Investing
in royalties
Annual Report & Accounts 2012
Anglo Pacific Group Plc Annual Report and Accounts 2012
2
Contents
Who we are
Our strategy
How we performed
Our royalty portfolio
Chairman’s review
Commodities review
Financial review
Directors’ report
Corporate governance report
Directors’ remuneration report
Directors’ responsibilities in the preparation of financial statements
Report of the independent auditor
Consolidated income statement
Consolidated statement of comprehensive income
Consolidated and company balance sheets
Consolidated statement of changes in equity
Company statement of changes in equity
Consolidated and company cash flow statements
Notes to the consolidated financial statements
Shareholder statistics
Directors and advisers
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Creating new royalties
Our new royalty agreements tend to come from
providing financing to mining operators, usually
to help them progress a mine into production. We
also develop royalty opportunities through equity
investments.
Acquiring existing royalties
We buy existing royalty agreements, such as
those owned by exploration companies who may
have retained an interest in a mine they helped
discover. Once acquired, royalty companies rarely
sell their agreements.
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. There are different
reasons for the origination of a royalty
ranging from land ownership to exploration
rights; however, as a royalty company,
our entitlement primarily comes through
purchasing existing royalty agreements or
as a result of direct financial investment.
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
Return (“GRR”) or Net Smelter Return (“NSR”)
Royalties, which are based on the gross sale
price of the actual minerals mined. Our model
is based around Gross Revenue or Net Smelter
Return Royalties as they provide the best and
clearest return.
Anglo Pacific Group Plc Annual Report and Accounts 2012
Who we are
Anglo Pacific Group PLC is the only fully listed
company on the London Stock Exchange focused
on the provision of royalty financing derived from
the mining of natural resources.
Our objective is to build a diversified and
growing portfolio of royalties to generate
long term cash flow growth for shareholders.
Our royalty portfolio is diversified by
commodity and geography and encompasses
both producing mines and development projects.
It is a continuing policy of the Group to pay a
substantial proportion of the royalty cash flows
to shareholders as dividends.
What we offer
To operators
To shareholders/investors
An alternative form of financing which
is often less dilutive to shareholders
Exposure to natural resource commodities
whilst minimising exposure to cost inflation
We consider projects from early stage
exploration through to production
We consider all commodities and
jurisdictions with established legal
structures, as illustrated by our
diversified royalty portfolio
Flexible finance structures to suit the
operators’ needs; and
Track record of investing in
successful projects
Exposure to a basket of commodities
Commitment to a progressive
dividend policy
Significant growth from our pipeline
of development royalties
A logical choice for those who continue
to believe in the continuing trend
of global growth led by urbanisation
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What commodities are we in?
Coking Coal
64%
Iron Ore
24%
Chromite
5%
Gold
5%
Uranium
2%
Anglo Pacific Group Plc Annual Report and Accounts 2012
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Our strategy
Strategic objectives Achieving our strategy
To expand our mining
We target the acquisition of 2-3 new royalties per annum, through both direct acquisition of existing
royalty portfolio in long life
projects.
royalties and the creation of new royalty agreements.
We actively search for existing royalties which may be non-core to the owner.
We use an extensive network of contacts built up over many years to search for new opportunities.
We take strategic stakes in mining and exploration companies where potential royalty opportunities
may exist and aim to profitably exit those companies where royalties are no longer an option.
This enables us to make a better assessment of the underlying project whilst providing direct access to
management.
We create flexible deal structures to meet the needs of operators.
We continue to grow a diversified royalty portfolio to reduce dependence on any one royalty or commodity.
Royalty companies are not operators and as such have a low cost base.
We maintain a progressive dividend policy.
To pay a substantial proportion of
our royalty income to shareholders
as dividends.
Our progress to date
Focus on becoming a royalty
company
Acquired:
El Valle–Boinás/Carlés (EVBC)8
Engenho7
Acquired:
Railway3
Amapa4
Tucano5
Bulqiza14
Acquired:
Mount Ida20
Churchrock
(option)21
Crinum2
(no further
production
expected)
2007
2008
2009
2010
2011
2012
Existing royalties:
Kestrel1 and Crinum2
(produced £60m to date)
Athabasca Basin13
Duggan17(option)
Acquired:
Acquired:
Four Mile11
Salamanca12
Ring of Fire15
Isua6
Highbank19
(option)
Eastbank 18
(option)
Jogjakarta9
Midway-
McKenzie10
Araguaia16
(option)
EVBC production commenced
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Anglo Pacific Group Plc Annual Report and Accounts 2012
Strategic risks
Managing risk
Insufficient funds to acquire
We are cash generative, have significant cash balances and liquidity in our mining and exploration interests.
royalties.
The Group’s dual listing on both the London Stock Exchange and Toronto Stock Exchange provides flexibility
in capital markets should additional funding be required for acquisitions.
Increased competition as
alternative financing becomes
more popular.
Our experienced management team, an extensive network of contacts and a track record of investing in
successful projects positions the Group to grow in a more competitive environment.
The Group provides flexible and innovative financing packages to suit the needs of the operator.
The Group does not focus on any one commodity. We have the in-house expertise to assess opportunities
across a wide spectrum of commodities and jurisdictions.
Delays to the commencement/
cessation of production at the
underlying mining assets.
The Group seeks to register its royalty title such that the royalty will endure both delays in production and
changes in ownership.
Newly created royalty agreements can include provisions for recourse to funds advanced where key
milestones have not been achieved.
Resource nationalisation.
The Group focuses its royalty investments to those countries with established legal jurisdictions, low
geopolitical risk and an established mining industry.
Significant falls in
commodity prices.
The Group’s diversified royalty portfolio provides exposure to a mix of commodities which reduces
dependence on any one commodity.
The Group operates with a low cost base.
Leading to future growth
Production expected:
Jogjakarta9 (initially 2Mt
iron sand concentrate pa)
Churchrock21 (option payment
$15m)
Production expected:
Ring of Fire15 (target � 2Mt pa
of concentrate and
ferrochrome feed)
Isua6 (production targeted for
late 2016)
Production expected:
Mount Ida20 (targeting 10Mt pa
of magnetite concentrate)
– will require $8m to acquire
remaining royalty
Araguaia16 (commencement of
Nickel laterite during the year)
– will require $12.5m to
exercise our option
2013
2014
2015
2016
2017
2018+
Production expected:
Tucano5 (target 0.5mt pa)
Four Mile4 (target 3mlb – 5mlb pa)
Acquired:
Dugbe I22 (Gold 2% NSR royalty
financing agreement signed with
Hummingbird Resources plc)
Production update:
Kestrel1 expansion
Production to increase to circa
5.7Mt pa
Production expected:
Salamanca12
(commencement of uranium
production expected during
the year)
1-22 as illustrated on page 7
Anglo Pacific Group Plc Annual Report and Accounts 2012
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How we performed
KPI’s: The Board has identified the following metrics to assess performance against strategy
Value of new royalties acquired
Generate significant operating profits
It is the strategy of the Group to expand
and diversify its royalty portfolio by
adding two to three new royalties per
annum.
The Group, with a diversified income
stream and a low cost base, aims to
generate significant operating profits.
Deliver long term
returns to shareholders
The Group is committed to offering long term
returns to its shareholders with its progressive
dividend policy and by outperforming the
FTSE350 mining index.
Royalties acquired
Operating profit
Dividend per share
£3.7m
£m
40
£9.3m
£m
40
10.2p
p
11
30
20
10
30
20
10
10
9
8
7
6
5
2008
2009
2010
2011
2012
2008* 2009* 2010* 2011*
2012
2008
2009
2010
2011
2012
FTSE 350 Mining Index vs Anglo Pacific Group – 5 years
220
170
120
70
20
Jan-08
Jul-08
Jan-09
Jul-09
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
Jul-12
APF
FTSE 350 Mining
*Restated (see note 2.1.3)
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9
3
2
20
1
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Anglo Pacific Group Plc Annual Report and Accounts 2012
Our royalty portfolio
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17
15
19
10
18
21
6
4
5
16
7
14
12
8
22
Exploration
Development
Producing
Option
Australia
Royalty and Operator
Commodity
Brazil
Royalty and Operator
1 Kestrel Rio Tinto Ltd
Coking coal
4 Amapá Anglo American Plc
2 Crinum BHP Billiton Ltd
Coking coal
5 Tucano
Beadell Resources Ltd
3 Pilbara royalties BHP Billiton Ltd
11 Four Mile Quasar Resources/
Alliance Resources Ltd
20 Mount Ida Jupiter Mines
Iron Ore
Uranium
Iron Ore
Commodity
Iron Ore
Non-precious metals
Iron Ore
Canada
Royalty and Operator
10 Malartic-Midway and McKenzie Break
Northern Star Mining Corp
Commodity
Gold
13 Athabasca Basin royalties Various
Uranium
7 Engenho Minera Gold Ltd
Gold
15 Ring of Fire Cliffs Natural Resources Inc
Chromite
16 Araguaia Horizonte Minerals Plc
Nickel
17 Duggan Creso Exploration Inc**
Gold
18 Eastbank Northern Shield
Platinum group metals
19 Highbank Lake Northern Shield
Platinum group metals
Europe
Royalty and Operator
Commodity
Greenland
Royalty and Operator
Commodity
Indonesia
Royalty and Operator
Commodity
8 El Valle-Boinás/Carlés
Gold and Copper
6
Isua London Mining Plc
Iron ore
9 Jogjakarta Indo Mines Ltd
Iron sands
Orvana Minerals Corp
12 Salamanca Berkeley Resources Ltd
Uranium
14 Bulqiza Columbus Copper Corporation
Chromite
Liberia
Royalty and Operator
Commodity
USA
Royalty and Operator
Commodity
22 Dugbe 1 Hummingbird Resources Plc*
Gold
21 Churchrock Uranium Resources Inc
Uranium
*Royalty financing agreement signed December 2012 **Option conversion expected in 2013
Anglo Pacific Group Plc Annual Report and Accounts 2012
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Chairman’s review
“
The Group will continue to make
the acquisition of new royalties
its principal strategic focus, as
it maintains its belief that the
long term urbanisation of the
developing world should still drive
demand for those commodities
covered by its royalties.”
Total assets
£353
m
Dividend for year
10.2 p
4.6%
Anglo Pacific Group Plc Annual Report and Accounts 2012
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2012 was an exceptionally difficult year for the
financial world in general and the mining industry
in particular. China was seen to be growing at
a slower pace than anticipated and Europe’s
continuing debt crisis appeared overwhelming.
The uncertainty over the US election and
regime change in China together with the
fiscal cliff stalemate in the USA further reduced
international business confidence.
These factors severely impacted commodity
prices throughout the year. In particular steel
oversupply and destocking in China had a severe
effect on iron ore and coking coal prices, the latter
falling by some 50%.
Royalties from the Kestrel coking coal mine in
Australia were also impacted early in the year by
a number of special factors including disruption of
production due to a longwall changeover as well
as adverse weather conditions. In the last quarter,
production was also affected by commissioning
delays of the new coal processing plant.
Elsewhere, the Amapá iron ore mine in Brazil
produced a steady flow of royalties albeit at lower
prices whilst the Group received its first full year
of royalties from the El Valle-Boinás/Carlés gold
mine in Spain at buoyant gold prices.
During the year there was a further decline in the
junior mining sector due to reduced commodity
prices, the scarcity of financing for new mining
projects and the impact of severe cost and capital
expenditure inflation across the mining industry.
This produced opportunities for the acquisition
of new royalties, enabling the Group to further
diversify its royalty portfolio with three new
projects in gold, uranium and iron ore.
Despite weaker mining markets the Group
continued to realise gains from its strategic
mining interests. The Group’s balance sheet
remained ungeared with a resilient asset backing.
The Group offers a stable hedge against weaker
currencies as well as against inflation due to its
royalty income being directly linked to the sales
prices of the commodities it finances.
The Group’s strategy remains focused on
acquiring new royalties by providing mining
finance and through its associated strategic
mining investments. The Group is fully committed
to generating consistent cash flows and dividends
for shareholders.
Outlook
The outlook for the world economy appears to
have improved since the year end with an increase
in Chinese output and infrastructure spending and
continuing signs of recovery in the US economy.
Japan, India and South Korea appear similarly
committed to a growth strategy. This confidence
has produced better mining markets and a
more optimistic outlook for metal prices and in
particular iron ore.
As Rio Tinto continue to progress with the Kestrel
expansion project, we remain confident of a
recovery in production from Kestrel in 2013.
This, together with the substantial increase in
royalty rates announced by the Queensland
Government in September last year from 10%
to 12.5% above A$100 and 10% to 15% for coal
prices realised above A$150 per tonne, should
impact positively on royalty receipts from
Kestrel in 2013.
The progress made during the year at a number
of the Group’s development royalties has been
positive and should bring forward future royalty
cash flows. The Group’s revenue is directly linked
to the top line of its royalty mining operations,
whilst avoiding exposure to the current
inflationary escalation in mining costs. The Group
itself has no operating mines of its own.
The Group will continue to make the acquisition
of new royalties its principal strategic focus,
as it maintains its belief that the long term
urbanisation of the developing world should still
drive demand for those commodities covered by
its royalties.
I would like to take this opportunity to welcome
both Mr Paul Cooke and Mr Michael Blyth to the
Board as Non-Executive Directors. They both
bring a wealth of expertise and experience in areas
which will considerably benefit our Group and
we look forward to working with them.
Finally, I would like to thank my Board colleagues
and staff for their application and hard work in
what has been a challenging year for the Group.
B.M. Wides
Acting Chairman
March 27, 2013
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Anglo Pacific Group Plc Annual Report and Accounts 2012
Metallurgical
Coal
What we own
The Group’s core asset is its 50% ownership
of certain sub-stratum lands which entitle it
to coal royalty receipts from the Kestrel and
Crinum mines, located in Queensland, Australia
(other than Crown areas). These mines are
operated by Rio Tinto Coal Australia Pty Ltd and
BM Alliance Coal Operations Pty Ltd (a 50/50
joint venture between BHP Billiton Limited and
Mitsubishi Development Pty Ltd), respectively.
The Kestrel coking coal mine has been in
production since 1992 and is a world class
coking coal deposit which has the capability
of producing between 3 to 6 million tonnes of
hard coking coal per annum. Production from
the adjacent Crinum mine largely left the Group’s
private royalty ground in 2011.
What is metallurgical coal
and what are its uses
Metallurgical coal normally
trades at a premium to
thermal coal and is an
essential raw material in
the production of iron for
steel making. The highest
quality coals include hard
coking coal and ultra-low
volatile Pulverised Coal
Injection (PCI) coal.
How our coal royalties work
The Group’s royalty entitlements from the Kestrel
and Crinum mines arise under Queensland
Government law and are to be paid on coal mined
from certain private subterranean lands. The
royalty rate to which the Group is presently
entitled is prescribed by the Queensland Mineral
Resources Regulations. These regulations
currently stipulate that the basis of calculation
is a three-tiered fixed percentage of the invoiced
value of the coal, without deduction for any costs
pertaining to rail and road freight or any other
costs incurred in relation to the sale or disposal of
the coal other than port and related charges, as
set out in the chart opposite.
Valuation
As the Group owns the physical right to the
minerals, its royalty entitlement from the Kestrel
mine is treated and accounted for as property,
plant and equipment. As such, the royalty
entitlement is valued at fair value based on future
discounted cash flows calculated on a quarterly
basis by an independent external consultant and
classified as “Coal royalties”.
The value of the Group’s Kestrel royalty increased
by £5million to £171million as at December 31,
2012, from £166million as at December 31, 2011
(restated). This increase is largely attributable to
the announcement of increased royalty rates by
the Queensland government, which will benefit
future royalty receipts to the Group.
Anglo Pacific Group Plc Annual Report and Accounts 2012
In addition to our royalties, the Group owns
several coal exploration licences over thermal
coal in British Columbia, Canada. These assets
are being carried in the balance sheet at just over
£2.2m, with £0.9m in deferred exploration costs.
Trefi Coal Corp is a thermal and PCI coal prospect
– 100% owned subsidiary – with NI 43-101
compliant measured coal resources of
14.25million tonnes, indicated resources of
24.85million tonnes of coal, and inferred
resources of 51.50million tonnes. Panorama Coal
Corp is an ultra-low volatile metallurgical coal
prospect – 100% owned subsidiary – with NI
43-101 indicated resources of 13.70million tonnes
semi-anthracite to anthracite coal, and inferred
resources of 24.10million tonnes.
The Group is actively seeking partners in order
to progress these projects towards the Group’s
objective of earning a royalty entitlement and
retaining a carried interest.
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Coal royalty rates (%)
15
12
9
6
$0
$100
$150
A$/tonne
New rates
Previous rates
Coal royalty income
£m
40
30
20
10
2008
2009
2010
2011
2012
Coal royalty valuation
£m
200
150
100
50
2008
2009
2010
2011
2012
Performance
Kestrel, Australia
Coking coal receipts from the Kestrel mine
operated by Rio Tinto Coal Australia Pty Ltd
were £10.9million (2011: £26.1million (restated))
on approximately 2.7million tonnes of hard
coking and thermal coal (2011: 3.8million tonnes
restated). Royalty income was impacted in the
first half of 2012 by a longwall changeover and
lower productivity during the ramp up and in the
second half of 2012 by a major coal preparation
plant shutdown as part of Kestrel’s mine
expansion project. Benchmark hard coking coal
quarterly contract prices fell from $235 FOB in Q1
2012 to $170 FOB in Q4 2012.
During the second quarter of 2012 the Group
was informed by Rio Tinto that an audit by
the Queensland Office of State Revenue had
identified a misallocation of royalty revenue
relating to areas reserved by the State of
Queensland for roads. This resulted in an
overpayment of royalties to the Group of
£4.6million (A$7.1million) for the period
September 2006 to December 2011, together
with an associated interest charge of £1.4million
(A$2.2million). The misallocation of royalty
revenues and associated interest charge has
been reflected in the restated balance sheet
at December 31, 2011, the impact of which is
described in note 2.1.3.
Crinum, Australia
Production at Crinum has now moved away from
our private royalty area and as such we are no
longer expecting any future income, and the
asset is ascribed no value on the balance sheet.
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Anglo Pacific Group Plc Annual Report and Accounts 2012
Iron Ore
What we own
Producing
Amapá: 1% GRR over Anglo American Plc’s
project in Brazil
Pre-Development
Pilbara royalties (inc Railway): 1.5% GRR over BHP
Billiton Ltd’s project in Western Australia
Development
Jogjakarta: Royalty over Indo Mines Ltd’s
project in Indonesia. (Please see below for
details on rates)
Isua: 1% GRR over London Mining Plc’s project
in Greenland
Mount Ida: 0.3% GRR over Jupiter Mines Ltd’s
project in Western Australia.
Tucano: 1% GRR over Beadell Resources Ltd’s
project in Brazil
Valuation
The Group does not own the physical
rights to the minerals contained within the
Amapá, Tucano, Isua, Mount Ida and Pilbara
Iron Ore projects. The royalties receivable
from the interests held are derived from the
rights attached to the underlying mineral
resources. As such these interests are
classified as “Intangibles” and are carried at
amortised cost.
The Group’s interest in the Jogjakarta
project arises from a debenture
instrument whereby initial royalty
receipts are repayments of principal. As
such this interest is classified as “Royalty
Instruments” and is carried at fair value.
Performance
Amapá, Brazil
Jogjakarta, Indonesia
Tucano, Brazil
In Brazil, royalty receipts from the Anglo American
Plc operated Amapá Iron Ore System (“Amapá”)
were £2.2million (2011: £2.7million) from circa
5.2million tonnes of pellet and sinter feed sales.
On January 4, 2013 Zamin Ferrous announced
they had signed a binding agreement for the
purchase of Amapá from Anglo American Plc
(70%) and Cliffs Natural Resources Inc (30%).
Isua, Greenland
On January 24, 2013 London Mining Plc
announced that they had completed the
Department of Minerals and Petroleum’s
permitting process requirements for its Isua iron
ore project in Greenland. London Mining Plc
also announced that they expected all required
approvals to be completed in 2013. For further
information on the project please see
www.londonmining.co.uk
Indo Mines Ltd (“Indo”) announced on October
25, 2012 that the Indonesian Ministry of
Energy and Mineral Resources issued a decree
confirming approval of the application for the
commencement of the construction phase of
the Jogjakarta Iron Project within the Contract
of Works area. Indo had previously announced
the AMDAL Environmental Impact Assessment
approval on February 1, 2012. The project will
follow a staged implementation to achieve
2million tonnes of iron concentrate production
per annum before moving downstream into the
manufacture of pig iron. Anglo Pacific holds a
2% NSR royalty which changes to a 1% NSR
royalty once our principal is repaid and provided
the pig iron price is less than $700 per tonne.
The NSR royalty remains at 2% if the pig iron
price is more than $700 per tonne. For further
information see www.indomines.com.au
On January 24, 2013 Beadell Resources Ltd
(“Beadell”) announced that the magnetic
separation plant is due to produce its first
concentrate in April 2013. Beadell previously
announced on August 24, 2012 an “Iron Ore
Concentrate Off-take Agreement” with Anglo
American Plc with an indicated production
level of 500,000 tonnes per annum of ~65% Fe
concentrate. For further information please see
www.beadellresources.com.au
2012 Acquisition: Mount Ida, Australia
The Group completed the first tranche of a
50% interest in the 1.5% GRR from Red Rock
Resources PLC. Tranche 1 was completed with
the payment of US$6million being settled
by $3.7million in cash with the remainder in
ordinary shares of the Company.
Anglo Pacific Group Plc Annual Report and Accounts 2012
Gold
What we own
Producing
El-Valle Bonáis/Carlés: 2.5% NSR (3%
over US$1,100/oz) over Orvana Mineral
Corporation’s project in Spain
Pre-Development
Malartic-Midway and McKenzie: 2.5% NSR
over Northern Star Mining Corporation’s
project in Canada
Development
Engenho: 2.5% NSR over Minera Gold Ltd’s
project in Brazil
Duggan (option): 2% NSR on Creso Exploration
Inc’s project in Canada. The Group has notified the
operator of its intention to exercise the option
Dugbe I: 2% variable NSR royalty financing
agreement over Hummingbird Resources
Plc’s project in Liberia, announced in
December 2012
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Valuation
The Group’s interests in the EVBC,
Engenho, and Malartic Midway mines
arise from debenture instruments whereby
initial royalty receipts are repayments
of principal. As such these interests are
classified as “Royalty Instruments” and
carried at fair value.
The Group does not own the physical
rights to the minerals contained within the
Dugbe I project. The royalties receivable
from the interest held are derived from the
rights attached to the underlying mineral
resources. As such these interests are
classified as “Intangibles” and carried at
amortised cost.
The Group’s option to acquire a 2% NSR
over the Duggan project is classified as
“Mining and exploration interests – royalty
options” and carried at fair value.
Performance
El Valle-Boinás/Carlés, Spain
2012 Acquisition: Dugbe I, Liberia
The Group announced in December 2012 the
signing of a royalty financing agreement with
Hummingbird Resources Plc to acquire a 2.0%
to 2.5% variable NSR royalty on its Dugbe I gold
project in Liberia.
Receipts from the El Valle-Boinás/Carlés
(“EVBC”) mine operated by Orvana Minerals
Corp (“Orvana”) were £1.9million (2011:
£0.3million). The mine continues to build up
to full production with a new 420 metre deep
shaft commissioned during 2012. On February
8, 2013 Orvana announced a fiscal 2013 (year-
end September, 2013) projected production for
EVBC of 63,000 ounces of gold, 200,000 ounces
of silver and 6million pounds of copper.
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Anglo Pacific Group Plc Annual Report and Accounts 2012
Energy
Minerals
What we own
Pre-Development
Salamanca: 1% NSR over Berkeley Resources
Ltd’s project in Spain
Athabasca: 2% to 3% variable NSR over
Advance Royalty Corp’s Project in Canada
Development
Four Mile: 1% NSR over Quasar Resources
Pty Ltd/Alliance Resources Ltd’s project in
Australia
Churchrock (option): 5% GRR option over
Uranium Rerources Inc’s project in USA
What are energy minerals
Energy is essential for
modern life and the
Group invests in uranium
projects and has exposure
to thermal coal via by-
product production from
Kestrel and through its
own private coal holdings.
Valuation
The Group does not own the physical rights
to the minerals contained within the Four
Mile Uranium, Salamanca Uranium and
Athabasca Uranium projects. The royalties
receivable from the interests held are derived
from the rights attached to the underlying
mineral resources. As such these interests
are classified as “Intangibles” and carried at
amortised cost.
The Group’s option over the Chruchrock
Properties is classified as “Mining and
exploration interests – royalty options”.
No value is ascribed to this asset due to the
uncertainty over the eventual exercise of
the option.
Performance
Four Mile Uranium, South Australia
On October 24, 2012 Alliance Resources Ltd
announced the Four Mile Project start-up with
in-situ recovery (“ISR”) mining operations
commencing at Four Mile East in Q2 2013 and at
Four Mile West in Q4 2013. Production guidance
for 2013 and Q1 2014 is 2.128Mlb of uranium
oxide and sales of 1.306Mlb with first sales
expected in Q3 2013. For additional information
please see www.allianceresources.com.au
2012 Acquisition
Churchrock Uranium option, USA
On August 13, 2012 the Group agreed to provide
Laramide Resources Ltd with an interest bearing
facility of CDN$5million in return for being
granted an option to acquire a 5% GRR over the
Churchrock Properties. The facility is repayable in
December 2015, and bears interest at a rate
of 7% per annum payable quarterly in arrears.
The option has an exercise price of US$15million.
