By Barbara Lewis
LONDON (Reuters) – Anglo Pacific Group is looking to expand in battery metals such as vanadium and lithium, or in potash or uranium, as the London-listed company capitalises on financial strains in the mining industry to snap up royalty deals.
The firm reported on Wednesday a 16 percent rise in 2018 revenues from mining royalties to 46 million pounds ($61 million), a record for the second straight year, and proposed a 14 percent dividend increase for shareholders.
Royalties, which provide the holder with the right to a share of revenue, profit or production, are increasingly being sold off by smaller miners struggling to raise capital for their projects.
Julian Treger, chief executive of Anglo Pacific, the only London-listed mining royalty company, said he expected this year’s results to be even higher as the Kestrel coal mine in Australia, its flagship royalty stream, is expected to raise output by around 40 percent.
By the end of the year, Treger said Anglo Pacific should have a $150 million warchest to spend on expansion.
Last year’s record revenue was driven by coal and vanadium.
Vanadium prices have fallen this year as some of the excitement around the mineral’s potential use for battery storage has waned, but Treger said he would consider buying another vanadium royalty at the right “entry point”.
Other options could be lithium, potash or uranium.
Treger said he wanted to reduce the share of coal, which is shunned by many investors, although that can make it a good source of income.
“What’s happening in the coal market is coal is becoming a scarce commodity, so the price is going to be higher for longer,” Treger said. “People with existing coal mines will have bigger margins, although it’s going to be very hard to build new mines.”
Treger predicts broader commodity shortages eventually as investors steer clear of the mining sector whose risks have been highlighted this year by the Vale dam disaster in Brazil, which killed an estimated 300 people.
“The sector has been set up for a tremendous scarcity of supply,” Treger said.
At 0957 GMT, Anglo Pacific’s shares were up 3 percent at 167 pence, building on gains of 11 percent so far this year.
BMO Capital markets, which rates Anglo Pacific “outperform”, said it appeared “well set for a year of strong free cash flow with expectations of continued earnings growth”.
(Reporting by Barbara Lewis; Editing by Mark Potter)