TIDMAPF
RNS Number : 0847X
Anglo Pacific Group PLC
26 August 2015
August 26, 2015
Anglo Pacific Group PLC
Interim results for the six months ended June 30, 2015
Anglo Pacific Group PLC ('Anglo Pacific', the 'Company', the
'Group') (LSE: APF) (TSX: APY) is pleased to announce interim
results for the six months ended June 30, 2015 which are available
on both the Group's website at www.anglopacificgroup.com and on
SEDAR at www.SEDAR.com.
Headlines:
-- Interim dividend of 4.00p (2014 interim dividend: 4.45p),
consistent with previously announced dividend policy of 8.00p per
annum
-- Total royalty income of GBP3.8m for the period, a 48%
increase on the same period in 2014 (GBP2.6m)
o Further increases anticipated in H2 2015 and already ahead of
2014 full year royalty income of GBP3.5m
o Includes first royalty receipts from Narrabri and Maracás
(GBP1.8m and GBP0.4m respectively)
-- Operating profit doubled in the period to GBP0.6m (June 30, 2014: GBP0.3m)
-- Loss after tax of GBP8.8m resulting in a basic loss per share
of 5.81p (June 30, 2014: loss after tax of GBP23.0m and basic loss
per share 20.84p respectively) mainly due to non-cash valuation and
impairment provisions
-- Adjusted profit after tax of GBP1.2m resulting in adjusted
earnings per share of 0.77p (June 30, 2014: loss GBP0.8m and
adjusted loss per share 0.77p respectively) - see note 5 for
further details
-- Net assets at June 30, 2015 of GBP171.0m resulting in net
assets per share of 101p (December 31, 2014: GBP161.3m and 138p
respectively)
-- Cash of GBP4.0m, net cash of GBP1.2m (December 31, 2014:
GBP8.8m cash with no borrowings) in addition to $25.5m (GBP16.2m)
undrawn, and available, revolving credit facility
-- Acquisition of the Narrabri royalty for GBP43.0m before costs
along with successful, oversubscribed equity issue
-- Narrabri exceeding production estimates in the first six
months with full year ROM production guidance of 7.7mtpa of coal
versus 6.5mtpa estimated at the time of acquisition
Julian Treger, Chief Executive Officer, commented:
"The first six months of 2015 have been encouraging. Income has
increased significantly and royalty income in the first half of the
year is now ahead of what we received for the whole of 2014. This
increase is largely driven by new sources of income from Narrabri
and Maracás, which further demonstrates the progress we are making
on executing our strategy of adding to, and diversifying, our
royalty income.
The outlook for the remainder of 2015 is equally encouraging,
with Narrabri running significantly ahead of our production
estimates at the time of acquisition and the latest Kestrel
forecasts from Rio Tinto continuing to suggest 70-75% of production
within our lands in H2 15. Both outcomes should allow us to report
much higher royalty income for 2015 as a whole, despite the fall in
commodity prices experienced in the year to date."
Analyst presentation webcast and conference call:
There will be a webcast and conference call for analysts at
09:30 (BST) on August 26, 2015. The call will be hosted by Julian
Treger (CEO) and Kevin Flynn (CFO) and accessed via the following
dial in details: +44 20 3059 8125 and by quoting 'Anglo Pacific
Interim Results' to gain access to the conference call.
The webcast can be accessed at anglopacificgroup.com and a
replay will also be available on the website shortly
afterwards.
For further information:
Anglo Pacific Group PLC
Julian Treger - Chief Executive Officer
Kevin Flynn - Chief Financial Officer and
Company Secretary +44 (0) 20 3435 7400
Website: www.anglopacificgroup.com
BMO Capital Markets Limited +44 (0) 20 7664 8020
Jeffrey Couch/Neil Haycock/Tom Rider
Macquarie Capital (Europe) Limited
Raj Khatri/Nicholas Harland/Ariel Tepperman +44 (0) 20 3037 2000
Peel Hunt LLP +44 (0) 20 7418 8900
Matthew Armitt/Ross Allister
Bell Pottinger +44 (0) 20 3772 2500
Nick Lambert/Lorna Cobbett
Notes to editors:
About Anglo Pacific
Anglo Pacific is a global natural resources royalty company. The
Company's strategy is to create a leading international diversified
royalty company with a portfolio centred on base metals and bulk
materials, focusing on accelerating income growth through acquiring
royalties on projects that are currently cash flow generating or
are expected to be so within the next 24 months. The policy of the
Company is to pay a substantial portion of these royalties to
shareholders as dividends.
Royalties explained
A royalty is an entitlement to an agreed percentage of a
project's sales revenue, without any liability for production costs
or capital expenditure. This is the key benefit of owning a
royalty.
Most of Anglo Pacific's royalties endure for the life of the
resource and are paid on a regular basis. Historically there have
been different terms for royalties including Gross Revenue or Net
Smelter Return ("GRR" or "NSR") royalties, which are both based on
the sales value of the actual mineral. Our model is based around
GRR or NSR royalties as we believe they provide the best and
clearest returns.
Acquiring existing royalties
In this case we buy existing royalty agreements, such as those
owned by exploration companies who may have retained a residual
royalty in a mine they helped discover. Royalty companies rarely
sell their royalties, once acquired.
Creating new royalties
Our new royalty agreements tend to come from providing financing
for mining operations, usually to help progress a mine into
production.
Business review
----------------
We are pleased to report that with these results we believe that
Anglo Pacific, with its lower risk royalty model, has turned the
corner. With a focus on top line revenue and two world class
producing royalties in the Kestrel Coal Mine ("Kestrel") and the
Narrabri North Mine ("Narrabri"), the Group has seen an increase in
royalty revenue, despite a noticeable decline in commodity prices,
in the first half of 2015, whilst keeping costs under control. This
suggests that 2014 should be the low point for Anglo Pacific's
royalty income and we expect to see it increasing as Kestrel, in
line with our previous guidance, moves largely into our private
royalty lands.
Despite the continued decline in commodity prices, Anglo Pacific
has started 2015 strongly. We announced the completion of our
largest ever royalty acquisition, Narrabri, in March 2015 from
which we were entitled to royalty income from January 1, 2015. We
remain convinced that good quality, cleaner coal such as that at
Narrabri and Kestrel will remain an important component of the
global energy mix going forward. We are of the view that lower
polluting coal should, over the longer term, attract a greater
premium to high ash content coal which is more detrimental to air
quality, particularly in China.
We are very pleased with the performance of the Narrabri royalty
in the first six months, which was well ahead of our production
estimates made at the time of the acquisition. Whitehaven has
announced its guidance for ROM coal production for the next fiscal
year, to 30 June 2016, at the Narrabri mine to be 6.6 Mt to 6.8 Mt,
slightly ahead of our investment assumptions but slightly lower
than the current ROM of 7.7 Mt as two long wall change outs are
scheduled to occur in their next fiscal year due to accelerated
levels of production in 2015.
In addition, the information we are receiving from Rio Tinto
regarding production forecasts at Kestrel suggests that 50-55% of
total production in 2015 will be within our private royalty lands,
most of which will accrue in the second half of the year. We expect
this to increase in 2016 and our previous guidance of 60-65% of
production within the Group's royalty land remains unchanged,
rising to 90% in 2017. This upward trend should drive revenue
growth over the coming years.
In the first half of 2015, this progress, together with
contributions from our royalties over the Maracás Menchen Vanadium
Mine ("Maracás") and EVBC, translated to overall royalty income of
GBP3.8m, compared with GBP2.6m for the same period in 2014.
Although the 2015 number includes the full six months of income
from Narrabri, income in the first half of 2015 is also
significantly ahead of H2 2014 on a comparable basis. Although
commodity price declines have impacted on current year revenue, we
now expect to report a significant increase in royalty income for
2015 compared to GBP3.5m reported for 2014 as a whole.
As part of the Narrabri acquisition we put in place a $30m
(GBP19.2m) revolving credit facility ("RCF"), largely for working
capital purposes. At June 30, 2015 we had drawn $4.5m (GBP2.9m) of
this, with a further $10.6m (GBP6.8m) drawn down to date in Q3
2015. The Group has unrestricted access to the remaining undrawn
amount of this facility. We continue to hold a small portfolio of
equity investments which provide additional liquidity, as required.
The largest single holding within this portfolio is Berkeley Energy
Limited ("Berkeley"), whose Salamanca project we own a royalty
over, and who have made considerable progress in the first half of
this year.
(MORE TO FOLLOW) Dow Jones Newswires
August 26, 2015 02:01 ET (06:01 GMT)
As announced in December 2014, we remain committed to our policy
of paying a significant portion of our royalty income to
shareholders as dividends. Subject to achieving our anticipated
level of adjusted earnings, we intend to pay at least an 8p annual
dividend until such time as the equivalent of a minimum of 65% of
adjusted earnings is higher than this figure, at which point we
will start to progressively increase the dividend again. We
recognise the importance of the dividend to our shareholders and,
with interest rates and yields on government bonds at historically
low levels, we believe that our yield should be attractive to
investors both with and without a mining focus.
During the first half of the year, we were pleased to welcome
Patrick Meier to the Board. As ex-head of European Investment
Banking at Royal Bank of Canada, Patrick brings with him a wealth
of experience and contacts in the City and the mining world
generally. He is already making a valuable contribution to our
company. We also wanted to thank Mark Potter, previously CIO, for
his efforts in helping turn around the fortunes of our company and
to wish him luck in his new ventures.
As announced separately today, and following discussions with
the UKLA during our recent fund raise, Anglo Pacific is proposing
to transition from a premium listing to a standard listing, a
process expected to complete in October 2015, subject to
shareholder approval at an EGM. The new listing will allow us to
streamline fundraising and acquisition processes which will in turn
help us take advantage of the value opportunity presented by
current market conditions, whilst choosing to retain high levels of
disclosure and corporate governance which a premium listing
requires.
Investment Review
------------------
Producing royalties
Kestrel, Queensland Australia - Coking Coal
Royalty income at Kestrel was GBP0.6m lower at GBP1.0m in the
six months to June 30, 2015 (2014: GBP1.6m), reflecting lower
average prices realised. As expected, royalty income from Kestrel
increased compared to H2 2014 as Rio Tinto Limited ("Rio Tinto")
mined substantially more tonnes from within our royalty lands
during this time period. The fall in commodity price has diluted
some of this benefit, although we expect to report an overall
increase in royalty income for 2015 as a whole.
