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Anglo Pacific Group plc: THE INVESTMENT CASE

Anglo Pacific Group boosted by coal price as broker upgrades

City firm Peel Hunt has moved its recommendation to 'buy' from 'add'
coal price rise sign
INVESTMENT OVERVIEW: APF The Big Picture
The revaluation has been fuelled by the rising coal price, but Anglo is more than a single commodity business

King coal appears to be back in the ascendancy and the rising price of the commodity was behind an upgrade for Anglo Pacific Group PLC (LON:APF), the mining royalty specialist.

Peel Hunt has bumped its valuation to 190p from 181p for shares in the business as it said it expected a ‘fade’ in the price of the black stuff to occur next year rather than this.

“Coal prices have been higher than expected over the past few months, due partly to logistics issues in a range of countries,” said analyst Peter Mallin-Jones in a note to clients.

“Demand has also been strong in Chinese steel output, and notably Chinese coal burn in power generation.

“This has driven an increase to our coal price estimates, lifting Anglo Pacific’s revenues and cash flows.”

Valuation underlines Anglo’s potential

So, why does this matter to Anglo? Well, it has exposure to the sector via royalty streams from the Kestrel and Narrabri mines in Australia, which were singled out by the Peel Hunt number cruncher.

The revised target price, meanwhile, was based on the average of the updated net asset value (187p) and the dividend yield valuation of Anglo (194p).

The shares, down a penny, were changing hands for 153.5p, or around 24% below the Peel Hunt target.

Gold and uranium too

Anglo isn’t just fuelled by coal. It receives royalties from a gold project in Spain, a vanadium operation in Brazil, as well as receiving uranium income from the US and Australia.

There’s also a royalty on the Berkeley Energia (LON:BKY) uranium mine in Spain, due to come on stream next year.

That’s already a good spread in terms of commodity and jurisdiction, but chief executive Julian Treger said recently he is keen to broaden the company’s exposure to industrial metals.

“We want to grow in copper, nickel and zinc,” he says. “But it will be specific to opportunity.”

As to the more fashionable commodities like lithium and cobalt, it seems likely that Anglo will leave those alone for the moment. Treger reckons cobalt is a bit “overblown” and is not convinced of the long-term dynamics for lithium either.

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Anglo Pacific Group plc Timeline

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