Anglo Pacific Group Plc Annual Report and Accounts 2012
Non-Ferrous
Metals
What we own
Pre-Development
Bulqiza: 3% NSR over Columbus Copper Corp’s
Chromite project in Albania
Development
Ring of Fire: 1% NSR over Cliffs Natural
Resources Inc’s Chromite project in Canada
Eastbank and Highbank options: 1% NSR
over Northern Shield Resources Inc’s projects
in Canada
Araguaia option: 1.1% to 1.5% NSR
over Horizonte Minerals Plc’s Nickel
project in Brazil
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What are non-ferrous metals and
what are their uses
Non-ferrous metals are
metals other than iron,
gold and platinum group
elements used in all
aspects of modern life
eg. copper (shown here),
nickel and chromite.
Valuation
The Group does not own the physical
rights to the minerals contained within
the Ring of Fire Chromite and Bulqiza
Chromite projects. The royalties receivable
from the interests held are derived from
the rights attached to the underlying
mineral resources. As such these interests
are classified as “Intangibles” and carried
at amortised cost.
The Group’s options to acquire royalties
over the Araguaia Nickel, East bank and
Highbank Platinum Group Elements
projects are classified as “Mining and
exploration interests – royalty options”
and carried at fair value.
Performance
Ring of Fire Chromite, Canada
Araguaia Nickel, Brazil (Variable NSR)
On May 20, 2012 Cliffs Natural Resources Inc
announced that the Ring of Fire project would
be advanced to the feasibility stage.
The project is expected to produce up to
2.3million tonnes of chromite concentrate per
annum and is scheduled to start production in
2016. Additional information can be found at
www.cliffsnaturalresources.com
Horizonte Minerals Plc (”Horizonte”) announced
on August 22, 2012 that its NI 43-101 compliant
Preliminary Economic Assessment (“PEA”)
showed strong economics based on a low strip
ratio, excellent infrastructure, large mineral
resource with two viable alternatives for
processing. The PEA recommended moving to
pre-feasibility which Horizonte expected to
begin in 2013. Anglo Pacific holds an option on
a sliding scale 1.1% to 1.5% NSR royalty to be
exercised for US$12.5million by the earlier of
120 days from the completion of a pre-feasibility
study or January 10, 2017. Further information
can be found at www.horizonteminerals.com
and www.sedar.com
16
Anglo Pacific Group Plc Annual Report and Accounts 2012
Report of the Directors
Financial review
Income statement
Royalty entitlements
Kestrel
Crinum
Amapá
Royalty income
El Valle-Boinás/Carlés*
Royalty entitlements
amounts receivable from royalty instruments, though £0.8million of
this was recovered in 2012. Other income represents returns from the
Group’s mining and exploration interests.
Overall this resulted in profit before tax for the year of £14.2million
compared to £48.5million (restated) reported in 2011. Allowing for a
tax charge of £4.2million (2011: £12.2million (restated)), profit after
tax was £10.1million (2011: £36.3million (restated)) which translates
to an earnings per share of 9.27p (2011: 33.51p (restated)).
Restated
2011
£’000
2012
£’000
10,921
26,083
117
5,902
2,229
2,694
13,267
34,679
Balance sheet
1,890
275
15,157
34,954
Asset summary
* El Valle-Boinás/Carlés is a debenture instrument whereby initial royalty receipts are
repayments of principal and therefore do not appear as royalty income in the income
statement.
Royalty income was £13.3million for the year ended December
31, 2012, down from £34.7million in 2011. The 2011 numbers have
been restated as a result of the previously announced misallocation
of royalty revenue at the Group’s Kestrel royalty which came to
light after an audit by the Queensland Office of State Revenue.
This restatement is discussed further in note 2.1.3, but resulted in a
reduction in the reported Kestrel income in 2011 of £0.4million.
As discussed in the Metallurgical Coal review, there were several
adverse production occurrences at Kestrel in the year, resulting
in unusually low levels of income. Overall income has also been
adversely impacted by continued downward pressure on the coking
coal price throughout 2012. Production at Crinum had largely left the
Group’s private royalty ground in the first half of 2011, and no future
royalty receipts are now expected. El Valle-Boinás/Carlés continued
its ramp up to full production in the year, though as this royalty was
structured as a debenture originally, royalty receipts are treated as
repayments of principal, until such time as the outstanding balance
has been repaid. From 2013 onwards, these royalty receipts will be
included in the income statement.
Operating expenses increased by £0.2million in the year, largely as a
result of an increase in professional fees associated with managing our
existing royalty portfolio and exploring new royalty opportunities. This
increase in professional fees was offset somewhat by the decision not
to award the Executive Directors an annual bonus this year.
A reduction in finance income of £0.8million in the year, largely
as a result of the cessation of interest bearing royalty instruments,
along with no change in the amortisation of the Amapá royalty,
resulted in an operating profit of £9.3million in the year, compared to
£31.8million in 2011 (restated).
In spite of very difficult equity markets, the Group realised gains of
£7.3million (2011: £20.3million) from its mining and exploration
interests in the year. The Group continued its strategy of taking
equity stakes in strategic opportunities with the prospect of potential
royalties. 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. The reduction in gains compared to those achieved
in 2011 largely reflects the difficulties in the junior mining equity
markets over the last year.
Other losses of £4.2million reflect write downs in the mining and
exploration interests of £3.7million which the Directors consider to
be impaired. Further information can be found in note 18. The losses
of £4.3million in 2011 largely represented provisions in respect of
Restated
2011
£’000
2012
£’000
Coal royalties (Kestrel and Crinum)*
170,995
165,967
Royalty instruments**
Intangibles - royalties***
Total royalty assets
Mining and exploration interests
Cash
24,032
24,736
70,477
68,334
265,504
259,037
55,793
64,551
24,036
32,197
Other intangibles (deferred exploration costs)
931
804
Other
Total assets
7,204
14,450
353,468
371,039
* Coal royalties relate to the Group’s entitlement to royalties from the Kestrel and Crinum
mines. As the Group owns the physical right to the minerals in its coal royalties, its royalty
entitlement is treated as property, plant and equipment, as such it is carried at fair value as
calculated by an independent consultant.
** Royalty instruments represent the Group’s royalties which are structured as debentures.
As these are financial assets they are carried at their fair value on the balance sheet.
*** Intangibles – royalties are carried at amortised cost. Though the expected future cash
flows from these royalties may enhance significantly post investment, accounting rules
prevent the Group from reflecting this on the balance sheet.
The Group’s royalty assets maintained their value in spite of a difficult
year for the mining and commodity sector. The Kestrel royalty
increased in value by £5.0million. This was largely as a result of the
increase to the Queensland royalty rate announced in September. The
decrease in production has also had a positive impact, as resource
depletion was lower in 2012, which should result in future sales at
both higher prices and higher royalty rates.
The Directors, as part of the annual impairment review, conducted
a discounted cash flow valuation of the Group’s other royalties. As
royalty investments are usually made at an early stage of a project,
changes in the project’s development between the point of investing
and the commencement of production can significantly impact on the
expected cash flows the Group could receive. If forecast commodity
prices and production schedules used by the Directors transpire, the
Group could achieve additional cash flows of £60.6million (2011:
£52.2million), on a discounted basis, above the initial investment. This
amount is not reflected on the balance sheet.
The Group ended the year in a strong position, with £24.0million
(2011: £32.2million) in cash along with further potential liquidity in
its mining and exploration portfolio.
Allowing for the provision for deferred tax of £48.5million, mainly
relating to the valuation of royalties and debentures, the Group had
net assets for the year ended December 31, 2012 of £301.0million.
This is down slightly on £306.2million at the end of 2011 (restated).
17
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Anglo Pacific Group Plc Annual Report and Accounts 2012
Report of the Directors
Directors’ report
The Group continues to expand and
diversify its royalty portfolio
The Directors submit their report and the audited financial statements
for the year ended December 31, 2012.
Anglo Pacific Group PLC is a public limited company, incorporated in
England, and listed on the London Stock Exchange under the symbol
APF and the Toronto Stock Exchange under the symbol APY.
Strategy
Anglo Pacific Group PLC’s strategy, conducted through the holding
company (the “Company”) and its subsidiary undertakings (together,
the “Group”), is set out in the Our Strategy section on
pages 4 to 5.
Principal activities
The Group’s principal royalty activities and coal interests are set out
in the Commodities Review on
the Group’s principal activities is set out in the Our Royalty Portfolio
section on
pages 10 to 15. The location of
page 7.
In addition to the Group’s principal royalty activities and coal interests,
the Group owns a number of strategic mining and exploration
interests held for the purpose of generating additional royalty
opportunities including a number of quoted and unquoted coal,
uranium, gold, base metals and platinum mining projects.
Results and dividends
The consolidated income statement is set out on
the financial statements.
page 35 of
The Group’s profit after tax decreased by 72% to £10.1million (2011:
£36.3million (restated)).
The Directors recommend a final dividend of 5.75p per share for the year
ended December 31, 2012 which, with the interim dividend of 4.45p
per share paid on February 5, 2013, will make total dividends for 2012
of 10.2p per share (2011: 9.75p per share). The final dividend is subject
to shareholder approval at the 2013 Annual General Meeting. The Board
proposes to pay the final dividend on August 7, 2013 to shareholders on
the Company’s share register at the close of business on June 7, 2013.
The shares will be quoted ex-dividend on the London Stock Exchange
and the Toronto Stock Exchange on June 5, 2013. 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. The Board is seeking to renew its
authority to offer this alternative at the Annual General Meeting. 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 June 5, 2013. The last date for elections
under such an alternative, if offered, will be July 19, 2013.
Review of the business
This business review comprises the Chairman’s Review on
page 9, the Key Performance Indicators included in the How
We Performed section on
page 17, the Commodities Review on
page 6 and those laid out on
pages 10 to 15,
page 16.
together with the Financial Review set out on
The Principal Risks and Uncertainties laid out on
page 17 together
with the strategic risks identified under the Our Strategy section on
page 5 also form part of this review.
Operational review
The Group’s operational review of its royalty and coal interests is set
out in the Commodities Review on
pages 10 to 15.
Mining and exploration interests
The Group’s equity investments in both listed and unlisted mineral
exploration and development companies continued to generate
opportunities for royalty acquisitions during the year. The Group’s
equity investments remained focused on copper, precious metals, iron
ore and uranium at December 31, 2012. Where royalty opportunities
appeared no longer identifiable within an equity investment, the
Group disposed of the interest. Difficult equity market conditions
during the year resulted in the Group realising decreased profits on
these disposals.
In addition to the difficult equity market conditions, the filing for
protection under a corporate reconstruction by one of the Group’s
mining and exploration interests subsequent to the year end, resulted
in the Group recognising an impairment loss of £3.7million for the year
ending December 31, 2012.
Key performance indicators
Consistent with the Group’s strategy of expanding our mineral royalty
portfolio and continuing to pay a substantial proportion of our royalty
income to shareholders as dividends, the Board has identified three
main key performance indicators, as a measure of our success in
delivering on our strategy, all of which are financial:
(i) Value of new royalties acquired
(ii) Operating profit
(iii) Dividends per share
In addition to these financial KPIs, the Board also considers non-
financial factors such as the Group’s compliance with Corporate
Governance Standards and environmental considerations relevant
to some of the Group’s mining interests. These factors cannot be
efficiently measured so do not form part of the Group’s KPIs.
Principal risks and uncertainties
In addition to normal business risks and the strategic risks set out in
the Our Strategy section on
page 5, the Board has identified, inter
alia, four main macro-economic risks that could affect the Group’s
performance:-
(i) A prolonged, world-wide economic recession
(ii) Sustained low commodity prices
(iii) A fall in precious metal prices
(iv) Currency volatility
Measures taken by the Board to manage these risks include:-
• Regular mining project management meetings and discussions
• Regular documented project review meetings
• Substantial cash holdings
• A diversified portfolio of projects covering a number of commodities
and geographical areas
• Substantial exposure to gold and other precious metals
• Regular review of sovereign risk
18
Anglo Pacific Group Plc Annual Report and Accounts 2012
Report of the Directors
Directors’ report
• Cash being held at a number of banks and stockbrokers in a variety
of currencies and short term financial instruments
The Board is also aware of the need for succession planning and the
associated risks to the Group are under constant review. Further
appointments will be made to the Board as required.
Financial instruments
The Group’s principal treasury objective is to provide sufficient liquidity
to meet operational cash flow and dividend requirements and to allow
the Group to take advantage of new growth opportunities whilst
maximising shareholder value. The Group operates controlled treasury
policies which are monitored by management to ensure that the needs
of the Group are met as they evolve. The impact of the risks required
to be discussed in accordance with IFRS 7 are summarised below, while
detailed discussion and sensitivity analysis relating to these risks is
contained in note 3 to these accounts.
Liquidity and funding risk
The objective of the Company in managing funding risk is to ensure
that it can meet its financial obligations as and when they fall due. At
the year end there was no debt outstanding and the Company, with its
strong balance sheet, had good access to capital markets, if required.
Credit risk
The Group’s principal financial assets are bank balances, royalty
instruments held as financial assets, trade and other receivables and
investments. These represent the Group’s maximum exposure to credit
risk in relation to financial assets.
The Group’s credit risk is primarily attributable to its other receivables,
including royalty receivables. It is the policy of the Group to present the
amounts in the balance sheet net of allowances for doubtful receivables,
estimated by the Group’s management based on prior experience and
the current economic environment. Where possible the Group has
registered its interests against the relevant mining titles for the royalties
it has acquired. In addition, the Group is generally entitled to full
reconciliations of amounts paid and retains the right to audit the royalty
returns and verify the calculations.
The Group’s credit risk on royalty instruments held as financial
instruments, has been reviewed and the estimated current exposure is
as disclosed in note 16 where the future contractual right to cash flow
from these instruments is reflected in their fair value.
The credit risk on bank deposits is limited because the counterparties
have high credit-ratings assigned by international credit-rating agencies.
The Group has no significant concentration of credit risk, with exposure
spread over a large number of currencies and counterparties.
In 2007, the Group created a derivative financial instrument to provide
finance to an unlisted mining development company, which has
subsequently listed (note 18). This instrument is convertible into equity
in the company or royalties over the company’s properties at the
Group’s option for a period of up to five years. In the event of default the
instrument becomes repayable and the Group would rank equally with
the company’s other unsecured creditors. The Group undertakes detailed
analysis of factors which mitigate the risk of default to the Group on a
regular basis.
Foreign exchange risk
The Group’s transactional foreign exchange exposure arises from
income, expenditure and purchase and sale of assets denominated in
foreign currencies. As each material commitment is made, the risk in
relation to currency fluctuations is assessed by the Board and regularly
reviewed. The Group does not consider it necessary to have a hedging
programme in place at this time.
The tables below show the extent to which the Group has residual
financial assets and liabilities in currencies other than sterling. Foreign
exchange differences on retranslation of these assets and liabilities are
taken to the income statement of the Group.
Net foreign currency monetary asset
AUD
CAD
USD
NOK
EUR
Total
£’000
£’000
£’000
£’000
£’000
£’000
20,385
21,996
4,180
16,371
37,928
30,514
3,117
3,191
6
6
62,938
74,756
Functional
currency of
operation
2012
Sterling
2011
Sterling
Interest rate risk
The Group has no borrowings or debt and the Group’s financial
instruments have limited exposure to fluctuations as a result of
changes in interest rates. This is regularly reviewed by management.
Other price risk
The Group’s mining and exploration interests are held for the purposes
of generating additional royalties and are considered long-term,
strategic investments. This strategy is unaffected by fluctuations in
prices for mining and exploration equities; however, changes in market
conditions may affect the value and recoverability of the amounts
invested. The Group has detailed investment review processes in place
to manage this risk to the greatest extent possible.
The royalty portfolio exposes the Group to other price risk through
fluctuations in commodity prices, particularly the price of hard coking
coal and iron ore, which may affect the future cash flows received from
the Group’s royalties.
Management
Directors
The Group’s directors have extensive experience in the mining
industry, with backgrounds in corporate finance, equity markets and
mining operations. This combination of skills continues to deliver new
royalties from long-life mining assets to grow returns for shareholders.
The following individuals have held office as directors of the Company
since January 1, 2012, unless stated otherwise:
Executive:
P.M. Boycott
(Executive Director)
A.C. Orchard
(Chief Investment Officer)
J. Theobald
B.M. Wides
Non Executive:
M.H. Atkinson
(Chief Executive Officer)
(Acting Chairman)
(Senior Independent Director, Nomination
Committee and Remuneration Committee
Chairman)
W.M. Blyth
(appointed March 20, 2013)
P.N.R. Cooke
(appointed December 10, 2012)
J.G. Whellock
(Audit Committee Chairman)
A.H. Yadgaroff
(Non-Executive Director)
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Anglo Pacific Group Plc Annual Report and Accounts 2012
Report of the Directors
Directors’ report
Peter M. Boycott was appointed to the Board in May 1997 and as
Chairman in June 1997. He has an MA in Mechanical Sciences from
the University of Cambridge and is a Chartered Accountant. During
his career he has been involved as Finance Director and substantial
shareholder in a number of private investment and property groups
including engineering and manufacturing companies supplying
thermal processing systems to major mining groups. He has been a
director of several public companies quoted in Australia and Canada.
He is currently taking a leave of absence from his role as Chairman for
health reasons.
A. Chris Orchard joined the Group as Chief Investment Officer in
December 2007 and was appointed to the Board in June 2009.
He has a BSc Honours in Mining from the University of Leeds and is
a Member of the Chartered Institute for Securities and Investment.
After graduating he worked in the South African mining industry and
on returning to the UK spent twenty years as an investment banker in
the City specialising in the resources sector. He was Managing Director
of Hambros Equity UK, a Director of RBC Dominion Securities and
prior to joining the Group managed the investment operations of a
private wealth management firm. He has been a director of several
public companies quoted in Canada and Australia.
John Theobald joined the Group as Chief Operating Officer in April
2008, joined the Board in June 2009 and was appointed Chief
Executive Officer on October 6, 2010. He is a Chartered Engineer with
a BSc Honours in Geology from the University of Nottingham. He is a
Fellow of the Geological Society, Fellow of the Institute of Materials,
Minerals and Mining and Member of the Institute of Directors. Prior
to joining the Group he held senior positions with the major industrial
minerals group SCR-Sibelco; he has also worked in the junior resource
sector and for major companies such as Anglo American, Phelps Dodge
and Iscor covering a wide range of metals, coal and industrial minerals.
He has been a director of several public companies quoted in Canada.
Brian M. Wides joined the Board in June 1997 and was appointed
Finance Director in September 1997. In July 2006 he was appointed
Chief Executive Officer and on October 6, 2010 was appointed
Director of International Business Development after standing down
as Chief Executive Officer. He has a Bachelor of Commerce degree
from the University of Witswatersrand and is a Chartered Accountant
(South Africa). His specialist experience includes corporate finance,
management consultancy and creating shareholder value for a
large spectrum of private and public companies in the UK, Australia
and Canada.
Mike H. Atkinson was appointed director in February 2006 and is
currently the Group’s Senior Independent Director. He also chairs the
Nomination Committee and the Remuneration Committee. He has
an MA in History from the University of Cambridge and is a qualified
management accountant. He worked for the National Coal Board
as a capital investment analyst before joining the UK Department of
Energy (later the Department of Trade and Industry). He was a senior
civil servant for nearly twenty years until his retirement in 2004, and
held a range of financial, management and policy posts including
Director of Coal and Chairman of British Coal.
W. Mike Blyth was appointed director in March 2013. He has a BSc
from St Andrews University and is a Chartered Accountant. He was,
until his retirement in 2011, a partner for 30 years in Baker Tilly,
specialising in providing audit and related services to AIM and full
list clients. During his career he held a number of senior management
positions with the firm, including a period on its National
Executive Committee.
Paul N. R. Cooke was appointed director in December 2012. He has
an MA in History from the University of Cambridge and is a qualified
Chartered Surveyor. He is a substantial shareholder in a number of
property companies specialising in property development, investment
and financing. He is also involved in farming and forestry interests in
the UK and abroad. He serves on the boards of several charities.
Dr. John G. Whellock was appointed director in March 2003 and
currently chairs the Audit Committee. He has a BSc and PhD in
Chemical Engineering from the University of Birmingham and is
a member of the Minerals, Metals and Materials Society of the
American Institute of Mining, Metallurgy and Petroleum. He has over
thirty years of experience in the development and implementation
of extractive metallurgy, mineral and chemical plants. He is the
founder of JW Technologies providing innovative technology and
thermal processing equipment for the metals, minerals and chemical
industries. Prior to this he worked for Minproc Technology Inc and was
founder and Vice-President of Tolltreck International Ltd.
Anthony H. Yadgaroff was appointed director in March 2003 and
previously chaired the Group’s Remuneration Committee. He is a
Member of the Chartered Institute for Securities and Investment, and
has specialised in investment research and management consultancy
during a forty year City career. Allenbridge Group, which he founded in
1984 to provide advisory services to private and institutional investors,
was acquired by Close Brothers in February 2011. He is Chairman of
Allenbridge Investment Solutions LLP (“AIS”), and is a member of
the partnership alongside Moody’s, the global rating agency. AIS is a
leading UK investment advisory business, consulting to pension funds
and charity clients which control some £30 billion of assets.
With regard to the appointment and replacement of directors, the
Company is governed by its Articles of Association, the UK Corporate
Governance Code, the Companies Act 2006 and related legislation.
At the next Annual General Meeting, all of the Company’s Directors
will be offering themselves for re-election.
The Directors may exercise all the powers of the Company subject to
applicable legislation and regulation and the Articles of Association of
the Company. The Company’s Articles of Association may be amended
by special resolution of the shareholders. At the 2012 Annual General
Meeting, held on April 19, 2012, the Directors were given the power to
issue new shares up to an aggregate nominal amount of £727,928.
This power will expire at the earlier of the conclusion of the 2017 Annual
General Meeting or April 19, 2017. Further, the Directors were given the
power to make market purchases of ordinary shares up to a maximum
number of 10,918,921. This power will expire at the earlier of the
conclusion of the 2013 Annual General Meeting or October 19, 2013.
At a General Meeting, held on May 29, 2012, the Directors were given
the power to allot equity shares or sell treasury shares for cash other
than pro-rata to existing shareholders. This power was limited to 5% of
the Company’s issued ordinary share capital (other than in connection
with a rights or other similar issue) and will expire at the earlier of the
conclusion of the 2013 Annual General Meeting or August 29, 2013.
The Group maintains insurance for its Directors and officers against
certain liabilities in relation to the Group.
20
Anglo Pacific Group Plc Annual Report and Accounts 2012
Report of the Directors
Directors’ report
Directors’ interests
The beneficial interests of the Directors and their connected persons in
the issued share capital of the Company were:
Ordinary shares of £0.02 each
March 26,
2013
December 31,
2012
December 31,
2011
P.M. Boycott (Executive Director)
2,691,947
2,691,947
2,706,947
A.C. Orchard (Executive Director)
402,049
402,049
J. Theobald (Executive Director)
337,625
337,625
357,245
287,550
B.M. Wides (Executive Director)
2,926,153
2,926,153
2,926,153
M.H. Atkinson (Non-Executive Director)
W.M. Blyth (Non-Executive Director)
7,422
1,400
7,422
*
P.N.R. Cooke (Non-Executive Director)
8,949,904
8,949,904
7,422
*
**
J.G. Whellock (Non-Executive Director)
13,084
13,084
13,084
A.H. Yadgaroff (Non-Executive Director)
175,460
175,460
169,932
* W.M. Blyth was appointed to the board on March 20, 2013.
** P.N.R. Cooke was appointed to the board on December 10, 2012.
Remuneration of directors
The Remuneration Report on
Directors’ Report and includes details of the nature and amount of
each element of the remuneration (including share options) of each of
the Directors.
pages 28 to 31 forms part of the
The 2012 Remuneration Report will be proposed for approval at the
2013 Annual General Meeting. In accordance with the Companies Act
2006 (United Kingdom) no entitlement of a person to remuneration is
conditional upon the passing of the resolution.
The 2011 Remuneration Report was approved by shareholders at the
2012 Annual General Meeting.
Corporate governance
A full report on corporate governance can be found on
and forms part of this Directors’ Report.
pages 24 to 27
Corporate responsibility
The Group is committed to maintaining the highest standards in all
areas of its business and, in so doing, considers the wider ethical,
environmental and social impacts of its business. Following on from its
publishing of a statement of integrity in 2011, the Group published a
broader corporate responsibility statement in 2012, a copy of which is
available on the Group’s website.
Business conduct
In addition to its published statement of integrity, the Group has policies
and procedures in place to ensure that all of its directors, officers,
employees, consultants, advisers, business partners, or anyone else,
who may be acting on its behalf, are aware of their responsibilities in
this area. The Group actively promotes a transparent approach to all of
its business dealings and expects its employees and representatives to
adopt a zero tolerance approach to corruption.
The Group has a whistle blowing policy in place and its employees
are encouraged to report any potential or apparent misconduct. Any
employee that raises any issues honestly and in good faith will be
supported by the Group.
Environment
The Group remains committed to an environmental policy of
collaborating fully with statutory authorities, local communities and
other interested parties in order to limit any potential adverse impacts
of its activities on the natural and human environments associated with
its operations. The nature of the Group’s royalty investments is such that
it does not operate any of the properties underlying its royalty portfolio
and consequently, it does not always have the ability to influence
the manner in which the operations are carried out. Nevertheless,
a responsible approach to a project’s environmental impact and its
sustainability management is essential to the success of the project over
its life, and, as part of its investment decision process, the Group has
access to consultants with the requisite expertise to ensure that it can
consider and, if necessary, mitigate any risks in this regard to a properly
maintainable level.
The Group complies with all relevant environmental legislation on its
private coal interests in British Columbia, Canada and is assisted in this
regard by a team of experienced Canadian consultants. We expect our
employees and consultants to address environmental and sustainability
responsibilities within the framework of normal operating procedures
and to look to minimise waste as much as economically practicable. The
Audit Committee is responsible for periodically reviewing the Group’s
environmental practices and for monitoring their effectiveness.
