Half-year Report

RNS Number : 0782I
Anglo Pacific Group PLC
25 August 2016
 

August 25, 2016

 

Anglo Pacific Group PLC

Interim results for the six months ended June 30, 2016

Headlines:

 

Results for the half year

 

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Outlook

 

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Julian Treger, Chief Executive Officer, commented:

 

 

1 Refer to pages 7 and 8

2 Refer to page 8 and note 5 to the financial statements

 

Analyst conference call:

 

There will be an analyst presentation via webcast at 09:30 (BST) on August 25, 2016 at www.anglopacificgroup.com. The presentation will be hosted by Julian Treger (CEO), Kevin Flynn (CFO) and Juan Alvarez (Head of Investments). Dial in details for the call are shown below and a replay of the webcast will also be available at www.anglopacificgroup.com.

 

Dial in number:

020 3059 8125 (United Kingdom local)   

+ 44 20 3059 8125 (all other locations)

 

Participant Password:

"Anglo Pacific" - this must be quoted to the Operator in order for participants to gain access to the conference

 

 

For further information:

 

Anglo Pacific Group PLC

 

+44 (0) 20 3435 7400

Website:               

 

www.anglopacificgroup.com

 

BMO Capital Markets Limited

+44 (0) 20 7664 8020

 

 

Macquarie Capital (Europe) Limited

 

+44 (0) 20 3037 2000

 

+44 (0) 20 7418 8900

 

 

Bell Pottinger

                +44 (0) 20 3772 2500

 

 

 

Notes to editors:

About Anglo Pacific

Royalties explained

 

Acquiring existing royalties

Creating new royalties

Business review

 

Anglo Pacific enjoyed a solid start to 2016 with an increase in both royalty income and net assets in the period. The outlook for the remainder of the year, and for 2017, is encouraging following a noticeable improvement in coal prices recently and the positive impact of a weaker pound when translating the Group's dollar derived revenue. Absent any weakening in commodity prices or a significant strengthening of the pound, royalty income for FY 2016 is expected to be significantly higher than 2015.

 

Another highlight in the year to date has been the share price performance. This has benefitted from a general recovery in the commodity and mining sectors in the year to date along with the decision by the UK to leave the EU, which has prompted investors to give a higher rating to companies less exposed to sterling. On a micro level, the market reacted favourably to the publication of the Kestrel mine plan by Rio Tinto which contained, for the first time, the private royalty boundaries. This enabled all stakeholders to see first-hand the direction of mining at Kestrel towards the Group's private royalty land, explaining why income from Kestrel over the last number of years has decreased and, in turn, providing greater confidence in the Group's future income growth. The recent decision by the Bank of England to cut interest rates to a historically low level should also make the Group's dividend attractive to those searching for yield.

 

It is pleasing to see the gap between the Company's share price and balance sheet net asset per share narrow during the period. It is the Group's view that there is additional value in its royalty portfolio which is not reflected in the balance sheet valuation which could provide further upside over the coming years, as discussed in the finance review below.

 

Operational performance

Anglo Pacific expects 2016 to show a similar trend to 2015 with royalty income heavily weighted to the second half of the year as mining from Kestrel was largely outside of the Group's private royalty land during the first half of both 2015 and 2016. This should be the last time that the Group reports such seasonality in its Kestrel royalty income, as it expects mining to be mainly within its private royalty land going forward. The diagram below shows the location of mining at Kestrel compared to the Group's royalty area, which clearly illustrates the reasons for the discrepancies between H1 and H2 of 2015 and 2016 and the reason for the Group's confidence going into the H2 2016 and beyond.

 

http://www.rns-pdf.londonstockexchange.com/rns/0782I_-2016-8-24.pdf

 

 

The Narrabri North mine ("Narrabri") continued to perform strongly in H1 2016 and should benefit from the rally in thermal coal prices at the beginning of the third quarter. The main positive for the Group at Narrabri continues to be production upside associated with both their recently announced permitting increase and the widening of their long wall infrastructure. As a result, production should continue to exceed the level which the Group anticipated at the time of acquiring the royalty and this should, over time, more than compensate for short-term commodity price volatility.

 

The Group has three other producing royalties in Maracás Menchen ("Maracás"), Four Mile and EVBC. Although income from Maracás has been impacted by the current vanadium price weakness, it is very encouraging to see Largo Resources Limited ("Largo"), the operator, announce recent record production numbers, which clearly demonstrates that the operation is now heading towards intended nameplate capacity. Four Mile has begun contributing to the Group's income, albeit at low initial levels, and should increase as long-term supply contracts are negotiated. EVBC continues to be consistent, and should benefit from the higher gold price seen to date in H2 2016.

 

Commodity prices

In addition to the positive underlying operational performance, the outlook for commodity prices, namely coking and thermal coal, which underlie the Group's royalty income, has improved noticeably.

 

The Q3 2016 benchmark coking coal price settled at US$92/t which is a 14% increase on the Q1 2016 price of US$81/t, and the recent spot price reached as high as US$110/t which represents a 15% and 29% increase on the Q3 2016 and Q1 2016 contract prices respectively. The price has benefitted from Chinese supply cuts, which have resulted in higher levels of imports in Q2 2016.    

 

Thermal coal has also benefitted from recent Chinese supply cuts, which has seen seaborne prices rise sharply since the half year. The spot price has recently moved back into the mid US$60/t range from the low to mid US$50/t levels on average in the first six months.

 

Foreign exchange and Brexit

In considering the performance of the Group's royalty portfolio in the first six months of the year it is worth noting that the Group's income is largely priced in US dollars. The average exchange rate (GBP:USD) for the first six months was 1.43, which only included one week of the weaker pound following the EU referendum vote on June 23, 2016. The closing rate at June 30, 2016 was 1.34, some 6% lower than the average rate, and this has weakened further during the third quarter of 2016.

 

A weaker pound should benefit the Group's reported income in the second half of 2016, especially if the pound continues to trade around the current level, which is reasonably likely in the short-term following the increase in interest rates in the US and the recent reduction of interest rates in the UK. As the Group is effectively a dollar denominated business, the impact of Brexit should have a dual benefit to the Company in the near-term in that a weaker pound will result in higher levels of reported profits and assets and, following the recent further cut in interest rates as a result of Brexit, the Group's dividend should be even more attractive in light of a longer period of lower returns on cash. It remains to be seen what the longer-term impact of Brexit will have on both the UK and the Company.

 

Balance sheet, cash resources and net asset value

The balance sheet at June 30, 2016 benefitted from foreign exchange as the majority of the Group's assets are dollar denominated.

 

The other noticeable increase at the end of June was the market value of the Group's equity portfolio, which increased in value by £4.6m. This increase is mainly attributable to the Group's 15% holding in Berkeley Energia Limited ("Berkeley") which had increased in value by 57% in the first six months of the year and a further ~15% since. This is largely due to the positive updates by Berkeley in advancing its Salamanca uranium project towards production, including the announcement of additional reserves at Zona 7, the publication of a Definitive Feasibility Study and the successful raising of a US$10.0m financing package.

 

Net debt at June 30, 2016 was £5.0m, a £3.2m increase from the year end following the payment of the dividend in February 2016. Total debt increased by a further £3.6m in August 2016 following the payment of the Group's 2015 final dividend. Subject to commodity prices, exchange rates and business growth requirements, the total level of borrowings should now gradually begin to reduce as free cash flow increases.

 

Overall, net assets increased to £164.8m at June 30, 2016 from £162.0m at the beginning of the year. This equates to a net asset value per share of 97p.

 

Outlook

The general market environment for the mining sector has seen marked improvement in the year to date. From a persistent mood of gloom surrounding commodities and mining companies' prospects at the beginning of the year, reflected in historically low equity prices, markets have seen a strong rebound in equity prices accompanied by much improved commodity prices on the whole. Whilst markets will no doubt continue to experience volatility, a greater degree of confidence will see a more dynamic deal environment. The Group is seeing more opportunities to invest in attractive propositions, as balance sheet pressure and financing needs continue, and is optimistic that it will be able to conclude value accretive transactions in the months to come.

