APF.L Regulatory News (APF)

News Release

25 August 2022

Anglo Pacific Group PLC

Half year results for the six months ended 30 June 2022

Anglo Pacific Group PLC ("Anglo Pacific", the "Company", the "Group") (LSE: APF) (TSX: APY) announces half year results for the six months ended 30 June 2022 which are available on both the Group's website at www.anglopacificgroup.com and on SEDAR at www.SEDAR.com.

Highlights:

· Record portfolio contribution in H1 2022 of $92.8m, 303% higher than H1 2021 ($23.0m) and 8.4% higher than the whole of FY 2021 ($85.6m)

· Adjusted earnings per share of 28.08c per share reflecting strong commodity prices and portfolio contribution

· Net debt as at 30 June 2022 reduced to $20.5m (31 December 2021: $90.0m). Net debt increased to $49.8m at the end of July 2022 following the acquisition of a portfolio of advanced development stage copper and nickel royalties from South32

· Queensland Government added new tiers to the statutory royalty regime, significantly increasing royalty revenue from the Group's Kestrel royalty entitlement at prices above A$175/tonne from 1 July 2022

· Brazilian Nickel announced first nickel production from the small scale PNP1000 plant at the Piauí nickel and cobalt project in Brazil

· Cameco announced plans to operate the Cigar Lake mine at 75% of licensed capacity in 2024, which would reduce the volumes of ore toll milled at the McClean Lake mill

· Post period end, agreed with the Group's lending syndicate to maintain the $150m revolving credit facility and add a $50m accordion feature

· ~$180m of liquidity available to finance further growth opportunities, including the residual LIORC stake of ~$23m and ~$7m of treasury shares

· Next quarterly dividend payment of 1.75p to be paid on 31 August 2022 to shareholders on the register at 16 June 2022

· The Board plans to rename the Company to reflect the evolution of the portfolio, from which 90% of its contribution is expected to come from future-facing commodities by 2026. We will be making a further announcement on this in the coming weeks

Marc Bishop Lafleche, Chief Executive Officer, commented:

"We are pleased to announce another record period with the portfolio contribution generated in the first half of 2022 exceeding the entirety of 2021. The outstanding financial performance has enabled us to significantly reduce debt and strengthen our balance sheet, providing the financial flexibility to pursue further growth.

"The portfolio is underpinned by attractive near and medium term organic growth prospects. These were further enhanced by the post period end acquisition of a portfolio of advanced stage development royalties from South32 marking the continued execution of the Company's strategy to be the leading future-facing commodities royalty and streaming company." 

Results

* Under IFRS 9, the royalties received from EVBC are reflected in the fair value movement of the underlying royalty rather than recorded as royalty income.

Analyst presentation

There will be an analyst presentation webcast at 9:30am (BST) today (25 August 2022). The presentation will be hosted by Marc Bishop Lafleche (CEO) and Kevin Flynn (CFO).

Please join the event 5-10 minutes prior to the scheduled start time. When prompted, provide the confirmation code or event title.

For further information:

Notes to editors:

About Anglo Pacific

Anglo Pacific Group PLC is a global natural resources royalty and streaming company. The Company's strategy is to become a leading natural resources company through investing in high quality projects in preferred jurisdictions with trusted counterparties, underpinned by strong ESG principles. It is a continuing policy of the Company to pay a portion of these royalties and streams to shareholders as dividends.

Alternative Performance Measures

Throughout this report a number of alternative financial measures are used by the Board to assess the Group's performance, particularly when determining dividend levels. Under IFRS the contribution from a number of the Group's royalty related assets is not reflected in the income statement, while fluctuations in forward looking commodity prices impacting the expected future cashflows of the Group are reflected in the income statement through valuation gains/losses, in the current reporting period, together with a number of other non-cash items. As it remains a primary objective of the Board to return a significant portion of the cash generated by the Group's royalty portfolio to shareholders in the form of dividends, the Board refers to these measures when assessing the overall contribution made by the Group's royalty portfolio. These measures are defined as follows:

Portfolio contribution

Portfolio contribution represents funds received or receivable from the Group's underlying royalty and stream related assets, and is taken into account by the Board when determining dividend levels. Portfolio contribution is royalty and stream related revenue net of metal stream costs of sales, plus royalties received or receivable from royalty financial instruments carried at FVTPL and principal repayments received under the Denison financing agreement. Refer to note 20 of the condensed consolidated interim financial statements for portfolio contribution.