Social and community issues
The Group acknowledges that, while its activities have little direct
contact with communities, it can positively influence the social
practices and policies of companies it conducts business with. Positive
social and community relationships are essential to profitable and
successful mining activities, and the Group endeavours to ensure that
the companies it works with have appropriate procedures in place to
facilitate this. Where we believe that our own operational activities
may have an impact on local community groups, the Group consults
with these groups and provides them with the opportunity to engage
at the planning stage. With respect to its private coal interests in British
Columbia, Canada, the Group has engaged with First Nations and will
continue to engage and consult as the projects advance. The Audit
Committee is responsible for periodically reviewing the Group’s social
and community practices and for monitoring their effectiveness.
Health and safety
The health and safety of the Group’s employees is a fundamental
responsibility. The small size of the Group’s organisation allows the
day-to-day responsibility to remain at the Board level, being monitored
by the Chief Executive Officer. Furthermore, a commitment to health
and safety is a fundamental component of a successful mining project,
and, as part of its investment decision process, the Group has access to
consultants with the requisite expertise to ensure that it can consider
and, if necessary, mitigate any such risks.
Donations
It is a continuing policy of the Group not to make either political or
charitable donations. The Group’s Directors and employees support
philanthropic efforts using their own personal resources. The Group’s
philosophy is that charity is a decision best made by shareholders
with their own resources, rather than management using the Group’s
resources to make this decision on their behalf. The Group aims to
increase the value of a shareholder’s investment in the Group, thus
indirectly enabling the shareholder to make its own donation decisions.
No political or charitable donations were made by the Group during the
year (2011: nil).
Employees
The Group has 11 employees, 4 of whom are Executive Directors. More
information regarding the Group’s employees can be found on
pages
19 to 21 and 56.
Policy on payment of creditors
The Company’s policy with regard to the payment of suppliers is to:
21
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Anglo Pacific Group Plc Annual Report and Accounts 2012
Report of the Directors
Directors’ report
• agree terms of payment at the start of business with each supplier;
• ensure that suppliers are made aware of the terms of payment;
• pay suppliers in accordance with contractual and legal obligations;
Substantial shareholdings
The Company has been notified of the following interests of 3% or
more in the share capital of the Company at March 20, 2013.
and
• encourage a prompt and open dialogue with suppliers where there is
any complaint about the supply or dispute about the invoice.
The Company acknowledges the importance of paying invoices
promptly, especially those of small businesses, and of encouraging
best practice with suppliers so that stronger relationships can be built
and confidence from certainty of payment increase. During the year to
December 31, 2012 the Company took an average of 22 days to settle
its bills with suppliers (2011: 33 days).
Essential contracts
The Group has a number of members of staff, who due to their
knowledge of the Group and its intellectual property, are essential
to the continued smooth running of the business. The Group reviews
its employment policies on an annual basis, including a review of its
performance-related pay policies, so as to ensure these members of
staff continue to remain incentivised and their goals remain congruent
with those of the Group. All employee contracts contain non-compete
agreements and also stipulate that all intellectual property remains
that of the Group.
Capital structure
The structure of the Company’s ordinary share capital at March 27,
2013 was as follows:
Issued No.
Nominal value
per share £
Total
£
% of total
capital
Ordinary
shares
109,605,376
0.02
2,192,108
100%
Rights and obligations
Dividends
The £0.02 ordinary shares carry the right to dividends determined at
the discretion of the Board.
Voting rights
The £0.02 ordinary shares carry the right to one vote per share.
Restrictions on transfer of holdings
There are no specific restrictions on the size of a holding nor on the
transfer of the Company’s shares, which are both governed by the
general provisions of the Articles of Association of the Company and
prevailing legislation. There are no known agreements between holders
of the Company’s shares that may result in restrictions on the transfer of
shares or voting rights.
Special control rights
None of the shares carry any special control rights. There are no known
agreements that take effect, alter or terminate upon a change of control
of the Company following a takeover bid, including any agreements
between the Company and its Directors or employees.
Employee share schemes
Details of employee share schemes are set out on
below and in note 2.11 to the financial statements.
pages 28 to 30
Treasury
No shares are currently held in treasury by the Company.
Liontrust Investment Partners LLP
Schroders PLC
AXA Investment Managers UK
Legal and General Group PLC
Ordinary
Shares
of 2p each
7,195,364
5,871,201
5,494,332
4,359,058
Representing
6.56%
5.36%
5.01%
3.98%
Statement as to disclosure of information to auditors
The Directors who were in office on the date of approval of these
financial statements have confirmed that, as far as they are aware,
there is no relevant audit information of which the auditors are
unaware. Each of the Directors have confirmed that they have taken all
the steps that they ought to have taken as directors in order to make
themselves aware of any relevant audit information and to establish
that it has been communicated to the auditors.
Auditors
Grant Thornton UK LLP have expressed willingness to continue in office.
In accordance with section 489(4) of the Companies Act 2006 (United
Kingdom) a resolution to reappoint Grant Thornton UK LLP will be
proposed at the 2013 Annual General Meeting.
Designated Foreign Issuer status
The Company continues to be listed on the TSX and to be a “reporting
issuer” in the Province of Ontario, Canada. The Company also
continues to be a “designated foreign issuer”, as defined in National
Instrument 71-102 – Continuous Disclosure and Other Exemptions
Relating to Foreign Issuers of the Canadian Securities Administrators.
As such, the Company is not subject to the same ongoing reporting
requirements as most other reporting issuers in Canada. Generally,
the Company will be in compliance with Canadian ongoing reporting
requirements if it complies with the UK Financial Services Authority
in its capacity as the competent authority for the purposes of Part VI
of the Financial Services and Markets Act 2000 (United Kingdom), as
amended from time to time, and the applicable laws of England and
Wales (the “UK Rules”) and files on its SEDAR profile at www.sedar.
com any documents required to be filed or furnished pursuant to the
UK Rules.
Technical reports
The scientific and technical information in this Annual Report relating
to the Panorama coal project and the Trefi coal project was derived,
respectively, from the technical report entitled “Resource Estimate for
the Discovery and Panorama Coal Properties” dated July 12, 2010
(the “Panorama and Discovery Report”) and the technical report
entitled “Resource Estimate for the Trefi Coal Property” dated March
18, 2010 (the “Trefi Report”), each of which was prepared by Mr Robert
J. Morris, Principal Geologist, and Mr Robert F. Engler, Principal, Moose
Mountain Technical Services. Each of Messrs Morris and Engler is a
“qualified person” for the purposes of NI 43-101 and is independent
of the Company. Each of the Panorama and Discovery Report and
the Trefi Report is available on the Company’s SEDAR profile at
www.sedar.com.
22
Anglo Pacific Group Plc Annual Report and Accounts 2012
Report of the Directors
Directors’ report
Standards of disclosure for mineral projects
National Instrument 43-101 – Standards of Disclosure for Mineral
Projects (“NI 43-101”) contains certain requirements relating to
the use of mineral resource and mineral reserve categories of an
“acceptable foreign code” (as defined in NI 43-101) in “disclosure”
(as defined in NI 43-101) made by Anglo Pacific Group Plc with
respect to a “mineral project” (as defined in NI 43-101), including the
requirement to include a reconciliation of any material differences
between the mineral resource and mineral reserve categories used
under an acceptable foreign code and the standards developed by
the Canadian Institute of Mining, Metallurgy and Petroleum, as the
CIM Definition Standards on Mineral Resources and Mineral Reserves
adopted by CIM Council, as amended (the “CIM Standards”) in
respect of a mineral project. Pursuant to an exemption order granted
to Anglo Pacific Group Plc by the Ontario Securities Commission
(the “Exemption Order”), the information contained herein with
respect to the Four Mile Uranium Project, the Ring of Fire Project,
the Jogjakarta Iron Sands and Pig Iron Project, the Tucano Project,
the Kestrel Coking Coal Mine and the Mount Ida Iron Ore Project has
been extracted from information publicly disclosed, disseminated,
filed, furnished or similarly communicated to the public by an issuer
whose securities trade on a “specified exchange” (as defined under
NI 43-101) that discloses mineral reserves and mineral resources
under one of the JORC Code, the PERC Code, the SAMREC Code,
SEC Industry Guide 7 or the Certification Code (each as defined in NI
43-101). As the definitions and standards of the JORC Code, the PERC
Code, the SAMREC Code, SEC Industry Guide 7 and the Certification
Code are substantially similar to the CIM Standards, a reconciliation
of any material differences between the mineral resource and mineral
reserve categories reported under the JORC Code, the PERC Code,
the SAMREC Code, SEC Industry Guide 7 and the Certification Code,
as applicable, to categories under the CIM Standards is not included
and no Form 43-101F1 technical report will be filed to support the
disclosure based upon such exemption. Alliance Resources Limited,
Indo Mines Limited, Beadell Resources Limited, Rio Tinto Limited
and Jupiter Mines Limited are all listed on the Australian Securities
Exchange and report in accordance with the JORC Code. Cliffs Natural
Resources Inc. is listed on the New York Stock Exchange and reports in
accordance with SEC Industry Guide 7.
Cautionary note to U.S. investors concerning estimates of measured,
indicated and inferred resources: Certain technical disclosure in this
Annual Report has been prepared in accordance with the requirements
of Canadian securities laws, including NI 43-101, in certain cases
as modified by the Exemption Order referred to above, which differ
from the requirements of U.S. securities laws. This Annual Report uses
the terms “measured resources”, “indicated resources” and “inferred
resources”. U.S. investors are advised that while such terms are
recognised and required by Canadian Securities laws, the Securities
and Exchange Commission does not recognise them. “Inferred
resources” have a great amount of uncertainty as to their existence
and as to their economic and legal feasibility. It cannot be assumed
that all or any part of an inferred resource will be upgraded to a
higher category. Under Canadian Securities laws, estimates of inferred
resources may not form the basis of feasibility or other economic
studies. U.S. investors are cautioned not to assume that all or any part
of measured resources or indicated resources will ever be converted
into reserves. U.S. investors are also cautioned not to assume that all
or any part of an inferred mineral resource exists, or is economically or
legally mineable.
References in this Annual Report to websites are made as inactive
textual references and for informational purposes only. Information
found at the relevant websites is not incorporated by reference into
this Annual Report. The Group makes no representation as to the
accuracy of any such information.
Cautionary statement on forward-looking statements
and related information
Certain statements in this Annual Report, other than statements
of historical fact, are forward-looking statements based on certain
assumptions and reflect the Group’s expectations and views of
future events. Forward-looking statements (which include the phrase
“forward-looking information”) are provided for the purposes of
assisting readers in understanding the Group’s financial position
and results of operations as at and for the periods ended on certain
dates, and of presenting information about management’s current
expectations and plans relating to the future. Readers are cautioned
that such forward-looking statements may not be appropriate other
than for purposes outlined in this Annual Report. These statements
may include, without limitation, statements regarding the operations,
business, financial condition, expected financial results, cash flow,
requirement for and terms of additional financing, performance,
prospects, opportunities, priorities, targets, goals, objectives,
strategies, growth and outlook of the Group including the outlook
for the markets and economies in which the Group operates, costs
and timing of acquiring new royalties, mineral reserve and resources
estimates, estimates of future production, production costs and
revenue, future demand for and prices of precious and base metals
and other commodities, for the current fiscal year and subsequent
periods. In addition, statements relating to “reserves” or “resources”
are forward-looking statements, as they involve implied assessment,
based on certain estimates and assumptions, that the resources and
reserves described can be profitably produced in the future.
Forward-looking statements include statements that are predictive
in nature, depend upon or refer to future events or conditions, or
include words such as “expects”, “anticipates”, “plans”, “believes”,
“estimates”, “seeks”, “intends”, “targets”, “projects”, “forecasts”, or
negative versions thereof and other similar expressions, or future or
conditional verbs such as “may”, “will”, “should”, “would” and “could”.
Forward-looking statements are based upon certain material factors
that were applied in drawing a conclusion or making a forecast or
projection, including assumptions and analyses made by the Group
in light of its experience and perception of historical trends, current
conditions and expected future developments, as well as other
factors that are believed to be appropriate in the circumstances. The
material factors and assumptions upon which such forward-looking
statements are based include: the stability of the global economy; the
stability of local governments and legislative background; the relative
stability of interest rates; the equity and debt markets continuing to
provide access to capital; the continuing of ongoing operations of the
properties underlying the Group’s portfolio of royalties by the owners
or operators of such properties in a manner consistent with past
practice; the accuracy of public statements and disclosures (including
feasibility studies, 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
Anglo Pacific Group Plc Annual Report and Accounts 2012
Governance
23
Directors’ report
This Annual Report also contains forward-looking information
contained and derived from publicly available information regarding
properties and mining operations owned by third parties. The Group’s
management relies upon this forward-looking information in its
estimates, projections, plans, and analysis. Although the forward-
looking statements contained in this Annual Report are based upon
what the Group believes are reasonable assumptions, there can be no
assurance that actual results will be consistent with these forward-
looking statements. The forward-looking statements made in this
Annual Report relate only to events or information as of the date on
which the statements are made and, except as specifically required
by applicable laws, listing rules and other regulations, 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.
Registered Office
17 Hill Street
London
W1J 5LJ
By Order of the Board
P.T.J. Mason
Company Secretary
March 27, 2013
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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. Forward-looking statements are not guarantees of future
performance and involve risks, uncertainties and assumptions, which
could cause actual results to differ materially from those anticipated,
estimated or intended in the forward-looking statements.
By its nature, this information is subject to inherent risks and
uncertainties that may be general or specific and which give rise to
the possibility that expectations, forecasts, predictions, projections or
conclusions will not prove to be accurate; that assumptions may not
be correct and that objectives, strategic goals and priorities will not be
achieved. A variety of material factors, many of which are beyond the
Group’s control, affect the operations, performance and results of the
Group, its businesses and investments, and could cause actual results
to differ materially from those suggested by any forward-looking
information. Such risks and uncertainties include, but are not limited
to current global financial conditions, royalty portfolio and associated
risk, adverse development risk, financial viability and operational
effectiveness of owners and operators of the relevant properties
underlying the Group’s portfolio of royalties, royalties subject to other
rights, and contractual terms not being honoured, together with
those risks identified in the “Risks and uncertainties” and “Financial
instruments” sections herein and the other risks identified in the
“Risk Factors” section of the Group’s most recent Annual Information
Form available on www.sedar.com and the Group’s website www.
anglopacificgroup.com. If any such risks actually occur, they could
materially adversely affect the Group’s business, financial condition
or results of operations. Readers are cautioned that the list of factors
noted in the section herein entitled “Risks and uncertainties” is not
exhaustive of the factors that may affect the Group’s forward-looking
statements. Readers are also cautioned to consider these and other
factors, uncertainties and potential events carefully and not to put
undue reliance on forward-looking statements.
24
Anglo Pacific Group Plc Annual Report and Accounts 2012
Governance
Corporate governance report
As a premium listed company on the London Stock Exchange, the
Company is subject to The UK Corporate Governance Code (the
“Code”). Although the Company will need to measure itself against
the revised version of the Code, published in September 2012, the
focus in this report is on the 2010 version of the Code. Copies of
both versions of the Code are available from the Financial Reporting
Council’s website.
The Company believes that it complies with the Main Principles of
the Code, except in respect of a formal annual process to evaluate
the performance of the Board and of its Committees and individual
directors. The Board believes that corporate governance involves the
application of good corporate governance principles in a sensible and
pragmatic fashion, which has proper regard to the Group’s particular
business profile and size. The key objective is to enhance and protect
shareholder value. In this report, the Company explains its degree of
compliance with the Code.
Leadership
The Board is collectively responsible for the long-term success of the
Company and meets regularly to provide leadership on the Group’s
long-term objectives and strategy and to monitor the Group’s
performance. The day to day management of the Group is delegated
to the executive team, which includes the Acting Chairman, save
for certain matters reserved for consideration by the Board. Other
responsibilities are given to the Committees of the Board, as set out in
the Committee sections below and in their terms of reference, which
are available on the Group’s website.
The Acting Chairman, Mr. B.M. Wides, is responsible for the leadership
and effectiveness of the Board. As announced on September 17,
2012, Mr. P.M. Boycott has taken a leave of absence from the role
of Executive Chairman. At that time, the Board appointed the
Company’s Senior Independent Director, Mr. M.H. Atkinson, as Acting
Chairman. Mr. Boycott continues in his role as an Executive Director
of the Company. On December 20, 2012, the Board announced that
Mr. Wides had become Acting Chairman with immediate effect.
Mr. Wides is Executive Director of International Business Development
and was appointed to the Board as an Executive Director in June 1997.
Although Mr. Wides has previously acted as Chief Executive Officer
of the Company, the Board felt that the role of Chairman should
continue to be an executive one at this time. Both Mr. Boycott and
Mr. Wides are employed on a three days a week basis. Furthermore,
the anticipated transition to the Chairman role being a non-executive
one continues to target completion within the next two years. The
Chairman and the Chief Executive Officer continue to have distinct
roles, which have been defined in writing and agreed by the Board.
Mr. M.H. Atkinson is the Group’s Senior Independent Director (“SID”).
The role of the SID is to provide a sounding board for the Chairman
and to serve as an intermediary for the other directors where
necessary. He also takes the lead on meetings of the Non-Executive
Directors outside the formal committee structure and works with the
Chairman to encourage constructive relations between the Executive
and Non-Executive Directors and to ensure that the Non-Executive
Directors are fully able to use their external experiences to
constructively challenge and develop proposals on strategy and
to scrutinise the performance of management. The SID is also
available to shareholders if they have concerns that have not been
resolved through the normal channels, or where such channels
would be inappropriate.
Effectiveness
Excluding the Chairman, and following the appointment of
Mr. P.N.R. Cooke as a Non-Executive Director in December 2012 and
the appointment of Mr. W.M. Blyth also as a Non-Executive Director
in March 2013, the Board is currently comprised of eight directors,
five of whom are Non-Executive Directors. Dr. J.G. Whellock and
Mr. A.H. Yadgaroff were appointed to the Board on March 3, 2003 and
as such, have now served as Non-Executive Directors for ten years. The
Board, however, continues to value the contributions made by both
Dr. Whellock and Mr. Yadgaroff and feels that their personal attributes,
judgment and experience still have much to offer the Group. Although
Mr. Cooke represents a significant shareholder, he brings to the Board a
wealth of experience in a number of businesses, including property and
finance, all of which will be useful to the Group. With Mr. M.H. Atkinson
(appointed in February 2006) and Mr. Blyth (appointed in March
2013), the Board considers that it now fully complies with the Code’s
requirements for at least two independent Non-Executive Directors on
the Board and in relation to the composition of the Board Committees.
Moreover, the Board recognises the value of refreshing the Board’s
composition in a progressive and orderly way taking into account the
skills and experience that the Group’s business requires.
Although no longer a constituent of the FTSE 350, the Company
continues to support Lord Davies’ published strategy and hopes to
make progress in increasing the number of females on the Board.
However, the Board also continues to be wary of the potential
superficiality of quotas and believes that the best approach is to
continue to ensure that the appointments process takes account of
the benefits of diversity (including gender), that all appointments
are made on merit and that the Board represents the best interests
of shareholders.
The Board, through its Nomination Committee, keeps under review
the need for new director appointments, so as to maintain an
appropriate balance of skills and independence within the Group
and to ensure that the Board is refreshed, as appropriate. The size of
the organisation allows the Directors to closely observe the skills,
knowledge and behaviour of those employees who have the potential
to become future leaders of the Group.
New director appointments are made by the Board, having regard to
the recommendations of the Nomination Committee. All directors
are subject to election by shareholders at the first opportunity
after their appointment. Under the terms of the Company’s Articles
of Association, all directors are required to retire and seek re-
appointment by shareholders at an annual general meeting on the
third anniversary of their appointment. The current Non-Executive
Directors, other than Mr. Cooke and Mr Blyth, were not appointed
to specified terms. Mr. Cooke and Mr Blyth were appointed on
rolling three-year contracts and the Board intends that all future
Non-Executive Director appointments will be on similar terms.
Notwithstanding this, as in 2012, the Board intends that all of the
Directors (including the Non-Executive Directors) will offer themselves
for re-election at each Annual General Meeting.
Each director is required to disclose to the Board their other significant
commitments prior to appointment and when there is any significant
change. There is a procedure in place whereby actual and potential
conflicts of interest are regularly reviewed. As permitted under the
Companies Act 2006, the Company’s Articles of Association contain
provisions that enable the Board to authorise conflicts or potential
conflicts that individual directors may have and to impose such limits
or conditions as the Board thinks fit. The Board considers that all of the
Directors allocate sufficient time to the Company to discharge their
responsibilities effectively.
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Anglo Pacific Group Plc Annual Report and Accounts 2012
Governance
Corporate governance report
The Company’s Directors have a wide range of skills as well as
experience in financial, commercial and mining activities. Each director
takes responsibility for undertaking the appropriate training required
for developing and updating their knowledge and capabilities. Where
appropriate, the Group provides the resources to meet the Directors’
requirements. During the year, Directors attended, inter alia, seminars
and conferences on mining industry developments and recent
economic and financing trends. The nature of the Group’s business
and the number of its employees allow the Directors to have a strong
understanding of both the Group’s operations and staff.
The executive team and the Board Committees report and refer to the
full Board at regular intervals on all matters relating to the running of
the Group. The Chairman, in conjunction with the Company Secretary,
is responsible for setting the Board’s agenda and for ensuring that the
Board receives accurate, timely and clear information. The Chairman
is also responsible for ensuring that adequate time is available for
discussion of all agenda items and, in particular, strategic issues which
are further discussed at annual strategy meetings attended by all
of the Directors and all of the Company’s employees. The Company
Secretary, Mr. P.T.J. Mason, is responsible for advising the Board,
through the Chairman, on all governance matters. All of the Directors
have access to his services and advice. Further, all of the Directors
may seek independent professional advice in the performance of their
duties, at the Group’s expense.
The Code recommends that the Board undertakes a formal and rigorous
annual evaluation of its own performance and that of its committees
and individual directors. The Board does not currently have such formal
standalone systems. The performance of individual Executive Directors
is reviewed by the Chairman and is discussed in a structured way by
the Non-Executive Directors in the context of determining annual
incentive awards. The Board believes that its approach is appropriate
and effective given the current structure of the Board, the compactness
of the organisation and the extent of collective decision-making by the
Executive Directors. Each Committee and the Board is satisfied overall
with its own effectiveness and the contribution and commitment of
each of the directors. The Board will annually review the case for a more
formal evaluation process.
Attendance
Directors’ attendance at Board and Committee meetings during 2012
was as follows:
Full Board Executive Audit Remuneration Nomination
Total meetings
held:
Attendance:
P.M. Boycott
A.C. Orchard
J. Theobald
B.M. Wides
M.H. Atkinson
W.M. Blyth1
P.N.R. Cooke2
J.G. Whellock
A.H. Yadgaroff
16
16
15
16
14
16
–
1
16
15
6
4
6
6
5
–
–
–
–
–
4
–
–
–
–
4
–
–
4
4
2
–
–
–
–
2
–
–
2
2
1 W.M. Blyth was appointed to the board on March 20, 2013
2 P.N.R. Cooke was appointed to the board on December 10, 2012
2
–
–
–
–
2
–
–
2
2
Committees of the Board
Most of the Board’s work is conducted in Committees comprising
mainly of either Executive Directors or Non-Executive Directors.
Each Committee deals with specific aspects of the Group’s affairs and
has written terms of reference, which are available on the Group’s
website. The Committees report to the full Board at regular intervals.
Executive Committee
The Executive Committee, comprising the Executive Directors of the
Company, the Company Secretary and the Chief Financial Officer, is
responsible for reaching and implementing decisions on matters not
reserved for the full Board. The Committee is chaired by the Chief
Executive Officer and held six meetings during the year.
Remuneration Committee
During the whole of 2012 the Remuneration Committee comprised
Mr. Atkinson, Dr. Whellock and Mr. Yadgaroff, who was also the
chairman of the Committee. Following Mr. Blyth’s appointment to the
Board on March 20, 2013, the Remuneration Committee is currently
comprised of Mr. Blyth and Mr. Atkinson, who is now the Chairman of
the Committee.
The Remuneration Committee is responsible for making
recommendations to the Board on the Group’s framework of executive
director remuneration. The Committee determines the contract terms,
remuneration and other benefits for each of the Executive Directors
(including the Chairman), including performance-related incentive
awards, pension rights and compensation payments. It has access to
the advice of independent remuneration consultants when required.
The Committee held two meetings during the year. The Board itself
determines the remuneration of the Non-Executive Directors.
The Directors’ Remuneration Report is set out on
pages 28 to 31.
Nomination Committee
During the whole of 2012 the Nomination Committee comprised
Dr. Whellock, Mr. Yadgaroff and Mr. Atkinson, who was also the
Chairman of the Committee. Following Mr. Blyth’s appointment to
the Board on March 20, 2013, the Nomination Committee is currently
comprised of Mr. Blyth, Mr. Yadgaroff and Mr. Atkinson, who remains
the Chairman of the Committee.
The Nomination Committee meets as required in order to review the
structure, size and composition of the Board (including its balance of
skills, experience, independence and knowledge) in light of
developments in the leadership needs of the Group and in accepted
best corporate governance practice. The Committee is responsible for
identifying and nominating candidates for the approval of the Board.
It may commission external advice or services as required.
The Committee is also responsible for making recommendations to
the Board concerning timely succession plans for both Executive and
Non-Executive Directors.
The Committee met twice during the year to consider interim leadership
arrangements following the illness of the Executive Chairman,
Mr. P.M. Boycott, and to discuss potential appointments of new
directors to the Board as well as to review the timetable and progress
of succession plans.
