Anglo Pacific Group PLC
LSE : APF
TSX : APY

Anglo Pacific Group PLC

October 31, 2011 09:30 ET

Anglo Pacific Group PLC Interim Results for the Three and Nine Months Ended September 30, 2011

LONDON, UNITED KINGDOM--(Marketwire - Oct. 31, 2011) - Anglo Pacific Group PLC ('Anglo Pacific', the 'Group') (LSE:APF)(TSX:APY) is pleased to announce interim results for the three and nine months ended September 30, 2011. The Group has published both the unaudited financial statements and the Management's Discussion and Analysis, and these, together with this release, are available on both the Group's website at www.anglopacificgroup.com and on SEDAR at www.SEDAR.com.

Highlights:

  • Increased royalty income for the quarter of £8.3 million (£6.6 million for Q3 2010)
  • Royalty cash flow per share for the nine months ended September 30, 2011 of 23.13p (21.06p for the comparable period in 2010)
  • Strong cash position at September 30, 2011 of £23.5 million (£28.3 million at December 31, 2010), with no borrowings or hedging
  • Completion of acquisition of royalties on Cliffs Natural Resources' Black Thor, Black Label and Big Daddy chromite deposits
  • Completion of acquisition of Isua iron ore royalty from London Mining Plc
  • Total assets of £388.5 million at September 30, 2011 (£415.6 million at December 31, 2010)

Peter Boycott, Chairman of Anglo Pacific, commented:

"We have continued to see a strong performance in our royalty portfolio and growth in our royalty income compared with the corresponding period in 2010, which demonstrates the strength of both our business model and strategy. We continue to benefit from top line revenue exposure at a time when the mining industry is subject to significant operating cost inflation.

The Group has also realised significant gains during the period from the disposal of its equity interests following takeovers of both First Coal Corporation and Goldminco Corporation. These and other disposals have provided valuable liquidity at a time when the Group is examining a number of royalty opportunities offering significant long term returns to shareholders. We have delivered on our stated goals of acquiring three to four new royalties annually with the recently completed chromite and iron ore acquisitions. These provide further diversification to our royalty portfolio and preserve our focus on projects owned and operated by established mining companies."

Conference call:

There will be a conference call for analysts on 31 October at 9:30am (GMT). The dial-in details are as follows:

Participant dial in number: +44 (0)20 7136 2056 / 2469473 (confirmation code). There will be a replay facility available on the Group's website, at www.anglopacific.com, until 7 November.

The full text of both the financial statements and the Management's Discussion and Analysis may also be obtained by following the following links in this press release:

Financial Statements: http://www.anglopacificgroup.com/i/pdf/111030Q3Financials

Management's Discussion and Analysis: http://www.anglopacificgroup.com/i/pdf/111030Q3MDA

Notes to editors:

Anglo Pacific Group PLC is a global natural resources royalties company. The strategy of the Group is to expand its mineral royalty interests in low-cost, long-life mining assets. The Group achieves this through both direct acquisition and investment in projects at the development and production stage. It is a continuing policy of the Group to pay a substantial proportion of these royalties to shareholders as dividends.

Royalties explained:

A royalty is an entitlement to an agreed percentage of a project's sales revenue, without any liability for production costs or capital expenditure. This is the key benefit of owning a royalty.

In the mining industry, most royalties endure for the life of the resource and are paid on a regular basis. Historically there have been different terms for royalties including Gross Revenue or Net Smelter Return ("GRR" or "NSR") royalties, which are both based on the gross sales value of the actual mineral. Our model is based around GRR or NSR royalties as they provide the best and clearest return.

Acquiring existing royalties

In this case we buy existing royalty agreements, such as those owned by exploration companies who may have retained a residual royalty in a mine they helped discover. Royalty companies rarely sell their royalties, once acquired.

Creating new royalties

Our new royalty agreements tend to come from providing financing for mining operations, usually to help progress a mine into production.

Acquisitions

Anglo Pacific has been successful in acquiring three royalties, in line with its stated goals, during the first nine months of 2011. These royalties have provided further diversification through the addition of potential revenue streams from nickel laterite, iron ore and chromite. This is consistent with the Group's focus on commodities leveraged to the continuing growth in Asia and other developing regions.

