TIDMAPF
RNS Number : 0782I
Anglo Pacific Group PLC
25 August 2016
August 25, 2016
Anglo Pacific Group PLC
Interim results for the six months ended June 30, 2016
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, 2016 which are available
on both the Group's website at www.anglopacificgroup.com and on
SEDAR at www.SEDAR.com.
Headlines:
Results for the half year
-- Total royalty income of GBP4.1m in H1 2016, a 6% increase
from GBP3.8m in H1 2015
-- Increased proportion of sales from Kestrel (37%) within
the Group's land in H1 2016 (H1 2015: 22%)
-- Weakening of the pound following the outcome of the EU
referendum significantly benefitted the balance sheet
at June 30, 2016 and should impact positively on the income
statement in H2 2016
-- Interim dividend maintained at the 2015 final dividend
level of 3.00p (2015 interim dividend: 4.00p) as per the
previously announced dividend policy
-- Free cash flow1 of GBP3.6m in H1 2016, more than double
the GBP1.7m generated in H1 2015
-- Loss after tax of GBP5.4m resulting in a basic loss per
share of 3.18p (June 30, 2015: GBP8.8m and 5.81p respectively)
mainly arising from the GBP10.2m non-cash Kestrel revaluation
deficit
-- The unrealised foreign exchange gain of translating the
Kestrel asset to pounds at the balance sheet date reverses
this loss, but this is recognised in other comprehensive
income and not the income statement
-- Adjusted profit after tax2 of GBP2.4m, up 50% on H1 2015,
resulting in adjusted earnings per share of 1.43p (June
30, 2015: GBP1.6m and 1.04p respectively)
-- Net debt3 of GBP5.0m at June 30, 2016 (December 31, 2015:
GBP1.8m) and currently GBP7.5m following the dividend
payment in August
-- Significant increase in the value of the Group's equity
stake in Berkeley Energia in the period, to GBP11.3m at
June 30, 2016 (December 31, 2015: GBP7.2m), currently
valued at GBP13.5m
-- Increase in net assets at June 30, 2016 to GBP164.8m from
GBP162.0m at December 31, 2015 resulting in net assets
per share of 97p (December 31, 2015: 95p)
Outlook
-- The majority of the Group's revenue from Kestrel for the
year is expected in H2 2016, similar to 2015, and this
is now likely to be the last time there is such a discrepancy
between reporting periods as mining will now be mainly
within the Group's private royalty land
-- Improved outlook for both coking and thermal coal prices
with the Q3 2016 coking coal contract price settling at
US$92/t, a 14% increase on Q1 2016 and spot price currently
at around US$110/t
-- Absent any downward movement in exchange rates and commodity
prices, FY 2016 royalty income is expected to be considerably
higher than 2015, mainly driven by production levels at
Kestrel
-- Borrowing levels expected to reduce from the current levels
and free cash flow is expected to increase, at least in
line with royalty income growth
Julian Treger, Chief Executive Officer, commented:
"Anglo Pacific performed strongly in the first six months of
2016, reporting higher royalty income, a doubling in free cash flow
and a 50% increase in adjusted earnings. We expect this to continue
for the remainder of 2016 as, similar to 2015, the majority of our
income should be generated in the second half of the year, due to
increased mining in our private royalty lands at Kestrel.
The immediate impact of Brexit was the weakening of the pound
and this should be positive for the Group as our assets and income
are in dollar denominated currencies. The price of both coking coal
and thermal coal ended the second quarter strongly, mainly on the
back of supply cuts in China. Both of these tailwinds combined
should facilitate a stronger second half of the year for the
Group.
There have been a number of positive developments in our royalty
portfolio during the period: increased permitting at Narrabri;
record production levels at Maracás Menchen; first royalty revenue
from Four Mile; and significant progress by Berkeley Energia
Limited at Salamanca. We were also pleased to see Berkeley announce
a further royalty during the year which would imply that our
existing royalty over the project is now worth three times the
balance sheet value.
Our encouraging start to the year, coupled with the near-term
improved outlook for commodity prices and a weaker pound, should
now accelerate dividend cover. We continue to work hard to acquire
accretive acquisitions but remain disciplined to only invest in
those opportunities which will, over time, enable us to grow the
dividend and create shareholder value."
1 Refer to pages 7 and 8
2 Refer to page 8 and note 5 to the financial statements
3 Refer to page 8 and note 11 to the financial statements
Analyst conference call:
There will be an analyst presentation via webcast at 09:30 (BST)
on August 25, 2016 at www.anglopacificgroup.com. The presentation
will be hosted by Julian Treger (CEO), Kevin Flynn (CFO) and Juan
Alvarez (Head of Investments). Dial in details for the call are
shown below and a replay of the webcast will also be available at
www.anglopacificgroup.com.
Dial in number: 020 3059 8125 (United Kingdom local)
+ 44 20 3059 8125 (all other locations)
Participant Password: "Anglo Pacific" - this must be quoted to the
Operator in order for participants to gain access
to the conference
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/David Bass/Richard Crowley
Notes to editors:
About Anglo Pacific
Anglo Pacific is a global natural resources royalty company. The
Group's strategy is to develop 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 within the next 24 months. It is a continuing
policy of the Company to pay a substantial portion of these
royalties to shareholders as dividends.
Royalties explained
A mining royalty is a non-operating interest in a mining project
that provides the royalty holder with a right to a proportion of
revenue, profit or production. A royalty holder is not generally
obligated to contribute towards operating or capital costs, nor
environment or reclamation liabilities; a 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. The Group's model is based
around GRR or NSR royalties as it believes they provide the best
and clearest returns.
Acquiring existing royalties
In this case, the Group buys 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
The Group's new royalty agreements tend to come from providing
financing for mining operations, usually to help progress a mine
into production.
Business review
----------------
Anglo Pacific enjoyed a solid start to 2016 with an increase in
both royalty income and net assets in the period. The outlook for
the remainder of the year, and for 2017, is encouraging following a
noticeable improvement in coal prices recently and the positive
impact of a weaker pound when translating the Group's dollar
derived revenue. Absent any weakening in commodity prices or a
significant strengthening of the pound, royalty income for FY 2016
is expected to be significantly higher than 2015.
Another highlight in the year to date has been the share price
performance. This has benefitted from a general recovery in the
commodity and mining sectors in the year to date along with the
decision by the UK to leave the EU, which has prompted investors to
give a higher rating to companies less exposed to sterling. On a
micro level, the market reacted favourably to the publication of
the Kestrel mine plan by Rio Tinto which contained, for the first
time, the private royalty boundaries. This enabled all stakeholders
to see first-hand the direction of mining at Kestrel towards the
Group's private royalty land, explaining why income from Kestrel
over the last number of years has decreased and, in turn, providing
greater confidence in the Group's future income growth. The recent
decision by the Bank of England to cut interest rates to a
historically low level should also make the Group's dividend
attractive to those searching for yield.
It is pleasing to see the gap between the Company's share price
and balance sheet net asset per share narrow during the period. It
is the Group's view that there is additional value in its royalty
portfolio which is not reflected in the balance sheet valuation
which could provide further upside over the coming years, as
discussed in the finance review below.
Operational performance
Anglo Pacific expects 2016 to show a similar trend to 2015 with
royalty income heavily weighted to the second half of the year as
mining from Kestrel was largely outside of the Group's private
royalty land during the first half of both 2015 and 2016. This
should be the last time that the Group reports such seasonality in
its Kestrel royalty income, as it expects mining to be mainly
within its private royalty land going forward. The diagram below
shows the location of mining at Kestrel compared to the Group's
royalty area, which clearly illustrates the reasons for the
discrepancies between H1 and H2 of 2015 and 2016 and the reason for
the Group's confidence going into the H2 2016 and beyond.
http://www.rns-pdf.londonstockexchange.com/rns/0782I_-2016-8-24.pdf
The Narrabri North mine ("Narrabri") continued to perform
strongly in H1 2016 and should benefit from the rally in thermal
coal prices at the beginning of the third quarter. The main
positive for the Group at Narrabri continues to be production
upside associated with both their recently announced permitting
increase and the widening of their long wall infrastructure. As a
result, production should continue to exceed the level which the
Group anticipated at the time of acquiring the royalty and this
should, over time, more than compensate for short-term commodity
price volatility.
