Anglo Pacific Group reveals steep rise in royalty income

Mining royalty business Anglo Pacific Group plc (LON:APF) revealed a steep rise in free cash flow as it reported a trading update for the six months to July 31.

Anglo Pacific said that free cash flow for the half would be between £18.5mln and £19mln, compared to £4.7mln in the same period of 2016, and it noted that the figure includes the impact of the Denison financing arrangement (this impact was seen between £3.1mln and £3.4mln).

Royalty income was up some 290% for the period, seen between £15.9mln and £16.3mln, and that is mostly attributable to an increase in sales from Kestrel mine which is now paying royalties on around 95% of its sales.

“We are encouraged by the level of royalty income received in the first half of the year, and expect this trend to continue into the second half now that we anticipate being paid a royalty on almost all sales by Rio Tinto at Kestrel,” said Julian Treger, Anglo Pacific chief executive.

“However on the flip side of such strong revenue from Kestrel is that it will impact on the valuation of the asset through resource depletion.”

“The level of cash generated during the first six months is also pleasing, and is already ahead of that generated in 2016 as a whole.”

Treger added: “With the full availability of our US$30m revolving credit facility, a recent strengthening of the spot coking coal price, further weakening of the pound against our income currencies and a comfortably covered dividend expected in 2017, we are in a healthy financial position with good liquidity to pursue further royalty acquisitions and provide meaningful returns to our shareholders.”

Story by ProactiveInvestors