MIDAS SHARE TIPS UPDATE: Anglo Pacific mines a richer profit seam


 

MIDAS SHARE TIPS UPDATE: Metals group Anglo Pacific mines a richer profit seam

Anglo Pacific is an unusual beast. The group makes royalty-based investments in metal and mining assets, lending them money in exchange for a share of their revenues now and in the future. 

Most royalty firms focus on precious metals. Anglo prefers the non-precious variety and is the only such company listed on the stock exchange, with 19 different investments around the world. 

Midas recommended Anglo in 2014, when the stock was £1.05. Today, the shares are £1.58 and should continue to rise. 

Diversifying: In recent times, Anglo Pacific has been steadily moving away from fossil fuel assets and towards metals deemed to be critical for a low-carbon world

Anglo has traditionally been associated with one key investment – a coal mine in Australia owned by Rio Tinto. That asset still plays a huge part in the business, accounting for almost 80 per cent of group income in the first half of this year, after a surge in the price of coal following Russia’s invasion of Ukraine. 

But, in recent times, Anglo has been steadily moving away from fossil fuel assets and towards metals deemed to be critical for a low-carbon world. 

The transition has largely been directed by Marc Bishop Lafleche, who joined Anglo in 2014 as an investment manager and moved steadily up the ranks, becoming chief executive in April this year. 

Lafleche is determined to turn Anglo into a business that will profit from long-term commodity trends, namely growing demand for metals such as copper, nickel, cobalt and vanadium, even as supplies remain constrained. Under that strategy, Anglo has made several acquisitions over the past two years, including the $185million (£155million) purchase of a group of nickel and copper royalties in Australia and Chile only last month. 

The shift away from coal is not just based on environmental concerns but financial ones too. The Kestrel royalty stream is due to run out in 2026 and Anglo needs to replace it so the business can expand and pay attractive dividends. The next few years could be challenging, but recent deals have made Anglo a lot more resilient. 

Revenues are expected to more than double this year, from $85million to $175million on the back of those exceptionally high coal prices. 

Turnover is then likely to fall back in 2023 and 2024, but dividends will remain steady at around 7 cents (5.9p), putting Anglo on a dividend yield of 3.6 per cent. 

Turnover and payouts should then start to rise, as environmentally friendly metal prices increase and Anglo’s new investments throw off increasing amounts of cash.

Midas verdict: Investors who bought Anglo Pacific shares in 2014 have had a decent run and enjoyed generous dividends too. Those with a short-term horizon could sell out now at £1.58 and bank the profits. Long-term investors should stick with the stock – and even buy shares at current levels. Governments around the world are committed to a green agenda and Anglo is well positioned to benefit. 

Traded on: Main market Ticker: APF Contact: anglopacificgroup.com or 020 3435 7400 



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