LONDON, UNITED KINGDOM--(Marketwire - Aug. 14, 2012) - Anglo Pacific Group PLC ('Anglo Pacific', the 'Company', the 'Group') (News - Market indicators)(TSX:APY) is pleased to announce interim results for the three and six months ended June 30, 2012. The Group has published both the unaudited financial statements and the Management's Discussion and Analysis, and these, together with this release, are available on both the Group's website at www.anglopacificgroup.com and on SEDAR at www.SEDAR.com. 

Highlights:

• Royalty income for the period of £6.9 million (H1 2011: £16.3 million (restated))
• Production at Kestrel returned to expected levels in the second quarter
• Interim dividend increased by 4.7% to 4.45p per share (H1 2011: 4.25p)
• Cash and receivables at June 30, 2012 of £20.4 million (£44.5 million at December 31, 2011 (restated))
• Strong balance sheet with no borrowings or hedging
• El Valle, the gold-copper mine in Spain, building up to full production
• Progress continues at a number of the Group's development royalties
• Total assets of £342 million at June 30, 2012 (£371 million at December 31, 2011 (restated))
• Completion of Mount Ida magnetite royalty in May 2012
• Announcement of Churchrock uranium royalty option in August 2012
• The Group owns a total of 21 royalty interests

Peter Boycott, Chairman of Anglo Pacific, commented:

"With the uncertain outlook for parts of the world economy, favourable conditions exist for acquiring additional royalties. The Group's total asset position continues to remain strong with no hedging or borrowings and a good degree of liquidity.

A number of adverse factors impacted royalty income from Kestrel in the first six months of 2012, including a longwall changeover and adverse weather. The level of production output on the Group's private royalty ground at Kestrel recovered in the second quarter and should continue in the second half. We are also encouraged by the progress made at a number of the Group's development royalties, which should bring forward future anticipated cash flows.

We are pleased to announce an increased interim dividend, which is in line with the Group's progressive dividend policy."

Interim Results Webcast:

There will be an audio webcast for analysts on August 14, 2012 at 9:30am (BST). The webcast will be accessible via www.anglopacificgroup.com, following which there will be a replay facility available.

The full text of both the financial statements and the Management's Discussion and Analysis may also be obtained by following the following link: http://www.anglopacificgroup.com/financial-reports.html/:

Notes to editors:

Anglo Pacific Group PLC is a global natural resources royalties company. The strategy of the Group is to expand its mineral royalty interests in long-life mining assets. The Group achieves this through both direct acquisition and investment in projects at the development and production stage. It is a continuing policy of the Group to pay a substantial proportion of these royalties to shareholders as dividends.

Royalties explained:

A royalty is an entitlement to an agreed percentage of a project's sales revenue, without any liability for production costs or capital expenditure. This is the key benefit of owning a royalty.

In the mining industry, most royalties endure for the life of the resource and are paid on a regular basis. Historically there have been different terms for royalties including Gross Revenue or Net Smelter Return ("GRR" or "NSR") royalties, which are both based on the gross sales value of the actual mineral. Our model is based around GRR or NSR royalties as they provide the best and clearest return.

Acquiring existing royalties

In this case we buy existing royalty agreements, such as those owned by exploration companies who may have retained a residual royalty in a mine they helped discover. Royalty companies rarely sell their royalties, once acquired.

Creating new royalties

Our new royalty agreements tend to come from providing financing for mining operations, usually to help progress a mine into production.

Acquisitions

On May 1, 2012, the Group completed the first tranche of the previously announced acquisition of a 50% interest in the 1.5% GRR over the Mount Ida iron ore project in Australia, from Red Rock Resources PLC. The Royalty Sale Agreement provides for a total of US$14 million being paid in three instalments as follows:

• Tranche 1: US$6 million on completion and agreement of the terms of the transaction, for a 0.3% GRR;
• Tranche 2: US$4 million for a further 0.225% GRR following the results of a positive definitive feasibility study ("DFS"), a formal decision to mine and 20% of the pre-production capital costs outlined in the DFS being provided for; and
• Tranche 3: US$4 million for a further 0.225% GRR following the commencement of commercial production, taking the total to a 0.75% GRR.

