Anglo Pacific Group PLC
LSE : APF
TSX : APY

Anglo Pacific Group PLC

October 31, 2012 09:30 ET

Financial Results

LONDON, UNITED KINGDOM--(Marketwire - Oct. 31, 2012) - Anglo Pacific Group PLC ('Anglo Pacific', the 'Company', the 'Group') (LSE:APF)(TSX:APY) is pleased to announce its financial results for the three and nine months ended September 30, 2012. 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:

  • Royalty income for the quarter of £5.0 million (Q3 2011: £8.0 million (restated))
  • Cash and current receivables at September 30, 2012 of £20.4 million (£44.5 million at December 31, 2011 (restated))
  • Increase in the independent valuation of coal royalties due to the recently announced rise in Queensland coal royalty rates
  • Completion of Churchrock uranium royalty option and financing agreement with Laramide Resources Ltd
  • Significant progress at a number of the Group's development royalties
  • Total assets of £353.2 million at September 30, 2012 (£371.0 million at December 31, 2011 (restated))

John Theobald, Chief Executive Officer of Anglo Pacific, commented:

"The Group achieved a solid performance in the period, despite the adverse commodity price environment. The increase in the independent valuation of our coking coal royalties, following the rise in the Queensland coal royalty rates announced in September 2012, has significantly offset the impact of current commodity prices on our royalty asset value.

Favourable conditions for acquiring additional royalties exist and we have grown our royalty portfolio to a total of 21, following the completion of the Churchrock royalty option this period. The Group has now acquired two new royalties in 2012 and further new royalty opportunities are being assessed.

We have been particularly encouraged by the progress across a number of the Group's development royalties, which we believe will bring forward future royalty cash flows, most notably the 132% increase in resources at the Mount Ida project and the announcement of plans to commence production at the Four Mile project."

Results Webcast:

There will be an audio webcast for analysts on October 31, 2012 at 9:30am (GMT). The webcast will be accessible through www.anglopacificgroup.com, following which there will be a replay facility available.

The full text of both the financial statements and the Management's Discussion and Analysis will be accessible through http://www.anglopacificgroup.com/financial-reports.html.

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 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

On August 13, 2012 the Group completed a financing agreement with Laramide Resources Ltd (''Laramide") in connection with Laramide's variable rate gross revenue royalty on the development stage ISL uranium properties owned by Uranium Resources Inc. (''URI") in the Grants Mineral District of New Mexico, United States (the ''Churchrock Properties").

In return for a facility of CDN$5 million, which is repayable in December 2015, Laramide has granted Anglo Pacific an option to acquire a 5% gross revenue royalty (the "GRR") for an exercise price of US$15 million. As part of the transaction, Laramide has also issued 650,000 warrants, each warrant entitling Anglo Pacific to acquire one Laramide common share at an exercise price of $1.35 per share on or before December 31, 2015. The CDN$5 million facility bears interest at a rate of 7% per annum payable quarterly in arrears.

URI's most recent guidance on the Churchrock Properties advises that it is continuing to refine the feasibility study performed on Section 8. The GRR also covers a portion of the adjacent Section 17 and the Mancos area, which comprises all of Section 13 and portions of Sections 7 and 12. URI has an NRC licence to produce up to 1 million pounds of uranium per year.

Producing Royalties

The Group's producing royalties turned in a solid performance in line with expectations. Production at Kestrel coking coal mine continued at normal levels whilst the El Valle-Boinás/Carlés gold and copper mine in Spain continues to build up to full production.

Kestrel Coking Coal, Australia (Rio Tinto Coal Australia)

Production from the Group's private royalty area was in line with expectations with an invoiced volume of 981,776 tonnes for the quarter ended September 30, 2012 (933,615 for the comparable period in 2011), which resulted in royalty income of £4.5 million against £6.8 million for the comparable period in 2011.

The scheduled longwall change over and lower productivity during the ramp-up in the first quarter resulted in invoiced volumes for the nine months ended September 30, 2012 of 2,290,921 tonnes compared to 2,699,877 tonnes during the same period in 2011.

Hard coking coal spot and monthly contract prices deteriorated during the quarter on the back of a weak steel market in China although demand elsewhere held up reasonably well. The benchmark September 2012 hard coking coal quarterly contract price was $225 per tonne (September 2011: $315 per tonne).

