(Sharecast News) - Analysts at Berenberg lowered their target price on mining firm Anglo Pacific on Monday, noting some investors appeared to be concerned about the company's ability to match the production growth and increased royalty payments stemming from its Kestrel mine.
Berenberg, however, said it was "more confident" about management's prospects, as its growth scenarios showed that the rising Kestrel income and Anglo Pacific's recent acquisitions of LIORC and Mantos should help unlock an ability to finance growth with only limited equity issuance out to 2025.
The German bank said it suspected Anglo Pacific would benefit from rising income in 2020-21 and also believed it would likely reinvest the proceeds in acquisitions ahead of mining progressively moving out of the Kestrel royalty area from 2022.
Berenberg said Anglo will need to deploy roughly $450m-500m into acquisitions in order to replace the Kestrel income by 2025. Given the improved balance sheet and acceleration of Anglo Pacific's investment rate, the analysts said this feels "achievable".
For so long as the company prioritises the acquisition of royalties that are already in production it should also be able to continue to maintain or increase the dividend, alongside delivering growth, noted the analysts.
"We have updated our valuation and forecasts to reflect the recent drops in coal prices, lower iron-ore pellet premiums, lower vanadium prices and forex movements," said Berenberg - which cut its price target on Anglo to 213p from 235p but kept its 'buy' rating unchanged.
29 Sep 2022 15:42