Anglo Pacific; New presentation elucidating new strategy under Treger and Potter now on website; looks exciting!

24th Oct '13 by johnrosier

5 comments 6058 reads

Anglo Pacific (224p and 3% of JIC) Long term readers of JIC will remember that I had a holding in Anglo Pacific during 2012 before cutting the position in August last year at 226p. I have today reintroduced the stock into the portfolio at almost exactly the same price!

This is what I wrote when I first purchased the holding;

15th February 2012
Anglo Pacific Group, (FTSE 250 Index and listed on Toronto Stock Exchange), has a similar business model. It is a global natural resources royalties company whose strategy 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 policy of the Group to pay a substantial proportion of these royalties to shareholders as dividends. The Group is focused on projects in areas with low political risk that have defined resources and near-term production. The Group has both corporate finance and real-world mining experience and takes an active approach to each project to achieve better returns at reduced risk. Directors hold just over 6% of the Group.

On Monday the Company announced that Julian Treger and Mark Potter had been appointed Chief Executive and Chief Investment Officer respectively replacing the incumbents who would be retiring with immediate effect. The Company also issued 1,282049 new shares at 195p, of which Julian Treger bought just over 1.2m shares through trusts in which he is a beneficiary. Mark Potter subscribed for 51,281 shares.

The Chairman of Anglo Pacific said, “In joining our team, Julian and Mark bring a strong track record of successful investing in the mining sector and a level of financial expertise that will be of substantial benefit to Anglo Pacific's current portfolio of royalty investments and to future activity. This is an exciting time for the Company and I am confident they will be able to lead the company successfully during its next phase of growth."

I originally bought a holding in February 2012 because I liked the business model. I cut because the shares were struggling, I think mainly because of weakness in underlying commodity markets. I believe the appointment of Julian Treger should lead to the Company maximising the potential from its existing portfolio as well as hopefully being involved in some lucrative new investments. It might just be…

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johnrosier

8th Nov '13

Anglo Pacific (220p and 3% of the JIC Portfolio) The Company issued a trading statement this morning covering the period from July 1st to November 7th. The main points were that royalty income in the third quarter was £3.2m, compared to £5.0m in the prior year. This was driven by income from the Kestrel coal mine in Western Australia which contributed £2.7m. Cash and equivalents at September 30th stood at £13.0m V £14.6m a year ago.

Conclusion; I bought back into this stock a couple of weeks ago on the appointment of Julian Treger and Mark Potter as Chief Executive and Chief Operating Officer respectively. Treger is positive in his outlook statement and gives special mention to the recently announced partnership with FlowStream which is expected to introduce new oil and gas royalty streaming deals to Anglo Pacific. I expect Treger to revitalise Anglo but also think the timing could be good. World growth seems to be picking up and after a difficult period for commodity prices over the last few years we may well be moving into a more favourable pricing environment. In the meantime a dividend of 10.2p is the consensus forecast for this year giving a prospective yield of 4.6%. Happy Holder!

snaj

Hi John

May I ask what your assessment is, of tangible net asset value for APF? It was a successful play for me a few years ago when Stephen Bland brought it up as a value play and at the time it was trading under TNAV, had net cash, low PE and a decent yield - I don't think it's currently such a bargain, but would be interested if close.

Regards

25th Nov '13

Anglo Pacific (215p and 2.9% of JIC) has published a comprehensive presentation on its website outlining the new strategy following the recent appointments of Julian Treger and Mark Potter as Chief Executive and Chief Operating Officer respectively.

The full presentation is at www.anglopacific group.com

The main points seem to be;

Treger and Potter will use their extensive network of contacts and financial skills to “create the premier base metals and bulk materials listed royalty company over the next 24 months”

In a market dominated by single asset or single royalty companies it will pursue a more differentiated approach with a target of c.50% from bulk materials, 35% from base metals and 15% from other. This compares with the current more than 80% dependence on bulk materials

Management objective is to grow net income and dividend and to that end will move focus to royalties on projects that are (1) currently cash flow generating or (2) will be cash flow generating within the next 24 months and increase cash return to shareholders as the company grows

It has 20 potential royalty deals in the pipeline since new management joined and growing

Re-Balance Commodity Spread to Reduce Risk; Target portfolio would see increased exposure to iron ore, copper and zinc. Seek to limit Anglo Pacific’s non-core metal exposure to a target of less than 20% of assets (to include oil & gas and uranium). Refine portfolio to focus on near-term, cash producing assets rather than long-term, blue sky projects

In conclusion it says;

Opportunity to create a leading international mining royalty company in base metals and bulk materials, growing royalty financing market as conventional funding routes for miners remain limited, strong existing asset base from which to develop the business, focus on royalties with immediate/near-term cash flow generation potential, commitment to grow net income and dividend progressively and increase cash return to shareholders as the company grows

Conclusion: I bought back into Anglo Pacific following the new management appointments last month. I like the urgency that comes across in the presentation. Treger and Potter clearly see an opportunity to accelerate the pace of activity and “fast-track Anglo Pacific’s transition into a premier royalty business”. They are focussed on creating shareholder value not least because they spent well over £2m subscribing to new shares in the Company when they were appointed. Treger has a good track record of creating value so I expect to do well out of my holding and look forward to hearing a flow of announcements as the strategy elucidated in the presentation is put into effect. In the meantime a yield of 4.6% looks attractive. (Happy Holder)

20th Dec '13

Following on from my sale of Polo Resources earlier this week I have this morning grasped the nettle and sold two other losing investments in the JIC Portfolio; Anglo Pacific and Agriterra. Both stocks have been disappointing with the market unenthused by what looks like cheap valuations and exciting longer term prospects. In Agriterra’s case I don’t think the current unrest in parts of Mozambique is helping and Anglo is suffering from the malaise hanging over smaller mining/resource stocks. If I felt confident that things would improve in the short term I would hang on but I think I can do better deploying the capital elsewhere. Remember, at the end of the day all I am interested is the performance of the whole JIC Portfolio and if a stock is not delivering, and I think I have better ideas for the use of that capital, then so be it; take a loss and move on! (See transactions)

Montyville2

10th Jun '14

I am pondering buying back into APF after selling about a yer ago. I like the business model and feel now could be a good point to get in. I am going to the AGM tomorrow and will see if I like what I hear...

Anglo Pacific; New presentation elucidating new strategy under Treger and Potter now on website; looks exciting!

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Johnrosier

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