On January 12, 2011 the Group completed the previously announced Royalty Option Agreement with Horizonte Minerals PLC ("Horizonte") for the Group to purchase a NSR royalty on all revenues from the advanced exploration stage Araguaia and Lontra Nickel Projects ("Araguaia Project") in Brazil. The Group paid Horizonte the sum of US$0.5 million in exchange for the six year option to acquire a 1.5% NSR royalty from the Araguaia Project for US$12.5 million.

On August 2, 2011, the Group announced the purchase of an existing 1% NSR royalty over the Black Label, Black Thor and Big Daddy chromite deposits in Ontario, Canada, from KWG Resources Inc ("KWG"). These projects are operated by Cliffs Natural Resources ("Cliffs") and form part of Cliffs' organic growth plans in the "Ring of Fire" area in northern Ontario. The consideration for the acquisition was US$18 million.

On August 3, 2011 the Group announced its agreement to advance US$30 million to London Mining PLC ("London Mining") in exchange for a 1.0% GRR royalty over the Isua iron ore project in Greenland. The agreement contains a number of benchmarks. In the event of these not being met the Group retains the right to be repaid in cash or, at London Mining's option, in shares at the market price at the time.

The Group continues to evaluate a number of opportunities to acquire or create more royalties in order to further diversify and increase the Group's revenue stream.

Royalty portfolio

The Group's portfolio of producing royalties continues its strong performance with growth in royalty income when compared with the corresponding period in 2010. This demonstrates the strength of both the Group's business model and strategy.

Kestrel

During the third quarter production volumes at Kestrel recovered following the completion of the longwall changeout, increasing by 172% compared to the second quarter, and were 20% higher than for the same period in 2010. Despite commodity prices coming under pressure during the quarter due to uncertainty surrounding world economic growth, a number of Queensland coking coal producers have taken longer than expected to recover from January's flooding and as a result coking coal prices have stayed firm, exceeding US$280 per tonne during the quarter.

These higher prices have resulted in Kestrel coal royalties for the quarter ended September 30, 2011 of £7.1 million (A$10.9 million) compared to £5.0 million (A$8.6 million) for the comparable period in 2010.

Crinum

As the Crinum longwall leaves the Group's private royalty ground royalties for the quarter ended September 30, 2011 reduced to £0.4 million (A$0.6 million) compared to £1.6 million (A$2.8 million) for the same quarter of 2010. In the Group's coal royalty valuation future production from Crinum continues to be difficult to evaluate and as a result is ascribed no value.

Amapá

Royalty receipts for the quarter ended September 30, 2011 were £0.8 million. This represented an increase of 77% over the second quarter of 2011. This is the first year the Group has owned the Amapá royalty. Continued strong iron ore contract pricing provides the Group with confidence in the future revenues from this royalty.

El Valle

The El Valle project commenced commissioning during the second quarter, with first sales from the project occurring in the three months ended September 30, 2011. The first royalty payment from this gold and copper mine is due in November 2011.

Engenho

Royalty payments during the three months to September 30, 2011 were £0.1 million compared to £0.1 million in the comparable quarter of 2010. Delays in permitting the adjacent Crista deposit have resulted in the Engenho operations being put on care and maintenance until the Crista permits have been resolved. In addition to Engenho, the Group's royalty covers Crista and other adjacent deposits. Royalty payments under this repayable debenture are classified as repayments of principal and interest until the debenture is repaid.

Financial performance

Group royalty revenue for the nine months ended September 30, 2011 increased to £24.7 million compared to £22.3 million for the first nine months of 2010. Cash flows from these royalties and the Group's royalty debentures increased, resulting in royalty cash flow per share for the nine months ended September 30, 2011 of 23.13p per share compared with 21.06p per share for the nine months ended September 30, 2010.

The Group's operating expenses decreased from £2.4 million in the first nine months of 2010 to £2.0 million in the nine months to September 30, 2011. This change was largely due to significantly decreased external legal fees. These fees were lower due to the "one-off" nature of the Group's listing on the Toronto Stock Exchange and more legal documentation being performed internally following the appointment of a Group counsel. Both this appointment and the addition of an internal analyst did however contribute to employee benefit expenses increasing by £0.3 million for the nine months ended September 30, 2011, compared to the same period in 2010.

Gains on disposal during the nine months to September 30, 2011 were £18.8 million, compared with £19.2 million realised during the comparable period in 2010.

