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Anglo Pacific Group PLC

Consolidated Financial Statements

Management's Discussion and Analysis

This Management's Discussion and Analysis ("MD&A") of financial position and results of operation of Anglo Pacific Group PLC ("Anglo Pacific Group", "the Group", "we" or "our") has been prepared based upon information available to the company as at May 16, 2011 and should be read in conjunction with the Group's unaudited quarterly consolidated financial statements and related notes as at and for three months ended March 31, 2011.

Readers are cautioned that this MD&A contains forward-looking statements and that actual events may vary from management's expectations. Readers are encouraged to read the Cautionary statement on forward-looking statements and related information included with this MD&A and to consult the Group's audited financial statements for the year ended December 31, 2010 and the corresponding notes to the financial statements which are available on the Group's website at www.anglopacificgroup.com and on www.sedar.com.

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

Anglo Pacific Group PLC

Consolidated Financial Statements

Management's Discussion and Analysis

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.

Who we are

We are a royalty company specialising in royalties derived from the mining of natural resources. Within this sector we have a diverse portfolio that spans different commodities including coal and a variety of metals. We also invest internationally from the Americas to Europe and Australasia and our portfolio includes both producing mines and development projects.

Our objective is simple - to build a diverse portfolio of royalties that will generate growing, long-term returns for our shareholders.

Our strategy for growth

We are developing our royalty portfolio through three primary routes:

1. Acquiring existing royalty agreements

2. Creating new royalties by financing development

3. Developing royalty opportunities through equity investments

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.

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 based on the gross sales value of the actual mineral. Our model is based around GRR or NSR royalties as they provide the best and clearest return.

Acquiring existing royalties

In this case we buy existing royalty agreements, such as those owned by exploration companies who may have retained an interest in a mine they helped discover. Once acquired, royalty companies rarely sell their agreements.

Creating new royalties

Our new royalty agreements tend to come from providing financing to mining operations, usually to help them progress a mine into production. We also make equity investments, which provide opportunities to create new royalty agreements.

Anglo Pacific Group PLC

Consolidated Financial Statements

Management's Discussion and Analysis

Acquisitions

On January 12, 2011 the Group completed the previously announced Royalty Option Agreement with Horizonte Minerals plc ("Horizonte") for the Group to purchase a NSR royalty on all revenues from the advanced exploration stage Araguaia and Lontra Nickel Projects ("Araguaia Project") in Brazil. The Group paid Horizonte the sum of US$0.5 million in exchange for the six year option to acquire a 1.5% NSR royalty from the Araguaia Project for US$12.5 million.

The Group are continually evaluating opportunities and during the quarter sent out a number of proposals for the creation and acquisition of royalties which would further diversify the Group's royalty portfolio and grow future revenues.

Financial performance

Royalty revenue of £9.9 million for the quarter compared to £4.6 million in the first quarter of 2010.

Despite the floods in Queensland in January 2011 which caused some short-term disruption to output at both Kestrel and Crinum mines, the Group has received record coal royalties for the three months ended March 31, 2011 of £9.4 million compared to £4.6 million for the three months ended March 31, 2010.

Kestrel coal royalties in the three months ended March 31, 2011 were £5.6 million (A$8.9 million) compared to £3.4 million (A$5.8 million) for the three months ended March 31, 2010. Production at Kestrel remained entirely in private royalty coal areas during the current quarter. Overall saleable production decreased 12% when compared to the three months ended March 31, 2010 however as a result of the wet weather and overall production problems in coking coal mines of Central Queensland March quarterly price negotiations have resulted in an increase in prices to circa US$328 per tonne, compared to spot prices circa US$220 per tonne at the same time last year. Industry consensus on coking coal prices currently indicate they will remain high for 2011 due to continuing supply difficulties in Queensland. Recent media reports state that the planned Kestrel expansion is still currently scheduled to come on-stream in early 2013.

Crinum coal royalties in the three months ended March 31, 2011 were £3.8 million (A$6.1 million) compared to £1.2 million (A$3.4 million) for the three months ended March 31, 2010. Most of the Group's private royalty coal at Crinum has now been extracted, with the exception of some remnant coal, the workability of which would require further evaluation and is currently uncertain.

The Amapá Iron Ore System royalty acquired in November 2010 commenced payment during the three months ended March 31, 2011 and royalties of £0.5 million were received in this period. This was in line with management expectations.

Group royalty revenue for the three months ended March 31, 2011 was £9.9 million compared to £4.6 million for the three months to March 31, 2010. When combined with cash flows from royalty debentures during the year of

Anglo Pacific Group PLC

Consolidated Financial Statements

Management's Discussion and Analysis

£0.1 million (March 31, 2010: £0.1 million) total royalty cash flow per share for the three months ended March 31, 2011 was 9.21p compared with 4.56p for the three months ended March 31, 2010.

