A drop in hard coking coal and iron ore prices and flooding at its core asset more than halved royalty income at Anglo Pacific during the first half. Still, a slowing global economy and junior explorers desperate for cash mean the mining investor could snap up additional royalties on the cheap and benefit when commodity prices recover, too.
Volumes at Rio Tinto's Kestrel coal mine only returned to normal in the second quarter following bad weather and downtime while the miner shifted equipment around. Little surprise, then, that royalty income from Anglo's biggest contributor tumbled 43 per cent to £5.6m. In all, group royalties fell from £16.3m to £6.9m, even after a £1.8m contribution from the Amapá iron ore mine in Brazil and El Valle gold and copper mine in northern Spain. And cash fell sharply, too, after a sharp-eyed Australian tax inspector spotted £4.6m of overpaid royalties.
However, Anglo now has 21 royalty interests following the Laramide Resources uranium option deal. That alone could chip in £2m after 2013. Even in the unlikely event that the project collapses, Anglo will get its money back. And, if all goes to plan, another four projects will enter production during 2014 and 2015. Expect further acquisitions before the year is out.
ANGLO PACIFIC (APF) | ||||
|---|---|---|---|---|
| ORD PRICE: | 239p | MARKET VALUE: | £ 261m | |
| TOUCH: | 236-240p | 12-MONTH HIGH: | 345p | Low: 220p |
| DIVIDEND YIELD: | 2.7% | PE RATIO: | 16 | |
| NET ASSET VALUE: | 264p* | NET CASH: | £18.3m | |
| Half-year to 30 Jun | Royalties (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 16.3 | 22.6 | 14.9 | 4.25 |
| 2012 | 6.9 | 7.9 | 4.7 | 4.45 |
| % change | -58 | -65 | -68 | +5 |
Ex-div:28 Nov Payment:05 Feb *Includes intangible assets of £72.3m, or 66p per share | ||||
