The Group's royalty assets maintained their value in spite of a difficult year for the mining and commodity sector. The Kestrel royalty increased in value by GBP 5.0 million. This was largely as a result of the increase to the Queensland royalty rate announced in September. The decrease in production has also had a positive impact, as resource depletion was lower in 2012, which should result in future sales at both higher prices and higher royalty rates.
The Directors, as part of the annual impairment review, conducted a discounted cash flow valuation of the Group's other royalties. As royalty investments are usually made at an early stage of a project, changes in the projects' development between the point of investing and the commencement of production can significantly impact on the expected cash flows the Group could receive. If forecast commodity prices and production schedules used by the Directors transpire, the Group could achieve additional cash flows of GBP 60.6 million (2011: GBP 52.2 million), on a discounted basis, above the initial investment. This amount is not reflected on the balance sheet.
The Group ended the year in a strong position, with GBP 24.0 million in cash along with further potential liquidity in its mining and exploration portfolio.
Allowing for the provision for deferred tax of GBP 48.5 million, mainly relating to the valuation of royalties and debentures, the Group had net assets for the year ended 31 December 2012 of GBP 301.0 million. This is down slightly on GBP 306.2 million at the end of 2011 (restated).
Finally, I would like to thank my Board colleagues and staff for their application and hard work in what has been a challenging year for the Group.
B.M. Wides, Acting Chairman
February 13, 2013
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.
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