On July 16, 2015 Rio Tinto announced its Second Quarter
Operations Review which reported strong coal production figures
from Kestrel following a longwall change out during Q4
2014.Production totalled 2.252 Mt of coal (1.956 Mt of hard coking
coal and 0.296 Mt of thermal coal) in H1 2015 compared to 1.59 Mt
(1.393 Mt of hard coking coal and 0.197 Mt of thermal coal) for the
corresponding period in 2014, an increase of 42%.
Anglo Pacific is increasingly confident in the production
forecasts provided by Rio Tinto and therefore reiterates its
expectations, based on Rio Tinto guidance, that production within
the Company's royalty lands from the Kestrel Mine will be in the
range of, or slightly above 70% to 75% for H2 2015, despite a
scheduled longwall change out during the second half. This would
bring the overall level of production within our land in 2015 to
50-55%. We expect this to increase to 60-65% in 2016, as per our
previous guidance, and to over 90% by 2017.
The fair value of the Group's Kestrel royalty decreased by
GBP17.1m, before tax, to GBP100.0m as at June 30, 2015, from
GBP117.1m as at December 31, 2014. This decrease is largely
attributable to downward movements in the forward coking and
thermal coal prices from those at December and the further
strengthening of the pound against the Australian dollar.
For further information please see www.riotinto.com.
Narrabri North, New South Wales, Australia - Thermal and PCI
Coal
Anglo Pacific acquired the Narrabri royalty in March 2015 for a
total consideration of US$65m ($43.0m) of which US$60m (GBP39.7m)
was payable in cash and US$5m (GBP3.3m) in Anglo Pacific shares.
Although the acquisition completed in March 2015, the Group was
entitled to royalty income from January 1, 2015.
Royalty income in the first six months of 2015 from the Group's
royalty on Narrabri was GBP1.8m. Run of Mine ("ROM") coal
production during the period was 4.9 Mt (2014: 2.4 Mt), and
saleable coal production was 4.1 Mt (2014: 2.3 Mt). Sales of
produced coal totalled 3.9 Mt (2014: 2.3 Mt). During the period,
Narrabri outperformed Whitehaven Coal Limited's ("Whitehaven")
production guidance and set a new half year production record.
Whitehaven has announced its ROM production guidance for
Narrabri for fiscal year ("FY") 2016 of between 6.6 Mt and 6.8 Mt.
Whitehaven anticipates two full longwall change outs in FY2016 with
a target period of five weeks for each change out as a result of
accelerated production in 2015. Whitehaven also announced in its
Full Year Results for FY2015 that it will widen the longwall face
at Narrabri to 400m panels in H2 FY2017 in a move expected to
increase production and reduce operating costs at the mine. This is
a good example of the upside potential we look for when evaluating
royalty opportunities as this acceleration of production increases
the value of the royalty although, as discussed in the finance
review, does not result in any valuation credit on the balance
sheet.
For further information, please see
http://www.whitehavencoal.com.au.
Maracás Menchen, Brazil - Vanadium
Royalty income in the first six months of 2015 from the Group's
royalty on Maracás was GBP0.4m. Maracás continued its production
ramp up during the period. On June 8, 2015, Largo Resources Limited
("Largo") announced that it achieved record monthly overall
production of approximately 487 tonnes during the month of May
2015, the highest level since production commenced in August, 2014.
During the same month Largo also achieved a record single day
production of 23 tonnes, representing approximately 87% of the
processing plant's design capacity. Once fully ramped up, Maracás
is forecast to produce approximately 11,400t of V(2) O(5)
equivalent annually over a 29 year mine life.
On June 15, 2015 Largo announced that it had received final
approval from the Brazilian Development Bank ("BNDES") for the
restructuring of its main construction debt facility and its export
credit facilities. The material terms of the restructuring package
included an additional one-year grace period on the amortization
schedule for the BNDES facility, a two-year extension of the
maturity date for the export facilities and a three-year extension
of the maturity date for the US dollar component of the BNDES
facility with no change in the maturity of the R$ component.
Additionally, Largo successfully closed a CDN$75.2m equity offering
on May 28, 2015. The proceeds of these funds will be used for,
among other things, working capital and optimisation projects on
the processing plant.
For further information please see www.largoresources.com.
El Valle-Boinás/Carlés, Spain - Gold/Copper/Silver
During the six months to June 30, 2015, the Group received
royalty receipts of GBP0.6m (2014: GBP0.8m) from the El
Valle-Boinás/Carlés Mine ("EVBC"). During the first six months of
2015, EVBC produced 26,371 ounces of gold, 2.91 million pounds of
copper and 82,227 ounces of silver compared with 33,529 ounces of
gold, 3.05 million pounds of copper and 84,293 ounces of silver
during the same period in 2014. The decrease in metal production
was generally impacted by a decrease in average processed grade and
tonnes milled, as well as power and maintenance issues, and
dewatering issues experienced as a result of unusually heavy rains
in Spain.
In February 2015, Orvana placed the Carlés Mine under care and
maintenance, but is planning to ramp up production at the higher
grade Boinás Mine by the equivalent amount as previously produced
from Carlés.
For further information please see www.orvana.com.
Four Mile, South Australia - Uranium
The Four Mile Uranium Mine ("Four Mile") continues to produce
uranium ore concentrate ("UOC"), although output continues to be
stockpiled. On July 30, 2015 Alliance Resources Ltd ("Alliance")
announced its Quarterly Activity Report for the period ending June
30, 2015, which stated total estimated UOC production since
commencement of mining in April 2014 to June 30, 2015, of 2.44 Mlbs
at an estimated cash operating cost of AUD$30.27 per pound
produced.
On July 13, 2015, Alliance announced that it had accepted a
revised offer from Quasar Resources Pty Ltd, the registered holder
of 75% of Four Mile and manager of the project, to purchase all of
Alliance's interest in Four Mile for a total consideration of
AUD$73.975m. The sale is subject to shareholder approval, the
consent of the South Australian Mines Minister, and the
Commonwealth Treasurer having no objection to the acquisition. The
board of Alliance has unanimously recommended that shareholders
approve the sale.
For further information please see
www.allianceresources.com.au.
Development royalties
Salamanca, Spain - Uranium
Following the announcement in November 2014 of a substantial
increase in resources at its Zona 7 deposit within the Salamanca
Project in central Spain, Berkeley Energy Limited's ("Berkeley")
has been progressing a Scoping Study designed to determine the
optimum integration of Zona 7 with the development of the
Retortillo and Alameda deposits. The results of the Scoping Study
will be incorporated into the Salamanca Project Definitive
Feasibility Study.
On July 20, 2015, Berkeley announced that it has been issued a
favourable report by the Spanish Nuclear Safety Council for the
grant of the Initial Authorisation of the proposed process plant at
the Salamanca Project. The report is an official recognition of the
purpose and selected location of the process plant, and represents
a significant permitting milestone for Berkeley.
For further information on the project please see
www.berkeleyresources.com.
Ring of Fire, Canada - Chromite
(MORE TO FOLLOW) Dow Jones Newswires
August 26, 2015 02:01 ET (06:01 GMT)
On March 23, 2015 Cliffs Natural Resources Inc. ("Cliffs")
announced its intention to sell its Ring of Fire chromite assets in
Northern Ontario, Canada, to Noront Resources Ltd. ("Noront").
These assets include a 100% interest in the Black Thor chromite
deposit; a 100% interest in the Black Label chromite deposit; and,
a 70% interest in the Big Daddy chromite deposit over all of which
the Company has a 1% life of mine NSR royalty. The transaction
closed on the April 28, 2015 for a final selling price of $27.5m in
cash.
Noront is currently reviewing the technical documentation for
these assets with a goal of producing a strategic plan and a
comprehensive preliminary economic analysis (PEA) for development
options for the projects.
For further information on the project please see
www.norontresources.com.
Non-current receivables
Dugbe 1, Liberia - Gold
Hummingbird Resources PLC ("Hummingbird") continues to progress
its Dugbe 1 Gold Project in Liberia during 2015. In April,
Hummingbird announced that it had signed a collaboration agreement
to explore the feasibility of a 20 to 30 MW hydro-electric power
plant in southeast Liberia, in an area approximately 10 km from the
Dugbe 1 Project. The study is due to be completed in April 2016. If
developed, the hydro-electric plant has the potential to reduce the
operating costs of the Dugbe 1 Project.
In July 2015, Hummingbird announced that it had signed a 25 year
Mineral Development Agreement ("MDA") with the Government of
Liberia for the Dugbe Shear Zone which contains the Dugbe 1
Project, and is expected to be signed by the President of Liberia
shortly. Thereafter the MDA will be sent for ratification by the
National Legislature of the Republic of Liberia following which the
MDA will be passed into law. Upon the full execution of the MDA,
the Group's loan agreement with Hummingbird falls away and will be
replaced by a 2% Net Smelter Royalty over the area of interest.
For further information please see
www.hummingbirdresources.co.uk.
Equity investment
As of June 30, 2015 Anglo Pacific had equity investments valued
at approximately GBP8.1m (December 31, 2014: GBP9.9m). The Group
took advantage of an opportunity to dispose of its investment in
Royalco Resources Ltd in February 2015, as the prospect of entering
into royalty transactions seemed limited. Of the remaining equity
investments, the majority relate to the Group's significant
shareholding in Berkeley Energy Ltd, which management expect could
outperform over the medium term. In the meantime, this represents
an additional potential source of liquidity for the Group. The
other noteworthy equity investment is that relating to our
co-investment agreement with Flowstream Commodities Ltd. It is
expected that less significant holdings will be disposed of as and
when market conditions allow.
Finance review
---------------
Royalty Income H1 2015 H1 2014 FY 2014
------------------- ------------------ ------------------ ------------------
AUD GBP AUD GBP AUD GBP
Royalty related $'000 GBP'000 $'000 GBP'000 $'000 GBP'000
income
------- --------- ------- --------- ------- ---------
Kestrel 2,000 1,027 2,844 1,558 3,030 1,657
EVBC 627 791 1,650
Amapá - 232 174
------------------- ------- --------- ------- --------- ------- ---------
Royalty income
(like for like) 1,654 2,581 3,481
Narrabri 3,503 1,799 - -
Maracás 375 - -
------------------- ------- --------- ------- --------- ------- ---------
Royalty income 3,828 2,581 3,481
------------------- ------- --------- ------- --------- ------- ---------
Royalty income, on a like for like basis, was GBP1.7m in the
period, down from GBP2.6m in the first half of 2014, largely as a
result of commodity price falls in the current year, but GBP1.1m
ahead of the GBP0.9m earned in the second half of 2014 when there
was virtually no production within the Group's lands at Kestrel.