Operating profit

Operating profit represents the Group's underlying operating performance from its royalty and stream interests. Operating profit is royalty and stream related revenue, less metal streams cost of sales, amortisation and depletion of royalties and streams and operating expenses. Operating profit excludes impairments and revaluations, and reconciles to 'operating profit before impairments and revaluations' on the income statement.

Adjusted earnings and adjusted earnings per share

Adjusted earnings represent the Group's underlying operating performance from core activities. Adjusted earnings is the profit/loss attributable to equity holders plus royalties received from financial instruments carried at fair value through profit or loss, less all valuation movements and impairments (which are non-cash adjustments that arise primarily due to changes in commodity prices), amortisation charges, unrealised foreign exchange gains and losses, and any associated deferred tax, together with any profit or loss on non-core asset disposals as such disposals are not expected to be ongoing. Adjusted earnings divided by the weighted average number of shares in issue gives adjusted earnings per share. Refer to note 6 of the condensed consolidated interim financial statements for adjusted earnings and adjusted earnings per share.

Dividend cover

Dividend cover is calculated as the number of times adjusted earnings per share exceeds the dividend per share. Refer to note 7 of the condensed consolidated interim financial statements for dividend cover.

Free cash flow and free cash flow per share

The structure of a number of the Group's royalty financing arrangements, such as the Denison transaction completed in February 2017, result in a significant amount of cash flow being reported as principal repayments, which are not included in the income statement. As the Group considers dividend cover by reference to both adjusted earnings per share and the free cash flow generated by its assets, management have determined that free cash flow per share is a key performance indicator.

Free cash flow per share is calculated by dividing net cash generated from operating activities, plus proceeds from the disposal of non-core assets and any cash considered as the repayment of principal, less finance costs, by the weighted average number of shares in issue. Refer to note 19 to the condensed consolidated interim financial statements for free cash flow per share.

BUSINESS REVIEW

Results

The first half of 2022 saw record portfolio contribution of $92.8m, a 303% increase on the comparative period for last year and a figure that surpassed the contribution generated in the full calendar year for 2021. These results are in line with the trading update published on 28 July 2022. This performance was driven by a period of elevated commodity prices with coking coal and cobalt up 257% and 75% respectively on the same period in the prior year.

Importantly, the Group's core portfolio performed well in the first six months. Excluding Kestrel, the portfolio generated contribution of $21.9m during H1 2022. On an annualised basis the assets acquired over the past eight years have now achieved the objective of replacing the Kestrel royalty, which has produced an average annual contribution of $31.8m since 2015.

The royalty and streaming business model excels in times of heightened inflation, with our costs remaining in line with those of the comparative period. This is in stark contrast to the margin erosion and capital expenditure revisions being felt in the wider mining industry. This also becomes apparent in the 400% increase in adjusted earnings per share to 28.08c. The results are discussed in more detail in the finance review.

Acquisition of South32 royalty portfolio

The record cash flows earned in the period enabled the Group to deleverage much more rapidly than had been expected at the time of the Voisey's Bay acquisition in March 2021. Net debt was $20.5m at the end of June 2022, down from $90.0m at the beginning of the year. This provided the Group with the financial flexibility to fund royalty and stream acquisitions, as evidenced by the post period $185.0m acquisition of an advanced development stage copper and nickel royalty portfolio from South32.

As part of the transaction, we acquired two key royalties, the West Musgrave copper and nickel project in Western Australia and the Santo Domingo copper project in Chile. West Musgrave is operated by Oz Minerals which announced on 15 August 2022 that it has now received all regulatory approvals and remains on schedule for a final investment decision before the end of 2022. Santo Domingo is operated by Capstone Copper and an integration plan reviewing the synergies between Santo Domingo and the nearby Mantoverde mine is due to be published in Q4 2022 with first production anticipated before 2026.

