29 Aug 2013 07:00
August 29, 2013
Anglo Pacific Group PLC
Interim Results for the six months ended June 30, 2013
Anglo Pacific Group PLC ('Anglo Pacific', the 'Company', the 'Group') (LSE: APF) (TSX: APY) is pleased to announce interim results for the six months ended June 30, 2013 which are available on both the Group's website at www.anglopacificgroup.com and on SEDAR at www.SEDAR.com.
Headlines:
§ Interim dividend maintained at 4.45p per share (2012 Interim: 4.45p)
§ Operating profit of £4.8 million (2012 Interim: £5.1 million)
§ Royalty income for the period of £6.3 million (2012 Interim: £6.9 million)
§ Loss of £30.0 million after impairment charge below (2012 Interim profit: £5.1 million)
§ Impairment charge of £34.3 million relating to equity investments, of which £26.7 million was already reflected on the balance sheet at December 31, 2012 (in line with current Accounting Standards)
§ Total assets of £304 million at June 30, 2013 (£360 million at December 31, 2012 (restated))
§ Further surplus of Directors' valuation of non Kestrel royalties over book value of £65 million
§ Cash and receivables at June 30, 2013 of £21.4 million (£26.0 million at December 31, 2012)
§ No borrowings or hedging
§ Kestrel South commenced production after $2 billion investment which will benefit the Group's future private land royalties
Chairman's comment
"The last six months have been a difficult period for world mining markets and coking coal prices. Despite this, your Board is pleased to announce a maintained interim dividend of 4.45p per share reflecting its confidence in a return to better commodity prices in the near future. Rio Tinto's production startup of its $2 billion mining extension (Kestrel South) will benefit our private land royalty in future years.
The Group's balance sheet remains strong, the asset value resilient with no borrowings or hedging.
The Group remains committed to generating cashflows and dividends for shareholders whilst maintaining a strict control of its cost base."
Interim Results Webcast:
There will be an audio webcast for analysts on August 29, 2013 at 9:30am (BST). The webcast will be accessible via www.anglopacificgroup.com, following which there will be a replay facility available. There is a conference call available at 9:30am (BST) for those unable to join the webcast, which can be accessed at +44 (0)20 8515 2313 (code: 4637397).
For further information:
Anglo Pacific Group PLC +44 (0) 20 3435 7400
Brian Wides, Acting Chairman
John Theobald, Chief Executive Officer
Chris Orchard, Chief Investment Officer
Liberum Capital +44 (0) 20 3100 2000
Christopher Kololian
Chris Bowman
Pelham Bell Pottinger +44 (0) 20 7861 3232
Lorna Spears
James MacFarlane
Notes to editors:
Anglo Pacific Group PLC is a global natural resources royalties company. Anglo Pacific's strategy is to expand its mineral royalty interests in long-life mining assets. Anglo Pacific achieves this through both direct acquisition of existing royalties and the creation of new royalty agreements. It is a continuing policy of Anglo Pacific to pay a substantial proportion of these royalties to shareholders as dividends.
Royalties explained:
A royalty is an entitlement to an agreed percentage of a project's sales revenue, without any liability for production costs or capital expenditure. This is the key benefit of owning a royalty.
In the mining industry, most royalties endure for the life of the resource and are paid on a regular basis. Historically there have been different terms for royalties including Gross Revenue or Net Smelter Return ("GRR" or "NSR") royalties, which are both based on the sales value of the actual mineral. Our model is based around GRR or NSR royalties as we believe they provide the best and clearest returns.
Acquiring existing royalties
In this case we buy existing royalty agreements, such as those owned by exploration companies who may have retained a residual royalty in a mine they helped discover. Royalty companies rarely sell their royalties, once acquired.
Creating new royalties
Our new royalty agreements tend to come from providing financing for mining operations, usually to help progress a mine into production.
Anglo Pacific Group PLC
Interim results for the six months ended June 30, 2013
Business and Finance Review
Introduction |
The last two quarters have produced conflicting signals in world stock and commodity markets. Positive news of renewed growth in the USA has introduced the prospect of a reduction to quantitative easing which may lead to an eventual rise in long term interest rates. This development is still being resisted by most governments and central banks. Furthermore, a recovering US Dollar has continued in parallel with a fall in the gold price despite the substantial increase in money supply in the leading Western economies and its potential impact on inflation.
A slowing down in the growth rate of China's GDP has produced a general fall in metal prices which in turn has impacted badly on mining stocks, and in particular the junior markets. Nevertheless, a 7% growth rate in the world's second largest economy still implies a continuing strong demand for commodities. Other indices in China continue to support steady growth.
This scenario has impacted on revenues from Kestrel in the first half of the year as prices for coking coal declined and output has been affected. In the longer term however the coking coal remains in the ground awaiting better times and this is reflected in the continued resilient independent value of the Group's Kestrel royalty valuation. Moreover, Rio Tinto has recently started production from its $2 billion investment in Kestrel South, thereby confirming its confidence in the long term future of the mine. This will benefit the Group when production moves into its private royalty land.
Furthermore, iron ore has continued to remain in tight supply resulting in steady prices which should result in additional cash flows to the Group in future years above that anticipated at the time of investment.
Despite these adverse factors, the Group's operating profits remain steady at £4.8 million (June 2012: £5.1 million), underlining the low cost base of the Group.
As has occurred with many of the major mining companies, with significant or prolonged diminution in value of their assets, the Group, in line with current Accounting Standards has recognised such impairment of various strategic equity investments in these Accounts. All of these investments are in the junior market where indices have fallen substantially over the last 18 months. Therefore, the half year figures have been impacted by a £34.3 million charge for impairment. Of this amount, £26.7 million was already reflected in the reduction in the Investment Revaluation Reserve on the Balance Sheet at December 31, 2012. This impairment charge is an accounting exercise with no cash involvement. As and when commodity prices recover and junior mining markets respond, the Directors consider it likely that there will be recovery of value in these investments. For further information on impairment see note 4.
The Board is pleased to announce an interim dividend of 4.45p per share (June 2012: 4.45p) reflecting its confidence in a return to better commodity prices and benefits to come from Kestrel.
The Group remains committed to generating cashflows and dividends for shareholders whilst maintaining a strict control of its cost base.
Royalty Review |
Coking Coal
Kestrel, Queensland, Australia
Coking coal receipts from the Kestrel mine for the half year were £4.4 million (2012 H1: £5.7 million). Royalty income was impacted by depressed coking and thermal coal prices during the half, and production was affected by the planned shutdown of the coal handling preparation plant as part of the Kestrel South project. Rio Tinto announced on July 12, 2013 that the long wall changeover has been completed and that coal production has started at Kestrel South. This will see a gradual transition of production increasing to an average of 5.7 million tonnes per annum of which the Group will expect to reap the full benefits by 2016. For further information please see www.riotinto.com
The value of the Group's Kestrel royalty decreased by £21.2 million to £149.8 million as at June 30, 2013, from £171.0 million as at December 31, 2012. This decrease is largely attributable to revisions to the underlying coking coal price and the further weakening of the Australian dollar against the pound sterling.
Crinum, Queensland, Australia
Production at Crinum has now moved away from our private royalty area and, as such, we are no longer expecting any future income, and the asset is ascribed no value on the balance sheet.
Iron Ore
Amapá, Brazil
Royalty receipts for the half year from the Anglo American PLC ("Anglo American") operated Amapá Iron Ore System ("Amapá") were £0.74 million (2012 H1: £1.06 million). Production from the mine for H1 2013 was 2.52 million tonnes of pellet and sinter feed. Regrettably, on March 28, 2013, a major incident led to the destruction of the Anglo American port shiploader and sampling tower at the Santana port, which has resulted in iron ore sales and shipments being halted until replacement loading facilities can be installed. Production continues at the mine and the railway line between the mine and port continues to operate, stockpiling iron ore at the port. It is currently unknown when the port will resume operations, but our internal estimates assume Q1 2014.
Anglo American has stated in its 2013 Interim report dated July 26, 2013 that the Amapá operations are still being held for sale to Zamin Ferrous and we believe the sales process will continue. For further information please see www.angloamerican.com
Jogjakarta, Indonesia
On April 3, 2013 Indo Mines Ltd ("Indo") announced that it had completed an in-depth review of its short and long term strategy and concluded that it was focussing its full attention on accelerating its plans on being a pig iron producer. As such Indo is working towards the submission of its feasibility study of the Jogjakarta Iron Project with an amended pig iron plant location. The project continues to pursue a staged implementation with Stage 1 targeting 500,000 tonnes of iron concentrate production capacity in the first half of 2014, increasing to 2 million tonnes capacity by the latter part of 2015. The pig iron plant is expected to commence operations in Q1 2017.
