LONDON, UNITED KINGDOM--(Marketwire - May 15, 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 months ended March 31, 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 quarter of £1.5 million (£9.9 million for Q1 2011)
  
  
• Royalty cash flow per share for the three months ended March 31, 2012 of 1.80p (9.21p for the comparable period in 2011)
  
  
• Strong cash position at March 31, 2012 of £20.9 million (£32.2 million at December 31, 2011), with no borrowings or hedging
  
  
• Completion of the Mount Ida iron ore royalty acquisition in May, following announcement of the proposed transaction in February
  
  
• Total assets of £366.0 million at March 31, 2012 (£380.2 million at December 31, 2011)
  

Peter Boycott, Chairman of Anglo Pacific, commented:

"The Company continues to receive an increasing number of new enquiries for mining finance, which are being assessed as potential royalty opportunities. We have made further progress towards building and strengthening our royalty portfolio through the recently completed acquisition of the iron ore royalty at Mount Ida, in Australia.

During the period, royalty flows from Kestrel in Australia were lower compared to the same period last year: this was due to bad weather and a protracted longwall changeover impacting the level of coal produced. As seen previously, with longwall changeovers, we are confident that the shortfall in output from the period will be made up at a later stage.

We have seen the valuation of our assets remain broadly similar to that at the year end, despite recent declines in mining markets. The current difficult debt and equity markets have created increased royalty opportunities for the Group. With our strong balance sheet, we are well placed to target these opportunities and further develop our royalty portfolio.

Anglo Pacific's strategy remains focused on paying a progressive dividend and acquiring new royalty cash flows from commodities linked to Asian growth."

Conference call:

There will be a conference call for analysts on May 15, 2012 at 9:30am (BST). The dial-in details are as follows: Participant dial in number: +44 (0)20 8515-2306 / 4538578 (confirmation code). A replay of the analysts' conference call will be available at www.anglopacificgroup.com.

The full text of both the financial statements and the Management's Discussion and Analysis may also be obtained by following the following links in this press release:

Financial Statements: http://www.anglopacificgroup.com/i/pdf/310312Q1Financials.pdf.

Management's Discussion and Analysis: http://www.anglopacificgroup.com/i/pdf/310312Q1MDA.pdf.

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 payment 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, targeting three to four new royalties a year, 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 quarter ended March 31, 2012. The El Valle-Boinás/Carlés gold and copper mine continues its build up to full production, whilst production from the Amapá iron ore mine was as expected.

Kestrel

During the first quarter, production volumes were impacted by a scheduled longwall changeover and lower productivity during the ramp-up, as well as adverse weather conditions. Production of hard coking coal at Kestrel for the first quarter was 365,000 tonnes (including production outside of the Group's private royalty area) compared to 968,000 tonnes in the first quarter of 2011. Higher production at Kestrel is expected during the rest of the year. Hard coking coal prices remained under pressure during the quarter due to uncertainty surrounding world economic growth with April contract prices between $210 and $225 per tonne compared to $330 per tonne in April 2011.

The combination of these factors resulted in royalty income from Kestrel of £1.1 million (A$1.6 million) based on a 50% share of invoiced volume of 234,000 tonnes for the quarter, compared to £5.6 million (A$8.9 million) on an invoiced volume of 997,000 tonnes for the comparable period in 2011.

The independent valuation of the Kestrel royalty at March 31, 2012 was £166.6 million (A$257.8 million) compared to £175.1 million (A$265.9 million) at December 31, 2011. This reduction in the valuation is largely due to the weakening of the Australian dollar relative to sterling.

Crinum

The Group received £0.1 million (A$0.2 million) in royalties during the quarter ended March 31, 2012, largely due to remnant mining on the private royalty ground. The Crinum longwall had largely left the Group's private royalty ground during the quarter ended December 31, 2011. 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 quarter ended March 31, 2012 were £0.4 million (£0.5 million for Q1 2011). Continued strong iron ore contract pricing provides the Group with confidence in the future revenues from this royalty.

El Valle-Boinás/Carlés

The Group received £0.3 million in royalties during the quarter ended March 31, 2012, relating to the Q4 2011 production of 4,499 ounces of gold, 17,880 ounces of silver and 727,525 pounds of copper at the El Valle-Boinás/Carlés ("EVBC") gold and copper mine.

Production at the mine remained on target during the quarter ended March 31, 2012 with 10,928 ounces of gold, 33,051 ounces of silver and 965,000 pounds of copper. The Group's royalty receipts from Q1 production will be received during the quarter ended June 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.