The Group realised a net foreign exchange loss in the nine months to September 30, 2011 of £0.8 million, compared to a net foreign exchange gain of £0.1 million in the comparable period of 2010. The Group benefited from the strength in the Australian and Canadian currencies relative to sterling for much of the first nine months of 2011, although both of these currencies weakened prior to the period end. Management continue to examine ways of reducing potential foreign exchange risks and minimise exchange rate related fluctuations in the Group's financial performance and position.

Income tax expense for the nine months ended September 30, 2011 was £9.5 million, compared to £9.0 million for the nine months ended September 30, 2010.

Overall the Group's profit before tax for the nine months ended September 30, 2011 was £41.6 million compared to £39.9 million for the nine months ended September 30, 2010. Group earnings per share for the nine months ended September 30, 2011 were 29.52p compared to 28.53p for the first nine months of 2010.

Financial position

Total assets of £388.5 million at September 30, 2011 compared to £415.6 million at December 31, 2010.

At September 30, 2011 the Group's Australian coal royalty interests have been independently valued at £191.4 million compared to £177.1 million at December 31, 2010. The change was primarily due to an increase in expected long term coking coal prices. The Group's royalty instruments following fair value adjustments were valued at £22.2 million at September 30, 2011 compared to £28.1 million at December 31, 2010. This decrease is due to adjustments to future foreign exchange and commodity price assumptions.

The total cost of royalties treated as intangibles was £60.8 million at September 30, 2011, compared to £42.1 million at December 31, 2010. The increase is due to the acquisition of the Isua iron ore and Ring of Fire chromite royalties during the period.

Coal
royalties
£'000
Royalty
Instruments
£'000
Royalty
Intangibles
£'000
Royalty
Options
£'000

Total
£'000
September 30, 2011
Number 2 4 9 4 19
Cost 195 12,493 60,810 728 74,226
Valuation 191,360 22,169 69,422 728 283,679
Accounting treatment Valuation Valuation Cost Cost
December 31, 2010
Number 2 4 6 2 14
Cost 166 12,493 42,130 406 55,195
Valuation 177,130 28,061 54,155 406 259,752
Accounting treatment Valuation Valuation Cost Cost

For further information on royalty instruments and intangibles refer to note 2.

At September 30, 2011, the Group's quoted and unquoted equity investments, including royalty options, were valued at £69.2 million compared to £128.5 million at December 31, 2010. The private equity interests and royalty options remain accounted for at cost. The reduction in the market value of the Group's quoted equity interests was primarily a result of lower mining equity prices following significant volatility during the nine month period to September 30, 2011, as well as a number of disposals where the Group's Investment Committee deemed a royalty opportunity was no longer likely.

At September 30, 2011 the Group had cash of £23.5 million compared to £28.3 million at December 31, 2010, with no borrowings or hedging. Combined with royalty and trade receivables, the Group's total cash and receivables at September 30, 2011 was £34.0 million compared to £37.1 million at December 31, 2010. This reduction was due to the acquisition of two new royalties in the period, which was largely offset by the receipt of royalties due and proceeds from disposals of equity interests.

The Group has limited capital expenditure requirements other than for the acquisition of additional royalties. Management believe that the Group's current cash resources and future cash flows from continuing royalty revenues will be sufficient to cover the cost of general and administrative expenses, income taxes and dividend payments. Management also believe the Group has sufficient capital and working capital resources to continue to deliver its strategy of acquiring new royalties.

The Group remains debt free and its liquid resources are held in a spread of currencies and financial institutions, however the Group's mining interests and royalty revenues are mainly denominated in Australian and Canadian dollars.

The book value of the Group's total assets at September 30, 2011 was £388.5 million compared to £415.6 million at December 31, 2010. As at the period end this does not include any increase in value over cost that may be attributable to the Group's Panorama and Trefi coal projects and royalty intangibles.

Outlook

The Group's royalty cash flows continue to benefit from the underlying demand for commodities in the world's developing economies. The Group's existing royalty exposure to steel-related commodities in the form of coking coal, iron ore and chromite provide it with exposure to the strong, long-term fundamentals of the continuing growth in Asia and other developing regions. In addition the Group now holds a number of high quality, long life assets with the potential for significant returns.

The Group's strategy of acquiring additional royalties continues to benefit from difficult debt and equity markets for mine developers. In this environment the Group is well placed with its strong balance sheet and royalty revenues to target acquisition opportunities that will add value for its shareholders.