At the relevant Board meeting, the appointment of Mr. P.N.R. Cooke
to the Board in December 2012 was unanimously supported by the
Non-Executive Directors. After the year end the appointment of
Mr. Blyth in March 2013 was supported by a majority of the Non-
Executive Directors at the relevant Board meeting. Whilst the
Committee may commission external advice or services as required,
neither an external search consultancy, nor open advertising was used
for either of these appointments. These were not considered necessary
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due to Mr. Cooke’s long involvement with the Group as representing
a significant shareholder and his successful business experience in
property and finance and due to Mr. Blyth’s extensive audit experience
and knowledge of corporate governance.
Audit Committee
During the whole of 2012 the Audit Committee comprised
Mr. Yadgaroff, Mr. Atkinson and Dr. Whellock, who was also the
Chairman of the Committee. Following Mr. Blyth’s appointment to the
Board on March 20, 2013, the Audit Committee is currently comprised
of Mr. Blyth, Mr. Atkinson and Dr. Whellock, who remains the Chairman
of the Committee.
The Committee meets at least three times a year at appropriate times
in the reporting and audit cycle and may be attended, by invitation, by
the Chairman, the Chief Executive Officer, the Chief Financial Officer
and the Company Secretary. The external auditors are invited to attend
meetings on a regular basis. 2012 saw a broad review of the role of
the Committee and its new terms of reference were published on the
Group’s website in January 2013. Its primary duty is to monitor the
integrity of the Group’s financial statements and the related reports
and announcements. In doing so, the Committee reviews and, where
necessary, challenges the consistency of the Group’s accounting
policies, methods and standards, the clarity and context of disclosures
and the material information presented with the financial statements.
The Committee is also responsible for monitoring and reviewing the
adequacy and effectiveness of the Group’s internal controls, including
the Group’s anti-corruption and whistle blowing policies and procedures
and in relation to the environmental and social impact of the
Group’s activities.
The Committee also considers the adequacy of arrangements for the
statutory audit and supporting the independence and objectivity of
the external auditor. In particular, the Committee advises the Board
in respect of the external auditor’s appointment, performance and
remuneration and meets regularly with the external auditor to discuss
its remit, any issues arising from the audit and its effectiveness.
The Committee is responsible for reviewing the extent of non-audit
services provided by the external auditor. The Committee accepts that
some non-audit work is most appropriately undertaken by the firm
responsible for the statutory audit, but requires any such engagement
to be approved in advance by the Committee’s Chairman. The Group
also uses other accounting firms for non-audit work, with the decision
on each engagement being taken with the objective of maintaining an
appropriate balance between experience, objectivity, independence and
value for money.
The Committee also considers, on an annual basis, whether an internal
audit function is required. Its present view is that one is not yet justified
given the compact size of the Group and the Directors’ involvement with
individual transactions.
In 2012, the Committee met four times. In addition to its duties related
to the reporting and audit cycle, the Committee placed a particular
focus on the Group’s risk management systems. In connection with the
annual assessment conducted by the Chief Financial Officer and the
Company Secretary of the risks that face the Group and the adequacy
of the prevention, monitoring and mitigation practices in place for
those risks, the Committee oversaw a full review of the associated
control and monitoring procedures. This resulted in a revision of the
Group’s risk register. In addition, whilst the review did not highlight
any significant issues with the effectiveness of the Group’s internal
controls and procedures, it did highlight a few areas where improvement
could be made and the Group has subsequently implemented the
Committee’s recommendations. Additional information on the Group’s
internal controls can be found below. 2012 also saw the Committee
take the lead on the publishing of the Group’s Corporate Responsibility
Statement. Additional information on this can be found on
pages 20 to 21.
Internal Control
The Board retains overall responsibility for the Group’s system of
internal control and risk management and determines the nature and
extent of the significant risks it is willing to take in achieving its strategic
objectives. A statement of directors’ responsibilities in respect of the
financial statements is set out on
page 32.
The Group’s system of internal control is designed to provide the
Directors with reasonable, but not absolute, assurance that the Group
will not be hindered in achieving its business objectives, or in the orderly
and legitimate conduct of its business, by circumstances that may
reasonably be foreseen. However, no system of internal control can
eliminate the possibility of poor judgment in decision-making, human
error, fraud or other unlawful behaviour, management overriding
controls, or the occurrence of unforeseeable circumstances and the
resulting potential for material misstatement or loss.
The key elements of the control system in operation are:
• The Board meets regularly with a formal schedule of matters
reserved to it for decision and has put in place an organisational
structure with clear lines of responsibility and appropriate delegation
of authority.
• There are established procedures for planning and approving
investments and information systems for monitoring the Group’s
financial performance against budgets and forecasts.
• The Chief Financial Officer is required to undertake an annual
assessment process, in conjunction with the Company Secretary, to
identify and quantify the risks that face the Group’s businesses and
functions, and to assess the adequacy of the prevention, monitoring
and mitigation practices in place for those risks. This process covers
all material controls, including financial, operational and compliance
controls. The Audit Committee is responsible for reviewing the risk
assessment process for completeness and accuracy.
• In addition to its work on the above, the Audit Committee also
receives regular reports about significant risks and associated control
and monitoring procedures. The Group’s risk register and internal
controls and procedures documentation are regular agenda items for
the Committee. The Committee also receives regular reports from
the external auditors.
• The Audit Committee reports regularly to the Board on these
matters, so as to enable the Directors to review the effectiveness
of the system of internal control. The Board also receives regular
reports from its other Committees and directly from management.
• The system accords with the Financial Reporting Council’s Internal
Control: Revised Guidance for Directors on the Combined Code.
There are no significant issues disclosed in the report and financial
statements for the year ended December 31, 2012 and up to the date of
approval of the report and financial statements that have required the
Board to deal with any related material internal control issues.
The Directors confirm that the Board has reviewed the effectiveness
of the system of internal control as described during the period and
concluded that the controls and procedures are adequate.
Relations with shareholders
The Group is the only major mining royalty company in the UK and
recognises the importance of developing a fuller understanding of its
Anglo Pacific Group Plc Annual Report and Accounts 2012
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business model amongst investors. To this end, increased attention
was paid to investor relations during the period, and to improving
the effectiveness of two-way communication with fund managers,
institutional investors and analysts, particularly those focusing on FTSE
350 companies. During the year, the Directors had several meetings with
institutional investors whose combined shareholdings represented over
50% of the total issued share capital of the Company. The Company is
assisted in this initiative by its external public relations advisers.
There are over 2,000 private investors in the Group. The Board was
pleased by the attendance at the 2012 Annual General Meeting where
investors were able to ask about current business activity. At this year’s
Annual General Meeting it is anticipated that the Chairmen of the Audit,
Remuneration and Nomination Committees, as well as the Executive
Directors, will be available to answer any shareholder questions.
Other statutory and regulatory information
Additional information on substantial shareholdings, voting rights
and the appointment and powers of the Company’s Directors,
amongst other things, can be found on
Directors’ Report.
pages 17 to 23 of the
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Directors’ remuneration report
During the whole of 2012, the Remuneration Committee comprised
Mr. Atkinson, Dr. Whellock and Mr. Yadgaroff, who was also the
Chairman of the Committee. Following Mr. Blyth’s appointment to
the Board on March 20, 2013, the Committee is currently comprised
of Mr. Blyth and Mr. Atkinson who is now the Chairman of the
Committee. The Remuneration Committee held two meeting during
the year.
The Committee’s policy in 2013 – and, most likely, 2014 – is to
continue to steadily raise the basic salaries towards the lower quartile
of FTSE companies of comparable size and nature, with further
increases of £20,000-25,000 in each year for full-time Executive
Directors and pro rata for part-time Executive Directors. This is
considered to be important for both retention and for attracting new
Executive Directors and senior managers in the future.
The Committee is responsible for making recommendations to the
Board on the Company’s framework for executive remuneration and
its cost. The Committee determines the contract terms, remuneration
and other benefits for each of the Executive Directors (including the
Chairman), including performance related bonus schemes, pension
rights and compensation payments. It has access to the advice of
independent remuneration consultants when required. The Board itself
determines the remuneration of the Non-Executive Directors.
No director is involved in deciding his own remuneration.
Policy
There are three important elements that impact on the Committee’s
policy. The Group has:
• a high market capitalisation (£296m at December 2012) relative to
the size of its management team (staff total: eleven, four of whom
are Executive Directors);
• long investment horizons (typically there can be an interval of
between two and ten years before a royalty comes on stream and
the royalty may continue to flow for twenty years or more);
• no comparable peer group, certainly in the UK, for the purposes of
benchmarking director performance.
As with any ‘people’ business the loss of key executives could be
seriously disruptive. The Committee has accordingly taken the
retention of Executive Directors as a key objective of its remuneration
policy, alongside incentivising their performance in acquiring new
royalties. Other objectives include a strong alignment of directors’
interests with those of shareholders, and a remuneration level
and structure that relates sensibly to the pay and bonuses of
non-Board employees.
Over the last two to three years, the Committee has pursued a
consistent and coherent policy for delivering these objectives. As
discussed more fully below, the main elements of the remuneration
package are:
• a fixed monthly basic salary;
• an annual performance-relate bonus; and
• longer-term share schemes, particularly a Joint Share Ownership
Plan (JSOP).
Basic Salary
Given the relative simplicity of the Group’s business model, the
Committee has taken as its benchmark the lower quartile of basic
salaries paid by FTSE companies of similar market capitalisation and
nature. The basic salaries paid by the Group have been well below this
level. Over the last three years, the Committee’s policy has been to
increase the basic salaries of full-time Executive Directors by £20,000-
25,000 per annum in order to narrow this gap, which nevertheless
remains significant (it would require an additional increase in the
Chief Investment Officer’s salary of approximately 23% to match the
lower quartile of operational heads and of 78% in the Chief Executive
Officer’s salary to match that of the top full time executive).
Mr. B.M. Wides receives fees in lieu of salary.
Annual Bonus
The Committee views the annual bonus as the primary means
for incentivising the performance of the Executive Directors.
Annual bonus is capped at 150% of basic salary. Awards over the
last three years have been assessed principally by reference to the
performance achieved against the Key Performance Indicators set
out on
page 17, i.e.:
• value of new royalties achieved;
• operating profit; and
• dividends per share.
Other factors including adjusted net asset value are also taken into
account. Where a new royalty that has been recognised in a bonus
award subsequently fails to come into production, the bonus paid in
the year the royalty fails will be reduced. Significant and successful
corporate activity may also be recognised through a bonus award.
A significant increase in the company’s share price during the year,
while it will not on its own trigger a bonus, may nevertheless amplify
the level of bonus awarded; conversely, a significant decrease in the
share price may constrain the level of bonus awarded. The Group’s
policy is that at least 25% of any annual bonus award will normally be
in the form of shares.
It is proposed to retain the annual bonus offer for 2013 on the same
basis. The threshold for bonus in respect of the aggregate value of
royalty acquisitions remains at $40m.
Longer-Term Share Schemes
The Group operates two share schemes for Executive Directors and
certain employees: a Company Share Option Scheme (“CSOP”) and a
Joint Share Ownership Plan (“JSOP”). Both schemes were introduced in
2010, with three purposes.
Their primary purpose was to incentivise retention of key personnel:
awards under both schemes are dependent on the employee
completing three years’ service following the grant of the options (the
vesting period). Secondly, the Committee believes that a substantial
shareholding in the Group helps provide assurance that the interests of
directors and key employees will be firmly aligned with shareholders.
Thirdly, the schemes incentivise longer-term performance. Under
both schemes, awards are conditional upon the Group’s absolute total
shareholder return growing at an annual rate (not compounded) of
3% in excess of the UK Retail Price Index over the three year vesting
period, and, in the case of the JSOP, also upon the Group’s share price
reaching a hurdle level during the vesting period, as determined by the
Committee at the time the option is granted.
The Committee believes that the current shareholdings of Executive
Directors, together with the share options available under the JSOP,
are now sufficient to assure the alignment of their interests with those
of shareholders. No further awards to existing Directors under the
JSOP are accordingly envisaged during 2013, although awards may still
be made to any new Executive Directors appointed during the year.
Previous initial awards of JSOP have been substantial (up to 350% of
basic salary), falling steadily in subsequent years, and this pattern is
expected to be followed in the future. Aside from the usual restrictions
on share dealings, the shares awarded to Directors are not subject to
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any additional specific restrictions on sale. However, the Committee
has indicated that disposals would make further awards to that
Director unlikely.
Company Share Option Plan
Share options are granted at the prevailing market price on the date
of grant. The vesting period for the option plan is three years and, if an
option remains unexercised after a period of 10 years from the date of
grant, the option will lapse. The exercise condition of the option plan
stipulates that the Group’s absolute total shareholder return must
grow at a rate of 3% per annum (not compounded) in excess of the UK
Retail Price Index over the vesting period.
Joint Share Ownership
Under the JSOP, the Remuneration Committee invites selected
employees and Directors to enter into an agreement with the Anglo
Pacific Group Employee Benefit Trust (the “Co-owner”) to acquire
a number of ordinary shares in the capital of the Company. The
shares are held in the name of the Co-owner; however, the selected
employees maintain a beneficial interest in these shares. The JSOP
was approved by shareholders at the Annual General Meeting held on
April 21, 2010.
Awards under the JSOP are conditional on the employee completing
three years’ service (the vesting period) and the Group’s absolute total
shareholder return growing at an annual rate (not compounded) of
3% in excess of the UK Retail Price Index over the three year vesting
period. In addition, the Company’s share price must reach a hurdle
price during the three year vesting period as determined by the
Remuneration Committee at the time of making the award.
Upon satisfying the performance targets and service requirements,
the beneficial interest conferred will entitle the employee to receive
a proportion of the proceeds of sale of the ordinary shares. Their
entitlement will be to receive the equivalent of all sales proceeds
in excess of the threshold amount, settled in ordinary shares of
the Company. The threshold amount is fixed by the Remuneration
Committee and will not be set less than the market value of the
ordinary shares of the Company at the time the JSOP award is made.
The JSOP awards are limited in value such that the initial value of
shares acquired jointly with the Co-owner under the award will not
exceed 400% of the employee’s gross annual salary.
During the vesting period, the Co-owner and the employee have
agreed to limit the exercise of their voting rights to matters concerning
alterations to the Articles of Association of the Company that could
adversely affect the employee’s rights under the JSOP, and to waive
their rights to dividends.
The Committee continues to review the scope for an alternative long-
term incentive plan designed to offer graduated rewards for increasing
levels of long-term performance; but, as noted in last year’s Report,
the long investment horizons and the absence of comparable royalty
companies in the UK make this difficult.
Pension rights
The Company makes contributions to employees’ pensions and has
designated AEGON Scottish Equitable PLC as its stakeholder pension
provider. The Committee is prepared to pay additional basic salary (or
fees) in lieu of part or all of a director’s pension contribution.
Executive Directors’ service contracts
Although all of the Executive Directors’ service contracts are for an
indefinite term, it is the Group’s policy that the service contracts
do not have a notice period of more than one year. In the event of
termination, the service contracts allow the Company to make a
payment in lieu of notice. The service contracts of Mr J. Theobald and
Mr A.C. Orchard also provide for an additional termination payment
equivalent to six months’ basic salary, whereas the service contracts
of Mr P.M. Boycott and Mr B.M. Wides simply limit payment for loss
of office to twelve months’ basic salary. The service contracts provide
that any such payments will be without prejudice to the director’s
duty to mitigate his loss. No executive director has provisions in his
service contract that relate to a change of control of the Company.
The details of the service contracts of the Executive Directors in office
at December 31, 2012 are as follows:
Executive Directors
P.M. Boycott
A.C. Orchard
J. Theobald
B.M. Wides
Contract
date
Notice
period
November 1, 2010
March 26, 2010
March 26, 2010
October 1, 2010
6 months
6 months
6 months
6 months
Non-Executive Directors
Other than Mr. W.M. Blyth and Mr. P.N.R. Cooke, the Group’s Non-
Executive Directors have letters of appointment for an indefinite term,
although they may be terminated by either party subject to 30 days’
notice. Mr. Blyth and Mr. Cooke were appointed on rolling three-year
contracts with a one month notice period and the Board intends that all
future Non-Executive Director appointments will be on similar terms.
None of the letters have provisions that relate to a change of control of
the Company. The fees of Non-Executive Directors are determined by
the Board and reviewed bi-annually having regard to the commitment
of time required and the level of fees in similar companies. Additional
amounts are awarded to reflect the increased commitment required
for members and chairpersons of the various Board committees
and associated with the role of Senior Independent Director. Non-
Executive Directors are not eligible to participate in the Company’s
annual performance-related incentive award, share option schemes or
pension scheme. The details of the Non-Executive Directors’ letters of
appointment in office at December 31, 2012 are as follows:
Non-Executive Directors
M.H. Atkinson
W.M. Blyth
P.N.R. Cooke
J.G. Whellock
A.H. Yadgaroff
Contract
date
Notice
period
February 9, 2006
30 days
March 20, 2013
One month
December 17, 2012
One month
May 19, 2003
May 19, 2003
30 days
30 days
External Appointments
It remains the Group’s policy that all earnings from Non-Executive
Directorships held by the Group’s Executive Directors be retained by
the Group.
Implementation
(i) Basic Salary
The basic salaries of the Executive Directors were last increased in
December 2011. Despite a recommendation from the Committee
that the salary increases continue in line with its policy, the Board
concluded that no further increase should be made until at least
Spring 2013. This would allow the Group additional time to canvass
shareholder views on the Group’s broader remuneration policy.
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Directors’ remuneration report
(ii) Annual Bonus
In 2010, bonus awards were around 100% of basic salaries, and in 2011
around 55%. For 2012, the Committee agreed that the award of bonus
would be primarily dependent on the acquisition of $40m of new
royalties. The value of new royalties acquired during the year fell short
of this. As regards the other key performance indicators, although
dividends per share rose, operating profit – and to a lesser extent net
asset value – fell. The Committee accordingly concluded that no bonus
should be paid in respect of 2012.
(iii) Longer-Term Share Schemes
The market price of the shares at December 31, 2012 was 269.75p and
the range during the year was 220p to 345p.
Company Share Option Plan
In 2010, share options were granted under the CSOP to Mr. A.C.
Orchard and Mr. J. Theobald up to the cumulative limit allowable
under HMRC rules, and no Executive Director has received further
CSOP options since then.
The table below shows, for the Directors who served during the year, the
options outstanding at December 31, 2012 for which nil has been paid.
A.C. Orchard
As at December 31, 2011 and
December 31, 2012
J. Theobald
As at December 31, 2011 and
December 31, 2012
No. of
Options
Exercisable
between
Exercise
price
12,024
20/05/13 – 20/05/20
249.50p
12,024
20/05/13 – 20/05/20
249.50p
Joint Share Ownership Plan
In the first year of the JSOP (2010), the Board (on the recommendation
of the Remuneration Committee), awarded share equivalent to 350%
of basic salary to Mr A.C. Orchard and Mr J. Theobald; an award of
175% of basic salary was made in 2011 to each of these individuals and
in 2012, a further award of 87.50% of basic salary was made to each of
these individuals.
The beneficial interests, under the JSOP, as at December 31, 2012
of the Directors who served during the year were as undernoted for
which nil as been paid.
No. of
Shares
Exercisable
between
Grant
price
Hurdle
price
A.C. Orchard
As at January 1, 2012
169,350 20/05/13 – 20/05/14 248.00p 315.00p
As at January 1, 2012
77,837 28/03/14 – 28/03/15 326.00p 422.50p
– Granted
44,804 28/03/15 – 28/03/16 332.00p 450.00p
As at December 31, 2012
169,350 20/05/13 – 20/05/14 248.00p 315.00p
As at December 31, 2012
77,837 28/03/14 – 28/03/15 326.00p 422.50p
As at December 31, 2012
44,804 28/03/15 – 28/03/16 332.00p 450.00p
J. Theobald
As at January 1, 2012
169,350 20/05/13 – 20/05/14 248.00p 315.00p
As at January 1, 2012
77,837 28/03/14 – 28/03/15 326.00p 422.50p
– Granted
50,075 28/03/15 – 28/03/16 332.00p 450.00p
As at December 31, 2012
169,350 20/05/13 – 20/05/14 248.00p 315.00p
As at December 31, 2012
77,837 28/03/14 – 28/03/15 326.00p 422.50p
As at December 31, 2012
50,075 28/03/15 – 28/03/16 332.00p 450.00p
(iv) Pension Rights
During the year the Group paid pension contributions in respect of
Directors as follows:
A.C. Orchard
M.J. Tack1
J. Theobald
2012
£
2,833
–
19,000
2011
£
14,500
10,875
15,333
1 M.J. Tack resigned from the board on September 23, 2011
Mr. P.M. Boycott, Mr. B.M. Wides, and Mr. A.C. Orchard currently
receive additional basic salary (or fees) in lieu of their pension
contribution.
Non-Executive Directors
During the year, the Board conducted its bi-annual review of the Non-
Executive Directors’ fees and agreed to increase them to £38,000 a
year commencing January 1, 2013. It was further agreed to pay
Mr. M. Atkinson an additional £4,000 a year, in order to reflect his
additional duties as Senior Independent Director. Mr. W.M. Blyth
receives £38,000 a year, whereas Mr. P.N.R. Cooke receives £36,000
a year – a lesser amount to reflect that he is neither a member, nor a
chair person of any of the Board committees.
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Total shareholder return
220
200
180
160
140
120
100
80
60
40
20
Jan-08
Jul-08
Jan-09
Jul-09
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
Jul-12
FTSE 350 Mining
Anglo Pacific Group
The above graph shows the Company’s total shareholder return performance over the last five years against the FTSE 350 Mining Index, both of
which have been rebased at the start of the period in order to provide a graphical measure of comparative performance. The Board considers this
index to be the nearest relevant index appropriate to the Group.
Directors’ emoluments and compensation
Salaries and benefits
Annual bonus award
Fees
The remuneration of the Directors was as follows:–
P.M. Boycott
A.C. Orchard
M.J. Tack1
J. Theobald
B.M. Wides
M.H. Atkinson
W.M. Blyth2
P.N.R. Cooke3
J.G. Whellock
A.H. Yadgaroff
2012
£
514,234
–
250,553
764,787
2012
Total
£
140,067
184,167
–
190,000
141,400
37,153
–
–
36,000
36,000
764,787
2011
£
515,983
432,000
216,000
1,163,983
2011
Total
£
218,900
225,000
156,750
237,333
218,000
36,000
–
–
36,000
36,000
1,163,983
Salary
£
140,067
184,167
–
190,000
–
–
–
–
–
–
514,234
Annual bonus
award
£
–
–
–
–
–
–
–
–
–
–
–
Fees
£
–
–
–
–
141,400
37,153
–
–
36,000
36,000
250,553
1 M.J. Tack resigned from the board on September 23, 2011
2 W.M. Blyth was appointed to the board on March 20, 2013
3 P.N.R. Cooke was appointed to the board on December 10, 2012
Audit
Under section 421 of the Companies Act 2006 (United Kingdom) the
Directors’ emoluments and compensation section, and items (iii) and
(iv) of the Directors’ Remuneration Report have been audited.
Approval
This report was approved by the Board and authorised for issue on
March 27, 2013 and signed on its behalf by:
P.T.J. Mason
Company Secretary
March 27, 2013
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Directors’ responsibilities in the preparation of financial statements
Directors’ statement pursuant to the Disclosure and
Transparency Rules
Each of the Directors, whose names and functions are listed in the
management section of the Directors’ Report confirm that, to the best
of each person’s knowledge and belief:
• the financial statements, prepared in accordance with IFRSs as
adopted by the EU, give a true and fair view of the assets, liabilities,
financial position and profit of the Group and Company; and
• the Directors’ Report contained in the Annual Report includes a fair
review of the development and performance of the business and the
position of the Company and Group, together with a description of
the principal risks and uncertainties that they face.
The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Group’s website,
www.anglopacificgroup.com. Legislation in the United Kingdom
governing the preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.
By order of the Board
B.M. Wides
Acting Chairman
March 27, 2013
The Directors are responsible for preparing the Annual Report, the
Directors’ Remuneration Report and the financial statements in
accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements
for each financial year. Under that law the directors have elected
to prepare the Group and parent Company financial statements in
accordance with International Financial Reporting Standards (“IFRSs”)
as adopted by the European Union (“EU”). Under company law the
Directors must not approve the financial statements unless they are
satisfied that they give a true and fair view of the state of affairs of the
Group and the Company and of the profit or loss of the Group and the
Company for that period. In preparing these financial statements, the
Directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and accounting estimates that are reasonable and
prudent;
• state whether applicable IFRSs as adopted by the European Union
have been followed, subject to any material departures disclosed and
explained in the financial statements; and
• prepare the financial statements on the going concern basis unless
it is inappropriate to presume that the Company will continue in
business.
The Directors are responsible for keeping adequate accounting records
that are sufficient to show and explain the Company’s transactions
and disclose with reasonable accuracy at any time the financial
position of the Company and the Group and enable them to ensure
that the financial statements and the Directors’ Remuneration
Report comply with the Companies Act 2006 (United Kingdom)
and, as regards the Group financial statements, Article 4 of the IAS
Regulation. They are also responsible for safeguarding the assets of the
Company and the Group and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The Directors who were in office at the date of this statement
confirm that:
• so far as they are each aware there is no relevant audit information
of which the Company’s auditors are unaware; and
• the Directors have taken all steps that they ought to have taken to
make themselves aware of any relevant audit information and to
establish that the auditors are aware of that information.