The Group has three other producing royalties in Maracás Menchen
("Maracás"), Four Mile and EVBC. Although income from Maracás has
been impacted by the current vanadium price weakness, it is very
encouraging to see Largo Resources Limited ("Largo"), the operator,
announce recent record production numbers, which clearly
demonstrates that the operation is now heading towards intended
nameplate capacity. Four Mile has begun contributing to the Group's
income, albeit at low initial levels, and should increase as
long-term supply contracts are negotiated. EVBC continues to be
consistent, and should benefit from the higher gold price seen to
date in H2 2016.
Commodity prices
In addition to the positive underlying operational performance,
the outlook for commodity prices, namely coking and thermal coal,
which underlie the Group's royalty income, has improved
noticeably.
The Q3 2016 benchmark coking coal price settled at US$92/t which
is a 14% increase on the Q1 2016 price of US$81/t, and the recent
spot price reached as high as US$110/t which represents a 15% and
29% increase on the Q3 2016 and Q1 2016 contract prices
respectively. The price has benefitted from Chinese supply cuts,
which have resulted in higher levels of imports in Q2 2016.
Thermal coal has also benefitted from recent Chinese supply
cuts, which has seen seaborne prices rise sharply since the half
year. The spot price has recently moved back into the mid US$60/t
range from the low to mid US$50/t levels on average in the first
six months.
Foreign exchange and Brexit
In considering the performance of the Group's royalty portfolio
in the first six months of the year it is worth noting that the
Group's income is largely priced in US dollars. The average
exchange rate (GBP:USD) for the first six months was 1.43, which
only included one week of the weaker pound following the EU
referendum vote on June 23, 2016. The closing rate at June 30, 2016
was 1.34, some 6% lower than the average rate, and this has
weakened further during the third quarter of 2016.
A weaker pound should benefit the Group's reported income in the
second half of 2016, especially if the pound continues to trade
around the current level, which is reasonably likely in the
short-term following the increase in interest rates in the US and
the recent reduction of interest rates in the UK. As the Group is
effectively a dollar denominated business, the impact of Brexit
should have a dual benefit to the Company in the near-term in that
a weaker pound will result in higher levels of reported profits and
assets and, following the recent further cut in interest rates as a
result of Brexit, the Group's dividend should be even more
attractive in light of a longer period of lower returns on cash. It
remains to be seen what the longer-term impact of Brexit will have
on both the UK and the Company.
Balance sheet, cash resources and net asset value
The balance sheet at June 30, 2016 benefitted from foreign
exchange as the majority of the Group's assets are dollar
denominated.
The other noticeable increase at the end of June was the market
value of the Group's equity portfolio, which increased in value by
GBP4.6m. This increase is mainly attributable to the Group's 15%
holding in Berkeley Energia Limited ("Berkeley") which had
increased in value by 57% in the first six months of the year and a
further 15% since. This is largely due to the positive updates by
Berkeley in advancing its Salamanca uranium project towards
production, including the announcement of additional reserves at
Zona 7, the publication of a Definitive Feasibility Study and the
successful raising of a US$10.0m financing package.
Net debt at June 30, 2016 was GBP5.0m, a GBP3.2m increase from
the year end following the payment of the dividend in February
2016. Total debt increased by a further GBP3.6m in August 2016
following the payment of the Group's 2015 final dividend. Subject
to commodity prices, exchange rates and business growth
requirements, the total level of borrowings should now gradually
begin to reduce as free cash flow increases.
Overall, net assets increased to GBP164.8m at June 30, 2016 from
GBP162.0m at the beginning of the year. This equates to a net asset
value per share of 97p.
Outlook
The general market environment for the mining sector has seen
marked improvement in the year to date. From a persistent mood of
gloom surrounding commodities and mining companies' prospects at
the beginning of the year, reflected in historically low equity
prices, markets have seen a strong rebound in equity prices
accompanied by much improved commodity prices on the whole. Whilst
markets will no doubt continue to experience volatility, a greater
degree of confidence will see a more dynamic deal environment. The
Group is seeing more opportunities to invest in attractive
propositions, as balance sheet pressure and financing needs
continue, and is optimistic that it will be able to conclude value
accretive transactions in the months to come.
As regards the Group's existing portfolio, the combination of a
weaker pound, increased production from Kestrel and Narrabri and a
more favourable outlook for coking and thermal coal should result
in the Group reporting a noticeable increase in revenue for 2016 as
a whole.
Investment Review
------------------
Producing royalties
-- Kestrel, Queensland, Australia - Coking Coal
Royalty income from the Kestrel mine during the first six months
of 2016 totalled GBP1.4m (H1 2015: GBP1.0m). On July 19, 2016, Rio
Tinto released its Second Quarter Operations Review which reported
production of 1.99Mt of coal (1.7Mt of hard coking coal and 0.3Mt
of thermal coal) in H1 2016 compared to 2.25Mt (1.96Mt of hard
coking coal and 0.3Mt of thermal coal) for the corresponding period
in 2015. Approximately 37% of coal sales were mined from within the
Group's private royalty land during the period compared to 22%
during 2015. The drop in tonnes comes in spite of the continued
longwall ramp up at the operations and is primarily due to the
timing of the longwall changeout from LW403 to LW404.
The Group's guidance on the proportion of tonnes mined within
its private royalty land remains unchanged at 85% to 90% for H2
2016, 60-65% for the full year 2016, and over 90% by the end of
2017.
For further information, please see www.riotinto.com.
Narrabri North, New South Wales, Australia - Thermal and PCI
Coal
Royalty income in the first six months of 2016 from the Narrabri
mine was GBP1.6m (H1 2015: GBP1.8m). Saleable coal production from
Narrabri during the period was 3.5Mt (2015: 4.1Mt) and coal sales
were 3.8Mt (2015: 3.9Mt). The drop in saleable coal production was
expected by Whitehaven Coal Limited ("Whitehaven") as there were
two longwall changeouts during the period, both completed on time
and on budget, and full longwall production has now resumed.
On February 5, 2016, Whitehaven announced its intention to
extend the Narrabri North longwall panels into the Narrabri South
area, and that work to integrate Narrabri South into existing
operations at Narrabri North had commenced. Drilling to convert
Narrabri South Mineral Resources to Mineral Reserves is scheduled
to occur during Whitehaven's fiscal year ending June 30, 2017.
The project to widen the longwall face to 400 metres (from 300
metres), leading to increased ROM coal production rates, appears to
be on schedule and on budget with first production from the first
400 metre wide panel (LW07) expected to commence in the second half
of FY2017.
For further information, please see
http://www.whitehavencoal.com.au.
Maracás Menchen, Brazil - Vanadium
Royalty income in the first six months of 2016 from the Maracás
mine was GBP0.2m (H1 2015: GBP0.4m). To date, Largo has announced
production up to June 2016 of 3,480 tonnes of V(2) O(5) from
Maracás, including a new record monthly production record of 801
tonnes in June. Largo has issued production guidance for 2016 in
the range of 7,639 tonnes and 8,639 tonnes of V(2) O(5) . This has
been offset by a weaker vanadium price in H1 2016 compared to the
same period in H1 2015.
On May 26, 2016, Largo announced an update to the mine plan and
Mineral Reserves of the project. The Proven and Probable Mineral
Reserves for the Campbell Pit at Maracás have increased by 40% to
18.4 million tonnes from the 13.1 million tonnes established
previously although Largo now expect the mine life to be reduced
slightly to 15 years at a production rate of 9,600 tonnes V(2) O(5)
per annum.
