16th Aug 2018 11:16
LONDON (Alliance News) - Anglo Pacific Group PLC has bought a 4.3% stake in a company with a royalty claim on a Rio Tinto PLC subsidiary for approximately GBP38 million.
Anglo Pacific has taken the holding in Labrador Iron Ore Royalty Corp, which is listed on the Toronto Stock Exchange with an approximate market capitalisation of CAD1.5 billion.
Labrador Iron Ore is a passive flow-through entity with a 7% gross revenue royalty claim and a CAD0.10 per tonne of iron ore commission on all iron ore products sold by the Iron Ore Co of Canada.
On top of that, Labrador Iron Ore also has a 15% stake in Iron Ore of Canada, which is operated by Rio Tinto and has mining operations near Labrador City in the province of Newfoundland & Labrador.
In 2017, Iron Ore of Canada sold 19.0 million tonnes of product, made up of both iron ore pellets and iron ore concentrate. Gross revenue was USD1.9 billion, and earnings before interest, tax, depreciation, and amortisation was USD800 million.
Anglo Pacific has funded the deal using cash as well as a GBP17.3 million drawdown from its revolving credit facility.
Anglo Pacific Chief Executive Julian Treger commented: "This transaction continues Anglo Pacific's growth trajectory, and is in-line with Anglo Pacific's stated strategy of diversifying its sources of income and commodity exposure.
"The transaction is expected to be immediately accretive to adjusted earnings and free cash flow per share, and based on Anglo Pacific's current shareholding and Labrador Iron Ore broker consensus 2019 dividend forecasts, the company expects to receive between CAD4.7 million and CAD5.7 million of royalty related revenue during the 2019 calendar year via Labrador Iron Ore dividends."
Shares in Anglo Pacific were trading in London at 127.50 pence each on Thursday, 2.8% higher.
Related Shares:
Rio TintoAPF.L