JULIAN TREGER We are just scratching the surface of the opportunities available through direct acquisition of primary and secondary royalties, and investment in projects at the development and production stage
LSE-listed resources royalties business Anglo Pacific Group tells Mining Weekly that there is “enormous growth potential” in the nonprecious metals royalty space globally.
“In terms of Anglo Pacific . . . I think we are just scratching the surface of the opportunities available through direct acquisition of primary and secondary royalties, and investment in projects at the development and production stage,” says Anglo Pacific Group CEO Julian Treger, noting that the industry is showing greater interest in alternative funding now that traditional funding from equity investors and banks is more difficult and costly to obtain.
He attributes the higher demand for Anglo Pacific’s services to current industry challenges, such as an oversupply of certain commodities and the simultaneous weakening of demand for these commodities. Anglo Pacific hopes to take advantage of this increased interest at the 2016 Investing in African Mining Indaba, when Treger will discuss the opportunities available to mining companies and merger and acquisition prospects.
Anglo Pacific aims to generate business opportunities for various mining interests at the Mining Indaba, which will run from February 8 to 11 at the Cape Town International Convention Centre.
He explains that the company generally makes money available to companies looking to develop mines and, once those mines have been developed, a percentage of the revenues from their operation is returned to Anglo Pacific through royalty payments. As such, Anglo Pacific does not require any repayment of their initial investment but will be entitled to royalty payments once the mine makes sales.
For example, Anglo Pacific provided financing for Aim-listed Hummingbird Resources’ Dugbe 1 gold project, in Liberia, for which the multi-asset gold company is compiling a feasibility study. In exchange for $15-million, paid in three tranches of $5-million, Anglo Pacific is entitled to a 2% life-of-mine net smelter return from any sales of gold mined within a 20 km radius of a specified point at the Dugbe 1 resource. The group paid the third and final tranche in March 2014.
Anglo Pacific is seeking to invest between $25-million and $1-billion in royalty opportunities, although the higher number will be in partnership with co-investors.
The industry requires improved quality management and a better understanding of the requirements of the public market when seeking investment, while private investors should consider aspects such as the criteria for return on investment and return on equity, Treger says.
He is also the managing partner of investment management and advisory firm Audley Capital Advisors and notes that, in September, the company led a consortium of investors in acquiring copper assets in Chile from Anglo American for a purchase consideration of up to $500-million. He says these kinds of acquisitions are also to be discussed at this year’s Mining Indaba.