The Group holds a 2% NSR royalty which changes to a 1% NSR royalty once our principal is repaid and provided the pig iron price is less than $700 per tonne. The NSR royalty remains at 2% if the pig iron price is more than $700 per tonne. For further information please see www.indomines.com.au
Isua, Greenland
Greenland conducted federal elections in March 2013 and elected its first female Prime Minister, Ms Aleqa Hammond with 42% of the vote. Mining was an issue that helped decide the election with Ms Hammond campaigning on a platform of greater control of foreign mining, heavier taxation through increased state royalties, and restrictions on allowing large companies to bring in cheap labour to work on mining construction projects. London Mining PLC ("London Mining") indicated in its Q1 2013 production report and IMS on May 9, 2013 that it is continuing to engage with the new Government on the permitting process for the project.
The Group holds a 1% GRR royalty on iron ore mined from the project over 55% Fe content and between 1.2% and 1.4% GRR for iron ore below 55% Fe content. In the event London Mining does not fulfil certain milestones, of which the next is obtaining an exploitation license by December 31, 2013, the Group can demand repayment of the $30 million which can be satisfied in cash or London Mining shares, at London Mining's election. For further information on the project please see www.londonmining.co.uk
Tucano, Brazil
On June 5, 2013 Beadell Resources Ltd ("Beadell") announced that construction of the magnetic separation plant completed on May 20, 2013, with production of the first iron ore concentrate product on May 27, 2013. Beadell has an off-take agreement in place with Anglo American for 500,000 tonnes of ~65% Fe concentrate per annum, but is currently stockpiling material until shipments are restarted at the Santana port.
Anglo Pacific holds a 1% GRR on all iron ore produced from the Tucano Project. For further information please see www.beadellresources.com.au
Gold
El Valle-Boinás/Carlés, Spain
Receipts for the half year from the El Valle-Boinás/Carlés ("EVBC") mine operated by Orvana Minerals Corp ("Orvana") were £3.2 million (2012 H1: £0.7 million). Of this amount, £1.1 million related to royalty income, with the remaining £2.1 million redeeming the outstanding debenture balance (2012 H1: £nil and £0.7 million respectively). Orvana was reporting strong quarterly production figures from EVBC until it announced on June 17, 2013 that an incident had resulted in material damage to its shaft system at the Boinás Mine. Orvana has reverted to using ramp haulage at the Boinás Mine while repairs to the hoist are conducted. This is the methodology used throughout 2012 prior to the hoist system becoming operational. Orvana announced on July 8, 2013 that annual metal production guidance for the mine remains unchanged at 63,000 ounces of gold, 200,000 ounces of silver and 6 million pounds of copper. For further information please see www.orvana.com
Dugbe 1, Liberia
On April 8, 2013 Hummingbird Resources PLC ("Hummingbird") announced the results of its Preliminary Economic Assessment ("PEA") on the Dugbe 1 gold deposit in Liberia. The PEA outlined annual gold production of 125,000 ounces per annum over a 20 year mine life. The post tax NPV10 of the project was US$337 million and produced an Internal Rate of Return of 43% at a US$1500 per ounce gold price. Estimated capital expenditure is US$212 million and cash operating costs of US$904 per ounce. For further information please see www.hummingbirdresources.co.uk
The Group holds a royalty financing agreement with Hummingbird to acquire a 2.0% to 2.5% variable NSR royalty on the Dugbe 1 gold project.
Energy Minerals
Four Mile Uranium, South Australia
On August 15, 2013 Alliance Resources Ltd ("Alliance") announced that the Program for Environment Protection and Rehabilitation has been approved. In addition the Environmental Protection Authority South Australia has also approved a License for Mining and Mineral Processing. The Group holds a 1% NSR over the project, which is held by Quasar Resources Pty Ltd (75%) and Alliance Resources Ltd (25%). For additional information please see www.allianceresources.com.au
Non-Ferrous Metals
Ring of Fire Chromite, Canada
On June 12, 2013 Cliffs Natural Resources ("Cliffs") announced that it has temporarily suspended the environmental assessment activities for its chromite project. Cliffs indicated that its decision to temporarily suspend these activities is due to delays related to the environment assessment process, land surface rights, and negotiations with the Province of Ontario. The project, over which the Group holds a 1% NSR, is still expected to produce up to 2.3 million tonnes of chromite concentrate per annum. Additional information can be found at www.cliffsnaturalresources.com
Araguaia Nickel, Brazil (Variable NSR)
During the period, Horizonte Minerals PLC ("Horizonte") continued to make progress on its Araguaia nickel project in Brazil. Perhaps most significantly, Horizonte announced on May 22, 2013 that recent metallurgical testwork has confirmed that the Araguaia ore is suitable for treatment via high temperature Rotary Kiln-Electric
Furnace technology. Horizonte also managed to raise over £3 million in a difficult market (as announced on June 11, 2013) and was left with a net cash position of £7.3 million. The Group holds an option on a sliding scale 1.1% to 1.5% NSR royalty to be exercised for US$12.5million by the earlier of 120 days from the completion of a
pre-feasibility study or January 10, 2017. Further information can be found at www.horizonteminerals.com and www.sedar.com
Financial Review |
Royalty income in the first six months of the year was £6.3 million, which is £0.6 million down on the same period in 2012. The Group recorded income from its three producing royalties as follows:
Royalty income (£ '000) | June 30, 2013 | June 30, 2012 | |
Kestrel | 4,438 | 5,699 | (1,261) |
Amapá | 738 | 1,060 | (322) |
El Valle-Boinás/Carlés ("EVBC") | 1,143 | - | 1,143 |
Crinum | - | 112 | (112) |
Total royalty income (per income statement) | 6,319 | 6,871 | (552) |
EVBC (debenture repayments) | 2,023 | 668 | 1,355 |
Total royalty income | 8,342 | 7,539 | 803 |
Income from Kestrel was down £1.3 million as noted in the royalty review. Amapá had been producing ahead of 2012 levels up until the port incident and income is down £0.3 million as a result. There is an indication from the operator that it hopes to recommence shipments from its ongoing production by December 2013. The Group received £1.1 million of income from EVBC in the period. This is now reflected in the income statement as the initial advance has been recovered. Future income from this investment will be recognised as royalty income. Additional receipts from EVBC of £2.0m in the period represent the settlement of the debenture balance outstanding at December 31, 2012.
The Group recorded a small decrease in overheads in the first six months of the year.
Allowing for amortisation of royalties, the Group made an operating profit of £4.8 million in the period compared to £5.1 million in the first six months of 2012.
The Group continued to exit from certain investments when it considered that a royalty was no longer likely. This has resulted in a loss on disposal of £4.9m in the period, reflecting the difficulties being experienced in the junior mining markets throughout 2013.
Other losses of £35.0 million relates largely to an impairment charge of £34.3 million in the period relating to unrealised losses in the Group's mining and exploration interests. Of this amount, £26.7 million was reflected in the revaluation reserve at the start of the year. This charge has minimal impact on the Group's financial position, as these assets are carried at market value at each reporting date. For further information see note 4.
The tax charge benefitted from a tax asset associated with the impairment charge. As a result, the income statement shows a credit of £4.5 million in the period as opposed to a £2.8 million charge in the first half of 2012.
All of the above results in a loss for the period of £30.0 million compared to a profit of £5.1 million in 2012.
Though the Group incurred significant losses in the period, the Balance Sheet has remained resilient. The Group has concluded that its deferred tax asset is now material and as such it is no longer appropriate to continue netting this off against the larger liability. The Group has split the deferred tax and restated the balance sheet accordingly. This change has no impact on net assets.
Asset summary (£ '000) |
June 30, 2013 | Restated December 31, 2012 |
Movement |
Coal royalties (Kestrel) | 149,787 | 170,995 | (21,208) |
Royalty instruments | 20,867 | 24,032 | (3,165) |
Intangibles - royalties | 66,436 | 70,477 | (4,041) |
Non - current receivables (royalty financing arrangements) | 9,753 | 3,141 | 6,612 |
Total royalty assets | 246,843 | 268,645 | (21,802) |
Mining and exploration interests | 26,014 | 55,793 | (29,779) |
Cash | 16,440 | 24,036 | (7,596) |
Other intangibles (deferred exploration costs) | 997 | 931 | 66 |
Deferred tax | 6,794 | 6,416 | 378 |
Other | 7,094 | 4,063 | 3,031 |
Total assets | 304,182 | 359,884 | (55,702) |
Total assets reduced from £359.9 million (restated) at the beginning of the year to £304.2 million at the end of June 2013. This reduction is mainly as a result of a £21.2 million decline in the valuation of the Group's Kestrel royalty along with a £29.8 million fall in the market value of the mining and exploration interests (see note 8).