 

As regards the Group's existing portfolio, the combination of a weaker pound, increased production from Kestrel and Narrabri and a more favourable outlook for coking and thermal coal should result in the Group reporting a noticeable increase in revenue for 2016 as a whole.

 

Investment Review

 

Producing royalties

 

·      Kestrel, Queensland, Australia - Coking Coal

 

Royalty income from the Kestrel mine during the first six months of 2016 totalled £1.4m (H1 2015: £1.0m). On July 19, 2016, Rio Tinto released its Second Quarter Operations Review which reported production of 1.99Mt of coal (1.7Mt of hard coking coal and 0.3Mt of thermal coal) in H1 2016 compared to 2.25Mt (1.96Mt of hard coking coal and 0.3Mt of thermal coal) for the corresponding period in 2015. Approximately 37% of coal sales were mined from within the Group's private royalty land during the period compared to 22% during 2015. The drop in tonnes comes in spite of the continued longwall ramp up at the operations and is primarily due to the timing of the longwall changeout from LW403 to LW404.

 

The Group's guidance on the proportion of tonnes mined within its private royalty land remains unchanged at 85% to 90% for H2 2016, 60-65% for the full year 2016, and over 90% by the end of 2017.

 

For further information, please see www.riotinto.com.

 

Narrabri North, New South Wales, Australia - Thermal and PCI Coal

 

Royalty income in the first six months of 2016 from the Narrabri mine was £1.6m (H1 2015: £1.8m). Saleable coal production from Narrabri during the period was 3.5Mt (2015: 4.1Mt) and coal sales were 3.8Mt (2015: 3.9Mt). The drop in saleable coal production was expected by Whitehaven Coal Limited ("Whitehaven") as there were two longwall changeouts during the period, both completed on time and on budget, and full longwall production has now resumed.

 

On February 5, 2016, Whitehaven announced its intention to extend the Narrabri North longwall panels into the Narrabri South area, and that work to integrate Narrabri South into existing operations at Narrabri North had commenced. Drilling to convert Narrabri South Mineral Resources to Mineral Reserves is scheduled to occur during Whitehaven's fiscal year ending June 30, 2017.

 

The project to widen the longwall face to 400 metres (from 300 metres), leading to increased ROM coal production rates, appears to be on schedule and on budget with first production from the first 400 metre wide panel (LW07) expected to commence in the second half of FY2017.

 

For further information, please see http://www.whitehavencoal.com.au.

 

Maracás Menchen, Brazil - Vanadium

 

Royalty income in the first six months of 2016 from the Maracás mine was £0.2m (H1 2015: £0.4m). To date, Largo has announced production up to June 2016 of 3,480 tonnes of V2O5 from Maracás, including a new record monthly production record of 801 tonnes in June. Largo has issued production guidance for 2016 in the range of 7,639 tonnes and 8,639 tonnes of V2O5. This has been offset by a weaker vanadium price in H1 2016 compared to the same period in H1 2015.

 

On May 26, 2016, Largo announced an update to the mine plan and Mineral Reserves of the project. The Proven and Probable Mineral Reserves for the Campbell Pit at Maracás have increased by 40% to 18.4 million tonnes from the 13.1 million tonnes established previously although Largo now expect the mine life to be reduced slightly to 15 years at a production rate of 9,600 tonnes V2O5 per annum.

 

For further information, please see www.largoresources.com.

 

·      El Valle-Boinás/Carlés, Spain - Gold/Copper/Silver

 

During the six months to June 30, 2016, the Group received royalty receipts of £0.6m (H1 2015: £0.6m) from the El Valle-Boinás/Carlés Mine ("EVBC"). During the first six months of 2016, EVBC produced 21,581 ounces of gold, 1.80Mlbs of copper and 64,757 ounces of silver compared with 26,371 ounces of gold, 2.91Mlbs of copper and 82,227 ounces of silver during the same period in 2015. Despite this, the gold price has, on average, been higher during H1 2016 compared to H1 2015.

 

In July 2016, Orvana Minerals Corp ("Orvana") announced a USD$12.5m Prepayment Facility with Samsung C&T. The proceeds are expected to be invested with a view to deliver increased production and lower unit costs at the El Valle/Boinás mine, and possibly support the restart of mining activities at the Carlés mine which was put into care and maintenance in February 2015.

 

For further information, please see www.orvana.com.

 

·      Four Mile, South Australia, Australia - Uranium

 

The Four Mile Uranium Mine ("Four Mile") commenced sales of uranium ore concentrate ("UOC") in late 2015 and during the six months to June 30, 2016, the Group received maiden royalty receipts of £0.2m from Quasar Resources Pty Ltd ("Quasar").  Despite the recent weakness in the spot price during the ramp-up at Four Mile, down from US$36.00/lbs in December 2015 to US$28.25/lbs in June 2016, the outlook on the long term contract price remains relatively stable.

 

Development royalties

 

·      Salamanca, Spain - Uranium

 

On July 14, 2016, Berkeley announced the results of a Definitive Feasibility Study ("DFS") on its Salamanca project. The DFS reports that the project is capable of producing an average of 4.4Mlbs of saleable uranium per annum over ten years of steady state production, or an average of 3.5Mlbs of uranium per year over a 14-year mine life. This is significantly higher than the rate of production assumed when the Company acquired the royalty in 2009 due to the considerable increase in resource discovered by Berkeley over the past 12 months. First production, and hence first generation of royalty income for the Company, is expected in 2018.

 

For further information on the project please see www.berkeleyenergia.com.

 

·      Groundhog, British Columbia, Canada - Anthracite

 

In April 2016, the Group settled the outstanding amount due under its promissory note receivable from Atrum Coal NL ("Atrum") by way of US$0.6m in cash along with the issue of a new royalty on the Groundhog anthracite project as follows:

 

·      0.5% GRR covering all production within Atrum's Groundhog Anthracite Project ("Groundhog") tenements from first production until ten years from the date that Atrum declares commercial production on the project; and subsequently

·      0.1% GRR from production within the Groundhog North Mining Complex project area.

 

In addition, the Group retained a royalty on certain Groundhog tenements following its disposal of the related mining licenses in 2014 to Atrum. The royalty entitles the Group to the higher of 1% of gross revenue on a mine gate basis or US$1/t from coal sales based on production within these licenses.

 

On June 9, 2016, Atrum announced a revised PFS which outlined an underground project capable of producing 880ktpa of ultra-high grade anthracite over a mine life of 28 years.

 

Finance review

 

Anglo Pacific reported a 6% increase in royalty income in H1 2016 compared to the same period in 2015. The Group's income benefitted from stronger operational performance at Kestrel, which also contributed to a doubling in free cash flow generated by the Group. The balance sheet benefitted from a weaker pound at the reporting date following the EU referendum result which significantly increased the value of the Group's dollar denominated assets.

 

Income Statement

 

Royalty income £'000

 

H1 2016

H1 2015

%

H2 2015

2015

1,433

1,027

+ 40%

2,587

3,614

1,607

1,799

- 11%

1,418

3,217

598

627

- 5%

619

1,246

246

375

- 34%

231

606

191

-

-

-

-

4,075

3,828

+ 6%

4,855

8,683

 

Royalty income increased by £247k in the period to £4,075k, an increase of 6%. This is largely as a result of additional mining within the Group's private royalty land at Kestrel which increased to 37% in H1 2016 from 22% in H1 2015. Similar to 2015, the majority of the Group's royalty income for 2016 is expected to be received in the second half of the year. Importantly, this should be the last reporting period where there is a significant discrepancy between the public and private royalty area, as mining is expected to be mainly within the Group's private royalty land from this point onwards. This should drive significant revenue growth in the years ahead. This should also be assisted by a recovery in the price of coking coal, which has increased by ~14% in the year to date. The recent spot price is currently trading well above the Q3 2016 contract price, driven by supply side cuts by China which is having a positive impact on the price of seaborne coal. This should translate into a higher Q4 2016 contract price in due course.

