Anglo Pacific Group PLC (LON:APF) has today announced that it has increased its total investment in Labrador Iron Ore Royalty Corporation by a further ~US$7.1 million (C$9.8 million,~£5.8 million) since the announcement of the Group’s 2019 interim results on 22 August 2019. To date in 2019 the Company has invested a total of ~US$20.0 million (C$26.7 million, ~£15.8 million) in LIORC.
Commenting on the investment, Julian Treger, Chief Executive Officer of Anglo Pacific Group, said:
“The global sell off in the equity markets at the beginning of Q3 2019 provided an attractive entry point for Anglo Pacific to opportunistically add to its LIORC position as we considered that the underlying fundamentals of the royalty and iron ore product fitted within our return requirements at such price levels. In this respect, we have made what we believe to be conservative assumptions about the iron ore and pellet prices going forward. The acquisition is immediately cash generative and will be accretive to our earnings in FY 2019 and beyond.
We will continue to opportunistically add to our position depending on the share price and our own liquidity, in the meantime we will allocate our cash towards shareholder returns, repaying our borrowings and making other royalty acquisitions to continue the considerable progress we have made in diversifying our sources of income.”
The Group has acquired a further ~1 million shares since the beginning of 2019, and when added to our investment during 2018 results in a 5.88% interest in LIORC at a total cost of ~US$70.0 million (C$92.8 million, ~£54.7 million). At the close of trading on Friday 13 September the Group’s investment in LIORC had a market value of ~US$76.3 million (C$101.9 million, ~£60.3 million)
LIORC has a policy of paying quarterly dividends and on 12 September 2019 announced cash dividends for the third quarter of 2019 of C$1.00 per common share, comprised of a regular dividend of C$0.25 and a special dividend of C$0.75. Anglo Pacific’s total investment will qualify for this dividend which will be additive to the Company’s third quarter income. Since the initial acquisition in August 2018 the Group has received dividends of C$8.9 million (£5.2 million) from LIORC.
LIORC is listed on the Toronto stock exchange (TSX:LIF) and has a market capitalisation of approximately C$1.7 billion and is essentially a pass through vehicle of the income it derives from the Labrador Iron Ore mine in Canada operated by Rio Tinto.
Anglo Pacific continues to view this investment as an attractive addition to its portfolio, with revenue from LIORC continuing to outperform the Company’s expectations. LIORC provides exposure to the premium end of the iron ore concentrate and high margin pellet markets, on terms which are immediately accretive. LIORC mainly receives revenue from its 7% GRR over the Labrador Iron Ore mine. It also receives dividends from its minority equity interest in the mine.
The additional investment was funded with cash on-hand and a partial draw down on the Company’s revolving credit facility and follows the 1.525% Net Smelter Return royalty acquisition over all copper produced at the Mantos Blancos copper mine announced at the end of last month. The Group retains access to ~US$35 million under its current revolving credit facility.
