8th Mar 2006 07:30
Anglo Pacific Group PLC08 March 2006 Anglo Pacific Group PLC8th March 2006 Anglo Pacific Group PLC Preliminary Results for the twelve months ended 31st December 2005 Anglo Pacific Group PLC (APG), the natural resources royalties company, todayannounces record preliminary results for the year ended 31st December 2005. FINANCIAL HIGHLIGHTS • Profit before tax increased 120% to £16,944,000 (2004: £7,710,000) • Proposed final dividend increased by 63% to 3.25p per share (2004: 2.00p) • Total dividend for the year increased by 53% to 5.50p (2004: 3.60p) • Coal royalties for the year increased by 117% to £11.5 million (2004: £5.3 million) • Australian coal royalty independent valuation at £56.7 million • Cash and strategic investments increase by 69% to £39.9 million (2004: £23.6 million) • Earnings increased by 101% to 14.31p per share (2004: 7.11p) • £33 million of unused tax losses OPERATIONAL HIGHLIGHTS • Announcement of joint venture with West Hawk Development Corporation to drill part of the Groundhog Coal Deposit in British Columbia, Canada • Acquisition of other new coal rights and tenancies in British Columbia • Substantial progress in Australia with Core Resources Pty Ltd in the search for new coal resources • Several new uranium projects • Strong coal royalty cashflows expected in 2006 • Sustained international demand for steel expected to keep coking coal prices high Commenting on the preliminary results, Peter Boycott, Chairman of Anglo Pacificsaid: "I am pleased to report further progress at Anglo Pacific Group during thetwelve months to 31st December 2005. Record royalties receipts have enabled theGroup to pay substantially greater dividends to shareholders whilst at the sametime increasing the Group's exposure to the buoyant commodity and miningmarkets. Coal royalties are expected to remain strong in 2006. In September 2005the Group raised £5.7 million for further working capital. The Group's strategyremains to search for projects that expect to yield dividend and royaltycashflow as well as asset appreciation. Considerable progress has been made in both Australia and British Columbia inadvancing the Company's private coal interests through strategic joint ventures.The Board remains optimistic about the outlook for coking coal prices and seesa continuation of the strong demand from China, India and the Far East forenergy products and other industrial commodities." Enquiries: Brian Wides / Peter Boycott / Matthew Tack Anglo Pacific Group PLC 020 7409 1111 Stephen Scott / James Harris Scott Harris 020 7618 6433 Website www.anglopacificgroup.com Chairman's Review The last six months of 2005 have seen a sharp recovery in both commodity pricesand mining markets after the weakness in prices in the first half of the year. Despite continued expectation of a setback in Chinese industrial activity,recent figures have confirmed that the demand for raw materials within Chinacontinues to increase, their economy is still expanding at nearly 10% per annumand is now the fourth largest in the world. Together with the recovery of the Japanese market and strong evidence ofcontinuing demand in India, Brazil, the Far East and Eastern Europe, the outlookfor commodity prices worldwide for the next few years seems sustainable at thehigher levels. The industrialisation of China and India has led to an ever increasing demandfor energy products such as gas, oil, coal and uranium. Energy prices havefurther tightened due to political worries about Iran, Iraq and the Middle Eastas well as supply problems in some major producers. A harsher winter than usualhas further exacerbated the situation. Furthermore, the price of gold has risen steadily in the last few monthsreflecting concern about the US dollar and the international political situationas well as buying by Central Bankers. It is against this background that the Group has increased its interests in coaland uranium projects in Australia and North America as well as maintainingsubstantial exposure to gold, diamond and platinum projects. During the year under review profits have been realised on some of the Group'squoted investments whilst the receipt of record coal royalties has enabled theGroup to pay out higher dividends to shareholders. In addition to its royalty and other private coal interests, the Group now hasnearly £40 million of cash and investments compared to £11 million two years agoand borrowings of £1 million five years ago. These investment results reflectbuoyant commodity and mining markets during the year as well as the Group'sactive management strategy over this period. The Group's policy is to maintain an active, merchant