The fall in the Kestrel valuation was mainly driven by revisions to the coal price, which has come under further pressure during 2013, and a weakening of the Australian Dollar, the currency in which the asset is denominated.
Other non-current receivables represent the Group's advances to Laramide Resources Ltd and Hummingbird Resources Plc under royalty finance arrangements.
The Group ended the period with £16.4 million in cash, having advanced US$10 million to Hummingbird Resources Plc during the period in accordance with the royalty financing agreement announced in December 2012.
After allowing for deferred tax on unrealised gains on the Group's assets, and the accrual of the 2012 final dividend, the Group had net assets at the period end of £248.7 million compared with £301.0 million at the end of 2012.
The royalty intangible assets are accounted for at cost and amortise over the course of the mine life. The investment is made based on a value derived from a discounted net present value of expected cashflows over the life of the investment. As time passes the original inputs to this model, such as indicated resource, commodity price or currency rates, can change along with the natural unwinding of the discount rate to significantly enhance the expected future cashflows.
Based on this analysis the Directors consider there to be £65.0 million in additional value attached to these investments which is not reflected on the balance sheet in accordance with IFRS.
Dividend |
On August 7, 2013 a final dividend of 5.75p per share for the year ended December 31, 2012 was paid. In light of the share price at the time, the Board decided not to offer shareholders the opportunity to elect to receive new shares instead of cash.
The Board has declared an interim dividend of 4.45p per share for the year ended December 31, 2013, maintaining the same dividend for the previous year. The dividend will be paid on February 4, 2014 to shareholders on the register at the close of business on November 29, 2013. The shares will be quoted ex dividend in Canada and London on November 27, 2013. As with previous dividends, depending on the share price at the time, the Board will consider whether shareholders will be given the opportunity to elect to receive new shares instead of cash. Should this alternative be offered, the price will be calculated on the basis of the average
mid-market closing price of the ordinary shares for the five business days commencing November 27, 2013. The last date for elections under such an alternative, if offered, will be January 14, 2014.
Outlook |
China is seeking to rebalance its economy towards a consumer driven model with output growth continuing above seven per cent. As has happened in the USA, Japan and India are aggressively applying extra monetary tools to kick start their respective economies. For these reasons, the Group still believes that the long term urbanisation of the developing world will continue to drive demand for all commodities including those that are steel related.
The decline in junior mining markets has reduced investors' appetite for equities in this sector. However, alternative financing is becoming more popular in the junior mining sector. This should create many opportunities for suitable royalty finance as and when commodity prices improve. Despite current lower coking coal prices, the Group remains confident that as the world economy shows signs of recovery, coking coal prices will recover and output at Kestrel will improve.
Responsibility statement
The Directors confirm to the best of their knowledge:
· The unaudited condensed set of financial statements has been prepared in accordance with IAS 34, Interim Financial Reporting, as adopted by the EU; and
· The interim management report includes a fair review of the information required by DTR 4.2.7R and DTR 4.2.8R of the Disclosure and Transparency Rules of the UK Financial Conduct Authority.
The business and finance review refers to important events which have taken place in the period.
The principal risks and uncertainties facing the business are discussed in note 13.
A list of the current Directors is maintained on the Group's website: www.anglopacificgroup.com.
On behalf of the Board
B.M. Wides
Acting Chairman
August 29, 2013
Anglo Pacific Group PLC
Consolidated Financial Statements
CONSOLIDATED INCOME STATEMENT (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 2013
Six months ended | ||||
June 30, 2013 | June 30, 2012 | |||
£'000 | £'000 | |||
Royalty income | 6,319 | 6,871 | ||
Finance income | 453 | 359 | ||
Amortisation of royalties | (455) | (509) | ||
Operating expenses | (1,565) | (1,601) | ||
Operating profit | 4,752 | 5,120 | ||
(Loss)/Gain on sale of mining and exploration interests | (4,888) | 2,039 | ||
Other income | 657 | 694 | ||
Other (losses)/gain | (35,015) | 85 | ||
Profit before tax | (34,494) | 7,938 | ||
Income tax credit/(expense) | 4,528 | (2,789) | ||
(Loss)/Profit attributable to equity holders | (29,966) | 5,149 | ||
Total and continuing earnings per share | ||||
Basic (loss)/earnings per share | (27.57p) | 4.75p | ||
Diluted (loss)/earnings per share | (27.57p) | 4.75p | ||
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 2013
Six months ended | ||||
June 30, 2013 | June 30, 2012 | |||
£'000 | £'000 | |||
(Loss)/Profit for the financial period | (29,966) | 5,149 | ||
Other comprehensive income | ||||
Net loss on revaluation of coal royalties | (10,361) | (5,465) | ||
Net loss on revaluation of available for sale investments | (16,922) | (15,076) | ||
Net exchange loss on translation of foreign operations | (10,904) | (476) | ||
Deferred tax | (799) | 7,738 | ||
Net expense recognised directly in equity | (68,952) | (8,130) | ||
Transferred to income statement on disposal of available for sale investments | 1,055 | (1,436) | ||
Transferred to income statement on impairment | 26,666 | - | ||
Total transferred from equity | 27,721 | (1,436) | ||
Total comprehensive expense for the financial period | (41,231) | (9,566) | ||
CONSOLIDATED BALANCE SHEET (UNAUDITED) AS AT JUNE 30, 2013
Restated | Restated | |||||
June 30, 2013 | June 30, 2012 | December 31, 2012 | ||||
£'000 | £'000 | £'000 | ||||
Non-current assets | ||||||
Property, plant and equipment | 2,116 | 2,125 | 2,105 | |||
Coal royalties | 149,787 | 159,568 | 170,995 | |||
Royalty instruments | 20,867 | 23,261 | 24,032 | |||
Intangibles | 67,433 | 72,284 | 71,408 | |||
Mining and exploration interests | 26,014 | 64,539 | 55,793 | |||
Deferred tax | 6,794 | 5,930 | 6,416 | |||
Other receivables | 9,753 | - | 3,141 | |||
282,764 | 327,707 | 333,890 | ||||
Current assets | ||||||
Trade and other receivables | 2,071 | 2,146 | 1,958 | |||
Income tax receivable | 2,907 | - | - | |||
Cash and cash equivalents | 16,440 | 18,252 | 24,036 | |||
21,418 | 20,398 | 25,994 | ||||
Total assets | 304,182 | 348,105 | 359,884 | |||
Non-current liabilities | ||||||
Deferred tax | 48,599 | 51,016 | 54,948 | |||
48,599 | 51,016 | 54,948 | ||||
Current liabilities | ||||||
Current income tax liabilities | - | 1,808 | 1,801 | |||
Trade and other payables | 6,849 | 7,856 | 2,171 | |||
6,849 | 9,664 | 3,972 | ||||
Total liabilities | 55,448 | 60,680 | 58,920 | |||
Capital and reserves attributable to shareholders | ||||||
Share capital | 2,192 | 2,192 | 2,192 | |||
Share premium | 26,853 | 26,853 | 26,853 | |||
Coal royalty revaluation reserve | 78,902 | 76,349 | 86,721 | |||
Investment revaluation reserve | (6,746) | (15,146) | (14,204) | |||
Share based payment reserve | 220 | 253 | 354 | |||
Foreign currency translation reserve | 27,445 | 41,138 | 38,349 | |||
Special reserve | 632 | 632 | 632 | |||
Investment in own shares | (2,601) | (2,601) | (2,601) | |||
Retained earnings | 121,837 | 157,755 | 162,668 | |||
Total equity | 248,734 | 287,425 | 300,964 | |||
Total equity and liabilities | 304,182 | 348,105 | 359,884 |
