Since taking control of the Kestrel coking coal mine in central Queensland from Rio Tinto, Adaro Energy has sought to boost output by 40 per cent. For Anglo Pacific (APF), whose core asset is a royalty stream over the site, that shift has provided an obvious catalyst for earnings. Powered by higher prices, income from Kestrel leapt 60 per cent in the first six months of 2019, to £22.7m.
However, higher rates of production also mean faster depletion, and one might expect the asset’s carrying value to have dropped. But combined with a resilient coal price, higher annual production assumptions have led to the asset’s upward re-valuation to £124m, from £110m at the end of 2018. This explains most of the surge in pre-tax profits in the table below, and a third of Anglo’s 19 per cent rise in net assets in the period.
The remainder of the uplift in shareholder equity can be explained by the group’s own equity stake in the Labrador Iron Ore Royalty Corporation (LIORC), which owns a 7 per cent royalty stream on Rio’s Canadian iron ore operations. This stake rose £18.7m in the period on the back of surging prices for the metal, and was marked at £59.5m at the end of June. Since then, Anglo has bought the dip, acquiring another £9m-worth of LIOC stock.
Analysts at Peel Hunt expect adjusted earnings of 25.2p per share this year, and 24.3p in 2020.
| ANGLO PACIFIC (APF) | ||||
| ORD PRICE: | 188p | MARKET VALUE: | £ 341m | |
| TOUCH: | 188-190p | 12-MONTH HIGH: | 229p | LOW: 127p |
| DIVIDEND YIELD: | 4.3% | PE RATIO: | 7 | |
| NET ASSET VALUE: | 143p* | NET CASH: | £14.5m | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2018 | 19.1 | 18.6 | 7.2 | 3.25 |
| 2019 | 31.3 | 41.2 | 16.8 | 3.25 |
| % change | +69 | +122 | +131 | - |
| Ex-div: | 03 Oct | |||
| Payment: | 14 Nov | |||
| *Includes intangible assets of £69.8m, or 38.5p a share. | ||||