The combination of these factors resulted in royalty income from Kestrel for the nine months ended September 30, 2012 of £10.3 million (A$15.6 million) based on a 50% share of invoiced volumes. This is compared to £16.7 million (A$25.9 million) for the comparable period in 2011.

In the 2012-2013 Queensland State Budget, the Queensland Government announced an increase in the royalty rates for coal sold, disposed of or used on or after October 1, 2012, which will also apply to the Group's Kestrel royalty. The effective royalty rate for a particular period depends on the average price per tonne of coal for the return period and is calculated on a tiered system. Where the average price per tonne is over A$100 and up to and including A$150 the royalty rate has risen from 10% to 12.5%, with an additional band of 15% where the average price is more than A$150 per tonne. The first A$100 will continue to attract a royalty rate of 7%.

The increase to the Queensland coal royalty rates have been reflected in the independent valuation of the Kestrel royalty at September 30, 2012, and have contributed to an increase of A$19.3 million to the underlying valuation to A$271.3 million (£174.6 million) from A$252.0 million (£166.0 million) at December 31, 2011 (restated).

Amapá Iron Ore, Brazil (Anglo American PLC 70% and Cliffs Natural Resources Inc 30%)

Production from Amapá was in line with expectations with an invoiced volume of 1,346,310 for the quarter ended September 30, 2012 which resulted in royalty income of £0.5 million (2011, £0.8 million). For the nine months ended September 30, 2012 royalty income was £1.5 million (£1.8 million for the comparable period in 2011).

El Valle-Boinás/Carlés Gold, Silver and Copper, Spain (Orvana Minerals Corp.)

The Group received £1.04 million in royalties during the nine months ended September 30, 2012 from the El Valle-Boinás/Carlés ("EVBC") gold, silver and copper mine in northern Spain. This related to the production of 15,260 ounces of gold, 50,928 ounces of silver and 1.684 million pounds of copper for the six months ended June 30, 2012.

On October 18, 2012 Orvana Minerals Corp announced production of 10,464 ounces of gold, 24,718 ounces of silver and 0.8 million pounds of copper for the quarter ended September 30, 2012. The Group's royalty receipts from EVBC for the third quarter's production will be received during the quarter ended December 31, 2012.

The royalty receipts from EVBC are currently repayment of principal and are applied against the debenture instrument. They are not included in the income statement but are included in the receipts from royalty instruments in the cash flow statement.

Crinum Coking Coal, Australia (BHP Billiton Mitsubishi Alliance)

The Group received £0.1 million (A$0.2 million) in royalties during the nine months ended September 30, 2012 compared to £5.8 million (A$9.0 million) in the comparable period in 2011, the royalty income is predominantly due to sales from stockpiles. The Crinum longwall has left the Group's private royalty ground and no significant future royalty receipts are anticipated. In the Group's coal royalty valuation Crinum is ascribed no value.

Development Royalties

Four Mile Uranium, Australia (Quasar Resources Pty Ltd 75% and Alliance Resources Ltd 25%)

On October 24, 2012 Alliance Resources Ltd(1) announced that a decision has been made to recommence the development of the Four Mile Project (Quasar Resources Pty Ltd ("Quasar") 75%, Alliance Craton Explorer Pty Ltd, 25%). The start-up plan comprises uranium capture at Heathgate Resources Pty Ltd's ("Heathgate") Pannikan satellite plant with elution, precipitation, drying and packing at Heathgate's Beverley processing plant. In-situ recovery ("ISR") operations will commence at Four Mile East in Q2 2013 and at Four Mile West in Q4 2013; first uranium sales are scheduled for Q3 2013. Quasar is an affiliated company of USA based General Atomics who through another affiliate company, Heathgate, operate the adjacent Beverley ISR uranium mine. The Group holds a 1% NSR royalty over the Four Mile Project. For further information see www.allianceresources.com.au.

Jogjakarta Iron Sands and Pig Iron, Indonesia (Indo Mines Ltd 70%)

On September 24, 2012 Indo Mines Ltd(2) ("Indo") announced that it had entered into a binding subscription agreement to complete a A$50 million placement to the Rajawali Group. Pursuant to the agreement, the Rajawali Group will increase its holding in the company to 57.12%, subject to approval by Indo's shareholders. The significant cash injection from the Rajawali Group will provide funding to assist with the staged implementation of the 2 million tonne per annum iron concentrate facility, ongoing studies into the requirements for pig iron production, completion of financing due diligence and working capital. The Rajawali Group, which was founded in 1984, is one of the largest privately owned conglomerates in Indonesia.