Financial performance

Group royalty revenue for the three months ended March 31, 2012 decreased to £1.6 million compared to £9.9 million for the first three months of 2011. Despite increased cash flows from the Group's royalty debentures, when combined with the reduction in cash flows from the Group's coal royalties, the Group's royalty cash flow per share decreased to 1.80p per share for the quarter compared with 9.21p per share for the three months ended March 31, 2011.

The Group's operating expenses increased from £0.5 million in the first three months of 2011 to £0.9 million in the three months to March 31, 2012. This change was largely due to increased external legal fees incurred in assessing royalty opportunities and managing our existing royalties. In addition, the Group's employee benefit expenses increased by £0.1 million for the three months ended March 31, 2012, compared to the same period in 2011 following the appointment of additional staff, including the Group's new Chief Financial Officer.

Gains on disposal during the three months to March 31, 2012 were £0.6 million, compared to £4.4 million realised during the comparable period in 2011.

The Group realised a net foreign exchange loss in the three months to March 31, 2012 of £1.2 million, compared to a net foreign exchange loss of £0.7 million in the comparable period of 2011, as a result of weakening in both the Australian and Canadian currencies relative to sterling. Management continue to examine ways of reducing potential foreign exchange risks and minimise exchange rate related fluctuations in the Group's financial performance and position.

Income tax expense for the three months ended March 31, 2012 was £0.2 million, compared to £2.7 million for the three months ended March 31, 2011.

Overall the Group's operating profit before tax for the three months ended March 31, 2012 was £0.7million compared to £9.4 million for the three months ended March 31, 2011. Group earnings per share for the three months ended March 31, 2012 were 0.19p compared to 9.72p for the first three months of 2011.

Financial position

Total assets of £366.0 million at March 31, 2012 compared to £380.2 million at December 31, 2011.

At March 31, 2012, the Group's Australian coal royalty interests have been independently valued at £166.6 million compared to £175.1 million at December 31, 2011. The change was primarily due to the weakening of the Australian dollar relative to sterling. The Group's royalty instruments following fair value adjustments were valued at £23.6 million at March 31, 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 £67.6 million at March 31, 2012, compared to £68.3 million at December 31, 2011. The decrease is due to the continued amortisation of the Amapá royalty.

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

At March 31, 2012, the Group's quoted and unquoted equity investments, including royalty options, were valued at £82.5 million compared to £64.6 million at December 31, 2011. The private equity interests and royalty options remain accounted for at cost. The increase in the market value of the Group's quoted and unquoted equity interests was primarily a result of a number of acquisitions made during the quarter, where the Group's Executive Committee deemed a royalty opportunity was possible.

At March 31, 2012, the Group had cash of £20.9 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 March 31, 2012 was £22.8 million compared to £44.5 million at December 31, 2011. This reduction was due to the lower production at Kestrel and the corresponding reduction in royalty receivables, together with the additional investment in mining and exploration interests.

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 March 31, 2012 was £366.0 million compared to £380.2 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.

Outlook

The Group's royalty cash flows during the year will be boosted by the continued ramp up of production at the El Valle-Boinás/Carlés gold mine in Spain and a return to normal coking coal output at Kestrel in Queensland.

The recent acquisition of the Mount Ida iron ore royalty enhances our exposure to steel related commodity projects geared to Asian growth, which the Group believes will continue to drive commodity prices in the long term. The Group now holds a number of high quality, long life assets with the potential for significant returns.

The current difficult debt and equity markets have made the raising of mining finance much more challenging, thus creating increased royalty opportunities for the Group. The Group is well placed with its strong balance sheet to target these opportunities and further develop its royalty portfolio and potential future revenue streams.

The results for the three months ended March 31, 2012 and 2011 have neither been audited nor reviewed by the Group's auditors.

The results for the three months ended March 31, 2012 and 2011 have neither been audited nor reviewed by the Group's auditors.

The results for the three months ended March 31, 2012 and 2011 have neither been audited nor reviewed by the Group's auditors.

1 Basis of preparation

The interim condensed consolidated interim financial information of Anglo Pacific Group PLC contained in this release is for the three months ended March 31, 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 March 31, 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 year to date 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.

The results for the three months ended March 31, 2012 and 2011 have neither been audited nor reviewed by the Group's auditors.

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 March 31, 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$257.8 million (£166.6 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 £2.4 million (A$3.7 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.