For further information, please see www.largoresources.com.
-- El Valle-Boinás/Carlés, Spain - Gold/Copper/Silver
During the six months to June 30, 2016, the Group received
royalty receipts of GBP0.6m (H1 2015: GBP0.6m) from the El
Valle-Boinás/Carlés Mine ("EVBC"). During the first six months of
2016, EVBC produced 21,581 ounces of gold, 1.80Mlbs of copper and
64,757 ounces of silver compared with 26,371 ounces of gold,
2.91Mlbs of copper and 82,227 ounces of silver during the same
period in 2015. Despite this, the gold price has, on average, been
higher during H1 2016 compared to H1 2015.
In July 2016, Orvana Minerals Corp ("Orvana") announced a
USD$12.5m Prepayment Facility with Samsung C&T. The proceeds
are expected to be invested with a view to deliver increased
production and lower unit costs at the El Valle/Boinás mine, and
possibly support the restart of mining activities at the Carlés
mine which was put into care and maintenance in February 2015.
For further information, please see www.orvana.com.
-- Four Mile, South Australia, Australia - Uranium
The Four Mile Uranium Mine ("Four Mile") commenced sales of
uranium ore concentrate ("UOC") in late 2015 and during the six
months to June 30, 2016, the Group received maiden royalty receipts
of GBP0.2m from Quasar Resources Pty Ltd ("Quasar"). Despite the
recent weakness in the spot price during the ramp-up at Four Mile,
down from US$36.00/lbs in December 2015 to US$28.25/lbs in June
2016, the outlook on the long term contract price remains
relatively stable.
Development royalties
-- Salamanca, Spain - Uranium
On July 14, 2016, Berkeley announced the results of a Definitive
Feasibility Study ("DFS") on its Salamanca project. The DFS reports
that the project is capable of producing an average of 4.4Mlbs of
saleable uranium per annum over ten years of steady state
production, or an average of 3.5Mlbs of uranium per year over a
14-year mine life. This is significantly higher than the rate of
production assumed when the Company acquired the royalty in 2009
due to the considerable increase in resource discovered by Berkeley
over the past 12 months. First production, and hence first
generation of royalty income for the Company, is expected in
2018.
For further information on the project please see
www.berkeleyenergia.com.
-- Groundhog, British Columbia, Canada - Anthracite
In April 2016, the Group settled the outstanding amount due
under its promissory note receivable from Atrum Coal NL ("Atrum")
by way of US$0.6m in cash along with the issue of a new royalty on
the Groundhog anthracite project as follows:
-- 0.5% GRR covering all production within Atrum's Groundhog
Anthracite Project ("Groundhog") tenements from first production
until ten years from the date that Atrum declares commercial
production on the project; and subsequently
-- 0.1% GRR from production within the Groundhog North Mining Complex project area.
In addition, the Group retained a royalty on certain Groundhog
tenements following its disposal of the related mining licenses in
2014 to Atrum. The royalty entitles the Group to the higher of 1%
of gross revenue on a mine gate basis or US$1/t from coal sales
based on production within these licenses.
On June 9, 2016, Atrum announced a revised PFS which outlined an
underground project capable of producing 880ktpa of ultra-high
grade anthracite over a mine life of 28 years.
Finance review
---------------
Anglo Pacific reported a 6% increase in royalty income in H1
2016 compared to the same period in 2015. The Group's income
benefitted from stronger operational performance at Kestrel, which
also contributed to a doubling in free cash flow generated by the
Group. The balance sheet benefitted from a weaker pound at the
reporting date following the EU referendum result which
significantly increased the value of the Group's dollar denominated
assets.
Income Statement
Royalty income H1 2016 H1 2015 % H2 2015 2015
GBP'000
Kestrel 1,433 1,027 + 40% 2,587 3,614
Narrabri 1,607 1,799 - 11% 1,418 3,217
EVBC 598 627 - 5% 619 1,246
Maracas 246 375 - 34% 231 606
Four Mile 191 - - - -
---------------- -------- -------- ------ -------- ------
4,075 3,828 + 6% 4,855 8,683
---------------- -------- -------- ------ -------- ------
Royalty income increased by GBP247k in the period to GBP4,075k,
an increase of 6%. This is largely as a result of additional mining
within the Group's private royalty land at Kestrel which increased
to 37% in H1 2016 from 22% in H1 2015. Similar to 2015, the
majority of the Group's royalty income for 2016 is expected to be
received in the second half of the year. Importantly, this should
be the last reporting period where there is a significant
discrepancy between the public and private royalty area, as mining
is expected to be mainly within the Group's private royalty land
from this point onwards. This should drive significant revenue
growth in the years ahead. This should also be assisted by a
recovery in the price of coking coal, which has increased by 14% in
the year to date. The recent spot price is currently trading well
above the Q3 2016 contract price, driven by supply side cuts by
China which is having a positive impact on the price of seaborne
coal. This should translate into a higher Q4 2016 contract price in
due course.
Although the price of thermal coal rallied since the end of the
second quarter, the lower thermal coal prices during the first half
of the year impacted royalty income from Narrabri, however, this
was partially offset by a slight increase in tonnage sold. More
importantly for the Group is the production upside associated with
the royalty. Whitehaven have increased the permitting at the mine
from 8Mtpa to 11Mtpa which, when aided by the upsized modification
to the longwall infrastructure, should result in higher levels of
production than assumed by the Group at the time the royalty was
acquired. This acceleration of production should result in higher
royalty revenues in the years ahead.
Royalty income from EVBC in the first half of the year was
consistent with the same period in 2015. The gold price has
increased considerably in the year to date and should continue to
benefit the Group in the second half of the year.
Royalty income from Maracás contributed GBP246k in the period
compared to GBP375k in H1 2015. The vanadium price continues to
trade at much lower levels compared to the price when the royalty
was acquired. Despite this, there have been a number of positive
developments in relation to this royalty during the period. Largo
has made considerable progress in ramping up production, and
reported a record month of production in June, which was running
close to nameplate capacity. This should benefit the Group in the
second half of the year.
The Group received its first royalty receipts from Four Mile
during the period of GBP191k. The Group expects that this income
will gradually ramp up over time as the operator secures
longer-term supply contracts.
The Group continued its focus on costs during the first half of
the year. Overheads were consistent with the previous year and this
will continue to be an ongoing area of focus going forward. The
other noticeable item in the income statement in the period is the
GBP1.2m foreign exchange credit reflecting the weakening of the
pound, particularly in the last week in June following the outcome
of the EU referendum.
Adjusted earnings in the period were GBP2.4m (after current tax
of GBP0.8m) resulting in adjusted earnings per share of 1.43p. This
is ahead of the GBP1.6m and 1.04p respectively in H1 2015. Taking
into account the amortisation charge, non-cash share based
payments, the Kestrel revaluation and associated deferred tax
resulted in an overall loss after tax for the period of GBP5.4m
compared to a loss of GBP8.8m in the first half of 2016 equating to
a basic loss per share of 3.18p (H1 2015: 5.81p).
Balance sheet
Net assets increased to GBP164.8m at the end of June from
GBP162.0m at the beginning of 2016. There were two main reasons for
this increase: the impact of the closing GBP:AUD exchange rate post
the outcome of the EU referendum; and the significant increase in
Berkeley's share price in the first six months of the year.