 

Although the price of thermal coal rallied since the end of the second quarter, the lower thermal coal prices during the first half of the year impacted royalty income from Narrabri, however, this was partially offset by a slight increase in tonnage sold. More importantly for the Group is the production upside associated with the royalty. Whitehaven have increased the permitting at the mine from 8Mtpa to 11Mtpa which, when aided by the upsized modification to the longwall infrastructure, should result in higher levels of production than assumed by the Group at the time the royalty was acquired. This acceleration of production should result in higher royalty revenues in the years ahead.

 

Royalty income from EVBC in the first half of the year was consistent with the same period in 2015. The gold price has increased considerably in the year to date and should continue to benefit the Group in the second half of the year.

 

Royalty income from Maracás contributed £246k in the period compared to £375k in H1 2015. The vanadium price continues to trade at much lower levels compared to the price when the royalty was acquired. Despite this, there have been a number of positive developments in relation to this royalty during the period. Largo has made considerable progress in ramping up production, and reported a record month of production in June, which was running close to nameplate capacity. This should benefit the Group in the second half of the year.

 

The Group received its first royalty receipts from Four Mile during the period of £191k. The Group expects that this income will gradually ramp up over time as the operator secures longer-term supply contracts.

 

The Group continued its focus on costs during the first half of the year. Overheads were consistent with the previous year and this will continue to be an ongoing area of focus going forward. The other noticeable item in the income statement in the period is the £1.2m foreign exchange credit reflecting the weakening of the pound, particularly in the last week in June following the outcome of the EU referendum.

 

Adjusted earnings in the period were £2.4m (after current tax of £0.8m) resulting in adjusted earnings per share of 1.43p. This is ahead of the £1.6m and 1.04p respectively in H1 2015. Taking into account the amortisation charge, non-cash share based payments, the Kestrel revaluation and associated deferred tax resulted in an overall loss after tax for the period of £5.4m compared to a loss of £8.8m in the first half of 2016 equating to a basic loss per share of 3.18p (H1 2015: 5.81p).

 

Balance sheet

 

Net assets increased to £164.8m at the end of June from £162.0m at the beginning of 2016. There were two main reasons for this increase: the impact of the closing GBP:AUD exchange rate post the outcome of the EU referendum; and the significant increase in Berkeley's share price in the first six months of the year.

 

Net asset value reconciliation

GBP:AUD

£'000

£'000

Pence per share

January 1, 2016

2.0281

 

161,983

95p

Kestrel:

 

 

 

 

Coal price (Income Statement)

 

(10,161)

 

 

FX on retranslation from AUD to GBP (OCI)

 

9,612

 

 

Deferred tax (income Statement)

 

3,004

 

 

Deferred tax (OCI)

 

(2,843)

(388)

 

Foreign exchange on translation of royalties

 

 

8,988

 

Amortisation of royalties

 

 

(1,339)

 

Equity portfolio increase

 

 

4,608

 

Adjusted earnings

 

 

2,418

 

Dividends

 

 

(11,830)

 

Other

 

 

339

 

June 30, 2016

1.7995

 

164,779

97p

 

As can be seen in the table above, the weakening of the pound against the dollar denominated currencies has benefitted the Group at the end of June. Although revisions to the longer-term coking coal price reduced the underlying value of the Kestrel royalty by £10.1m during the period, as recognised in the income statement, this deficit was virtually reversed in full on the balance sheet, through the unrealised foreign exchange gain on retranslation from Australian dollars to pounds at the period end.

 

The majority of the Group's other royalties are denominated in Australian dollars, which also benefitted from retranslation gains of £9.0m at June 30, 2016. The dividend of £11.8m reflects the payment of the 2015 interim dividend in February 2016 of 4.00p per share (£6.8m) and the final dividend for 2015 of 3.00p per share (£5.0m) which was accrued at June 30, 2016, but not at December 31, 2015, following its approval at the AGM in May 2016.

 

The other noticeable increase in the period was the £4.6m increase in value of the Group's non-core equity portfolio. The vast majority of this is in relation to the Group's 15% holding in Berkeley, which has increased in value significantly in the period following previously announced progress at their Salamanca project, which the Group also has a royalty over. At June 30, 2016 the value of the Group's equity stake in Berkeley was £11.3m. This has increased in value further since the half year and currently valued at £13.5m.

The Group ended the period with net assets per share of 97p, a slight increase from the 95p reported at the year end. The Directors consider there to be further inherent value in Anglo Pacific's business as certain of its royalties have, in their view, increased in value since the Group acquired them and this value is not reflected on the balance sheet. One readily observable instance of this is the royalty which Berkeley sold on its Salamanca project in June 2016 which, on an equivalent basis, would value the Group's royalty at some $10m (or approximately three times) higher than the Group's balance sheet value. Other examples include the planned volume increases at Narrabri, which has the impact of accelerating production therefore increasing value, and income commencing at Four Mile which, in addition to the natural unwinding of the discount rate, brings forward the cash flow on a DCF basis. Both acceleration of production and additional reserves naturally increases the value in use to the Group of owning the royalty.

 

Cash flow and net debt

 

The Group generated free cash flow of £3.6m in the first six months of 2016, more than double the £1.7m generated in the first six months of 2015.

 

 

H1 2016

 

H1 2015

Financial resources (£m)

Debt

Cash

 

Debt

Cash

 

 

 

 

 

 

January 1

(7.5)

5.7

 

-

8.8

Royalty receipts

 

4.8

 

 

2.0

Non-royalty asset income

 

0.4

 

 

0.3

Non-core asset disposals

 

-

 

 

1.7

Administrative costs

 

(1.7)

 

 

(2.0)

Tax, FX and other

 

0.2

 

 

0.1

Finance costs

 

(0.1)

 

 

(0.4)

Free cash flow

 

3.6

 

 

1.7

Royalty acquisitions

 

-

 

 

(41.6)

Equity issuance

 

-

 

 

37.4

RCF drawdown

(1.6)

1.6

 

(2.9)

2.9

Dividend

 

(6.8)

 

 

(5.2)

June 30

(9.1)

4.1

 

(2.9)

4.0

 

Free cash flow in 2015 was skewed towards the second half of the year due to the production profile associated with Kestrel. This trend is expected to repeat in H2 2016, following which the Group expects half yearly fluctuations in its income profile to level off as Kestrel moves largely within the Group's private royalty land.

 

The Group received £0.6m in the period in relation to tax owing to it following the overpayment of tax on account in previous periods.

 

The Group ended the period with net debt of £5.0m, which is up £3.2m from the beginning of the year. The increase is largely attributable to the payment of the 2015 interim dividend in February 2016. The Group drew a further £3.6m in August with the payment of the 2015 final dividend leaving net debt outstanding of ~£7.5m at present.

 

Although mindful of not declaring an inflection point, borrowings should begin to decrease from this point onwards, subject to the continuing operations of the business remaining unchanged and no material decrease in commodity prices or exchange rates. With approximately US$13.0m undrawn under the current revolving credit facility, along with further liquidity through the Group's non-core listed equity portfolio, the Directors believe the Group has sufficient cash resources to maintain the dividend at current levels for the foreseeable future.

 

Dividend

 

Principal risks and uncertainties

 

The Group is exposed to a variety of risks and uncertainties which may have a financial, operational or reputational impact on the Group.  The principal risks and uncertainties facing the Group at the year-end were set out in detail in the strategic report section of the Annual Report 2015 and have not changed significantly since.  The principal risks relate to the following:

 

·      Commodity prices

·      Political and regulatory

·      Production

 

Performance measures

 

Adjusted earnings/(loss)

 

Operating profit/(loss)

Free cash flow

Net debt

 

Responsibility statement

 

The Directors confirm that to the best of their knowledge:

 

·     the condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting';

 

·     the interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and

 

·     the interim management report includes a true and fair review of the information required by DTR 4.2.8R (disclosure of related parties' transactions and changes therein).