When combined with income from the Group's two recent acquisitions,
Narrabri and Maracás, overall royalty income for the period was
GBP3.8m. This is already ahead of that received in 2014 as a whole,
a year which should represent the low point for the Group's royalty
income both historically and going forward. With strong production
at Narrabri and promising production forecasts from Rio Tinto at
Kestrel, the Group is well placed to report a significant increase
in royalty income for 2015, although somewhat diluted by the impact
of lower commodity prices being experienced in 2015.
The Group's amortisation cost increased significantly in the
first six months due to the commencement of amortisation of the
Narrabri, Maracás and Four Mile royalties now that they are in full
production. As the Amapá royalty has yet to recommence production
following the destruction of the shipping facilities at the Santana
port in March 2013, amortisation of this royalty has been suspended
until such time as production resumes.
Operating profit, which represents royalty income less
amortization and operating expenses (and is stated before
impairments, revaluations and gains and losses on disposals) was
GBP0.6m for the first six months of 2015 compared to GBP0.3m for
the same period in 2014 and an operating loss of GBP2.8m for 2014
as a whole.
The items beneath the operating line continue to be dominated by
the non-cash Kestrel valuation and impairment charges relating to
the Group's royalty assets. Kestrel, representing an interest in
investment property, is carried at fair value at each reporting
date with the valuation movement recognised in the income
statement. The decrease of GBP9.1m in the period mainly relates to
the downward revision to premium hard coking coal prices and
reserve depletion estimates. A further translation loss of GBP8.0m
is reflected in reserves, as described below.
During the period, the Group recognised further impairment
provisions on its Amapá (GBP1.2m) and Ring of Fire (GBP1.6m)
royalties. This is based on the risk adjusted net present value of
the future projected cash flows being exceeded by the preceding
carrying value. The provision at Amapá is mainly driven by the fall
in iron ore price throughout 2015, along with revisions to the
expected restart date once the port shipping facilities are
re-established. The provision at Ring of Fire mainly relates to a
possible delay to our previously expected start date following the
acquisition of the project by Noront Resources Ltd in the first
half of the year from the previous owner, Cliffs Resources Ltd. The
start date will most likely be impacted, amongst other things, by
the large capex requirement to build the necessary infrastructure
along with disputes between local stakeholders. Although the time
to production is less certain than Amapá, which is effectively the
restarting of production, the Group is encouraged that the Ring of
Fire project is now in the hands of a stakeholder with considerable
local interest and presence. For these reasons, the Board consider
that these royalties still have value and continue to reflect this
on the balance sheet.
The deferred tax credit in the first six months of 2015 is due
to the downward revaluation of the Kestrel royalty. A similar
credit was recognised in the first six months of 2014 but was more
than offset by the release of certain deferred tax assets for which
recoverability was no longer certain.
Allowing for current tax and smaller income and expenditure
items, the overall loss for the first six months was GBP8.8m
compared to a loss of GBP23.0m for the same period in 2014.
GBP'000 Pence
per share
==================================================== ========= ===========
January 1, 2015 161,250 138p
==================================================== ========= ===========
Adjusted profit after tax 1,174
==================================================== ========= ===========
Kestrel
==================================================== ========= ===========
* Translation (8,010)
==================================================== ========= ===========
* Valuation decrease (price, depletion & FX) (9,074)
==================================================== ========= ===========
* Deferred tax 5,538
==================================================== ========= ===========
Narrabri acquisition (equity funded), including
capitalised costs 44,971
==================================================== ========= ===========
Amapá and Ring of Fire impairment charges (2,786)
==================================================== ========= ===========
Amortisation (1,344)
==================================================== ========= ===========
Loss on disposal of equities (507)
==================================================== ========= ===========
Dividend (11,874)
==================================================== ========= ===========
Foreign exchange and other (8,385)
---------------------------------------------------- --------- -----------
(MORE TO FOLLOW) Dow Jones Newswires
August 26, 2015 02:01 ET (06:01 GMT)
June 30, 2015 170,953 101p
==================================================== ========= ===========
The Group's net assets increased in the period as a result of
the equity funded Narrabri royalty acquisition, offset somewhat by
commodity price and exchange movements. Net assets per share
decreased to reflect the greater number of shares now in issue.
The Kestrel valuation resulted in a net decrease of GBP11.5m in
the period, due to assumptions regarding price and reserve
depletion along with the impact of translating the asset into
pounds from the weakening Australian dollar. Foreign exchange has
adversely impacted the balance sheet in the period, as a
substantial portion of the Group's assets are denominated in
Australian dollars, which depreciated by over 8% in the period and
has continued to weaken post June 30. Encouragingly, the Group
reported an adjusted profit for the period reflecting higher
overall royalty income.
Although net assets per share decreased due to the issuance of
new equity associated with the Narrabri acquisition in March 2015,
it should be noted that this does not reflect the true value to the
Group of the acquisition. The Group's royalties which are accounted
for as intangible assets are carried on the balance sheet at
amortised cost, regardless of any potential future value increases
such as additional resource or, in the case of Narrabri, higher
production than factored into the price at the time of the
acquisition. Although the Group must recognise any adverse impact
on value via an impairment charge, there are certain royalties
within the portfolio where the underlying value is greater than the
carrying value i.e. amortised cost. Any increase in commodity price
will increase further the future expected cash flows from these
royalties and will represent an additional source of value to the
Group. Although each has challenges to overcome in order to come
into production, this is often an overlooked source of value when
looking at the balance sheet net asset per share metric in
isolation
As part of the Narrabri acquisition, the Group obtained a $30m
(GBP19.0m) three year secured revolving credit facility. The
purpose of this facility was largely to fund working capital
requirements until such time that royalty revenue increased as
mining moved largely back into the Group's private royalty lands at
Kestrel from 2017 onwards. At the balance sheet date, $4.5m
(GBP2.9m) had been drawn under the facility, with a further $10.6m
(GBP6.8m) drawn down so far in Q3 2015. The remaining undrawn
amount of $15m (GBP9.5m) is fully available and, fully drawn, the
facility would represent an approximate Loan to Value ratio of
9%.
Principal risks and uncertainties
----------------------------------
Through its royalty ownership, Anglo Pacific is exposed to a
number of risks and uncertainties which may have a financial impact
on the Group, and which may also have an impact on the achievement
of its strategic objectives.
The principal risks and uncertainties facing the Group at the
year-end were set out in detail in the Strategic Report section of
the Annual Report 2014 (pages 12 to 13), and have not changed
significantly since. Key headline risks relate to the
following:
-- Commodity prices
-- Dependence on operators
-- Achieving investment projections
-- Financial covenants associated with secured debt
-- Liquidity risk
-- Credit risk
-- Foreign exchange risk
-- Interest rate risk
-- Other pricing risk
The Group is exposed to changes in the economic environment, as
with any other business. Details of any key risks and uncertainties
specific to the period are covered in the business and investment
review sections.
The Annual Report 2014 is available on the Group's website
www.anglopacificgroup.com
Dividend
---------
The Board has declared an interim dividend for 2015 of 4.00p per
share, maintaining the 2014 final dividend per share. The dividend
will be paid on February 4, 2016 to shareholders on the register at
the close of business on November 27, 2015. The shares will be
quoted ex-dividend in London on November 26, 2015 and in Canada on
November 25, 2015.
A payment of GBP5.1m, equivalent to 4.45p per share, is included
in the cash flow statement to June 30, 2015, representing the 2014
interim dividend recognised and paid in February 2015. This,
together with the 4.00p per share 2014 final dividend approved at
the AGM in April and paid in August 2015, means total dividend
payments in relation to 2014 were 8.45p per share. As previously
communicated, it is the Group's intention, subject to maintaining
an expected level of adjusted earnings, to maintain bi-annual
payments of 4.00p per share until such time that the equivalent of
65% of adjusted earnings per share is higher, at which point the
dividend will increase.
Outlook
--------
We expect 2015 to show significant growth in royalty income for
Anglo Pacific. The latest forecasts which we have received from Rio
Tinto confirm that our previous guidance of 70-75% of production at
Kestrel should be within the Group's private royalty land. This
should result in income from Kestrel for 2015 being significantly
higher than in 2014 when only GBP0.1m of income was earned in H2
2014. Our income will also benefit from the current production
levels being achieved at Narrabri, which are running ahead of our
estimates when we acquired the royalty. Although commodity prices
have fallen during 2015, we still expect to report higher royalty
income compared to 2014, a year which we believe will be our lowest
year of royalty income.
Our progress in 2015 is encouraging when considered against the
wider mining industry which continues to see large scale impairment
charges and margin erosion following the decline in commodity
prices to date in 2015. This prolonged period of commodity price
decline is now starting to weigh on the balance sheets of larger
operators whose ability to access the capital markets, whilst still
available, has the potential to impact shareholders through
dilution or financing ability through potential credit rating
downgrades. This presents real opportunities for Anglo Pacific to
acquire royalties over high quality, low cost, long life assets
with significant commodity price upside whilst offering our mining
partners a source of valuable finance to assist them in managing
financial covenants and credit ratings.
Whilst remaining cautiously optimistic, we believe we have
turned a corner and, in an environment of depressed commodity
prices, are well positioned to target world class royalties which
will be earnings accretive and allow our dividend to grow.
Responsibility statement
The Directors confirm that, to the best of their knowledge,
these condensed consolidated interim financial statements have been
prepared in accordance with IAS 34 'Interim financial reporting',
as adopted by the European Union and the Disclosure and
Transparency Rules of the United Kingdom's Financial Services
Authority. The interim management report includes a fair review of
the information required by DTR 4.2.7 and DTR 4.2.8, namely:
-- an indication of important events that have occurred during
the first six months of the financial year and their impact on the
condensed set of financial statements, and a description of the
principal risks and uncertainties for the remaining six months of
the financial year; and
-- material related-party transactions in the first six months
of the financial year and any material changes in the related-party
transactions described in the last Annual Report.
The Directors are listed in the Annual Report of December 31,
2014 and a list of the current Directors is maintained on the Anglo
Pacific website: www.anglopacificgroup.com. The maintenance and
integrity of this website is the responsibility of the
Directors.
