Anglo Pacific Group PLC (“Anglo Pacific”, the “Company” or the “Group”) (LSE: APF, TSX: APY), issues the following trading update for the period 1 October 2020 to 7 February 2021, which includes certain information for the year ended 31 December 2020. The Company expects to release its full year results on 24 March 2021. Unless otherwise stated, all unaudited financial information is for the quarter or year ended 31 December 2020.
- £35m – £37m in portfolio contribution down ~40% vs. record year in 2019 (£59.5m)
- Decrease in portfolio contribution primarily driven by softening in coal prices during 2020 and an associated reduction in the applicable royalty rate at Kestrel, together with a 10% decrease in sales volumes at Kestrel
- Q4 2020 portfolio contribution rebounded strongly from Q3 2020 as commodity markets started to recover, particularly iron ore and copper which rallied during H2 2020 and coking coal prices which continue to recover in 2021, currently trading at around $156/t, an increase of 50% year to date
- Strong contribution from LIORC, on the back of stronger iron ore prices, with total dividends for 2020 announced of C$3.05 per share, representing an implied yield of ~9.4% at year-end
- During Q4 2020 and Q1 2021 the Group took advantage of the strong iron ore prices and higher LIORC share price to realise C$102.3m (£59.1m) proceeds through the sale of 73% of the Group’s holding, generating a capital gain of C$22.7m (£13.1m) equating to a total return on investment of nearly 60%
- Record quarterly and full year 2020 production levels achieved at the Maracás Menchen vanadium mine, with sales volumes exceeding Largo Resources’ previously announced sales guidance for 2020 of 10,000t and further growth expected in 2021 with sales guidance of between 12,250t and 12,750t
- The operations underlying the Group’s producing royalty related assets remained largely unaffected by Covid-19, with the exception of the McClean Lake Mill which has been placed back on care and maintenance at the start of January 2021, following suspension of operations at the Cigar Lake uranium mine during Q4 2020, however this is not material and represents ~7% of portfolio contribution
- A further ~US$2 million investment into Brazilian Nickel made during the year, helping to accelerate the Piauí Project which, if the Company decides to exercise its option to increase the GRR to 4.25%, has the potential to generate income of US$14.5 million per annum
- Net debt at year-end of £24.4m, reflecting £7m of acquisitions, £16.7m of dividend payments, £5m share buyback and pre-year end LIORC sales of £15.1m. Incorporating the additional LIORC sales post-year end, the Group is currently in a net cash position of approximately £25.2m
- Share buyback of £5m completed in November 2020 represents a return of 2.75p per share to shareholders
- Recommended final dividend of 3.75p which when combined with the 5.25p already paid or declared results in total dividends for 2020 of 9p (2019: 9p)
Julian Treger, Chief Executive Officer of the Company, commented
“While I am pleased to report that the operations underlying the Group’s portfolio were largely unaffected by the Covid-19 pandemic, commodity prices and in particular softer coal prices have resulted in a drop in portfolio contribution for 2020, in what has been a challenging period for all. A large fall off in prices during Q2 2020 affected the results for the full year, however there was a strong rebound in iron ore and copper in H2 2020 and it is encouraging that coking coal is one of the best performing commodities of 2021, up almost 50% year to date, which could drive a more positive portfolio contribution in 2021.
With the strong rebound in the price of iron ore we opportunistically sold a significant portion of our holding in LIORC, generating close to a 60% return on the investment. This strengthens our balance sheet for new transactions as we continue to shift the portfolio into commodities that will underpin a sustainable future, in line with our stated strategy.
At a time when the outlook for nickel looks favourable, we were pleased to invest a further ~US$2m in Brazilian Nickel alongside TechMet to accelerate the development of the Piauí Project. Should Brazilian Nickel proceed with the full-scale expansion of the project, the Group retains its option to invest a further US$70m and increase the GRR it holds from 1.25% to 4.25%.
We are now in a net cash position, with a US$120m Revolving Credit Facility, including the US$30m accordion and have considerable fire power to enable us to further diversify the Group’s portfolio, with a particular focus on the base metals required in the 21st century. We are pleased to be recommending a final dividend for 2020 of 3.75p, bringing the total dividend for 2020 to 9p, maintaining the level paid in 2019. This is in addition to the share buyback completed during the year amounting to a return to shareholders of a further 2.75p per share.
I would like to thank all of our stakeholders for their continued support and we look forward to updating you with our progress as we continue to assess opportunities to steer Anglo Pacific towards becoming a growth royalty and streaming business, focused on 21st century materials.”
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