Further positive news was announced by Indo on October 25, 2012, as the Indonesian Ministry of Energy and Mineral Resources issued a decree confirming approval for commencement of the construction phase of the Jogjakarta Iron Project within the Contract of Works area. This approval is a major milestone for Indo, completing the government approvals required to commence construction of the commercial scale facility.

Mount Ida Magnetite, Australia (Jupiter Mines Ltd)

On September 4, 2012, Jupiter Mines Ltd(3) ("Jupiter") announced a 132% increase in Mount Ida magnetite resources with a JORC compliant indicated resource of 1.062 billion tonnes at 30.23% Fe and a JORC compliant inferred resource of 170 million tonnes at 27.03% Fe. Further details can be found at www.jupitermines.com.

The Group completed the first tranche of the acquisition of a 50% interest in the 1.5% GRR over the Mount Ida iron ore project in Australia, from Red Rock Resources PLC in May 2012. The Royalty Sale Agreement provides for a total of US$14 million being paid in three instalments as follows:

  • Tranche 1: US$6 million on completion and agreement of the terms of the transaction, for a 0.3% GRR;
  • Tranche 2: US$4 million payment for a further 0.225% GRR following the results of a positive definitive feasibility study ("DFS"), a formal decision to mine and 20% of the pre-production capital costs outlined in the DFS being provided for; and
  • Tranche 3: US$4 million for a further 0.225% GRR following the commencement of commercial production, taking the total to a 0.75% GRR.

Following the completion of Tranche 1, the Group currently holds a 0.3% GRR royalty over the Mount Ida project.

Ring of Fire Chromite, Canada (Cliffs Natural Resources Inc)

On May 9, 2012 Cliffs Natural Resources Inc. ("Cliffs") announced that its Board of Directors had approved advancing its proposed chromite project, located in the Ring of Fire area of Northern Ontario, from pre-feasibility to feasibility. Cliffs also announced that it had reached an agreement in principle with the Government of Ontario over key elements of the project including development of provincial infrastructure. In the announcement, Cliffs believes the chromite deposits it controls are world class, and, based on successful completion of the feasibility and other project milestones, Cliffs anticipates a majority of the project's expected capital requirements will be made in 2014 and 2015. The Group holds a 1% NSR royalty over the Ring of Fire project including the Black Thor and Big Daddy deposits.

Salamanca Uranium, Spain (Berkeley Resources Ltd)

On July 24, 2012, Berkeley Resources Ltd ("Berkeley") announced they had reached an agreement with Enusa Industrias Avanzadas S.A. on terms which provide Berkeley with a 100% interest in and exploitation rights to State Reserves 28 and 29. The Group has a 1% NSR royalty over all uranium resources in Spain and Portugal held by Berkeley.

Financial performance

The Group's royalty revenue for the three months ended September 30, 2012 was £5.0million compared to £8.0 million for the three months to September 30, 2011, and for the nine months ended September 30, 2012 was £11.9 million, compared to £24.3 million for the nine months to September 30, 2011. The Group's royalty entitlement per share for the third quarter was 5.02p per share compared to 7.52p per share for the comparable period in 2011 and was 12.11p per share for the nine months ended September 30, 2012 compared to 27.85p per share for the comparable period in 2011.

The Group's operating expenses, including salaries and wages, share-based compensation, audit, tax, legal advisory fees and general office expenses, increased from £2.0 million in the nine months ended September 30, 2011 to £2.5 million for the same period in 2012. The operating expenses in the quarter ended September 30, 2012 were £0.9 million compared to £0.7 million in the comparable period in 2011. This reflects additional headcount in the first quarter and other costs incurred in exploring new investment opportunities.

Realised gains on disposal of mining and exploration interests during the nine months to September 30, 2012 were £4.3 million compared with £18.8 million for comparable period in 2011. Gains on disposals during the quarter to September 30, 2012 were £2.3 million compared with £11.3 million realised in the third quarter of 2011. These gains were the result of the disposal of some of the Group's mining investments where the acquisition of royalties was considered unlikely to materialise.