Net asset value reconciliation GBP:AUD GBP'000 GBP'000 Pence
per
share
--------------------------------- -------- --------- --------- -------
January 1, 2016 2.0281 161,983 95p
--------------------------------- -------- --------- --------- -------
Kestrel:
--------------------------------- -------- --------- --------- -------
Coal price (Income Statement) (10,161)
--------------------------------- -------- --------- --------- -------
FX on retranslation from AUD to
GBP (OCI) 9,612
--------------------------------- -------- --------- --------- -------
Deferred tax (income Statement) 3,004
--------------------------------- -------- --------- --------- -------
Deferred tax (OCI) (2,843) (388)
--------------------------------- -------- --------- --------- -------
Foreign exchange on translation
of royalties 8,988
--------------------------------- -------- --------- --------- -------
Amortisation of royalties (1,339)
--------------------------------- -------- --------- --------- -------
Equity portfolio increase 4,608
--------------------------------- -------- --------- --------- -------
Adjusted earnings 2,418
--------------------------------- -------- --------- --------- -------
Dividends (11,830)
--------------------------------- -------- --------- --------- -------
Other 339
--------------------------------- -------- --------- --------- -------
June 30, 2016 1.7995 164,779 97p
--------------------------------- -------- --------- --------- -------
As can be seen in the table above, the weakening of the pound
against the dollar denominated currencies has benefitted the Group
at the end of June. Although revisions to the longer-term coking
coal price reduced the underlying value of the Kestrel royalty by
GBP10.1m during the period, as recognised in the income statement,
this deficit was virtually reversed in full on the balance sheet,
through the unrealised foreign exchange gain on retranslation from
Australian dollars to pounds at the period end.
The majority of the Group's other royalties are denominated in
Australian dollars, which also benefitted from retranslation gains
of GBP9.0m at June 30, 2016. The dividend of GBP11.8m reflects the
payment of the 2015 interim dividend in February 2016 of 4.00p per
share (GBP6.8m) and the final dividend for 2015 of 3.00p per share
(GBP5.0m) which was accrued at June 30, 2016, but not at December
31, 2015, following its approval at the AGM in May 2016.
The other noticeable increase in the period was the GBP4.6m
increase in value of the Group's non-core equity portfolio. The
vast majority of this is in relation to the Group's 15% holding in
Berkeley, which has increased in value significantly in the period
following previously announced progress at their Salamanca project,
which the Group also has a royalty over. At June 30, 2016 the value
of the Group's equity stake in Berkeley was GBP11.3m. This has
increased in value further since the half year and currently valued
at GBP13.5m.
The Group ended the period with net assets per share of 97p, a
slight increase from the 95p reported at the year end. The
Directors consider there to be further inherent value in Anglo
Pacific's business as certain of its royalties have, in their view,
increased in value since the Group acquired them and this value is
not reflected on the balance sheet. One readily observable instance
of this is the royalty which Berkeley sold on its Salamanca project
in June 2016 which, on an equivalent basis, would value the Group's
royalty at some $10m (or approximately three times) higher than the
Group's balance sheet value. Other examples include the planned
volume increases at Narrabri, which has the impact of accelerating
production therefore increasing value, and income commencing at
Four Mile which, in addition to the natural unwinding of the
discount rate, brings forward the cash flow on a DCF basis. Both
acceleration of production and additional reserves naturally
increases the value in use to the Group of owning the royalty.
Cash flow and net debt
The Group generated free cash flow of GBP3.6m in the first six
months of 2016, more than double the GBP1.7m generated in the first
six months of 2015.
H1 2016 H1 2015
---------------------------- -------------- ---------------
Financial resources (GBPm) Debt Cash Debt Cash
---------------------------- ------ ------ ------ -------
January 1 (7.5) 5.7 - 8.8
---------------------------- ------ ------ ------ -------
Royalty receipts 4.8 2.0
---------------------------- ------ ------ ------ -------
Non-royalty asset income 0.4 0.3
---------------------------- ------ ------ ------ -------
Non-core asset disposals - 1.7
---------------------------- ------ ------ ------ -------
Administrative costs (1.7) (2.0)
---------------------------- ------ ------ ------ -------
Tax, FX and other 0.2 0.1
---------------------------- ------ ------ ------ -------
Finance costs (0.1) (0.4)
---------------------------- ------ ------ ------ -------
Free cash flow 3.6 1.7
---------------------------- ------ ------ ------ -------
Royalty acquisitions - (41.6)
---------------------------- ------ ------ ------ -------
Equity issuance - 37.4
---------------------------- ------ ------ ------ -------
RCF drawdown (1.6) 1.6 (2.9) 2.9
---------------------------- ------ ------ ------ -------
Dividend (6.8) (5.2)
---------------------------- ------ ------ ------ -------
June 30 (9.1) 4.1 (2.9) 4.0
---------------------------- ------ ------ ------ -------
Free cash flow in 2015 was skewed towards the second half of the
year due to the production profile associated with Kestrel. This
trend is expected to repeat in H2 2016, following which the Group
expects half yearly fluctuations in its income profile to level off
as Kestrel moves largely within the Group's private royalty
land.
The Group received GBP0.6m in the period in relation to tax
owing to it following the overpayment of tax on account in previous
periods.
The Group ended the period with net debt of GBP5.0m, which is up
GBP3.2m from the beginning of the year. The increase is largely
attributable to the payment of the 2015 interim dividend in
February 2016. The Group drew a further GBP3.6m in August with the
payment of the 2015 final dividend leaving net debt outstanding of
GBP7.5m at present.
Although mindful of not declaring an inflection point,
borrowings should begin to decrease from this point onwards,
subject to the continuing operations of the business remaining
unchanged and no material decrease in commodity prices or exchange
rates. With approximately US$13.0m undrawn under the current
revolving credit facility, along with further liquidity through the
Group's non-core listed equity portfolio, the Directors believe the
Group has sufficient cash resources to maintain the dividend at
current levels for the foreseeable future.
Dividend
---------
The Board has declared an interim dividend for 2016 of 3.00p per
share, maintaining the level of the 2015 final dividend per share.
The dividend will be paid on February 8, 2017 to shareholders on
the register at the close of business on December 30, 2016. The
shares will be quoted ex-dividend in London on December 29, 2016
and in Canada on December 28, 2016.
A payment of GBP6.8m, equivalent to 4.00p per share, is included
in the cash flow statement to June 30, 2016, representing the 2015
interim dividend recognised and paid in February 2016. This,
together with the 3.00p per share 2015 final dividend approved at
the AGM in May and paid in August 2016, means total dividend
payments in relation to 2015 were 7.00p per share. As previously
communicated, it is the Group's intention to maintain bi-annual
payments of 3.00p per share until such time that the equivalent of
65% of adjusted earnings per share is higher, at which point the
dividend level will be reviewed.
Principal risks and uncertainties
----------------------------------
The Group is exposed to a variety of risks and uncertainties
which may have a financial, operational or reputational impact on
the Group. 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 2015 and have not changed
significantly since. The principal risks relate to the
following:
-- Commodity prices
-- Political and regulatory
-- Production
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 Investment Review and
Finance Review sections.
The Annual Report 2015 is available on the Group's website
www.anglopacificgroup.com
Performance measures
---------------------
Throughout this report a number of financial measures are used
to assess the Group's performance. The measures are defined as
follows:
Adjusted earnings/(loss)
Adjusted earnings/(loss) represents the Group's underlying
operating performance from core activities. Adjusted
earnings/(loss) is the profit/(loss) attributable to equity holders
less all valuation movements, non-cash impairments and amortisation
charges (which are non-cash IFRS adjustments that arise primarily
due to changes in commodity prices), finance costs, any associated
deferred tax and any profit or loss on non-core asset disposals as
these are not expected to be ongoing. See note 5 to the financial
statements for adjusted earnings/(loss).
Operating profit/(loss)
Operating profit/(loss) represents the Group's underlying
operating performance from its royalty interests. Operating
profit/(loss) is royalty related income, less amortisation of
royalties and operating expenses, and excludes impairments,
revaluations and gain/(loss) on disposals. Operating profit/(loss)
reconciles to 'operating profit/(loss) before impairments,
revaluations and gain/(losses) on disposals' on the income
statement.
Free cash flow
Free cash flow represents the net cash generated in the period
before dividends, royalty acquisitions, equity issuances and
changes in the level of borrowings. It includes cash flow generated
from the disposal of non-core asset disposals. The Group's free
cash flow is reconciled on page 7.
