LONDON, UNITED KINGDOM--(Marketwire - Feb. 22, 2012) - Anglo Pacific Group PLC ('Anglo Pacific', the 'Group') (News - Market indicators)(TSX:APY) is pleased to announce preliminary results for the year ended December 31, 2011. This release together with the Chairman's Review and accompanying financial statements are available on both the Group's website at www.anglopacificgroup.com and on SEDAR at www.SEDAR.com. 

Highlights:

• Record royalty income for the year of £35.1 million, compared to £30.1 million for the year ended December 31, 2010
  
  
• Record royalty cash flow per share for the year ended December 31, 2011 of 33.11p (2010: 28.65p)
  
  
• Strong cash position as at December 31, 2011 of £32.2 million (2010: £28.3 million), with no borrowings or hedging
  
  
• Final dividend increased by 7.8% to 5.50p per share (2010: 5.10p), in line with progressive dividend policy. Total dividends for the year increased by 7.7% to 9.75p per share (2010: 9.05p)
  
  
• Following El Valle entering production in June 2011, the Group has four producing royalties
  
  
• Continued diversification of the Group's royalty portfolio during the year with the acquisition of two royalties in iron ore and chromite and an option to acquire a nickel royalty
  
  
• The Group will own a total of 20 royalty interests, following the completion of its agreement to acquire an iron ore royalty announced in February 2012
  

Peter Boycott, Chairman of Anglo Pacific, commented:

"We are pleased to announce a record year for our royalty income, as Anglo Pacific continues to make progress with its strategy of developing a leading portfolio of royalties. During the year we have increased and diversified our portfolio with three new royalties, further delivering on our stated strategy. The agreement to acquire an iron ore royalty after the period end supports our focus on commodities leveraged to Asian growth and we will look to utilise our record cash balance to fund new acquisitions.

The Board remains committed to offering significant long term returns to our shareholders and is pleased to be able to propose a 7.8% increase in the final dividend."

Results Presentation and Audio Webcast:

There will be a results presentation for analysts on February 22, 2012 at 9:30 GMT at the London Stock Exchange. In addition, there will be an audio webcast available on the Group's website, at www.anglopacificgroup.com, after the results presentation.

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 low-cost, 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.

Chairman's Review

In the year under review I am pleased to report that the Group has further expanded its royalty portfolio and continues to realise profits from the sale of non-core mining interests despite difficult market conditions. With the Group reporting record royalty revenues and a substantial liquidity position, the Board will again be recommending an increased final dividend.

A year in review

During the first half of 2011, two natural disasters affected the short term outlook for certain commodities to which the Group is exposed.

The extensive flooding in Queensland, Australia, during the first quarter of the year caused substantial disruption to coal deliveries from the Group's Kestrel and Crinum coal interests. This reduction in output at both mines was more than compensated for by higher coking coal prices in the first half of the year resulting in increased royalty cash flows for the Group.

The Fukushima earthquake in March 2011 caused severe disruption in economic activity in Japan and elsewhere. The subsequent nuclear disaster affected the prospects for the nuclear power industry and the near term outlook for the uranium market.

In the second half of 2011, both mining markets and commodities prices were further impacted by fears of recession in Europe and a slackening of demand from China.

Despite these headwinds, the Group was able to realise substantial gains from its strategic mining interests and has maintained a resilient, ungeared balance sheet in the face of increasing recessive forces. The Group continues to report substantial earnings and record royalty cash flows, whilst benefiting from its royalty income based on top line sales revenue at a time when the mining industry is subject to significant operating cost inflation, as well as fluctuating demand.

The Group's strategy remains focused on securing new royalties, both by acquisition and through investment in its mining interests, thereby generating consistent cash flows and supporting increasing dividends to shareholders. 

Results and dividends

The Group's profit after tax for the year ended December 31, 2011 was £36.7 million (2010: £56.3 million).

The Directors recommend a final dividend of 5.50p per share for the year ended December 31, 2011 which, with the interim dividend of 4.25p per share paid on January 11, 2012, will make total dividends for 2011 of 9.75p per share (2010: 9.05p per share).