Tranche 1 was completed with the payment of US$6 million being settled by US$3.9 million in cash and the issue and allotment of 416,161 ordinary shares in the capital of the Company to Red Rock. This acquisition is consistent with the Group's focus on commodities leveraged to the continuing growth in Asia and other developing regions.

The Group continues to evaluate a number of opportunities to acquire or create more royalties in order to further diversify and increase the Group's revenue stream.

Royalty portfolio

The performance of the Group's portfolio of producing royalties was impacted by lower hard coking coal prices and a short-term fall in sales volumes at Kestrel during the first quarter of 2012. The El Valle-Boinás/Carlés gold and copper mine continued its build up to full production, whilst output from the Amapá iron ore mine was as expected. Significant progress has also been made on a number of the Group's development royalties.

Kestrel Coking Coal, Australia (Rio Tinto Coal Australia)

During the first six months of 2012, production from the Group's private royalty area was 1,165,567 tonnes. Volumes were impacted during the first quarter by a scheduled longwall changeover, lower productivity during the ramp-up as well as adverse weather conditions. Production returned to normal levels during the second quarter which is expected to continue for the second half of the year.

Hard coking coal prices remained under pressure during the first six months of 2012 due to uncertainty surrounding Europe's debt crisis, steel oversupply in China and improved hard coking coal supplies from Australia. Coking coal spot prices for July 2012 averaged $214 per tonne (July 2011: $305 per tonne) with benchmark July 2012 quarterly contract prices of $225 per tonne (July 2011: $305 per tonne).

The combination of these factors resulted in royalty income from Kestrel for the first six months of 2012 of £5.6 million (A$8.9 million) based on a 50% share of invoiced volume of 1,165,567 tonnes of coal. This is compared to £9.9 million (A$15.5 million) for the comparable period in 2011 on an invoiced volume of 2,077,303 tonnes.

During the second quarter of 2012 the Group was informed by Rio Tinto that an audit by the Queensland Office of State Revenue identified a misallocation of royalty revenue relating to areas reserved by the State of Queensland for roads. This has resulted in an overpayment of royalties to the Group of £4.6 million (A$7.1 million) for the period September 2006 to December 2011. The misallocation of royalty revenues has been reflected in the restated balance sheet at December 31, 2011 as shown in note one to these accounts and is being independently verified by the Group's own consultants.

The independent valuation of the Kestrel royalty at June 30, 2012 was £159.6 million (A$243.7 million) compared to £166.0 million (A$252.0 million) at December 31, 2011 (restated). This reduction in the valuation is largely due to adjustments relating to reserve depletion.

Amapá Iron Ore, Brazil (Anglo American PLC 70% and Cliffs Natural Resources Inc 30%)

Royalty receipts for the six months ended June 30, 2012 were £1.1 million (£1.0 million for the comparable period in 2011). Anglo American PLC reported production of 3.1 million tonnes for the six months to June 30, 2012 an increase of 29% on the comparable period in 2011 but royalty receipts were affected by lower iron ore prices. 

El Valle-Boinás/Carlés Gold, Silver and Copper, Spain (Orvana Minerals Corp.)

The Group received £0.67 million in royalties during the six months ended June 30, 2012 from the El Valle-Boinás/Carlés ("EVBC") gold and copper mine in northern Spain. This related to the production of 15,260 ounces of gold, 50,928 ounces of silver and 1.684 million pounds of copper for the six months ended June 30, 2012.

Production at the mine remained on target during the quarter ended June 30, 2012 with 13,983 ounces of gold, 39,621 ounces of silver and 1.47 million pounds of copper. The Group's royalty receipts from EVBC for the second quarter's production will be received during the quarter ended September 30, 2012.

The royalty receipts from EVBC are currently repayment of principal and are applied against the debenture instrument. They are not included in the income statement but are included in the receipts from royalty instruments in the cash flow statement.

Crinum Coking Coal, Australia (BHP Billiton Mitsubishi Alliance)

Largely due to sales from stockpiles, the Group received £0.1 million (A$0.2 million) in royalties during the six months ended June 30, 2012 compared to £5.4 million (A$8.4 million) in the comparable period in 2011. The Crinum longwall has left the Group's private royalty ground and no significant future royalty receipts are anticipated. In the Group's coal royalty valuation Crinum is ascribed no value. 

