Anglo Pacific Share Discussion Threads

[the deacon] 17/8/2021 09:02

https://www.bloomberg.com/news/articles/2021-08-17/glencore-acquires-stake-in-u-k-battery-maker-britishvoltBritishvolt securing long term supply of cobalt

[piedro] 17/8/2021 00:12

PRESS RELEASE DETAILS
ORVANA REPORTS EL VALLE PLANT TEMPORARY STOPPAGE
08/16/2021
Legacy Open Pit Wall Failure impacted East Border of Tailings Storage Facility Underground Mining Continues in Normal Course ....

[laurence llewelyn binliner] 16/8/2021 19:24

#illiswilgig, exactly why we have a go at forecasting, and if we are off, then why, and go again until it is closer then use that information to position and get ahead of the share price . :o)

I had GBP10-11 down for Q2, which came in at 9.6M, I was off but it turned out to be mostly due to the VB deliveries and not a full quarters Cobalt received by the cut off date..

On that note, I think you could be light on your LIORC estimate, this is why..

The Q2 dividend of CAD1.75 per share went XD on 29.06.2021, we still held our c1M shares at the Q2 update to 30.06.2021 and the dividend was paid 26.07.2021 inside our Q3, so this GBP1M is already in the pot .. :o)

If LIORC gets sold in our Q3/Q4 the next XD is 29.09.2021 which may or may not pull the average back some..

[illiswilgig] 16/8/2021 18:24

Cocopah - regarding China imports. I looked into this briefly at the time. Kestrel output has mainly been destined for India, Japan and maybe some to Europe.

As China still needs the same amount of coal - if not more - the main effect has been to divert US and other exports towards China where they can now earn a premium, and for Australian coal that can't get into China to replace the US and other trade. Some crazy global merry-go-round of coal ships.

China does seem to be accepting Australian shipments when it suits them despite the ban still being in place.

The world is still using the same amount of coal - and maybe more, sadly - the net result of all this seems to be to tighten coal prices rather than loosen them,

Of course with China anything can happen - and it probably will.

Hope this helps

cheers

[illiswilgig] 16/8/2021 18:13

LLB - yes I also added a few.

Since we are in full disclosure mode. I don't really do quarters. To much varibility? Here is my H2 'back of an envelope' pro-rata'd for Q3

Please don't take this as meaning I have any special insight - I don't. It's amazing what you can whip up on a spread-sheet these days. My main aim is to establish how far out my projections are and to correct them for the future.

Royalties
VB - 2.9
Kestrel - 9.25
LIORC - 0.25
Narribri - 0.875
Mantos Blancos - 0.6
Maracas Menchen - 0.15
McLean Lake – Interest - 0.475
Four Mile - 0.055
Royalty Rev - 14.555

EVBC - 0.5
McLean Lake – repayment - 0.375

Total Rev - 15.43

Surprised how close it is to your estimate. But then I guess fools seldom differ much.........

Sorry for the mis-post I tried to paste in the figures and the page decided I meant post it. Hopefully this now has the figures - not that they are worth much....

cheers

[illiswilgig] 16/8/2021 18:07

LLB - yes I also added a few.

Since we are in full disclosure mode. I don't really do quarters. To much varibility? Here is my H2 'back of an envelope' pro-rata'd for Q3

Please don't take this as meaning I have any special insight - I don't. It's amazing what you can whip up on a spread-sheet these days. My main aim is to establish how far out my projections are and to correct them for the future.

Royalties
VB
Kestrel
LIORC
Narribri
Mantos Blancos
Maracas Menchen
McLean Lake – Interest
Four Mile
Royalty Rev
EVBC
McLean Lake – repayment

Total Rev

[cocopah] 16/8/2021 17:51

LLB I seem to remember that there was a block on coal being shipped from Australia to China from mid-2020 onwards … when I read the article below it made me think of our investment in Kestrel … I assume that there are no shipment and sales issues?

