TIDMAPF
RNS Number : 0224H
Anglo Pacific Group PLC
26 November 2015
News Release
November 26, 2015
Anglo Pacific Group PLC
Q3 2015 Trading Update
Anglo Pacific Group PLC ("Anglo Pacific", the "Company" or the
"Group") (LSE: APF, TSX: APY), the London and Toronto listed
royalty company, issues the following trading update for the period
July 1, 2015 to November 25, 2015. Unless otherwise stated, all
unaudited financial information is for the quarter ended September
30, 2015.
Highlights
-- Royalty related income of GBP1.9m in Q3 2015 (Q3 2014:
GBP0.5m) despite headwinds in the price of commodities
-- Royalty related income of GBP5.7m for the nine months ended
September 30, 2015 (nine months ended September 30, 2014: GBP3.0m;
and FY2014: GBP3.5m)
-- Successful completion of longwall changeouts at both Kestrel
and Narrabri in the period, leaving full year production targets
unchanged
-- Positive developments for the Group's Narrabri and Salamanca
royalties
-- Cash and cash equivalents of GBP3.6m as at September 30, 2015
(June 30, 2015: GBP4.0m)
-- Total quoted equity interests valued at GBP7.4m as at
September 30, 2015 (June 30, 2015: GBP6.5m)
-- Borrowings of GBP8.6m as at September 30, 2015 (June 30,
2015: GBP2.6m)
-- Net assets of GBP161.4m at September 30, 2015 (June 30, 2015:
GBP171.0m)
Julian Treger, Chief Executive Officer of the Company,
commented:
"We are pleased to build on the half year performance and report
a significant increase in royalty income compared to the third
quarter of last year. The increase in the Group's royalty income is
largely due to the royalty income received from the Narrabri
royalty, acquired in the first half of the year, and has been
achieved in a period where commodity prices have remained under
significant pressure.
With longwall changeouts successfully completed at both Kestrel
and Narrabri, we are expecting a strong finish to 2015. There have
also been additional positive developments at our Narrabri and
Salamanca royalties following the end of the quarter, which have
the potential to significantly enhance our near term royalty
flows.
Our move to the standard listing on the Main Market creates
greater flexibility as we continue to grow the business, whilst
still providing shareholders with a high level of protection. We
continue to work hard to identify and appraise new royalty
opportunities which will complement our existing portfolio and
further the considerable progress we have made this year."
Portfolio update
Planned longwall changeouts at both Kestrel and Narrabri
impacted production at the Group's two main royalties in the third
quarter. Both changeouts completed on time and will therefore not
impact total expected production and income for the year. Anglo
Pacific's guidance in relation to production at Kestrel within the
Group's royalty land remains unchanged.
Significant news followed the quarter ended September 30, 2015
with the positive updates from Berkeley Energy, which continues to
make exceptional progress at its Salamanca Project, suggesting
potential upside for both Anglo Pacific's royalty and equity
interests. In addition, Whitehaven Coal announced that they are to
apply for consent to mine up to 11Mtpa of coal at Narrabri, a large
increase to the current permitted levels of production (8Mtpa),
which has the potential to significantly enhance the Group's near
term royalty flows.
Kestrel
In line with Anglo Pacific's expectations, Rio Tinto announced
Kestrel Mine Q3 2015 production of 0.54 Mt of hard coking coal and
0.11 Mt of thermal coal run of mine ("ROM") compared to 0.94 Mt of
hard coking coal and 0.18 Mt of thermal coal during Q2 2015.
Production rates at Kestrel were lower during Q3 2015 due to the
planned longwall changeout which was announced by Rio Tinto in its
Half Year Results 2015. The longwall changeout has not affected
Anglo Pacific's H2 2015 guidance range of 70% to 75% of production
within Anglo Pacific's royalty area.
Anglo Pacific expects total production at the Kestrel Mine to
recover during Q4 2015 as production rates continue to improve
towards nameplate longwall capacity of around 6Mtpa.
On November 16, 2015 several Australian media publications
reported that Rio Tinto had applied for an extension of their
mining licence at Kestrel. As part of this application, Rio Tinto
was reported to have told the Australian federal government that it
would close the Kestrel Mine if the application was refused. The
Group has reviewed the Rio Tinto application in detail and believes
that it is part of the normal permitting process for an extension
of the existing mining licence to cover the full extent of the mine
plan.