On behalf of the Board
J.A. Treger
Chief Executive Officer
August 25, 2015
Anglo Pacific Group PLC
Condensed Consolidated Financial Statements
CONDENSED CONSOLIDATED INCOME STATEMENT (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 2015
Six months ended
June 30, 2015 June 30, 2014
Notes GBP'000 GBP'000
Royalty related income 15 3,828 2,581
Amortisation of royalties 9 (1,344) (380)
Operating expenses (1,837) (1,928)
-------------- --------------
Operating profit before impairments, revaluations and gain/(losses) on
disposal 647 273
Finance income 2 149 183
Finance costs 3 193 (1,151)
Other income 4 155 1,017
(Loss)/Gain on sale of mining and exploration interests 10 (507) 2,073
Impairment of mining and exploration interests 10 (128) (759)
Impairment of royalty intangibles 9 (2,786) (4,500)
Revaluation of coal royalties (Kestrel) 7 (9,074) (18,055)
(MORE TO FOLLOW) Dow Jones Newswires
August 26, 2015 02:01 ET (06:01 GMT)
-------------- --------------
Loss before tax (11,351) (20,919)
Current income tax charge (806) (838)
Deferred income tax credit/(charge) 12 3,333 (1,291)
-------------- --------------
Loss attributable to equity holders (8,824) (23,048)
============== ==============
Total and continuing earnings per share
Basic and diluted earnings per share 5 (5.81p) (20.84p)
Anglo Pacific Group PLC
Condensed Consolidated Financial Statements
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 2015
June 30, 2015 June 30, 2014
Notes GBP'000 GBP'000
Loss attributable to equity holders (8,824) (23,048)
Items that will not be reclassified to profit or loss - -
Items that have been or may be subsequently reclassified to profit or
loss
Available-for-sale investments
Revaluation of available-for-sale investments (933) (4,534)
Reclassification to income statement on disposal of
available-for-sale investments 507 (563)
Reclassification to income statement on impairment 128 759
Deferred tax relating to items that will be reclassified 12 136 583
Net exchange (loss)/gain on translation of foreign operations (10,421) 3,600
-------------- --------------
Other comprehensive loss for the period, net of tax (10,583) (155)
Total comprehensive loss for the period (19,407) (23,203)
============== ==============
Anglo Pacific Group PLC
Condensed Consolidated Financial Statements
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
AS AT JUNE 30, 2015
June 30, June 30, December 31,
2015 2014 2014
Notes GBP'000 GBP'000 GBP'000
Non-current assets
Property, plant and equipment 131 1,945 153
Coal royalties (Kestrel) 7 100,013 116,702 117,097
Royalty financial instruments 8 7,356 24,643 8,142
Royalty and exploration intangible assets 9 73,727 46,088 37,110
Mining and exploration interests 10 8,149 14,877 9,896
Deferred costs - - 1,462
Other receivables 9,543 11,874 9,657
Deferred tax 12 2,377 3,084 2,307
--------- --------- -------------
201,296 219,213 185,824
Current assets
Trade and other receivables 6,604 1,699 5,272
Cash and cash equivalents 4,023 14,413 8,769
--------- --------- -------------
10,627 16,112 14,041
Total assets 211,923 235,325 199,865
--------- --------- -------------
Non-current liabilities
Borrowings 11 2,625 - -
Other payables 115 - 83
Deferred tax 12 29,255 35,116 34,908
--------- --------- -------------
31,995 35,116 34,991
Current liabilities
Income tax liabilities 662 794 687
Trade and other payables 8,313 7,467 2,937
--------- --------- -------------
8,975 8,261 3,624
Total liabilities 40,970 43,377 38,615
--------- --------- -------------
Net assets 170,953 191,948 161,250
========= ========= =============
Capital and reserves attributable to shareholders
Share capital 13 3,399 2,329 2,329
Share premium 13 49,211 29,328 29,328
Other reserves 25,095 21,989 15,832
Retained earnings 14 93,248 138,302 113,761
--------- --------- -------------
Total equity 170,953 191,948 161,250
========= ========= =============
Total equity and liabilities 211,923 235,325 199,865
========= ========= =============
Anglo Pacific Group PLC
Condensed Consolidated Financial Statements
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(UNAUDITED) FOR THE SIX MONTHS ENDED JUNE 30, 2014
Other reserves
Foreign
Share
Investment based currency
Investment
Share Share Merger Warrant revaluation payment translation Special in Retained Total
capital premium reserve reserve reserve reserve reserve reserve own shares earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------- -------- -------- -------- -------- ------------ --------- ------------ -------- ----------- --------- ---------
Balance at January
1, 2014 2,218 29,328 - - 5,570 158 8,750 632 (2,601) 172,796 216,851
Loss for the year - - - - - - - - - (23,048) (23,048)
Other comprehensive
income:
Available-for-sale
investments
Valuation movement
taken to equity - - - - (4,534) - 545 - - - (3,989)
Transferred to
income
statement on
disposal - - - - (563) - - - - - (563)
Transferred to
income
statement on
impairment - - - - 759 - - - - - 759
Deferred tax - - - - 583 - 14 - - - 597
Foreign currency
translation - - - - - - 3,041 - - - 3,041
-------- -------- -------- -------- ------------ --------- ------------ -------- ----------- ---------
Total comprehensive
expense - - - - (3,755) - 3,600 - - (23,048) (23,203)
-------- -------- -------- -------- ------------ --------- ------------ -------- ----------- --------- ---------
(MORE TO FOLLOW) Dow Jones Newswires
August 26, 2015 02:01 ET (06:01 GMT)
Dividends - - - - - - - - - (11,535) (11,535)
Issue of ordinary
shares and warrants 111 - 9,479 143 - - - - - - 9,733
Value of employee
services - - - - - 13 - - - 89 102
Total transactions
with owners of the
company 111 - 9,479 143 - 13 - - - (11,446) (1,700)
-------- -------- -------- -------- ------------ --------- ------------ -------- ----------- --------- ---------
Balance at June 30,
2014 2,329 29,328 9,479 143 1,815 171 12,350 632 (2,601) 138,302 191,948
======== ======== ======== ======== ============ ========= ============ ======== =========== ========= =========
Anglo Pacific Group PLC
Condensed Consolidated Financial Statements
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(UNAUDITED) FOR THE SIX MONTHS ENDED DECEMBER 31, 2014
Other reserves
Foreign
Share
Investment based currency
Investment
Share Share Merger Warrant revaluation payment translation Special in Retained Total
capital premium reserve reserve reserve reserve reserve reserve own shares earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------- -------- -------- -------- -------- ------------ --------- ------------ -------- ----------- --------- ---------
Balance at June 30,
2014 2,329 29,328 9,479 143 1,815 171 12,350 632 (2,601 ) 138,302 191,948
Loss for the period - - - - - - - - - (24,541) (24,541)
Other comprehensive
income:
Available-for-sale
investments
Valuation
movement taken
to equity - - - - (4,106) - (243) - - - (4,349)
Transferred to
income statement
on disposal - - - - (787) - - - - - (787)
Transferred to
income
statement on
impairment - - - - 4,114 - - - - - 4,114
Deferred tax - - - - 451 - (33) - - - 418
Foreign currency
translation - - - - - - (6,034) - - - (6,034)
------------ ------------
Total comprehensive
expense - - - - (328) - (6,310) - - (24,541) (31,179)
-------- -------- -------- -------- ------------ --------- ------------ -------- ----------- --------- ---------
Issue of ordinary
shares - - (26) - - - - - - - (26)
Value of employee
services - - - - - 507 - - - - 507
Total transactions
with owners of the
company - - (26) - - 507 - - - - 481
-------- -------- -------- -------- ------------ --------- ------------ -------- ----------- --------- ---------
Balance at December
31, 2014 2,329 29,328 9,453 143 1,487 678 6,040 632 (2,601) 113,761 161,250
======== ======== ======== ======== ============ ========= ============ ======== =========== ========= =========
Anglo Pacific Group PLC
Condensed Consolidated Financial Statements
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(UNAUDITED) FOR THE SIX MONTHS ENDED JUNE 30, 2015
Other reserves
Foreign
Share
Investment based currency
Investment
Share Share Merger Warrant revaluation payment translation Special in Retained Total
capital premium reserve reserve reserve reserve reserve reserve own shares earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------- -------- -------- -------- -------- ------------ --------- ------------ -------- ----------- --------- ---------
Balance at January
1, 2015 2,329 29,328 9,453 143 1,487 678 6,040 632 (2,601) 113,761 161,250
Loss for the year - - - - - - - - (8,824) (8,824)
Other comprehensive
income:
Available-for-sale
investments
Valuation movement
taken to equity - - - - (933) - 3 - - - (930)
Transferred to
income statement
on disposal - - - - 507 - - - - - 507
Transferred to
income
statement on
impairment - - - - 128 - - - - - 128
Deferred tax - - - - 136 - 1 - - - 137
Foreign currency
translation - - - - - - (10,425) - - - (10,425)
-------- -------- -------- -------- ------------ --------- ------------ -------- ----------- ---------
Total comprehensive
expense - - - - (162) - (10,421) - - (8,824) (19,407)
-------- -------- -------- -------- ------------ --------- ------------ -------- ----------- --------- ---------
Dividends - - - - - - - - - (11,901) (11,901)
Issue of ordinary
shares 1,070 19,883 19,681 - - - - - - - 40,634
Value of employee
services - - - - - 165 - - - 212 377
Total transactions
with owners of the
company 1,070 19,883 19,681 - - 165 - - - (11,689) 29,110
-------- -------- -------- -------- ------------ --------- ------------ -------- ----------- --------- ---------
Balance at June 30,
2015 3,399 49,211 29,134 143 1,325 843 (4,381) 632 (2,601) 93,248 170,953
======== ======== ======== ======== ============ ========= ============ ======== =========== ========= =========
Anglo Pacific Group PLC
Condensed Consolidated Financial Statements
CONDENSED CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED)
(MORE TO FOLLOW) Dow Jones Newswires
August 26, 2015 02:01 ET (06:01 GMT)
FOR THE SIX MONTHS ENDED JUNE 30, 2015
June 30, 2015 June 30, 2014
Notes GBP'000 GBP'000
Cash flows from operating activities
Loss before taxation (11,351) (20,919)
Adjustments for:
Interest received (149) (69)
Shares in-lieu of interest on mining and exploration interests - (330)
Depreciation of property, plant and equipment 19 8
Amortisation of intangibles - royalties 9 1,344 380
Loss/(Gain) on disposal of mining and exploration interests 10 507 (2,073)
Impairment of royalty intangible 9 2,786 4,500
Impairment of mining and exploration interests 10 128 759
Revaluation of coal royalties 7 9,074 18,055
Share-based payment 378 102
-------------- --------------
2,736 413
(Increase)/Decrease in trade and other receivables (1,332) 534
(Decrease)/Increase in trade and other payables (605) 63
-------------- --------------
Cash generated from operations 799 1,010
Income taxes paid (857) (305)
Net cash (used in)/generated from operating activities (58) 705
-------------- --------------
Cash flows from investing activities
Proceeds from disposal of mining and exploration interests 10 1,722 7,047
Purchases of mining and exploration interests 10 - (391)
Purchases of royalty interests 9 (41,587) (13,094)
Exploration and evaluation expenditure - (57)
Interest received 149 69
Net cash used in from investing activities (39,716) (6,426)
-------------- --------------
Cash flows from financing activities
Drawdown of revolving credit facility 11 2,863 -
Proceeds from issue of share capital - net of costs 13 37,326 9,590
Dividends paid 6 (5,140) (4,893)
Net cash generated from financing activities 35,049 4,697
-------------- --------------
Net decrease in cash and cash equivalents (4,725) (1,024)
Cash and cash equivalents at beginning of period 8,769 15,706
-------------- --------------
Unrealised foreign currency gain (21) (269)
Cash and cash equivalents at end of period 4,023 14,413
============== ==============
Anglo Pacific Group PLC
Condensed Consolidated Financial Statements
NOTES TO THE ACCOUNTS
1. Basis of preparation
These condensed consolidated interim financial statements of
Anglo Pacific Group PLC are for the six months ended June 30, 2015.
