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Looks like someone forgot to press send on the internet banking .... Woops!
We have had a good run recently and with a 3p dividend tomorrow the future looks bright. The first quarter results will give us a really good insight into how the Company is performing in the met. coal space as well as progress in cobalt , vanadium etc.
New CEO doing the rounds of the great and good and putting on a good show perhaps?
Good to see the SP looking more healthy the last few days - anything behind it?
If I had not maxed out my ISA this year more available I would add some more....
Agreed, I'd like to see more diversification and pipeline, but isn't that the strategy anyway? JT seemed to imply they'd have firepower of ~$150m later this year. They'll be looking at record earnings and have lots of cash to deply. Coal and cobalt both look very strong.
Agreed. Salamanca just isn't going to happen.
Now, Candente Copper just released some excellent news from Canariaco. That's looking like it should be one that gets over the line in the future. Similarly Dugbe is progressing very well under Pasofino Gold, with the BFS due in April. Incoa will produce revenue but limited.
What we need here is a bigger pipeline providing plenty of optionality.
Piaui looks like it's well supported and should develop into an excellent replacement as Kestrel falls way. But I suppose the underlying issue is we've got the future pinned (at the moment) on 3 or 4 assets. For arguments sake let's just imagine that Paiui fails to get permits that enable them to get into production. Okay, it'd be a problem for any royalty co, but most others have other projects moving along the development curve. I just don't see those lost ounces being replaced within the pipeline yet. There has to be a constant replenishment, with potential future cashflow replacing what's been mined.
There's scope for APF to bulk out the pipeline with assets that'll contribute £2-5m per year, rather than relying on just one or two pig payers, with a few £1-2m streams dotted here and there.
Unfortunatly the Salamanca uranium Mine was vetoed by the Spainish Nuclear Board last year and now looks a none starter. I havent heard any change to that decision but could be wrong.
I agree with what you're saying re: Value Investing and companies without a pipeline. But I don't see APF in this category; clearly the market disagrees with me at the moment.
How about the Development and Early Stage projects?
================
Development:
- BRAZILIAN NICKEL / NICKEL & COBALT: This sounds like a solid project, admittedly it's small, but they have the option to increase it substantially.
- SALAMANCA / URANIUM
Early Stage:
- CAÑARIACO / COPPER
- PILBARA / IRON ORE
- INCOA / CALCIUM CARBONATE
- DUGBE 1 / GOLD
================
With Cobalt and Coking Coal prices so strong, APF should also be able to add another significant royalty this year. I've not studied these development/early stage projects, but this looks like a decent pipeline. It looks like they're going to have a record year and have plenty of cash to deploy.
An example of where this is evident is through comparing Elemental Royalties and Metalla Royalty. Both are precious metals royalty companies. Elemental has cashflow from 80% of its assets. It's income is circa $10m per year, with a market cap of circa $100m. What it lacks though is a pipeline. Whilst it enjoys cashflow today, those ounces aren't being replaced and, at the moment, it's difficult to see where future growth comes from outside of what's in the limited pipeline already. Compare that to Metalla, where they've got circa $2m revenue at very best, from a small % of their total portfolio, but they have a stellar pipeline of future growth and optionality from royalties on assets operated by the likes of Newmont, Agnico, Barrick etc. Metalla's market cap is circa $275m. From my (and most other value investors) point of view is that Elemental is the better value. But it's always been the case in the PM royalty space that future growth and optionality carries a premium.
I'm not saying that APF should just go and buy royalties over any assets they can find. What I'd like to see are royalties over some earlier stage assets that look like they're going to be producing mines in the future. Orion picking up a a 2.25% NSR on HZM's Araguaia project, or their 2% on HZM's Vermelho. Both likely to go into production later this decade. Both royalties bought by Orion for circa $25m. Something along those lines, across the spectrum of commodities/stages of development. That's what I'd like to see, and I think the market would react very favourably too.
@Cacher: I think your comments regarding the pipeline are important. I'd not thought about that aspect much and I think that might explain the stagnation of the share price. I'm expecting them to fix it, in view of them having $150m of firepower available to them later in the year, according to JT.
Yes of course they're predominantly precious metals focused. The stated ambition of these diversified royalty companies like APF, TRR, Altius etc is to try and bridge that valuation gap. I absolutely don't want APF to venture down the precious metals route. I've owned some of the aforementioned gold focused royalty companies for many years and don't want another one. I want APF to continue to do what they've been doing, but also to grow the pipeline akin to those PM peers. I'm not suggesting they buy gold assets, I'm merely suggesting they build a portfolio where the future growth is clear to see, hence the reason I've used them as examples. A better example might be Altius Minerals who are a diversified royalty company.
I agree with you regarding copper and lithium. Two very key resources going forward, so projects across the development curve would be good additions to the portfolio.
It'll be interesting to see how Marc approaches this. Obviously they've got Incoa and Piaui to contribute to soon, but as you say there's plenty of firepower to deploy. Trident have done well with regards good quality lithium royalty deals. Hopefully Marc can be similarly opportunistic.