Anglo Pacific Group PLC
CONSOLIDATED INCOME STATEMENT (UNAUDITED)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2011
Three months ended Nine months ended
September
30, 2011

£'000
September
30, 2010

£'000
September
30, 2011

£'000
September
30, 2010

£'000
Royalty income 8,329 6,614 24,690 22,294
Finance income 217 162 708 504
Amortisation of royalties (254 ) - (763 ) -
Operating expenses (658 ) (928 ) (1,997 ) (2,387 )
Operating profit 7,634 5,848 22,638 20,411
Share of profits of associates - - - 262
Gain on sale of mining and exploration interests 11,326 1,808 18,790 19,179
Other income 405 93 1,081 289
Other (losses)/gains (534 ) 434 (937 ) (231 )
Profit before tax 18,831 8,183 41,572 39,910
Income tax expense (3,129 ) (2,037 ) (9,457 ) (9,032 )
Profit attributable to equity holders 15,702 6,146 32,115 30,878
Total and continuing earnings per share
Basic earnings per share 14.44p 5.68p 29.52p 28.53p
Diluted earnings per share 14.43p 5.68p 29.52p 28.53p
Anglo Pacific Group PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2011
Three months ended Nine months ended
September
30, 2011

£'000
September
30, 2010

£'000
September
30, 2011

£'000
September
30, 2010

£'000
Profit for the financial period 15,702 6,146 32,115 30,878
Other comprehensive income
Net gain/(loss) on revaluation to coal royalties 539 (5,374 ) 19,721 988
Net (loss)/gain on revaluation of available for sale investments (17,188 ) 22,052 (52,422 ) 19,106
Net exchange (loss)/gain on translation of foreign operations (10,540 ) 15,528 (6,098 ) 17,179
Share of other comprehensive income of associates - (141 ) - (38 )
Deferred tax 4,932 (4,961 ) 1,035 (6,596 )
Net (expense)/income recognised directly in equity (6,555 ) 33,250 (5,649 ) 61,517
Transferred to income statement disposal of available for sale investments (2,898 ) (88 ) (8,919 ) (16,327 )
Total transferred from equity (2,898 ) (88 ) (8,919 ) (16,327 )
Total comprehensive income for the financial period (9,453 ) 33,162 (14,568 ) 45,190
Anglo Pacific Group PLC
CONSOLIDATED BALANCE SHEET (UNAUDITED) AS AT SEPTEMBER 30, 2011
Unaudited
September
30, 2011

£'000
Unaudited
September
30, 2010

£'000
Audited
December
31, 2010

£'000
Non-current assets
Property, plant and equipment 2,118 2,086 2,144
Coal royalties 191,360 166,778 177,130
Royalty instruments 22,169 25,178 28,061
Intangibles 69,606 23,986 42,741
Mining and exploration interests 69,225 108,913 128,479
Investments in associates - - -
354,478 326,941 378,555
Current assets
Trade and other receivables 10,490 7,421 8,813
Cash and cash equivalents 23,533 27,768 28,258
34,023 35,189 37,071
Total assets 388,501 362,130 415,626
Non-current liabilities
Deferred tax 62,579 55,461 63,838
62,579 55,461 63,838
Current liabilities
Current income tax liabilities 2,860 7,417 4,987
Trade and other payables 560 753 913
3,420 8,170 5,900
Total liabilities 65,999 63,631 69,738
Capital and reserves attributable to shareholders
Share capital 2,184 2,171 2,175
Share premium 25,539 23,262 24,207
Coal royalty revaluation reserve 102,473 89,170 88,883
Investment revaluation reserve (4,066 ) 38,121 51,780
Share based payment reserve 189 2 65
Foreign currency translation reserve 35,259 31,257 39,686
Special reserve 632 632 632
Investment in own shares (2,601 ) (1,295 ) (1,295 )
Retained earnings 162,893 115,179 139,755
Total equity 322,502 298,499 345,888
Total equity and liabilities 388,501 362,130 415,626
Anglo Pacific Group PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED) FOR THE TWENTY-ONE MONTHS ENDED SEPTEMBER 30, 2011