They have been prepared in accordance with IAS 34 'Interim
Financial Reporting', as adopted by the European Union. They do not
include all of the information required for full annual financial
statements, and should be read in conjunction with the consolidated
financial statements of the Group for the year ended December 31,
2014.
The condensed consolidated interim financial statements have
been prepared in accordance with the accounting policies adopted in
the last annual financial statements for the year to December 31,
2014, which were prepared in accordance with IFRS, as adopted by
the European Union.
This condensed consolidated financial information does not
comprise statutory accounts within the meaning of Section 434 of
the Companies Act 2006. Statutory accounts for the year ended
December 31, 2014 were approved on March 24, 2015. Those accounts,
which contained an unqualified audit report under Section 495 of
the Companies Act 2006 and which did not make any statements under
Section 498 of the Companies Act 2006, have been delivered to the
Registrar of Companies in accordance with Section 441 of the
Companies Act 2006.
1.2 Going concern
The financial position of the Group and its cash flows are set
out on pages 11 to 15. As at June 30, 2015, the Group had GBP2.9m
in borrowings (note 11) following the partial draw down on its
revolving credit facility (2015: GBPnil) and access to a further
GBP16.4m in undrawn funds under the same facility.
After making enquiries and reviewing the Group's forecasts and
projections, the Directors have a reasonable expectation that the
Group has adequate resources to continue to operate within the
level of its current facilities for the foreseeable future. The
Group therefore continues to adopt the going concern basis in
preparing its consolidated financial statements.
1.3 Changes in accounting policies
The accounting policies used by the Group in these condensed
financial statements are consistent with those applied by the Group
in its financial statements for the year ended 31 December 2014, as
amended to reflect the adoption of new standards, amendments and
interpretations which became effective in the period as shown
below:
-- Amendments to IAS19 - Employee Benefits: Defined Benefit Plans - Employee Contributions
-- Annual Improvements to IFRSs 2010 - 2012 cycle
-- Annual Improvements to IFRSs 2011 - 2013 cycle
The adoption of these new accounting pronouncements has not had
a significant impact on the accounting policies, methods of
computations or presentation applied by the Group. The Group has
not early adopted any amendment, standard or interpretation that
has been issued but is not yet effective. It is expected that where
applicable, these standards and amendments will be adopted on each
respective effective date.
2 Finance income
Six months ended
June 30, 2015 June 30, 2014
GBP'000 GBP'000
Interest on bank deposits 10 69
Interest on royalty financial instruments - 20
Interest on receivables 139 94
-------------- --------------
149 183
============== ==============
3 Finance costs
Six months ended
June 30, 2015 June 30, 2014
GBP'000 GBP'000
Professional fees (310) (339)
Revolving credit facility fees (77) (120)
Revolving credit facility interest (30) -
-------------- --------------
(417) (459)
Net foreign exchange gain/(loss) 610 (692)
-------------- --------------
193 (1,151)
============== ==============
4 Other income
Six months ended
June 30, 2015 June 30, 2014
GBP'000 GBP'000
Dividends received from mining and exploration interests - 84
Fixed income from mining and exploration interests - 330
Effective interest income on royalty financial instruments 105 95
Recovery of impaired royalty financial instruments - 502
Other income 50 6
-------------- --------------
155 1,017
============== ==============
5 Loss per share
(MORE TO FOLLOW) Dow Jones Newswires
August 26, 2015 02:01 ET (06:01 GMT)
Loss per ordinary share is calculated on the Group's loss after
tax of GBP8.8m for the six months ended June 30, 2015 (June 30,
2014: loss GBP23.0m) and the weighted average number of shares in
issue during the period of 151,868,607 (2014: 110,604,762).
June 30, 2015 June 30, 2014
GBP'000 GBP'000
Net profit attributable to shareholders
Earnings - basic (8,824) (23,048)
Earnings - diluted (8,824) (23,048)
============== ==============
June 30, 2015 June 30, 2014
Weighted average number of shares in issue
Ordinary shares in issue 151,867,805 110,604,762
Employee Share Option Scheme 802 -
-------------- --------------
Diluted number of shares outstanding 151,868,607 110,604,762
============== ==============
Loss per share - basic and diluted (5.81p) (20.84p)
The weighted average number of shares in issue excludes the
issue of shares under the Group's Joint Share Ownership Plan, as
the Employee Benefit Trust has waived its right to receive
dividends on the 925,933 ordinary 2p shares it holds as at June 30,
2015 (2014: 925,933).
As the Group is loss making in 2015 and 2014, the Employee Share
Option Scheme is considered anti-dilutive because including it in
the diluted number of shares outstanding would decrease the loss
per share. Consequently basic and diluted loss per share is the
same.
Due to the growing number of valuation and other non-cash
movements being recognised in the income statement, the Group
presents an adjusted earnings per share metric, which the directors
consider to be a useful additional measure of the Group's
performance. In calculating the adjusted earnings per share, the
weighted average number of shares in issue remains consistent with
those used in the earnings per share calculation.
Diluted
Earnings earnings
Earnings per share per share
GBP'000 p p
Net profit attributable to shareholders
Loss - basic and diluted for the six months ended June 30, 2015 (8,824) (5.81p) (5.81p)
Adjustment for:
Impairment of mining and exploration interests 128
Profit on sale of mining and exploration interests 507
Revaluation of coal royalties (Kestrel) 9,074
Impairment of royalty intangible assets 2,786
Amortisation of royalty intangible assets 1,344
Effective interest income on royalty financial instruments (105)
Tax effect of the adjustments above (3,736)
---------
Adjusted profit - basic and diluted for the six months ended June 30, 2015 1,174 0.77p 0.77p
========= ========== ==========
Diluted
Earnings earnings
Earnings per share per share
GBP'000 p p
Net profit attributable to shareholders
Loss - basic and diluted for the six months ended June 30, 2014 (23,048) (20.84p) (20.84p)
Adjustment for:
Impairment of mining and exploration interests 759
Profit on sale of mining and exploration interests (2,073)
Revaluation of coal royalties (Kestrel) 18,055
Impairment of royalty intangible assets 4,500
Amortisation of royalty intangible assets 380
Effective interest income on royalty financial instruments (95)
Recovery of impaired royalty financial instruments (502)
Tax effect of the adjustments above 1,178
---------
Adjusted loss - basic and diluted for the six months ended June 30, 2014 (846) (0.77p) (0.77p)
========= ========== ==========
6 Dividends
An interim dividend of 4.00p per share has been declared for the
period ended June 30, 2015, and will be paid on February 4,
2016.
On August 7, 2015 a final dividend in respect of the year ended
December 31, 2014 of 4.00p per share was paid to shareholders
(GBP6.8m). As the final dividend was approved by shareholders at
the AGM on April 30, 2015 it has been included as a current
liability in 'Trade and other payables' as at June 30, 2015.
On February 4, 2015 an interim dividend of 4.45p per share was
paid to shareholders (GBP5.1m) in respect of the year ended
December 31, 2014.
7 Coal royalties (Kestrel)
GBP'000
At January 1, 2014 131,434
Foreign currency translation 3,323
Revaluation of coal royalties
(Kestrel) (18,055)
---------
At June 30, 2014 116,702
Foreign currency translation (5,838)
Revaluation of coal royalties
(Kestrel) 6,233
---------
At December 31, 2014 117,097
Foreign currency translation (8,010)
Revaluation of coal royalties
(Kestrel) (9,074)
---------
At June 30, 2015 100,013
=========
The coal royalty was valued during June 2015 at GBP100.0m
(A$205.2m) by Geos Mining, independent coal industry advisors, on a
net present value of the pre-tax cash flow discounted at a rate of
7%. The net royalty income from this investment is currently taxed
in Australia at a rate of 28.5%. This valuation is incorporated in
the accounts and the above revaluation adjustment represents the
difference between the opening carrying value and the external
valuation, excluding the effects of foreign currency changes. Were
the coal royalty to be carried at cost the carrying value would be
GBP0.2 million (2014: GBP0.2 million).
The shares over the entity which is the beneficial owner of the
Kestrel royalty have been guaranteed as security in connection with
the three-year secured revolving credit facility.
8 Royalty financial instruments
GBP'000
Held at fair value
At January 1, 2014 27,847
Foreign currency translation 393
Revaluation of royalty financial instruments recognised in equity (3,597)
---------
At June 30, 2014 24,643
Foreign currency translation (113)
Impairment of royalty financial instruments (15,288)
Revaluation of royalty financial instruments recognised in equity (1,100)
At December 31, 2014 8,142
Foreign currency translation 144
Revaluation of royalty financial instruments recognised in equity (930)
---------
At June 30, 2015 7,356
=========
In the period effective interest of GBP0.1m (2014: GBP0.1m) was
recognised in other income (see note 4). This was directly offset
by cash received in the period of the same amount.
