Anglo Pacific (APF) has built a leading position as an investor in mines, from which it generates royalties as commodities are extracted. It's a business model that's common in the US although little-known in the UK and it offers exposure to the upside of commodity prices without the operational risks and cost pressures associated with mining.
IC TIP:
Buy
at
252p
Tip style
Growth
Risk rating
Medium
Timescale
Long Term
Bull points
- Long-term demand for commodities
- Royalty model sheds risks
- Exposed to wide set of commodities
- Decent dividend yield
Bear points
- Few producing royalties
- Some deals may not come to fruition
Mining royalties provide APF with an entitlement to a percentage of a mine's sales revenue, generally over the life of the project. Royalty companies secure such deals by financing development projects several years before production.