[laurence llewelyn binliner] 16/8/2021 17:02

As we have got a handle on Kestrel income and how it is calculated, another look at Q3 potential income:

Kestrel | GBP 7.5M (at USD150 per tonne)
Narrabri | GBP 1M
Mantos Blancos | GBP 1.2M
Maracás Menchen | GBP 0.5M
Four Mile | tbc
Voiseys Bay |GBP 3.5M
LIORC dividends | GBP 1M
McClean Lake - Interest | GBP 0.4M
McClean Lake - Principal repayment | tbc
EVBC | GBP 0.5M

Total portfolio contribution | GBP 15.6M (with upside from Kestrel if coal prices stay around where they are)

Q1-2021 | GBP 6.8M
Q2-2021 | GBP 9.4M

So we are now looking at a much stronger Q3, and could be close to double Q2.., on that basis I added today filled at 131p in the last auction... :o)

[cocopah] 16/8/2021 16:47

Great posts LLB, Illiswilgig & StevieBlunder … instead of having to guesstimate wouldn’t it be great if APF gave a monthly update (say) on Kestrel and VB income (the two biggest income drivers). It would stabilise the share price and give comfort to the owners (us) that income goals were likely or unlikely to be achieved and keep traders away (who can only be gambling anyway). We have this merry dance every quarter for no purpose. If there are stock market rules or RNSs required, so be it (though I don’t think so because I invest in SEQI who do a comprehensive monthly NAV update with detail on income, investments and settlements). Just my opinion but the BOD are here for their owners IMHO. 🤷‍a94;️

[illiswilgig] 16/8/2021 15:18

Thank you both for your detailed posts.

Nice usernames both by the way!

My comment that Kestrel might suprise to the upside is based upon H1 2019 Australian Hard Coking Coal prices in the range 190 USD/mT - 214 USD/mT (FOB) Source - IEA 2020report and APF royalty in H1 2019 of 22.7m GBP - as a comparator.

At the start of H2 2021 coking coal prices shot up to above 200 USD/mT and have so far - ok thats only 6weeks so far) stayed above 200 USD/mT

If they stay above 200 USD/mT APF royalty could meet or exceed the 22.7m GPB of H12019.

This is not intended to be a prediction - just an observation that at current prices the Kestrel royalty increases very rapidly and that the mine may choose to try to maximise sale contracts whilst the price is high?

That's the upside. I reworked my figures for a higher price a couple of weeks ago and pencilled in H2 APF royalty of 18.5m - pro-rata 9.25m for Q3.

Shamefully your excellent work has shown me that I forgot to convert to AUD to calculate the royalty APF can expect to receive. The good news is that I underestimated APF royalty at these high prices.

Having included the conversion to and from AUD (my figures are the same as those Stevie gives but my base case contract price is USD190 rather than USD150) - my calclation now gives

At price of 190 USD/mT I estimate APF royalty is 10.9 USD/mT and at output of 2.5m mT

H2 royalty of 19.56m GBP (27.2m USD) or
Q3 royalty of 9.7m GBP pro-rata.

At 200 USD/mT and 3m mT output that increases significantly - H2 royalty

25m GBP for H2
12.5m for Q3

I am not suggesting that these upside figures will be achieved - just to show that at these prices APF royalty increases significantly due to increasing contribution from the 15% top rate.

If

[1] prices remain above 200 USD /mT
[2] Kestrel chooses to increase output or decrease stockpiles into the higher prices
[3] GBP does not strengthen further against the USD

then Kestrel royalty has the potential for significant upside surprise,

Hopefully I've not made that too confusing?

cheers

[laurence llewelyn binliner] 16/8/2021 10:41

#Stevie Blunder, nice handle BTW... :o)

I was hoping someone else would have a go at the Kestrel income forecast, thanks for adding, and by 2 different methods we have pretty much come in at the same number for H2..

Let us see how it pans out at Q3, but either way it is looking a lot stronger than the Q2 income number..