Development Royalties

Progress has been made at a number of the Group's development royalties.

Ring of Fire Chromite, Canada (Cliffs Natural Resources Inc) 

On May 9, 2012 Cliffs Natural Resources Inc. ("Cliffs") announced that its Board of Directors had approved advancing its proposed chromite project, located in the Ring of Fire area of Northern Ontario, from pre-feasibility to feasibility. Cliffs also announced that it had reached an agreement in principle with the Government of Ontario over key elements of the project including development of provincial infrastructure. In the announcement, Cliffs believes the chromite deposits it controls are world class, and, based on successful completion of the feasibility and other project milestones, Cliffs anticipates a majority of the project's expected capital requirements will be made in 2014 and 2015. The Group holds a 1% NSR royalty over the Ring of Fire project including the Black Thor and Big Daddy deposits.

Salamanca Uranium, Spain (Berkeley Resources Ltd)

On July 24, 2012, Berkeley Resources Ltd ("Berkeley") announced they had reached an agreement with Enusa Industrias Avanzadas S.A. ("ENUSA") on terms which provide Berkeley with a 100% interest in and exploitation rights to State Reserves 28 and 29. The Group has a 1% NSR royalty over all uranium resources in Spain and Portugal held by Berkeley.

Jogjakarta Iron Sands and Pig Iron, Indonesia (Indo Mines Ltd 70%)

On May 22, 2012 Indo Mines Ltd. ("Indo") announced first production from its trial iron sand mining and processing facility in Jogjakarta, Indonesia and on May 28, 2012, announced that it was operating at the design throughput of 130 tonnes per hour. This is an important milestone for the project. The next phase is to develop a mine to produce 2 million tonnes per annum of 55% Fe concentrate culminating ultimately in the production of pig iron.

Four Mile Uranium, Australia (Quasar Resources Pty Ltd 75% and Alliance Resources Ltd 25%)

On April 27, 2012 Alliance Resources Ltd ("Alliance") announced that Quasar Resources Pty Ltd ("Quasar") and Alliance Craton Explorer Pty Ltd (a subsidiary of Alliance) had been granted a ten year mineral lease over the Four Mile Project area by the South Australian Minister for Mineral Resources and Petroleum. Quasar is an affiliated company of USA based General Atomics who through another affiliate company, Heathgate Resources Pty Ltd, operate the adjacent Beverley in-situ recovery (ISR) uranium mine. The Group holds a 1% NSR royalty over the Four Mile Project.

Financial performance

Group royalty revenue for the six months ended June 30, 2012 was £6.9 million compared to £16.3 million for the six months to June 30, 2011 and £5.3 million for the three months ended June 30, 2012 compared to £6.4 million for the three months to June 30, 2011. Despite the continued increase in cash flows from the Group's royalty debentures, when combined with the cash flows from the Group's coal royalties, the Group royalty entitlement per share decreased to 7.04p per share for the six months ended June 30, 2012 when compared with 15.16p per share for the six months ended June 30, 2011. Royalty entitlement per share for the second quarter was 5.26p per share compared to 5.76p per share for the comparable period in 2011.

The Group's operating expenses, including salaries and wages, share-based compensation, audit, tax, legal advisory fees and general office expenses, increased from £1.3 million in the first half of 2011 to £1.6 million in the first half of 2012. Within these costs salaries and wages increased by approximately £0.1 million compared to the same period in 2011, following the appointment of additional staff. The Group's external legal fees incurred in assessing royalty opportunities and managing our existing royalties increased by £0.1 million during the first half of 2012 when compared to the same period in 2011. The operating expenses in the quarter ended June 30, 2012 were £0.7 million compared to £0.8 million in the comparable period in 2011.

Realised gains on disposals of mining and exploration interests during the first half of 2012 were £2.0 million compared with £7.5 million for the six months ended June 30, 2011. Gains on disposals during the quarter to June 30, 2012 were £1.4 million compared with £3.0 million realised in the second quarter of 2011. These gains were the result of the disposal of some of the Group's successful mining investments where the acquisition of royalties was considered unlikely.