The transaction was structured to maintain the Group's strong balance sheet, leaving the Group well positioned to fund further royalty and stream acquisitions. Net debt at the end of July 2022, post transaction close, was $49.8m, with the $55.0m deferred payments to South32 over the next six quarters expected to be funded by free cash flow generated by the Group's producing royalty assets.

This acquisition is consistent with the Group's stated strategy of recycling Kestrel cashflows into future-facing commodities, enhancing the Company's growth profile beyond the runoff of its metallurgical coal exposure in 2026.

As part of the acquisition, the Group's $150.0m revolving credit facility was modified such that the scheduled $25.0m stepdown, due to take effect in August 2022, was removed. In addition, a $50.0m accordion feature was added which would see the facility increase to $200.0m for suitable acquisitions. With ~$50.0m of net debt currently, the Group has access to ~$150.0m for future permitted acquisitions, as well as a residual stake in LIORC of ~$23.0m and ~$7.0m of treasury shares. As a result, despite deploying ~$400.0m over the past 18 months, the Group remains well positioned to continue its growth journey.

Commodity prices and macro environment

The price of commodities underlying the Group's key assets were strong during the period, particularly in the first four months of the year. In part, this was driven by the war in Ukraine which disrupted a number of global commodity supply chains of a magnitude not seen for several decades. The conflict also resulted in the introduction of sanctions being placed on Russia, impacting, amongst other commodities, nickel and coal prices with uncertainty around Russian volumes being removed or displaced to different markets. The conflict has also driven significant energy cost inflation and supply chain disruption, threatening global industrial production, particularly in Europe.

Inflationary pressures remain strong, with US and UK consumer price inflation levels recently exceeding an annual rate of 10%, which is likely to trigger a significant increase in interest rates and a reduction in future consumer demand, particularly for discretionary items. Whilst no major economy has officially entered recession yet, many commentators attribute a high probability to this occurring, possibly during the second half of the year.

Thus far in Q3 2022, commodity prices underpinning the Group's portfolio have traded off significantly from recent record levels and are forecast to remain subdued for the remainder of the year.

Company Name

Anglo Pacific Group has come a long way from the coal focused business of eight years ago, evolving into a forward-looking company with a clear role to play in the energy transition through financing the development of future-facing commodities that will be vital to enable society to decarbonise.

As such, the Board feels it is time adopt a new name that is more reflective of the future of the business, and we will be making an announcement in this regard in the coming weeks.

People

The Board appointed Marc Bishop Lafleche to the role of Chief Executive Officer ("CEO") effective from 1 April 2022 following the departure of previous CEO, Julian Treger.

Outlook

Commodity prices were at elevated levels during the first half of the year which drove a record performance. Although prices have recently softened, the Group expects to deliver a strong performance in the second half of the year. The spot coking coal price is currently ~45% lower than the record average level achieved in Q2 2022 and spot cobalt prices have fallen 23%, however current price levels remain higher than those seen in recent years.

The impact of lower coking coal prices in Q3 2022 should be partially offset by the proposed addition of three new progressive royalty tiers announced by the Queensland Government on 21 June 2022, which sees three new bands of 20%, 30% and 40% when coal prices are above A$175/t, A$225/t and A$300/t respectively. The increases are applicable to the Group's Kestrel royalty entitlement as of 1 July 2022. For illustrative purposes, based on a spot price of A$300/t, would result in an additional A$6.61/t of royalties from Kestrel.

Despite near-term macroeconomic headwinds, the structural demand trends underlying the Group's commodity mix remain strong. Fundamentally, we believe that the long-term dynamic for future-facing commodities, such as those within our portfolio, remain favourable and we would expect to see continued demand as the world continues to pursue cleaner energy policies.

Substantial supply growth of commodities such as copper, nickel, lithium and cobalt will be required to meet expected demand as global economies decarbonise. Significant capital will be required to expand capacity, and this will create additional investment opportunities for Anglo Pacific.

There are a number of potential milestones expected in the coming months as we await the final investment decision on West Musgrave following the recent granting of regulatory approvals, a synergies report for Santo Domingo and potential progress at the Incoa and Piauí projects.