banking approach to eachproject by providing specific business and financial support to management. Thiscreates more opportunities within projects whilst at the same time reducing therisks associated with these mining ventures. Financial Review Group profits before tax for the year ended 31st December 2005 were £16,944,000compared to £7,710,000 for the previous year. Profits after tax increased by117% to £13,866,000 (2004: £6,400,000) with earnings per share for the year of14.31p (2004: 7.11p). The Group has realised capital gains of £6,626,000 (2004:£3,507,000) from its various mining interests. I am pleased to announce a final dividend of 3.25p per share for the year ended31st December 2005 which with the interim dividend of 2.25p per share paid on27th January 2006 will make a total for 2005 of 5.50p per share (2004: 3.60p).The Board proposes to pay the final dividend on 4th August 2006 to shareholderson the Company's share register at the close of business on 23rd June 2006. Aswith the interim dividend, shareholders will be given the opportunity to electto receive a scrip dividend instead of cash. In September 2005 the Group raised £5.7 million after expenses by placing 4.7million shares at 126p per share for further working capital and to takeadvantage of some strategic opportunities. With the further development during the year of the Group's private coalinterests in Australia, the Board has decided that it is still in the bestinterests of the Company and shareholders to maintain its listing on theAustralian Stock Exchange (ASX). The Board has therefore decided not to list onthe Toronto Stock Exchange at this stage. The Group's Australian coal royalty interests have been independently valued at£56.7 million as at 31st December 2005 (2004: £57.6 million). The change in thevaluation compared to last year has been debited to the revaluation reserve. The Group's private mining operational interests and quoted stakes in miningprojects were valued at 31st December 2005 at £34.1 million after havingrealised profits of £6.6 million over the year. This valuation included anadditional unrealised profit over book value of £5.7 million. The Group had cashof £5.8 million at 31st December 2005 (2004: £3.5 million) with no borrowings.The Group still has unused capital losses of £33 million to offset against thesegains. All comparatives used are the restated 2004 balances after adjusting forInternational Financial Reporting Standards (IFRS). International Financial Reporting Standards (IFRS) The European Commission published an EU Regulation in 2002 that requires theadoption of International Financial Reporting Standards (IFRSs) in member statesfor the preparation of the consolidated financial statements of listed entities.The Regulation applies to financial periods, beginning on or after 1st January2005 for entities whose securities are traded on a regulated market. As of 1st January 2005 the Group implemented IFRS for the preparation of itsfinancial statements. The Group made the relevant adjustments to the InterimAccounts for the six months ended 30th June 2005 published in September 2005.The standards have required an adjustment for deferred tax on revaluation of thecoal royalty. At 31st December 2005 this adjustment was £13.0 million. Quotedmining investments are now shown at market value with the difference from costbeing credited to investment revaluation reserve. An adjustment for employeestock options issued during the year has also been made. While the financial information included in this preliminary announcement hasbeen computed in accordance with IFRS, this announcement does not itself containsufficient information to comply with IFRS. The Group expects to publish fullfinancial statements that comply with IFRS in March 2006. Operational Review Coal Energy Interests Coal Royalties In Australia, coal royalty receipts from the Kestrel and Crinum mines, operatedby Rio Tinto Limited and BHP Billiton Limited respectively, were £11,479,000(2004: £5,313,000). The independent valuation of these interests at the year-end was A$133.4 million(£56.7 million) compared to A$141.3 million (£57.6 million) at 31st December2004 and is based on the net present value of the pre-tax cashflow discounted ata rate of 7%. The net royalty income is taxed in Australia at a rate of 30%. The coal royalty is computed by reference to Queensland Government legislationwhich resulted in an increase in the rate of royalty from 4% to 7% in April2000. The legislation applies to both ground owned by the Crown and certainother privately owned areas in which the Group participates. During 2005 theGroup received record royalties as mining