The Group's royalty financial instruments are represented by
four royalty agreements which entitle the Group to either, the
repayment of principal and a net smelter return ("NSR") royalty for
the life of the mine or a gross revenue royalty ("GRR") where the
project commences commercial production or the repayment of
principal where it
does not. Details of the Group's royalty financial instruments are summarised below:
Cost Royalty Option Discount Royalty Valuation
Project Commodity '000 Rate Escalation Price Rate GBP'000
-
Engenho(1) Gold A$4,000 2.5% - A$0.35 -
EVBC Gold C$7,500 2.5% 3% >US$1,100/oz C$0.958 9% 4,811
(MORE TO FOLLOW) Dow Jones Newswires
August 26, 2015 02:01 ET (06:01 GMT)
Isua(2) Iron ore A$28,000 1% - - 10% -
Jogjakarta Iron sands A$5,000 2 % - A$0.10 - A$0.50 10% 2,545
7,356
==================
(1) Engenho royalty instrument was fully provided for as at
December 31, 2011.
(2) Isua royalty instrument was fully provided for as at
December 31, 2014.
9 Royalty and exploration intangibles assets
Exploration and Royalty
Evaluation Costs Interests Total
Group GBP'000 GBP'000 GBP'000
Gross carrying amount
At January 1, 2015 697 59,705 60,402
Additions - 44,971 44,971
Foreign currency translation - (3,434) (3,434)
----------------- ---------- ---------
At June 30, 2015 697 101,242 101,939
Amortisation and impairment
At January 1, 2015 (697) (22,595) (23,292)
Amortisation charge - (1,344) (1,344)
Impairment charge - (2,786) (2,786)
Foreign currency translation - (790) (790)
----------------- ---------- ---------
At June 30, 2015 (697) (27,515) (28,212)
----------------- ---------- ---------
Carrying amount June 30, 2015 - 73,727 73,727
================= ========== =========
Exploration and Royalty
Evaluation Costs Interests Total
Group GBP'000 GBP'000 GBP'000
Gross carrying amount
At January 1, 2014 951 48,713 49,664
Additions 57 13,237 13,294
Foreign currency translation (36) 422 386
----------------- ---------- ---------
At June 30, 2014 972 62,372 63,344
Amortisation and impairment
At January 1, 2014 - (12,376) (12,376)
Amortisation charge - (380) (380)
Impairment charge - (4,500) (4,500)
----------------- ---------- ---------
At June 30, 2014 - (17,256) (17,256)
----------------- ---------- ---------
Carrying amount June 30, 2014 972 45,116 46,088
================= ========== =========
Exploration and Royalty
Evaluation Costs Interests Total
Group GBP'000 GBP'000 GBP'000
Gross carrying amount
At January 1, 2014 951 48,713 49,664
Additions 47 13,166 13,213
Disposals (275) - (275)
Foreign currency translation (26) (2,174) (2,200)
----------------- ---------- ---------
At December 31, 2014 697 59,705 60,402
Amortisation and impairment
At January 1, 2014 - (12,376) (12,376)
Amortisation charge - (759) (759)
Impairment charge (697) (9,336) (10,033)
Foreign currency translation - (124) (124)
----------------- ----------
At December 31, 2014 (697) (22,595) (23,292)
----------------- ---------- ---------
Carrying amount December 31, 2014 - 37,110 37,110
================= ========== =========
Exploration and evaluation costs
The exploration and evaluation costs comprise expenditure that
is directly attributable to the Trefi and Panorama coal projects in
British Columbia, Canada. The Group disposed of its interest in the
Panorama coal project and fully impaired its interests in the Trefi
coal project during 2014.
Royalty interests
On March 11, 2015, the Group completed its acquisition of the
Narrabri royalty for US$65.0m (GBP43.3m). The Narrabri royalty is a
1% gross revenue royalty over all coal produced from the Narrabri
mine located in New South Wales, Australia, owned and operated by
Whitehaven Coal Limited. Of the total consideration of US$65.0m,
US$60.0m (GBP40.0m) was paid in cash and US$5.0m (GBP3.3m) was
satisfied by the issue of 4,135,238 ordinary shares (note 13).
Under the terms of the royalty sale agreement, the Group was
entitled to royalty receipts from January 1, 2015 and has
recognised royalty income of GBP1.8m for the six months ended June
30, 2015. In accordance with Group's amortisation accounting
policy, the Narrabri royalty has been amortised from January 1,
2015 resulting in an amortisation charge of GBP1.0m for the six
months ended June 30, 2015.
The Group recognised maiden royalty receipts from its Maracás
royalty of GBP0.4m for the six months ended June 30, 2015. The
Maracás royalty is a 2% net smelter return royalty interest on all
mineral products sold from the area of the Maracás Project that the
Group acquired on June 10, 2014. The Group commenced amortising the
Maracás royalty following its entry into commercial production and
recognised an amortisation charge of GBP0.2m for the six months
ended June 30, 2015.
As noted in the Group's investment review, the Four Mile Uranium
Mine, over which the Group holds a 1% net smelter return royalty,
continues to produce and stockpile uranium ore concentrate. The
Group considers the production and stockpiling of the concentrate
to constitute commercial production and commenced amortising the
Four Mile royalty from January 1, 2015, recognising an amortisation
charge of GBP0.1m for the six months ended June 30, 2015.
Amortisation of the remaining interests will commence once they
begin commercial production.
All intangible assets are assessed for indicators of impairment
at each reporting date. In light of the ongoing delays in
recommencing production, together with further declines in the
underlying iron ore price, the Group recognised an impairment
charge of GBP1.2m in relation to its Amapá royalty during the six
months ended June 30, 2015. The Group also recognised and
impairment charge of GBP1.6m in relation to its Ring of Fire
royalty during the six months ended June 30, 2015, due to revised
assumptions surrounding the anticipated date of the mine entering
commercial production.
No intangible assets have been pledged as security for
liabilities.
10 Mining and exploration interests
GBP'000
Fair value
At January 1, 2014 20,072
Additions 391
Disposals (5,131)
Revaluation adjustment (607)
Foreign currency translation 152
--------
At June 30, 2014 14,877
Additions 770
Disposals (3,066)
Revaluation adjustment (2,555)
Foreign currency translation (130)
--------
At December 31, 2014 9,896
Disposals (2,229)
Revaluation adjustment (3)
Foreign currency translation 485
--------
At June 30, 2015 8,149
========
The fair values of listed securities are based on quoted market
prices. Unquoted investments and royalty options are initially
recognised using cost where fair value cannot be reliably
determined. In the absence of an active market for these
securities, the Group considers each unquoted security to ensure
there has been no material change in the fair value since initial
recognition.
An impairment charge (representing the recognition of losses
previously deferred to equity) is recognised in the income
statement when the absolute decline in value below costs of any
individual investment is considered 'significant' or 'prolonged' in
accordance with the Group's impairment policy. Following continued
declines in mining equity markets, the Group recognised an
impairment charge of GBP0.1m for the six months ended June 30, 2015
(six months ended June 30, 2014: GBP0.8m).
For the six months ended June 30, 2015, the Group realised
GBP1.7m in cash (six months ended June 30, 2014: GBP7.0m) through
the disposal of a number of its mining and exploration interest
which management no longer considered royalty opportunities to
exist. These disposals resulted in a loss GBP0.5m for the six
months ended June 30, 2015 (six months ended June 30, 2014: gain
GBP2.1m).
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Total mining and exploration interests are represented by:
June 30,2015 June 30,2014 December 31, 2014
GBP'000 GBP'000 GBP'000
Quoted investments 6,517 14,415 8,820
Unquoted investments 1,632 304 1,076
Royalty Options - 158 -
------------- ------------- ------------------
8,149 14,877 9,896
============= ============= ==================
11 Borrowings
June 30, June 30, December 31,
2015 2014 2014
GBP'000 GBP'000 GBP'000
Non-current
Interest bearing liabilities 2,863 - -
Deferred borrowing costs (238) - -
--------- --------- -------------
2,625 - -
========= ========= =============
Non-current interest bearing liabilities relates to the partial
draw-down of the Group's revolving credit facility. Deferred
borrowing costs relate to the establishment fees associated with
the facility and will be amortised over its term. As at June 30,
2015, the Group had utilised US$4.5m (GBP2.9m) of the US$30.0m
(GBP19.1m) available under the facility.
The Group's revolving credit facility is secured by way of a
floating charge over the Group's assets and is subject to a number
of financial covenants.
