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Anglo Pacific continues to generate lots of cash from its mining royalty portfolio

During the opening three months of 2018, Anglo Pacific generated £13.3mln in free cash flow, helped by the continued recovery of commodities prices
trucks at a mine
With cash in the bank and access to a US$40mln borrowing facility, Anglo is in a position to self-finance further opportunities

Higher commodity prices helped royalty company Anglo Pacific Group plc (LON:APF) get off to a solid start in 2018.

Royalty income from the Kestrel coal mine and other projects totalled £7.9mln in the opening three months of the year, in line with the £8.2mln generated in the same period of 2017, which was a record year for the group.

Strong cash generation

The slight drop-off in income was down to production shortfalls at Rio Tinto PLC’s (LON:RIO) Kestrel mine and Whitehaven’s Narrabri project, although volumes at those two mines are expected to pick up over the year.

The lower volumes were partially offset by the continued recovery of commodity prices; in particular vanadium, which has more than doubled over the past year.

Higher prices look set to be a key feature moving forward as well, with the second quarter consensus for coking coal now 50% higher than what was predicted this time last year.

During the quarter, Anglo generated free cash flow of £13.3mln (Q1 2017: £13.4mln) leaving it with £18.7mln in the bank come the end of March (Dec 31: £8.1mln).

WATCH: Higher commodity prices sees Anglo Pacific get off to a solid start in 2018

“We continue to generate significant cash from our portfolio, have immediate access to circa US$65mln and are currently in the process of upsizing our bank facility,” said chief executive Julian Treger.

“The focus for the year is firmly on growth and we continue to work very hard on exploring, evaluating and appraising new opportunities.”

He added: “The announced sale of Kestrel during the quarter was around 50% higher than what the market had anticipated in 2017, suggesting a potential upside to our royalty. This should benefit Anglo Pacific as the beneficiary of the vast majority of royalty payments over the next 8-10 years.”

Anglo shares were down 0.9% to 161p shortly after the opening bell in London.

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