output increased from the private areaof the coal deposits. In 2006 further strong cashflows are anticipated. BHP Billiton recently announced forward contracts for coking coal at aroundUS$115 per ton, despite expectations that prices would be 15 to 20% lower thanthe peaks of US$120 to US$125 achieved in 2005. The strength of the covenants from Rio Tinto and BHP Billiton make the Group'scoal royalty interests a world class source of revenue for shareholders. For this reason the Board's strategy remains to develop its private coalinterests in British Columbia and Australia with a view to creating future coalroyalties or carried interests and dividend flow by similar associations. Coal Deposits In January 2006 the Group announced, via a Memorandum of Understanding, aproposed joint venture with West Hawk Development Corporation, (WHD-TSX.V), toexplore and develop the Upper and Lower Discovery deposits at Groundhog inBritish Columbia, Canada. The coal seams outcrop on both properties and arebelieved to be stratigraphically and structurally related according to theresults of previous drilling. In total, twenty five individual seams have beendocumented in the area grading from anthracite to meta-anthracite in quality.These deposits are only part of a number of licences and tenancies that theGroup owns in the strategically important Groundhog coal field. As part of theagreement the Group has taken down a 40 cent placing in West Hawk and now owns acirca 13% strategic stake. Amongst other interests West Hawk has ambitions todevelop and build electricity power plants using the environmentally cleangasification of coal technology. The Group still retains its licences and tenancies of the Peace River depositand is looking to expand and similarly joint venture this project. Core Resources The Group retains a 20% direct interest in Core Resources Pty Limited, a privateAustralian based resource group, involved in the Vasse coal project in WesternAustralia and owner of the Albion process, a technology for use in recovery ofbase and precious metals from complex or refractory ores. In addition, the Grouphas a joint venture with Core Resources to explore for new coal deposits in theNorthern Territories, Queensland and New South Wales. The Group is awaitingresults from field work done in areas where outcrops of coal exist and drillcores show visible coal. Further exploration work will be needed before theeconomic viability of the deposits is determined. Cambrian Mining The Group recently announced an increased stake of 8% in Cambrian Mining.Cambrian has disposed of its stake in Asia Energy and is now a mining house fora range of interests, mostly in iron ore and coal. Cambrian still retains a oneUS dollar per ton royalty on all coal produced at Asia Energy's Phulbari coalproject on Bangladesh, where new management has recently taken over. The Groupstill also retains direct interests in both Western Canadian Coal andInternational Coal both companies in which Cambrian holds a controllinginterest. Cambrian's market capitalisation is at a substantial discount to itsunderlying assets enabling the Group to obtain exposure to a wide range ofcommodities at reduced risk. Other Metal Interests Uranium Interests Whilst still retaining an interest in Laramide Resources, the Group has realisedsubstantial profits after the dramatic rise in the share price due to investors'appreciating the value of the Westmoreland-Lagoon Creek uranium deposit inAustralia. Forum Development Corporation, in which the Group has a 14% stake, now hasextensive uranium interests in the Athabasca Basin in eastern Canada as well asstill retaining its coal bed methane project at Merritt, British Columbia. The Group has a number of other interests in quoted uranium companies includinga 10% stake in Quincy Energy Corporation which is the subject of an agreedtakeover by Energy Metals Corporation, an American company with substantialuranium deposits within the USA. Precious Metals The Group still retains an 18% stake in Platinum Australia where 2005 was a yearof great progress on its three main projects. Platinum Australia is now quotedon the Alternative Investment Market (AIM) and is well funded for its immediateplans. Platinum and palladium prices have risen substantially in recent monthsbringing the prospect of viability for the Panton project in Australia as wellas making the South African projects potentially more profitable. The Group has a number of stakes in diamond exploration and producing companiesincluding an 8% stake in North Australian Diamonds owners of the Merlin diamondproject in the Northern Territories in Australia. The Group is still a major