Share
capital
£'000


Share
premium
£'000
Coal
royalty
revalua-tion
reserve
£'000

Investment
revalua-
tion

reserve
£'000

Share
based

payment
reserve
£'000
Foreign
currency
translation
reserve
£'000


Special
reserve
£'000
Investment
in

Own
Shares

£'000


Retained
earnings
£'000
Total
equity
£'000
Balance at January 1, 2010 2,149 20,718 88,582 36,850 78 18,804 632 - 92,223 260,036
Profit for the period - - - - - - - - 30,878 30,878
Other comprehensive income:
Coal royalties:
Royalties valuation movement taken to equity - - 988 - - 15,893 - - - 16,881
Deferred tax on valuation - - (400 ) - - (4,688 ) - - - (5,088 )
Available-for-sale investments:
Valuation movement taken to equity - - - 19,106 - 84 - - - 19,190
Deferred tax on valuation - - - (1,508 ) - - - - - (1,508 )
Transferred to income statement on disposal - - - (16,327 ) - - - - - (16,327 )
Reclassification as investment in associate - - - - - - - - - -
Share of comprehensive income of associates - - - - - (38 ) - - - (38 )
Foreign currency translation - - - - - 1,202 - - - 1,202
Total comprehensive income - - 588 1,271 - 12,453 - - 30,878 45,190
Dividends paid - - - - - - - (6,725 ) (6,725 )
Scrip dividend 11 1,199 - - - - - (1,210 ) -
Issue of share capital - - - - - - - - - -
Issue of share capital under share-based payment 11 1,345 - - (76 ) - - (1,295 ) 13 (2 )
22 2,544 - - (76 ) - - (1,295 ) (7,922 ) (6,727 )
Balance at September 30, 2010 2,171 23,262 89,170 38,121 2 31,257 632 (1,295 ) 115,179 298,499
Balance at September 30, 2010 2,171 23,262 89,170 38,121 2 31,257 632 (1,295 ) 115,179 298,499
Profit for the period - - - - - - - - 25,405 25,405
Other comprehensive income:
Coal royalties:
Royalties valuation movement taken to equity - - (633 ) - - 10,986 - - - 10,353
Deferred tax on valuation - - 346 - - (3,240 ) - - - (2,894 )
Available-for-sale investments: -
Valuation movement taken to equity - - - 29,121 - 440 - - - 29,561
Deferred tax on valuation - - - (5,138 ) - (24 ) - - - (5,162 )
Transferred to income statement on disposal - - - (10,324 ) - - - - - (10,324 )
Reclassification as investment in associate - - - - - - - - - -
Share of comprehensive income of associates - - - - - (2 ) - - - (2 )
Foreign currency translation - - - - - 269 - - - 269
Total comprehensive income - - (287 ) 13,659 - 8,429 - - 25,405 47,206
Dividends paid - - - - - - - - - -
Scrip dividend 3 826 - - - - - - (829 ) -
Issue of share capital - - - - - - - - - -
Issue of share capital under share-based payment 1 119 - - 63 - - - - 183
4 945 - - 63 - - - (829 ) 183
Balance at December 31, 2010 2,175 24,207 88,883 51,780 65 39,686 632 (1,295 ) 139,755 345,888
Balance at January 1, 2011 2,175 24,207 88,883 51,780 65 39,686 632 (1,295 ) 139,755 345,888
Profit for the period - - - - - - - - 32,115 32,115
Other comprehensive income:
Coal royalties:
Royalties valuation movement taken to equity - - 19,721 - - (5,490 ) - - - 14,231
Deferred tax on valuation - - (6,131 ) - - 1,618 - - - (4,513 )
Available-for-sale investments:
Valuation movement taken to equity - - - (52,422 ) - (354 ) - - - (52,776 )
Deferred tax on valuation - - - 5,495 - 53 - - - 5,548
Transferred to income statement on disposal - - - (8,919 ) - - - - - (8,919 )
Reclassification as investment in associate - - - - - - - - - -
Share of comprehensive income of associates - - - - - - - - - -
Foreign currency translation - - - - - (254 ) - - - (254 )
Total comprehensive income - - 13,590 (55,846 ) - (4,427 ) - - 32,115 (14,568 )
Dividends paid - - - - - - - - (8,977 ) (8,977 )
Scrip dividend - - - - - - - - - -
Issue of share capital - - - - - - - - - -
Issue of share capital under share-based payment 9 1,332 - - 124 - - (1,306 ) - 159
9 1,332 - - 124 - - (1,306 ) (8,977 ) (8,818 )
Balance at September 30, 2011 2,184 25,539 102,473 (4,066 ) 189 35,259 632 (2,601 ) 162,893 322,502
Anglo Pacific Group PLC
CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2011
Three months ended Nine months ended
September
30, 2011