[stevie blunder] 16/8/2021 09:14

Hi LLB,
Thanks for all your informative postings :)

My understanding of the royalty on Kestrel is that APF own half the royalty. So that the %ages work out as 3.5% below AD 100, 6.25% above 100 but below 150, and 7.5% above 150 AUD. But the royalty applies to all the coal mined on APF owned land, so one does not need to account for the ownership structure.

My estimate at say USD 150 or 203 AUD would be

3.5% of 100 = 3.5 AUD
6.25% of 50 = 3.125
7.5% of 53 = 3.975
--------
total 10.6 AUD = 7.81 USD per T


If production for Q3 is a quarter of the projection of 5.74Mt at 1.43 Mt then total royalty would be 7.81 x 1.43 = 11.17 M USD = 8.09 M£

Looking good.

[laurence llewelyn binliner] 15/8/2021 10:02

#illiswilgig, on Kestrel - APF royalty is for 7% of value up to and including AUD100 per tonne, 12.5% of the value over AUD100 and up to and including AUD150, and 15% thereafter..

Met coal current prices are around USD150 per tonne or AUD200 (FX of 1:1.38), but achieved prices are dependant on the quality/quantity that gets sold and sulphur levels, to calculate earnings from the royalty and ownership structure I think it is 48% of 80% (Adaro share is 38.4% of total production) but we are in the highest royalty rate for starters.. :o)

In 2019, Kestrel coal sales were 6.50 Mt
In 2020, Kestrel coal sales were 5.97 Mt
In 2021, Kestrel saleable coal production target is 5.74 Mt

H2-2021 could give us a nice surprise as prices are now at the 2019 level where income was Q3 - GBP7.5M / H2 of GBP15M, volumes around -15% but on todays prices if my maths is correct then we could see GBP17M from Kestrel for H2..

GBP16.2M for H1 2021, and possibly Q3/Q4 of GBP14/15M each with full quarters income of GBP3.5M from VB included..

The Q3 update will give us a much stronger picture of where we are and I am looking forward to seeing what the full portfolio can crank out..

[buywell3] 14/8/2021 21:32

EV's and AV's will be using cobalt free batteries

[illiswilgig] 14/8/2021 18:27

Kestrel has the possibility to surprise on the upside in H2 ?

Met coal prices are currently USD220 and have been mostly above USD200 since the start of H2?

If there is full output of 3m tonnes and prices remain above USD200 then APF royalty could exceed the £22.6m of H1 FY19 ?

Plenty of time to go for the price to soften - but perhaps the most important point is that Q3 payment from Kestrel is likely to be high based upon the July and August prices already in the bag?

cheers

[cocopah] 14/8/2021 16:27

#LLB we are not far apart as I am thinking £13m income a quarter for the last two quarters this year (so £26m for H2) which should just about do it. I do think that anything under £22m would be disappointing but anything above £25m would (I still think) be good enough to service the divi and potentially put us on track for a sustainable share price of £1.60 by year-end … and we can build from there. As ever you are more clued-up on the detail and it will be interesting to see how we intend to finance any future increase in investment at Piaui.

[laurence llewelyn binliner] 14/8/2021 11:04

#Cocopops, with 212M shares in ussue (4.7M in treasury) and 9p a share for FY21 dividends the payout is around GBP19M to cover it once, and with earnings of c40M, debt interest comes off the top line and deductable so there is some wiggle room for reducing the principle.., but not a whole lot though..

USD 20M needed for tranche 2 at Incoa
USD 70M needed for tranche 2 at Piaui if we take it up, which I am sure we will as the pilot plant starts to deliver for us next year..

In December 2020 BRN completed a USD27.57M equity raise to enable it to finalise the Bankable Feasibility Study (BFS) and begin construction of the PNP 1000.
US25DM of the funding came from the U.S. International Development Finance
Corporation through BRN’s funding partner TechMet Limited.
BRN has begun the final phase of a BFS on the project, in parallel with the BFS BRN plans to expand the existing demonstration plant by a factor of 10, this will expand the production at the demo plant to 1,400T of Ni a year, for a capital cost of just US$ 16 million. PNP1000 is profitable at prices above US$ 10,400/t. This expansion can be implemented in only 12 months without the need for any further study and using existing environmental permits, and would thus jump-start BRN project to immediate producer status..