Realised gains on disposal of mining and exploration interests during the quarter were £4.4 million compared with £12.6 million for the three months ended March 31, 2010. These gains were the result of the disposal in active junior mining markets of some of the Group's successful mining investments where the acquisition of royalties was unlikely.

Overall the Group's profit before tax for the three months ended March 31, 2011 was £13.3 million compared to £17.8 million for the three months ended March 31, 2010 and Group earnings per share for the three months ended March 31, 2011 was 9.72p compared to 15.47p for the first quarter of 2010.

Financial position

Total assets of £426.3 million at March 31, 2011 compared to £415.6 million at December 31, 2010.

At March 31, 2011 the Group's Australian coal royalty interests have been independently valued at £197.4 million compared to £177.1 million at December 31, 2010. The increase was due to higher forecast prices being incorporated into the independent valuation. The Group's royalty instruments following fair value adjustments were valued at £27.9 million at March 31, 2011 compared to £28.1 million at December 31, 2010.

The total cost of royalties treated as intangibles was £42.1 million at March 31, 2011, the same as at December 31, 2010. As part of a bi-annual impairment review at December 31, 2010 a directors' valuation of these royalties was undertaken using a discounted cash flow valuation model which used forecast commodity prices and management's best estimate of an appropriate discount rate taking into account project-specific risk factors. At this date the directors' valuation of these assets was £54.2 million.

Anglo Pacific Group PLC

Consolidated Financial Statements

Management's Discussion and Analysis

At March 31, 2011, the Group's quoted and unquoted equity investments, including royalty options, were valued at £122.7 million compared with £128.5 million at December 31, 2010. The private equity interests and royalty options remain accounted for at cost.

At March 31, 2011 the Group had cash of £22.5 million compared to £28.3 million at December 31, 2010, with no borrowings or hedging. When combined with royalty and trade receivables, total cash and receivables at March 31, 2011 was £33.7 million compared to £37.1 million at December 31, 2010. The Group has limited capital expenditure requirements other than for the acquisition of additional royalties. Management believe that the Group's current cash resources and future cash flows will be sufficient to cover the cost of general and administrative expenses, income taxes and dividend payments. The Group remains debt free and its liquid resources are held in a spread of currencies and financial institutions. The Group's mining interests and royalty revenues are mainly denominated in Australian and Canadian dollars.

The Group's total assets at March 31, 2011 were £426.3 million compared to £415.6 million at December 31, 2010. As at the period end this does not include any increase in value over cost that may be attributable to the Group's royalty intangibles or the Panorama and Trefi coal projects.

Dividends

Following approval at the Annual General Meeting, the Board will pay the final dividend for the year ended December 31, 2010 on July 6, 2011 to shareholders on the Group's share register at the close of business on May 6, 2011. The shares were quoted ex dividend on the London Stock Exchange (LSE) and the TSX on May 4, 2011. In light of the current share price the Board have decided not to offer shareholders the opportunity to elect to receive new shares instead of cash.

Outlook

The Group continues to identify a range of new royalty opportunities. Management believes the Group is well placed with its cash resources and strong royalty revenues to continue its growth strategy.

Anglo Pacific Group PLC

Consolidated Financial Statements

CONSOLIDATED INCOME STATEMENT (UNAUDITED)

Anglo Pacific Group PLC

Consolidated Financial Statements

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)

Anglo Pacific Group PLC

Consolidated Financial Statements

Anglo Pacific Group PLC

Consolidated Financial Statements

Anglo Pacific Group PLC

Consolidated Financial Statements

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED) FOR THE FIFTEEN MONTHS ENDED MARCH 31, 2011

Anglo Pacific Group PLC

Consolidated Financial Statements

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED) FOR THE FIFTEEN MONTHS ENDED MARCH 31, 2011

Anglo Pacific Group PLC

Consolidated Financial Statements

CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED)

Anglo Pacific Group PLC

Consolidated Financial Statements

CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED)

1 Summary of significant accounting policies

1.1 Basis of preparation

These interim, condensed consolidated financial statements of Anglo Pacific Group PLC are for the three months ended March 31, 2011. They have been prepared in accordance with IAS 34 'Interim Financial Reporting'. 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, 2010.

These 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, 2010.

This condensed consolidated quarterly 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, 2010 were approved on March 8, 2011. These 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.

2 Critical accounting estimates and judgements

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

2.1 Critical accounting estimates and assumptions

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates and assumptions will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below:

(a) Review of asset carrying values and impairment charges and

Anglo Pacific Group PLC

Consolidated Financial Statements

reversals.

(b) Recoverability of deferred tax assets.

2.2 Critical judgements in applying the Group's accounting policies

Areas of judgement that have the most significant effect on the amounts recognised in the financial statements are:

(a) Classification of mining and exploration interests;

(b) Classification of royalty instruments and royalty interests.

The Directors review the nature of those royalty agreements to determine which class of asset they fall under. For those royalties acquired which give the Group a straight royalty with no conversion rights to shares for example, these are classified as a royalty interest within intangibles.

