We like royalties as an investment class. It can give investors access to much of the excitement of mining, with considerably less risk. Green royalties tick two of our boxes and get us rather excited. And large institutional funds like Blackrock seem to agree.
Anglo Pacific is perhaps a victim of its own pragmatism, and by focussing on de-risking royalty streams for investors, the market may have perceived the company as picky and stagnant. The reality is that Anglo Pacific has a clear, sensible, thorough criteria for royalty deals: the prospect of returns, quality of jurisdiction, position in a coherent narrative about purer and less pollutive materials, cost, and honesty/integrity of counterparties. Because Anglo Pacific is unwilling to deviate from these criteria, the company has only made two recent deals. Two new transactions are expected by the end Q1/20, borrowing facilities have been extended to US$120M and the pace of investing has accelerated.
Anglo Pacific Group is a “unique financing vehicle for the mining sector” listed in London and Canada. Anglo Pacific's primary focus isn't on widely prevalent gold and silver royalties. Instead the company's central aim is to secure royalties on commodities that are part of the changing world; specifically, energy metals.
Anglo Pacific has a reasonable portfolio of around 15 “major” royalties. Anglo Pacific started with 1 and have been diversifying the portfolio moving away from Kestrel, an underground coking coal mine located in the Bowen Basin, Queensland, Australia. The company concentrates on safe jurisdictions. Anglo Pacific appears to be a relatively unique opportunity for investors to get access to the EV story.
By taking the focus off Kestrel, Anglo Pacific is moving away from an aura of "dirty old coal." However, Treger claims Anglo Pacific's coking coal resources are cleaner. It is used in the making of steel and is not as dirty as other coal. Kestrel has produced, and continues to produce an enormous amounts of income. This will decline in next few years. Treger was keen to stress the distinction between the coal used for energy (7% of Anglo Pacific's total income) vs coal used for steel (much more difficult to substitute).
Anglo Pacific's challenge for 2020 is to segue to greener commodities. It wants to be a large-cap royalty company. The competition in gold/silver Royalties is high, but for EV-related commodities, there is an increasing lack of capital in mining sector; therefore, the cost of capital continues to go up.
Anglo Pacific's share price has underperformed on recent months. Anglo Pacific's challenges for this year involve resolving the liquidity trap for North American investors, telling the story to more investors and developing a better portfolio of streams, with a focus on battery metals (lithium, cobalt, copper, nickel, graphite, manganese, vanadium), rare-earths, potash, phosphates, and even high-quality Labrador iron ore.
What did you make of Julian Treger? What can the company do to get the share price back on track? Comment below and we will answer your questions.
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1:07 - Company Overview: Which Portfolios are They Looking at?
3:16 - Kestrel Coking Coal: A Look at a Green Type of Coal
5:33 - Competitor or Niche: How are They Positioning Themselves in the Market?
7:46, 16:17 - Scaling Up Anglo Pacific: Criteria for Projects & Choosing Commodities
11:46 - Drop in Share Price: Reasons Why
18:08 - Thoughts on the Uranium Market
20:39 - Easy Access to Capital Yet Slow Growth: Moving Anglo Pacific Forward
23:44 - Telling the Story and Enticing New Investors
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