The Group remains committed to a progressive dividend policy. 

Royalty portfolio

Acquisitions

During 2011, the Group acquired an iron ore and a chromite royalty and completed the purchase of an option to acquire a substantial nickel royalty.

The announcement of an agreement to acquire an additional iron ore royalty in February 2012, will, following its completion, increase the total royalties in the Group's portfolio to 20, of which four are currently in production.

In addition, the Group's Trefi coal interests are currently subject to a proposal that would result in the Group owning a 3% gross revenue royalty over all coal mined from the project.

The new royalties announced during the year and after the period end were:

• On January 12, 2011, the Group completed the previously announced Royalty Option Agreement with Horizonte Minerals PLC ("Horizonte") for the Group to purchase a net smelter return royalty on all revenues from the advanced exploration stage Araguaia and Lontra Nickel Projects ("Araguaia Project") in Brazil. The Group paid Horizonte the sum of US$0.5 million in exchange for the six year option to acquire a 1.5% net smelter return royalty from the Araguaia Project for US$12.5 million.

• On August 2, 2011, the Group announced the purchase of an existing 1% net smelter return royalty over the Black Label, Black Thor and Big Daddy chromite deposits in Ontario, Canada, from KWG Resources Inc ("KWG"). These projects are operated by Cliffs Natural Resources Inc ("Cliffs") and form part of Cliffs' organic growth plans in the "Ring of Fire" area in northern Ontario. The consideration for the acquisition was US$18 million.

• On August 3, 2011, the Group announced its agreement to provide a non-interest bearing advance of US$30 million to London Mining PLC ("London Mining") in exchange for a 1% gross revenue royalty over the Isua iron ore project in Greenland. The agreement contains a number of milestones. In the event of these not being met, the Group retains the right to be repaid in cash or, at London Mining's discretion, in shares at the market price at the time.

• On November 17, 2011, the Group announced that it had signed a letter of intent with Cardero Resource Corp. relating to a proposal to develop the Trefi coal project in British Columbia, Canada.

• On February 6, 2012, the Group announced its agreement to acquire 50% of the Mount Ida 1.5% gross revenue iron ore royalty, in Western Australia, from Red Rock Resources PLC for a total consideration of US$14 million. The consideration will be paid in three instalments depending on certain milestones being achieved, with the initial payment of US$6 million on completion of the transaction.

These acquisitions have broadened and diversified the Group's portfolio of royalties, both by commodity and geographically. The Group will continue to focus its efforts on commodities leveraged to the Asian growth story.

Producing royalties

The Group's portfolio of producing royalties continues its strong performance with record growth in royalty income when compared with 2010. This demonstrates the strength of both the Group's business model and strategy.

Kestrel

Rio Tinto Limited reported coal sales from Kestrel for 2011 of 3.8 million tonnes, a reduction compared to 4.4 million tonnes in 2010, and largely due to adverse weather in Queensland during the first half of the year. The lower export levels from Australia combined with record global steel production supported the strength of coking coal prices throughout the year with sale prices for hard coking coal ranging between US$328 and US$235 per tonne.

The higher prices for hard coking coal resulted in Kestrel coal royalties for the year ended December 31, 2011 of £26.5 million (A$41.2 million) compared to £21.9 million (A$37.0 million) received in 2010.

Crinum

As the Crinum longwall leaves the Group's private royalty ground, the royalties for the year ended December 31, 2011 reduced to £6.0 million (A$9.1 million) compared to £8.0 million (A$7.6 million) received in 2010. In the Group's coal royalty valuation, future production from Crinum continues to be difficult to evaluate and as a result is ascribed no value.

Amapá

Royalty receipts for the year ended December 31, 2011 were £2.7 million. This is the first year the Group has received a full year of cash flow from Amapá. 