The Group realised a net foreign exchange loss in the nine months to September 30, 2012 of £0.5 million compared to a net foreign exchange loss of £0.8 million in the comparable period of 2011. The net foreign exchange gain for the quarter ended September 30, 2012 was £0.3 million, against a net foreign exchange gain of £0.5 million in the third quarter of 2011. The Group both receives and acquires royalties in foreign currencies and is therefore subject to foreign exchange risk, particularly in relation to its Australian activities.

The Group's profit before tax for the nine months ended September 30, 2012 was £15.0 million compared to £41.1 million for the nine months ended September 30, 2011. Group earnings per share for the nine months ended September 30, 2012 were 10.51p compared to 29.39p for the comparable period of 2011. For the quarter ended September 30, 2012 the Group's profit before tax was £7.1 million compared to £18.5 million for the comparable quarter in 2011. The Group's earnings per share for the three months ended September 30, 2012 were 5.76p compared to 14.31p for the third quarter of 2011.

Financial position

Total assets of £353.2 million at September 30, 2012 compared to £371.0 million at December 31, 2011

At September 30, 2012, the Group's Australian coal royalty interests have been independently valued at £174.6 million compared to £166.0 million at December 31, 2011 (restated). The increase was primarily due to the rise in the Queensland coal royalty rates announced by the Queensland State Government. The Group's royalty instruments following fair value adjustments were valued at £21.3 million at September 30, 2012 compared to £24.7 million at December 31, 2011. This decrease is due to adjustments to future foreign exchange and commodity price assumptions.

The total amortised cost of royalties treated as intangibles was £70.8 million at September 30, 2012, compared to £68.3 million at December 31, 2011. The increase is due to the acquisition of the gross revenue royalty over the Mount Ida iron ore project in Western Australia. As part of the annual impairment review a directors' valuation of these royalties has been undertaken using a discounted cash flow valuation model, which uses forecast commodity prices and management's best estimate of an appropriate discount rate taking into account project-specific risk factors. At September 30, 2012 the directors' valuation of these assets was £104.3 million (December 31, 2011: £120.5 million). This excess over amortised cost is not included in the balance sheet.

Coal Royalty Royalty Royalty
royalties Instruments Intangibles Options Total
£'000 £'000 £'000 £'000 £'000
September 30, 2012
Number 2 4 10 5 21
Amortised cost 196 12,493 70,819 728 84,236
Valuation 174,582 21,285 104,266 728 300,861
December 31, 2011
Number 2 4 9 4 19
Amortised cost 196 12,493 68,334 728 81,751
Valuation 165,967 24,736 120,485 728 311,916

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

At September 30, 2012, the Group's quoted and unquoted equity investments, including royalty options, were valued at £60.0 million compared to £64.6 million at December 31, 2011. The private equity interests and royalty options remain accounted for at cost.

At September 30, 2012, the Group had cash of £15.2 million compared to £32.2 million at December 31, 2011, with no borrowings or hedging. Combined with royalty and trade receivables, the Group's total cash and receivables at September 30, 2012 was £23.5 million compared to £44.5 million at December 31, 2011. This reduction was due to the lower production at Kestrel in the first quarter of 2012, recovery of royalties overpaid in previous years and further strategic mining investments with a view to royalty acquisitions.

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.

The Group remains debt free and its liquid resources are held in a spread of currencies and financial institutions. 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, 2012 was £353.2 million compared to £371.0 million at December 31, 2011. 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 uncertain outlook for much of the world economy has created difficult mining capital markets. As a result, favourable conditions remain for acquiring existing royalties and for creating new royalties through the provision of mining finance. The Group continues to identify and assess new opportunities and remains confident of securing additional royalties.

The progress made during the year at a number of the Group's development royalties has been positive and should bring forward future royalty cash flows.

The Group's revenue is directly linked to the top line of a number of mining operations, whilst avoiding exposure to the current inflationary escalation in their mining costs. The Group itself has no operating mines of its own and consequently has limited overheads.

The Group maintains its belief that the long term urbanisation of the developing world should continue to drive demand for commodities.

