Anglo Pacific Logs Record Profit, Sees Very Strong Business Outlook — Commodity Comment

By Jaime Llinares Taboada

Anglo Pacific Group PLC on Wednesday reported a record profit for 2021 and said that the outlook for the business is very strong due to an increase in commodity prices. Here’s what the royalty and streaming company had to say:

On 2021 performance:

Record annual portfolio contribution of $85.6 million (2020: $47.5 million) with 45% of this generated in the final quarter. Portfolio contribution comprises $77.3 million of royalty and stream income, $8.0 million of other royalty contributed revenue, $4.3 million of other portfolio contribution less $4.0 million of stream cost of sales.”

“Record results driven by strong performances at Kestrel and Voisey’s Bay–with the former producing $26 million in 4Q 2021–over 50% of total contributions in FY 2020.”

“Profit after tax, of $37.5 million (2020: Loss after tax $23.9 million), which includes valuation and impairment charges and reflects a $30.5 million valuation increase, primarily for Kestrel and EVBC, and a loss on disposal of the Narrabri royalty of $19.0 million .”

“Final dividend proposed of 1.75 pence per share, which will take the total dividend for FY 2021 to 7 pence per share in line with the company’s guidance during the year.”

On outlook:

“The ramifications of the invasion by Russian forces has the potential to create significant global economic consequences for the foreseeable future. The initial impact of the severe sanctions being placed on Russia will likely result in an energy shock not seen since the early 1970s, at a time when inflation is already running significantly above long-term averages.”

“In times of significant inflation, hard assets such as commodities are expected to outperform. We are seeing material commodity price increases, particularly for commodities from which the majority of the group’s near-term revenues are derived.”

“Coking coal prices have now reached levels of around $600/ton–the highest price level ever achieved. To put this into context, the coking coal price this time last year was around $120/ton. The record quarter we achieved at Kestrel in 4Q 2021 was based on an average daily coking coal price of around $308/ton. for the year ahead could produce a wide spectrum of possible outcomes. We calculate that a $50/ton increase in the coking coal price should produce an additional $3.5 million of revenue per quarter.

“Year-to-date commodity prices are substantially higher than the levels driving our record 4Q 2021 results. We expect similar levels of production from the assets in our portfolio, and with a more than doubling of coking coal prices as well as resilient performances in cobalt and copper prices, the near-term outlook for the business is very strong.”

“We intend to use this higher cash flow to reduce our borrowings in the first instance and then recycle into growth opportunities. We will continue to develop our portfolio in line with our strategy, with a focus on commodities which will support and benefit from the move towards a low-carbon future.”

Write to Jaime Llinares Taboada at jaime.llinares@wsj.com; @JaimeLlinares

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