Anglo Pacific Group Plc Annual Report and Accounts 2012
Accounts
33
Report of the independent auditor to the members of Anglo Pacific Group PLC
We have audited the financial statements of Anglo Pacific Group PLC
for the year ended December 31, 2012 which comprise the consolidated
income statement, the consolidated statement of comprehensive
income, the consolidated and company balance sheets, the consolidated
and company statements of changes in equity, the consolidated and
company cash flow statements and the related notes 1 to 31. The
financial reporting framework that has been applied in their preparation
is applicable law and International Financial Reporting Standards (IFRSs)
as adopted by the European Union and, as regards the parent company
financial statements, as applied in accordance with the provisions of the
Companies Act 2006.
This report is made solely to the company’s members, as a body, in
accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the
Company’s members those matters we are required to state to them
in an auditor’s report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone
other than the company and the company’s members as a body, for our
audit work, for this report, or for the opinions we have formed.
page 32, the Directors are responsible for the preparation of
Respective responsibilities of directors and auditors
As explained more fully in the Directors’ Responsibilities Statement set
out on
the financial statements and for being satisfied that they give a true
and fair view. Our responsibility is to audit and express an opinion
on the financial statements in accordance with applicable law and
International Standards on Auditing (UK and Ireland). Those standards
require us to comply with the Auditing Practices Board’s (APB’s) Ethical
Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is provided
on the APB’s website at www.frc.org.uk/apb/scope/private.cfm.
Opinion on financial statements
In our opinion:
• the financial statements give a true and fair view of the state of the
Group’s and of the parent Company’s affairs as at December 31, 2012
and of the Group’s profit for the year then ended;
• the Group financial statements have been properly prepared in
accordance with IFRS as adopted by the European Union;
• the parent Company financial statements have been properly
prepared in accordance with IFRS as adopted by the European Union
and as applied in accordance with the provisions of the Companies
Act 2006; and
• the financial statements have been prepared in accordance with the
requirements of the Companies Act 2006 and, as regards the Group
financial statements, Article 4 of the IAS Regulation.
Opinion on other matters prescribed by the
Companies Act 2006
In our opinion:
• the part of the Directors’ Remuneration Report to be audited has
been properly prepared in accordance with the Companies Act 2006;
• the information given in the Directors’ Report for the financial year
for which the financial statements are prepared is consistent with the
financial statements; and
• the information given in the Corporate Governance Statement set
out on
pages 24 to 27 with respect to internal control and risk
management systems in relation to financial reporting processes
and about share capital structures is consistent with the financial
statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following:
Under the Companies Act 2006 we are required to report to you if,
in our opinion:
• adequate accounting records have not been kept by the parent
Company, or returns adequate for our audit have not been received
from branches not visited by us; or
• the parent Company financial statements and the part of the
Directors’ Remuneration Report to be audited are not in agreement
with the accounting records and returns; or
• certain disclosures of Directors’ remuneration specified by law are
not made; or
• we have not received all the information and explanations we require
for our audit; or
• a corporate governance statement has not been prepared by the
company.
Under the Listing Rules, we are required to review:
• the Directors’ statement, set out on
page 42, in relation to going
concern; and
• the part of the Corporate Governance Statement relating to the
Company’s compliance with the nine provisions of the UK Corporate
Governance Code specified for our review; and
• certain elements of the report to shareholders by the Board on
Directors’ remuneration.
A
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s
Christopher Smith
Senior Statutory Auditor
for and on behalf of
Grant Thornton UK LLP
Statutory Auditor,
Chartered Accountants
Grant Thornton UK LLP
Grant Thornton House
Melton Street, Euston Square
LONDON NW1 2EP
March 27, 2013
34
Anglo Pacific Group Plc Annual Report and Accounts 2012
Accounts
Report of the independent auditor to the directors of Anglo Pacific Group PLC
in respect of compatibility with Canadian GAAS
In accordance with the requirement contained in National Instrument
52-107 we report below on the compatibility of Canadian Generally
Accepted Auditing Standards (“Canadian GAAS”) and International
Standard on Auditing (UK and Ireland) (ISAs).
We conducted our audits of the Group’s financial statements for each
of the two years ended December 31, 2012 in accordance with ISAs.
If we had been required to conduct the audits of the Group’s financial
statements for each of the two years ended December 31, 2012 in
accordance with Canadian GAAS there would have been no material
differences in the form or content of our audit reports.
Furthermore an auditors’ report prepared in accordance with reporting
standards under Canadian GAAS on the aforementioned consolidated
financial statements would not contain a qualification.
Grant Thornton UK LLP
Statutory Auditor,
Chartered Accountants
Grant Thornton UK LLP
Grant Thornton House
Melton Street, Euston Square
LONDON NW1 2EP
March 27, 2013
Anglo Pacific Group Plc Annual Report and Accounts 2012
Accounts
35
Consolidated income statement
for the year ended December 31, 2012
Royalty income
Finance income
Amortisation of royalties
Operating expenses
Operating profit
Gain on sale of mining and exploration interests
Other income
Other losses
Profit before tax
Income tax expense
Profit attributable to equity holders
Total and continuing earnings per share
Basic earnings per share
Diluted earnings per share
Notes
5
6
17
7(a)
5
9
10
11
12
12
2012
£’000
13,267
676
(1,018)
(3,633)
9,292
7,347
1,746
(4,165)
14,220
(4,163)
10,057
Restated
2011
£’000
34,679
1,507
(1,018)
(3,393)
31,775
20,303
634
(4,261)
48,451
(12,171)
36,280
9.27p
33.51p
9.27p
33.51p
The notes on pages 51 to 86 are an integral part of these consolidated financial statements.
The company has elected to take the exemption under section 408 of the Companies Act 2006 (United Kingdom) not to present the parent company profit and loss account.
The profit for the parent company for the year was £3,135,000 (2011: £37,005,000).
A
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t
s
36
Anglo Pacific Group Plc Annual Report and Accounts 2012
Accounts
Consolidated statement of comprehensive income
for the year ended December 31, 2012
Profit for the year
Other comprehensive income:
Net gain/(loss) on revaluation of coal royalties
Net loss on revaluation of available for sale investments
Net exchange (loss)/gain on translation of foreign operations
Deferred tax
Net income/(expense) recognised directly in equity
Transferred from income statement: disposal of available for sale investments
Total transferred from equity
Notes
2012
£’000
Restated
2011
£’000
10,057
36,280
15
22
9,339
(10,308)
(4,482)
3,927
8,533
(4,666)
(4,666)
(4,139)
(51,669)
2,150
5,933
(11,445)
(10,090)
(10,090)
Total comprehensive income/(expense) for the year
3,867
(21,535)
The notes on pages 51 to 86 are an integral part of these consolidated financial statements.
Anglo Pacific Group Plc Annual Report and Accounts 2012
Accounts
37
Consolidated balance sheet and company balance sheet as at December 31, 2012
Non-current assets
Property, plant and equipment
Coal royalties
Royalty instruments
Intangibles
Mining and exploration interests
Other receivables
Investments in subsidiaries
Deferred tax
Current assets
Trade and other receivables
Cash and cash equivalents
Total assets
Non-current liabilities
Deferred tax
Current liabilities
Income tax liabilities
Trade and other payables
Total liabilities
Capital and reserves attributable to shareholders
Share capital
Share premium
Coal royalty revaluation reserve
Investment revaluation reserve
Share based payment reserve
Foreign currency translation reserve
Special reserve
Investment in own shares
Retained Earnings
Total equity
Group
Restated
2011
£’000
Restated
2010
£’000
Company
2012
£’000
2011
£’000
Notes
2012
£’000
14
15
16
17
18
20
19(a)
22
2,105
2,152
2,144
170,995
165,967
169,304
24,032
71,408
55,793
3,141
–
–
24,736
69,138
64,551
28,061
42,741
128,479
–
–
–
–
–
–
854
–
24,032
3,997
37,001
13,581
33,545
1,800
875
–
24,736
3,997
56,369
9,038
33,545
–
327,474
326,544
370,729
114,810
128,560
20
21
1,958
24,036
25,994
12,298
32,197
44,495
8,813
28,258
37,071
292
41,157
41,449
1,922
43,672
45,594
353,468
371,039
407,800
156,259
174,154
22
48,532
48,532
54,240
54,240
59,824
59,824
–
–
4,401
4,401
23
24
24
1,801
2,171
3,972
3,731
6,896
10,627
52,504
64,867
4,987
6,470
11,457
71,281
1,596
721
2,317
2,317
413
694
1,107
5,508
A
c
c
o
u
n
t
s
2,192
26,853
86,721
2,184
25,539
80,285
2,175
24,207
83,405
2,192
26,853
-
2,184
25,539
-
(14,204)
(4,843)
51,780
(14,032)
(5,268)
354
177
65
38,349
41,614
39,686
26
632
632
632
(2,601)
(2,601)
(1,295)
354
82
632
-
177
82
632
-
27
162,668
163,185
135,864
137,861
145,300
300,964
306,172
336,519
153,942
168,646
Total equity and liabilities
353,468
371,039
407,800
156,259
174,154
The notes on pages 51 to 86 are an integral part of these consolidated financial statements.
The financial statements of Anglo Pacific Group Plc (registered number: 897608) on pages 35 to 71 were approved by the Board and authorised for issue on March 27, 2013 and are signed
on its behalf by:
Brian Wides Acting Chairman
John Theobald Chief Executive Officer
38
Anglo Pacific Group Plc Annual Report and Accounts 2012
Accounts
Consolidated statement of changes in equity
for the two years ended December 31, 2012
Share
capital
£’000
Share
premium
£’000
Coal
royalty
revaluation
reserve
£’000
Investment
revaluation
reserve
£’000
Share
based
payment
reserve
£’000
Foreign
currency
translation
reserve
£’000
Investment
in own
shares
£’000
Special
reserve
£’000
Retained
earnings
£’000
Total
equity
£’000
Balance at January 1, 2011
(as previously reported –
note 2.1.3)
2,175
24,207
88,883
51,780
Impact of restatement
–
(5,478)
–
Balance at January 1, 2011
(as restated – note 2.1.3)
Profit for the year (restated)
Other comprehensive income:
Coal Royalties:
Royalties valuation
movement taken to equity
(restated)
Deferred tax on valuation
(restated)
Available-for-sale
investments:
Valuation movement taken
to equity
Deferred tax on valuation
Transferred to income
statement on disposal
Foreign currency translation
Total comprehensive
expense
Dividends
Issue of share capital under
share-based payment
Total transactions with
owners of the company
Balance at December 31,
2011 (restated)
2,175
24,207
83,405
51,780
–
–
–
–
–
–
–
–
–
9
9
–
–
–
–
–
–
–
–
–
1,332
1,332
–
(4,139)
1,019
–
–
–
–
–
–
–
(51,669)
5,136
(10,090)
–
(3,120)
(56,623)
–
–
–
–
–
–
The notes on pages 51 to 86 are an integral part of these consolidated financial statements.
65
–
65
–
–
–
–
–
–
–
–
–
112
112
39,686
632
(1,295)
139,755
345,888
–
39,686
–
–
632
–
–
(3,891)
(9,369)
(1,295)
135,864
336,519
–
36,280
36,280
802
(235)
(237)
13
–
1,585
1,928
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(3,337)
784
(51,906)
5,149
(10,090)
1,585
36,280
(21,535)
(8,978)
(8,978)
(1,306)
19
166
(1,306)
(8,959)
(8,812)
2,184
25,539
80,285
(4,843)
177
41,614
632
(2,601)
163,185
306,172
Anglo Pacific Group Plc Annual Report and Accounts 2012
Accounts
Consolidated statement of changes in equity
for the two years ended December 31, 2012 (continued)
Share
capital
£’000
Share
premium
£’000
Coal
royalty
revaluation
reserve
£’000
Investment
revaluation
reserve
£’000
Share
based
payment
reserve
£’000
Foreign
currency
translation
reserve
£’000
Investment
in own
shares
£’000
Special
reserve
£’000
Retained
earnings
£’000
Total
equity
£’000
2,184
25,539
80,285
(4,843)
–
–
–
–
–
–
–
–
–
8
–
8
–
–
–
–
–
–
–
–
–
1,314
–
1,314
–
9,339
(2,903)
–
–
–
–
–
–
–
(10,308)
5,613
(4,666)
–
6,436
(9,361)
–
–
–
–
–
–
–
–
177
–
–
–
–
–
–
–
–
–
–
177
177
41,614
632
(2,601)
163,185
306,172
–
(4,311)
1,274
(375)
(57)
–
204
(3,265)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
10,057
10,057
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
5,028
(1,629)
(10,683)
5,556
(4,666)
204
10,057
3,867
(10,579)
(10,579)
–
5
1,322
182
(10,574)
(9,075)
2,192
26,853
86,721
(14,204)
354
38,349
632
(2,601)
162,668
300,964
Balance at January 1, 2012
(restated)
Profit for the year
Other comprehensive income:
Coal Royalties:
Royalties valuation
movement taken to equity
Deferred tax on valuation
Available-for-sale
investments:
Valuation movement taken
to equity
Deferred tax on valuation
Transferred to income
statement on disposal
Foreign currency translation
Total comprehensive
income for the year
Dividends
Issue of ordinary shares
Value of employee services
Total transactions with
owners of the company
Balance at December 31,
2012
The notes on pages 51 to 86 are an integral part of these consolidated financial statements.
39
A
c
c
o
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t
s
40
Anglo Pacific Group Plc Annual Report and Accounts 2012
Accounts
Company statement of changes in equity
for the two years ended December 31, 2012
Balance at January 1, 2011
Changes in equity for 2011
Available-for-sale investments:
Valuation movement taken to equity
Deferred tax on valuation
Transferred to income statement on disposal
Net expense recognised direct into equity
Profit for the year
Total recognised income and expenses
Dividends paid
Issue of share capital under
share based payment
Balance at December 31, 2011
Balance at January 1, 2012
Changes in equity for 2012
Available-for-sale investments:
Valuation movement taken to equity
Deferred tax on valuation
Transferred to income statement on disposal
Net expense recognised direct into equity
Profit for the period
Total recognised income and expenses
Dividends
Issue of ordinary shares
Value of employee services
Share
capital
£’000
Share
premium
£’000
Investment
revaluation
reserve
£’000
Share based
payment
reserve
£’000
Foreign
currency
translation
reserve
£’000
Special
reserve
£’000
Retained
earnings
£’000
Total
equity
£’000
2,175
24,207
50,403
65
82
632
117,254
194,818
–
–
–
–
–
–
–
9
2,184
2,184
–
–
–
–
–
–
–
8
–
–
–
–
–
–
–
–
1,332
25,539
25,539
–
–
–
–
–
–
–
1,314
–
(50,203)
5,078
(10,546)
(55,671)
–
(55,671)
–
–
(5,268)
(5,268)
(9,449)
5,307
(4,622)
(8,764)
–
(8,764)
–
–
–
–
–
–
–
–
–
–
112
177
177
–
–
–
–
–
–
–
–
177
354
–
–
–
–
–
–
–
–
82
82
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
37,005
37,005
(50,203)
5,078
(10,546)
(55,671)
37,005
(18,666)
(8,978)
(8,978)
19
1,472
632
632
145,300
168,646
145,300
168,646
–
–
–
–
–
–
–
–
–
–
–
–
–
3,135
3,135
(9,449)
5,307
(4,622)
(8,764)
3,135
(5,629)
(10,579)
(10,579)
–
5
1,322
182
82
632
137,861
153,942
Balance at December 31, 2012
2,192
26,853
(14,032)
The notes on pages 51 to 86 are an integral part of these consolidated financial statements.
Anglo Pacific Group Plc Annual Report and Accounts 2012
Accounts
41
Consolidated cash flow statement and company cash flow statement
for the year ended December 31, 2012
Cash flows from operating activities
Profit before taxation
Adjustments for:
Interest received
Unrealised foreign currency (gain)/loss
Depreciation of property, plant and equipment
Amortisation of intangibles – royalties
Gain on disposal of mining and exploration interests
Provision for non-recovery of interest receivable
Royalty instrument (recovery)/provision
Loss on impairment of royalty intangible
Loss on write down of mining and exploration interests
Intercompany dividends
Share based payment
Decrease/(Increase) in trade and other receivables excluding
amounts due from subsidiary companies
(Decrease)/Increase in trade and other payables
Receipts from royalty instruments
Cash generated from operations
Income taxes paid
Net cash generated from/(used in) operating activities
Cash flows from investing activities
Proceeds on disposal of mining and exploration interests
Purchases of mining and exploration interests
Purchases of royalty interests
Purchases of property, plant and equipment
Exploration and evaluation expenditure
Interest received
Investment in subsidiaries
Group
Company
2012
£’000
Restated
2011
£’000
Notes
2012
£’000
2011
£’000
14,220
48,451
4,414
40,110
6,9
(1,723)
(1,507)
(2,265)
(2,786)
14
17
10
10
10
10
8(a)
(431)
21
1,018
1,712
21
1,018
–
21
–
–
21
–
(7,347)
(20,303)
(6,974)
(20,744)
–
(806)
–
4,013
–
183
709
1,563
1,088
42
–
130
-
(806)
–
3,722
–
183
9,148
32,924
(1,705)
7,199
(3,483)
(4,725)
2,898
14,520
(6,186)
8,334
423
742
30,606
(13,083)
17,523
(56)
27
2,898
1,164
697
1,861
709
1,563
–
–
(19,200)
130
(197)
(2,110)
(165)
742
(1,730)
(2,692)
(4,422)
19,280
51,491
18,543
40,604
(23,781)
(28,101)
(11,182)
(27,488)
(2,398)
(28,395)
–
(127)
1,110
–
(29)
(108)
536
–
–
–
–
41
–
–
(14)
–
2,524
(15,233)
A
c
c
o
u
n
t
s
Net cash (used in)/generated from investing activities
(5,916)
(4,606)
7,402
393
Cash flows from financing activities
Dividends paid
Financing of related entities
Net cash (used in)/generated from financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
The notes on pages 51 to 86 are an integral part of these consolidated financial statements.
(10,579)
(8,978)
(10,579)
-
-
(1,199)
(10,579)
(8,978)
(11,778)
(8,161)
32,197
21
24,036
3,939
28,258
32,197
(2,515)
43,672
41,157
(8,978)
52,693
43,715
39,686
3,986
43,672
42
Anglo Pacific Group Plc Annual Report and Accounts 2012
Accounts
Notes to the consolidated financial statements
for the year ended December 31, 2012
1 General information
Anglo Pacific Group Plc (the “Company”) and its subsidiaries (together, the “Group”) secure natural resources royalties by acquisition and
through investment in mining and exploration interests. The Group has royalties and investments in mining and exploration interests primarily in
Australia, North and South America and Africa, with a diversified exposure to commodities that is strongly represented by coal, iron ore, gold and
uranium.
The Company is a public limited company, which is listed on the London Stock Exchange and Toronto Stock Exchange and incorporated and
domiciled in the United Kingdom. The address of its registered office is 17 Hill Street, London, W1J 5LJ, United Kingdom (registered number:
897608).
2 Summary of significant accounting policies
The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have
been consistently applied to all the years presented, unless otherwise stated.
2.1 Basis of preparation
The consolidated financial statements of Anglo Pacific Group Plc have been prepared in accordance with International Financial Reporting
Standards as adopted by the European Union (IFRSs as adopted by the EU), IFRIC interpretations and the Companies Act 2006 (United Kingdom)
applicable to companies reporting under IFRS. The consolidated financial statements have been 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.
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires
management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of
judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in
note 4.
2.1.1 Going concern
After making enquiries and reviewing the Group’s forecasts and projections, the Directors have a reasonable expectation that the Group has
adequate resources to continue in operational existence for the foreseeable future. The Group therefore continues to adopt the going concern
basis in preparing its consolidated financial statements.
2.1.2 Changes in accounting policies and disclosures
(a) New and amended standards adopted by the Group
There are no IFRSs or IFRIC interpretations that are effective for the first time for the financial year beginning on or after January 1, 2012 that
would be expected to have a material impact on the Group.
(b) New standards and interpretations not yet adopted
A number of new standards and amendments to standards and interpretations are effective for annual periods beginning after January 1, 2012,
and have not been applied in preparing these consolidated financial statements. None of these is expected to have a significant effect on the
consolidated financial statements of the Group, except the following set out below:
• IAS 1 (Amendments) ‘Presentation of Financial Statements’
IAS 1 (Amendments) requires an entity to group items presented in other comprehensive income into those that, in accordance with other
IFRSs: (a) will not be reclassified subsequently to profit or loss and (b) will be reclassified subsequently to profit or loss when specific conditions
are met. It is applicable for annual periods beginning on or after July 1, 2012. The Group’s management expects this will change the current
presentation of items in other comprehensive income; however, it will not affect the measurement or recognition of such items.
• IFRS 9 ‘Financial Instruments’ – effective January 1, 2015
• IFRS 10 ‘Consolidated Financial Statements’ – effective January 1, 2014
• IFRS 12 ‘Disclosure of Interests in Other Entities’ – effective January 1, 2013
• IFRS 13 ‘Fair Value Measurement’ – effective January 1, 2013
• IAS 19 ‘Employee Benefits’ (Revised June 2011) – effective January 1, 2013
• IAS 27 (Revised 2011), ‘Separate Financial Statements’ – effective January 1, 2013
The Group’s management has yet to assess the impact of IFRS 13 and IAS 19. In respect of the other Standards, the Directors anticipate that their
adoption in future periods will have no material impact on the financial statements of the Group. The Group does not intend to apply any of
these pronouncements early.
2.1.3 Prior period adjustment
As mentioned in the royalty 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 £4.6million (A$7.1 million) more than it was entitled to over a six year period ended
December 31, 2011. An associated interest charge of £1.4million (A$2.2million) was also incurred on the overpayments. 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:
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Anglo Pacific Group Plc Annual Report and Accounts 2012
Accounts
Notes to the consolidated financial statements
for the year ended December 31, 2012
Consolidated Income Statement
Royalty income
Operating expenses
Operating profit
Profit before tax
Income tax expense
Profit attributable to equity holders
Total and continuing earnings per share
Basic earnings per share
Diluted earnings per share
Consolidated Statement of Comprehensive Income
Profit for the financial period
Other comprehensive income
Net loss on revaluation of coal royalties
Net exchange gain on translation of foreign operations
Deferred tax
Net expense recognised directly in equity
Total comprehensive expense for the financial period
Year ended December 31, 2011
Restated
£’000
As previously
reported
£’000
Adjustment
£’000
34,679
(3,393)
31,775
48,451
(12,171)
36,280
35,103
(3,262)
32,330
49,006
(12,337)
36,669
(424)
(131)
(555)
(555)
166
(389)
33.51p
33.51p
33.87p
33.87p
(0.36p)
(0.36p)
Year ended December 31, 2011
Restated
£’000
As previously
reported
£’000
Adjustment
£’000
36,280
36,669
(389)
(4,139)
2,150
5,933
(11,445)
(21,535)
(2,844)
2,188
5,532
(10,124)
(20,214)
(1,295)
(38)
401
(1,321)
(1,321)
Consolidated Balance Sheet
Coal royalties
Total assets
Deferred tax
Trade and other payables
Total liabilities
Total equity and liabilities
Consolidated Statement of Cash Flows
Cash flows from operating activities
Profit before taxation
Decrease in trade and other payables
Restated
£’000
165,967
371,039
54,240
6,896
64,867
371,039
December 31, 2011
As previously
reported
£’000
Adjustment
£’000
Restated
£’000
December 31, 2010
As previously
reported
£’000
Adjustment
£’000
175,124
380,196
58,822
781
63,334
380,196
(9,157)
(9,157)
(4,582)
6,115
1,533
(9,157)
169,304
407,800
59,824
6,470
71,281
407,800
177,130
415,626
63,838
913
69,738
415,626
(7,826)
(7,826)
(4,014)
5,557
1,543
(7,826)
Year ended December 31, 2011
Restated
£’000
As previously
reported
£’000
Adjustment
£’000
48,451
423
49,006
(132)
(555)
555
Overall, the net assets of the Group at December 31, 2011 were overstated by £10.7million as a result of this overpayment and the corresponding
impact on the coal royalty valuation. The value of the coal royalty was £9.2million less when taking into account road areas over the remaining
portion of the private royalty ground which are payable to the State. Trade and other payables now reflect an amount owing to the mine
operator as a result of these overpayments and the associated interest charge. 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.
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Anglo Pacific Group Plc Annual Report and Accounts 2012
Accounts
Notes to the consolidated financial statements
for the year ended December 31, 2012
2.2 Consolidation
(a) Subsidiaries
Subsidiaries are all entities (including special purpose entities) over which the Group has the power to govern the financial and operating policies
generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are
currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated
from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.
Investments in subsidiaries are accounted for in the parent company at cost less impairment. Cost is adjusted to reflect changes in consideration
arising from contingent consideration amendments.
Inter-company transactions, balances and unrealised gains on transactions between Group companies are eliminated on consolidation.
Unrealised losses are also eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the
policies adopted by the Group.
(b) Associates
Associates are all entities over which the Group has significant influence but not control, generally accompanying a shareholding of between
20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting and are initially
recognised at cost. The Group’s investment in associates includes goodwill identified on acquisition, net of any accumulated impairment loss.
The Group’s share of its associates’ post-acquisition profits or losses is recognised in the income statement, and its share of post-acquisition
movements in other comprehensive income is recognised in other comprehensive income. The cumulative post-acquisition movements are
adjusted against the carrying amount of the investment. When the Group’s share of losses in an associate equals or exceeds its interest in the
associate, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred obligations or made
payments on behalf of the associate.
Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates.
Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of
the associates have been changed where necessary to ensure consistency with the policies adopted by the Group.
(c) Joint ventures
A joint venture is an entity in which the Group holds an interest on a long-term basis and which is jointly controlled by the Group and one or
more other partners under a contractual arrangement.
