viewAnglo Pacific Group PLC

Anglo Pacific Group set to reap rewards from Kestrel mine ramp-up


Peel Hunt has a ‘buy’ recommendation and target price of 235p on shares


Quick facts: Anglo Pacific Group PLC

Price: 185 GBX

Market: LSE
Market Cap: £335.72 m
  • Royalty acquisitions continue, with new exposure to copper and increased exposure to iron ore

  • Interim results show royalty income up by more than 60% 

  • Anglo looking to diversify its portfolio with US$100mln warchest, including £14.5mln in cash and US$90mln facility

  • Mantos Blancos latest royalty acquisition at cost of US$50.3mln


What Anglo Pacific does: 

Anglo Pacific Group PLC (LON:APF) (TSE:APY) is a London and Toronto-listed company that 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.

Royalty portfolio:

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 another over the Pilbara iron ore mine 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.

What the broker says: Peel Hunt

Near-term Kestrel weakness 50% offset by LIORC and recent acquisition Mantos Blancos ( copper, Chile), says Peel Hunt, which has a price target of 235p.

The portfolio changes have also helped diversify the P&L exposure away from Kestrel.

Income generated from investments made over the Q3 2018 to Q3 2019 period is now equal to the Kestrel income weakness.

From that perspective, it should be noted that APG operating cash reinvestment is now at the point where any incremental investments should stand to more than offset any Kestrel weakness in the near term.

"We still also expect APG to be back in net cash in 2020 and ready to add more to its growth portfolio, not including potentially incremental volumes at Kestrel."

Inflection points:

  • The operator of the Kestrel mine, Adaro Energy, has implemented changes at the project that are expected to increase production in 2019 by 40% year-on-year.
  • Adaro expects any increase in production to be well absorbed by the market due to the high demand for Kestrel's premium quality coal.
  • Net assets rose to US$260mln during the interim period, up by 19%.
  • A dividend of 9p minimum forecast for 2019


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