Anglo Pacific - a seductive 8% yielder

Anglo Pacific: After the recent equity raise, we now have the annual results to 31^st December 2014. This is a case of looking back on a horrible time, but looking forward to more optimistic times. Apart from low commodity prices in 2014, Anglo Pacific was hit by low royalties from Kestrel (coking coal), where Rio Tinto, as operator, was mining mainly outside Anglo’s land.  This year (and beyond) Rio are moving back onto Anglo’s land and have agreed to give Anglo more forecast information on future mining plans. Anglo has also managed to diversify its portfolio, increasing it to six producing royalties, as against three a year ago. This total includes the new long-life Narrabri (thermal coal) royalty, recently bought for $65m. None of this hides the fact that life has been grim. The loss for the year was £47.6m, slightly worse than the £42.5m last time, but these were after hefty impairment charges of £31.5m and £34.6m respectively. The cash balance at year-end was down to £8.8m from £15.7m. A final dividend of 4p, makes a total of 8.45p, still substantial, but down on last year’s 10.2p.

Moving forward the dividend policy is set out to be progressive, based on 65% of adjusted earnings, with a medium term annual minimum of 8p. Whilst the words ‘medium term’ raises a slight worry about this year, I may be just worrying too much. However, on current forecasts an 8p dividend in 2015 would be uncovered again. Looking out to 2016, a possible 11.5p of eps would almost cover the 8p at a 65% payout. All this is very subject to commodity prices, but a recent recovery in coal settlement prices offers hope. Eighteen months into the job Julian Treger has wrought some significant changes for the better. It is flagged that they would like to acquire an interest in the copper market. He has rather nailed his colours to the mast over that yield, which, at the possible nadir of the commodity markets, is a very seductive income stream. (Neil Cumming^, 25^th March 2015)

These comments are not a personal recommendation to deal. Any investments can fall as well as rise in value, so you could get back less than you invest. I may have a financial interest in some of the stocks written about. www.dividendpower.co.uk or e-mail at info@dividendpower.co.uk  Twitter:  @DividendPower