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED) FOR THE EIGHTEEN MONTHS ENDED JUNE 30, 2013
Coal | Foreign | ||||||||||
royalty | Investment | Share based | currency | ||||||||
Share | Share | revaluation | revaluation | payment | translation | Special | Investment in | Retained | Total | ||
capital | premium | reserve | reserve | reserve | reserve | reserve | own shares | earnings | equity | ||
£'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||
Balance at January 1, 2012 (restated, see note 1.1) | 2,184 | 25,539 | 80,285 | (4,843 ) | 177 | 41,614 | 632 | (2,601) | 163,185 | 306,172 | |
Profit for the period | - | - | - | - | - | - | - | - | 5,149 | 5,149 | |
Other comprehensive income: | |||||||||||
Coal royalties: | |||||||||||
Royalties valuation movement taken to equity | - | - | (5,465) | - | - | (936) | - | - | - | (6,401) | |
Deferred tax on valuation | - | - | 1,529 | - | - | 276 | - | - | - | 1,805 | |
Available-for-sale investments: | |||||||||||
Valuation movement taken to equity | - | - | - | (15,076) | - | (45) | - | - | - | (15,121) | |
Deferred tax on valuation | - | - | - | 6,209 | - | (33) | - | - | - | 6,176 | |
Transferred to income statement on disposal | - | - | - | (1,436) | - | - | - | - | - | (1,436) | |
Foreign currency translation | - | - | - | - | - | 262 | - | - | - | 262 | |
Total comprehensive income | - | - | (3,936) | (10,303) | - | (476) | - | - | 5,149 | (9,566) | |
Dividends | - | - | - | - | - | - | - | (10,579) | (10,579) | ||
Issue of ordinary shares | 8 | 1,314 | - | - | - | - | - | - | - | 1,322 | |
Value of employee services | - | - | - | - | 76 | - | - | - | - | 76 | |
8 | 1,314 | - | - | 76 | - | - | - | (10,579) | (9,181) | ||
Balance at June 30, 2012 | 2,192 | 26,853 | 76,349 | (15,146) | 253 | 41,138 | 632 | (2,601) | 157,755 | 287,425 |
Coal | Foreign | ||||||||||
royalty | Investment | Share based | currency | ||||||||
Share | Share | revaluation | revaluation | payment | translation | Special | Investment in | Retained | Total | ||
capital | premium | reserve | reserve | reserve | reserve | reserve | own shares | earnings | equity | ||
£'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||
Balance at June 30, 2012 | 2,192 | 26,853 | 76,349 | (15,146) | 253 | 41,138 | 632 | (2,601) | 157,755 | 287,425 | |
Profit for the period | - | - | - | - | - | - | - | - | 4,909 | 4,909 | |
Other comprehensive income: | |||||||||||
Coal royalties: | |||||||||||
Royalties valuation movement taken to equity | - | - | 14,804 | - | - | (3,375) | - | - | - | 11,429 | |
Deferred tax on valuation | - | - | (4,432) | - | - | 998 | - | - | - | (3,434) | |
Available-for-sale investments: | - | ||||||||||
Valuation movement taken to equity | - | - | - | 4,768 | - | (330) | - | - | - | 4,438 | |
Deferred tax on valuation | - | - | - | (596) | - | (24) | - | - | - | (620) | |
Transferred to income statement on disposal | - | - | - | (3,230) | - | - | - | - | - | (3,230) | |
Foreign currency translation | - | - | - | - | - | (58) | - | - | - | (58) | |
Total comprehensive income | - | - | 10,372 | 942 | - | (2,789) | - | - | 4,909 | 13,434 | |
Dividends | - | - | - | - | - | - | - | - | - | - | |
Value of employee services | - | - | - | - | 101 | - | - | - | 4 | 105 | |
- | - | - | - | 101 | - | - | - | 5 | 106 | ||
Balance at December 31, 2012 | 2,192 | 26,853 | 86,721 | (14,204) | 354 | 38,349 | 632 | (2,601) | 162,668 | 300,964 |
Coal | Foreign | ||||||||||
royalty | Investment | Share based | currency | ||||||||
Share | Share | revaluation | revaluation | payment | translation | Special | Investment in | Retained | Total | ||
capital | premium | reserve | reserve | reserve | reserve | reserve | own shares | earnings | equity | ||
£'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||
Balance at December 31, 2012 | 2,192 | 26,853 | 86,721 | (14,204) | 354 | 38,349 | 632 | (2,601) | 162,668 | 300,964 | |
Loss for the period | - | - | - | - | - | - | - | - | (29,966) | (29,966) | |
Other comprehensive income: | |||||||||||
Coal royalties: | |||||||||||
Royalties valuation movement taken to equity | - | - | (10,361) | - | - | (10,847) | - | - | - | (21,208) | |
Deferred tax on valuation | - | - | 2,542 | - | - | 3,216 | - | - | - | 5,758 | |
Available-for-sale investments: | |||||||||||
Valuation movement taken to equity | - | - | - | (16,922) | - | (478) | - | - | - | (17,400) | |
Deferred tax on valuation | - | - | - | (3,341) | - | (15) | - | - | - | (3,356) | |
Transferred to income statement on disposal | - | - | - | 1,055 | - | - | - | - | - | 1,055 | |
Transferred to income statement on impairment | - | - | - | 26,666 | - | - | - | - | - | 26,666 | |
Foreign currency translation | - | - | - | - | - | (2,780) | - | - | - | (2,780) | |
Total comprehensive income | - | - | (7,819) | 7,458 | - | (10,904) | - | - | (29,966) | (41,231) | |
Dividends | - | - | - | - | - | - | - | - | (11,080) | (11,080) | |
Value of employee services | - | - | - | - | (134) | - | - | - | 215 | 81 | |
- | - | - | - | (134) | - | - | - | (10,865) | (10,999) | ||
Balance at June 30, 2013 | 2,192 | 26,853 | 78,902 | (6,746) | 220 | 27,445 | 632 | (2,601) | 121,837 | 248,734 |
CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 2013
Six months ended | ||||
June 30, 2013 | June 30, 2012 | |||
£'000 | £'000 | |||
Cashflows from operating activities | ||||
(Loss)/Profit before taxation | (34,494) | 7,938 | ||
Adjustments for: | ||||
Interest received | (739) | (769) | ||
Dividend received | (360) | (274) | ||
Unrealised foreign currency loss/(gain) | 768 | (867) | ||
Depreciation of property, plant and equipment | 10 | 10 | ||
Amortisation of intangibles - royalties | 455 | 509 | ||
Loss/(Gain) on disposal of mining and exploration interests | 4,888 | (2,039) | ||
Loss on impairment of mining and exploration interests | 34,266 | - | ||
Share based payments | 82 | 77 | ||
4,876 | 4,585 | |||
(Increase)/Decrease in trade and other receivables | (6,726) | 8,876 | ||
Decrease in trade and other payables | (1,586) | (3,612) | ||
Receipt from royalty instruments | 2,321 | 823 | ||
Cash generated from operations | (1,115) | 10,672 | ||
Income taxes paid | (4,434) | (4,198) | ||
Net cash (used in)/from operating activities | (5,549) | 6,474 | ||
Cash flows from investing activities | ||||
Proceeds on disposal of mining and exploration interests | 3,021 | 5,180 | ||
Purchase of mining and exploration interests | (971) | (18,977) | ||
Purchases of royalty interests | - | (2,497) | ||
Purchases of property, plant and equipment | (14) | - | ||
Exploration and evaluation expenditure | (66) | (55) | ||
Interest received | 439 | 257 | ||
Dividend received | 360 | 274 | ||
Net cash generated from/(used in) investing activities | 2,769 | (15,818) | ||
Cash flows from financing activities | ||||
Dividends paid | (4,816) | (4,601) | ||
Net cash used in financing activities | (4,816) | (4,601) | ||
Net decrease in cash and cash equivalents | (7,596) | (13,945) | ||
Cash and cash equivalents at beginning of period | 24,036 | 32,197 | ||
Cash and cash equivalents at end of period | 16,440 | 18,252 | ||
NOTES TO THE ACCOUNTS
1. Basis of preparation
These condensed consolidated interim financial statements of Anglo Pacific Group PLC are for the six months ended June 30, 2013. They have been prepared in accordance with IAS 34 'Interim Financial Reporting', as adopted by the European Union. They do not include all of the information required for full annual financial statements, and should be read in conjunction with the consolidated financial statements of the Group for the year ended December 31, 2012.
The condensed consolidated interim financial statements have been prepared in accordance with the accounting policies adopted in the last annual financial statements for the year to December 31, 2012, which were prepared in accordance with IFRS, as adopted by the European Union.