Anglo Pacific is well positioned for the future, having added ~$400m of acquisitions to the portfolio over the past 18 months. The Group's long-term portfolio (excluding Kestrel) generated total contribution of $21.9m in H1 2022. When annualised, this is more than Kestrel's contribution on average over the past eight years. At these levels, the portfolio excluding Kestrel is in a position to cover the Group's costs and safeguard the 7p dividend.

Looking further ahead, the potential Incoa and Piauí royalty acquisitions, along with the expected revenue to come from the West Musgrave and Santo Domingo operations, should see a path towards meaningful earnings growth from the point at which the Group's Kestrel royalty entitlement runs off. With ~$180.0m of financing flexibility and modest leverage ratios, the Group is well capitalised to continue to execute its strategy.

PORTFOLIO REVIEW

Operations at the assets within the Group's portfolio performed broadly in line with expectations during the period, with volumes across most of the portfolio increasing year on year. Adverse weather and maintenance stoppages however, resulted in slight decreases in volumes at Maracás Menchen and EVBC. Key highlights from the Group's producing assets are detailed below.

Voisey's Bay ($10.8m net of cost of sales, 12% of portfolio contribution)

In line with guidance published by Vale, production from Voisey's Bay was impacted by the ongoing transition between the depletion of the open pit mine and ramp up of underground operations.

Due to the timing of attributable cobalt deliveries, we expect stream income in FY2022 to be significantly weighted towards H1 2022, with volumes of 0.4Mlbs to 30 June 2022 representing approximately two thirds of overall volumes expected in the year. This has allowed the Group to benefit from the high cobalt price environment in H1 2022, resulting in an average cobalt price for the Company's attributable cobalt deliveries of approximately $38/lb, an 86% increase compared to $20/lb in H1 2021.

Following on from the start of production from the Reid Brook underground mine in June 2021, it is continuing ramping up to full production. The Eastern Deeps mine development continues with first ore forecast to begin in mid-2023 and the production ramp up advancing in H2 2023. The full ramp up in underground production is expected to be completed in 2025 when annual production is forecast to reach around 45,000 tonnes of nickel by 2025, with about 20,000 tonnes of copper and 2,600 tonnes of cobalt as by-products.

Kestrel ($70.9m, 76% of portfolio contribution)

Kestrel continues to move eastwards towards the boundary of Anglo Pacific's private royalty land. Longwall production in the period was lower than forecast although this has been offset by production rates through faulted ground that were above expectations. We understand that longwall panel LW410 has been completed and mining has now moved to the LW411 panel. Guidance remains at 7.0Mt of saleable coal for 2022.

Volumes within the Group's land were 2.9Mt during H1 2022 and for the full year are expected to be around 5.0Mt.

As reported in the business review, the period to 30 June 2022 saw record coking coal prices which, in the short-term, are expected to translate into additional income from the royalty as a number of new royalty tiers at higher commodity prices introduced by the Queensland Government came into effect from 1 July 2022.

Mantos Blancos ($3.1m, 3% of portfolio contribution)

Mantos Blancos produced 21.9kt of payable copper during the first half of the year, marginally higher than in H1 2021 (21.6kt). The royalty benefited from strong copper prices with an achieved price of $4.41/lb, approximately 19% higher than the $3.71/lb achieved in the same period last year.

The operator has focused on optimising production from the expanded plant, which now has throughput capacity for 7.3Mtpa of sulphide ore and expects to achieve steady state production in Q3 2022.

Capstone Copper is currently reviewing Mantos Blancos Phase II which will see the throughput of the sulphide concentrator plant expand to 10Mtpa and a potential extension of the life of copper cathode production. A pre-feasibility study was completed in Q2 2022 and will be incorporated into an Advanced Engineering Study in Q4 2022.

LIORC ($1.1m, 1% of portfolio contribution)

During the second quarter, LIORC's financial results were impacted by lower iron ore prices, partially offset by higher pellet premiums and higher volumes of pellets and concentrate for sale. Pellet sales tonnage in Q2 2022 was 9% higher than in Q2 2021 and 1% higher than Q1 2022.