The Group realised a net foreign exchange loss in the six months to June 30, 2012 of £0.2 million compared to a net foreign exchange loss of £0.3 million in the comparable period of 2011. The net foreign exchange gain for the quarter ended June 30, 2011 was £0.9 million, against a net foreign exchange gain of £0.4 million in the second quarter of 2011. The Group both receives and acquires royalties in foreign currencies and is therefore subject to foreign exchange risk, particularly in relation to its Australia and Canadian activities. The Group has benefited from the strengthening of the Australian and Canadian currencies in the quarter ended June 30, 2012, when compared to the first quarter of 2012. However, there is no assurance that this will continue, or that the steps taken by management to reduce potential foreign exchange risks will eliminate future fluctuations in the Group's financial performance and position.

The Group's profit before tax for the six months ended June 30, 2012 was £7.9 million compared to £22.6 million for the six months ended June 30, 2011. Group earnings per share for the six months ended June 30, 2012 were 4.71p compared to 14.92p for the first half of 2011. For the quarter ended June 30, 2012 the Group's profit before tax was £7.5 million compared to £9.4 million for the comparable quarter in 2011. The Group's earnings per share for the three months ended June 30, 2012 were 4.94p compared to 5.20p for the second quarter of 2011.

Financial position

Total assets of £342.2 million at June 30, 2012 compared to £371.0 million at December 31, 2011.

At June 30, 2012, the Group's Australian coal royalty interests have been independently valued at £159.6 million compared to £166.0 million at December 31, 2011 (restated). The change was primarily due to adjustments relating to reserve depletion. The Group's royalty instruments following fair value adjustments were valued at £23.3 million at June 30, 2012 compared to £24.7 million at December 31, 2011. This decrease is due to adjustments to future foreign exchange and commodity price assumptions.

The total amortised cost of royalties treated as intangibles was £71.4 million at June 30, 2012, compared to £68.3 million at December 31, 2011. The increase is due to the acquisition of the gross revenue royalty over the Mount Ida iron ore project in Western Australia. As part of the annual impairment review a directors' valuation of these royalties has been undertaken using a discounted cash flow valuation model, which uses forecast commodity prices and management's best estimate of an appropriate discount rate taking into account project-specific risk factors. At June 30, 2012 the directors' valuation of these assets was £130.6 million (December 31, 2011: £120.5 million). This excess over amortised cost is not included in the balance sheet.

For further information on royalty instruments and intangibles please refer to note 2 below.

At June 30, 2012, the Group's quoted and unquoted equity investments, including royalty options, were valued at £64.5 million compared to £64.6 million at December 31, 2011. The private equity interests and royalty options remain accounted for at cost.

At June 30, 2012, the Group had cash of £18.3 million compared to £32.2 million at December 31, 2011, with no borrowings or hedging. Combined with royalty and trade receivables, the Group's total cash and receivables at June 30, 2012 was £20.4 million compared to £44.5 million at December 31, 2011. This reduction was due to the lower production at Kestrel in the first quarter of 2012, together with offsetting the second quarter royalties against those overpaid between September 2006 and December 2011.

The Group has limited capital expenditure requirements other than for the acquisition of additional royalties. Management believe that the Group's current cash resources and future cash flows from continuing royalty revenues will be sufficient to cover the cost of general and administrative expenses, income taxes and dividend payments. Management also believe that the Group has sufficient capital and working capital resources to continue to deliver its strategy of acquiring new royalties.

The Group remains debt free and its liquid resources are held in a spread of currencies and financial institutions. The Group's mining interests and royalty revenues are mainly denominated in Australian and Canadian dollars.

The book value of the Group's total assets at June 30, 2012 was £342.2 million compared to £371.0 million at December 31, 2011. As at the period end, this does not include any increase in value over cost that may be attributable to the Group's Panorama and Trefi coal projects and royalty intangibles.

Dividends

On July 4, 2012 a final dividend of 5.50p per share for the year ended December 31, 2011 was paid. In light of the share price at the time the Board decided not to offer shareholders the opportunity to elect to receive new shares instead of cash.