 

The Directors are listed in the Annual Report of December 31, 2015 and a list of the current Directors is maintained on the Anglo Pacific website: www.anglopacificgroup.com. The maintenance and integrity of this website is the responsibility of the Directors.

 

On behalf of the Board

 

J.A. Treger

Chief Executive Officer

August 24, 2016

 

 

CONDENSED CONSOLIDATED INCOME STATEMENT (UNAUDITED)

FOR THE SIX MONTHS ENDED JUNE 30, 2016

 

 

 

 

Six months ended

 

 

 

June 30, 2016

 

June 30, 2015

 

Notes

 

£'000

 

£'000

 

 

 

 

 

 

Royalty income

 

 

4,075

 

3,828

Amortisation of royalties

 

 

(1,339)

 

(1,344)

Operating expenses

 

 

(1,824)

 

(1,837)

 

 

 

 

 

 

Operating profit before impairments, revaluations and losses on disposals

 

 

912

 

647

 

 

 

 

 

 

Loss on sale of mining and exploration interests

 

 

-

 

(507)

Impairment of mining and exploration interests

 

 

-

 

(128)

Impairment of royalty and exploration intangible assets

 

 

-

 

(2,786)

Revaluation of coal royalties (Kestrel)

 

 

(10,161)

 

(9,074)

Finance income

2

 

70

 

149

Finance costs

3

 

825

 

193

Other income

4

 

179

 

155

 

 

 

 

 

 

Loss before tax

 

 

(8,175)

 

(11,351)

 

 

 

 

 

 

Current income tax charge

 

 

(800)

 

(806)

Deferred income tax credit

12

 

3,595

 

3,333

 

 

 

 

 

 

Loss attributable to equity holders

 

 

(5,380)

 

(8,824)

 

 

 

 

 

 

Total and continuing loss per share

 

 

 

 

 

Basic and diluted loss per share

5

 

(3.18p)

 

(5.81p)

 

 

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)

FOR THE SIX MONTHS ENDED JUNE 30, 2016

 

 

 

 

Six months ended

 

 

 

June 30, 2016

 

June 30, 2015

 

Notes

 

£'000

 

£'000

 

 

 

 

 

 

Loss attributable to equity holders

 

 

(5,380)

 

(8,824)

 

 

 

 

 

 

Items that will not be reclassified to profit or loss

 

 

-

 

-

 

 

 

 

 

 

Items that have been or may be subsequently reclassified to profit or loss

 

 

 

 

 

Available-for-sale investments

 

 

 

 

 

     Revaluation of available-for-sale investments

 

 

4,229

 

(933)

     Reclassification to income statement on disposal of available-for-sale investments

 

 

-

 

507

     Reclassification to income statement on impairment

 

 

-

 

128

Deferred tax relating to items that have been or may be reclassified

12

 

18

 

136

Net exchange gain/(loss) on translation of foreign operations

 

 

15,407

 

(10,421)

Other comprehensive income/(loss) for the year, net of tax

 

 

19,654

 

(10,583)

 

 

 

 

 

 

Total comprehensive income/(loss) for the period

 

 

14,274

 

(19,407)

 

 

CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)

AS AT JUNE 30, 2016

 

 

 

 

June 30,

 

June 30,

 

December 31,

 

 

 

2016

 

2015

 

2015

 

Notes

 

£'000

 

£'000

 

£'000

 

 

 

 

 

 

 

 

Non-current assets

 

 

 

 

 

 

 

Property, plant and equipment

 

 

95

 

131

 

113

Coal royalties (Kestrel)

7

 

82,107

 

100,013

 

82,649

Royalty financial instruments

8

 

16,613

 

7,356

 

6,534

Royalty and exploration intangible assets

9

 

79,791

 

73,727

 

71,491

Mining and exploration interests

10

 

15,506

 

8,149

 

10,898

Deferred costs

 

 

1,120

 

-

 

1,013

Other receivables

 

 

-

 

9,543

 

10,132

Deferred tax

12

 

3,446

 

2,377

 

3,094

 

 

 

198,678

 

201,296

 

185,924

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

Trade and other receivables

 

 

3,132

 

6,604

 

5,106

Cash and cash equivalents

 

 

4,059

 

4,023

 

5,708

 

 

 

7,191

 

10,627

 

10,814

 

 

 

 

 

 

 

 

Total assets

 

 

205,869

 

211,923

 

196,738

 

 

 

 

 

 

 

 

Non-current liabilities

 

 

 

 

 

 

 

Borrowings

11

 

8,900

 

2,625

 

7,272

Other payables

 

 

1,348

 

115

 

1,193

Deferred tax

12

 

23,970

 

29,255

 

24,546

 

 

 

34,218

 

31,995

 

33,011

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

Income tax liabilities

 

 

465

 

662

 

574

Trade and other payables

 

 

6,407

 

8,313

 

1,170

 

 

 

6,872

 

8,975

 

1,744

 

 

 

 

 

 

 

 

Total liabilities

 

 

41,090

 

40,970

 

34,755

 

 

 

 

 

 

 

 

Net assets

 

 

164,779

 

170,953

 

161,983

 

 

 

 

 

 

 

 

Capital and reserves attributable to shareholders

 

 

 

 

 

 

 

Share capital

13

 

3,399

 

3,399

 

3,399

Share premium

13

 

49,211

 

49,211

 

49,211

Other reserves

 

 

49,984

 

25,095

 

29,976

Retained earnings

14

 

62,185

 

93,248

 

79,397

Total equity

 

 

164,779

 

170,953

 

161,983

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED) FOR THE SIX MONTHS ENDED JUNE 30, 2015

 

 

 

 

 

Other reserves

 

 

 

 

 

 

 

 

 

 

Foreign

 

 

 

 

 

 

 

 

 

 

Investment

Share based

 currency

 

 

 

 

 

 

Share

Share

Merger

Warrant

revaluation

payment

translation

Special

Investment in

Retained

Total

 

 

capital

premium

reserve

reserve

reserve

 reserve

 reserve

reserve

own shares

earnings

equity

 

 

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at January 1, 2015

 

2,329

29,328

9,453

143

1,487

678

6,040

632

(2,601 )

113,761

161,250

Loss for the period

 

-

-

-

-

-

-

-

-

-

(8,824)

(8,824)

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

Available-for-sale investments

 

 

 

 

 

 

 

 

 

 

 

 

     Valuation movement taken to equity

 

-

-

-

-

(933)

-

3

-

-

-

(930)

     Transferred to income statement on disposal

 

-

-

-

-

507

-

-

-

-

-

507

     Transferred to income statement on impairment

 

-

-

-

-

128

-

-

-

-

-

128

     Deferred tax

 

-

-

-

-

136

-

1

-

-

-

137

Foreign currency translation

 

-

-

-

-

-

-

(10,425)

-

-

-

(10,425)

Total comprehensive income/(loss)

 

-

-

-

-

(162)

-

(10,421)

-

-

(8,824)

(19,407)

Dividends

 

-

-

-

-

-

-

-

-

-

(11,901)

(11,901)

Issue of ordinary shares

 

1,070

19,883

19,681

-

-

-

-

-

-

-

40,634

Value of employee services

 

-

-

-

-

-

165

-

-

-

212

377

Total transactions with owners of the company

 

1,070

19,883

19,681

-

-

165

-

-

-

(11,689)

29,110

Balance at June 30, 2015

 

3,399

49,211

29,134

143

1,325

843

(4,381)

632

(2,601)

93,248

170,953

 

 

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED) FOR THE SIX MONTHS ENDED DECEMBER 31, 2015