Unless I'm wrong, Sandstorm is gold-focussed. They have a forward pe of 33 and have not done well lately - as you'd expect, as they're mirroring gold itself.
Similar story for Osiko and Maverix - gold focussed.
Again, APF has a forward pe of just seven (7) and that's probably going to drop if commmodity prices stay as they are.
I agree with the idea of your post, but I don't see any value in APF trying to become another gold royalty company. I think there's more value in continuing to extend along the current path: battery metals, etc, which they're already pivoting to. They have the luxury that they're going to have $150m of firepower later this year as JT mentions. That's a lot of firepower for this company and I'm really optimistic about their future. I think they're likely to see institutional interest soon.
I'd like to see them pickup a meaningful copper or lithium royalty.
The sort of rating that Wheaton, Franco and smaller royalty companies like Sandstorm, Osisko, Maverix and even Gold Royalty Corp all enjoy are much higher than APF. What they all have is visibility on pipeline developments.
APF (and other similar companies like Altius Minerals, Trident etc) has stated that they want to be the first $bn diversified royalty company. Many times JT allided to the ratings that Franco etc enjoy as a target for APF. This has to be the goal for Anglo Pacific. Yes they can carry on as they are, but other than dividends we aren't going to see much capital appreciation. Ultimately a successful royalty company is one that consistently grows in scale.
I think we're comparing chalk and cheese.
Wheaton has a market cap of £13b, forward pe of 26, they're heavily exposed to gold and silver, palladium + some cobalt; they've suffered along with gold miners for that reason.
Franco has an £18m market cap, forward pe of 35.
Anglo Pacific has a market cap of just £293m and a forward pe of 7.
Clearly Wheaton and Franco have more staff and much bigger budgets, but they don't have a forward pe of 7..........
Yes agreed, we can judge him on future results. As I said yesterday, the problem for APF isn't the current crop of cashflowing royalties. It's the pipeline/what provides future record cashflows. Piaui should hopefully go some way to replacing Kestrel (assuming we upgrade the NSR). The rest of the portfolio is relatively small scale. Canariaco and Dugbe are very promising, but they're a long way off production. The bigger North American royalty companies enjoy much higher ratings, but that's not just because they're hitting record cashflows. A major factor is they have pipeline visibility of where the growth is coming from. Don't get me wrong, I'm a supportive shareholder of APF and willing to give Marc time, but in order to take APF to the next level and see the sort of premium valuations some peers enjoy then APF needs to prove to the market that firstly the impending fall off of Kestrel income is replaced. Subsequently they need to show where the future growth comes from. They don't have the pipeline for that yet. The likes of Wheaton, Franco and others enjoy higher ratings, higher proportional institutional ownership etc etc because investors can look at the pipeline and see clear growth.
RBC Raises target price for APF to 245 outperform.
I'll judge the guy by results. Quarterly and Annual results are a record. I don't see how that can be improved. I guess you guys wanted Elon Musk as CEO - he turned down the role - sorry!
Could not agree more with all the below re being disappointed in this appointment.
What is the message from the Board to our new CEO - we looked for 6 months for someone better than you but eventually gave up and settled for you! Hardly an inspiring new job.
I am sure he is a good guy and has carried out some good work for JT over the last few years but is he an inspiring CEO who will grow this company? I wish him the best of luck and hold nothing against him.
I am a frustrated and disappointed seller but my focus is on the Board of Directors. This was a chance to shake things up with fresh blood to build this business to a size that is competitive in a crowded space.
Thank you for sight of this. It is clearly in all our interests that he does well but I would not be honest if I did not say I was worried by this appointment. I had previously intended to buy more shares but have decided to sit back and see how this goes over the next few months .
The initial deal was stuck with Vale to fund the VB underground. Circa $700m funding came in the form of a stream - constructed, negotiated and funded by Wheaton and Cobalt 27. That stream was for sale of the byproduct cobalt. APF eventually bought cobalt 27's portion of the stream.
As CaneToad says, it doesn't really matter now. What is critical though is that the new CEO has the ability to source and negotiate new deals. APF suffers from a lack of future pipeline. Many royalty co's enjoy better ratings as the pipeline is packed with optionality. Piaui is potentially exceptional, and Incoa will switch on soon. I'd like to see Marc flesh out the pipeline a little more though.
From an apf perspective what's said is entirely correct I would assume. Though, I'd assume that the standards / processes empoyed by wheaton are probably more rigorous as are likely the calibre / experiences of their team. So apf participated in the deal, but can't exactly claim they negotiated the whole thing.
They said 'transformational' again :(
@Cacher: This is what the RNS says:
"Mr. Bishop Lafleche has been with the Company for the past eight years, most recently as Chief Investment Officer responsible for originating and executing the Group's acquisitions and disposals. He led the Group's most recent and transformational Voisey's Bay cobalt stream acquisition and the successful exit of Anglo Pacific's only thermal coal royalty. As a member of the Group's Executive Committee, Marc has been integral in shaping the Group's vision and strategy."
Are you saying that this is wrong?
Do you know more about the company that JT?