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Anglo Pacific's over-reliance on Kestrel

Anglo Pacific's revenues sagged in 2014 as royalty payments from its key Kestrel coal mine dried up.
March 25, 2015

Given the widespread risk aversion towards base metals and bulk mining assets, it's not surprising that Anglo Pacific (APF) saw its royalty income collapse in 2014. The group, which holds a handful of interests in long-life mining assets, generated £3.5m in royalties in 2014 against £14.7m in the previous year. The value of mining assets declined significantly during the second half of 2014, forcing Anglo Pacific to revalue its portfolio. Non-cash impairments and revaluations totalling £43.4m pushed the income statement into the red.

IC TIP: Hold at 83p

Aside from weak commodity prices, the main problem for Anglo Pacific was "over-reliance on one asset", as management put it - namely the Kestrel coal mining complex in Queensland. During 2014, the bulk of activity at the complex took place outside areas that attract royalty payments for Anglo Pacific.

Given its heavy exposure to Kestrel, Anglo Pacific has taken steps to diversify its asset portfolio. Last June it acquired an interest in the Maracás vanadium project in Brazil, and this year it has bought a royalty interest in the Narrabri thermal coal project in Australia for $65m (£43m).

Prior to these figures, Peel Hunt gave an adjusted EPS of 4.9p for 2015, based on pre-tax profits of £6.8m.

ANGLO PACIFIC (APF)
ORD PRICE:83pMARKET VALUE:£141m
TOUCH:82-83p12M HIGH / LOW:191p74p
DIVIDEND YIELD:10.2%PE RATIO:NA
NET ASSET VALUE:95p*NET CASH:£8.8m

Year to 31 DecTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201030.165.852.09.05
201134.648.433.59.75
2012 (restated)15.218.010.710.20
201314.7-52.9-39.010.20
20143.5-42.4-42.18.45
% change-76---17

Ex-div: 25 Jun

Payment: 07 Aug

*Includes intangible assets of £37.1m, or 22p a share