The Group's net cash position after offsetting interest bearing
liabilities against cash and cash equivalents is as follows:
June 30, June 30, December 31,
2015 2014 2014
GBP'000 GBP'000 GBP'000
Interest bearing liabilities (2,863) - -
Cash and cash equivalents 4,023 14,413 8,769
--------- --------- -------------
Net cash and cash equivalents 1,160 14,413 8,769
========= ========= =============
12 Deferred tax
The following are the major deferred tax liabilities/(assets)
recognised by the Group and the movements thereon during the
period:
Coal royalties Available-for
(Kestrel) sale-investments
Revaluation Revaluation Impairment Accrual of
of Revaluation of
of coal Effects royalty of mining intangible royalty Other
of financial tax
royalty tax instruments interests royalty receivable losses Total
(Kestrel) losses assets
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At January 1,
2014 38,463 (516) 3,116 (9,099) (2,330) 731 - 30,365
Charge/(Credit)
to profit or
loss (5,730) (287) - 7,679 691 (745) (65) 1,543
Reclassification
from current to
deferred tax
asset - - - - - - (650) (650)
Charge/(Credit)
to other
comprehensive
income - - (1,397) 725 - - - (672)
Exchange
differences 1,760 (12) - (36) - 14 2 1,728
Effect of change
in tax rate:
Equity - - (281) (1) - - - (282)
------------ ---------- ------------ ------------ ----------- ----------- -------- --------
At June 30, 2014 34,493 (815) 1,438 (732) (1,639) - (713) 32,032
Charge/(Credit)
to profit or
loss 1,872 (173) - 3 1,639 31 (1,111) 2,261
Charge/(Credit)
to other
comprehensive
income - - (232) 152 - - - (80)
Exchange
differences (1,750) 45 - 55 - (1) 39 (1,612)
Effect of change
in tax rate:
Equity - - - - - - - -
------------ ---------- ------------ ------------ ----------- ----------- -------- --------
At December 31,
2014 34,615 (943) 1,206 (522) - 30 (1,785) 32,601
============ ========== ============ ============ =========== =========== ======== ========
Coal royalties Available-for
(Kestrel) sale-investments
Revaluation Revaluation Impairment Accrual of
of Revaluation of
of coal Effects royalty of mining intangible royalty Other
of financial tax
royalty tax instruments interests royalty receivable losses Total
(Kestrel) losses assets
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At January 1,
2015 34,615 (943) 1,206 (522) - 30 (1,785) 32,601
Charge/(Credit)
to profit or
loss (2,757) (490) - 356 - 18 (460) (3,333)
Charge/(Credit)
to other
comprehensive
income - - (186) 102 - - - (84)
Exchange
differences (2,384) 93 - (1) - (3) 41 (2,254)
Effect of change
in tax rate:
Equity - - (57) 5 - - - (52)
------------ ---------- ------------ ------------ ----------- ----------- --------
At June 30, 2015 29,474 (1,340) 963 (60) - 45 (2,204) 26,878
============ ========== ============ ============ =========== =========== ======== ========
13 Share capital, share premium and merger reserve
Share Share Merger
Number of capital premium reserve Total
shares GBP'000 GBP'000 GBP'000 GBP'000
Group and Company
Ordinary shares of 2p each at January 1, 2014 110,887,425 2,218 29,328 - 31,546
Issue of ordinary shares 5,544,371 111 - 9,453 9,564
------------ -------- -------- -------- --------
Ordinary shares of 2p each at June 30, 2014 and
December 31, 2014 116,431,796 2,329 29,328 9,453 41,110
Issue of ordinary shares 49,375,000 987 16,658 19,681 37,326
Issue of ordinary shares on acquisitions (note 9) 4,135,238 83 3,225 - 3,308
Ordinary shares of 2p each at June 30, 2015 169,942,034 3,399 49,211 29,134 81,744
============ ======== ======== ======== ========
On June 2, 2014 the Group completed the placing of 5,544,371 new
ordinary shares of 2 pence each at a price of 180 pence per share.
The proceeds of this placing were used in the acquisition of the 2%
net smelter return royalty over the Maracás Project described in
note 9. As the shares were placed in return for acquiring 100% of
the share capital of a related entity, the proceeds raised in
excess of the nominal value issued is recorded in the merger
reserve.
On February 27, 2015, the Group completed a firm placing,
placing and open offer that resulted in the issue of 49,375,000 new
ordinary shares of 2 pence each at a price of 80p per share,
raising GBP39.5m, before costs. The funds raised were used to
satisfy the US$60.0m (GBP38.2m) cash component of the Narrabri
royalty acquisition.
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On March 11, 2015, the Group issued 4,135,238 new ordinary
shares of 2 pence each at a price of 80p per share to satisfy the
non-cash component of US$5.0m (GBP3.3m) upon the completion of the
Narrabri royalty acquisition. Total consideration for the Narrabri
royalty acquisition was US$65.0m (note 9).
14 Retained earnings
GBP'000
Balance at January 1, 2014 172,796
Surrender of options from share-based
payments 89
Dividends (11,535)
Loss for the period (23,048)
---------
Balance at June 30, 2014 138,302
Loss for the period (24,541)
---------
Balance at December 31, 2014 113,761
Surrender of options from share-based
payments 212
Dividends (11,901)
Loss for the period (8,824)
---------
Balance at June 30, 2015 93,248
=========
15 Segment information
The Group's chief operating decision maker is considered to be
the Executive Committee. The Executive Committee evaluates the
financial performance of the Group based on a portfolio view of its
individual royalty arrangements. Royalty related income and its
associated impact on operating profit is the key focus of the
Executive Committee. The income from royalties is presented based
on the jurisdiction in which the income is deemed to be sourced as
follows:
Australia: Kestrel, Narrabri, Four Mile, Pilbara, Mount Ida
Americas: Maracás, Amapá and Tucano, Churchrock, Ring of Fire
Europe: EVBC, Salamanca, Isua, Bulqiza
Other: Jogjakarta, Dugbe I, and includes the Group's mining and
exploration interests.
The following is an analysis of the Group's results by
reportable segment. The key segment result presented to the
Executive Committee for making strategic decision and allocation of
resources is operating profit as analysed below.
The segment information provided to the Executive Committee for
the reportable segments for the six months ended June 30, 2015 is
as follows (noting that total segment operating profit corresponds
to operating profit before impairments, revaluations and
gains/losses on disposals which is reconciled to Loss before tax on
the face of the consolidated income statement):
Australia Americas Europe All other
Royalty Royalty Royalty segments Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Royalty related income 2,826 375 627 - 3,828
Amortisation of royalties (1,132) (212) - - (1,344)
Operating expenses (917) - - (920) (1,837)
Total segment operating (loss)/profit 777 163 627 (920) 647
---------- --------- -------- ---------- --------
Total segment assets 154,566 15,061 7,348 34,948 211,923
Total assets include:
Additions to non-current assets (other than financial
instruments and deferred tax assets) 44,971 - - - 44,971
--------
Total segment liabilities 28,179 - 1,078 11,713 40,970
---------- --------- -------- ---------- --------
The segment information for the six months ended June 30, 2014
is as follows:
Australia Americas Europe All other
Royalty Royalty Royalty segments Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Royalty related income 1,558 232 791 - 2,581
Amortisation of royalties - (380) - - (380)
Operating expenses (1,434) - - (494) (1,928)
Total segment operating (loss)/profit 124 (148) 791 (494) 273
---------- --------- -------- ---------- --------
Total segment assets 132,325 32,589 25,633 44,778 235,325
Total assets include:
Additions to non-current assets (other than financial
instruments and deferred tax assets) - 13,237 - 57 13,294
--------
Total segment liabilities 33,679 - 1,437 8,261 43,377
---------- --------- -------- ---------- --------
The segment information for the twelve months ended December 31,
2014 is as follows:
Australia Americas Europe All other
Royalty Royalty Royalty segments Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Royalty related income 1,657 174 1,650 - 3,481
Amortisation of royalties - (759) - - (759)
Operating expenses (3,269) - - (2,255) (5,524)
Total segment operating (loss)/profit (1,612) (585) 1,650 (2,255) (2,802)
---------- --------- -------- ---------- --------
Total segment assets 129,666 22,711 8,091 39,397 199,865
Total assets include:
Additions to non-current assets (other than financial
instruments and deferred tax assets) - 13,166 - 235 13,401
--------
Total segment liabilities 33,702 - 1,364 3,549 38,615
---------- --------- -------- ---------- --------
The amounts provided to the Executive Committee with respect to
total segment assets are measured in a manner consistent with that
of the financial statements. These assets are allocated based on
the operations of the segment and the physical location of the
asset.
The amounts provided to the Executive Committee with respect to
total segment liabilities are measured in a manner consistent with
that of the financial statements. These liabilities are allocated
based on the operations of the segment.
The royalty related income in Australia of GBP2.8m (2014:
GBP1.6m) is derived from the Kestrel and Narrabri royalties, which
generated GBP1.0m and GBP1.8m respectively for the six months ended
June 30, 2015 (2014: GBP1.6m and GBPnil). Both royalties represent
greater than 10% of the Group's revenue in 2014 and 2015. In
addition, royalty related income in Europe of GBP0.6m (2014:
GBP.08m) is derived from a single gold, copper and silver royalty
and represents greater than 10% of the Group's revenue in 2014 and
2015.
16 Financial risk management
The Group's principal treasury objective is to provide
sufficient liquidity to meet operational cash flow and dividend
requirements and to allow the Group to take advantage of new growth
opportunities whilst maximising shareholder value. The Group's
activities expose it to a variety of financial risks including
liquidity risk, credit risk, foreign exchange risk and price risk.
The Group operates controlled treasury policies which are monitored
by management to ensure that the needs of the Group are met while
minimising potential adverse effects of unpredictability of
financial markets on the Group's financial performance.
Financial instruments
The Group held the following investments in financial
instruments (this includes investment properties):
June 30, 2015 June 30, 2014 December 31, 2014
GBP'000 GBP'000 GBP'000
Investment property (held at fair value)
Coal royalties (Kestrel) 100,013 116,702 117,097
Available-for-sale (held at fair value)
Royalty financial instruments 7,356 24,643 8,142
Mining and exploration interests 8,149 14,877 9,896
Loans and receivables
Trade and other receivables 15,159 12,065 14,153
Cash at bank and in hand 4,023 14,413 8,769
Financial liabilities
Borrowings 2,863 - -
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Trade and other payables 1,130 481 2,466
Cash and cash equivalents comprise cash and short-term deposits
held by the Group treasury function. The carrying amount of these
assets approximates their fair value.
The Directors consider that the carrying amount of trade and
other receivables and trade and other payables is approximately
their fair value.
Liquidity and funding risk
The objective of the Group in managing funding risk is to ensure
that it can meet its financial obligations as and when they fall
due. At June 30, 2015 the Group had utilised US$4.5m (2014: GBPnil)
of its US$30.0m revolving credit facility (note 11), the undrawn
portion of the facility of US$25.5m adds further flexibility and
liquidity to the Group's cash balances.
Credit risk
The Group's principal financial assets are bank balances and
cash, trade and other receivables and investments, which represent
the Group's maximum exposure to credit risk in relation to
financial assets. The Group undertakes detailed analysis of factors
which mitigate the risk of default to the Group.
Foreign exchange risk
The Group's transactional foreign exchange exposure arises from
income, expenditure and purchase and sale of assets denominated in
foreign currencies. As each material commitment is made, the risk
in relation to currency fluctuations is assessed by the Board and
regularly reviewed. The Group does not consider it necessary to
have a hedging programme in place at this time.
Other price risk
The Group is exposed to other price risk in respect of its
mining and exploration interests which include listed and unlisted
equity securities and any convertible instruments. Interests are
continually monitored for indicators that may suggest problems for
these companies raising capital or continuing their day-to-day
business activities to ensure remedial action can be taken if
necessary. No specific hedging activities are undertaken in
relation to these interests and the voting rights arising from
these equity instruments are utilised in the Group's favour.