El Valle

The El Valle Boinas/Carles gold and copper mine was commissioned during the second quarter of 2011, with production to September 30, 2011 of 9,336 ounces of gold, 1.05 million pounds of copper and 28,456 ounces of silver. During the year, maiden receipts of £0.3 million arising from the Group's net smelter return royalty were received and applied against the debenture instrument.

Engenho

Royalty payments for the year ended December 31, 2011 were £0.3 million. Delays in permitting the adjacent Crista deposit and other operational matters have resulted in the Engenho operations being put on care and maintenance. On December 20, 2011, Mundo Mineral Limited's Brazilian subsidiary was put into the Brazilian equivalent of the US Chapter 11 process and the Group does not expect any royalty receipts during 2012. 

Financial review

The Group's royalty revenues for the year ended December 31, 2011 were £35.1 million compared to £30.1 million for the previous year. The total of these royalty revenues and cash flows from royalty debentures during the year of £0.7 million (2010: £0.9 million), result in total royalty cash flow per share increasing by 16% to 33.11p (2010: 28.65p).

Realised gains on disposal of mining and exploration interests were £20.3 million (2010: £41.0 million). In difficult junior mining markets 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. Overall the Group's profit before tax for the year was £49.0 million (2010: £65.8 million) and Group earnings per share for the year were 33.87p (2010: 51.99p).

The Group's Australian coking coal royalty interests have been independently valued at December 31, 2011 at £175.1 million (2010: £177.1 million). The Group's royalty instruments following fair value adjustments were valued at £24.7 million at December 31, 2011 (2010: £28.1 million).

The total cost of royalties, excluding amortisation, treated as intangibles has increased to £70.5 million at December 31, 2011 (2010: £42.1 million). 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 December 31, 2011 the directors' valuation of these assets was £120.5 million (2010: £54.2 million).

The Group's quoted and unquoted equity investments, including royalty options, were valued at £64.6 million at December 31, 2011 (2010: £128.5 million). The private equity interests and royalty options remain accounted for at cost. The Group's work on the Trefi and Panorama coal projects in British Columbia, Canada continues to be included in the accounts at cost, and the cost of property acquisition, tenure maintenance and deferred exploration totalled £2.1 million at December 31, 2011 (2010: £2.0 million). The proposed disposal of Trefi is subject to contract and had not been completed as at December 31, 2011.

As at December 31, 2011, the Group had cash of £32.2 million compared to £28.3 million at December 31, 2010, with no borrowings or hedging. When combined with royalty and trade receivables, total cash and receivables at December 31, 2011 was £44.5 million (2010: £37.1 million). 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 will be sufficient to cover the cost of general and administrative expenses, income taxes and dividend payments. The Group remains debt free and its liquid resources are held mostly in Australian and Canadian dollars and with a number of different financial institutions. The Group's mining interests and royalty revenues are also mainly denominated in these two currencies.

The Group's total assets at December 31, 2011 were £380.2 million, compared to £415.6 million at December 31, 2010. This does not include any increase in value over cost that may be attributable to the Group's royalty intangibles or the Panorama and Trefi coal projects. If royalty intangibles were included at valuation this would enhance assets by a further £52.2 million (2010: £12.1 million).

In a difficult year, the Group's conservative approach to the evaluation of mining projects and management of its balance sheet and cash resources has again produced strong results.

Equity interests

During the year, the Group continued its strategy of taking equity stakes in strategic opportunities with the prospect of potential royalties. This allows the Group to develop a detailed understanding of project risks and form working relationships with management. Where royalties cease to be a financing option, the Group will seek to dispose of the particular equity investment in a manner that is profitable to the Group, while minimising disruption to the investee company. This approach has again proved successful with the Group realising significant gains for shareholders during 2011 while generating a number of royalty opportunities. However, difficult market conditions and a confused outlook for uranium affected equity valuations at the year end.

Board and personnel developments

On September 23, 2011, Mr. Matthew Tack resigned as Finance Director. He joined the Group in 2004 and was appointed to the Board in 2006. He is leaving the Group at the end of March 2012 to return to Australia after ten years working in the United Kingdom. Mr. Tack has been an integral part of the development of the Group during the past seven years and we are grateful for the contribution he has made. The Group has recruited a Chief Financial Officer, Mr. Kevin Flynn, who commenced duties in January 2012.

