Q3 2021 Trading Update – Record quarterly portfolio contribution

By October 25, 2021Anglo Pacific News

Anglo Pacific Group PLC (“Anglo Pacific”, the “Company” or the “Group”) (LSE: APF, TSX: APY), issues the following trading update for the period 1 July to 25 October 2021. Unless otherwise stated, all unaudited financial information is for the quarter ended 30 September 2021.

Highlights

Q3 2021 Q2 2021 9M 2021 9M 2020
$m QoQ% $m $m YoY% $m
Kestrel 11.70 139% 4.90   21.47 19% 18.12
Voisey’s Bay 6.81 119% 3.12   9.93
Narrabri 0.52 34% 0.39   1.67 (45%) 3.05
Mantos Blancos 1.57 11% 1.41   4.32 83% 2.36
Maracás Menchen 0.90 8% 0.83   2.33   (0.13)
Four Mile 0.10 (1%) 0.10   0.21 (37%) 0.33
Royalty and stream income 21.60   10.75   39.93   23.73
             
Dividends – LIORC & Flowstream 1.80 (9%) 1.98   4.67 6% 4.40
Interest – McClean Lake 0.61 (2%) 0.62   1.84 10% 1.67
             
Royalty and stream related revenue 24.01 80% 13.35   46.43 56% 29.80
             
EVBC* 0.74 (25%) 0.99   2.33 8% 2.17
Principal repayment – McClean Lake 0.51     0.51 2% 0.50
               
Less:              
Metal streams cost of sales (1.65) 116% (0.77)   (2.42)
             
Total portfolio contribution 23.61 74% 13.57   46.85 44% 32.47

• Portfolio contribution of $23.6m in Q3 2021 – the highest individual quarter in the Company’s history
• Portfolio contribution in the quarter was 180% higher than Q3 20 and also ahead of that generated in the first six months of 2021
• Results benefitted from very high coking coal prices being captured at Kestrel during the third quarter, resulting in revenue of $11.7m
• Current coking coal spot prices are ~US$390/t, significantly ahead of the average for Q3 21, suggesting an even stronger quarter to come in Q4
• Cobalt prices were also higher during the third quarter, resulting in a net contribution of $5.2m from Voisey’s Bay – and with spot prices in excess of US$27/lbs, the outlook for the remainder of the year looks promising
• Solid performance from the Group’s Maracás Menchen, Mantos Blancos and EVBC royalties in the third quarter – with possible volume upside to come in the final quarter
• Further well documented production and quality issues at Narrabri, impacting revenue in the third quarter
• Strength of portfolio contribution generated in Q3 21 resulted in the Group’s leverage ratio dropping below 2x at the end of the third quarter

Julian Treger, Chief Executive Officer of the Company, commented:

“We are delighted to announce a record quarter of portfolio contribution from our royalty and streaming assets.

Having lagged the broader commodity basket, coking coal prices began to rebound significantly at the beginning of the third quarter, averaging around $210/t for the period in which our Q3 royalty was payable. Prices have continued to increase since and are now at ~$390/t which suggests that the fourth quarter could provide a very strong finish to the year for the Group.

Elsewhere, we were pleased with the performance from Voisey’s Bay, which has also benefitted from a higher cobalt price environment than what we anticipated for H2 21 at the time of the acquisition. Overall cobalt prices have increased by 13% since we acquired the stream.

The portfolio contribution from the third quarter has enabled the Group to meaningfully de-lever during the fourth quarter, with our leverage ratio now under 2x. The Group has ~$36m available under its existing credit facility and ~$9m of shares held in treasury, along with our remaining stake in LIORC valued at ~$30m providing ~$75m in financing flexibility, not including the ~$13m to be received in instalments over the next 18 months following the sale of the Narrabri royalty.

Following the recent announcement of the sale of our thermal coal royalty, we continue to pursue our strategy of increasing our exposure to commodities that support a more sustainable world and expect the contribution from coking coal related assets to reduce to ~8% of Group’s total portfolio contribution by 2025. To this end we are actively evaluating opportunities and are confident in our pipeline and ability to further diversify the business. We remain positive going into Q4 with the strong commodity fundamentals seen recently, looking broadly sustainable as well as strong volume performance expected from the portfolio.”

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