Standards of disclosure for mineral projects

National Instrument 43-101 - Standards of Disclosure for Mineral Projects ("NI 43-101") contains certain requirements relating to the use of mineral resource and mineral reserve categories of an "acceptable foreign code" (as defined in NI 43-101) in "disclosure" (as defined in NI 43-101) made by Anglo Pacific Group PLC with respect to a "mineral project" (as defined in NI 43-101), including the requirement to include a reconciliation of any material differences between the mineral resource and mineral reserve categories used under an acceptable foreign code and the standards developed by the Canadian Institute of Mining, Metallurgy and Petroleum, as the CIM Definition Standards on Mineral Resources and Mineral Reserves adopted by CIM Council, as amended (the "CIM Standards") in respect of a mineral project. Pursuant to an exemption order granted to Anglo Pacific Group PLC by the Ontario Securities Commission (the "Exemption Order"), the information contained herein with respect to the Four Mile Uranium Project, the Jogjakarta Iron Sands and Pig Iron Project and the Mount Ida Magnetite Project has been extracted from information publicly disclosed, disseminated, filed, furnished or similarly communicated to the public by an issuer whose securities trade on a "specified exchange" (as defined under NI 43-101) that discloses mineral reserves and mineral resources under one of the JORC Code, the PERC Code, the SAMREC Code, SEC Industry Guide 7 or the Certification Code (each as defined in NI 43-101). As the definitions and standards of the JORC Code, the PERC Code, the SAMREC Code, SEC Industry Guide 7 and the Certification Code are substantially similar to the CIM Standards, a reconciliation of any material differences between the mineral resource and mineral reserve categories reported under the JORC Code, the PERC Code, the SAMREC Code, SEC Industry Guide 7 and the Certification Code, as applicable, to categories under the CIM Standards is not included and no Form 43-101F1 technical report will be filed to support the disclosure based upon such exemption.

Cautionary note to U.S. investors concerning estimates of measured, indicated and inferred resources: Certain technical disclosure in this press release has been prepared in accordance with the requirements of Canadian securities laws, including NI 43-101, in certain cases as modified by the Exemption Order referred to above, which differ from the requirements of U.S. securities laws. This press release uses the terms "measured resources", "indicated resources" and "inferred resources". U.S. investors are advised that while such terms are recognised and required by Canadian Securities laws, the Securities and Exchange Commission does not recognise them. "Inferred resources" have a great amount of uncertainty as to their existence and as to their economic and legal feasibility. It cannot be assumed that all or any part of an inferred resource will be upgraded to a higher category. Under Canadian Securities laws, estimates of inferred resources may not form the basis of feasibility or other economic studies. U.S. investors are cautioned not to assume that all or any part of measured resources or indicated resources will ever be converted into reserves. U.S. investors are also cautioned not to assume that all or any part of an inferred mineral resource exists, or is economically or legally mineable.

Anglo Pacific Group PLC
CONSOLIDATED INCOME STATEMENT (UNAUDITED)
FOR THE THREE AND SIX MONTHS ENDED SEPTEMBER 30, 2012
Three months ended Nine months ended
Restated Restated
September 30, 2012 September 30, 2011 September 30, 2012 September 30, 2011
£'000 £'000 £'000 £'000
Royalty income 5,020 8,016 11,891 24,265
Finance income 116 392 475 1,150
Amortisation of royalties (254 ) (254 ) (763 ) (763 )
Operating expenses (865 ) (653 ) (2,464 ) (1,993 )
Operating profit/(loss) 4,017 7,501 9,139 22,659
Gain on sale of mining and exploration interests 2,256 11,326 4,295 18,790
Other income 642 229 1,336 638
Other gains/(losses) 186 (534 ) 271 (937 )
Profit before tax 7,101 18,522 15,041 41,150
Income tax expense (854 ) (3,035 ) (3,643 ) (9,329 )
Profit attributable to equity holders 6,247 15,487 11,398 31,821
Total and continuing earnings per share
Basic earnings per share 5.76p 14.31p 10.51p 29.39p
Diluted earnings per share 5.76p 14.30p 10.51p 29.39p

The results for the three and nine months ended September 30, 2012 and 2011 have neither been audited nor reviewed by the Group's auditors.