The results and assets and liabilities of joint ventures are incorporated in these financial statements using the proportionate consolidation
method of accounting. The Group’s share of the assets, liabilities, income and expenses of the joint ventures are incorporated with the similar
items, line by line, in its financial statements.
Where a Group company transacts with a joint venture of the Group, profits and losses are eliminated to the extent of the Group’s interest in the
relevant joint venture. Losses may provide evidence of an impairment of the asset transferred in which case appropriate provision is made for
impairment.
Where necessary, adjustments are made to the results of joint ventures to bring their accounting policies into line with those used by the Group.
(d) Transactions and loss of control or significant influence
When the Group ceases to have control or significant influence, any retained interest in the entity is remeasured to its fair value, with the change
in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the
retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income
in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts
previously recognised in other comprehensive income are reclassified to profit or loss.
If the ownership interest in an associate is reduced but significant influence is retained, only a proportionate share of the amounts previously
recognised in other comprehensive income are reclassified to profit or loss where appropriate.
2.3 Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief
operating decision-maker, who is responsible for allocating resources and assessing performance of the Group’s operating segments, has been
identified as the Executive Committee which makes the strategic decisions for the Group.
2.4 Foreign currencies
(a) Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment
in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in pounds sterling, which is the
Company’s functional and the Group’s presentation currency.
(b) Transactions and balances
Foreign currency transactions are translated into the functional currency of the respective Group entity, using the exchange rates prevailing at
the dates of the transactions (spot exchange rate). Foreign exchange gains and losses resulting from the settlement of such transactions and
from the remeasurement of monetary items at year-end exchange rates are recognised in profit or loss. Non-monetary items measured at
Anglo Pacific Group Plc Annual Report and Accounts 2012
Accounts
Notes to the consolidated financial statements
for the year ended December 31, 2012
45
historical cost are translated using the exchange rates at the date of the transaction (not retranslated). Non-monetary items measured at fair
value are translated using the exchange rates at the date when fair value was determined.
(c) Group companies
The results and financial position of all the Group entities that have a functional currency different from the presentation currency are translated
into the presentation currency as follows:
(a) assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;
(b) income and expenses for each income statement are translated at average exchange rates; and
(c) all resulting exchange differences are charged/credited to other comprehensive income and recognised in the currency translation reserve
in equity.
On consolidation, exchange differences arising from the translation of the net investment in foreign operations are taken to the currency
translation reserve in equity. When a foreign operation is partially disposed of or sold, exchange differences that were recorded in equity are
reclassified in the income statement as part of the gain or loss on sale.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and
translated at the closing rate.
2.5 Property, plant and equipment (excluding coal royalties)
Property, plant and equipment is stated at cost, less accumulated depreciation and accumulated impairment losses. The cost of property, plant
and equipment comprises its purchase price and any costs directly attributable to bringing the asset to the location and condition necessary
for it to be capable of operating in the manner intended by management. Once a mining project has been established as commercially viable,
expenditure other than that on land, buildings, plant and equipment is capitalised under ‘Producing assets’ together with any amount transferred
from ‘Exploration and evaluation costs’ (note 2.7(a)).
Property, plant and equipment is depreciated over its useful life, or over the remaining life of the mine if shorter. The major categories of
property, plant and equipment are depreciated on a units of production and/or straight line basis as follows:
Producing assets
Coal tenures
Fixtures and equipment
Units of production
Units of production
4 to 10 years
The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying
amount of the asset and is recognised in profit or loss.
2.6 Coal royalties
The Group owns a royalty entitlement to the output from the Kestrel and Crinum underground mines in Queensland, Australia, excluding
the output from Crown areas. As the Group owns the physical right to the minerals this entitlement is treated in the consolidated financial
statements as a tangible fixed asset under IAS 16 Property, Plant and Equipment and the Group has adopted the revaluation method accordingly.
The coal royalties are valued at fair value based on future discounted cash flows calculated on a quarterly basis by an independent external
consultant. Management consider the valuation on a quarterly basis for any indications of possible impairment considering factors such as
pricing and production forecasts.
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Any movement in the valuation of the royalties is recognised in the coal royalty revaluation reserve, excluding the effects of foreign currency
changes, which are recognised in the foreign currency translation reserve and net of deferred taxation in accordance with IAS 12 ‘Income taxes’.
2.7 Intangibles
(a) Exploration and evaluation costs
Exploration and evaluation expenditure comprises costs that are directly attributable to:
• researching and analysing exploration data;
• conducting geological studies, exploratory drilling and sampling;
• examining and testing extraction and treatment methods; and/or
• compiling prefeasibility and feasibility studies.
Exploration expenditure relates to the initial search for deposits with economic potential. Evaluation expenditure arises from a detailed
assessment of deposits or other projects that have been identified as having economic potential.
Expenditure on exploration and evaluation activities is capitalised when there is a high degree of confidence in the project’s viability and hence it
is probable that future economic benefits will flow to the Group.
The carrying values of capitalised amounts are reviewed twice per annum by management and the results of these reviews are reported to the
Audit Committee. In the case of undeveloped projects there may be only inferred resources to form a basis for the impairment review. The review
is based on a status report regarding the Group’s intentions for development of the undeveloped project.
Subsequent recovery of the resulting carrying value depends on successful development or sale of the undeveloped project. If a project does not
prove viable, all irrecoverable costs associated with the project net of any related impairment provisions are written off to the income statement.
For developments that are considered viable and move to commercial production, these are transferred to producing assets.
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Anglo Pacific Group Plc Annual Report and Accounts 2012
Accounts
Notes to the consolidated financial statements
for the year ended December 31, 2012
(b) Royalty interests
Royalty interests represent the net smelter 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, the Mt Ida magnetite iron ore project in Western Australia and three exploration licences, including the Railway iron ore deposit, in
the central Pilbara region of Western Australia.
The Group does not own the physical rights to the minerals contained within these deposits. The royalties receivable from the interests held are
derived from the rights attached to the underlying mineral resources. In line with IAS 38 ‘Intangible assets’ these royalties are recognised at cost.
The useful life of the royalty interests will be determined by reference to planned mine life on commencement of mining and the cost of the
royalty contract will be amortised on a systematic basis over the life of the mine. Amortisation rates are adjusted on a prospective basis for all
changes to estimates of the life of mine. Amortisation will stop when the royalty is classified as held for sale or derecognised.
2.8 Impairment of non-financial assets
Intangible assets are reviewed for impairment at least at each reporting date and the assessment includes variables such as the production
profiles, commodity prices and management representations. Property, plant and equipment is tested for impairment whenever events or
changes in circumstances indicate that the carrying amount may not be recoverable.
An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount, which is the higher of fair
value less costs to sell or value-in-use. To determine the value-in-use, management estimates expected future cash flows from each asset and
determines a suitable discount rate in order to calculate the present value of those cash flows. The data used for impairment testing procedures
are directly linked to the Group’s latest forecasts. Discount factors are determined individually for each asset and reflect their respective risk
profiles as assessed by management. Impairment losses for business combinations reduce the carrying amount of any goodwill allocated to
that business combination first. Any remaining impairment loss is charged to the investment in the subsidiary or associate. With the exception
of goodwill, all assets are subsequently reassessed for indications that an impairment loss previously recognised may no longer exist. An
impairment charge is reversed if the asset’s recoverable amount exceeds its carrying amount.
2.9 Financial instruments
Financial assets and financial liabilities are recognised on the Group’s balance sheet when the Group has become a party to the contractual
provisions of the instrument.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits, together with other short-term, highly liquid investments that are
readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. On initial
recognition loans and receivables are stated at their fair value. After initial recognition these are measured at amortised cost using the effective
interest method, less provision for impairment. Discounting is omitted where the effect of discounting is immaterial. The Group’s trade and most
other receivables fall into this category of financial instruments.
Individually significant receivables are considered for impairment when they are past due or when other objective evidence is received that a
specific counterparty will default. Receivables that are not considered to be individually impaired are reviewed for impairment in groups, which
are determined by reference to the industry and region of a counterparty and other available features of shared credit risk characteristics.
The percentage of the write down is then based on recent historical counterparty default rates for each identified group. Impairment of trade
receivables are presented within ‘other losses’.
Mining and exploration interests
Mining and exploration interests are recognised and derecognised on a trade date where a purchase or sale of an investment is under a contract
whose terms require delivery of the investment within the timeframe established by the market concerned, and are initially measured at fair
value, including transaction costs.
Mining and exploration interests are classified upon initial recognition as either available-for-sale or as assets at fair value through profit or loss,
depending on the characteristics of the particular instrument and its purpose.
Interests classified as available-for-sale are measured at subsequent reporting dates at their fair value. For available-for-sale investments, gains
and losses arising from changes in fair value are recognised directly in equity within the investment revaluation reserve, until the security is
disposed of or is determined to be impaired, at which time the cumulative gain or loss previously recognised in equity is included in the profit
or loss for the period. Unquoted investments are measured at cost where fair value cannot be reliably determined. When a market price can be
established these investments are revalued to fair value accordingly.
For those mining and exploration interests which contain a convertible embedded derivative, these derivatives are separated and recognised
at fair value through profit or loss with gains and losses arising from changes in fair value being recognised directly in the income statement.
The fair values of such instruments are assessed with reference to the relevant factors, which include, inter alia, equity prices in active markets,
commodity prices, production profiles and management representations. These assets are reviewed regularly to ensure that the initial
classification remains correct given the asset characteristics and the Group’s investment policies. These assets may be initially recognised using
47
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Anglo Pacific Group Plc Annual Report and Accounts 2012
Accounts
Notes to the consolidated financial statements
for the year ended December 31, 2012
transaction price as the best evidence of fair value at acquisition (see note 18). Options can be carried at cost if they are linked to unquoted
equities where fair value cannot be reliably measured.
All mining and exploration interests held as available for sale are assessed for impairment at least at each reporting date and the assessment
includes variables such as the instrument’s valuation in active markets, the company’s underlying assets as well as any potential for economic
mineral development within the relevant company’s licences. The Company has determined that impairment exists when the outcome of this
assessment indicates a significant or prolonged fall in value of the interest.
Royalty instruments
Royalty instruments are recognised or derecognised on completion date where a purchase or sale of the royalty is under a contract, and are
initially measured at fair value, including transaction costs.
Royalty instruments are classified upon initial recognition as available-for-sale or as assets at fair value through profit or loss, depending on the
characteristics of the particular instrument and its purpose. Some royalty contracts include clauses relating to the possibility of conversion to
equity in the company granting the royalty. These clauses are treated as embedded derivatives and are classified as fair value through profit or
loss.
Royalty instruments classified as available-for-sale are measured at subsequent reporting dates at their fair value. For royalties classified in this
manner gains and losses arising from changes in fair value are recognised directly in equity within the investment revaluation reserve, until the
royalty is disposed of or is determined to be impaired, at which time the cumulative gain or loss previously recognised in equity is reclassified in
the profit or loss for the period.
For royalty instruments which contain an embedded derivative, these derivatives are separated and measured as assets at fair value through
profit or loss, gains and losses arising from changes in fair value are recognised directly in the income statement. The fair values of such
instruments are assessed with reference to the relevant factors, which include, inter alia, equity prices in active markets, production profiles,
commodity prices and management representations. These assets are reviewed regularly to ensure that the initial classification remains correct
given the asset characteristics and the Group’s investment policies. These assets may be initially recognised using transaction price as the best
evidence of fair value at acquisition; however, embedded derivatives are valued at acquisition and are recognised separately from the host
royalty instrument (see note 16).
All royalty instruments, except those held at fair value through profit and loss, are assessed for impairment at least at each reporting date and
the assessment includes variables such as the instrument’s valuation in active markets, production profiles, commodity prices or management
representations.
Financial liabilities and equity
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity
instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities.
Trade payables
Trade payables are not interest bearing and are stated at their fair value on initial recognition. After initial recognition these are measured at
amortised cost using the effective interest method.
Equity instruments
Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.
2.10 Current and deferred income tax
The tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement
because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable
or deductible. The Group’s liability for current tax is calculated by using tax rates and laws that have been enacted or substantively enacted by
the balance sheet date.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amount of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability
method. Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is
probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not
recognised if the temporary differences arise from initial recognition of goodwill on business combinations.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and interests in
joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference
will not reverse in the foreseeable future.
Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled. Deferred
tax is charged or credited in the income statement, except when it relates to items credited or charged directly to equity, in which case the
deferred tax is also dealt with in equity.
2.11 Share based payments
The Group operates a number of equity-settled, share based compensation plans, under which the entity receives services from employees as
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Accounts
Notes to the consolidated financial statements
for the year ended December 31, 2012
consideration for equity instruments (options and jointly-owned shares) of the Company. The fair value of the employee services received in
exchange for the grant of the options is recognised as an expense. The total amount to be expensed is determined by reference to the fair value
of the options granted:
• including any market performance conditions;
• excluding the impact of any service and non-market performance vesting conditions; and
• including the impact of any non-vesting conditions.
Non-market vesting conditions are included in assumptions about the number of options and jointly-owned shares that are expected to vest.
The total expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied.
At the end of each reporting period, the entity revises its estimates of the number of options and jointly-owned shares that are expected to vest
based on the non-market vesting conditions. It recognises the impact of the revision to original estimates, if any, in the income statement, with a
corresponding adjustment to equity.
When options are exercised, the Company issues new shares. The proceeds received net of any directly attributable transaction costs are credited
to share capital and share premium when the options are exercised.
The grant by the company of options over its equity instruments to employees of subsidiary undertakings in the Group is treated as a capital
contribution. The fair value of employee services received, measured by reference to the grant date fair value, is recognised over the vesting
period as an increase to investment in subsidiary undertakings, with a corresponding credit to equity.
2.12 Reserves
Equity comprises the following:
• “Share capital” represents the nominal value of equity shares.
• “Share premium” represents the excess over nominal value of the fair value of consideration received for equity shares, net of expenses of the
share issue.
• “Coal royalty revaluation reserve” represents revaluation of the coal royalty from the opening carrying value, excluding the effects of deferred
tax and foreign currency changes.
• “Investment revaluation reserve” represents gains and losses due to the revaluation of the investments in mining and exploration interests and
other royalties from the opening carrying values, including the effects of deferred tax and foreign currency changes.
• “Share based payment reserve” represents equity-settled share based employee remuneration until such share options are exercised.
• “Foreign currency reserve” represents the differences arising from translation of investments in overseas subsidiaries.
• “Special reserve” represents the level of profit attributable to the Group for the period ended June 30, 2002 which was created as part of a
capital reduction performed in 2002.
• “Investment in own shares” represents the shares held by the Anglo Pacific Group Employee Benefit Trust for awards made under the Joint
Share Ownership Plan (note 25).
• “Retained earnings” represents retained profits.
2.13 Revenue recognition
The revenue of the Group comprises royalty income and amounts receivable from external customers for services excluding value added tax and
other sales related taxes. It is measured at the fair value of the consideration received or receivable. The royalty income becomes receivable on
extraction and sale of the relevant minerals, at which point the revenue is recognised.
Disposals of mining and exploration interests are disclosed net of any commissions and foreign exchange.
Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate
that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset’s net carrying amount.
Dividend income from investments is recognised when the shareholders’ rights to receive payment have been established.
2.14 Leases
Rentals payable under operating leases where substantially all of the benefits and risks of ownership are not transferred to the lessee are charged
against profits on a straight line basis over the term of the lease.
2.15 Dividend distribution
Dividend distribution to the Company’s shareholders is recognised as a liability in the Group’s financial statements in the period in which the
dividends are approved by the Company’s shareholders.
3 Financial risk management
The Group’s principal treasury objective is to provide sufficient liquidity to meet operational cash flow and dividend requirements and to allow
the Group to take advantage of new growth opportunities whilst maximising shareholder value. The Group’s activities expose it to a variety of
financial risks including liquidity risk, credit risk, foreign exchange risk, interest rate risk and price risk. The Group operates controlled treasury
policies which are monitored by management to ensure that the needs of the Group are met while minimising potential adverse effects of
unpredictability of financial markets on the Group’s financial performance.
Anglo Pacific Group Plc Annual Report and Accounts 2012
Accounts
Notes to the consolidated financial statements
for the year ended December 31, 2012
49
Liquidity and funding risk
The objective of the Company in managing funding risk is to ensure that it can meet its financial obligations as and when they fall due. At the
year end there was no debt outstanding and the Company, with its strong balance sheet, had good access to capital markets, if required.
Credit risk
The Group’s principal financial assets are bank balances, royalty instruments held as financial assets, trade and other receivables and
investments. These represent the Group’s maximum exposure to credit risk in relation to financial assets.
The Group’s credit risk is primarily attributable to its other receivables, including royalty receivables. It is the policy of the Group to present the
amounts in the balance sheet net of allowances for doubtful receivables, estimated by the Group’s management based on prior experience and
the current economic environment. Where possible the Group has registered its interests against the relevant mining titles for the royalties it has
acquired. In addition, the Group is generally entitled to full reconciliations of amounts paid and retains the right to audit the royalty returns and
verify the calculations.
The Group's credit risk on royalty instruments held as financial instruments, has been reviewed and the estimated current exposure is as
disclosed in note 16 where the future contractual right to cash flow from these instruments is reflected in their fair value.
The credit risk on bank deposits is limited because the counterparties have high credit-ratings assigned by international credit-rating agencies.
The Group has no significant concentration of credit risk, with exposure spread over a large number of currencies and counterparties.
In 2007, the Group created a derivative financial instrument to provide finance to an unlisted mining development company, which has
subsequently listed (note 18). This instrument is convertible into equity in the company or royalties over the company’s properties at the Group’s
option for a period of up to five years. In the event of default the instrument becomes repayable and the Group would rank equally with the
company’s other unsecured creditors. The Group undertakes detailed analysis of factors which mitigate the risk of default to the Group on a
regular basis.
Foreign exchange risk
The Group’s transactional foreign exchange exposure arises from income, expenditure and purchase and sale of assets denominated in foreign
currencies. As each material commitment is made, the risk in relation to currency fluctuations is assessed by the Executive Committee and
regularly reviewed. The Group does not consider it necessary to have a hedging programme in place at this time.
Foreign currency denominated financial assets and liabilities, translated into Pound Sterling at the closing rate, are as follows:
2012
2011
GBP
AUD
CAD
USD
NOK
EUR
GBP
AUD
CAD
USD
NOK
EUR
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
Financial assets
Financial liabilities
Short term exposure
1
–
1
20,385
21,996
4,180
16,371
–
–
–
–
20,385
21,996
4,180
16,371
6
–
6
1
–
1
37,928
30,514
3,117
3,191
–
–
–
–
37,928
30,514
3,117
3,191
6
–
6
A
c
c
o
u
n
t
s
The following table illustrates the sensitivity of the net result for the year and equity in regards to the Group’s financial assets and financial
liabilities and the Australian Dollar / Pound Sterling and the Canadian Dollar / Pound Sterling exchange rate.
It assumes a +/- 10% change of the Pound Sterling / Australian Dollar exchange rate for the year ended December 31, 2012 (2011: 10%). A +/-
10% is considered for the Pound Sterling / Canadian Dollar exchange rate (2011: 10%). The sensitivity analysis is based on the Group’s foreign
currency financial instruments held at balance sheet date.
If the Pound Sterling had weakened against the Australian Dollar and the Canadian Dollar by 10% this would have had the following impact:
2012
2011
GBP
AUD
CAD
USD
NOK
EUR
GBP
AUD
CAD
USD
NOK
EUR
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
Net result for the year
Equity
–
–
720
47
2,039
2,200
20
418
(1)
1,637
–
1
–
–
765
3,793
1,267
3,051
–
312
–
319
–
1
If the Pound Sterling had strengthened against the Australian Dollar and the Canadian Dollar by 10% this would have had the following impact:
2012
2011
GBP
AUD
CAD
USD
NOK
EUR
GBP
AUD
CAD
USD
NOK
EUR
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
Net result for the year
Equity
–
–
(720)
(47)
(20)
1
(2,039)
(2,200)
(418)
(1,637)
–
(1)
–
–
(765)
(1,267)
–
–
(3,793)
(3,051)
(312)
(319)
–
(1)
50
Anglo Pacific Group Plc Annual Report and Accounts 2012
Accounts
Notes to the consolidated financial statements
for the year ended December 31, 2012
Exposures to foreign exchange rates vary during the year depending on the volume of overseas transactions. Nonetheless, the analysis above is
considered to be representative of the Group’s exposure to currency risk.
Interest rate risk
The Group is exposed to interest rate risk in respect of the cash balances held with banks and other highly rated counterparties. If the interest
rates the Group received had increased by one percent during the year, the net result for the year would have been increased by £537,000 (2011:
£268,000). If the interest rates the Group received had decreased by one percent during the year, the net result for the year would have been
reduced by £387,000 (2011: £268,000). There would have been no impact on equity.
2012
Assets
Cash
Trade receivables
Other receivables (note 20)
Total Financial Assets
Financial Liabilities
Trade payables
Other payables
Total Financial Liabilities
Net Financial Assets
2011
Assets
Cash
Trade receivables
Other receivables
Total Financial Assets
Financial Liabilities
Trade payables
Other payables
Total Financial Liabilities
Net Financial Assets
Weighted
average effective
interest rate
Fixed
interest rate
£’000
Non interest
bearing
£’000
0.72%
7.0%
21,463
–
3,141
24,604
–
–
–
24,604
2,573
–
1,219
3,792
106
1,724
1,830
1,962
Weighted
average effective
interest rate
Fixed
interest rate
£’000
Non interest
bearing
£’000
2.00%
22,463
–
–
22,463
–
–
–
22,463
9,734
–
10,111
19,845
100
6,427
6,527
13,318
Total
£’000
24,036
–
4,360
28,396
106
1,724
1,830
26,566
Total
£’000
32,197
–
10,111
42,308
100
6,427
6,527
35,781
Other price risk
The Group is exposed to other price risk in respect of its mining and exploration interests which include listed and unlisted equity securities and
any convertible instruments.
A sensitivity analysis based on a 30% increase or decrease in listed equity prices has been performed (2011: 26%). If the quoted stock price for
these securities had increased or decreased by this percentage the net result for the year would have been increased / reduced by £5.8 million
(2011: £13.4 million). Equity would have changed by £15.4 million (2011: £16.2 million).
The royalty portfolio exposes the Group to other price risk through fluctuations in commodity prices, particularly the prices of iron ore, gold and
uranium. As the Directors obtain independent commodity price forecasts, the generation of which takes into account fluctuations in prices, no
detailed analysis of the impact of fluctuations on the valuations of the royalties has been undertaken.
The Group is exposed to other price risk through its convertible instruments (note 18(b)) that can be converted into equity or royalties.
The underlying value of the equity may change resulting in an increase or decrease in the value of the instrument. As the equity is currently
unlisted it is not possible to quantify this risk at this stage.
Anglo Pacific Group Plc Annual Report and Accounts 2012
Accounts
Notes to the consolidated financial statements
for the year ended December 31, 2012
51
The Group’s mining and exploration interests are held for the purposes of generating additional royalties and are considered long-term, strategic
investments. This strategy is unaffected by recent fluctuations in prices for mining and exploration equities; however, interests are continually
monitored for indicators that may suggest problems for these companies raising capital or continuing their day-to-day business activities to
ensure remedial action can be taken if necessary.
No specific hedging activities are undertaken in relation to these interests and the voting rights arising from these equity instruments are utilised
in the Group’s favour.
Capital management and procedures
The Group’s capital management objectives are:
• to ensure the Group’s ability to continue as a going concern;
• to increase the value of the assets of the Group; and
• to enhance shareholder value in the Company and returns to shareholders.
The achievement of these objectives is undertaken by developing existing assets and identifying new royalty opportunities. The Group will also
undertake other transactions where these are deemed financially beneficial to the Group.
The Directors continue to monitor the capital requirements of the Group by reference to expected future cash flows. Capital for the reporting
periods under review is summarised in the consolidated statement of changes in equity. The Group does not presently need or have any long
term funding requirements.
Financial Assets
The Group and Company held the following investments in financial assets:
2012
2011
Available–for–sale
Royalty instruments
Mining and exploration interests
Fair value through profit or loss
Royalty instruments
Mining and exploration interests
Trade and other receivables
Cash and cash equivalents
Group
£’000
24,032
55,545
–
248
4,360
24,036
Company
£’000
24,032
36,753
–
248
13,581
41,157
Group
£’000
24,736
64,303
–
248
10,111
32,197
Company
£’000
24,736
56,121
–
248
9,038
43,672
A
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c
o
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n
t
s
Cash and cash equivalents comprise cash and short-term deposits held by the Group treasury function. The carrying amount of these assets is
approximately their fair value.
Fair value hierarchy
The following table presents financial assets and liabilities measured at fair value in the balance sheet in accordance with the fair value hierarchy.
This hierarchy groups financial assets and liabilities into three levels based on the significance of inputs used in measuring the fair value of the
financial assets and liabilities. The fair value hierarchy has the following levels:
• Level 1: quoted prices (unadjusted) in active markets for identical assets and liabilities;
• Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or
indirectly (i.e. derived from prices); and
• Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
The level within which the financial asset or liability is classified is determined based on the lowest level of significant input to the fair value
measurement.