This condensed consolidated financial information does not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006. Statutory accounts for the year ended December 31, 2012 were approved on March 27, 2013. Those accounts, which contained an unqualified audit report under Section 495 of the Companies Act 2006 and which did not make any statements under Section 498 of the Companies Act 2006, have been delivered to the Registrar of Companies in accordance with Section 441 of the Companies Act 2006.
1.1 Changes in accounting policies
The accounting policies applied by the Group in these condensed financial statements are the same as those applied by the Group in its financial statements for the year ended December 31, 2012 with the exception of the new standards adopted during 2013 and the additional policy changes as outlined below.
(1) Deferred tax
The deferred tax amount consists of tax liabilities associated with unrealised gains on the Group's royalty assets (mainly Kestrel, as this has an immaterial cost base). There are deferred tax assets based on the unrealised losses in the Group's strategic mining and exploration interests, assuming that there will be future profits to offset these against. Due to the continued decline in the junior mining markets the deferred tax asset is now considered material, and as such the amount is separated from the liability on the balance sheet. This has no impact on overall net assets.
(2) Interest on road overpayments
As noted in the latest annual report, the Group was charged interest of £1.43m (A$2.2m) on the overpayment of royalties over a six year period. Though the Group was notified of the overpayment of royalties early in 2012 it was not notified of Rio Tinto's intention to charge the Group interest on these monies at the half year and as such this was not reflected in the interim report in 2012. This created an associated deferred tax asset of £0.34m. This was reflected in the 2012 annual report and accounts as a prior period adjustment and, in order to be consistent, the Directors propose restating the 2012 interim financial statements similarly.
The following tables illustrate the impact of the above prior period adjustments:
Consolidated Balance Sheet £ '000 | June 30, 2012 | December 31, 2012 | ||||||
Restated | Previously reported | Adjust-ment |
Restated | Previously reported | Adjust-ment | |||
Non-current assets | ||||||||
Deferred tax | 1 | 5,930 | - | 5,930 | 6,416 | - | 6,416 | |
Total assets | 348,105 | 342,175 | 5,930 | 359,884 | 353,468 | 6,416 | ||
Non-current liabilities | ||||||||
Deferred tax | 1,2 | (51,016) | (45,513) | (5,503) | (54,948) | (48,532) | (6,416) | |
Current liabilities | ||||||||
Trade and other payables | 2 | (7,856) | (6,432) | (1,424) | (2,171) | (2,171) | - | |
Total liabilities | (60,680) | (53,753) | (6,927) | (58,920) | (52,504) | (6,416) | ||
Capital and reserves | ||||||||
Retained earnings | 2 | 157,755 | 158,752 | (997) | 162,668 | 162,668 | - | |
Total equity | 287,425 | 288,422 | (997) | 300,964 | 300,964 | - | ||
1.2 New standards adopted during the period
The new standards adopted during the half year to June 30, 2013 are outlined below:
· IFRS 7 (amended) - Offsetting Financial Assets and Financial Liabilities;
· IFRS 13 Fair Value Measurement;
· IAS 1 (amended) - Presentation of Items of Other Comprehensive Income;
· IAS 12 (amended) - Deferred tax: Recovery of Underlying Assets; and
· IAS 19 (revised) - Employee Benefits.
These had no material impact on the financial statements.
The following standards are deemed not relevant to the Group or to have no material impact on the financial statements of the Group when the relevant standards become effective:
· IFRS 9 Financial Instruments;
· IFRS 12 Disclosure of Interests in Other Entities;
· IAS 27 (revised) - Separate Financial Statements;
· IAS 32 (amended) - Offsetting Financial Assets and Financial Liabilities; and
· Annual Improvements to IFRSs (2009-2011 Cycle).
The following standards will affect the accounting for any future joint arrangements entered into by the Group:
· IFRS 10 Consolidated Financial Statements; and
· IFRS 11 Joint Arrangements.
2 Financial risk management
The Group's principal treasury objective is to provide sufficient liquidity to meet operational cash flow requirements and to allow the Group to take advantage of new growth opportunities whilst maximising shareholder value. The Group's activities expose it to a variety of financial risks including liquidity risk, credit risk, foreign exchange risk, price risk and interest rate risk. The Group manages these risks as follows:
Liquidity and funding risk
The objective of the Group in managing funding risk is to ensure that it can meet its financial obligations as and when they fall due. At June 30, 2013 there was no debt outstanding. The Group has a strong credit rating and has good access to capital markets, if required.
Credit risk
The Group's principal financial assets are bank balances and cash, trade and other receivables and investments, which represent the Group's maximum exposure to credit risk in relation to financial assets. The Group undertakes detailed analysis of factors which mitigate the risk of default to the Group.
Foreign exchange risk
The Group's transactional foreign exchange exposure arises from income, expenditure and purchase and sale of assets denominated in foreign currencies. As each material commitment is made, the risk in relation to currency fluctuations is assessed by the Board and regularly reviewed. The Group does not consider it necessary to have a hedging programme in place at this time.
Other price risk
The Group is exposed to other price risk in respect of its mining and exploration interests which include listed and unlisted equity securities and any convertible instruments. Interests are continually monitored for indicators that may suggest problems for these companies raising capital or continuing their day-to-day business activities to ensure remedial action can be taken if necessary. No specific hedging activities are undertaken in relation to these interests and the voting rights arising from these equity instruments are utilised in the Group's favour.
(a) Financial Assets
The Group held the following investments in financial assets:
June 30, 2013 | June 30, 2012 | December 31, 2012 | ||||
£'000 | £'000 | £'000 | ||||
Available-for-sale | ||||||
Royalty instruments | 20,867 | 23,261 | 24,032 | |||
Mining and exploration interests | 26,014 | 64,291 | 55,545 | |||
Fair value through profit or loss | ||||||
Royalty instruments | - | - | - | |||
Mining and exploration interests | - | 248 | 248 | |||
Loans and receivables | ||||||
Trade and other receivables | 12,272 | 2,146 | 4,360 | |||
Cash at bank and in hand | 16,440 | 18,252 | 24,036 |
(b) Fair value hierarchy
The following table presents financial assets and liabilities measured at fair value in the statement of financial position in accordance with the fair value hierarchy. This hierarchy groups financial assets and liabilities into three levels based on the significance of inputs used in measuring the fair value of the financial assets and liabilities. The fair value hierarchy has the following levels:
· Level 1: quoted prices (unadjusted) in active markets for identical assets and liabilities;
· Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (ie. as prices) or indirectly (ie. derived from prices); and
· Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
The level within which the financial asset or liability is classified is determined based on the lowest level of significant input to the fair value measurement.
The following tables present the Group's assets and liabilities that are measured at fair value at June 30, 2013, June 30, 2012 and December 31, 2012:
June 30, 2013 | |||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||
£'000 | £'000 | £'000 | £'000 | ||||||
Assets | |||||||||
Royalty instruments | - | - | 20,867 | 20,867 | |||||
Mining and exploration interests - quoted | 23,396 | - | - | 23,396 | |||||
Mining and exploration interests - unquoted | - | 2,138 | - | 2,138 | |||||
Mining and exploration interests - royalty options | - | 480 | - | 480 | |||||
Total | 23,396 | 2,618 | 20,867 | 46,881 | |||||
Net fair value | 23,396 | 2,618 | 20,867 | 46,881 | |||||
June 30, 2012 | |||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||
£'000 | £'000 | £'000 | £'000 | ||||||
Assets | |||||||||
Royalty instruments | - | - | 23,261 | 23,261 | |||||
Mining and exploration interests - quoted | 63,006 | - | - | 63,006 | |||||
Mining and exploration interests - unquoted | - | 805 | - | 805 | |||||
Mining and exploration interests - royalty options | - | 728 | - | 728 | |||||
Total | 63,006 | 1,533 | 23,261 | 87,800 | |||||
Net fair value | 63,006 | 1,533 | 23,261 | 87,800 | |||||
December 31, 2012 | |||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||
£'000 | £'000 | £'000 | £'000 | ||||||
Assets | |||||||||
Royalty instruments | - | - | 24,032 | 24,032 | |||||
Mining and exploration interests - quoted | 51,547 | - | - | 51,547 | |||||
Mining and exploration interests - unquoted | - | 3,518 | - | 3,518 | |||||
Mining and exploration interests - royalty options | - | 728 | - | 728 | |||||
Total | 51,547 | 4,246 | 24,032 | 79,825 | |||||
Net fair value | 51,547 | 4,246 | 24,032 | 79,825 | |||||
3 Segment information
Management has determined the operating segments based on the reports reviewed by the Executive Committee that are used to make strategic decisions. The Committee consider the Group's undertakings from a business perspective. This has resulted in the Group being organised into two operating segments - royalties and mining and exploration interests.
