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MarketScreener Homepage  >  Equities  >  London Stock Exchange  >  Anglo Pacific Group plc    APF   GB0006449366

ANGLO PACIFIC GROUP PLC

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Anglo Pacific says coal tempting after high-value Rio sale

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03/28/2018 | 07:58am EDT

LONDON (Reuters) - A global lack of investment in coal helped to create a record full-year profit for mining royalty company Anglo Pacific (>> Anglo Pacific Group plc) and is likely to continue to boost its earnings as many funds shun the sector, its CEO said on Wednesday.

LONDON (Reuters) - A global lack of investment in coal helped to create a record full-year profit for mining royalty company Anglo Pacific and is likely to continue to boost its earnings as many funds shun the sector, its CEO said on Wednesday.

Anglo Pacific said on Wednesday its income from mining royalties had risen 90 percent last year and its free cash flow more than tripled.

Its flagship royalty is for the Kestrel mine in Australia, which Rio Tinto (>> Rio Tinto Limited) said on Wednesday it had sold for $2.25 billion. The sale does not affect Anglo Pacific's ownership of the royalty.

A mining royalty provides the holder with the right to a share of revenue, profit or production. Historically, royalties resulted from the sale of a mineral property, but increasingly they are created by operators or developers as a source of finance.

Anglo Pacific CEO Julian Treger said the sale's value, at about twice the level some analysts expected, also meant the royalty was worth more than thought.

"Paradoxically, we're creating a situation where existing (coal) producers are going to be rewarded on an ongoing basis," he said. Coal has felt most acutely the lack of new investment, while absolute demand is rising, driven by emerging economies.

The Kestrel royalty deal kicked off Anglo Pacific's business model. It bought the rights in the 1980s for A$180,000 (97,531 pounds) when coal was discovered on land it owned. Since then, the royalty has delivered more than A$400 million.

Treger said Anglo Pacific aimed to diversify and increase exposure to minerals such as copper, nickel and zinc, as well as metals used for alloys to help make vehicles lighter and reduce emissions. Coal, however, may be too good an opportunity to ignore.

"If we get offers that are hard to resist we have a responsibility to look at these for the shareholders," he said.

As one of the most capital intensive sectors, mining suffers particularly from the shift to indexation and away from specialist mining funds that were hit by the commodity price crash of 2015-16.

Coal investment has been further squeezed by concerns about planet-warming emissions.

The indexation trend means generalist investors favour the already cash-rich majors, whose shares they can easily sell if need be, leaving junior miners scrambling to sell royalties as a way to raise cash.

"The result of indexation is that people want to go into large caps. They're drawn by liquidity. That's good for Anglo Pacific. We are seeing tremendous interest for development royalties," Treger said.

Anglo Pacific's share price fell around 4 percent by 1100 GMT and is down by nearly 3 percent since the start of the year. The broader sector <.FTNMX1770>, which last year extended a strong recovery from the commodity markets crash of 2015-16, has also fallen.

(Reporting by Barbara Lewis, editing by David Evans)

By Barbara Lewis

Stocks treated in this article : Anglo Pacific Group plc, Rio Tinto Limited, Rio Tinto
Stocks mentioned in the article
ChangeLast1st jan.
AMP LIMITED 0.57% 1.755 End-of-day quote.-8.36%
ANGLO PACIFIC GROUP PLC -0.47% 127.6 Delayed Quote.-33.23%
JUST GROUP PLC -3.32% 49.84 Delayed Quote.-34.75%
LAND CO., LTD. 0.00% 10 End-of-day quote.-16.67%
NEXT PLC 5.61% 5004 Delayed Quote.-32.49%
SHIFT, INC. -2.15% 11390 End-of-day quote.42.73%
WILL GROUP, INC. 2.87% 646 End-of-day quote.-48.40%
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Financials
Sales 2020 46,0 M 57,9 M 57,9 M
Net income 2020 19,0 M 23,9 M 23,9 M
Net Debt 2020 17,3 M 21,8 M 21,8 M
P/E ratio 2020 12,2x
Yield 2020 7,06%
Capitalization 231 M 291 M 290 M
EV / Sales 2019
EV / Sales 2020 5,40x
Nbr of Employees 11
Free-Float 91,0%
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Mean consensus BUY
Number of Analysts 6
Average target price 190,67 GBX
Last Close Price 1,28 GBX
Spread / Highest target 16 514%
Spread / Average Target 14 843%
Spread / Lowest Target 12 988%
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Managers
NameTitle
Julian Andre Treger Chief Executive Officer & Executive Director
Nicolas Patrick H. Meier Non-Executive Chairman
Kevin Flynn CFO, Secretary & Executive Director
Robert H. Stan Independent Non-Executive Director
Vanessa Dennett Independent Non-Executive Director
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