VANCOUVER (miningweekly.com) – Royalty streaming firm Anglo Pacific Group has reported strong results for the first half of 2016, more than doubling free cash flow and narrowing its net loss, which was helped by a weaker pound and higher royalty income.
For the interim period ended June 30, the London, UK-based firm reported a net loss of £5.4-million, or 3.18p a share, compared with a net loss of £8.8-million, or 5.81p a share, for the same period a year earlier. The net loss in the period was mainly owing to a £10.2-million impairment booked on the company’s Kestrel royalty, in Australia, by operator Rio Tinto.
The impairment was, however, virtually reversed through the unrealised foreign exchange gain on the Australian dollar conversion to pounds at the period end, the company advised.
Removing special items, the LSE- and TSX-listed company reported adjusted earnings of £2.4-million, or 1.43p a share, up 50% on the year-earlier results of £1.6-million, or 1.04p a share.
Royalty income increased during the six-month period to £4.1-million, a 6% increase from £3.8-million in the comparable period of 2015.
Anglo Pacific, which owns a portfolio of royalties on coal assets in Australia, as well as precious metals and uranium royalties elsewhere, expanded free cash flow in the period to £3.6-million, more than double the £1.7-million generated in the first half of 2015.
CEO Julian Treger noted that the company expected a stronger second half of the year, as the immediate impact of Britain’s vote to leave the European Union was a weakening of the pound, which is expected to be positive for the group as its assets and income are in dollar-denominated currencies.
Further, he stated that the price of both coking coal and thermal coal ended the second quarter strongly, mainly on the back of supply cuts in China. “Both of these tailwinds combined should facilitate a stronger second half of the year for the group. Our encouraging start to the year, coupled with the near-term improved outlook for commodity prices and a weaker pound, should now accelerate dividend cover,” said Treger.
Anglo Pacific also expects strong performance from its Kestrel interests, as Rio Tinto is expected to increase mining rates on the company’s private royalty land to about 60% to 65% for the full year. In 2017, this rate is expected to rise to more than 90%.
The company expects an improved outlook for both coking and thermal coal prices, with the third-quarter coking coal contract price settling at $92/t, a 14% increase on the first quarter, and with spot prices currently around $110/t.
Following the results, the company’s LSE-listed stock gained nearly 5% on Thursday to 101p apiece.