The application for licence extension relates to the 500 series
longwall panels which are due to be mined at the back end of its
expected mine life and are largely outside of the Anglo Pacific
royalty area. Rio Tinto has not commented on the timing of any
closure, and the Company does not believe this would occur before
the completion of any permitted Reserves in the current mine
schedule. The Group believes this will have little or no impact on
its Kestrel royalty.
Narrabri
During the third quarter, Whitehaven Coal announced that a
planned longwall changeout was successfully completed at Narrabri.
ROM coal production for the quarter was 1.0 Mt, down 52% compared
to 2.1 Mt in the quarter ended September 30, 2014. Narrabri
production was impacted by the scheduled longwall changeout,
therefore quarterly production is not fully comparable with the
same quarter of the previous year, during which no longwall
changeout occurred. Saleable coal production for the quarter was
1.6 Mt, with coal sales of 1.6 Mt. The sale of coal inventories
resulted in coal sales exceeding ROM coal production.
On October 30, 2015, Whitehaven Coal announced that it was
seeking approval for an 11Mtpa production limit at the Narrabri
Mine. If granted, this has the potential to lead to significantly
increased production at the mine, ahead of the levels of annual
production included in the Group's calculations at the time it
acquired the royalty. The acceleration of production is one source
of additional value which the Group seeks as part of any royalty
acquisition and it is encouraging that Narrabri is outperforming
the Group's expectations at current and planned future production
levels.
EVBC
EVBC continues to produce at a steady rate for the Group. On
November 13, 2015 Orvana Minerals announced that they had met their
updated 2015 production guidance with 53,733 ounces of gold, a
decrease in production of 14.5% compared to FY 2014. Orvana noted
that the weaker Euro had impacted positively on their costs.
Maracás
The Group's royalty income has been impacted by the decline in
the vanadium pentoxide price throughout 2015, which has now dropped
to $2.40 per pound. In spite of this, production at the mine
continues to ramp up, and Largo Resources announced that they
achieved a production record of 110% of nameplate capacity for a
short period in August. Although operating costs continue to fall,
and should fall further as production increases, these remain above
the current vanadium price.
Salamanca
Anglo Pacific is encouraged by Berkeley Energy's decision, as
published on November 4, 2015, to accelerate the development of the
Salamanca Project, with site works now expected to commence in
mid-2016. This, combined with the longer mine life, increased grade
and a higher uranium production profile, should considerably
increase the potential value of the Group's Salamanca royalty, well
in excess of the current carrying value of AUD$4m.
Berkeley Energy noted that the inclusion of the Zona 7 deposit
into the wider Salamanca Project (which previously only included
the Retortillo and Alameda deposits) transformed the project
economics, with a stated net present value of US$871.3m and an IRR
of 93.3% over a mine life of 18 years.
In addition to holding a 1% Net Smelter Royalty covering all
production from Berkeley Energy's Spanish and Portuguese assets,
the Group also has a 16.75% disclosed equity interest in Berkeley
Energy, which has increased in value throughout 2015. At September
30, 2015 this was carried on the Balance Sheet at GBP6.1m, and the
share price has further increased in value by 12% since.
Royalty income
A key part of the Group's strategy is to diversify its sources
of royalty income. The Group has gone someway to achieving this
strategy through its acquisition of the Narrabri royalty, which
generated royalty related income of GBP2.5m, representing 44% of
the Group's total royalty related income of GBP5.7m for the nine
months ended September 30, 2015 (September 30, 2014: GBP3.0m).
Anglo Pacific is encouraged that royalty income for 2015 will be
considerably higher than that received in 2014 which, the Company
believes, represented a low point for its royalty income.
Standard listing
In October the Company completed its planned transition from the
premium to the standard segment of the Main Market of the London
Stock Exchange. The transfer was a result of ongoing discussions
with the UK Listing Authority in relation to the appropriate
categorisation of the Company under the Listing Rules with respect
to technical considerations related to the Company's royalty
business model. After careful consideration of the alternative
listing regimes available to the Company, the Board concluded that
remaining on the Official List with a standard listing would be the
most appropriate listing category.
The move creates greater flexibility as the Group continues to
grow the business, whilst still providing shareholders with a high
standard of protection as a London listed company. The Company
retains its TSX listing.
Financial position
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