The fall in iron ore prices, from the record levels experienced in 2021, was primarily a result of lower steel production, with demand in China falling 4% in the quarter. Pellet premiums have remained strong, averaging $87/t in July compared to $81/t in Q2 2022.

The weaker iron ore price environment resulted in dividends declared for H1 2022 of C$1.40 per share, a 49% drop compared to C$2.75 in H1 2021. Broker consensus for dividends for H2 2022 is ~C$1.35 per share.

Maracás Menchen ($2.0m, 2% of portfolio contribution)

Production volumes in the period were impacted by weather conditions, scheduled maintenance and other operating issues. As a result of H1 impacts full year production guidance has been reduced slightly from 11,600-12,400 tonnes of V2O5 to 11,000-12,000 tonnes.

Vanadium pricing was up period on period with an average of $11.64/lb in H1 2022 compared to $8.22/lb in H1 2021.

Construction of the ilmenite concentration plant continues as planned with completion of production targeted for Q2 2023. Commissioning of the TiO2 plant, however, has been delayed until the first half of 2025 due to delays associated with the project's land acquisition.

EVBC ($1.3m, 1% of portfolio contribution)

The first quarter was impacted by a combination of maintenance and supply chain disruptions but production in Q2 2022 reverted back to normal levels and guidance is that the operations are on track to meet full year guidance of 44-46,000 Au oz.

Denison financing arrangement (McClean Lake Mill) ($2.7m, 3% of portfolio contribution)

Cameco have successfully caught up on development work that had been deferred from 2021 and expects Cigar Lake production in 2022 to be in line with licensed capacity of 18Mlbs of uranium.

As part of its supply discipline strategy, however, Cameco announced that starting in 2024, it plans to operate Cigar Lake 25% below licensed capacity targeting 13.5Mlbs of production per year. The reduction in production volumes from Cigar Lake will impact volumes processed at the McClean Lake Mill, resulting in lower tolling revenues for the Group.

Four Mile ($0.8m, 1% of portfolio contribution)

The dispute with Quasar in relation to the level of charges being applied against royalty revenues remains ongoing. In April, the Group received a favourable decision from the courts which has resulted in the Group receiving a payment of approximately A$6.0m. Quasar is in the process of appealing this judgement and a further update will be provided once legal proceedings in relation to the appeal have been concluded which is expected to be in H1 2023.

Piauí

In June 2022, Brazilian Nickel announced production of first nickel from the small scale PNP1000 plant. Annual production guidance for 2022 is 300 tonnes of nickel and 3 tonnes of cobalt, ramping up to 1,400 tonnes of nickel and 35 tonnes of cobalt in 2023.

A Bankable Feasibility Study with regards to the full-scale project is due to be published in Q3 2022. The Group has the right to invest a further $70.0m for an incremental 3% royalty rights to part fund the construction of the full-scale plant which would have an expected annual production capacity of up to 24Kt of nickel and 1Kt of cobalt. At current broker consensus commodity prices, the annual royalty income from the full-scale operations would be between $12.5m and $17.5m.

FINANCE REVIEW

The Group has now reported three consecutive record quarterly results culminating in $49.2m of portfolio contribution generated in the second quarter of 2022 and bringing the total for the first six months to $92.8m, an increase of 303% on the same period in 2021. In addition to record levels of portfolio contribution during the first half of 2022, the Group's cost base has remained constant at $5.0m, highlighting the defensive nature of the royalty business model in stark contrast to inflationary pressures across the wider mining sector. Shortly following the end of the reporting period, the Group acquired a portfolio of advanced development stage royalties from South32 for a headline consideration of $185.0m, with the financial impact discussed in more detail in the cash flow section below.

Results

The record level of portfolio contribution, along with a significant increase in the value of the Kestrel royalty which benefitted from higher pricing inputs and the increase in the royalty rate tiers announced in June 2022, resulted in profit after tax for the period of $94.3m, a 13x increase on the same period in 2021. This generated basic earnings per share of 44.08c for the first half compared to 3.83c in H1 2021. Adjusting for the royalties from EVBC, valuation movements, non-cash items and the tax effect of these adjustments, adjusted earnings increased to $60.1m in the first half compared to $10.4m in H1 2021, resulting in adjusted earnings per share of 28.08c, five times that of the 5.48c generated in the same period in 2021.

