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or Name
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Anglo Pacific Group PLC
Symbol APY
Shares Issued 116,431,796
Close 2014-11-21 C$ 3.48
Market Cap C$ 405,182,650
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Anglo Pacific to buy Narrabri royalty for $65M (U.S.)

2015-02-04 07:13 ET - News Release

Mr. Julian Treger reports

PROPOSED ACQUISITION AND FIRM PLACING AND PLACING AND OPEN OFFER

Anglo Pacific Group PLC has entered into a conditional agreement with a private party to acquire its royalty interest in the Narrabri coal project, a major thermal coal and pulverized coal injection coal mine located in New South Wales, Australia, operated by Australian Securities Exchange-listed Whitehaven Coal Ltd. for total consideration of $65-million (U.S.) (42.8 million British pounds).

Anglo Pacific will pay the seller the total consideration of $65-million (U.S.) (42.8 million British pounds) in cash and Anglo Pacific shares, in exchange for its royalty interest. The Narrabri royalty entitles the holder to royalty payments equal to 1 per cent of gross revenue on all coal produced from within the area covered by the Narrabri royalty.

Highlights of the acquisition:

  • Opportunity for Anglo Pacific to further diversify its producing royalty portfolio;
  • Consistent with and demonstrates management's delivery on its strategy;
  • Acquisition entitles the company to royalty income from Jan. 1, 2015, and is accretive to the key performance indicators of adjusted earnings per share and dividend cover in 2015;
  • Whitehaven, the majority owner and operator of the Narrabri mine, has a consistent historical production record at Narrabri, as well as established operational expertise in developing and operating coal mines;
  • The Narrabri mine has scope to materially increase production over the short and medium term, with an estimated 22 years of mine life remaining at Narrabri North, and the potential to extend production in the future through the development of Narrabri South;
  • The Narrabri mine has an attractive position in the global thermal and PCI coal producer cost curve and is located in Australia, an established mining jurisdiction;
  • Exposure to a potential recovery in thermal and PCI markets, with the price of thermal coal close to a five-year low;
  • Total consideration of $65-million (U.S.) (42.8 million British pounds) payable as follows:
    • $60-million (U.S.) (39.5 million British pounds) payable in cash;
    • $5-million (U.S.) (3.3 million British pounds) payable in Anglo Pacific shares.

The acquisition constitutes a Class 1 transaction (as defined in Chapter 10 of the listing rules) for the company and requires the approval of shareholders pursuant to the listing rules. Further information on the acquisition, the Narrabri royalty and the company is included below.

Financing of the acquisition

The acquisition and associated expenses are expected to be financed from a combination of a proposed firm placing, placing and open offer to raise $55-million (U.S.) to $60-million (U.S.) (36.2 million to 39.5 million British pounds) and a $30-million (U.S.) (19.7-million-British-pound) three-year revolving credit facility from Barclays Bank PLC.

It is intended that $22.5-million (U.S.) to $32.5-million (U.S.) (14.8 million to 21.4 million British pounds) will be raised through the firm placing and $22.5-million (U.S.) to $32.5-million (U.S.) (14.8 million to 21.4 million British pounds) through the placing and open offer. The new issue will be partially underwritten by the joint bookrunners (as defined below) up to $7.5-million (U.S.) (4.9 million British pounds).

The firm placing, placing and open offer

The firm placed shares and the conditional placed shares are being placed through an accelerated book build process which will be launched immediately following this announcement. A draft prospectus dated Feb. 4, 2015, will be provided to placees invited to take part in the firm placing and placing.

The firm placing and placing are for invited placees only. Members of the public are not eligible to take part in the firm placing or placing.

Qualifying shareholders will be able to participate in the fundraising through the open offer. The company will make a further announcement following the close of the book build and upon the company and Macquarie Capital (Europe) Ltd. and BMO Capital Markets Ltd. agreeing that the open offer will proceed, a further announcement will be made regarding the launch of the open offer and the company will publish a prospectus in connection with the open offer. The prospectus will contain the terms and conditions and further details regarding the proposed open offer and the process by which qualifying shareholders may apply for open offer shares. The prospectus will also constitute a Class 1 circular prepared in accordance with the listing rules, including a notice to convene a general meeting of the company for the purpose of passing all resolutions required pursuant to the firm placing, placing and open offer, and approving the acquisition by the company of the Narrabri royalty and setting out the date on which the general meeting will be convened.

BMO and Macquarie Capital are acting as joint bookrunners in connection with the firm placing, placing and open offer, and Shard Capital Partners LLP is acting as co-manager.

The firm placing, placing and open offer are conditional upon, among other things, shareholder approval. The full timetable for the open offer is expected to be published on Feb. 6, 2015.

It is expected that certain directors will participate in the firm placing and placing subject to final allocations.

Pricing of the firm placed shares and conditional placed shares

The price per ordinary share at which the firm placed shares and conditional placed shares are to be placed will be decided at the close of the book build. The book will open with immediate effect following this announcement. The timing of the closing of the book, pricing and allocations are at the discretion of the joint bookrunners and the company. Details of the offer price and the number of firm placed shares and conditional placed shares will be announced as soon as practicable after the close of the book build.

An appendix available on-line sets out further information relating to the book build and the terms and conditions of the firm placing and placing. By choosing to participate in the firm placing and placing and by making an oral and legally binding offer to acquire firm placed shares or conditional placed shares, investors will be deemed to have read and understood the pathfinder and this announcement (including the appendix) in their entirety and to be making such offer on the terms and subject to the terms and conditions in this announcement (including the appendix) and to be providing the representations, warranties and acknowledgments contained in the appendix. This announcement should be read in its entirety.

The directors expect the net proceeds of the firm placing, placing and open offer to be used to provide the majority of financing for the acquisition of the Narrabri royalty.

Commenting on the acquisition, Julian Treger, chief executive officer of Anglo Pacific, said: "The Narrabri royalty will immediately enhance our portfolio of producing royalties and diversify our royalty income. The acquisition is also consistent with Anglo Pacific's strategy to acquire royalties on mining assets that are competitively positioned on the cost curve, cash or near-term cash producing and located in established mining jurisdictions and, in Whitehaven, the royalty has an operator with an established track record of operational expertise. The acquisition demonstrates the opportunities that the current market conditions provide and we will continue to look to enhance our royalty portfolio and further diversify our royalty income stream for the benefit of all our shareholders."

Analyst conference call

There will be an analyst conference call on Feb. 4, 2015, at 9:30 a.m. (GMT), hosted by Mr. Treger and Mark Potter, chief investment officer. The call can be accessed by dialling 44-20-3450-9987 and using the confirmation code 7807732 or quoting Anglo Pacific conference call.

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