Results for the year ended December 31, 2015

Anglo Pacific Group PLC (‘Anglo Pacific’, the ‘Company’ or the ‘Group’) (LSE: APF) (TSX: APY) is pleased to announce full year results for the year ended December 31, 2015 and publication of its audited 2015 Annual Report and Accounts. These are available on both the Group’s website at www.anglopacificgroup.com and on SEDAR at www.SEDAR.com.

Financial Highlights

  • Increase in royalty income of 149% to £8.7m (2014: £3.5m), driven largely by strong production performance at Narrabri and an increase in mining within the Group’s royalty lands at Kestrel
  • 34.5% reduction in overheads (before share-based payments) to £3.2m (2014: £4.9m)
  • Adjusted earnings1, which excludes non-cash revaluations and impairment charges, increased by £6.2m to £4.0m (2014: loss £2.2m) resulting in adjusted earnings per share of 2.47p (2014: loss of 1.97p)
  • Loss after tax of £22.6m (2014: £47.6m), due largely to the Kestrel revaluation charge of £27.2m (2014: £11.8m), resulting in a loss per share of 14.06p (2014: 42.09p)
  • Significant reduction in reported impairment charges to £5.3m (2014: £31.5m)
  • Cash balance of £5.7m at December 31, 2015 (2014: £8.8m) and net debt of £1.8m (2014: nil)
  • Recovery of Laramide Resources C$5.0m (£2.9m) advance in full on December 31, 2015
  • Net assets of £162.0m at December 31, 2015 (2014: £161.3m) resulting in net assets per share of 95p (2014: 138p)
  • Recommended final dividend of 3p per share resulting in a total dividend for 2015 of 7p (2014: 8.45p). Longer-term progressive dividend policy of at least 65% of adjusted earnings. Expectation in the medium-term is a minimum total annual dividend of 6p per share

Operational Highlights

  • Five income generating royalties following the first royalty receipt from Four Mile in Q1 2016
  • All the Group’s income generating royalties remained in production throughout 2015, with strong performances at the Group’s Kestrel and Narrabri royalties
  • Production at Kestrel within the Group’s private royalty land was approximately 49% in 2015. Based on the latest guidance from Rio Tinto, this is expected to increase to 60-65% in 2016 (30-35% in H1 2016 and 85-90% in H2 2016), with the expectation of this increasing to at least 90% in 2017
  • Production at Narrabri was 8.3Mt in the calendar year 2015, well ahead of the original design capacity of 6Mtpa and comfortably in excess of the level which the Group assumed when pricing the royalty at acquisition in March 2015
  • Further production upside expected at Narrabri following the recent announcement by the operator, Whitehaven Coal Limited (“Whitehaven”) of approval to increase capacity from 8Mtpa to 11Mtpa and to install a 400 metre wide longwall panel from H2 2017 onwards (projected to increase tonnage by 750Ktpa)
  • Whitehaven also announced plans to extend the Narrabri North longwall into the Narrabri South area, which will increase the existing life of mine. Anglo Pacific only included Narrabri North in its valuation of the royalty at acquisition
  • Positive developments at the Group’s Salamanca royalty with the operator, Berkeley Energia Limited (“Berkeley Energia”) announcing a near doubling of Indicated Resources along with an increase in grade which will lead to an increase in mine life from 11 to 18 years
  • First royalty receipt from Four Mile received in Q1 2016. The project came into production in 2014 although the operator, Quasar Resources Pty Ltd, had been stockpiling since with a view to obtaining supply contracts

Julian Treger, Chief Executive Officer of Anglo Pacific, commented:

“Anglo Pacific made good progress in 2015, despite this being a very difficult year for the mining sector in general. We were pleased to see our royalty income more than doubling in the period along with a significant reduction in our operating costs. We look well placed to build on this with strong growth expected in 2016. Of particular note was the performance of our Narrabri royalty, which we acquired in March 2015. Production at the mine totalled 8.3Mt in 2015 which was considerably higher than the ROM estimates we had used to price the royalty at the time of acquisition. We expect there to be further production upside in the coming years driven by increased permitting capacity and extended longwall infrastructure. Despite a decline in commodity prices, we believe this royalty is worth more today than we paid for it just over twelve months ago.

Despite the progress we have made in the year, Anglo Pacific has not been immune to the declines which have beset the mining sector over the past year. The indiscriminate selling which has affected commodity stocks has also impacted our share price, to an extent that we trade well below our net asset value per share and at a very high dividend yield. Ordinarily such a yield would suggest to the market a further dividend cut. However, following our announcement on January 28, 2016, in which we outlined a revision to our dividend policy, we have now made the cuts we believe are necessary to protect our balance sheet, subject to ongoing market conditions being relatively stable.

We recognise the attractive opportunities present in the market at this time and are determined not to let these prospects pass without obtaining exposure to some high quality attractive royalties. We are now seeing investment opportunities with well positioned counterparties which have not been as freely available in recent years. We are confident that we can continue to acquire attractive royalties which will enhance the lifespan and diversity of our existing portfolio and which will enable us to continue our policy of paying a substantial portion of royalties to shareholders as dividends.”

Kevin Flynn, Chief Financial Officer of Anglo Pacific commented:

“The Group has more than doubled its royalty income during 2015, with strong underlying performance at Narrabri and 49% of Kestrel’s production being within our land. Despite challenging market conditions over the past year, all of our income generating royalties remained in production and we expect to see our income continue to grow during 2016, underpinned by Kestrel which is expected to produce 60-65% within our royalty lands. Equally encouraging during the year was a significant reduction in operating expenses and we will continue to target further reductions in the year ahead.

The results for the year would have been considerably stronger but for the further declines in commodity prices throughout 2015 which, in addition to tempering royalty income, resulted in a downward valuation of Kestrel and further impairment charges, although the latter were considerably less than those in 2014. Although we report a headline loss for the year of £22.6m, our adjusted earnings, which exclude non-cash revaluation and impairment charges, were £6.2m higher in the year at £4.0m compared with a loss of £2.2m in 2014.

The organic growth within our portfolio, along with the headroom under our borrowing facility and a continued focus on costs should ensure that Anglo Pacific is well placed to achieve further growth in the year ahead.”

Analyst presentation

There will be an analyst presentation via webcast at 09:30 (GMT) on March 23, 2016 at www.anglopacificgroup.com. The presentation will be hosted by Julian Treger (CEO) and Kevin Flynn (CFO). Dial in details for the call, which can be accessed by quoting “Anglo Pacific”, are shown below and a replay of the webcast will be available at www.anglopacificgroup.com.

To view the 2015 Annual Report & Accounts please click here.

For a full copy of this release please click here.