The Board has declared an interim dividend of 4.45p per share for the year ending December 31, 2012, representing an increase of 4.7% from the interim dividend for the previous year of 4.25p per share. This dividend will be paid on February 5, 2013 to shareholders on the register at the close of business on November 30, 2012. The shares will be quoted ex dividend in Canada and London on November 28, 2012. As with previous dividends, depending on the share price at the time, the Board will consider whether shareholders will be given the opportunity to elect to receive new shares instead of cash. Should this alternative be offered, the price will be calculated on the basis of the average mid-market closing price of the ordinary shares for the five business days commencing November 28, 2012. The last date for elections under such an alternative, if offered, will be January 18, 2013.

Outlook

The uncertain outlook for parts of the world economy has created difficult mining capital markets. As a result, favourable conditions remain for acquiring existing royalties and for creating new royalties through the provision of mining finance.

Production levels from the Group's private royalty ground at Kestrel should continue at expected levels for the remainder of the year. With an increasing level of production at the El Valle-Boinás/Carlés gold-copper mine in Spain and increased output at Amapá in Brazil, the Group's royalty cash flows should improve in the second half of the year.

The Group maintains its belief that the long term urbanisation of the developing world should continue to drive demand for steel related commodities. The current level of currency volatility could also impact positively on precious metals. The Group's spread of royalty interests gives good exposure to these commodities.

With the possibility of inflationary currents in coming years, the Group remains a stable hedge against perceived weaker currencies. The Group's revenue is directly linked to the top line of a number of major mining operations, whilst avoiding exposure to the current inflationary escalation in their mining costs. The Group itself has no operating mines of its own and consequently limited overheads. 

1 Basis of preparation

The condensed consolidated interim financial information of Anglo Pacific Group PLC contained in this release is for the three and six months ended June 30, 2012. This information has been prepared in accordance with IAS 34 'Interim Financial Reporting', as adopted by the European Union, however this release does not include sufficient information to comply with IFRS, and should be read in conjunction with the consolidated financial statements of the Group for the year ended December 31, 2011 and the condensed consolidated interim financial statements for the period ended June 30, 2012.

The condensed consolidated interim financial statements have been prepared in accordance with the accounting policies adopted in the last annual financial statements for the year to December 31, 2011, which were prepared in accordance with IFRS, as adopted by the European Union.

This condensed consolidated quarterly and half yearly financial information does not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006. Statutory accounts for the year ended December 31, 2011 were approved on March 6, 2012. These accounts which contained an unqualified audit report under Section 495 of the Companies Act 2006 and which did not make any statements under Section 498 of the Companies Act 2006, have been delivered to the Registrar of Companies in accordance with Section 441 of the Companies Act 2006.

Financial results presented for the three months ended June 30, 2012 and 2011, together with all other quarterly results have been presented for comparative purposes only. These results have neither been audited nor reviewed by the Group's auditors.

1.2 Prior period adjustment

As mentioned in the business review, an audit conducted by the Queensland Office of State Revenue identified a misallocation of royalty revenue attributable to the Group. As a result, the Group received A$7.1 million more than it was entitled to over a six year period ended December 31, 2011. In accordance with IAS 8, the prior periods financial statements are restated to reflect what the position would have been, taking into account this information. The following tables reconcile the restated position to that previously reported:

Overall, the net assets of the Group at December 31, 2011 were overstated by £9.7m (June 30, 2011: £9.1m) as a result of this overpayment and the corresponding impact on the coal royalty valuation. The value of the coal royalty was £9.2m less (June 30, 2011: £8.6m) when taking into account roads over the remaining portion of the private royalty ground which has yet to be mined. Trade and other payables now reflect an amount owing to the mine operator as a result of these overpayments. The deferred tax balance has been recalculated based on the new coal royalty valuation and also reflects a credit to the group arising on the payment of tax on the previously overstated revenue. 

2 Non-current assets

(a) Coal royalties

The Group's coal royalties comprise the Kestrel and Crinum coal royalties in Queensland, Australia. 

