Anglo Pacific (APF) is the only mining royalty outfit in the world without a dominant focus on precious metals. A glance at the company’s half-year numbers suggest the distinction is working well. In the first half of 2017, higher coking coal prices, a favourable exchange rate, and increased mining at Anglo’s royalty land at Rio Tinto’s (RIO) Kestrel mine combined to triple free cash flow to £18.9m. That’s £5.5m ahead of the same figure for all of 2016, and has allowed Anglo to eliminate C$12.8m (£8m) of debt drawn to partly fund February’s loan to Toronto-listed Denison Mines.
That latter deal is already proving its worth. Under the agreement, Anglo receives 22.5 per cent of the proceeds of the McClean Lake uranium mill owed to Denison, as well as a 10 per cent annual interest on a C$40.8m loan. Cash returns to Anglo now average C$0.5m a month, which helps to lower the dependency on the Kestrel tenement, whose carrying value fell 8 per cent in the period to £108m on resource depletion and lower forward price assumptions.
So, what to do with all this cash? A higher final dividend seems likely, although Anglo is waiting for greater clarity on the outlook for 2018 before committing to a bump. Alternatively, with royalty offers flooding in from capital-hungry miners, the group may tap a $40m (£31.3m) credit facility to add a new stream, preferably involving an electric vehicle-bound commodity.
Peel Hunt expects adjusted pre-tax profit of £42.2m and EPS of 18p this year, up from £16.4m and 9.2p in 2016.
| ANGLO PACIFIC (APF) | ||||
| ORD PRICE: | 122p | MARKET VALUE: | £221m | |
| TOUCH: | 120-123p | 12-MONTH HIGH: | 135p | LOW: 94p |
| DIVIDEND YIELD: | 4.9% | PE RATIO: | 7 | |
| NET ASSET VALUE: | 116p | NET DEBT: | 0.3% | |
| Half-year to 30 Jun | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend share (¢) |
| 2016 | 4.08 | -8.2 | -3.18 | 3.0 |
| 2017 | 16.1 | -3.0 | -1.46 | 3.0 |
| % change | +295 | -63 | -54 | - |
| Ex-div: | 5 Oct | |||
| Payment: | 15 Nov | |||