Anglo Pacific Group PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2012
Three months ended Nine months ended
Restated Restated
September 30, 2012 September 30, 2011 September 30, 2012 September 30, 2011
£'000 £'000 £'000 £'000
Profit for the financial period 6,247 15,487 11,398 31,821
Other comprehensive income
Net gain on revaluation of coal royalties 13,411 23,380 12,396 19,456
Net loss on revaluation of available for sale investments (2,636 ) (29,435 ) (18,233 ) (52,422 )
Net exchange loss on translation of foreign operations (6,516 ) (13,601 ) (4,311 ) (5,855 )
Deferred tax (265 ) (1,369 ) 5,793 1,041
Net income/(expense) recognised directly in equity 10,241 (5,538 ) 7,043 (5,959 )
Transferred to income statement on disposal of available for sale investments (1,522 ) (6,578 ) (2,668 ) (8,919 )
Total transferred from equity (1,522 ) (6,578 ) (2,668 ) (8,919 )
Total comprehensive income/(expense) for the financial period 8,719 (12,116 ) 4,375 (14,878 )

The results for the three and nine months ended September 30, 2012 and 2011 have neither been audited nor reviewed by the Group's auditors.

Anglo Pacific Group PLC
CONSOLIDATED BALANCE SHEET (UNAUDITED) AS AT SEPTEMBER 30, 2012
Restated Restated Restated
September 30, 2012 September 30, 2011 December 31, 2011 December 31, 2010
£'000 £'000 £'000 £'000
Non-current assets
Property, plant and equipment 2,128 2,118 2,152 2,144
Coal royalties 174,582 183,512 165,967 169,304
Royalty instruments 21,285 22,169 24,736 28,061
Intangibles 71,725 69,606 69,138 42,741
Mining and exploration interests 59,966 69,225 64,551 128,479
Other receivables 3,181 - - -
332,867 346,630 326,544 370,729
Current assets
Trade and other receivables 5,166 10,491 12,298 8,813
Cash and cash equivalents 15,201 23,533 32,197 28,258
20,367 34,024 44,495 37,071
Total assets 353,234 380,654 371,039 407,800
Non-current liabilities
Deferred tax 47,232 58,817 54,667 60,212
47,232 58,817 54,667 60,212
Current liabilities
Current income tax liabilities 3,201 2,861 3,731 4,987
Trade and other payables 400 5,249 5,472 5,177
3,601 8,110 9,203 10,164
Total liabilities 50,833 66,927 63,870 70,376
Capital and reserves attributable to shareholders
Share capital 2,192 2,184 2,184 2,175
Share premium 26,853 25,539 25,539 24,207
Coal royalty revaluation reserve 88,853 96,809 80,285 83,405
Investment revaluation reserve (17,190 ) (4,066 ) (4,843 ) 51,780
Share based payment reserve 291 189 177 65
Foreign currency translation reserve 38,370 35,429 41,614 39,686
Special reserve 632 632 632 632
Investment in own shares (2,601 ) (2,601 ) (2,601 ) (1,295 )
Retained earnings 165,001 159,612 164,182 136,769
Total equity 302,401 313,727 307,169 337,424
Total equity and liabilities 353,234 380,654 371,039 407,800
Anglo Pacific Group PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED) FOR THE TWENTY-ONE MONTHS ENDED SEPTEMBER 30, 2012
Coal Foreign
royalty Investment Share based currency Investment
Share Share revaluation revaluation payment translation Special in Retained Total
capital premium reserve reserve reserve reserve reserve Own Shares earnings equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at January 1, 2011 (a previously reported) 2,175 24,207 88,883 51,780 65 39,686 632 (1,295 ) 139,755 345,888
Impact of restatement - - (5,478 ) - - - - - (2,986 ) (8,464 )
Balance at January 1, 2011 (as restated) 2,175 24,207 83,405 51,780 65 39,686 632 (1,295 ) 136,769 337,424
Profit for the period (restated) - - - - - - - - 31,821 31,821
Other comprehensive income:
Coal royalties:
Royalties valuation movement taken to equity - - 19,456 - - (5,247 ) - - - 14,209
Deferred tax on valuation - - (6,052 ) - - 1,545 - - - (4,507 )
Available-for-sale investments:
Valuation movement taken to equity - - - (52,422 ) - (355 ) - - - (52,777 )
Deferred tax on valuation - - - 5,495 - 53 - - - 5,548
Transferred to income statement on disposal - - - (8,919 ) - - - - - (8,919 )
Foreign currency translation - - - - - (253 ) - - - (253 )
Total comprehensive income - - 13,404 (55,846 ) - (4,257 ) - - 31,821 (14,878 )
Dividends paid - - - - - - - - (8,978 ) (8,978 )
Issue of share capital under share-based payment 9 1,332 - - 124 - - (1,306 ) - 159
9 1,332 - - 124 - - (1,306 ) (8,978 ) (8,819 )
Balance at September 30, 2011 (restated) 2,184 25,539 96,809 (4,066 ) 189 35,429 632 (2,601 ) 159,612 313,727
Coal Foreign
royalty Investment Share based currency Investment
Share Share revaluation revaluation payment translation Special in Retained Total