The following tables present the Group’s assets and liabilities that are measured at fair value at December 31, 2012 and December 31, 2011:
52
Anglo Pacific Group Plc Annual Report and Accounts 2012
Accounts
Notes to the consolidated financial statements
for the year ended December 31, 2012
Group
Assets
Royalty instruments
Mining and exploration interests – quoted
Mining and exploration interests – unquoted
Mining and exploration interests – royalty options
Total
Net fair value
Group
Assets
Royalty instruments
Mining and exploration interests – quoted
Mining and exploration interests – unquoted
Mining and exploration interests – royalty options
Total
Net fair value
Note
(a)
(b)
(c)
(d)
Note
(a)
(b)
(c)
(d)
Level 1
£’000
–
51,547
–
–
51,547
51,547
Level 1
£’000
–
62,389
–
–
62,389
62,389
2012
Level 2
£’000
–
–
3,518
728
4,246
4,246
2011
Level 2
£’000
–
–
1,434
728
2,162
2,162
Level 3
£’000
24,032
–
–
–
24,032
24,032
Level 3
£’000
24,736
–
–
–
24,736
24,736
Total
£’000
24,032
51,547
3,518
728
79,825
79,825
Total
£’000
24,736
62,389
1,434
728
89,287
89,287
The following tables present the Company’s assets and liabilities that are measured at fair value at December 31, 2012 and December 31, 2011:
Company
Assets
Royalty instruments
Mining and exploration interests – quoted
Mining and exploration interests – unquoted
Mining and exploration interests – royalty options
Total
Net fair value
Company
Assets
Royalty instruments
Mining and exploration interests – quoted
Mining and exploration interests – unquoted
Mining and exploration interests – royalty options
Total
Net fair value
Note
(a)
(b)
(c)
(d)
Note
(a)
(b)
(c)
(d)
Level 1
£’000
–
35,102
–
–
35,102
35,102
Level 1
£’000
–
54,656
–
–
54,656
54,656
2012
Level 2
£’000
–
–
1,171
728
1,899
1,899
2011
Level 2
£’000
–
–
985
728
1,713
1,713
Level 3
£’000
24,032
–
–
–
24,032
24,032
Level 3
£’000
24,736
–
–
–
24,736
24,736
Total
£’000
24,032
35,102
1,171
728
61,033
61,033
Total
£’000
24,736
54,656
985
728
81,105
81,105
There have been no significant transfers between levels 1 and 2 in the reporting period.
The methods and valuation techniques used for the purposes of measuring fair value are unchanged compared to the previous reporting period.
(a) Royalty instruments
The Group’s royalty streams arising from its four royalty instruments have been classified as available for sale, with value on initial recognition
being calculated as the total cost of the agreement less the valuation of the option to convert to shares. At the reporting date the royalty streams
have been valued on the net present value of the pre-tax cash flows discounted at a rate management considers reflects the risk associated with
each of the projects. Note 16 details the discount rates used.
53
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Anglo Pacific Group Plc Annual Report and Accounts 2012
Accounts
Notes to the consolidated financial statements
for the year ended December 31, 2012
The option to convert to shares has been treated as fair value through profit or loss as designated on initial recognition at the date of acquisition
and has been valued at December 31, 2012 utilising an option model. The key assumptions, in addition to those utilised in the royalty stream
valuations such as mine life and expected cash flows, include the price, volatility of the projects listed equity and where applicable the
conversion price and redemption value of redeemable shares.
(b) Mining and exploration interests – quoted
All the quoted mining and exploration interests have been issued by publicly traded companies in Australia, Canada, the United Kingdom and
Norway. Fair values for these securities have been determined by reference to their quoted bid prices at the reporting date.
(c) Mining and exploration interests – unquoted
All the unquoted mining and exploration interests are initially recognised using cost where fair value cannot be reliably determined.
(d) Mining and exploration interests – royalty options
All the royalty options are initially recognised using cost where fair value cannot be reliably determined. The Group considers the progress of the
projects related to each of the royalty options to ensure there has been no material change in the fair value since initial recognition.
Fair value measurements in Level 3
The Group’s financial assets classified in Level 3 uses valuation techniques based on significant inputs that are not based on observable market
data.
The following table presents the changes in Level 3 instruments for the year ended December 31, 2012.
At January 1, 2012
Revaluation gains or losses recognised in:
Other comprehensive income
Receipts from royalty instruments
At December 31, 2012
Available-for-
sale financial
assets
Net smelter
return royalty
£’000
24,736
1,185
(1,889)
24,032
The following table presents the changes in Level 3 instruments for the year ended December 31, 2011.
At January 1, 2011
Revaluation gains or losses recognised in:
Other comprehensive income
Royalty instrument provision
Receipts from royalty instruments
At December 31, 2011
Available-for-
sale financial
assets
Net smelter
return royalty
£’000
28,061
(1,377)
(1,563)
(385)
24,736
Financial assets
at fair value
through profit
and loss
Optionality to
convert debenture
£’000
–
–
–
–
Financial assets
at fair value
through profit
and loss
Optionality to
convert debenture
£’000
–
–
–
–
Total
£’000
24,736
1,185
(1,889)
24,032
Total
£’000
28,061
(1,377)
(1,563)
(385)
24,736
There have been no transfers into or out of Level 3 in either year.
The Group measures its entitlement to the royalty streams and any optionality embedded within the royalty instruments using discounted cash
flow models. In determining the discount rate to be applied, management consider the country and sovereign risk associated with the projects,
together with the time horizon to the commencement of production and the success or failure of projects of a similar nature.
Management have not undertaken detailed analysis of the impact of using alternative discount rates on the fair value of the royalty streams or
the optionality embedded in the royalty instruments, as the rates used reflect the risks inherent in the four projects and the use of alternative
rates would be unjustified.
54
Anglo Pacific Group Plc Annual Report and Accounts 2012
Accounts
Notes to the consolidated financial statements
for the year ended December 31, 2012
4 Critical accounting estimates and judgements
Estimates and judgements are regularly evaluated and are based on historical experience and other factors, including expectations of future
events that are believed to be reasonable under the circumstances.
4.1 Critical accounting estimates and assumptions
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates and assumptions will, by definition,
seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next financial year are addressed below:
(a) Review of asset carrying values and impairment charges and reversals – note 2.6, note 2.7, note 2.8, note 15, note 16, note 17 and note 18.
(b) Recoverability of deferred tax assets – note 2.10 and note 22.
4.2 Critical judgements in applying the Group’s accounting policies
Areas of judgement that have the most significant effect on the amounts recognised in the financial statements are:
(a) Classification of mining and exploration interests – note 2.9 and note 18.
(b) Classification of royalty instruments and royalty interests.
The Directors review each royalty acquired to determine whether there is a contractual right to receive cash which would meet the
definition of a financial asset, or if the royalty receivable for the interest acquired is derived from the rights attached to the underlying
asset/mineral resource. In the latter case these are treated as an intangible asset – note 2.7(b) and note 17.
Where a royalty agreement contains a convertible option within it, the contracts are reviewed to determine whether the assets should be
classified as a derivative at fair value through profit or loss or can be classified as an available for sale financial asset with an embedded
derivative – note 2.9 and note 16.
(c) Review of assumptions underlying the independent coal industry advisors’ valuation of the Kestrel and Crinum coal royalty – note 15.
(d) Review of assumptions underlying the valuation of royalty instruments and their associated embedded derivatives – note 17.
The Directors review the latest available mine plans and obtain independent foreign exchange and commodity price forecasts to
determine each of the royalty instruments carrying value at reporting date.
(e) Review of asset carrying values and impairment charges and reversals – note 2.6, note 2.7, note 2.8, note 15, note 16, note 17 and note 18.
(f) Recognition of deferred tax liabilities and the continued application of relevant exemptions – note 2.10, note 11 and note 22.
(g) Treatment of unrealised losses on mining and exploration interests – note 18.
The Directors review the fair value of all quoted mining and exploration interests in light of market conditions and assess unrealised losses for
indications or impairment. As at December 31, 2012 the Group’s unrealised losses totalled £39.5 million. In light of events occurring after year
end, the Directors considered £3.7 million of the unrealised losses to be impaired and recognised these losses through “other losses” in the
income statement (note 30). The Directors do not consider the remaining losses to be impaired and therefore, the movement in fair value has
been recognised directly in equity, resulting in a negative investment revaluation reserve of £35.8 million.
5 Segment information
Management has determined the operating segments based on the reports reviewed by the Executive Committee that are used to make strategic
decisions.
The Committee considers the Group’s undertakings from a business perspective. This has resulted in the Group being organised into two
operating segments – royalties and mining and exploration interests.
The royalties segment encompasses all Group activities relating directly to the royalties received from mining operations. The mining and
exploration interests segment encompasses all Group activities relating directly to the acquisition, disposal and continued monitoring of the
Group’s investments in listed and unlisted entities operating in mining and mineral exploration. The segment information provided to the
Executive Committee for the reportable segments for the year ended December 31, 2012 is as follows:
55
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Anglo Pacific Group Plc Annual Report and Accounts 2012
Accounts
Notes to the consolidated financial statements
for the year ended December 31, 2012
Australia
Americas
Europe
Royalty income
Finance income
Gain on sale of mining and exploration
interests
Other income
Total segment income
Profit before tax
Amortisation
Income tax expense
Total assets
Total assets include:
Additions to non-current assets
(other than financial instruments
and deferred tax assets)
Total liabilities
Royalty
£’000
11,038
–
–
–
11,038
11,038
–
(1,686)
191,410
Mining
interests
£’000
–
–
7,021
678
7,699
7,699
–
–
24,550
Royalty
£’000
2,229
–
–
–
2,229
2,017
(1,018)
(310)
33,241
Mining
interests
£’000
Royalty
£’000
Mining
interests
£’000
All other
segments
£’000
–
–
337
–
337
337
–
(28)
–
–
–
–
–
–
–
–
–
–
(11)
1,047
1,036
–
–
10,804
35,993
20,641
–
676
-
21
–
(2,139)
36,829
Total
£’000
13,267
676
7,347
1,746
14,220
(1,018)
(4,163)
353,468
697
23,036
(2,975)
(3,896)
3,720
50,395
–
–
–
–
–
–
–
2,745
–
–
–
(636)
3,720
52,504
The segment information for the year ended December 31, 2011 is as follows:
Australia
Americas
Europe
Royalty income (restated)
Finance income
Gain on sale of mining and exploration
interests
Other income
Total segment income
Profit before tax (restated)
Amortisation
Impairment of royalty intangibles
Income tax expense
Total assets (restated)
Total assets include:
Additions to non-current assets
(other than financial instruments
and deferred tax assets)
Total liabilities (restated)
Royalty
£’000
Mining
interests
£’000
All other
segments
£’000
Royalty
£’000
31,985
–
–
–
31,985
31,985
–
–
(8,533)
191,705
Mining
interests
£’000
–
–
6,714
615
7,329
7,329
–
–
-
35,672
Royalty
£’000
2,694
–
–
–
2,694
(1,684)
(1,018)
(1,088)
(384)
31,049
Mining
interests
£’000
–
–
12,663
–
12,663
12,621
–
–
115
–
–
–
–
–
–
–
–
–
–
–
926
–
926
926
–
–
–
19,877
36,708
9,076
Total
£’000
34,679
1,507
20,303
634
57,123
48,451
(1,018)
(1,088)
(12,171)
371,039
29,105
64,867
–
1,507
–
19
1,526
(2,726)
–
–
(3,369)
46,952
-
9,303
-
52,912
–
–
10,714
–
–
–
18,391
2,652
–
–
The amounts provided to the Executive Committee with respect to total assets are measured in a manner consistent with that of the financial
statements. These assets are allocated based on the operations of the segment and the physical location of the asset.
Investments in mining and exploration interests (classified as available-for-sale financial assets or financial assets at fair value through profit or loss)
held by the Group are classified by geographic segment by reference to the country of the investee’s primary listing for quoted investments or the
country of operations for unquoted investments.
The amounts provided to the Executive Committee with respect to total liabilities are measured in a manner consistent with that of the financial
statements. These liabilities are allocated based on the operations of the segment.
The royalty income in Australia of £11,038,000 (2011: £31,985,000) is derived from a single coal royalty.
56
Anglo Pacific Group Plc Annual Report and Accounts 2012
Accounts
Notes to the consolidated financial statements
for the year ended December 31, 2012
6 Finance income
Group
Interest on bank deposits
Interest on royalty instruments
Interest on long term receivables
7a Expense by nature
Group
Employee benefit expense (note 8a)
Listing fees
Operating lease payments
Other expenses
7b Auditors’ remuneration
Group
Fees payable to Company’s auditor for the audit of parent company and consolidated financial statements
Fees payable to the Company's auditor and its associates for other services:
– The audit of the Company's subsidiaries pursuant to legislation
– Other services pursuant to legislations
– Tax and other services
8a Employee benefits expense
Wages and salaries
Share-based awards to directors and employees
Social security costs
Other pension costs
2012
£’000
387
202
87
676
2012
£’000
1,783
178
164
1,508
3,633
2012
£’000
73
6
18
–
97
2011
£’000
536
971
–
1,507
2011
£’000
2,008
243
168
974
3,393
2011
£’000
48
22
13
8
91
Group
Company
2012
£’000
1,404
183
155
41
2011
£’000
1,639
130
181
58
2012
£’000
1,312
183
153
41
2011
£’000
1,495
130
176
58
1,783
2,008
1,689
1,859
8b Retirement benefits plans
The Group operates a money purchase group personal pension scheme. Under this scheme the Group makes contributions to personal pension
plans of individual directors and employees. The pension cost charge represents contributions payable by the Group to these plans in respect of
the year.
The total cost charged to income of £41,000 (2011: £58,000) represents contributions payable to these schemes by the Group at rates specified
in the rules of the schemes. As at December 31, 2012, contributions of £5,000 (2011: £12,000) due in respect of the current reporting period had
not been paid over to the schemes.
Anglo Pacific Group Plc Annual Report and Accounts 2012
Accounts
Notes to the consolidated financial statements
for the year ended December 31, 2012
8c Average number of people employed
Group
Number of employees
Group
Average number of people (including executive directors) employed:
Executive directors
Administration
Company
The average number of administration staff employed by the Company during the year, including executive directors was 10 (2011: 10).
Directors’ salaries are shown in the Directors’ Remuneration Report on
pages 28 to 31, including the highest paid director.
9 Other income
Group
Dividends received from mining and exploration interests
Fixed income from mining and exploration interests
Other income
10 Other (losses)/gains – net
Group
Net foreign exchange loss
Provision for non-recovery of interest receivable (note 20)
Recovery/(Loss) on permanent write down of royalty instrument (note 16)
Loss on impairment of royalty intangible (note 17)
Loss on impairment of mining and exploration interests (note 18)
11 Income tax expense
Group
Current tax expense
Deferred tax charged to income – current year (note 22)
Total income tax expense
2012
£’000
678
1,047
21
1,746
2012
£’000
(958)
–
806
–
(4,013)
(4,165)
2012
£’000
5,917
(1,754)
4,163
2012
2011
11
4
7
11
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11
5
6
11
2011
£’000
615
–
19
634
2011
£’000
(859)
(709)
(1,563)
(1,088)
(42)
(4,261)
Restated
2011
£’000
11,850
321
12,171
58
Anglo Pacific Group Plc Annual Report and Accounts 2012
Accounts
Notes to the consolidated financial statements
for the year ended December 31, 2012
Group
Factors affecting the tax charge for the year:
Profit on activities before tax
Prima facie tax payable at UK rate of 24.5% (2011: 26.5%) and Australian rate of 30% (2011: 30%)
Adjustment for tax exempt income
Utilisation of losses brought forward
Non-deductible expenses
Reassessment of 2010 income tax return
Foreign controlled profits
Total income tax expense
Refer to note 22 for information regarding the Group’s deferred tax assets and liabilities.
2012
£’000
14,220
3,215
(713)
78
55
1,060
468
4,163
Restated
2011
£’000
48,451
19,117
(7,460)
54
460
-
-
12,171
12 Earnings per share
Earnings per ordinary share is calculated on the Group’s profit after tax of £10,057,000 (2011: £36,280,000 (restated)) and the weighted average
number of shares in issue during the year of 108,540,723 (2011: 108,263,282).
The diluted earnings per ordinary share is calculated on the Group’s profit after tax of £10,057,000 (2011: £36,280,000 (restated)) and
108,544,883 shares (2011: 108,274,402). The dilutive effect is due to options outstanding under the Company Share Option Plan at the year end.
Net profit attributable to shareholders
Earnings – basic
Earnings – diluted
Weighted average number of shares in issue
Ordinary shares in issue
Employee Share Option Scheme
2012
£’000
10,057
10,057
2012
Restated
2011
£’000
36,280
36,280
2011
108,540,723
108,263,282
4,160
11,120
108,544,883
108,274,402
13 Dividends
On January 11, 2012 an interim dividend of 4.25 pence per share was paid to shareholders in respect of the year ended December 31, 2011. On July 4,
2012 a final dividend of 5.50 pence per share was paid to shareholders to make a total dividend for the year of 9.75 pence per share. Total dividends
paid during the year were £10.58 million (2011: £8.98 million).
On February 5, 2013 an interim dividend of 4.45 pence per share was paid to shareholders in respect of the year ended December 31, 2012. This
dividend has not been included as a liability in these financial statements. The Directors propose that a final dividend of 5.75 pence per share be paid
to shareholders on August 7, 2013, to make a total dividend for the year of 10.20 pence per share. This dividend is subject to approval by shareholders
at the Annual General Meeting and has not been included as a liability in these financial statements.
The proposed final dividend for 2012 is payable to all shareholders on the Register of Members on June 7, 2013. The total estimated dividend to be
paid is £6.2 million. This will be reduced to the extent that shareholders elect to receive scrip instead of cash under any scrip dividend alternative.
The Board will consider whether shareholders will be given the opportunity to elect to receive a scrip dividend instead of cash depending on the
share price at the time.
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Anglo Pacific Group Plc Annual Report and Accounts 2012
Accounts
Notes to the consolidated financial statements
for the year ended December 31, 2012
14 Property, plant and equipment
Group
Gross carrying amount
At January 1, 2012
Foreign currency translation
At December 31, 2012
Depreciation and impairment
At January 1, 2012
Depreciation
At December 31, 2012
Carrying amount December 31, 2012
Group
Gross carrying amount
At January 1, 2011
Additions
At December 31, 2011
Depreciation and impairment
At January 1, 2011
Depreciation
At December 31, 2011
Carrying amount December 31, 2011
Producing
assets
£’000
Coal
tenures
£’000
Equipment
and
fixtures
£’000
821
–
821
(2)
–
(2)
819
1,277
(26)
1,251
–
–
–
1,251
175
–
175
(119)
(21)
(140)
35
Producing
assets
£’000
Coal
tenures
£’000
Equipment
and
fixtures
£’000
821
–
821
(2)
–
(2)
819
1,262
15
1,277
–
–
–
1,277
161
14
175
(98)
(21)
(119)
56
Total
£’000
2,273
(26)
2,247
(121)
(21)
(142)
2,105
Total
£’000
2,244
29
2,273
(100)
(21)
(121)
2,152
Coal tenures relate to the Trefi and Panorama coal projects in British Columbia, Canada. As both projects are not yet in production there was no
depreciation during the period.
Company
Gross carrying amount
At January 1, 2012
At December 31, 2012
Depreciation and impairment
At January 1, 2012
Depreciation
At December 31, 2012
Carrying amount December 31, 2012
Producing
assets
£’000
Coal
tenures
£’000
Equipment
and
fixtures
£’000
821
821
(2)
–
(2)
819
–
–
–
–
–
–
175
175
(119)
(21)
(140)
35
Total
£’000
996
996
(121)
(21)
(142)
854
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Anglo Pacific Group Plc Annual Report and Accounts 2012
Accounts
Notes to the consolidated financial statements
for the year ended December 31, 2012
Company
Gross carrying amount
At January 1, 2011
Additions
At December 31, 2011
Depreciation and impairment
At January 1, 2011
Depreciation
At December 31, 2011
Carrying amount December 31, 2011
Producing
assets
£’000
Coal
tenures
£’000
Equipment
and
fixtures
£’000
821
–
821
(2)
–
(2)
819
–
–
–
–
–
–
–
161
14
175
(98)
(21)
(119)
56
Total
£’000
982
14
996
(100)
(21)
(121)
875
The Group’s property plant and equipment are carried at cost less depreciation with the exception of leases relating to the talc deposit on
Shetland, Scotland held by the parent company. The producing asset on Shetland is included at a directors’ valuation of £0.8 million (2011: £0.8
million) plus additions which are carried at cost. An external valuation was carried out on March 26, 2001. At the date of transition to IFRS, the
Group elected to use this valuation as deemed cost at that date.
15 Coal royalties
At January 1, 2010 (as previously reported - note 2.1.3)
Foreign currency translation
Revaluation adjustment
At December 31, 2010 (restated - note 2.1.3)
Foreign currency translation
Revaluation adjustment
At December 31, 2011 (restated - note 2.1.3)
Foreign currency translation
Revaluation adjustment
At December 31, 2012
Group
£’000
149,896
26,879
(7,471)
169,304
802
(4,139)
165,967
(4,311)
9,339
170,995
Company
£’000
–
–
–
–
–
–
–
–
–
–
The Group’s coal royalty entitlements comprise the Kestrel and Crinum coal royalties.
During the second quarter of 2012 the Group was informed by Rio Tinto that an audit by the Queensland Office of State Revenue had identified
a misallocation of royalty revenue relating to areas reserved by the State of Queensland for roads. This resulted in an overpayment of royalties
to the Group of £4.6million (A$7.1million) for the period September 2006 to December 2011, together with an associated interest charge of
£1.4million (A$2.2million). The misallocation of royalty revenues and associated interest charge has been reflected in the restated balance sheet
at December 31, 2011, the impact of which is described in note 2.1.3.
The coal royalty was valued during December 2012 at £171.0 million (A$266.6 million) by Resource Management International Pty Ltd,
independent coal industry advisors, on a net present value of the pre-tax cash flow discounted at a rate of 7%. The net royalty income from this
investment is currently taxed in Australia at a rate of 30%. This valuation is incorporated in the accounts and the above revaluation adjustment
represents the difference between the opening carrying value and the external valuation, excluding the effects of foreign currency changes.
Were the coal royalty 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 calculation (note 22). Were the coal royalty to be carried at cost the
carrying value would be £0.2 million (2011: £0.2 million). The Directors do not presently have any intention to dispose of the coal royalty.
16 Royalty instruments
The Group’s royalty instruments are represented by four convertible debentures which entitle the Group to the repayment of principal and a
net smelter return (“NSR”) royalty for the life of the mine. Until such time as the principal is repaid the Group retains the option to convert the
outstanding balance into the common shares of the grantor. Details of the Group’s royalty instruments are summarised opposite:
Anglo Pacific Group Plc Annual Report and Accounts 2012
Accounts
Notes to the consolidated financial statements
for the year ended December 31, 2012
61
Project
Engenho1
El Valle-Boinás/
Carlés mines
Malartic-Midway
and McKenzie
Break2
Jogjakarta Iron
Sands
Commodity
Cost
‘000
Gold
A$4,000
Royalty
Rate
2.50%
Gold
C$7,500
2.50%
Escalation
–
3%
>US$1,100/oz
2.75%
>US$1,250/oz
Option
Price
A$0.35
C$0.958
C$0.70
C$8,000
2.50%
Gold
Iron
Sands
A$5,000
2.00%3
– A$0.10 - A$0.50
Discount
Rate
–
8%
–
15%
Royalty
Valuation
£’000
–
14,083
–
9,949
24,032
Option
Valuation
£’000
–
–
–
–
–
1 Engenho royalty instrument was fully provided for as at December 31, 2011.
2 Malartic-Midway and McKenzie Break royalty instrument was fully provided for as at December 31, 2010.
3 Jogjakarta Iron Sands royalty rate decreases to 1% following repayment of principal, unless liquid iron prices exceed US$700/t.
(a) Available for sale
The Group’s entitlement to the repayment of the principal and the NSR royalty have been classified as available for sale and are carried at fair value.
Any gains and losses arising from changes in fair value are recognised directly in equity with the investment revaluation reserve as detailed below:
Fair value
At January 1, 2011
Receipts from royalty instruments
Revaluation adjustment
Royalty instrument provision
At December 31, 2011
Receipts from royalty instruments
Revaluation adjustment
At December 31, 2012
Group
£’000
28,061
(385)
(1,377)
26,299
(1,563)
24,736
(1,889)
1,185
24,032
Company
£’000
28,061
(385)
(1,377)
26,299
(1,563)
24,736
(1,889)
1,185
24,032
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(b) Fair value through profit and loss
The Group’s option to convert the outstanding balance of the debentures into common shares of the grantors is an embedded derivative
requiring a separate valuation to the NSR royalty. As at December 31, 2011 and December 31, 2012 the Directors considered the likelihood of the
options being exercised to be remote and therefore, assessed the fair value of the options to be nil. The options are classified as fair value through
profit and loss, with gains and losses arising from changes in fair value directly recognised in the income statement as detailed below:
Fair Value
At December 31, 2011 and December 31, 2012
Royalty instruments
Royalty instrument provision
Total royalty instruments
Group
£’000
–
2012
2011
Group
£’000
28,983
(4,951)
24,032
Company
£’000
28,983
(4,951)
24,032
Group
£’000
30,493
(5,757)
24,736
Company
£’000
–
Company
£’000
30,493
(5,757)
24,736
62
Anglo Pacific Group Plc Annual Report and Accounts 2012
Accounts
Notes to the consolidated financial statements
for the year ended December 31, 2012
The total royalty instrument provision of £4.95 million (2011: £5.76 million) relates to the Group’s convertible debentures with Northern
Star Mining Corp. and Minera Gold Limited (formerly Mundo Minerals Limited) which give rise to the royalties over the Malartic-Midway and
McKenzie Break and the Engenho projects respectively (note 10).
During the year the Group received £0.8 million in principal repayments from Minera Gold Limited, which were previously provided for in full.
The Group continues to pursue its rights under the terms of the convertible debentures with Northern Star Mining Corp. and Minera Gold
Limited however, the outstanding debenture balances remain fully provided for.
17 Intangibles
The Group’s intangibles comprise capitalised exploration and evaluation costs and royalty interests.