Where an agreement has a convertible option within it, the contracts are reviewed to determine whether the option is closely related or not to the host contract. This will determine whether the assets should be classified as a derivative at fair value through profit and loss or an available for sale financial asset with an embedded derivative.

(c) Review of assumptions underlying the independent coal industry advisors' valuation of the Kestrel and Crinum coal royalty.

(d) Review of assumptions underlying the valuation of royalty instruments and their associated embedded derivative.

Anglo Pacific Group PLC

Consolidated Financial Statements

The Directors review the latest available mine plans and obtain independent foreign exchange and commodity price forecasts to determine each of the royalty instruments carrying value at reporting date.

(e) Review of asset carrying values and impairment charges and reversals.

(f) Recognition of deferred tax liabilities and the continued application of relevant exemptions.

3 Non-current assets

(a) Coal Royalties

The Group's coal royalties comprise the Kestrel and Crinum coal royalties in Queensland, Australia.

The Group commissioned a valuation of the coal royalties as at March 31, 2011, based on a net present value of the pre-tax cash flow discounted at a rate of 7%, which produced a valuation of A$307.0 million (£197.4 million). At present the net royalty income is taxed in Australia at a rate of 30%. Were the coal royalties to be realised at the revalued amount there are £2.4 million (A$3.7 million) of capital losses potentially available to offset against taxable gains. These losses have been included in the deferred tax computation.

(b) Royalty Instruments

Royalty instruments represent the Group's interests in four mineral properties which, through the issue of convertible debentures, the Group has acquired GRR or NSR royalties. These are the Engenho property in Brazil, the El Valle property in Spain, the Jogjakarta Iron Sands Project in Indonesia and the Midway-McKenzie Break properties in Canada. In the Group's latest annual financial statements for the year ended December 31, 2010, these interests were described as "Royalty Instruments". No change has been made to the accounting treatment of these interests.

(c) Intangibles

Intangible royalty interests represent the GRR and NSR royalties acquired on the Four Mile Project in South Australia, the Salamanca Uranium Project in Spain, the Railway Deposit in Western Australia and the Amapá Iron Ore System in Brazil.

Acquisition costs of royalty interests on feasibility stage mineral properties are not amortised. At such time as the associated mineral interests are placed into production, the cost basis is amortised over the expected life of mine. Amortisation rates are adjusted on a prospective basis for all changes to estimates of the life of mine.

Also included within intangibles are the deferred exploration costs of £688,000 (March 31, 2010: £864,000) associated with the Group's Panorama and Trefi Projects in British Columbia, Canada.

(d) Mining and Exploration Interests

Anglo Pacific Group PLC

Consolidated Financial Statements

The investments in securities included above represent investments in listed and unlisted equity securities which are acquired as part of the Group strategy to acquire new royalties. Gains may be realised where it is deemed appropriate by the Investment Committee. The fair values of these securities are based on quoted market prices for listed securities and cost for unlisted securities based on the variability of cash flows being so significant that an alternative valuation technique would not provide a useful value. The fair values are reviewed for impairment biannually. In the statement of changes in equity these interests are classified as "available-for-sale investments". For a full explanation of the Group's accounting policies in relation to the Mining and Exploration interests please see the 2010 Annual Report.

4 Earnings per ordinary share

The earnings per ordinary share is calculated on the Group's profit after tax of £10,573,000 (March 31, 2010: £16,620,000) and the weighted average number of shares in issue during the quarter of 108,771,332 shares (March 31, 2010: 107,469,580). Diluted earnings per ordinary share is calculated on a profit after tax of £10,573,000 (March 31, 2010: £16,620,000) and 108,789,179 shares (March 31, 2010: 107,469,580).

Earnings per ordinary share excludes the issue of shares under the Company's Joint Share Ownership Plan, as the Employee Benefit Trust has waived its right to receive dividends on the 864,258 ordinary 2p shares it holds as at March 31, 2011.

The numbers used in calculating basic and diluted earnings per share are restated below:

5 Royalty cash flow per share

Anglo Pacific Group PLC

Consolidated Financial Statements

The Group's management considers royalty cash flow per share to be a useful measure of the performance of the Group's assets. Changes in equity market conditions lead to annual fluctuations in gains on sale of mining and exploration interests, and while these gains can be significantly value accretive for shareholders, the Group's management focus remains on increasing the Group's cash flows from royalties. In addition, the classification of the Group's royalty instruments as repayable debentures results in cash flows which are classified as repayments until the principal and interest are repaid. As a result, the combination of royalty income and cash received from the debenture repayments during the year form the numerator for this metric. Both of these components are calculated before tax.

The numbers used in calculating the basic and diluted royalty cash flow per share are stated below:

6 Segment information

Management has determined the operating segments based on the reports reviewed by the Executive and Investment committees that are used to make strategic decisions. The committees 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 and Investment committees for the reportable segments for the three months ended March 31, 2011 is as follows:

Anglo Pacific Group PLC

Consolidated Financial Statements