You only have to look at a recent Anglo Pacific (LON:APF) share price graph to know whether Julian Treger’s decision to double down on coal has paid off.
The company’s shares have risen by a factor of more than 150% in the past 12 months as the full impact of the acquisition of the Narrabri coal royalty began to show through, and as the coal price in turn improved on the back of increased demand in Asia.
To be sure, sentiment in the wider mining sector has improved too, but not all companies have enjoyed a corresponding uplift. Copper, for example, has remained unrelentingly flat.
So too, has uranium. But, against the run of play Anglo Pacific has had a major success in backing the Salamanca uranium project in Spain, held by the consummate operators at Berkeley Energia (LON:BKY).
Berkeley shares have enjoyed a run out of all proportion to anything that’s happening in the wider uranium market, up by more than 600% in the past 18 months, and Salamanca hasn’t even come on stream yet.
But will one success in uranium breed another?
Julian Treger is certainly hoping so, as his latest deal takes a substantial stake in a North American operation, securing an income stream from processing ore from the famous Cigar Lake uranium mine in Canada.
Under the terms of the deal, Denison Mines (TSE:DML), another famous name in uranium mining, will sell a right to 22.5% of the toll milling proceeds from the McClean Lake Mill, which takes ore from Cigar Lake.
The transaction takes the form of an up-front payment of C$2.7 mln, plus the granting to Denison of a C$40.8 mln loan.
It takes Anglo Pacific into partnership with another great name in uranium production, Areva, which owns 70% of the McClean Lake Mill and 37.1% of Cigar Lake, and really begins to set it amongst the big leagues.
Anglo Pacific’s other major asset is a coal royalty on the producing Kestrel mine in Australia, owned and operated by BHP Billiton.
Treger has done well out of coal, but he’s happy to be diversifying Anglo Pacific’s exposure, both in terms of commodity and in terms of jurisdiction. The timing is important too.
“We like getting more exposure to uranium when the uranium price is low,” he says.
“In mining you’ve got to be contrarian to generate good returns. We think it will be accretive to our earnings this year.”
The market seemed to support that view, as half the deal will be funded by new equity, in the form of £13.7 mln raised at 131.75p, a modest discount of 5% to the market price then prevailing.
Even allowing for the small correction that followed, the shares are still bumping along at close to 12 month highs.
“This transaction ticks all the boxes for Anglo Pacific,” says Treger. It will be interesting to see what he does next.