royalty on Cyprium Metals Limited’s Nifty Copper Mine, located in Western Australia. Production is expected to re-start at this operation in H2 2022 and Anglo Pacific expect the project to generate annual average returns of between US$1-3 million.
- A 5.0% NSR royalty on KGHM Polska Miedź S.A’s Carlota Copper Mine, located in Arizona. Production in 2021 was 5.5 kt of copper cathode and final production is expected in 2024, and we estimate that at 2021 production levels and the current copper price this could generate c. US$2 million per annum.
These royalties could potentially be contributing a total of between US$31 million and US$53 million to Anglo Pacific’s top line by 2024. During 2021 Anglo Pacific generated total revenue of around US$85.3 million, the additional revenue from this portfolio acquisition would potentially increase the company’s annual revenue by between 36% and 62% by 2024.
This makes it a very significant deal for the company that could form an important component of the company’s transition from a mid-tier mining royalty business to a large-tier.
This deal also compares favourably compared to some other ongoing transactions in the sector such as:
- Sandstorm Gold Ltd (TSX:SAND) acquisition of Nomad Royalty (TSX:NSR) Company Ltd for US$590 million, which is expected to generate around US$69 million by 2025, and
- Sandstorms acquisition of BaseCore Metals LP for total consideration of US$525 million, which is expected to generate around US$2.5 million by 2025.
Of the consideration only US$47.6 million is payable in cash with US$82.4 million to be paid through the issue of 43,622,091 Anglo Pacific shares at a price of 154p per share, giving South32 a 16.9% stake in Anglo Pacific.
The deal also has deferred cash payments totalling US$55 million that are to be paid in six equal quarterly instalments with the first instalment due in October 2022 and the final instalment due in January 2024.
The transaction also includes contingent consideration of up to US$15 million, which may be payable subject to future nickel prices and minimum production levels at the West Musgrave project.
Not only does this potential acquisition, align with Anglo Pacific’s strategy to increase its portfolio’s exposure to future-facing commodities, it also enhances its exposure to long-life, low-cost assets located in well-established mining jurisdictions, operated by well-regarded and well-capitalised counterparties.
The acquisition is expected to close in the second half of July 2022.