 

 

 

 

 

Other reserves

 

 

 

 

 

 

 

 

 

 

Foreign

 

 

 

 

 

 

 

 

 

 

Investment

Share based

 currency

 

 

 

 

 

 

Share

Share

Merger

Warrant

revaluation

payment

translation

Special

Investment in

Retained

Total

 

 

capital

premium

reserve

reserve

reserve

 reserve

 reserve

reserve

own shares

earnings

equity

 

 

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at June 30, 2015

 

3,399

49,211

29,134

143

1,325

843

(4,381)

632

(2,601)

93,248

170,953

Loss for the year

 

-

-

-

-

-

-

-

-

-

(13,752)

(13,752)

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

Available-for-sale investments

 

 

 

 

 

 

 

 

 

 

 

 

     Valuation movement taken to equity

 

-

-

-

-

1,790

-

48

-

-

-

1,838

     Transferred to income statement on disposal

 

-

-

-

-

(23)

-

-

-

-

-

(23)

     Transferred to income statement on impairment

 

-

-

-

-

802

-

-

-

-

-

802

     Deferred tax

 

-

-

-

-

23

-

-

-

-

-

23

Foreign currency translation

 

-

-

-

-

-

-

1,776

-

-

-

1,776

Total comprehensive income/(loss)

 

-

-

-

-

2,592

-

1,824

-

-

(13,752)

(9,336)

Dividends

 

-

-

-

-

-

-

-

-

-

-

-

Issue of ordinary shares

 

-

-

-

-

-

-

-

-

-

-

-

Value of employee services

 

-

-

-

-

-

465

-

-

-

(99)

366

Total transactions with owners of the company

 

-

-

-

-

-

465

-

-

-

(99)

366

Balance at December 31, 2015

 

3,399

49,211

29,134

143

3,917

1,308

(2,557)

632

(2,601)

79,397

161,983

 

 

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED) FOR THE SIX MONTHS ENDED JUNE 30, 2016

 

 

 

 

 

Other reserves

 

 

 

 

 

 

 

 

 

 

Foreign

 

 

 

 

 

 

 

 

 

 

Investment

Share based

 currency

 

 

 

 

 

 

Share

Share

Merger

Warrant

revaluation

payment

translation

Special

Investment in

Retained

Total

 

 

capital

premium

reserve

reserve

reserve

 reserve

 reserve

reserve

own shares

earnings

equity

 

 

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at January 1, 2016

 

3,399

49,211

29,134

143

3,917

1,308

(2,557)

632

(2,601)

79,397

161,983

Loss for the year

 

-

-

-

-

-

-

-

-

-

(5,380)

(5,380)

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

Available-for-sale investments

 

 

 

 

 

 

 

 

 

 

 

 

     Valuation movement taken to equity

 

-

-

-

-

4,229

-

43

-

-

-

4,272

     Transferred to income statement on disposal

 

-

-

-

-

-

-

-

-

-

-

-

     Transferred to income statement on impairment

 

-

-

-

-

-

-

-

-

-

-

-

     Deferred tax

 

-

-

-

-

18

-

-

-

-

-

18

Foreign currency translation

 

-

-

-

-

-

-

15,364

-

-

-

15,364

Total comprehensive income/(loss)

 

-

-

-

-

4,247

-

15,407

-

-

(5,380)

14,274

Dividends

 

-

-

-

-

-

-

-

-

-

(11,832)

(11,832)

Issue of ordinary shares

 

-

-

-

-

-

-

-

-

-

-

-

Value of employee services

 

-

-

-

-

-

354

-

-

-

-

354

Total transactions with owners of the company

 

-

-

-

-

-

354

-

-

-

(11,832)

(11,478)

Balance at June 30, 2016

 

3,399

49,211

29,134

143

8,164

1,662

12,850

632

(2,601)

62,185

164,779

 

CONDENSED CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED)

FOR THE SIX MONTHS ENDED JUNE 30, 2016

 

 

 

 

June 30, 2016

 

June 30, 2015

 

Notes

 

£'000

 

£'000

 

 

 

 

 

 

Cash flows from operating activities

 

 

 

 

 

Loss before taxation

 

 

(8,175)

 

(11,351)

Adjustments for:

 

 

 

 

 

 

 

(70)

 

(149)

 

 

423

 

417

 

 

(179)

 

(155)

10

 

-

 

507

10

 

-

 

128

9

 

-

 

2,786

7

 

10,161

 

9,074

Depreciation of property, plant and equipment

 

 

17

 

19

9

 

1,339

 

1,344

 

 

354

 

378

 

 

(1,248)

 

-

 

 

 

2,622

 

2,998

 

 

 

 

 

 

 

 

635

 

(1,332)

 

 

167

 

(605)

 

 

3,424

 

1,061

 

 

(172)

 

(857)

Net cash generated from operating activities

 

 

3,252

 

204

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

Proceeds on disposal of mining and exploration interests

10

 

-

 

1,722

9

 

-

 

(41,587)

8

 

116

 

105

 

 

392

 

-

 

 

63

 

50

 

 

70

 

149

Net cash from/(used in) investing activities

 

 

641

 

(39,561)

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

Drawdown of revolving credit facility

11

 

4,400

 

2,863

Repayment of revolving credit facility

11

 

(2,827)

 

-

Proceeds from issue of share capital

13

 

-

 

37,326

6

 

(6,762)

 

(5,140)

 

 

(414)

 

(417)

Net cash (used in)/from financing activities

 

 

(5,603)

 

34,632

 

 

 

 

 

 

Net decrease in cash and cash equivalents

 

 

(1,710)

 

(4,725)

 

 

 

 

 

 

Cash and cash equivalents at beginning of period

 

 

5,708

 

8,769

 

 

 

 

 

 

 

 

61

 

(21)

 

 

 

 

 

 

Cash and cash equivalents at end of period

 

 

4,059

 

4,023

 

 

 

 

 

 

 

 

NOTES TO THE ACCOUNTS

 

1.  Basis of preparation

 

1.2 Going concern

 

 

1.3 Changes in accounting policies

 

The accounting policies used by the Group in these condensed financial statements are consistent with those applied by the Group in its financial statements for the year ended December 31, 2015.  A number of new accounting pronouncements, principally minor amendments to existing standards, became effective on January 1, 2016, and have been adopted by the Group.  The adoptions of these new accounting pronouncements has not had a significant impact on the accounting policies, methods of computation or presentation applied by the Group.

 

The Group has not early adopted any amendment, standard or interpretation that has been issued but is not yet effective.  It is expected that where applicable, these standards and amendments will be adopted on each respective effective date.

 

2              Finance income

 

 

 

June 30, 2016

 

June 30, 2015

 

£'000

 

£'000

 

 

 

 

Interest on bank deposits

45

 

10

Interest on long-term receivables

25

 

139

 

70

 

149

 

 

 

 

3              Finance costs

 

 

June 30, 2016

 

June 30, 2015

 

£'000

 

£'000

 

 

 

 

Professional fees

(229)

 

(310)

Revolving credit facility fees

(63)

 

(77)

Revolving credit facility interest

(131)

 

(30)

 

(423)

 

(417)

 

 

 

 

Net foreign exchange gain

1,248

 

610

 

825

 

193

 

4              Other income

 

Six months ended

 

June 30, 2016

 

June 30, 2015

 

£'000

 

£'000

Group

 

 

 

Effective interest income on royalty financial instruments

116

 

105

Sundry income

63

 

50

 

179

 

155

 

5              Loss per share

 

 

 

June 30, 2016

 

June 30. 2015

 

£'000

 

£'000

Net profit attributable to shareholders

 

 

 

(5,380)

 

(8,824)

(5,380)

 

(8,824)

 

 

June 30, 2016

 

June 30. 2015

Weighted average number of shares in issue

 

 

 

169,016,101

 

151,867,805

-

 

-

Diluted number of shares outstanding

169,016,101

 