Fair value hierarchy
The following table presents financial assets and liabilities
measured at fair value in the statement of financial position in
accordance with the fair value hierarchy. This hierarchy groups
financial assets and liabilities into three levels based on the
significance of inputs used in measuring the fair value of the
financial assets and liabilities. The fair value hierarchy has the
following levels:
-- Level 1: quoted prices (unadjusted) in active markets for identical assets and liabilities;
-- Level 2: inputs other than quoted prices included within
Level 1 that are observable for the asset or liability, either
directly (ie. as prices) or indirectly (ie. derived from prices);
and
-- Level 3: inputs for the asset or liability that are not based
on observable market data (unobservable inputs).
The level within which the financial asset or liability is
classified is determined based on the lowest level of significant
input to the fair value measurement.
The following tables present the Group's assets and liabilities
that are measured at fair value at June 30, 2015, June 30, 2014 and
December 31, 2014:
June 30, 2015
Level 1 Level 2 Level 3 Total
Note GBP'000 GBP'000 GBP'000 GBP'000
Assets
Coal royalties (Kestrel) (a) - - 100,013 100,013
Royalty financial instruments (b) - - 7,356 7,356
Mining and exploration interests - quoted (c) 6,517 - - 6,517
Mining and exploration interests - unquoted (d) - 1,632 - 1,632
Mining and exploration interests - royalty options (e) - - - -
-------- -------- -------- --------
Net fair value 6,517 1,632 107,369 115,518
======== ======== ======== ========
June 30, 2014
Level 1 Level 2 Level 3 Total
Note GBP'000 GBP'000 GBP'000 GBP'000
Assets
Coal royalties (Kestrel) (a) - - 116,702 116,702
Royalty financial instruments (b) - - 24,643 24,643
Mining and exploration interests - quoted (c) 14,415 - - 14,415
Mining and exploration interests - unquoted (d) - 304 - 304
Mining and exploration interests - royalty options (e) - 158 - 158
-------- -------- -------- --------
Net fair value 14,415 462 141,345 156,222
======== ======== ======== ========
December 31, 2014
Level 1 Level 2 Level 3 Total
Note GBP'000 GBP'000 GBP'000 GBP'000
Assets
Coal royalties (Kestrel) (a) - - 117,097 117,097
Royalty financial instruments (b) - - 8,142 8,142
Mining and exploration interests - quoted (c) 8,820 - - 8,820
Mining and exploration interests - unquoted (d) - 1,076 - 1,076
Mining and exploration interests - royalty options (e) - - - -
-------- -------- -------- --------
Net fair value 8,820 1,076 125,239 135,135
======== ======== ======== ========
There have been no significant transfers between Levels 1 and 2
in the reporting period.
The methods and valuation techniques used for the purposes of
measuring fair value of royalty financial instruments gives more
prominence to the probability of production by applying a risk
weighting to the discounted net present value outcome in order to
fully reflect the risk that the operation never comes into
production, rather than factoring this risk into the discount rate
applied to the future cash flow.
(a) Coal royalties (investment property)
The Group's coal royalties derive from its ownership of certain
sub-stratum land in Queensland, Australia. In accordance with IAS
40, this land is revalued at each reporting date on the basis of
future expected income discounted at 7% by an independent valuation
consultant. See note 7 for further details. All unobservable inputs
are obtained from third parties.
The Group's independent coal industry advisor who prepares the
coal royalty valuation provided an analysis of the valuation's
sensitivity to fluctuations in coal prices as follows:
-- a 10% reduction in the coal price would have resulted in the
coal royalties being valued at A$173.1m (GBP84.3m) and an
additional charge to the income statement of GBP15.6m; and
-- a 10% increase in the coal price would have resulted in the
coal royalties being valued at A$239.3m (GBP116.5m) and a decrease
in the charge to the income statement of GBP16.6m.
(b) Royalty financial instruments
At the reporting date the royalty instruments are valued based
on the net present value of the pre-tax cash flows discounted at a
rate management considers reflects the risk associated with each of
the underlying projects. The outcome is then risk weighted to
reflect the likelihood of the project achieving production based on
any published updates in the year. The discount rate is the only
unobservable input determined by management. All other unobservable
inputs are obtained from third parties.
(c) Mining and exploration interests - quoted
All the quoted mining and exploration interests have been issued
by publicly traded companies in well established security markets.
Fair values for these securities have been determined by reference
to their quoted bid prices at the reporting date.
(d) Mining and exploration interests - unquoted
All the unquoted mining and exploration interests are initially
recognised using cost as the best approximation of fair value. The
Group notes any trading activity in the unquoted instruments and
will value its holding accordingly. At present, the Group holds
these investments with a view to generating future royalties and
there is no present intention to sell. The vast majority of these
are investments which the Group anticipates a realistic possibility
of a future listing.
(e) Mining and exploration interests - royalty options
All the royalty options are initially recognised using cost
where fair value cannot be reliably determined. The Group considers
the progress of the projects related to each of the royalty options
to ensure there has been no material change in the fair value since
initial recognition.
Fair value measurements in Level 3
The Group's financial assets classified in Level 3 uses
valuation techniques based on significant inputs that are not based
on observable market data.
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The following table presents the changes in Level 3 instruments
for the six months ended June 30, 2015.
Royalty financial instruments Coal royalties (Kestrel) Total
GBP'000 GBP'000 GBP'000
At January 1, 2015 8,142 117,097 125,239
Revaluation gains or losses recognised
in:
Other comprehensive income (931) - (931)
Income statement - (9,074) (9,074)
Foreign currency translation 145 (8,010) (7,865)
------------------------------ ------------------------- --------
At June 30, 2015 7,356 100,013 107,369
============================== ========================= ========
The following table presents the changes in Level 3 instruments
for the six months ended June 30, 2014.
Royalty financial Coal royalties
instruments (Kestrel) Total
GBP'000 GBP'000 GBP'000
At January 1, 2014 27,847 131,434 159,281
Revaluation gains or losses
recognised in:
Other comprehensive income (3,597) - (3,597)
Income statement - (18,055) (18,055)
Foreign currency translation 393 3,323 3,716
------------------ --------------- ---------
At June 30, 2014 24,643 116,702 141,345
================== =============== =========
The following table presents the changes in Level 3 instruments
for the year ended December 31, 2014.
Royalty financial Coal royalties
instruments (Kestrel) Total
GBP'000 GBP'000 GBP'000
At January 1, 2014 27,847 131,434 159,281
Revaluation gains or losses
recognised in:
Other comprehensive income (4,697) - (4,697)
Income statement - (11,822) (11,822)
Impairment of royalty instruments (15,288) - (15,288)
Foreign currency translation 280 (2,515) (2,235)
At December 31, 2014 8,142 117,097 125,239
================== =============== =========
There have been no transfers into or out of Level 3 in any of
the years.
The Group measures its entitlement to the royalty income and any
optionality embedded within the royalty instruments using
discounted cash flow models. In determining the discount rate to be
applied, management considers the country and sovereign risk
associated with the projects, together with the time horizon to the
commencement of production and the success or failure of projects
of a similar nature.
17 Related party transactions
Related party transactions during the six months ended June 30,
2015 were payments of GBP5,590.87 to Audley Capital Advisors LLP, a
company of which Mr J.A. Treger, Chief Executive Officer, is both a
director and shareholder, for the reimbursement of travel related
expenditure (six month ended June 30, 2014: GBP18,184.94). At June
30, 2015 a total of GBPnil was owing to Audley Capital Advisors LLP
(2014: GBPnil).
18 Events occurring after period end
With the exception of the declaration of the 2015 interim
dividend, there are no events occurring after the period end, which
require disclosure.
19 Availability of financial statements
This statement will be sent to shareholders and will be
available at the Group's registered office at 1 Savile Row, London,
W1S 3JR.
Anglo Pacific Group PLC
INDEPENDENT REVIEW REPORT TO ANGLO PACIFIC GROUP PLC
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended June 30, 2015 which comprises the condensed
consolidated income statement, condensed consolidated statement of
comprehensive income, condensed consolidated balance sheet,
condensed consolidated statement of changes in equity, condensed
consolidated cash flow statement and related notes 1 to 19. We have
read the other information contained in the half-yearly financial
report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed set of financial statements.
This report is made solely to the company in accordance with
International Standard on Review Engagements (UK and Ireland) 2410
"Review of Interim Financial Information Performed by the
Independent Auditor of the Entity" issued by the Auditing Practices
Board. Our work has been undertaken so that we might state to the
company those matters we are required to state to it in an
independent review report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility
to anyone other than the company, for our review work, for this
report, or for the conclusions we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
As disclosed in note 1, the annual financial statements of the
group are prepared in accordance with IFRSs as adopted by the
European Union. The condensed set of financial statements included
in this half-yearly financial report have been prepared in
accordance with International Accounting Standard 34, "Interim
Financial Reporting, " as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK and Ireland) and consequently does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended June
30, 2015 is not prepared, in all material respects, in accordance
with International Accounting Standard 34 as adopted by the
European Union and the Disclosure and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
Deloitte LLP
Chartered Accountants and Statutory Auditor
London, UK
August 25, 2015
Anglo Pacific Group PLC
Cautionary statement on forward-looking statements and related
information
Certain information contained in this announcement, including
any information as to future financial or operating performance and
other statements that express management's expectation or estimates
of future performance, constitute "forward looking statements". The
words "expects", "anticipates", "plans", "believes", "estimates",
"seeks", "intends", "targets", "projects", "forecasts", or negative
versions thereof and other similar expressions identify
forward-looking statements. Forward-looking statements are
necessarily based upon a number of estimates and assumptions that,
while considered reasonable by management, are inherently subject
to significant business, economic and competitive uncertainties and
contingencies. Further, forward-looking statements are not
guarantees of future performance and involve risks and
uncertainties which could cause actual results to differ materially
from those anticipated, estimated or intended in the
forward-looking statements. Furthermore, this announcement contains
information and statements that are based on certain estimates and
forecasts that have been provided to the Group by Kestrel Coal Pty
Ltd ("KCPL"), the accuracy of which KCPL does not warrant and on
which readers may not rely. The material assumptions and risks
relevant to the forward-looking statements in this announcement
include, but are not limited to: stability of the global economy;
stability of local government and legislative background;
continuing of ongoing operations at the properties underlying the
Group's portfolio of royalties in a manner consistent with past
practice; accuracy of public statements and disclosures (including
feasibility studies and estimates of reserve, resource, production,
grades, mine life, and cash cost) made by the owners and operators
of such underlying properties; accuracy of the information provided
to the Group by the owners and operators of such underlying
properties; no
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