Notes to editors:
Anglo Pacific Group PLC is a global natural resources royalties company. Anglo Pacific's strategy is to expand its mineral royalty interests in long-life mining assets. Anglo Pacific achieves this through both direct acquisition of existing royalties and the creation of new royalty agreements. It is a continuing policy of Anglo Pacific to pay a substantial proportion of these royalties to shareholders as dividends.
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 sales value of the actual mineral. Our model is based around GRR or NSR royalties as we believe they provide the best and clearest returns.
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.
2012 was an exceptionally difficult year for the financial world in general and the mining industry in particular. China was seen to be growing at a slower pace than anticipated and Europe's continuing debt crisis appeared overwhelming. The uncertainty over the US election and regime change in China together with the fiscal cliff stalemate in the USA further reduced international business confidence. These factors severely impacted commodity prices throughout the year. In particular steel oversupply and destocking in China had a severe effect on iron ore and coking coal prices, the latter falling by some 50%.
Royalties from the Kestrel coking coal mine in Australia were also impacted early in the year by a number of special factors including disruption of production due to a longwall changeover as well as adverse weather conditions. In the last quarter, production was also affected by commissioning delays of the new coal processing plant.
Elsewhere, the Amapa iron ore mine in Brazil produced a steady flow of royalties albeit at lower prices whilst the Group received its first full year of royalties from the El Valle-Boinas/Carles gold mine in Spain at buoyant gold prices.
During the year there was a further decline in the junior mining sector due to reduced commodity prices, the scarcity of financing for new mining projects and the impact of severe cost and capital expenditure inflation across the mining industry. This produced opportunities for the acquisition of new royalties, enabling the Group to further diversify its royalty portfolio with three new projects in gold, uranium and iron ore.
Despite weaker mining markets the Group continued to realise gains from its strategic mining interests. The Group's balance sheet remained ungeared with a resilient asset backing. The Group offers a stable hedge against weaker currencies as well as against inflation due to its royalty income being directly linked to the sales prices of the commodities it finances.
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