151,867,805

 

 

 

(3.18p)

 

(5.81p)

 

 

 

 

 

 

Diluted

 

 

 

Earnings

 

earnings

 

Earnings

 

per share

 

per share

 

£'000

 

p

 

p

Net profit attributable to shareholders

 

 

 

 

 

(5,380)

 

(3.18p)

 

(3.18p)

 

 

 

 

 

Adjustment for:

 

 

 

 

 

1,339

 

 

 

 

-

 

 

 

 

10,161

 

 

 

 

(116)

 

 

 

 

402

 

 

 

 

(3,997)

 

 

 

 

 

 

 

 

 

2,409

 

1.43p

 

1.43p

 

 

 

 

 

 

 

 

 

 

Diluted

 

 

 

Earnings

 

earnings

 

Earnings

 

per share

 

per share

 

£'000

 

p

 

p

Net profit attributable to shareholders

 

 

 

 

 

(8,824)

 

(5.81p)

 

(5.81p)

 

 

 

 

 

Adjustment for:

 

 

 

 

 

1,344

 

 

 

 

507

 

 

 

 

128

 

 

 

 

2,786

 

 

 

 

9,074

 

 

 

 

(105)

 

 

 

 

411

 

 

 

 

(3,736)

 

 

 

 

 

 

 

 

 

1,585

 

1.04p

 

1.04p

6              Dividends

 

7              Coal royalties (Kestrel)

 

£'000

117,097

(8,010)

(9,074)

100,013

763

(18,127)

82,649

9,619

(10,161)

82,107

 

8              Royalty financial instruments

 

£'000

Held at fair value

 

8,142

(931)

145

7,356

(978)

156

6,534

10,133

(339)

285

16,613

 

 

Cost

Royalty

 

Option

Discount

Royalty Valuation

Project

Commodity

'000

Rate

Escalation

Price

Rate

£'000

Engenho1

 

Gold

A$4,000

2.5%

-

A$0.35

-

-

EVBC

Gold

C$7,500

2.5%

3% >U$1,100/oz

C$0.958

8%

3.493

Isua2

Iron ore

A$28,000

1%

-

-

-

-

Jogjakarta

Iron sands

A$5,000

2%

-

A$0.10 - A$0.50

10%

2,987

Dugbe 1

Gold

U$15,000

2%

2.5% >U$1,800/oz

-

12.5%

10,133

 

 

 

 

 

 

 

16,613

 

9              Royalty and exploration intangibles assets

 

Exploration and

 

Royalty

 

 

 

Evaluation Costs

 

Interests

 

Total

Group

£'000

 

£'000

 

£'000

Gross carrying amount

 

 

 

 

 

697

 

96,845

 

97,542

-

 

-

 

-

-

 

-

 

-

-

 

12,927

 

12,927

697

 

109,772

 

110,469

 

 

 

 

 

Amortisation and impairment

 

 

 

 

 

(697)

 

(25,354)

 

(26,051)

-

 

(1,339)

 

(1,339)

-

 

(3,288)

 

(3,288)

(697)

 

(29,981)

 

(30,678)

Carrying amount June 30, 2016

-

 

79,791

 

79,791

 

 

Exploration and

 

Royalty

 

 

 

Evaluation Costs

 

Interests

 

Total

Group

£'000

 

£'000

 

£'000

Gross carrying amount

 

 

 

 

 

697

 

59,705

 

60,402

-

 

44,971

 

44,971

-

 

-

 

-

-

 

(3,434)

 

(3,434)

697

 

101,242

 

101,939

 

 

 

 

 

Amortisation and impairment

 

 

 

 

 

(697)

 

(22,595)

 

(23,292)

-

 

(1,344)

 

(1,344)

-

 

(2,786)

 

(2,786)

-

 

(790)

 

(790)

At June 30, 2015

(697)

 

(27,515)

 

(28,212)

Carrying amount June 30, 2016

-

 

73,727

 

73,727

 

 

Exploration and

 

Royalty

 

 

 

Evaluation Costs

 

Interests

 

Total

Group

£'000

 

£'000

 

£'000

Gross carrying amount

 

 

 

 

 

697

 

59,705

 

60,402

-

 

44,971

 

44,971

-

 

(7,831)

 

(7,831)

697

 

96,845

 

97,542

 

 

 

 

 

Amortisation and impairment

 

 

 

 

 

(697)

 

(22,595)

 

(23,292)

-

 

(2,573)

 

(2,573)

-

 

(4,414)

 

(4,414)

-

 

4,228

 

4,228

At December 31, 2015

(697)

 

(25,354)

 

(26,051)

Carrying amount December 31, 2015

-

 

71,491

 

71,491

 

Exploration and evaluation costs

The exploration and evaluation costs comprise expenditure that is directly attributable to the Trefi project in British Columbia, Canada which was fully impaired during 2014.

 

Royalty interests

The amortisation charge for the period, of £1.3m (June 30, 2015: £1.3m) relates to the Group's producing royalties, Narrabri, Maracás Menchen and Four Mile.  Amortisation of the remaining interests will commence once they begin commercial production. 

 

All intangible assets are assessed for indicators of impairment at each reporting date.  As at June 30, 2016 no further impairment charges were recognised (December 31, 2015: £2.8m).  The Group's intangible assets will be assessed for indicators of impairment again at December 31, 2016.

 

No intangible assets have been pledged as security for liabilities.

 

On March 11, 2015, the Group completed its acquisition of the Narrabri royalty for US$65.0m (£43.3m).  The Narrabri royalty is a 1% GRR royalty over all coal produced from the Narrabri mine located in New South Wales, Australia, owned and operated by Whitehaven.  The total cost of the Narrabri acquisition was total consideration of US$65.0m, US$60.0m (£40.0m) was paid in cash and US$5.0m (£3.3m) was satisfied by the issue of 4,135,238 ordinary shares (note 13) and £1.7 in capitalised acquisition costs.

 

10         Mining and exploration interests

 

 

£'000

Fair value

 

9,896

(2,206)

(3)

462

8,149

51

2,769

(71)

10,898

47

4,569

(8)

15,506

 

The fair values of listed securities are based on quoted market prices.  Unquoted investments and royalty options are initially recognised using cost where fair value cannot be reliably determined.  In the absence of an active market for these securities, the Group considers each unquoted security to ensure there has been no material change in the fair value since initial recognition.

 

An impairment charge (representing the recognition of losses previously deferred to equity) is recognised in the income statement when the absolute decline in value below cost of any individual investment is considered 'significant' or 'prolonged' in accordance with the Group's impairment policy.

 

June 30, 2016

 

June 30, 2015

 

December 31, 2015

 

Group

 

Group

 

Group

 

£'000

 

£'000

 

£'000

12,742

 

6,517

 

8,405

2,764

 

1,632

 

2,493

 

15,506

 

8,149

 

10,898

 

11         Borrowings

 

 

June 30, 2016

 

June 30, 2015

 

December 31, 2015

 

Group

 

Group

 

Group

 

£'000

 

£'000

 

£'000

 

 

 

 

 

 

Secured borrowing at amortised cost

 

 

 

 

 

Revolving credit facility

9,100

 

2,863

 

7,527

Deferred borrowing costs

(200)

 

(238)

 

(255)

 

8,900

 

2,625

 

7,272

 

 

 

 

 

 

 

 

 

 

 

 

Amount due for settlement within 12 months

-

 

-

 

-

 

 

 

 

 

 

Amount due for settlement after 12 months

9,100

 

2,863

 

7,527

 

Non-current interest bearing liabilities relates to the partial draw-down of the Group's revolving credit facility. Deferred borrowing costs relate to the establishment fees associated with the facility and will be amortised over its term.  As at June 30, 2016, the Group had utilised U$12.2m (£9.1m) (June 30, 2015: US$4.5m (£2.9m)) of the US$30.0m (£22.4m) available under the facility.