shareholder in Hidefield Gold, Alto Ventures andPiper Capital as well as in a number of other gold companies operating inNevada, USA. The Group has also recently announced a 5% stake in Tritton Resources, a copperproducer in Australia, as well as a 12% stake in Goldminco Corporation, anAustralian gold explorer. Both companies benefit from being managed andcontrolled by Straits Resources, an Australian holding company with major coal,copper and gold interests. These projects give the Group exposure to the precious and base metal marketswhilst at the same time maintaining the possibility of creating new royaltystreams from closer involvement with management. Talc New improved leases have been signed during the year covering a larger area ofthe deposit. Other land issues remain to be negotiated. Strategy The Group will continue to pay a substantial proportion of the coal royalties asdividends to shareholders. The Board is resolved to continue its policy of pursuing other mining interestsby adopting an active, merchant banking approach to each project to achievebetter returns at reduced risk. The Board will still concentrate its activitiesin Australia, Canada and the USA. Outlook The Board expects continued strong coal royalty cashflows in 2006 and isconfident that its exposure to energy and precious and base metal markets willyield further asset appreciation. Shareholders were informed that Mr Henry Michaelis resigned for health reasonson 20th June 2005. The Directors wish to thank Mr Michaelis for his hard workand substantial contribution to the development of the Group since he wasappointed in May 1997. The Board wishes him well in his retirement. The Company has recently appointed Mr Michael Atkinson as a non-executivedirector and welcomes him to the Board. His lifelong experience of the coalmining industry and other energy related businesses should prove invaluable tothe Group. Finally I wish to thank shareholders for their continued support and also ourhard working directors and staff for all their efforts in making this anotherpositive year of growth for the Group. P.M. BOYCOTTChairman8th March 2006 CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2005 Restated 2005 2004 £'000 £'000 Royalty income 11,479 5,313Other operating income 91 122Profit on sale of mining and exploration interests 6,626 3,507Finance income 188 86 -------- -------- 18,384 9,028 -------- -------- Net operating expenses (1,440) (1,318) -------- --------Profit before tax 16,944 7,710 Tax (3,078) (1,310) -------- --------Profit attributable to equity holders 13,866 6,400 ======== ======== Basic earnings per share 14.31p 7.11p -------- -------- Fully diluted earnings per share 14.21p 7.06p -------- -------- Turnover and profit before tax are derived from the Group's continuingoperations. CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2005 Restated 2005 2004 £'000 £'000 -------- --------Non-current assetsProperty plant and equipment 847 852Coal royalties (at valuation) 56,715 57,648Investments in subsidiary undertakings - -Mining and exploration interests 34,135 20,186 -------- -------- 91,697 78,686 Current assetsTrade and other receivables 2,548 2,142Cash at bank 5,797 3,452 -------- -------- 8,345 5,594 -------- -------- Total assets 100,042 84,280 ======== ======== Current liabilitiesTaxation 1,386 401Trade and other payables 595 429 -------- -------- 1,981 830 Non-current liabilitiesDeferred tax 13,713 13,341 -------- -------- 13,713 13,341 -------- --------Total liabilities 15,694 14,171 -------- -------- Capital and reserves attributable to shareholdersShare capital 2,005 1,891Share premium 11,338 4,741Revaluation reserve 42,017 42,964Investment revaluation reserve 5,704 7,850Share based payment reserve 12 2Foreign currency translation reserve 279 119Special reserve 632 632Retained Earnings 22,361 11,910 -------- -------- 84,348 70,109 -------- -------- -------- --------Total equity and liabilities 100,042 84,280 ======== ======== CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE TWO YEARS ENDED 31 DECEMBER 2005 Share Share Revaluation Investment Share based Foreign Special Retained Total capital premium reserve revaluation payment currency reserve earnings equity reserve reserve translation reserve £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000----------------------------------------------------------------------------------------------------------------------- Balance at 1 January 2004 1,749 420 33,647 3,530 0 103 632 7,793 47,874Gain on Royalties revaluation 9,317 9,317Gain on Investments revaluation 4,320 4,320Foreign currency translation 16 16 -----------------------------------------------------------------------------------------Net income recognised direct into equity 1,749 420 42,964 7,850 0 119 632 7,793 61,527Profit for the period 4,117 4,117 ----------------------------------------------------------------------------------------- Total recognised income and expenses 1,749 420 42,964 7,850 0 119 632 11,910 65,644Issue of share capital 88 3,402 3,490Scrip Dividend 24 679 703Issue of share capital on 30 240 270exercise of optionsEquity share options issued 2 2 -----------------------------------------------------------------------------------------Balance at 1 January 2005 1,891 4,741 42,964 7,850 2 119 632 11,910 70,109 -----------------------------------------------------------------------------------------(Loss) on Royalties revaluation (947) (947)(Loss) on Investments revaluation (2,146) (2,146)Foreign currency translation 160 160 -----------------------------------------------------------------------------------------Net income recognised direct into equity 1,891 4,741 42,017 5,704 2 279 632 11,910 67,176Profit for the period 10,451 10,451 -----------------------------------------------------------------------------------------Total recognised income and expenses 1,891 4,741 42,017 5,704 2 279 632 22,361 77,627Issue of share capital 94 5,640 5,734Scrip Dividend 20 957 977Equity share options issued 10 10 -----------------------------------------------------------------------------------------Balance at 31 December 2005 2,005 11,338 42,017 5,704 12 279 632 22,361 84,348 ========================================================================================= CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2005 Restated 2005 2004 £'000 £'000 Cashflows from operating activitiesProfit before taxation 16,944 7,710Adjustments for:Interest received (188) (86)Foreign exchange losses 160 16Depreciation of property, plant and equipment 9 8(Gain) on disposal of mining and exploration interests (6,626) (3,507)Share based payments 10 2 -------- -------- 10,309 4,143 (Increase) in trade and other receivables (406) (1,207)Increase in trade and other payables 166 315 -------- --------Cash generated from operations 10,069 3,251Income taxes paid (1,738) (1,027) -------- --------Net cash from operating activities 8,331 2,224 -------- -------- Cash flows from Investing activitiesProceeds on disposal of mining and exploration interests 11,276 8,647Purchase of mining and exploration interests (20,744) (11,444)Interest received 188 86 -------- --------Net cash used in investing activities (9,280) (2,711) -------- --------Cash flows from Financing activitiesProceeds from issue of share capital 5,734 3,760Dividends paid (2,440) (1,579) -------- --------Net cash used in financing activities 3,294 2,181 -------- -------- Net increase in cash and cash equivalents 2,345 1,694 Cash and cash equivalents at beginning of period 3,452 1,758 -------- --------Cash and cash equivalents at end of period 5,797 3,452 ======== ======== Explanation of material adjustments to the cash flow statement Income taxes paid in the relevant period are now classified as operating cashflows under IFRS, but were included as a separate category of tax cash flowsunder UK GAAP. This was £1,738,000 for the year to 31st December 2005 and£1,027,000 for the year to 31st December 2004. Under IFRS credit cash balancesheld by stockbrokers are treated as cash. Under UK GAAP, these were treated asaccounts receivable. This was £261,000 at 31st December 2005 and £311,000 at31st December 2004. There are no other material differences in the cash flow statements presentedunder IFRS and previously presented under UK GAAP. NOTES 1. Earnings per ordinary share is calculated on the Group's profit after tax of £13,866,000 (2004 - £6,400,000) and the weighted average number of shares in issue during the year of 96,892,627 (2004 - 90,020,365). The diluted earnings per ordinary share is calculated on a profit after tax of £13,866,000 and 97,612,472 shares. 2. The above figures do not constitute full accounts within the meaning of Section 240 of the Companies Act 1985. The figures for the year ended 31st December 2004 constitute abridged accounts extracted from the published accounts for the year which have been filed with the Registrar of Companies and on which the auditors' report was unqualified and did not contain a statement under Section 237(2) or (3) of the Companies Act 1985. These figures have been restated in accordance with IFRS. The audit opinion on the accounts for the year ended 31st December 2005 has not yet been signed. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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