The Group's financial performance continued to benefit from a high commodity price environment in the period, noticeably for coking coal and cobalt - the two commodities from which the Group's income is primarily derived. This was not the case in the same period in 2021, when the coking coal price was at a cyclical low, largely as a result of COVID-19 lockdowns in Asia and the ban on Australian coal imports into China. Prices began a gradual and prolonged period of steady gains during Q3 2021, peaking at over $600/t in Q1 2022 which coincided with mining activities at Kestrel being predominantly within the Group's private royalty area.

The cobalt price also experienced notable gains in the same period, which benefitted the Group's Voisey's Bay stream. The price increase was mainly due to logistical issues preventing the export of cobalt from key African markets in parallel to rapid electric vehicle demand growth.

Elsewhere, performance from Mantos Blancos and Maracás Menchen were in line with our expectations, whilst the LIORC revenue was lower as a result of lower iron ore prices. Whilst we achieved a favourable ruling at Four Mile in relation to allocable charges, the verdict is being appealed and we will not be recognising additional revenues until the appeal process has concluded.

The table below outlines the key drivers of portfolio contribution increases in the period.

Operating costs remained in line with the comparative period as the business continues to be run in a cost-efficient manner with staff costs the primary source of expenditure. There will invariably be some cost inflation to come across the Group's non-personnel cost base, but the impact on the Group's results should be minimal as the remaining costs mainly pertain to running the office and costs associated with being a listed business.

Finance costs were lower in the period as the Group had lower average borrowings drawn and there were no costs associated with refinancings. The higher costs in 2021 reflect the early refinancing of the previous facility as part of the Voisey's Bay acquisition, which resulted in the acceleration of amortising the capitalised costs associated with the previous facility. Although subsequent to the period end, the acquisition of the Copper and Nickel royalties from South32 did not necessitate refinancing of the existing facility.

The interest rate environment has shifted significantly over the course of the second quarter as central banks adopt monetary policies to contain inflation. This will impact on the Group's finance costs in the second half of the year. At present, the Group does not hedge interest rates, although this will be kept under review depending on the quantum of portfolio contribution generated in the third quarter and the impact this will have on deleveraging.

Other income of $3.5m largely reflects the deferred and contingent consideration structure related to the Narrabri disposal whilst foreign exchange gains of $0.6m largely reflects the translation of the McClean Lake loan and the Group's currency hedging valuations.

The increase in the tax charge in the period reflects the increase in royalty related revenue in the period, whilst the deferred tax charge mirrors the Kestrel non-cash valuation increase.

As a result, the Group generated profit after tax for the period of $94.3m compared to $7.3m in H1 2021. This produced basic earnings per share of 44.08c (H1 2021: 3.83c). Adjusting for the royalties from EVBC, valuation movements, non-cash items and the tax effect of these adjustments, adjusted earnings were 28.08c compared to 5.48c in H1 2021.

Balance Sheet

Net assets increased by ~$70.0m in the first six months of the year, mainly due to record levels of portfolio contribution and an increase of ~$20.0m in the value of the Kestrel royalty (net of tax).

Total royalty and stream related assets at the end of June were $413.9m of which 70% represent battery metals (31 December 2021: $425.0m; 75%). The Group's coal exposure is now 19% (31 December 2021: 13%). Whilst this is an increase over the number reported at the end of 2021, this reflects expectations for a more positive metallurgical coal pricing environment, along with a significant uplift in the Queensland royalty rate. This will benefit short-term cashflows in advance of the operation commencing its transition outside of the Group's private royalty land.

The value of the Kestrel royalty should decrease noticeably from H2 2022 onwards with FY 2022 being the last year of significant volumes within the Group's private royalty land. Volumes are expected to halve in FY 2023 and then reduce further over the next two years before becoming insignificant thereafter. As a result, on a pro-forma basis, the Group's royalty assets will be ~92% battery metals in 2026.