 

 

 

June 30, 2016

 

June 30, 2015

 

December 31, 2015

 

Group

 

Group

 

Group

 

£'000

 

£'000

 

£'000

 

 

 

 

 

 

Revolving credit facility

(9,100)

 

(2,863)

 

(7,527)

Cash and cash equivalents

4,059

 

4,023

 

5,708

Net (debt)/cash and cash equivalents

(5,041)

 

1,160

 

(1,819)

 

12            Deferred tax

 

Coal royalties

 

Available-for sale-investments

 

 

 

 

 

Revaluation

Effects of

 

Revaluation

Revaluation

 

Accrual of

 

 

 

of coal

Tax losses

 

of royalty

of mining

 

royalty

Other tax

 

 

royalty

 

 

instruments

interests

 

receivable

losses

Total

 

£'000

£'000

 

£'000

£'000

 

£'000

£'000

£'000

 

 

 

 

 

 

 

 

 

 

At January 1, 2015

34,615

(943)

 

1,206

(522)

 

30

(1,785)

32,601

Charge/(credit) to profit or loss

(2,757)

(490)

 

-

356

 

18

(460)

(3,333)

Charge/(credit) to other comprehensive income

-

-

 

(186)

103

 

-

-

(83)

Exchange differences

(2,384)

93

 

-

(2)

 

(3)

41

(2,255)

Effect of change in tax rate:

 

 

 

 

 

 

 

 

 

       - equity

-

-

 

(57)

5

 

-

-

(52)

At June 30, 2015

29,474

(1,340)

 

963

(60)

 

45

(2,204)

26,878

Charge/(credit) to profit or loss

(5,433)

21

 

-

(6)

 

519

(681)

(5,580)

Charge/(credit) to other comprehensive income

-

-

 

(196)

173

 

-

-

(23)

Exchange differences

238

(37)

 

-

1

 

3

(27)

178

Effect of change in tax rate:

 

 

 

 

 

 

 

 

 

       - equity

-

-

 

-

(1)

 

-

-

(1)

At December 31, 2015

24,279

(1,356)

 

767

107

 

567

(2,912)

21,452

Charge/(credit) to profit or loss

(3,004)

-

 

-

(23)

 

(270)

(298)

(3,595)

Charge/(credit) to other comprehensive income

-

-

 

699

50

 

-

-

749

Exchange differences

2,843

(172)

 

-

-

 

49

(35)

2,685

Effect of change in tax rate:

 

 

 

 

 

 

 

 

 

       - equity

-

-

 

(767)

-

 

-

-

(767)

At June 30, 2016

24,118

(1,528)

 

699

134

 

346

(3,245)

20,524

 

 

 

 

June 30, 2016

 

June 30, 2015

 

December 31, 2015

 

 

£'000

 

£'000

 

£'000

 

 

 

 

 

 

 

Deferred tax liabilities

 

23,970

 

29,255

 

24,546

Deferred tax assets

 

(3,446)

 

(2,377)

 

(3,094)

 

 

20,524

 

26,878

 

21,452

 

13            Share capital, share premium and merger reserve

 

 

 

 

Share

 

Share

 

Merger

 

 

 

Number of

 

capital

 

premium

 

reserve

 

Total

 

shares

 

£'000

 

£'000

 

£'000

 

£'000

Group and Company

 

 

 

 

 

 

 

 

 

Ordinary shares of 2p each at January 1, 2015

116,431,796

 

2,329

 

29,328

 

9,453

 

41,110

Issue of share capital under placing and placing and open offer

49,375,000

 

987

 

16,658

 

19,681

 

37,326

Issue of share capital for royalty acquisition

4,135,238

 

83

 

3,225

 

-

 

3,308

Ordinary shares of 2p each at June 30, 2015, and December 31, 2015 and June 30, 2016

169,942,034

 

3,399

 

49,211

 

29,134

 

81,744

 

 

14            Retained earnings

 

 

£'000

113,761

212

(11,901)

(8,824)

93,248

(99)

(13,752)

79,397

(11,832)

(5,380)

62,185

 

15            Segment information

 

The Group's chief operating decision maker is considered to be the Executive Committee.  The Executive Committee evaluates the financial performance of the Group based on a portfolio view of its individual royalty arrangements.  Royalty related income and its associated impact on operating profit is the key focus of the Executive Committee. The income from royalties is presented based on the jurisdiction in which the income is deemed to be sourced as follows:

 

Australia:               Kestrel, Narrabri, Four Mile, Pilbara, Mount Ida

Americas:               Maracás, Amapá and Tucano, Ring of Fire, Groundhog

Europe:                  EVBC, Salamanca, Isua, Bulqiza

Other:                     Jogjakarta, Dugbe 1, and includes the Group's mining and exploration interests

 

The following is an analysis of the Group's results by reportable segment.  The key segment results presented to the Executive Committee for making strategic decision and allocation of resources is operating profit as analysed below.

 

The segment information provided to the Executive Committee for the reportable segments for the six months ended June 30, 2016 is as follows (noting that total segment operating profit corresponds to operating profit before impairments, revaluations and gains/losses on disposals which is reconciled to Loss before tax on the face of the consolidated income statement):

 

 

Australian

 

Americas

 

European

 

All other

 

 

 

Royalties

 

Royalties

 

Royalties

 

segments

 

Total

 

£'000

 

£'000

 

£'000

 

£'000

 

£'000

 

 

 

 

 

 

 

 

 

 

Royalty related income

3,231

 

246

 

598

 

-

 

4,075

Amortisation of royalties

(1,128)

 

(211)

 

-

 

-

 

(1,339)

Operating expenses

(872)

 

-

 

-

 

(952)

 

(1,824)

Total segment operating profit/(loss)

1,231

 

35

 

598

 

(952)

 

912

 

 

 

 

 

 

 

 

 

 

Total segment assets

142,581

 

20,183

 

5,931

 

37,174

 

205,869

Total assets include:

 

 

 

 

 

 

 

 

 

Additions to non-current assets (other than financial instruments and deferred tax assets)

-

 

-

 

-

 

-

 

-

 

 

 

 

 

 

 

 

 

 

Total segment liabilities

23,008

 

1,120

 

699

 

16,263

 

41,090

 

The segment information for the six months ended June 30, 2015 is as follows:

 

 

Australian

 

Americas

 

European

 

All other

 

 

 

Royalties

 

Royalties

 

Royalties

 

segments

 

Total

 

£'000

 

£'000

 

£'000

 

£'000

 

£'000

 

 

 

 

 

 

 

 

 

 

Royalty related income

2,826

 

375

 

627

 

-

 

3,828

Amortisation of royalties

(1,132)

 

(212)

 

-

 

-

 

(1,344)

Operating expenses

(917)

 

-

 

-

 

(920)

 

(1,837)

Total segment operating profit/(loss)

777

 

163

 

627

 

(920)

 

647

 

 

 

 

 

 

 

 

 

 

Total segment assets

154,566

 

15,061

 

7,348

 

34,948

 

211,923

Total assets include:

 

 

 

 

 

 

 

 

 

Additions to non-current assets (other than financial instruments and deferred tax assets

44,971

 

-

 

-

 

-

 

44,971

 

 

 

 

 

 

 

 

 

 

Total segment liabilities

28,179

 

-

 

1,078

 

11,713

 

40,970

 

The segment information for the twelve months ended December 31, 2015 is as follows:

 

 

Australian

 

Americas

 

European

 

All other

 

 

 

Royalties

 

Royalties

 

Royalties

 

segments

 

Total

 

£'000

 

£'000

 

£'000

 

£'000

 

£'000

 

 

 

 

 

 

 

 

 

 

Royalty related income

6,831

 

606

 

1,246

 

-

 

8,683

Amortisation of royalties

(2,167)

 

(406)

 

-

 

-

 

(2,573)

Operating expenses

(1,898)

 

-

 

-

 

(2,162)

 

(4,060)

Total segment operating profit/(loss)

2,766

 

200

 

1,246

 

(2,162)

 

2,050

 

 

 

 

 

 

 

 

 

 

Total segment assets

138,635

 

17,359

 

6,298

 

34,447

 

196,739

Total assets include:

 

 

 

 

 

 

 

 

 

Additions to non-current assets (other than financial instruments and deferred tax assets

44,971

 

-

 

-

 

-

 

44,971

 

 

 

 

 

 

 

 

 

 

Total segment liabilities

23,573

 

1,013

 

767

 

9,402

 

34,755

 

The amounts provided to the Executive Committee with respect to total segment assets are measured in a manner consistent with that of the financial statements. These assets are allocated based on the operations of the segment and the physical location of the asset.