APF has a 1.25% GRR on the project and the right to increase this investment by a further USD70M for a total gross royalty of 4.25% upon the satisfaction of certain developmental milestones.

The full scale project is for 25,000 tonnes a year of contained nickel and 900 tonnes of contained cobalt, with production targeted for end 2024..

Another USD20M a year income / GBP15.0M at current prices substituting Kestrel as it winds off in the same year..

-------------------

At Largo... In Q2 2021 the Company concluded the commissioning and ramp up activities associated with its kiln and cooler upgrades, including improvements of the mining, crushing and milling circuits to support a new nameplate production capacity of 1,100 tonnes of V2O5 per month, we expect to reach the new nameplate capacity in Q3 2021..

We are also pleased to report that commissioning of the Company’s V2O3 processing plant has begun and production is expected by the end of the third quarter..

Anglo Pacific has a 2% NSR royalty on ALL mineral products sold from the area of the Maracás Menchen project to which the royalty interest relates..

-------------------

As some of our royalties get up to full capacity and firmer prices filter down into payments, I am expecting to see around GBP25M income from H2-2021..

[cocopah] 13/8/2021 21:24

It’s tight, very tight, however as passive investors we can only hope/trust that Q3 contribution comes in at £13m so that the market believes/sees that we can meet the divi from income and start to reduce the debt burden. As long as that happens all will be good. Until then I don’t see much of a recovery in the s/p. Tbf I need to see that income delivered too! It’s all about execution now.🤞ㇿ5;

[mrmytton] 13/8/2021 18:46

Agreed - with the transition from carbon to renewables timing is everything. Trusting JT to get it right

[laurence llewelyn binliner] 13/8/2021 18:16

128/129p was bought into PDQ..., H1 financials in c10 days and we can see what the BOD have been up to, where we are on any new royalties, progress on developing royalties, and LIORC...

[johnrxx99] 13/8/2021 16:41

I've decided to stick with it for the reasons mentioned by you guys (and gals) at least for 2021. Having looked back over the company's releases I'm sure they are headed in the right direction even if not at the pace I'd like.

[illiswilgig] 13/8/2021 07:38

John - I am with you on that. APF is the last of my holdings with exposure to the old economy. And that only because the company has already demonstrated its commitment to transition.

Sentiment is changing and it will only become a bigger issue as the cost of problems caused by continued cheap fossil fuelled growth are laid bare. I suspect that the APF shareprice is already held back somewhat by sentiment.

It will be a tight few months with high dividend payments to make and payments on new acquisitions/loans whilst staying within debt covenants - which makes it very hard to sell anything that disrupts income streams right now - but I think it will look very different in 12 months time.

Good luck whatever you decide,

cheers

[the deacon] 13/8/2021 07:15

Wheaton - Voiseys Bay report:Voisey's Bay: In the second quarter of 2021, the Voisey's Bay mine produced 380,000 pounds of attributable cobalt. As at the end of the second quarter 2021, approximately 134,000 pounds of cobalt were held in inventory by Wheaton and 777,000 pounds were produced but not delivered. As per Vale's Second Quarter 2021 Performance Report, physical completion of the Voisey's Bay underground mine extension, which includes developing two underground mines - Reid Brook and Eastern Deeps - was 66% at the end of the second quarter. Reid Brook produced its first ore in June of 2021, and Vale reports that Eastern Deeps is expected to start up in 2022.

[the deacon] 12/8/2021 12:05

*exposure - typo

[the deacon] 12/8/2021 12:05

Indeed. If only there was a way to get exposing to royalties on some of the best nickel, cobalt, vanadium etc operations globally...It won't be long until APF is an ESG/green/renewables investors dream...