The Group's Voisey's Bay asset is allocated on the balance sheet between Metal Streams and Deferred Tax. This is due to the asset being acquired through a holding structure which had accumulated tax losses available against the income from the stream. Elsewhere, the McClean Lake tolling asset is within Other Receivables.

Cash flow and liquidity

The record levels of cash flow generated by the portfolio over the past six months has facilitated a rapid reduction in the Group's net debt. The Group began the year with net debt of $90.0m and ended June 2022 with net debt of only $20.5m. At period close, the Group's leverage ratio was under 0.2x and as such the lowest margin ratchet of 275bps applied to drawings under the facility.

During the period, the average cobalt price and Voisey's Bay cobalt production volumes triggered contingent payments under the terms of Voisey's Bay stream acquisition. Contingent payments to the vendor of the stream amounted to $1.0m in the period. A further $2.3m was paid in July 2022 in relation to amounts accruing during H1 2022, slightly offset by the receipt of deferred and contingent consideration to which the Group is entitled under the terms of the Narrabri royalty disposal.

The acquisition of the West Musgrave and Santo Domingo royalties, together with the Nifty and Carlotta royalties, from South32 for $185.0m occurred in July 2022, after the balance sheet date. The transaction was structured from a financing perspective in a way which only resulted in an upfront cash payment of ~$48.0m, with a further ~$82.0m by way of equity placing to the vendor. As such, upon closing of the transaction, the Group's net debt at the end of July 2022 only increased to $49.8m.

At current spot commodity price levels, the six committed deferred consideration payments of $9.2m are expected to be primarily financed from cash flow generated from Kestrel over the upcoming 18-months. As such, the Group's net debt is expected to remain below $100.0m, inclusive of the $20.0m Incoa royalty funding which we expect to make in early 2023.

In conjunction with the South32 acquisitions, the revolving credit facility was amended slightly. The $25.0m step down, which was due to take place in August 2022 was removed and a $50.0m accordion feature was added which will be available to the Group for future permitted acquisitions at the discretion of our lenders. As such, the Group now has $200.0m of borrowing potential for further growth and, with ~$50.0m of net debt presently, has access to ~$150.0m of liquidity. There remains further financing flexibility through the Group's stake in LIORC of ~$23.0m. When combined with ~$7.0m of shares held in treasury, the Group's total financing flexibility is ~$180.0m.

Principal risks and uncertainties

Anglo Pacific is exposed to a variety of risks and uncertainties which may have a financial, operational or reputational impact on the Group. The principal risks and uncertainties facing the Group relate to the following:

• Catastrophic and natural catastrophe risks

• Future demand for our product

• Commodity prices

• Operator dependence and concentration risk

• Geopolitical events

• Financing capability

• Stakeholder support

• Investment approval

• Pandemic

The Group is exposed to changes in the economic environment, including to tax rates and regimes, as with any other business.

Details of any key risks and uncertainties specific to the period are covered in the Business and Portfolio review sections. Details of relevant tax matters are included in note 6 to the Condensed financial statements. The principal risks and uncertainties facing the Group at the 2021 year end are set out in detail on pages 62 to 64 of the strategic report in the 2021 Annual Report and Accounts. The 2021 Annual Report and Accounts is available on the Group's website www.anglopacificgroup.com

Anglo Pacific Group PLC

Condensed Consolidated Financial Statements

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)

FOR THE SIX MONTHS ENDED 30 JUNE 2022

Anglo Pacific Group PLC

Condensed Consolidated Financial Statements

CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)

AS AT 30 JUNE 2022

Anglo Pacific Group PLC

Condensed Consolidated Financial Statements

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED) FOR THE SIX MONTHS ENDED 30 JUNE 2021

Anglo Pacific Group PLC

Condensed Consolidated Financial Statements

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED) FOR THE SIX MONTHS ENDED 31 DECEMBER 2021

Anglo Pacific Group PLC

Condensed Consolidated Financial Statements

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED) FOR THE SIX MONTHS ENDED 30 JUNE 2022

Anglo Pacific Group PLC

Condensed Consolidated Financial Statements

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)

FOR THE SIX MONTHS ENDED 30 JUNE 2022