Net debt
Net debt represents the Group's utilisation of its revolving
credit facility, excluding deferred borrowing costs, less cash and
cash equivalents. See note 11 to the financial statements for the
Group's net debt position as at June 30, 2016.
Responsibility statement
The Directors confirm that to the best of their knowledge:
-- the condensed set of financial statements has been prepared
in accordance with IAS 34 'Interim Financial Reporting';
-- the interim management report includes a fair review of the
information required by DTR 4.2.7R (indication of important events
during the first six months and description of principal risks and
uncertainties for the remaining six months of the year); and
-- the interim management report includes a true and fair review
of the information required by DTR 4.2.8R (disclosure of related
parties' transactions and changes therein).
The Directors are listed in the Annual Report of December 31,
2015 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 24, 2016
CONDENSED CONSOLIDATED INCOME STATEMENT (UNAUDITED)
FOR THE SIX MONTHSED JUNE 30, 2016
Six months ended
June 30, 2016 June 30, 2015
Notes GBP'000 GBP'000
Royalty income 4,075 3,828
Amortisation of royalties (1,339) (1,344)
Operating expenses (1,824) (1,837)
-------------- --------------
Operating profit before impairments, revaluations and losses on disposals 912 647
Loss on sale of mining and exploration interests - (507)
Impairment of mining and exploration interests - (128)
Impairment of royalty and exploration intangible assets - (2,786)
Revaluation of coal royalties (Kestrel) (10,161) (9,074)
Finance income 2 70 149
Finance costs 3 825 193
Other income 4 179 155
-------------- --------------
Loss before tax (8,175) (11,351)
Current income tax charge (800) (806)
Deferred income tax credit 12 3,595 3,333
-------------- --------------
Loss attributable to equity holders (5,380) (8,824)
============== ==============
Total and continuing loss per share
Basic and diluted loss per share 5 (3.18p) (5.81p)
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(UNAUDITED)
FOR THE SIX MONTHSED JUNE 30, 2016
Six months ended
June 30, 2016 June 30, 2015
Notes GBP'000 GBP'000
Loss attributable to equity holders (5,380) (8,824)
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 4,229 (933)
Reclassification to income statement on disposal of
available-for-sale investments - 507
Reclassification to income statement on impairment - 128
Deferred tax relating to items that have been or may be reclassified 12 18 136
Net exchange gain/(loss) on translation of foreign operations 15,407 (10,421)
-------------- --------------
Other comprehensive income/(loss) for the year, net of tax 19,654 (10,583)
Total comprehensive income/(loss) for the period 14,274 (19,407)
============== ==============
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
AS AT JUNE 30, 2016
June 30, June 30, December 31,
2016 2015 2015
Notes GBP'000 GBP'000 GBP'000
Non-current assets
Property, plant and equipment 95 131 113
Coal royalties (Kestrel) 7 82,107 100,013 82,649
Royalty financial instruments 8 16,613 7,356 6,534
Royalty and exploration intangible assets 9 79,791 73,727 71,491
Mining and exploration interests 10 15,506 8,149 10,898
Deferred costs 1,120 - 1,013
Other receivables - 9,543 10,132
Deferred tax 12 3,446 2,377 3,094
--------- --------- -------------
198,678 201,296 185,924
Current assets
Trade and other receivables 3,132 6,604 5,106
Cash and cash equivalents 4,059 4,023 5,708
--------- --------- -------------
7,191 10,627 10,814
Total assets 205,869 211,923 196,738
--------- --------- -------------
Non-current liabilities
Borrowings 11 8,900 2,625 7,272
Other payables 1,348 115 1,193
Deferred tax 12 23,970 29,255 24,546
--------- --------- -------------
34,218 31,995 33,011
Current liabilities
Income tax liabilities 465 662 574
Trade and other payables 6,407 8,313 1,170
--------- --------- -------------
6,872 8,975 1,744
Total liabilities 41,090 40,970 34,755
--------- --------- -------------
Net assets 164,779 170,953 161,983
========= ========= =============
Capital and reserves attributable to shareholders
Share capital 13 3,399 3,399 3,399
Share premium 13 49,211 49,211 49,211
Other reserves 49,984 25,095 29,976
Retained earnings 14 62,185 93,248 79,397
--------- --------- -------------
Total equity 164,779 170,953 161,983
========= ========= =============
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(UNAUDITED) FOR THE SIX MONTHSED 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 period - - - - - - - - - (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
income/(loss) - - - - (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
======== ======== ======== ======== ============ ========= ============ ======== =========== ========= =========
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(UNAUDITED) FOR THE SIX MONTHSED DECEMBER 31, 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 June 30,
2015 3,399 49,211 29,134 143 1,325 843 (4,381) 632 (2,601) 93,248 170,953
Loss for the year - - - - - - - - - (13,752) (13,752)
Other comprehensive
income:
Available-for-sale
investments
Valuation
movement taken
to equity - - - - 1,790 - 48 - - - 1,838
Transferred to
income
statement on
disposal - - - - (23) - - - - - (23)
Transferred to
income
statement on
impairment - - - - 802 - - - - - 802
Deferred tax - - - - 23 - - - - - 23
Foreign currency
translation - - - - - - 1,776 - - - 1,776
------------
Total comprehensive
income/(loss) - - - - 2,592 - 1,824 - - (13,752) (9,336)
-------- -------- -------- -------- ------------ --------- ------------ -------- ----------- --------- ---------
Dividends - - - - - - - - - - -
Issue of ordinary
shares - - - - - - - - - - -
Value of employee
services - - - - - 465 - - - (99) 366
Total transactions
with owners of the
company - - - - - 465 - - - (99) 366
-------- -------- -------- -------- ------------ --------- ------------ -------- ----------- --------- ---------
Balance at December
31, 2015 3,399 49,211 29,134 143 3,917 1,308 (2,557) 632 (2,601) 79,397 161,983
======== ======== ======== ======== ============ ========= ============ ======== =========== ========= =========
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(UNAUDITED) FOR THE SIX MONTHSED JUNE 30, 2016
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, 2016 3,399 49,211 29,134 143 3,917 1,308 (2,557) 632 (2,601) 79,397 161,983
Loss for the year - - - - - - - - - (5,380) (5,380)
Other comprehensive
income:
Available-for-sale
investments
Valuation
movement taken
to equity - - - - 4,229 - 43 - - - 4,272
Transferred to
income
statement on
disposal - - - - - - - - - - -
Transferred to
income
statement on
impairment - - - - - - - - - - -
Deferred tax - - - - 18 - - - - - 18
Foreign currency
translation - - - - - - 15,364 - - - 15,364
------------
Total comprehensive
income/(loss) - - - - 4,247 - 15,407 - - (5,380) 14,274
-------- -------- -------- -------- ------------ --------- ------------ -------- ----------- --------- ---------
Dividends - - - - - - - - - (11,832) (11,832)
Issue of ordinary
shares - - - - - - - - - - -
Value of employee
services - - - - - 354 - - - - 354
Total transactions
with owners of the
company - - - - - 354 - - - (11,832) (11,478)
-------- -------- -------- -------- ------------ --------- ------------ -------- ----------- --------- ---------
Balance at June 30,
2016 3,399 49,211 29,134 143 8,164 1,662 12,850 632 (2,601) 62,185 164,779
======== ======== ======== ======== ============ ========= ============ ======== =========== ========= =========
CONDENSED CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED)
FOR THE SIX MONTHSED JUNE 30, 2016
June 30, 2016 June 30, 2015
Notes GBP'000 GBP'000
Cash flows from operating activities
Loss before taxation (8,175) (11,351)
Adjustments for:
Finance income (70) (149)
Finance costs - excluding foreign exchange gains/losses 423 417
Other income (179) (155)
Loss on disposal of mining and exploration interests 10 - 507
Impairment of mining and exploration interests 10 - 128
Impairment of royalty and exploration intangible assets 9 - 2,786
Revaluation of coal royalties (Kestrel) 7 10,161 9,074
Depreciation of property, plant and equipment 17 19
Amortisation of royalty intangible assets 9 1,339 1,344
Share based payment 354 378
Foreign exchange (gain)/loss (1,248) -
-------------- --------------
2,622 2,998
Decrease/(Increase) in trade and other receivables 635 (1,332)
Increase/(Decrease) in trade and other payables 167 (605)
-------------- --------------
Cash generated from operations 3,424 1,061
Income taxes paid (172) (857)
Net cash generated from operating activities 3,252 204
-------------- --------------
Cash flows from investing activities
Proceeds on disposal of mining and exploration interests 10 - 1,722
Purchases of royalty and exploration intangible assets 9 - (41,587)
Proceeds from royalty financial instruments 8 116 105
Other royalty related repayments 392 -
Sundry income 63 50
Finance income 70 149
Net cash from/(used in) investing activities 641 (39,561)
-------------- --------------
Cash flows from financing activities
Drawdown of revolving credit facility 11 4,400 2,863
Repayment of revolving credit facility 11 (2,827) -
Proceeds from issue of share capital 13 - 37,326
Dividends paid 6 (6,762) (5,140)
Finance costs - excluding foreign exchange gains/losses (414) (417)
Net cash (used in)/from financing activities (5,603) 34,632
-------------- --------------
Net decrease in cash and cash equivalents (1,710) (4,725)
Cash and cash equivalents at beginning of period 5,708 8,769
-------------- --------------
Unrealised foreign currency gain/(loss) 61 (21)
Cash and cash equivalents at end of period 4,059 4,023
============== ==============
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, 2016.