Group
Gross carrying amount
At January 1, 2012
Additions
Foreign currency translation
At December 31, 2012
Amortisation and impairment
At January 1, 2012
Amortisation charge
At December 31, 2012
Carrying amount December 31, 2012
Group
Gross carrying amount
At January 1, 2011
Additions
Acquisition costs returned
At December 31, 2011
Amortisation and impairment
At January 1, 2011
Impairment charge
Amortisation charge
At December 31, 2011
Carrying amount December 31, 2011
Company
Carrying amount December 31, 2011 and December 31, 2012
Exploration and
evaluation costs
£’000
804
127
–
931
–
–
–
931
Exploration and
evaluation costs
£’000
696
108
–
804
–
–
–
–
823
Royalty
interests
£’000
70,525
3,720
(559)
73,686
(2,191)
(1,018)
(3,209)
70,477
Royalty
interests
£’000
42,130
29,105
(710)
70,525
(85)
(1,088)
(1,018)
(2,191)
68,334
Royalty
interests
£’000
3,997
Total
£’000
71,329
3,847
(559)
74,617
(2,191)
(1,018)
(3,209)
71,408
Total
£’000
42,826
29,213
(710)
71,329
(85)
(1,088)
(1,018)
(2,191)
69,138
Total
£’000
3,997
The exploration and evaluation costs comprise expenditure that is directly attributable to the Trefi and Panorama coal projects in British
Columbia, Canada.
Royalty interests represent the net smelter return 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, the Mt Ida magnetite iron ore project in Western Australia and three exploration licences, including the Railway iron ore deposit, in
the central Pilbara region of Western Australia.
63
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Anglo Pacific Group Plc Annual Report and Accounts 2012
Accounts
Notes to the consolidated financial statements
for the year ended December 31, 2012
The net smelter royalties on the exploration licences in the Athabasca Basin region of Canada remain impaired as a result of the inherent
uncertainty of these licences entering commercial production and have a carrying value of nil (2011: nil). The Group will continue to review the
development of these licences on an annual basis.
The Amapá royalty interest is the only producing interest and therefore, subject to amortisation. Amortisation of the remaining interests will
commence once they begin commercial production. No intangible assets have been pledged as security for liabilities.
18 Mining and exploration interests
(a) Available for sale
Fair value
At January 1, 2011
Additions
Disposals
Impairment
Revaluation adjustment
Foreign currency translation
At December 31, 2011
Additions
Disposals
Impairment
Revaluation adjustment
Foreign currency translation
At December 31, 2012
Group
£’000
128,231
28,101
(41,458)
(42)
(50,292)
(237)
64,303
23,781
(16,660)
(4,011)
(11,493)
(375)
55,545
Company
£’000
107,865
27,488
(30,406)
–
(48,826)
–
56,121
11,182
(16,195)
(3,721)
(10,634)
–
36,753
The Group’s investments are acquired as part of the Group’s strategy to acquire new royalties and are not held for the purpose of trading. Gains
may be realised where it is deemed appropriate. The fair values of listed securities are based on quoted market prices. Unquoted investments and
royalty options are initially recognised using cost where fair value cannot be reliably determined. In the absence of an active market for these
securities, the Group considers each unquoted security to ensure there has been no material change in the fair value since initial recognition.
Further guidance on fair value measurement is provided in note 3.
The impairment represents £3.7 million in unrealised losses the Directors consider to be impaired at December 31, 2012, following the underlying
investee company filing for protection under a corporate reconstruction.
(b) Fair value through profit and loss
At January 1, 2012 and December 31, 2012
Group
£’000
248
Company
£’000
248
A non-repayable convertible instrument was acquired by the Group in 2007. The convertible instrument was designated as fair value through
profit or loss. This convertible instrument was created to provide finance to a listed mining development company and is convertible into equity
in the company or royalties over the company’s properties at the Group’s option for a period of up to five years. The instrument was initially
recognised using cost as fair value could not be reliably determined. The Group considers that there had been no material change in the fair value
of the instrument at the reporting date, and this will be re-examined on a regular basis considering factors such as the presence of an active
market for the equity and valuations of the potential royalty streams. Prior to the instrument’s expiration in November 2012, the Group notified
the underlying company of its intention to convert the instrument to royalties. The conversion is expected to be completed in 2013.
Total mining and exploration interests at 31 December are represented by:
Quoted investments
Unquoted investments
Royalty Options
Number of investments
2012
2011
Group
£’000
51,547
3,518
728
55,793
37
Company
£’000
35,102
1,171
728
37,001
31
Group
£’000
62,389
1,434
728
64,551
42
Company
£’000
54,656
985
728
56,369
33
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Anglo Pacific Group Plc Annual Report and Accounts 2012
Accounts
Notes to the consolidated financial statements
for the year ended December 31, 2012
19a Investments in subsidiaries
Company
Cost:
At January 1, 2011
Capital injection into existing subsidiary
At December 31, 2011 and December 31, 2012
Provisions:
At January 1, 2011
At December 31, 2011 and December 31, 2012
Net book value:
At January 1, 2011
At December 31, 2011 and December 31, 2012
Investments in
subsidiaries
£’000
18,657
15,233
33,890
345
345
18,312
33,545
The Group’s full listing of subsidiaries is provided in note 31.
19b Joint ventures
The Group previously held a 50% equity shareholding (and voting rights) in a joint venture established in Australia between Jandale Holdings Pty
Ltd (a wholly owned subsidiary of the Company) and Core Coal Holdings Pty Ltd for the purpose of exploration and development.
The following amounts are included in the Group’s financial statements using proportionate consolidation:
Current assets
Current liabilities
Expenses
2012
£’000
–
–
13
2011
£’000
7
1
12
Following the disposal of its interest in Jandale Holdings Pty Ltd in 2012, the Group has no contingent liabilities or any capital commitments
under this joint venture (2011: nil).
20 Trade and other receivables
Current
Prepayments and accrued income
Royalty receivables
Other receivables
Provision for non-recovery of interest receivable
2012
2011
Group
£’000
136
1,219
603
–
1,958
Company
£’000
123
–
169
–
292
Group
£’000
158
10,111
2,738
(709)
12,298
Company
£’000
146
–
2,485
(709)
1,922
Trade and other receivables principally comprise amounts relating to royalties receivable for the final quarter in each year. The Directors consider
that the carrying amount of trade and other receivables is approximately their fair value.
Anglo Pacific Group Plc Annual Report and Accounts 2012
Accounts
Notes to the consolidated financial statements
for the year ended December 31, 2012
65
Non–current
Other receivables
Amounts due from subsidiaries
2012
2011
Company
£’000
Group
£’000
Company
£’000
–
13,581
13,581
–
–
–
–
9,038
9,038
Group
£’000
3,141
–
3,141
On August 13, 2013, the Group provided Laramide Resources Ltd with an interest bearing facility of C$5 million, which is repayable in December
2015. In return Laramide Resources Ltd granted Anglo Pacific an option to acquire a 5% gross revenue royalty for an exercise price of US$15
million. The facility bears interest at a rate of 7% per annum payable quarterly in arrears.
Amounts due from subsidiaries, are considered long term loans. The Directors consider that the carrying amount of amounts due from
subsidiaries is approximately their fair value.
21 Cash and cash equivalents
Cash and cash equivalents include the following for the purposes of the statement of cash flows:
Cash at bank and on hand
Trading deposits with brokers
Cash and cash equivalents
22 Deferred tax
The movement in the year in the Group’s net deferred tax position was as follows:
2012
2011
Group
£’000
23,083
953
24,036
Company
£’000
40,206
951
41,157
Group
£’000
31,116
1,081
32,197
Company
£’000
42,595
1,077
43,672
At 1 January (restated – note 2.1.3)
Released to income for the year
(Credit)/Charge to equity for the year
Foreign currency translation
At 31 December
2012
2011
2010
Group
£’000
54,240
(1,754)
(2,710)
(1,244)
48,532
Company
£’000
4,401
(894)
(5,307)
–
(1,800)
Group
£’000
59,824
321
(6,155)
250
54,240
Company
£’000
9,479
-
(5,078)
-
4,401
Group
£’000
46,459
760
4,353
8,252
59,824
Company
£’000
3,189
-
6,290
-
9,479
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Anglo Pacific Group Plc Annual Report and Accounts 2012
Accounts
Notes to the consolidated financial statements
for the year ended December 31, 2012
The following are the major deferred tax liabilities/(assets) recognised by the Group and the movements thereon during the period:
Group
Coal royalties
Available-for-sale investments
At January 1, 2010 (restated - note 2.1.3)
Released to income for the year (note 11)
(Credit)/Charge to equity for the year
Foreign currency translation
At December 31, 2010 (restated - note 2.1.3)
Released to income for the year (note 11)
(Credit)/Charge to equity for the year
Foreign currency translation
At December 31, 2011 (restated - note 2.1.3)
Released to income for the year (note 11)
Charge/(Credit) to equity for the year
Foreign currency translation
At December 31, 2012
Revaluation
of coal
royalty
£’000
Effects of
tax losses
£’000
Revaluation
of royalty
instruments
£’000
Revaluation
of mining
interests
£’000
Accrual of
royalty
receivable
£’000
44,456
–
(2,241)
8,062
50,277
–
(1,244)
239
49,272
–
2,802
(1,293)
50,781
(757)
–
(52)
(136)
(945)
–
225
(4)
(724)
–
101
19
(604)
2,665
–
2,230
–
4,895
–
2
–
4,897
–
(939)
–
3,958
410
–
4,416
23
4,849
–
(5,138)
(13)
(302)
(893)
(4,674)
57
(5,812)
(315)
760
–
303
748
321
–
28
1,097
(861)
–
(27)
209
Total
£’000
46,459
760
4,353
8,252
59,824
321
(6,155)
250
54,240
(1,754)
(2,710)
(1,244)
48,532
This provision represents the Group’s full potential liability to deferred taxation. This may be reduced by tax losses available to the Group.
Australian capital losses are disclosed in note 15. Temporary differences arising in connection with interests in associates and joint ventures are
insignificant.
The following are the major deferred tax liabilities recognised by the Company and the movements thereon during the period:
Company
Available-for-sale investments
At January 1, 2011
Charge to equity for the year
At December 31, 2011
Released to income for the year
Charge to equity for the year
At December 31, 2012
23 Trade and other payables
Other taxation and social security payable
Trade payables
Other payables
Accruals and deferred income
Revaluation
of royalty
instruments
£’000
4,895
2
4,897
–
(939)
3,958
Revaluation
of mining
interests
£’000
4,584
(5,080)
(496)
(894)
(4,368)
(5,758)
2012
2011
Group
£’000
121
106
1,724
220
2,171
Company
£’000
117
103
291
210
721
Group
£’000
302
100
6,427
67
6,896
Company
£’000
301
90
245
58
694
Total
£’000
9,479
(5,078)
4,401
(894)
(5,307)
(1,800)
2010
Group
£’000
364
131
5,801
174
6,470
Trade and other payables principally comprise amounts outstanding for other taxation, investment purchases and ongoing costs. The liability
arising from the overpayment of royalties identified by the Queensland Office of State Revenue as discussed in note 2.1.3 has been included in
other payables.
The average credit period taken for trade purchases is 22 days (2011: 33 days). The Directors consider that the carrying amount of trade and
other payables is approximately their fair value. All amounts are considered short term and none are past due.
Anglo Pacific Group Plc Annual Report and Accounts 2012
Accounts
Notes to the consolidated financial statements
for the year ended December 31, 2012
67
24 Share capital and share premium
Group and Company
At January 1, 2011
Issue of share capital under share-based payment
At December 31, 2011
Issue of share capital under share-based payment
At December 31, 2012
Number of
shares
108,771,332
417,883
109,189,215
416,161
109,605,376
Share
capital
£’000
2,175
9
2,184
8
2,192
Share
premium
£’000
24,207
1,332
25,539
1,314
26,853
Total
£’000
26,382
1,341
27,723
1,322
29,045
25 Share based payments
Following the approval at the 2010 Annual General Meeting, the Group operates two equity-settled share based compensation plans as follows:
• The HMRC approved Company Share Ownership Plan (the “CSOP”); and
• The Joint Share Ownership Plan (the “JSOP”) operated through the Anglo Pacific Group Employee Benefit Trust.
(a) Company Share Ownership Plan
Under the CSOP, share options are granted to directors and to selected employees. The exercise price of the granted options is equal to
the average mid market closing price of an ordinary share for the three days before the grant. The options are conditional on the employee
completing three years’ service (the vesting period). The options are exercisable starting three years from the grant date, subject to the Group
achieving its target growth in absolute total shareholder return over the period of 3% per annum (not compounded) in excess of the UK Retail
Price Index; the options have a contractual option term of ten years. The Group has no legal or constructive obligation to repurchase or settle the
options in cash.
Movements in the number of share options outstanding and their related weighted average exercise prices are as follows:
Outstanding at 1 January
Granted during the year
Exercised during the year
Surrendered during the year
Forfeited during the year
Outstanding at 31 December
2012
2011
Weighted
average
exercise
price (£)
2.6681
2.9446
–
–
2.9535
2.7406
Options
67,463
20,375
–
–
(10,157)
77,681
Weighted
average
exercise
price (£)
2.4950
3.0981
–
–
2.4950
2.6681
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Options
60,120
19,367
–
–
(12,024)
67,463
Out of the 77,681 outstanding options (2011: 67,463), nil options (2011: nil) were exercisable.
Share options outstanding at the end of the year have the following expiry date and exercise prices:
Expiry date
2019
2021
2021
2022
2022
Exercise price in
£ per share
2.4950
3.2570
2.9535
3.2860
2.6675
Shares
2012
48,096
9,210
–
9,129
11,246
77,681
2011
48,096
9,210
10,157
–
–
67,463
68
Anglo Pacific Group Plc Annual Report and Accounts 2012
Accounts
Notes to the consolidated financial statements
for the year ended December 31, 2012
The weighted average fair value of options granted during the period determined using the Black-Scholes valuation model was £1.649 per option
granted in March 2012 and £1.318 per option granted in September 2012 (March 2011: £1.741 and September 2011: £1.482). The significant
inputs into the model were weighted average share price of £3.286 and £2.668 (March 2011: £3.257 and September 2011: £2.953) at the grant
date in March and September 2012 respectively, exercise price shown above, volatility of 40% (2011: 40%), expected option life of three years
(2011: three years) and an annual risk-free interest rate of 1.1% and 0.8% for the options granted in March and September 2012 respectively
(March 2011: 2.3% and September 2011: 1.1%). See note 8a for the total expense recognised in the income statement for share options granted
to directors and employees.
(b) Joint Share Ownership Plan
Under the JSOP, the Remuneration Committee invites selected directors and employees to enter into an agreement with the Anglo Pacific Group
Employee Benefit Trust (the ‘Co-owner’) to acquire a number of ordinary shares in the capital of the Company. The shares are held in the name of
the Co-owner, however, the selected directors and employees maintain a beneficial interest in these shares.
Awards under the JSOP are conditional on the employee completing three years’ service (the vesting period) and the Group’s absolute total
shareholder return growing at an annual rate (not compounded) of 3% in excess of the UK Retail Price Index over the three year vesting period.
In addition the Company’s share price must reach a hurdle price during the three year vesting period as determined by the Remuneration
Committee at the time of making the award.
Upon satisfying the performance targets and service requirements, the beneficial interest conferred will entitle the director or employee to
receive a proportion of the proceeds of sale of the ordinary shares. Their entitlement will be to receive the equivalent of all sales proceeds in
excess of the threshold amount, settled in ordinary shares of the Company. The threshold amount is fixed by the Remuneration Committee and
will not be set less than the market value of the ordinary shares of the Company at the time the JSOP award is made.
JSOP awards made during the year were as follows:
Outstanding at 1 January
Awarded in March 2011
Awarded in September 2011
Awarded in March 2012
Awarded in September 2012
Surrendered during the year
Outstanding at 31 December
Grant price
in £ per share
Hurdle price
in £ per share
2.480
3.260
2.919
3.320
2.668
3.150
4.225
4.625
4.500
3.692
Shares
2010
Expiry Date
2014
2015
2015
2016
2016
508,050
356,208
61,675
–
–
(247,187)
678,746
2012
678,746
–
–
205,420
71,227
(88,783)
866,610
The weighted average fair value of shares awarded during the period determined using the Monte Carlo valuation model was £0.75 per share
granted in March 2012 and £0.57 per share granted in September 2012 (March 2011: £0.79 and September 2011: £0.55). The significant inputs
into the model were weighted average share price of £3.32 and £2.67 (March 2011: £3.26 and September 2011: £2.87) at the grant date in
March and September 2012 respectively, share price hurdle shown above, volatility of 40% (2011: 40%), expected option life of four years and
an annual risk-free interest rate of 1.1% and 0.8% for the shares granted in March and September 2012 (March 2011: 2.3% and September 2011:
1.1%). See note 8a for the total expense recognised in the income statement for share options granted to directors and employees.
26 Special reserve
As part of the capital reduction in 2002, a special reserve was created, which represents the level of profit attributable to the Group for the
period ended June 30, 2002. At December 31, 2011, this reserve remains unavailable for distribution.
At January 1, 2012 and December 31, 2012
Group
£’000
632
Company
£’000
632
69
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Anglo Pacific Group Plc Annual Report and Accounts 2012
Accounts
Notes to the consolidated financial statements
for the year ended December 31, 2012
27 Retained earnings
Balance at January 1, 2011 (restated)
Surrender of options from share-based payment
Dividends paid
Profit for the financial year (restated)
Balance at December 31, 2011 (restated)
Surrender of options from share-based payment
Dividends paid
Profit for the financial year
Balance at December 31, 2012
Group
£’000
135,864
19
(8,978)
36,280
163,185
5
(10,579)
10,057
162,668
Company
£’000
117,254
19
(8,978)
37,005
145,300
5
(10,579)
3,135
137,861
28 Financial commitments
Operating leases
The Group’s most significant operating lease commitments relate to premises maintained in both London, England and Shetland, Scotland.
At the balance sheet date, the Group had outstanding commitments under non-cancellable operating leases. The total commitments due under
these leases are shown according to the scheduled expiry dates of the leases as follows:
Group
Within one year
In the second to fifth years inclusive
After five years
2012
£’000
168
218
171
557
2011
£’000
168
436
125
729
The annual commitments for leases expiring after five years total £50,000 per annum.
Capital commitments
At the year end the Group had capital commitments of £nil (2011: £nil) in respect of purchases of quoted investments. The Group’s share of
capital commitments of joint ventures at the balance sheet date amounted to £nil (2011: £nil).
Subsidiary undertakings have commitments as detailed below:
Shetland Talc Limited
A bond was granted to Shetland Islands Council for £10,000 in respect of the installation of a Talc processing plant at Broonies Taing, Sandwick
and the extraction of talc magnesite rock at Catpund, Cunningsburgh.
29 Related party transactions
During the year, Group companies entered into the following transactions with subsidiaries:
Funding transactions
Management fee
Amounts owed by related parties at year end
All transactions were made in the course of funding the Group’s continuing activities.
Subsidiaries
2012
£’000
(1,199)
2,176
13,581
2011
£’000
51,984
2,384
9,039
70
Anglo Pacific Group Plc Annual Report and Accounts 2012
Accounts
Notes to the consolidated financial statements
for the year ended December 31, 2012
Remuneration of key management personnel
The remuneration of the key management personnel including directors of the Group is set out below in aggregate for each of the categories
specified in IAS 24 Related Party Disclosures. Further information about the remuneration of individual directors is provided in the audited part
of the Directors’ Remuneration Report on
pages 28 to 31.
Short–term employee benefits
Post–employment benefits
Share based payment
Directors’ transactions
During the year, the Group entered into the following related party transactions:
Allenbridge Group Plc
JW Technologies
2012
£’000
841
22
120
983
2012
–
–
–
2011
£’000
1,384
44
104
1,532
2011
2,489
1,130
3,619
The payments to Allenbridge Group Plc, a company in which Mr A.H. Yadgaroff, a non-executive director, is both a director and shareholder, were
for the provision of office support services.
The payments to JW Technologies, a company in which Dr J.G. Whellock, a non-executive director, is both a director and shareholder, were for
the provision of consulting services.
As at December 31, 2012 a total of £nil was owing to both Allenbridge Group Plc and JW Technologies (2011: £nil).
During the year the Directors received dividends as ordinary shareholders of the Company in cash or scrip totalling:
P.M. Boycott
A.C. Orchard
M.J. Tack1
J. Theobald
B.M. Wides
M.H. Atkinson
W.M. Blyth2
P.N.R. Cooke3
J.G. Whellock4
A.H. Yadgaroff
2012
263,102
10,731
–
3,935
285,300
724
–
–
1,276
16,788
581,856
2011
246,164
9,105
10,520
3,378
264,817
355
–
–
1,184
14,875
550,398
1 Mr M.J. Tack resigned as a director on September 23, 2011.
2 Mr W.M. Blyth was appointed as a director on March 20, 2013.
3 Mr P.N.R. Cooke was appointed as a director on December 10, 2012.
4 Dr J.G. Whellock, being a resident of the United States of America, is unable to receive scrip, as such all dividends were received in cash.
30 Events occurring after year end
On February 8, 2013, an investee company in which the Group holds both secured and unsecured mining and exploration interests filed for
protection under a corporate reconstruction based on a shortage of liquidity.
As at December 31, 2012, the Group’s mark to market losses on the unsecured interest was £3.7million. In light of the investee company’s filing
on February 8, 2013, management consider the fall in the market value of the investee company at December 31, 2012 to be impaired and have
recognised these losses through “other losses” in the income statement.
The Group considered that there was sufficient recourse attached to the secured interest and as such, no impairment was considered necessary as at
December 31, 2012.
Anglo Pacific Group Plc Annual Report and Accounts 2012
Accounts
Notes to the consolidated financial statements
for the year ended December 31, 2012
On March 15, 2013, the Group made its first advance of US$5million in relation to royalty financing agreement, entered into with Hummingbird
Resources Plc in December 2012.
31 Principal subsidiaries
Starmont Holdings Pty Ltd
Indian Ocean Resources Ltd
Alkormy Pty Ltd
Argo Royalties Pty Ltd
Starmont Ventures Pty Ltd
Gordon Resources Ltd
APG Aus No 1 Pty Ltd
APG Aus No 2 Pty Ltd
APG Aus No 3 Pty Ltd
APG Aus No 4 Pty Ltd
APG Aus No 5 Pty Ltd
APG Aus No 6 Pty Ltd
Anglo Pacific Finance Ltd
Country of
registration and
operation
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Ireland
Principal activity
Intermediate holding company
Investments
Investments
Investments
Investments
Owner of coal royalty
Investments
Investments
Investments
Investments
Investments
Investments
Treasury
Anglo Pacific Group Employee Benefit Trust
Guernsey
Administering Group incentive plans
Centaurus Royalties Ltd
Southern Cross Royalties Ltd
Shetland Talc Ltd
Advance Royalty Corporation
Panorama Coal Corporation
Trefi Coal Corporation
Polaris Royalty Corporation
Albany River Royalty Corporation
†Denotes held by a subsidiary company
England
Owner of iron ore royalties
England Owner of iron ore and uranium royalties
Scotland
Canada
Canada
Canada
Canada
Canada
Mineral exploration
Owner of uranium royalties
Owner of coal tenures
Owner of coal tenures
Intermediate holding company
Owner of chromite royalty
Proportion
of shares
held at
December 31,
2012
100%
100%†
100%†
100%†
100%†
100%†
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%†
100%
100%
100%†
100%†
71
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Anglo Pacific Group Plc Annual Report and Accounts 2012
Accounts
Accounts
Shareholder statistics
(a) Size of Holding (at March 20, 2013)
Category
UK and Canada
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – and over
Number of
Shareholders
752
1,019
219
412
2,402
%
31.31
42.42
9.12
17.15
100.00
Number
of Shares
411,998
2,502,369
1,627,252
105,063,757
109,605,376
%
0.38
2.28
1.48
95.86
100.00
(b) The percentage of total shares held by or on behalf of the twenty largest shareholders as at March 20, 2013 was 53.00%.
Anglo Pacific Group Plc Annual Report and Accounts 2012
73
Directors
Executive
P.M. Boycott (Executive Director)
A.C. Orchard (Chief Investment Officer)
J. Theobald (Chief Executive Officer)
B.M. Wides (Acting Chairman)
Non-Executive
M.H. Atkinson (Senior Independent
Director)
W.M. Blyth
P.N.R. Cooke
J.G. Whellock
A.H. Yadgaroff
Secretary
P.T.J. Mason
Head office
17 Hill Street, London W1J 5LJ
Registered office
17 Hill Street, London W1J 5LJ
Registered in England No. 897608
Auditors
Grant Thornton UK LLP
Grant Thornton House,
Melton Street, London NW1 2EP
Bankers
Barclays Bank PLC
Business Banking Larger Business
27th Floor
Churchill Place
London E14 5HP
Registrars
Equiniti Registrars Limited
Aspect House
Spencer Road
Lancing
West Sussex BN99 6DA
Transfer Agent
Equity Transfer & Trust Company
Suite 400
200 University Avenue
Toronto
Ontario M5H 4H1
Stockbrokers
Liberum Capital Limited
Ropemaker Place
12th Floor
25 Ropemaker Street
London EC2Y 9LY
Listings
London Stock Exchange
Full Listing
Symbol APF
Toronto Stock Exchange
Secondary Listing
Symbol APY
Website
www.anglopacificgroup.com
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Anglo Pacific Group Plc Annual Report and Accounts 2012
Accounts
74
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Anglo Pacific Group Plc
17 Hill Street, Mayfair
London W1J 5LJ
United Kingdom
T +44 (0) 20 3435 7400
F +44 (0) 20 7629 0370
info@anglopacificgroup.com
www.anglopacificgroup.com