£'000
September
30, 2010

£'000
September
30, 2011

£'000
September
30, 2010

£'000
Cashflows from operating activities
Profit before taxation 18,831 8,183 41,572 39,910
Adjustments for:
Interest received (393 ) (196 ) (1,151 ) (766 )
Unrealised foreign currency (gain)/loss (740 ) 1,168 617 1,164
Depreciation of property, plant and equipment 6 5 16 14
Amortisation of Intangibles - royalties 254 - 763 -
(Gain) on disposal of mining and exploration interests (11,326 ) (1,808 ) (18,790 ) (19,179 )
Loss on revaluation of assets held as fair value through profit or loss - - - 810
Loss on write down of assets - - 147 -
Share of associates (profit) - (529 ) - (791 )
Share based payments 49 - 124 12
6,681 6,823 23,298 21,174
(Increase) / Decrease in trade and other receivables (3,233 ) 4,254 (1,677 ) (2,343 )
Increase / (Decrease) in trade and other payables 100 315 (353 ) 345
Receipt from royalty instruments 120 156 467 654
Cash generated from operations 3,668 11,548 21,735 19,830
Income taxes paid (4,978 ) (15 ) (12,052 ) (4,754 )
Net cash (used) / from operating activities (1,310 ) 11,533 9,683 15,076
Cash flows from investing activities
Proceeds on disposal of mining and exploration interests 24,060 6,990 47,988 36,280
Purchase of mining and exploration interests (2,991 ) (5,288 ) (26,189 ) (18,813 )
Purchases of royalty interests (27,599 ) (726 ) (27,599 ) (13,727 )
Purchases of property, plant and equipment - (9 ) (48 ) (344 )
Exploration and evaluation expenditure (8 ) 14 (26 ) 190
Interest received 176 196 443 766
Acquisition of associates - - - (109 )
Return of capital from associates - - - 949
Net cash (used) / generated in investing activities (6,362 ) 1,177 (5,431 ) 5,192
Cash flows from financing activities
Proceeds from issue of share capital - - - 30
Dividends paid (5,521 ) (3,788 ) (8,977 ) (6,725 )
Net financing of related entities - - - -
Net cash used in financing activities (5,521 ) (3,788 ) (8,977 ) (6,695 )
Net (decrease) / increase in cash and cash equivalents (13,193 ) 8,922 (4,725 ) 13,573
Cash and cash equivalents at beginning of period 36,726 18,846 28,258 14,195
Cash and cash equivalents at end of period 23,533 27,768 23,533 27,768
The results for the three and nine months ended September 30, 2011 and 2010 have neither been audited nor reviewed by the Group's auditors.

1 Basis of preparation

The condensed consolidated interim financial information of Anglo Pacific Group PLC contained in this release is for the three and nine months ended September 30, 2011. This information has been prepared in accordance with IAS 34 'Interim Financial Reporting', as adopted by the European Union, however this release does not include sufficient information to comply with IFRS, and should be read in conjunction with the consolidated financial statements of the Group for the year ended December 31, 2010 and the condensed consolidated interim financial statements for the period ended September 30, 2011.

The condensed consolidated interim financial statements have been prepared in accordance with the accounting policies adopted in the last annual financial statements for the year to December 31, 2010, which were prepared in accordance with IFRS, as adopted by the European Union.

This condensed consolidated quarterly and year to date financial information does not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006. Statutory accounts for the year ended December 31, 2010 were approved on March 8, 2011. These accounts which contained an unqualified audit report under Section 495 of the Companies Act 2006 and which did not make any statements under Section 498 of the Companies Act 2006, have been delivered to the Registrar of Companies in accordance with Section 441 of the Companies Act 2006.

The results for the three and nine months ended September 30, 2011 and 2010 have neither been audited nor reviewed by the Group's auditors.

2 Non-current assets

(a) Coal royalties

The Group's coal royalties comprise the Kestrel and Crinum coal royalties in Queensland, Australia.

The Group commissioned a valuation of the coal royalties as at September 30, 2011, based on a net present value of the pre-tax cash flow discounted at a rate of 7%, which produced a valuation of A$301.3 million (£191.4 million). At present the net royalty income is taxed in Australia at a rate of 30%. Were the coal royalties to be realised at the revalued amount there are £2.4 million (A$3.7 million) of capital losses potentially available to offset against taxable gains. These losses have been included in the deferred tax computation.