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,
2015.
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,
2015, 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, 2015 were approved on March 22, 2016. 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 10 to 16. As at June 30, 2016, the Group had GBP9.1m
in borrowings (note 11) following the partial draw down on its
revolving credit facility (December 31, 2015: GBP7.5m) and access
to a further GBP13.3m 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 December 31, 2015. A
number of new accounting pronouncements, principally minor
amendments to existing standards, became effective on January 1,
2016, and have been adopted by the Group. The adoptions of these
new accounting pronouncements has not had a significant impact on
the accounting policies, methods of computation 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, 2016 June 30, 2015
GBP'000 GBP'000
Interest on bank deposits 45 10
Interest on long-term receivables 25 139
-------------- --------------
70 149
============== ==============
3 Finance costs
Six months ended
June 30, 2016 June 30, 2015
GBP'000 GBP'000
Professional fees (229) (310)
Revolving credit facility fees (63) (77)
Revolving credit facility interest (131) (30)
-------------- --------------
(423) (417)
Net foreign exchange gain 1,248 610
-------------- --------------
825 193
============== ==============
4 Other income
Six months ended
June 30, 2016 June 30, 2015
GBP'000 GBP'000
Group
Effective interest income on royalty financial instruments 116 105
Sundry income 63 50
-------------- --------------
179 155
============== ==============
5 Loss per share
Loss per ordinary share is calculated on the Group's loss after
tax of GBP5.4m for the six months ended June 30, 2016 (June 30,
2015: loss GBP8.8m) and the weighted average number of shares in
issue during the period of 169,016,101 (2015: 151,867,805).
June 30, 2016 June 30. 2015
GBP'000 GBP'000
Net profit attributable to shareholders
Earnings - basic (5,380) (8,824)
Earnings - diluted (5,380) (8,824)
============== ==============
June 30, 2016 June 30. 2015
Weighted average number of shares in issue
Basic number of shares outstanding 169,016,101 151,867,805
Dilutive effect of Employee Share Option Scheme - -
-------------- --------------
Diluted number of shares outstanding 169,016,101 151,867,805
============== ==============
Loss per share - basic and diluted (3.18p) (5.81p)
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,
2016 (June 30, 2015: 925,933).
As the Group is loss making in 2016 and 2015, 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 month ended June 30, 2016 (5,380) (3.18p) (3.18p)
Adjustment for:
Amortisation of royalty intangible assets 1,339
Impairment of mining and exploration interests -
Revaluation of coal royalties (Kestrel) 10,161
Effective interest income on royalty financial instruments (116)
Share-based payments and associated national insurance 402
Tax effect of the adjustments above (3,997)
---------
Adjusted profit - basic and diluted for the six months ended June 30, 2016 2,409 1.43p 1.43p
========= ========== ==========
Diluted
Earnings earnings
Earnings per share per share
GBP'000 p p
Net profit attributable to shareholders
Loss - basic and diluted for the six month ended June 30, 2015 (8,824) (5.81p) (5.81p)
Adjustment for:
Amortisation of royalty intangible assets 1,344
Gain on sale of mining and exploration interests 507
Impairment of mining and exploration interests 128
Impairment of royalty and exploration intangible assets 2,786
Revaluation of coal royalties (Kestrel) 9,074
Effective interest income on royalty financial instruments (105)
Share-based payments and associated national insurance 411
Tax effect of the adjustments above (3,736)
---------
Adjusted profit - basic and diluted for the six months ended June 30, 2015 1,585 1.04p 1.04p
========= ========== ==========
6 Dividends
An interim dividend of 3.00p per share has been declared for
year ending December 31, 2016, and will be paid on February 8,
2017.
On August 5, 2016 a final dividend in respect of the year ended
December 31, 2015 of 3.00p per share was paid to shareholders
(GBP5.1m). As the final dividend was approved by shareholders at
the AGM on May 10, 2016 it has been included as a current liability
in 'Trade and other payables' as at June 30, 2016.
On February 4, 2016 an interim dividend of 4.00p per share was
paid to shareholders (GBP6.8m) in respect of the year ended
December 31, 2015.
7 Coal royalties (Kestrel)
GBP'000
At January 1, 2015 117,097
Foreign currency translation (8,010)
Loss on revaluation of coal
royalties (9,074)
---------
At June 30, 2015 100,013
Foreign currency translation 763
Loss on revaluation of coal
royalties (18,127)
---------
At December 31, 2015 82,649
Foreign currency translation 9,619
Loss on revaluation of coal
royalties (10,161)
---------
At June 30, 2016 82,107
=========
The coal royalty was valued during June 2016 at GBP82.1m
(A$147.8m) by Geos Mining, independent coal industry advisors, on a
net present value of the pre-tax cash flow discounted at a nominal
rate of 7.5% (June 30, 2015: 7.0%). The net royalty income from
this investment is currently taxed in Australia at a rate of 30.0%.
The revaluation of the underlying Australian dollar asset is
recognised in the Income Statement with the retranslation of the
Group's sterling presentation currency recognised in the foreign
currency translation reserve. Were the coal royalty to be carried
at cost the carrying value would be GBP0.2 million (2015: 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, 2015 8,142
Revaluation of royalty financial
instruments recognised in equity (931)
Foreign currency translation 145
At June 30, 2015 7,356
Revaluation of royalty financial
instruments recognised in equity (978)
Foreign currency translation 156
--------
At December 31, 2015 6,534
Transfer from non-current other
receivables 10,133
Revaluation of royalty financial
instruments recognised in equity (339)
Foreign currency translation 285
--------
At June 30, 2016 16,613
========
In the period effective interest of GBP0.1m (2015: GBP0.1m) was
recognised in other income (see note 4). This was directly offset
by cash received in the period of the same amount.
On February 23, 2016 the Group was notified by Hummingbird
Resources PLC that a Mineral Development Agreement had been signed
by the Liberian government, satisfying the conditions precedent to
extinguish the Group's non-interest bearing advance of US$15.0m,
previously held as non-current other receivables, in return for a
2.0-2.5% NSR royalty over the Dugbe 1 project.
