LONDON, UK: Anglo Pacific Group has agreed to acquire a high-quality portfolio of royalties over advanced development stage copper and nickel projects from South32 Royalty Investments Pty Ltd for a fixed consideration of US$185 million with further contingent consideration of up to US$15 million.

The transaction further reinforces Anglo Pacific’s position as the leading royalty and streaming company focused on future-facing commodities that are critical to achieving the energy transition required to support a more sustainable world. The acquisition of this portfolio provides compelling growth and complements the Group’s substantial weighting to income producing assets.

The initial consideration comprises a US$47.6 million cash payment along with an US$82.4 million share issuance on completion to South32, which will become a 16.9% shareholder in the enlarged business. In addition, the Company will make six quarterly cash payments totalling US$55 million, to be paid in equal instalments over the next 18 months. These will be largely self-financed by cash flow generated from the Group’s current asset portfolio.

The Group has agreed with its lending syndicate to maintain the facility at US$150 million without the previously scheduled US$25 million facility step down which was due in August 2022. The Group has also agreed a US$50 million accordion feature for future acquisitions.

Marc Bishop Lafleche, Chief Executive Officer of Anglo Pacific, commented: “Anglo Pacific is now firmly positioned as the leading, future-facing commodities royalty and streaming company with copper, nickel and cobalt at the core of its commodity exposure. The decarbonisation of the global economy will be very metal intensive, with sizable copper and nickel supply deficits expected to emerge over the next decade. We believe this is an attractive copper and nickel entry point with substantial commodity price upside potential, all the while meeting our disciplined approach to acquisitions and robust sustainability criteria.

“This transaction transforms the Group’s medium-term income growth profile. The US$55 million deferred consideration to be paid over the next 18 months will allow the Group to recycle record levels of metallurgical coal cash flows to fund the acquisition. The modifications we have made to our borrowing facility, along with the deferred structure of the consideration, ensures the Group remains well capitalised for further acquisitions.

“South32 will hold an approximate 16.9% stake in Anglo Pacific post transaction completion, demonstrating conviction in the outlook for our existing business, the acquired royalty portfolio, and our proven ability to deliver shareholder value. We are delighted to welcome South32 as a shareholder.”

Graham Kerr, Chief Executive Officer of South32, commented: “The sale of these royalties unlocks further value from South32’s portfolio. The transaction will realise upfront and future cash payments for South32 while retaining our exposure to these base metals royalties through a shareholding in Anglo Pacific. We look forward to continuing our relationship with Anglo Pacific.”