The royalties segment encompasses all Group activities relating directly to the royalties received from mining operations. The mining and exploration interests segment encompasses all Group activities relating directly to the acquisition, disposal and continued monitoring of the Group's investments in listed and unlisted entities operating in mining and mineral exploration. The segment information provided to the Executive Committee for the reportable segments for the six months ended June 30, 2013 is as follows:
Australia | Americas | Europe | |||||||||||||
Mining | Mining | Mining | All other | ||||||||||||
Royalty | interests | Royalty | interests | Royalty | interests | segments | Total | ||||||||
£'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||||||||
Royalty income | 4,438 | - | 738 | - | 1,143 | - | - | 6,319 | |||||||
Finance income | - | - | - | - | - | - | 453 | 453 | |||||||
Loss on sale of mining and exploration interests | - | 27 | - | (292) | - | (4,623) | - | (4,888) | |||||||
Other income | - | 373 | - | - | - | 284 | - | 657 | |||||||
Total segment income | 4,438 | 400 | 738 | (292) | 1,143 | (4,339) | 453 | 2,541 | |||||||
Loss before tax | 4,438 | (23,399) | 283 | (7,437) | 1,143 | (7,661) | (1,861) | (34,494) | |||||||
Amortisation | - | - | (455) | - | - | - | - | (455) | |||||||
Income tax credit | (502) | - | - | - | - | - | 5,031 | 4,529 | |||||||
Total assets | 169,977 | 13,677 | 27,861 | 8,023 | 34,198 | 4,825 | 45,621 | 304,182 | |||||||
Total assets include: | |||||||||||||||
Additions to non-current assets (other than financial instruments and deferred tax assets) | - | - | - | - | - | - | - | - | |||||||
Total liabilities | 44,885 | - | - | - | 2,889 | - | 7,674 | 55,448 | |||||||
The segment information for the six months ended June 30, 2012 is as follows:
Australia | Americas | Europe | |||||||||||||
Mining | Mining | Mining | All other | ||||||||||||
Royalty | interests | Royalty | interests | Royalty | interests | segments | Total | ||||||||
£'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||||||||
Royalty income | 5,811 | - | 1,060 | - | - | - | - | 6,871 | |||||||
Finance income | - | - | - | - | - | - | 359 | 359 | |||||||
Gain on sale of mining and exploration interests | - | 1,860 | - | 190 | - | (11) | - | 2,039 | |||||||
Other income | - | 284 | - | - | - | 410 | - | 694 | |||||||
Total segment income | 5,811 | 2,144 | 1,060 | 190 | - | 399 | 359 | 9,963 | |||||||
Profit before tax | 5,811 | 2,144 | 1,384 | 190 | - | 399 | (1,990) | 7,938 | |||||||
Amortisation | - | - | (509) | - | - | - | - | (509) | |||||||
Income tax expense | (882) | - | (185) | - | - | - | (1,722) | (2,789) | |||||||
Total assets | 180,548 | 34,453 | 30,248 | 11,251 | 34,441 | 18,930 | 38,234 | 348,105 | |||||||
Total assets include: | |||||||||||||||
Additions to non-current assets (other than financial instruments and deferred tax assets | 3,819 | - | - | - | - | - | - | 3,819 | |||||||
Total liabilities | 47,161 | - | - | - | 2,245 | - | 11,274 | 60,680 | |||||||
The segment information for the twelve months ended December 31, 2012 is as follows:
Australia | Americas | Europe | |||||||||||||
Mining | Mining | Mining | All other | ||||||||||||
Royalty | interests | Royalty | interests | Royalty | interests | segments | Total | ||||||||
£'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||||||||
Royalty income | 11,038 | - | 2,229 | - | - | - | - | 13,267 | |||||||
Finance income | - | - | - | - | - | - | 676 | 676 | |||||||
Gain on sale of mining and exploration interests | - | 7,021 | - | 337 | - | (11) | - | 7,347 | |||||||
Other income | - | 678 | - | - | - | 1,047 | 21 | 1,746 | |||||||
Total segment income | 11,038 | 7,699 | 2,229 | 337 | - | 1,036 | 697 | 23,036 | |||||||
Profit before tax | 11,038 | 7,699 | 2,017 | 337 | 1,890 | (2,975) | (3,896) | 16,110 | |||||||
Amortisation | - | - | (1,018) | - | - | - | - | (1,018) | |||||||
Income tax expense | (1,686) | - | (310) | (28) | - | - | (2,139) | (4,163) | |||||||
Total assets | 191,410 | 24,550 | 33,241 | 10,804 | 35,993 | 20,641 | 43,245 | 359,884 | |||||||
Total assets include: | |||||||||||||||
Additions to non-current assets (other than financial instruments and deferred tax assets) | 3,720 | - | - | - | - | - | - | 3,720 | |||||||
Total liabilities | 50,395 | - | - | - | 2,745 | - | 5,780 | 58,920 | |||||||
The amounts provided to the Executive Committee with respect to total assets are measured in a manner consistent with that of the financial statements. These assets are allocated based on the operations of the segment and the physical location of the asset.
Investments in mining and exploration interests (classified as available-for-sale financial assets or financial assets at fair value through profit or loss) held by the Group are classified by geographic segment by reference to the country of the investee's primary listing for quoted investments or the country of operations for unquoted investments.
The amounts provided to the Executive Committee with respect to total liabilities are measured in a manner consistent with that of the financial statements. These liabilities are allocated based on the operations of the segment.
Of the total royalty income, £4.4 million received during the six months to June, 2013 is derived from a single royalty (June 30, 2012: £5.7 million). This income is attributable to the Australian royalty segment.
4 Other losses
Six months ended | |||||
June 30, 2013 | June 30, 2012 | December 31, 2012 | |||
£'000 | £'000 | £'000 | |||
Group | |||||
Net foreign exchange loss | (749) | (239) | (959) | ||
Recovery on permanent write down of royalty instrument | - | 324 | 806 | ||
Impairment of mining and exploration interests | (34,266) | - | (4,011) | ||
(35,015) | 85 | (4,165) | |||
Other losses in the period represent an impairment charge in relation to the Group's strategic mining and exploration interests. These investments are largely by way of listed equity instruments of junior mining companies. Junior mining equities have suffered large declines in recent times.
The Group recognises that, at the current levels and at a defined point in time, this decline in value is considered significant both in terms of the Group's internal impairment review procedures and in the context of IAS 39 and that it is appropriate to reflect an impairment charge accordingly. As the Group still holds these investments with a view to obtaining royalties, it is the Directors' view that the underlying assets of those companies are not impaired and for this reason the directors consider it likely there will be some recovery of value in the future.
The impairment does not impact on the overall net assets, as these investments are carried at open market value at each reporting date. The charge simply extracts the relevant unrealised loss contained within the revaluation reserve and allocates it to retained earnings via the income statement in the period.
5 (Loss)/Earnings per share
The numbers used in calculating basic and diluted (loss)/earnings per share are stated below:
Six months ended | |||||
June 30, 2013 | June 30, 2012 | December 31, 2012 | |||
£'000 | £'000 | £'000 | |||
Net profit attributable to shareholders | |||||
(Loss)/Earnings-basic | (29,966) | 5,149 | 10,057 | ||
(Loss)/Earnings-diluted | (29,966) | 5,149 | 10,057 | ||
June 30, 2013 | June 30, 2012 | December 31, 2012 | |||
Weighted average number of shares in issue | |||||
Ordinary shares in issue | 108,679,443 | 108,263,282 | 108,540,723 | ||
Employee Share Option Scheme | - | 7,492 | 4,423 | ||
108,679,443 | 108,270,774 | 108,545,145 | |||
(Loss)/Earnings per share - basic | (27.57p) | 4.75p | 9.27p | ||
(Loss)/Earnings per share - diluted | (27.57p) | 4.75p | 9.27p | ||
Earnings per ordinary share excludes the issue of shares under the Group's Joint Share Ownership Plan, as the Employee Benefit Trust has waived its right to receive dividends on the 925,933 ordinary 2p shares it holds as at June 30, 2013.