The Group commissioned a valuation of the coal royalties as at June 30, 2012, based on a net present value of the pre-tax cash flow discounted at a rate of 7%, which produced a valuation of A$243.7 million (£159.6 million). At present the net royalty income is taxed in Australia at a rate of 30%. Were the coal royalties to be realised at the revalued amount there are £2.0 million (A$3.1 million) of capital losses potentially available to offset against taxable gains. These losses have been included in the deferred tax computation.

(b) Royalty instruments

Royalty instruments represent the Group's interests in four mineral properties which, through the issue of convertible debentures, the Group has acquired GRR or NSR royalties. These are the Engenho property in Brazil, the El Valle-Boinás/Carlés property in Spain, the Jogjakarta Iron Sands Project in Indonesia and the Midway-McKenzie Break properties in Canada. In the Group's latest annual financial statements for the year ended December 31, 2011, these interests were described as "Royalty Instruments". No change has been made to the accounting treatment of these interests.

(c) Intangibles

Intangible royalty interests represent the NSR royalties acquired on the Four Mile project in South Australia, the Salamanca uranium project in Spain, the Black Thor, Black Label and Big Daddy chromite projects in Northern Ontario, Canada and a number of tenements in the Athabasca Basin region of Canada, together with the gross revenue royalties covering the Amapá iron ore system in Brazil, the Isua iron ore project in Greenland and three exploration licences, including the Railway iron ore deposit, in the central Pilbara region of Western Australia.

Acquisition costs of royalty interests on feasibility stage mineral properties are not amortised. At such time as the associated mineral interests are placed into production, the cost base is amortised over the expected life of mine. Amortisation rates are adjusted on a prospective basis for all changes to estimates of the life of mine.

Also included within intangibles are the deferred exploration costs of £828,000 (December 31, 2011: £804,000) associated with the Group's Panorama and Trefi Projects in British Columbia, Canada.

(d) Mining and exploration Interests

The investments in mining and exploration interests represent investments in listed and unlisted equity securities which are acquired as part of the Group strategy to acquire new royalties. Gains may be realised where it is deemed appropriate by the Investment Committee. The fair values of these securities are based on quoted market prices for listed securities and cost for unlisted securities based on the variability of cash flows being so significant that an alternative valuation technique would not provide a useful value. The fair values are reviewed for impairment biannually. In the statement of changes in equity these interests are classified as "available- for- sale investments". For a full explanation of the Group's accounting policies in relation to the mining and exploration interests please see the 2011 Annual Report.

Cautionary statement on forward-looking statements and related information

Certain information contained in this press release, including any information as to future financial or operating performance and other statements that express management's expectation or estimates of future performance, constitute "forward looking statements". The words "expects", "anticipates", "plans", "believes", "estimates", "seeks", "intends", "targets", "projects", "forecasts", or negative versions thereof and other similar expressions identify forward-looking statements. Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable by management, are inherently subject to significant business, economic and competitive uncertainties and contingencies. Further, forward-looking statements are not guarantees of future performance and involve risks and uncertainties which could cause actual results to differ materially from those anticipated, estimated or intended in the forward-looking statements. The material assumptions and risks relevant to the forward-looking statements in this press release include, but are not limited to: stability of the global economy; stability of local government and legislative background; continuing of ongoing operations of the properties underlying the Group's portfolio of royalties in a manner consistent with past practice; accuracy of public statements and disclosures (including feasibility studies and estimates of reserve, resource, production, grades, mine life, and cash cost) made by the owners or operators of such underlying properties; no material adverse change in the price of the commodities underlying the Group's portfolio of royalties and investments; no material adverse change in foreign exchange exposure; no adverse development in respect of any significant property in which the Group holds a royalty or other interest, including but not limited to unusual or unexpected geological formations and natural disasters; successful completion of new development projects; planned expansions or additional projects being within the timelines anticipated and at anticipated production levels; and maintenance of mining title. If any such risks actually occur, they could materially adversely affect the Group's business, financial condition or results of operations. 

For additional information with respect to such risks and uncertainties, please refer to the "Risk Factors" section of our most recent Annual Information Form available on www.SEDAR.com and the Group's website www.anglopacificgroup.com. Readers are cautioned to consider these and other factors, uncertainties and potential events carefully and not to put undue reliance on forward-looking statements. The forward-looking statements contained in this press release are made as of the date of this press release only and the Group undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events.