The Group's royalty financial instruments are represented by
five royalty agreements (2015: four) which entitle the Group to
either the repayment of principal and a NSR royalty for the life of
the mine or a GRR royalty 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% >U$1,100/oz C$0.958 8% 3.493
Isua(2) Iron ore A$28,000 1% - - - -
Jogjakarta Iron sands A$5,000 2% - A$0.10 - A$0.50 10% 2,987
Dugbe 1 Gold U$15,000 2% 2.5% >U$1,800/oz - 12.5% 10,133
------------------
16,613
==================
(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, 2016 697 96,845 97,542
Additions - - -
Disposals - - -
Foreign currency translation - 12,927 12,927
----------------- ---------- ---------
At June 30, 2016 697 109,772 110,469
Amortisation and impairment
At January 1, 2016 (697) (25,354) (26,051)
Amortisation charge - (1,339) (1,339)
Foreign currency translation - (3,288) (3,288)
At June 30, 2016 (697) (29,981) (30,678)
----------------- ---------- ---------
Carrying amount June 30, 2016 - 79,791 79,791
================= ========== =========
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
Disposals - - -
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 - (790) (790)
----------------- ---------- ---------
At June 30, 2015 (697) (27,515) (28,212)
----------------- ---------- ---------
Carrying amount June 30, 2016 - 73,727 73,727
================= ========== =========
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 - (7,831) (7,831)
----------------- ---------- ---------
At December 31, 2015 697 96,845 97,542
Amortisation and impairment
At January 1, 2015 (697) (22,595) (23,292)
Amortisation charge - (2,573) (2,573)
Impairment charge - (4,414) (4,414)
Foreign currency - 4,228 4,228
----------------- ---------- ---------
At December 31, 2015 (697) (25,354) (26,051)
----------------- ---------- ---------
Carrying amount December 31, 2015 - 71,491 71,491
================= ========== =========
Exploration and evaluation costs
The exploration and evaluation costs comprise expenditure that
is directly attributable to the Trefi project in British Columbia,
Canada which was fully impaired during 2014.
Royalty interests
The amortisation charge for the period, of GBP1.3m (June 30,
2015: GBP1.3m) relates to the Group's producing royalties,
Narrabri, Maracás Menchen and Four Mile. 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. As at June 30, 2016 no further impairment
charges were recognised (December 31, 2015: GBP2.8m). The Group's
intangible assets will be assessed for indicators of impairment
again at December 31, 2016.
No intangible assets have been pledged as security for
liabilities.
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% GRR royalty over all coal produced from the Narrabri mine
located in New South Wales, Australia, owned and operated by
Whitehaven. The total cost of the Narrabri acquisition was 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) and GBP1.7 in capitalised acquisition costs.
10 Mining and exploration interests
GBP'000
Fair value
At January 1, 2015 9,896
Disposals (2,206)
Revaluation adjustment (3)
Foreign currency translation 462
--------
At June 30, 2015 8,149
Mining and exploration interests
received in lieu of payment 51
Revaluation adjustment 2,769
Foreign currency translation (71)
--------
At December 31, 2015 10,898
Mining and exploration interests
received in lieu of payment 47
Revaluation adjustment 4,569
Foreign currency translation (8)
At June 30, 2016 15,506
========
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 cost of any
individual investment is considered 'significant' or 'prolonged' in
accordance with the Group's impairment policy.
Total mining and exploration interests are represented by:
June 30, 2016 June 30, 2015 December 31, 2015
Group Group Group
GBP'000 GBP'000 GBP'000
Quoted investments 12,742 6,517 8,405
Unquoted investments 2,764 1,632 2,493
-------------- -------------- ------------------
15,506 8,149 10,898
============== ============== ==================
11 Borrowings
June 30, 2016 June 30, 2015 December 31, 2015
Group Group Group
GBP'000 GBP'000 GBP'000
Secured borrowing at amortised cost
Revolving credit facility 9,100 2,863 7,527
Deferred borrowing costs (200) (238) (255)
8,900 2,625 7,272
============== ============== ==================
Amount due for settlement within 12 months - - -
============== ============== ==================
Amount due for settlement after 12 months 9,100 2,863 7,527
============== ============== ==================
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,
2016, the Group had utilised U$12.2m (GBP9.1m) (June 30, 2015:
US$4.5m (GBP2.9m)) of the US$30.0m (GBP22.4m) 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, 2016 June 30, 2015 December 31, 2015
Group Group Group
GBP'000 GBP'000 GBP'000
Revolving credit facility (9,100) (2,863) (7,527)
Cash and cash equivalents 4,059 4,023 5,708
Net (debt)/cash and cash equivalents (5,041) 1,160 (1,819)
============== ============== ==================
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 sale-investments
Revaluation Effects of Revaluation Revaluation Accrual of
of coal Tax losses of royalty of mining royalty Other tax
royalty instruments interests receivable losses Total
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) 103 - - (83)
Exchange
differences (2,384) 93 - (2) (3) 41 (2,255)
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
Charge/(credit)
to profit or
loss (5,433) 21 - (6) 519 (681) (5,580)
Charge/(credit)
to other
comprehensive
income - - (196) 173 - - (23)
Exchange
differences 238 (37) - 1 3 (27) 178
Effect of change
in tax rate:
- equity - - - (1) - - (1)
------------ ----------- ---------------- --------------- ----------- ---------- --------
At December 31,
2015 24,279 (1,356) 767 107 567 (2,912) 21,452
Charge/(credit)
to profit or
loss (3,004) - - (23) (270) (298) (3,595)
Charge/(credit)
to other
comprehensive
income - - 699 50 - - 749
Exchange
differences 2,843 (172) - - 49 (35) 2,685
Effect of change
in tax rate:
- equity - - (767) - - - (767)
--------
At June 30, 2016 24,118 (1,528) 699 134 346 (3,245) 20,524
============ =========== ================ =============== =========== ========== ========
Deferred tax assets and liabilities are offset where the Group
has a legally enforceable right to do so. The following is the
analysis of the deferred tax balances (after offset) for financial
reporting purposes:
June 30, June 30, December
2016 2015 31, 2015
GBP'000 GBP'000 GBP'000
Deferred tax liabilities 23,970 29,255 24,546
Deferred tax assets (3,446) (2,377) (3,094)
20,524 26,878 21,452
========= ========= ==========
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, 2015 116,431,796 2,329 29,328 9,453 41,110
Issue of share capital under placing and placing and
open offer 49,375,000 987 16,658 19,681 37,326
Issue of share capital for royalty acquisition 4,135,238 83 3,225 - 3,308
------------ -------- -------- --------
Ordinary shares of 2p each at June 30, 2015, and
December 31, 2015 and June 30, 2016 169,942,034 3,399 49,211 29,134 81,744
============ ======== ======== ======== ========
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
partially satisfy the cash component of the Narrabri royalty
acquisition (refer to note 9).
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 (refer to note 9).