6 Coal royalties
£'000 | |
At January 1, 2012 | 165,967 |
Foreign currency translation | (936) |
Revaluation adjustment | (5,463) |
At June 30, 2012 | 159,568 |
Foreign currency translation | (3,375) |
Revaluation adjustment | 14,802 |
At December 31, 2012 | 170,995 |
Foreign currency translation | (10,847) |
Revaluation adjustment | (10,361) |
At June 30, 2013 | 149,787 |
The coal royalty was valued during June 2013 at £149.8 million (A$249.3 million) by Resource Management International Pty Ltd, independent coal industry advisors, on a net present value of the pre-tax cash flow discounted at a rate of 7%. The net royalty income from this investment is currently taxed in Australia at a rate of 30%. This valuation is incorporated in the accounts and the above revaluation adjustment represents the difference between the opening carrying value and the external valuation, excluding the effects of foreign currency changes. Were the coal royalty to be carried at cost the carrying value would be £0.2 million (2011: £0.2 million). The Directors do not presently have any intention to dispose of the coal royalty.
7 Intangibles
Exploration and | Royalty | ||||
Evaluation Costs | Interests | Total | |||
£'000 | £'000 | £'000 | |||
Gross carrying amount | |||||
At January 1, 2013 | 931 | 73,686 | 74,617 | ||
Additions | 66 | 248 | 314 | ||
Foreign currency translation | - | (3,873) | (3,873) | ||
At June 30, 2013 | 997 | 70,061 | 71,058 | ||
Amortisation and impairment | |||||
At January 1, 2013 | - | (3,209) | (3,209) | ||
Amortisation charge | - | (455) | (455) | ||
Foreign currency translation | - | 39 | 39 | ||
At June 30, 2012 | - | (3,625) | (3,625) | ||
Carrying amount June 30, 2013 | 997 | 66,436 | 67,433 | ||
Gross carrying amount | |||||
At January 1, 2012 | 804 | 70,525 | 71,329 | ||
Additions | 55 | 3,819 | 3,874 | ||
Foreign currency translation | - | (219) | (219) | ||
At June 30, 2012 | 859 | 74,125 | 74,984 | ||
Amortisation and impairment | |||||
At January 1, 2012 | - | (2,191) | (2,191) | ||
Amortisation charge | - | (509) | (509) | ||
At June 30, 2012 | - | (2,700) | (2,700) | ||
Carrying amount June 30, 2012 | 859 | 71,425 | 72,284 |
Exploration and | Royalty | ||||
Evaluation Costs | Interests | Total | |||
£'000 | £'000 | £'000 | |||
Gross carrying amount | |||||
At January 1, 2012 | 804 | 70,525 | 71,329 | ||
Additions | 127 | 3,720 | 3,847 | ||
Foreign currency translation | - | (559) | (559) | ||
At December 31, 2012 | 931 | 73,686 | 74,617 | ||
Amortisation and impairment | |||||
At January 1, 2012 | - | (2,191) | (2,191) | ||
Amortisation charge | - | (1,018) | (1,018) | ||
At December 31, 2012 | - | (3,209) | (3,209) | ||
Carrying amount December 31, 2012 | 931 | 70,477 | 71,408 |
The exploration and evaluation costs comprise expenditure that is directly attributable to the Trefi and Panorama coal projects in British Columbia, Canada.
Royalty interests represent the net smelter return royalties acquired on the Four Mile project in South Australia, the Salamanca uranium project in Spain, the Black Thor, Black Label and Big Daddy chromite projects in Northern Ontario, Canada and a number of tenements in the Athabasca Basin region of Canada, together with the gross revenue royalties covering the Amapá iron ore system in Brazil, the Isua iron ore project in Greenland, the Mt Ida magnetite iron ore project in Western Australia and three exploration licences, including the Railway iron ore deposit, in the central Pilbara region of Western Australia.
The net smelter royalties on the exploration licences in the Athabasca Basin region of Canada remain impaired as a result of the inherent uncertainty of these licences entering commercial production and have a carrying value of nil (December 2012: nil). The Group will continue to review the development of these licences on an annual basis.
The Amapá royalty interest is the only producing interest and therefore, subject to amortisation. Amortisation of the remaining interests will commence once they begin commercial production. No intangible assets have been pledged as security for liabilities.
8 Mining and exploration interests
(a) Available for sale | |
£'000 | |
Fair value | |
At January 1, 2012 | 64,303 |
Additions | 18,977 |
Disposals | (4,882) |
Impairment of mining and exploration interests | - |
Revaluation adjustment | (14,062) |
Foreign currency translation | (45) |
At June 30, 2012 | 64,291 |
Additions | 4,804 |
Disposals | (11,776) |
Impairment of mining and exploration interests | (4,013) |
Revaluation adjustment | 2,569 |
Foreign currency translation | (330) |
At December 31, 2012 | 55,545 |
Additions | 971 |
Disposals | (6,979) |
Impairment of mining and exploration interests | (34,266) |
Revaluation adjustment | 11,221 |
Foreign currency translation | (478) |
At June 30, 2013 | 26,014 |
The Group's investments are acquired as part of the Group's strategy to acquire new royalties and are not held for the purpose of trading. Gains may be realised where it is deemed appropriate. The fair values of listed securities are based on quoted market prices. Unquoted investments and royalty options are initially recognised using cost where fair value cannot be reliably determined. In the absence of an active market for these securities, the Group considers each unquoted security to ensure there has been no material change in the fair value since initial recognition.
(b) Fair value through profit and loss | |
£'000 | |
At January 1, 2012 | 248 |
Additions | - |
Disposals | - |
Revaluation adjustment | - |
At June 30, 2012 | 248 |
Additions | - |
Disposals | - |
Revaluation adjustment | - |
At December 31, 2012 | 248 |
Additions | - |
Conversion to intangible - royalty | (248) |
Revaluation adjustment | - |
At June 30, 2013 | - |
A non-repayable convertible instrument was acquired by the Group in 2007. The convertible instrument was designated as fair value through profit or loss. This convertible instrument was created to provide finance to a listed mining development company and was convertible into equity in the company or royalties over the company's properties at the Group's option for a period of up to five years. The instrument was initially recognised using cost as fair value could not be reliably determined. Prior to the instrument's expiration in November 2012, the Group notified the underlying company of its intention to convert the instrument to royalties. The conversion was completed in January 2013.
Total mining and exploration interests are represented by:
June 30, 2013 | June 30, 2012 | December 31, 2012 | |||
£'000 | £'000 | £'000 | |||
Quoted investments | 23,396 | 63,006 | 51,547 | ||
Unquoted investments | 2,138 | 805 | 3,518 | ||
Royalty Options | 480 | 728 | 728 | ||
26,014 | 64,539 | 55,793 |
9 Deferred tax
The following are the major deferred tax liabilities/(assets) recognised by the Group and the movements thereon during the period:
Coal royalties | Available-for sale-investments | |||||||
Revaluation | Effects of | Revaluation | Revaluation | Accrual of | ||||
of coal | Tax losses | of royalty | of mining | royalty | ||||
royalty | instruments | interests | receivable | Total | ||||
£'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |||
At January 1, 2012 | 49,272 | (724) | 4,897 | (302) | 1,097 | 54,240 | ||
Released to income for the year | - | - | - | - | (1,127) | (1,127) | ||
(Credit)/Charge to equity for the year | (1,639) | 110 | (1,234) | (4,975) | - | (7,738) | ||
Foreign currency translation | (280) | 4 | - | 33 | (46) | (289) | ||
At June 30, 2012 | 47,353 | (610) | 3,663 | (5,244) | (76) | 45,086 | ||
Coal royalties | Available-for sale-investments | |||||||
Revaluation | Effects of | Revaluation | Revaluation | Accrual of | ||||
of coal | Tax losses | of royalty | of mining | royalty | ||||
royalty | instruments | interests | receivable | Total | ||||
£'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |||
At June 30, 2012 | 47,353 | (610) | 3,663 | (5,244) | (76) | 45,086 | ||
Released to income for the year | - | - | - | (893) | 266 | (627) | ||
(Credit)/Charge to equity for the year | 4,441 | (9) | 295 | 301 | - | 5,028 | ||
Foreign currency translation | (1,013) | 15 | - | 24 | 19 | (955) | ||
At December 31, 2012 | 50,781 | (604) | 3,958 | (5,812) | 209 | 48,532 | ||
Released to income for the year | - | - | - | (5,475) | 295 | (5,180) | ||
Charge/(Credit) to equity for the year | (3,108) | 566 | (244) | 4,478 | - | 1,692 | ||
Foreign currency translation | (3,254) | 38 | - | 15 | (38) | (3,239) | ||
At June 30, 2013 | 44,419 | - | 3,714 | (6,794) | 466 | 41,805 | ||
10 Outstanding share data
As at August 29, 2013 there were 109,605,376 ordinary 2p shares outstanding. Anglo Pacific Group PLC has no other class of shares in issue. All shares have the same voting rights.