(b) Royalty instruments

Royalty instruments represent the Group's interests in four mineral properties which, through the issue of convertible debentures, the Group has acquired GRR or NSR royalties. These are the Engenho property in Brazil, the El Valle property in Spain, the Jogjakarta Iron Sands Project in Indonesia and the Midway-McKenzie Break properties in Canada. In the Group's latest annual financial statements for the year ended December 31, 2010, these interests were described as "Royalty Instruments". No change has been made to the accounting treatment of these interests.

(c) Intangibles

Intangible royalty interests represent the GRR and NSR royalties acquired on the Four Mile Project in South Australia, the Salamanca Uranium Project in Spain, the Railway Deposit in Western Australia, the Amapá Iron Ore System in Brazil, the Isua Project in Greenland and the Ring of Fire Deposits in Canada.

Acquisition costs of royalty interests on feasibility stage mineral properties are not amortised. At such time as the associated mineral interests are placed into production, the cost base is amortised over the expected life of mine. Amortisation rates are adjusted on a prospective basis for all changes to estimates of the life of mine.

Following the acquisition of the subsidiary which holds the royalties related to the Ring of Fire Deposits in Canada, the Group recognised the excess of the acquisition cost over the fair value of the identifiable net assets of this company as goodwill. This excess resulted in a charge to goodwill of £8.9 million (December 31, 2010: £nil). Goodwill is carried at cost less accumulated impairment losses. The Group conducts an impairment review of goodwill biannually.

Also included within intangibles are the deferred exploration costs of £722,000 (December 31, 2010: £696,000) associated with the Group's Panorama and Trefi Projects in British Columbia, Canada.

(d) Mining and exploration Interests

The investments in mining and exploration interests represent investments in listed and unlisted equity securities which are acquired as part of the Group strategy to acquire new royalties. Gains may be realised where it is deemed appropriate by the Investment Committee. The fair values of these securities are based on quoted market prices for listed securities and cost for unlisted securities based on the variability of cash flows being so significant that an alternative valuation technique would not provide a useful value. The fair values are reviewed for impairment biannually. In the statement of changes in equity these interests are classified as "available– for– sale investments". For a full explanation of the Group's accounting policies in relation to the mining and exploration interests please see the 2010 Annual Report.

Cautionary statement on forward-looking statements and related information

Certain information contained in this press release, including any information as to future financial or operating performance and other statements that express management's expectation or estimates of future performance, constitute "forward looking statements". The words "expects", "anticipates", "plans", "believes", "estimates", "seeks", "intends", "targets", "projects", "forecasts", or negative versions thereof and other similar expressions identify forward-looking statements. Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable by management, are inherently subject to significant business, economic and competitive uncertainties and contingencies. Further, forward-looking statements are not guarantees of future performance and involve risks and uncertainties which could cause actual results to differ materially from those anticipated, estimated or intended in the forward-looking statements. The material assumptions and risks relevant to the forward-looking statements in this press release include, but are not limited to: stability of the global economy; stability of local government and legislative background; continuing of ongoing operations of the properties underlying the Group's portfolio of royalties in a manner consistent with past practice; accuracy of public statements and disclosures (including feasibility studies and estimates of reserve, resource, production, grades, mine life, and cash cost) made by the owners or operators of such underlying properties; no material adverse change in the price of the commodities underlying the Group's portfolio of royalties and investments; no material adverse change in foreign exchange exposure; no adverse development in respect of any significant property in which the Group holds a royalty or other interest, including but not limited to unusual or unexpected geological formations and natural disasters; successful completion of new development projects; planned expansions or additional projects being within the timelines anticipated and at anticipated production levels; and maintenance of mining title. If any such risks actually occur, they could materially adversely affect the Group's business, financial condition or results of operations. For additional information with respect to such risks and uncertainties, please refer to the "Risk Factors" section of our most recent Annual Information Form available on www.sedar.com and the Group's website www.anglopacificgroup.com. Readers are cautioned to consider these and other factors, uncertainties and potential events carefully and not to put undue reliance on forward-looking statements. The forward-looking statements contained in this press release are made as of the date of this press release only and the Group undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events.

Contact Information

  • Anglo Pacific Group PLC
    Peter Boycott, Chairman
    John Theobald, Chief Executive Officer
    +44 (0) 20 3435 7400
    www.anglopacificgroup.com

    Liberum Capital
    Chris Bowman
    Christopher Kololian
    +44 (0) 20 3100 2000

    Pelham Bell Pottinger
    Lorna Spears
    James Macfarlane
    +44 (0) 20 7861 3232