14 Retained earnings
GBP'000
Balance at January 1, 2015 113,761
Surrender of options from share-based
payment 212
Dividends (11,901)
Profit for the financial year (8,824)
---------
Balance at June 30, 2015 93,248
Surrender of options from share-based
payment (99)
Profit for the financial year (13,752)
Balance at December 31, 2015 79,397
Dividends (11,832)
Profit for the financial year (5,380)
---------
Balance at June 30, 2016 62,185
=========
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, Ring of Fire, Groundhog
Europe: EVBC, Salamanca, Isua, Bulqiza
Other: Jogjakarta, Dugbe 1, 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 results 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, 2016 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):
Australian Americas European All other
Royalties Royalties Royalties segments Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Royalty related income 3,231 246 598 - 4,075
Amortisation of royalties (1,128) (211) - - (1,339)
Operating expenses (872) - - (952) (1,824)
Total segment operating profit/(loss) 1,231 35 598 (952) 912
----------- ---------- ---------- ---------- --------
Total segment assets 142,581 20,183 5,931 37,174 205,869
----------- ---------- ---------- ---------- --------
Total assets include:
Additions to non-current assets (other than
financial instruments and deferred tax assets) - - - - -
Total segment liabilities 23,008 1,120 699 16,263 41,090
----------- ---------- ---------- ---------- --------
The segment information for the six months ended June 30, 2015
is as follows:
Australian Americas European All other
Royalties Royalties Royalties 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 profit/(loss) 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 twelve months ended December 31,
2015 is as follows:
Australian Americas European All other
Royalties Royalties Royalties segments Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Royalty related income 6,831 606 1,246 - 8,683
Amortisation of royalties (2,167) (406) - - (2,573)
Operating expenses (1,898) - - (2,162) (4,060)
Total segment operating profit/(loss) 2,766 200 1,246 (2,162) 2,050
----------- ---------- ---------- ---------- --------
Total segment assets 138,635 17,359 6,298 34,447 196,739
----------- ---------- ---------- ---------- --------
Total assets include:
Additions to non-current assets (other than
financial instruments and deferred tax assets 44,971 - - - 44,971
Total segment liabilities 23,573 1,013 767 9,402 34,755
----------- ---------- ---------- ---------- --------
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 GBP3.2m (2015:
GBP2.8m) is substantially derived from the Kestrel and Narrabri
royalties, which generated GBP1.4m and GBP1.6m respectively for the
six months ended June 30, 2016 (2015: GBP1.0m and GBP1.8). Both
royalties represent greater than 10% of the Group's revenue in 2015
and 2016. In addition, royalty related income in Europe of GBP0.6m
(2015: GBP0.6m) is derived from a single gold, copper and silver
royalty and represents greater than 10% of the Group's revenue in
2015 and 2016.
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, 2016 June 30, 2015 December 31, 2015
GBP'000 GBP'000 GBP'000
Investment property (held at fair value)
Coal royalties (Kestrel) 82,107 100,013 82,649
Available-for-sale (held at fair value)
Royalty financial instruments 16,613 7,356 6,534
Mining and exploration interests 15,506 8,149 10,898
Loans and receivables
Trade and other receivables 2,359 15,159 14,073
Cash at bank and in hand 4,059 4,023 5,708
Financial liabilities
Trade and other payables (1,093) (1,130) (832)
Borrowings (9,100) (2,863) (7,527)
Other payables (1,120) - (1,013)
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 approximates 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, 2016 the Group had GBP9.1m in borrowings (December
31, 2015: GBP7.5m) and access to a further GBP13.3m (December 31,
2015: GBP12.5m) in undrawn funds from its revolving credit
facility, adding 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 (i.e. as prices) or indirectly (i.e. 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, 2016:
June 30, 2016
Level 1 Level 2 Level 3 Total
Note GBP'000 GBP'000 GBP'000 GBP'000
Assets
Coal royalties (Kestrel) (a) - - 82,107 82,107
Royalty financial instruments (b) - - 16,613 16,613
Mining and exploration interests - quoted (c) 12,742 - - 12,742
Mining and exploration interests - unquoted (d) - 2,764 - 2,764
Net fair value 12,742 2,764 98,720 114,226
======== ======== ======== ========
The following tables present the Group's assets and liabilities
that are measured at fair value at June 30, 2015:
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
Net fair value 6,517 1,632 107,369 115,518
======== ======== ======== ========
The following tables present the Group's assets and liabilities
that are measured at fair value at December 31, 2015:
December 31, 2015
Level 1 Level 2 Level 3 Total
Group Note GBP'000 GBP'000 GBP'000 GBP'000
Assets
Coal royalties (Kestrel) (a) - - 82,649 82,649
Royalty financial instruments (b) - - 6,534 6,534
Mining and exploration interests - quoted (c) 8,405 - - 8,405
Mining and exploration interests - unquoted (d) - 2,493 - 2,493
Net fair value 8,405 2,493 89,183 100,081
======== ======== ======== ========
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 7.5% 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$124.1m (GBP69.0m) and an
additional charge to the income statement of GBP12.1m; and
-- a 10% increase in the coal price would have resulted in the
coal royalties being valued at A$171.8m (GBP95.5m) and a decrease
in the charge to the income statement of GBP12.3m.
(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.
The following table presents the changes in Level 3 instruments
for the six months ended June 30, 2016.
Royalty financial instruments Coal royalties (Kestrel) Total
GBP'000 GBP'000 GBP'000
At January 1, 2016 6,534 82,649 89,183
Additions 10,133 - 10,133
Revaluation gains or losses
recognised in:
Other comprehensive income (339) - (339)
Income statement - (10,161) (10,161)
Foreign currency translation 285 9,619 9,904
At June 30, 2016 16,613 82,107 98,720
============================== ========================= =========
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 year ended December 31, 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 (1,909) - (1,909)
Income statement - (27,201) (27,201)
Foreign currency translation 301 (7,247) (6,946)
At December 31, 2015 6,534 82,649 89,183
============================== ========================= =========
There have been no transfers into or out of Level 3 in any of
the reporting periods.
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
The Group received GBP19,839 from Audley Capital Advisors LLP, a
company of which Mr J.A. Treger, Chief Executive Officer, is both a
director and shareholder, for the subletting of office space during
the period ended June 30, 2016 (2015: GBPnil). As at June 30, 2016,
Audley Capital Advisors LLP, owe the Group a further GBP20,024 for
the subletting of office space (2015: GBPnil).
The Group has made no payments to related parties during six
months ended June 30, 2016. During the same period in 2015, the
Group made payments of GBP5,591 to Audley Capital Advisors LLP for
the reimbursement of travel related expenditure.
18 Events occurring after period end
With the exception of the declaration of the 2016 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.
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, 2016, which comprises the condensed
consolidated income statement, condensed consolidated statement of
comprehensive income, condensed consolidated balance sheet, the
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 has 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 inquiries, 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, 2016, 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 24, 2016
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 material
adverse change in the price of the commodities produced from the
properties underlying the Group's portfolio of royalties and
investments; no material adverse change in foreign exchange
exposure; no adverse development in respect of any property in
which the Group holds a royalty or other interest, including but
not limited to unusual or unexpected geological formations and
natural disasters; successful completion of new development
projects; planned expansions or additional projects being within
the timelines anticipated and at anticipated production levels; and
maintenance of mining title. If any such risks actually occur, they
could materially adversely affect the Group's business, financial
condition or results of operations. For additional information with
respect to such risks and uncertainties, please refer to the
"Principal Risks and Uncertainties" section of our most recent
Annual Report available on www.sedar.com and the Group's website
www.anglopacificgroup.com. Readers are cautioned to consider these
and other factors, uncertainties and potential events carefully and
not to put undue reliance on forward-looking statements. The
forward-looking statements contained in this announcement are made
as of the date of this announcement only and the Group undertakes
no obligation to update or revise publicly any forward-looking
statements, whether as a result of new information, future events
or otherwise, after the date on which the statements are made or to
reflect the occurrence of unanticipated events.
Third party information
As a royalty holder, the Group often has limited, if any, access
to non-public scientific and technical information in respect of
the properties underlying its portfolio of royalties, or such
information is subject to confidentiality provisions. As such, in
preparing this announcement, the Group has largely relied upon the
public disclosures of the owners and operators of the properties
underlying its portfolio of royalties, as available at the date of
this announcement.
Rio Tinto Limited, Whitehaven Coal Limited, Berkeley Energia
Limited and Atrum Coal NL are all listed on the Australian Stock
Exchange and report in accordance with the JORC Code. Orvana
Minerals Corporation and Largo Resources Limited are listed on the
Toronto Stock Exchange and report in accordance with NI 43-101.
Zamin is an independent mining group. Hummingbird Resources PLC is
listed on AIM.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR VZLFLQVFBBBE
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August 25, 2016 02:01 ET (06:01 GMT)
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