capital premium reserve reserve reserve reserve reserve Own Shares earnings equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at October 1, 2011 (restated) 2,184 25,539 96,809 (4,066 ) 189 35,429 632 (2,601 ) 159,612 313,727
Profit for the period (restated) - - - - - - - - 4,551 4,551
Other comprehensive income:
Coal royalties:
Royalties valuation movement taken to equity - - (23,595 ) - - 6,050 - - - (17,545 )
Deferred tax on valuation - - 7,071 - - (1,781 ) - - - 5,290
Available-for-sale investments:
Valuation movement taken to equity - - - 753 - 118 - - - 871
Deferred tax on valuation - - - (359 ) - (40 ) - - - (399 )
Transferred to income statement on disposal - - - (1,171 ) - - - - - (1,171 )
Foreign currency translation - - - - - 1,838 - - - 1,838
Total comprehensive income - - (16,524 ) (777 ) - 6,185 - - 4,551 (6,565 )
Dividends paid - - - - - - - - - -
Issue of share capital under share-based payment - - - - (12 ) - - - 19 7
- - - - (12 ) - - - 19 7
Balance at December 31, 2011 (restated) 2,184 25,539 80,285 (4,843 ) 177 41,614 632 (2,601 ) 164,182 307,169
Coal Foreign
royalty Investment Share based currency Investment
Share Share revaluation revaluation payment translation Special in Retained Total
capital premium reserve reserve reserve reserve reserve Own Shares earnings equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at January 1, 2011 (restated) 2,184 25,539 80,285 (4,843 ) 177 41,614 632 (2,601 ) 164,182 307,169
Profit for the period - - - - - - - - 11,398 11,398
Other comprehensive income:
Coal royalties:
Royalties valuation movement taken to equity - - 12,396 - - (3,781 ) - - - 8,615
Deferred tax on valuation - - (3,828 ) - - 1,117 - - - (2,711 )
Available-for-sale investments:
Valuation movement taken to equity - - - (18,233 ) - (324 ) - - - (18,557 )
Deferred tax on valuation - - - 8,554 - (50 ) - - - 8,504
Transferred to income statement on disposal - - - (2,668 ) - - - - - (2,668 )
Foreign currency translation - - - - - (206 ) - - - (206 )
Total comprehensive income - - 8,568 (12,347 ) - (3,244 ) - - 11,398 4,375
Dividends paid - - - - - - - - (10,579 ) (10,579 )
Issue of ordinary shares 8 1,314 - - - - - - - 1,322
Value of employee services - - - - 114 - - - - 114
8 1,314 - - 114 - - - (10,579 ) (9,143 )
Balance at September 30, 2012 2,192 26,853 88,853 (17,190 ) 291 38,370 632 (2,601 ) 165,001 302,401
Anglo Pacific Group PLC
CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2012
Three months ended Nine months ended
September 30, 2012 September 30, 2011 September 30, 2012 September 30, 2011
£'000 £'000 £'000 £'000
Cash flows from operating activities
Profit before taxation 7,101 18,522 15,041 41,150
Adjustments for:
Interest received (431 ) (393 ) (1,200 ) (1,151 )
Unrealised foreign currency (gain)/loss (371 ) (740 ) (1,238 ) 617
Depreciation of property, plant and equipment 6 6 16 16
Amortisation of Intangibles - royalties 254 254 763 763
Gain on disposal of mining and exploration interests (2,256 ) (11,326 ) (4,295 ) (18,790 )
Loss on write down of assets - - - 147
Share based payments 38 49 115 124
4,341 6,372 9,202 22,876
(Increase)/Decrease in trade and other receivables (1,744 ) (3,234 ) 7,132 (1,678 )
(Decrease)/Increase in trade and other payables (1,460 ) 412 (5,072 ) 72
Receipt from royalty instruments 374 120 1,197 467
Cash generated from operations 1,511 3,670 12,459 21,737
Income taxes paid 72 (4,978 ) (4,126 ) (12,052 )
Net cash from operating activities 1,583 (1,308 ) 8,333 9,685
Cash flows from investing activities
Proceeds on disposal of mining and exploration interests 7,790 24,058 12,968 47,986
Purchase of mining and exploration interests (3,986 ) (2,992 ) (22,963 ) (26,189 )
Purchases of royalty interests - (27,599 ) (2,497 ) (27,599 )
Purchases of property, plant and equipment - - - (48 )
Funding of royalty financing arrangements (3,181 ) - (3,181 ) -
Exploration and evaluation expenditure (70 ) (8 ) (125 ) (26 )
Interest received 791 176 1,048 443
Net cash generated/(used) in investing activities 1,344 (6,365 ) (14,750 ) (5,433 )
Cash flows from financing activities
Dividends paid (5,978 ) (5,520 ) (10,579 ) (8,977 )
Net cash used in financing activities (5,978 ) (5,520 ) (10,579 ) (8,977 )
Net decrease in cash and cash equivalents (3,051 ) (13,193 ) (16,996 ) (4,725 )
Cash and cash equivalents at beginning of period 18,252 36,726 32,197 28,258
Cash and cash equivalents at end of period 15,201 23,533 15,201 23,533