Annual General Meeting

Investors are invited to attend the Annual General Meeting, which will be held at the Institute of Chartered Accountants in England and Wales, 1 Moorgate Place, London EC2R 6EA, United Kingdom on Thursday April 19, 2012 at 11.00 am. As in previous years, the Board will present a review of the results for the past year and comment on current business activities.

Scrip dividend alternative

Subject to approval at the Annual General Meeting, the Board proposes to pay the final dividend on July 4, 2012 to shareholders on the Group's share register at the close of business on May 4, 2012. The shares will be quoted ex dividend on the London Stock Exchange (LSE) and the Toronto Stock Exchange (TSX) on May 2, 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 May 2, 2012. The last date for elections under such an alternative, if offered, will be June 15, 2012.

Outlook

With recent signs of recovery in the US economy and much better bank liquidity within the troubled Eurozone, mining markets and commodity prices have improved sharply in the last two months. This has resulted in a significant increase in the value of the Group's equity interests since the year end. Furthermore, with this improving background, the raising of mining finance from conventional lenders or equity issues has become less of a challenge for larger mining companies. However, in the junior mining sector access to finance still remains challenging. In this environment, the Group continues to identify royalty opportunities and receive numerous enquiries for mining finance.

The Group will continue to make the acquisition of new royalties its principal strategic focus, leveraging off its cash resources, strong royalty revenues and pro-active management.

Finally, I would like to thank my Board colleagues and staff for their application and hard work in achieving another good year's results.

P.M. Boycott, Chairman

February 22, 2012

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.

NOTES

1. Earnings per ordinary share is calculated on the Group's profit after tax of £36,669,000 (2010: £56,283,000) and the weighted average number of shares in issue during the year of 108,263,282 (2010: 108,257,718).

The diluted earnings per ordinary share is calculated on the Group's profit after tax of £36,669,000 (2010: £56,283,000) and 108,274,402 shares (2010: 108,266,665). The dilutive effect is due to options outstanding under the Company Share Option Plan at the year end.

2. The Group's management considers royalty cash flow per share to be a useful measure of the performance of the Group's assets. Changes in equity market conditions lead to annual fluctuations in gains on sale of mining and exploration interests, and while these gains can be significantly value accretive for shareholders, the Group's management focus remains on increasing the Group's cash flows from royalties. In addition, the classification of the Group's royalty instruments as repayable debentures results in cash flows which are classified as repayments until the principal and interest are repaid. As a result, the combination of royalty income and cash received from the debenture repayments during the year form the numerator for this metric. Both of these components are calculated before tax.

Royalty cash flow per share is calculated on the Group's royalty cash flow of £35,845,000 (2010: £31,014,000) and the weighted average number of shares in issue during the year of 108,263,282 (2010: 108,257,718).

The diluted royalty cash flow per share is calculated on the Group's royalty cash flow of £35,845,000 (2010: £31,014,000) and 108,274,402 shares (2010: 108,266,665). The dilutive effect is due to options outstanding under the Company Share Option Plan at the year end.

Status of financial information

This preliminary announcement does not constitute the Group's full financial statements for 2011. This report is based on accounts which are in the process of being audited and will be approved by the Board and subsequently filed with the Registrar of Companies. Accordingly, the financial information for 2011 is unaudited and does not have the status of statutory accounts within the meaning of Section 435 of the Companies Act 2006.

Financial information for the year to December 31, 2010 has been extracted from the full financial statements prepared under the historical cost convention, as modified by the revaluation of coal royalties, available-for-sale financial assets, and financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss, as filed with the Registrar of Companies. The Auditors' report on the full financial statements for the year to December 31, 2010 was unqualified and did not contain statements under section 498(2) of the United Kingdom Companies Act 2006 (regarding adequacy of accounting records and returns), or under 498(3) (regarding provision of necessary information and explanations).