Vale's Voisey's Bay
Royalty and streaming company Anglo Pacific on Wednesday announced the $205-million acquisition of a holding company that owns a 70% net interest in a stream on cobalt production from the Voisey's Bay mine, in Canada, progressing its ambition to focus on commodities that support a more sustainable world.
CEO Julian Treger said the transaction would be immediately earnings accretive and provided Anglo Pacific exposure to a market fuelled by the fast-growing future demand for electric vehicles.
Voisey's Bay, owned by a subsidiary of Brazil’s Vale, represents one of the largest sources of cobalt outside of Democratic Republic of Congo.
“We believe that this transaction largely solves Anglo Pacific's two major strategic challenges: it addresses the medium-term declining income at Kestrel and significantly repositions the company's portfolio away from coal. We are delivering on our promise to recycle our short-term coal cash flow into clean commodities whose use is largely in facilitating cleaner energy and technology. The acquisition of this new cornerstone asset will underpin Anglo Pacific's ability to deliver further growth and sustainable future returns for our shareholders,” said Treger.
Anglo Pacific would finance the acquisition through a combination of an equity placing of less than 20% of the company's issued share capital, the monetisation of a portion of the group's Labrador Iron Ore Royalty Corporation (LIORC) investment, and a new $180-million credit facility from a syndicate of Canadian banks, comprising Scotiabank, RBC Capital Markets, and Canadian Imperial Bank of Commerce.
“We have taken advantage of the recent strong rebound in the price of iron-ore and have sold a large portion of our holding in LIORC to partially finance an optimal entry point in cobalt. This, together with the support of a new syndicate of leading Canadian banks, means that we are in a strong position to further grow and diversify our portfolio,” said Treger.
Anglo Pacific is entitled to receive 22.82% of all cobalt production from Voisey's Bay up until 7 600 t of finished cobalt has been delivered, which then reduces the stream to an 11.41% entitlement thereafter.
The company will make ongoing payments equal to 18% of an industry cobalt reference price for each pound of cobalt delivered under the cobalt stream, until the company has recovered the $300-million original upfront amount paid for the stream through cobalt deliveries; thereafter, the ongoing payments will increase to 22% of the cobalt reference price.
The acquisition is expected to close in March and is subject to completion of customary conditions.