 

The amounts provided to the Executive Committee with respect to total segment liabilities are measured in a manner consistent with that of the financial statements. These liabilities are allocated based on the operations of the segment.

 

The royalty related income in Australia of £3.2m (2015: £2.8m) is substantially derived from the Kestrel and Narrabri royalties, which generated £1.4m and £1.6m respectively for the six months ended June 30, 2016 (2015: £1.0m and £1.8). Both royalties represent greater than 10% of the Group's revenue in 2015 and 2016.  In addition, royalty related income in Europe of £0.6m (2015: £0.6m) is derived from a single gold, copper and silver royalty and represents greater than 10% of the Group's revenue in 2015 and 2016.

 

16            Financial risk management

 

Financial instruments

 

 

 

June 30, 2016

 

June 30, 2015

 

December 31, 2015

 

 

 

£'000

 

£'000

 

£'000

Investment property (held at fair value)

 

 

 

 

 

 

 

Coal royalties (Kestrel)

 

 

82,107

 

100,013

 

82,649

 

 

 

 

 

 

 

 

Available-for-sale (held at fair value)

 

 

 

 

 

 

 

Royalty financial instruments

 

 

16,613

 

7,356

 

6,534

Mining and exploration interests

 

 

15,506

 

8,149

 

10,898

 

 

 

 

 

 

 

 

Loans and receivables

 

 

 

 

 

 

 

Trade and other receivables

 

 

2,359

 

15,159

 

14,073

Cash at bank and in hand

 

 

4,059

 

4,023

 

5,708

 

 

 

 

 

 

 

 

Financial liabilities

 

 

 

 

 

 

 

Trade and other payables

 

 

(1,093)

 

(1,130)

 

(832)

Borrowings

 

 

(9,100)

 

(2,863)

 

(7,527)

Other payables

 

 

(1,120)

 

-

 

(1,013)

Liquidity and funding risk

Credit risk

Foreign exchange risk

Other price risk

 

Fair value hierarchy

·      Level 1: quoted prices (unadjusted) in active markets for identical assets and liabilities;

·      Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

·      Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

 

 

 

June 30, 2016

 

 

 

Level 1

 

Level 2

 

Level 3

 

Total

 

Note

 

£'000

 

£'000

 

£'000

 

£'000

Assets

 

 

 

 

 

 

 

 

 

(a)

 

-

 

-

 

82,107

 

82,107

(b)

 

-

 

-

 

16,613

 

16,613

(c)

 

12,742

 

-

 

-

 

12,742

(d)

 

-

 

2,764

 

-

 

2,764

Net fair value

 

 

12,742

 

2,764

 

98,720

 

114,226

 

 

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2015

 

 

 

Level 1

 

Level 2

 

Level 3

 

Total

 

Note

 

£'000

 

£'000

 

£'000

 

£'000

Assets

 

 

 

 

 

 

 

 

(a)

 

-

 

-

 

100,013

 

100,013

(b)

 

-

 

-

 

7,356

 

7,356

(c)

 

6,517

 

-

 

-

 

6,517

(d)

 

-

 

1,632

 

-

 

1,632

Net fair value

 

 

6,517

 

1,632

 

107,369

 

115,518

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2015

 

 

 

Level 1

 

Level 2

 

Level 3

 

Total

Group

Note

 

£'000

 

£'000

 

£'000

 

£'000

Assets

 

 

 

 

 

 

 

 

(a)

 

-

 

-

 

82,649

 

82,649

(b)

 

-

 

-

 

6,534

 

6,534

(c)

 

8,405

 

-

 

-

 

8,405

(d)

 

-

 

2,493

 

-

 

2,493

Net fair value

 

 

8,405

 

2,493

 

89,183

 

100,081

·      a 10% reduction in the coal price would have resulted in the coal royalties being valued at A$124.1m (£69.0m) and an additional charge to the income statement of £12.1m; and

·      a 10% increase in the coal price would have resulted in the coal royalties being valued at A$171.8m (£95.5m) and a decrease in the charge to the income statement of £12.3m.

 

(c) Mining and exploration interests - quoted

 

 

Fair value measurements in Level 3

 

 

 

 

Royalty financial instruments

 

Coal royalties (Kestrel)

 

Total

 

 

 

£'000

 

£'000

 

£'000

 

6,534

 

82,649

 

89,183

 

10,133

 

-

 

10,133

 

 

 

 

 

 

 

(339)

 

-

 

(339)

 

-

 

(10,161)

 

(10,161)

 

285

 

9,619

 

9,904

 

16,613

 

82,107

 

98,720

 

 

 

Royalty financial instruments

 

Coal royalties (Kestrel)

 

Total

 

 

 

£'000

 

£'000

 

£'000

 

8,142

 

117,097

 

125,239

 

 

 

 

 

 

 

(931)

 

-

 

(931)

 

-

 

(9,074)

 

(9,074)

 

145

 

(8,010)

 

(7,865)

At June 30, 2015

 

 

7,356

 

100,013

 

107,369

 

 

 

Royalty financial instruments

 

Coal royalties (Kestrel)

 

Total

 

 

 

£'000

 

£'000

 

£'000

 

8,142

 

117,097

 

125,239

 

 

 

 

 

 

 

(1,909)

 

-

 

(1,909)

 

-

 

(27,201)

 

(27,201)

 

301

 

(7,247)

 

(6,946)

 

6,534

 

82,649

 

89,183

 

17            Related party transactions

 

 

18                  Events occurring after period end

 

With the exception of the declaration of the 2016 interim dividend, there are no events occurring after the period end, which require disclosure.

 

19                  Availability of financial statements

 

This statement will be sent to shareholders and will be available at the Group's registered office at 1 Savile Row, London W1S 3JR.

 

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended June 30, 2016, which comprises the condensed consolidated income statement, condensed consolidated statement of comprehensive income, condensed consolidated balance sheet, the condensed consolidated statement of changes in equity, condensed consolidated cash flow statement and related notes 1 to 19. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

 

This report is made solely to the company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board.  Our work has been undertaken so that we might state to the company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review work, for this report, or for the conclusions we have formed.

 

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors.  The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

 

As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union.  The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting" as adopted by the European Union.

 

Our responsibility

Scope of review

 

Conclusion

 

Deloitte LLP

Chartered Accountants and Statutory Auditor

London, UK

August 24, 2016

 

 

 

Cautionary statement on forward-looking statements and related information

Third party information

As a royalty holder, the Group often has limited, if any, access to non-public scientific and technical information in respect of the properties underlying its portfolio of royalties, or such information is subject to confidentiality provisions.  As such, in preparing this announcement, the Group has largely relied upon the public disclosures of the owners and operators of the properties underlying its portfolio of royalties, as available at the date of this announcement.

 

Rio Tinto Limited, Whitehaven Coal Limited, Berkeley Energia Limited and Atrum Coal NL are all listed on the Australian Stock Exchange and report in accordance with the JORC Code.  Orvana Minerals Corporation and Largo Resources Limited are listed on the Toronto Stock Exchange and report in accordance with NI 43-101.  Zamin is an independent mining group.  Hummingbird Resources PLC is listed on AIM.

 


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