The results for the three and nine months ended September 30, 2012 and 2011 have neither been audited nor reviewed by the Group's auditors.

1 Summary of significant accounting policies

1.1 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, 2012. 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, 2011 and the condensed consolidated interim financial statements for the period ended September 30, 2012.

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, 2011, 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, 2011 were approved on March 6, 2012. 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.

Financial results presented for the three and nine months ended September 30, 2012 and 2011, together with all other quarterly results have neither been audited nor reviewed by the Group's auditors.

1.2 Prior period adjustment

As reported in the Group's condensed consolidated interim financial statements for the three and six months ended June 30, 2012, an audit by the Queensland Office of State Revenue identified a misallocation of royalty revenue attributable to the Group of A$7.1 million more than it was entitled to, over a six year period ended December 31, 2011. In accordance with IAS 8, the prior periods financial statements are restated to reflect what the position would have been, taking into account this information.

The restatement has resulted in a reduction in income of £425,000 to £24,265,000 for the nine months ended September 30, 2011. Allowing for income tax credits, the reported profit after tax has reduced by £294,000 to £31,821,000 for the nine months ended September 30, 2011.

The Group's independent valuation of coal royalties was restated to reflect future income now set aside for the State, resulting in a £7,800,000 reduction in their carrying value to £183,512,000 as at September 30, 2011. Allowing for a deferred tax credit of £4,000,000 and after reflecting a payable to the State of £4,700,000, net assets reduced from £322,500,000 as originally reported to £313,700,000 as now shown on the balance sheet as at September 30, 2011.

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, 2012, based on a net present value of the pre-tax cash flow discounted at a rate of 7%, which produced a valuation of A$271.3 million (£174.6 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 £2.0 million (A$3.1 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-Boinás/Carlés 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, 2011, 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 NSR royalties acquired on the Four Mile project in South Australia, the Salamanca uranium project in Spain, the Black Thor, Black Label and Big Daddy chromite projects in Northern Ontario, Canada and a number of tenements in the Athabasca Basin region of Canada, together with the gross revenue royalties covering the Amapá iron ore system in Brazil, the Isua iron ore project in Greenland, the Mount Ida magnetite project in Western Australia and three exploration licences, including the Railway iron ore deposit, in the central Pilbara region of Western Australia.

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.

Also included within intangibles are the deferred exploration costs of £905,000 (December 31, 2011: £804,000) 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 2011 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.

(1) Alliance Resources Limited is listed on the Australian Securities Exchange and reports in accordance with the JORC Code.

(2) Indo Mines Limited is listed on the Australian Securities Exchange and reports in accordance with the JORC Code.

(3) Jupiter Mines Limited is listed on the Australian Securities Exchange and reports in accordance with the JORC Code.

Contact Information

  • Anglo Pacific Group PLC
    John Theobald
    Chief Executive Officer
    +44 (0) 20 3435 7400

    Anglo Pacific Group PLC
    Chris Orchard
    Chief Investment Officer
    +44 (0) 20 3435 7400
    www.anglopacificgroup.com

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

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

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

    Pelham Bell Pottinger
    James MacFarlane
    +44 (0) 20 7861 3232