The Group operates two equity-settled share-based compensation plans as follows:
· The HMRC approved Company Share Ownership Plan (the "CSOP"); and
· The Joint Share Ownership Plan (the "JSOP") operated through the Anglo Pacific Group Employee Benefit Trust (see note 9).
As at August 29, 2013, there are currently 77,681 share options outstanding under the CSOP, with exercise prices ranging from £2.50 to £3.29.
11 Own shares held
Following approval at the 2010 Annual General Meeting the Group established the Anglo Pacific Group PLC Employee Benefit Trust (the "Trust") to be used as part of the remuneration arrangement for employees. The purpose of the Trust is to facilitate and encourage the ownership of shares by or for the benefit of employees by the acquisition and distribution of shares in the Group.
At June 30, 2013 the Trust held 925,933 (December 31, 2012: 925,933) ordinary 2p shares in Anglo Pacific Group PLC.
12 Events occurring after period end
There are no events occurring after the period end, which require disclosure.
13 Principal risks and uncertainties
The Group's normal business risks and the strategic risks are set out in the Our Strategy section on pages 4 and 5 of the Annual Report for the year ended December 31, 2012. In addition to these risks, the Board has identified, inter alia, four main macro-economic risks that could affect the Group's performance:-
(i) A prolonged, world-wide economic recession
(ii) Sustained low commodity prices
(iii) A fall in precious metal prices
(iv) Currency volatility
Measures taken by the Board to manage these risks include:-
· Regular mining project management meetings and discussions
· Regular documented project review meetings
· Substantial cash holdings
· A diversified portfolio of projects covering a number of commodities and geographical areas
· Substantial exposure to gold and other precious metals
· Regular review of sovereign risk
· Cash being held at a number of banks and stockbrokers in a variety of currencies and short term financial instruments
The Board is also aware of the need for succession planning and the associated risks to the Group are under constant review. Further appointments will be made to the Board as required.
14 Availability of financial statements
This announcement will be available from the Company's website, www.anglopacificgroup.com, from the date of this statement and copies will be available upon request from the Company Secretary at the Company's registered office at 17 Hill Street, London, W1J 5LJ.
Independent review report to the members of Anglo Pacific Group PLC
Introduction
We have reviewed the condensed set of financial statements in the half-yearly financial report of Anglo Pacific Group PLC for the six months ended June 30, 2013 which comprises the consolidated income statement, consolidated statement of comprehensive income, consolidated balance sheet, consolidated statement of changes in equity, consolidated cash flow statement and the related notes. We have read the other information contained in the half yearly financial report which comprises only Business and Finance Review and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
This report is made solely to the company's members, as a body, in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information performed by the Independent Auditor of the Entity'. Our review work has been undertaken so that we might state to the company's members those matters we are required to state to them in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our review work, for this report, or for the conclusion we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.
As disclosed in note 1, the annual financial statements of the group are prepared in accordance with International Financial Reporting Standards as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union.
Our responsibility
Our responsibility is to express a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity'. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended June 30, 2013 is not prepared, in all material respects, in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.
GRANT THORNTON UK LLP
AUDITOR
LondonAugust 29, 2013
Cautionary statement on forward-looking statements and related information
Certain information contained in this press release, including any information as to future financial or operating performance and other statements that express management's expectation or estimates of future performance, constitute "forward looking statements". The words "expects", "anticipates", "plans", "believes", "estimates", "seeks", "intends", "targets", "projects", "forecasts", or negative versions thereof and other similar expressions identify forward-looking statements. Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable by management, are inherently subject to significant business, economic and competitive uncertainties and contingencies. Further, forward-looking statements are not guarantees of future performance and involve risks and uncertainties which could cause actual results to differ materially from those anticipated, estimated or intended in the forward-looking statements. The material assumptions and risks relevant to the forward-looking statements in this press release include, but are not limited to: stability of the global economy; stability of local government and legislative background; continuing of ongoing operations of the properties underlying the Group's portfolio of royalties in a manner consistent with past practice; accuracy of public statements and disclosures (including feasibility studies and estimates of reserve, resource, production, grades, mine life, and cash cost) made by the owners or operators of such underlying properties; no material adverse change in the price of the commodities underlying the Group's portfolio of royalties and investments; no material adverse change in foreign exchange exposure; no adverse development in respect of any significant property in which the Group holds a royalty or other interest, including but not limited to unusual or unexpected geological formations and natural disasters; successful completion of new development projects; planned expansions or additional projects being within the timelines anticipated and at anticipated production levels; and maintenance of mining title. If any such risks actually occur, they could materially adversely affect the Group's business, financial condition or results of operations. For additional information with respect to such risks and uncertainties, please refer to the "Risk Factors" section of our most recent Annual Information Form available on www.sedar.com and the Group's website www.anglopacificgroup.com. Readers are cautioned to consider these and other factors, uncertainties and potential events carefully and not to put undue reliance on forward-looking statements. The forward-looking statements contained in this press release are made as of the date of this press release only and the Group undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events.
Standards of disclosure for mineral projects
National Instrument 43-101 - Standards of Disclosure for Mineral Projects ("NI 43-101") contains certain requirements relating to the use of mineral resource and mineral reserve categories of an "acceptable foreign code" (as defined in NI 43-101) in "disclosure" (as defined in NI 43-101) made by Anglo Pacific Group PLC with respect to a "mineral project" (as defined in NI 43-101), including the requirement to include a reconciliation of any material differences between the mineral resource and mineral reserve categories used under an acceptable foreign code and the standards developed by the Canadian Institute of Mining, Metallurgy and Petroleum, as the CIM Definition Standards on Mineral Resources and Mineral Reserves adopted by CIM Council, as amended (the "CIM Standards") in respect of a mineral project. Pursuant to an exemption order granted to Anglo Pacific Group PLC by the Ontario Securities Commission (the "Exemption Order"), the information contained herein with respect to the Kestrel mine, the Ring of Fire Project and the Jogjakarta Iron Sands and Pig Iron Project has been extracted from information publicly disclosed, disseminated, filed, furnished or similarly communicated to the public by an issuer whose securities trade on a "specified exchange" (as defined under NI 43-101) that discloses mineral reserves and mineral resources under one of the JORC Code, the PERC Code, the SAMREC Code, SEC Industry Guide 7 or the Certification Code (each as defined in NI 43-101). As the definitions and standards of the JORC Code, the PERC Code, the SAMREC Code, SEC Industry Guide 7 and the Certification Code are substantially similar to the CIM Standards, a reconciliation of any material differences between the mineral resource and mineral reserve categories reported under the JORC Code, the PERC Code, the SAMREC Code, SEC Industry Guide 7 and the Certification Code, as applicable, to categories under the CIM Standards is not included and no Form 43-101F1 technical report will be filed to support the disclosure based upon such exemption.
Rio Tinto Limited and Indo Mines Limited are both listed on the Australian Securities Exchange and report in accordance with the JORC Code. Cliffs Natural Resources Inc. is listed on the New York Stock Exchange and reports in accordance with SEC Industry Guide 7. Orvana Minerals Corp is listed on the Toronto Stock Exchange and reports in accordance with NI 43-101.
Cautionary note to U.S. investors concerning estimates of measured, indicated and inferred resources:Certain technical disclosure in this press release has been prepared in accordance with the requirements of Canadian securities laws, including NI 43-101, in certain cases as modified by the Exemption Order referred to above, which differ from the requirements of U.S. securities laws. This press release uses the terms "measured resources", "indicated resources" and "inferred resources". U.S. investors are advised that while such terms are recognised and required by Canadian Securities laws, the Securities and Exchange Commission does not recognise them. "Inferred resources" have a great amount of uncertainty as to their existence and as to their economic and legal feasibility. It cannot be assumed that all or any part of an inferred resource will be upgraded to a higher category. Under Canadian Securities laws, estimates of inferred resources may not form the basis of feasibility or other economic studies. U.S. investors are cautioned not to assume that all or any part of measured resources or indicated resources will ever be converted into reserves. U.S. investors are also cautioned not to assume that all or any part of an inferred mineral resource exists, or is economically or legally mineable.