28th Aug 2014 12:21
LONDON (Alliance News) - Anglo Pacific Group PLC Thursday said it has sold its interest in the Panorama coal project in British Columbia, Canada to Atrum Coal NL.
At the same time the natural resources investment firm said it expects the remainder of 2014 to remain subdued, and it expects lower earnings right up until the second half of 2015.
Anglo Pacific said it is selling off non-core assets to help with cashflow during the period when production at the Kestrel mine in Queensland, Australia remains largely outside of its private royalty lands.
The company said that, as a result, it decided to sell its Panorama coal licences to Australian-listed Atrum Coal in exchange for USD2.5 million in cash and a 12-month promissory note, plus shares in Atrum. It also retained its royalty interest on future coal sales of at least USD1 per tonne.
"We have made revitalising the royalty pipeline a priority. We remain keen to seek larger, more transformational deals, which should accelerate our diversification and reduce dependency on Kestrel," the company said in a statement.
Anglo Pacific said it narrowed its loss for the six months to end-June to GBP20.9 million from GBP32.8 million a year earlier, after its results last year were hit by a GBP20.8 million impairment on its mining and exploration interests.
This was despite significantly lower royalty income on the back of a fall in commodity prices and higher operating expenses. The group said royalty income was only GBP2.6 million in the first half, compared with GBP6.3 million last year, hit by a further fall in the value of the Kestrel royalty, largely due to a softening in consensus coking coal prices, which it said hit both royalty income and asset valuations.
"In the short term, the outlook for the remainder of 2014 remains subdued and the group expects lower adjusted earnings until production from Kestrel returns to our private royalty lands in the second half of 2015," the company said in a statement.
The mining royalty company - which generates its profit from an agreed percentage of a project's sales revenue - said that while coal and iron ore prices have been near multi-year lows, and financing remains challenging for mining companies in its target investment sector, the shortage of capital flowing into the mining sector makes it a good time to acquire new royalties.
"This presents opportunities for Anglo Pacific to acquire additional royalties at prices which we hope will generate strong and sustainable long-term returns, which in turn should result in future dividend growth," the company said in a statement.
The company maintained its interim dividend at 4.45 pence per share, and said it continues to focus on diversifying and growing its portfolio of royalties, which in turn should improve our cash flow generation.
"This reflects our confidence in a long-term, albeit slower, global recovery in demand for raw materials coupled with the anticipated return of mining at Kestrel to the group's land in the second half of 2015 and the continuing expansion and diversification of our royalty portfolio as evidenced by the recent acquisition of the Maracás royalty," said Treger.
The company said it held net assets of GBP191.9 million at June 30, compared with GBP216.9 million at December 31, 2013.
Anglo Pacific shares were down 3.7% at 161.75 pence Thursday early afternoon.
By Rowena Harris-Doughty; [email protected]; @rharrisdoughty
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