Anglo Pacific Group deals into significant cobalt stream to benefit from electric vehicles boom

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Anglo Pacific Group Plc (LON:APF, TSE:APY) has struck a deal to acquire a 70% net interest in a stream on cobalt production from the Voisey’s Bay mine in Canada.

The company, in a statement, highlighted that it will provide a significant long-life revenue stream from an established, world class operation. At the same time, it provides exposure to a market that’s fuelled by the fast rising demand for electric vehicles.

The stream will entitle Anglo Pacific to 22.82% of all cobalt production from Voisey’s Bay until a total of 7,600 tonnes of finished cobalt has been delivered, thereafter the stream will reduce to 11.41% of the project’s cobalt production.

Anglo Pacific is buying the instrument from private equity sellers, for US$205mln in cash.

The terms of the stream will see the company pay equal to 18% of an industry reference price for each pound of cobalt, until it has recovered US$300mln (the original upfront outlay paid for the stream) and thereafter it will be raised to 22% of the reference price.

Chief executive Julian Treger highlighted that the transaction is expected to be immediately earnings accretive.

“It will provide a significant long-life income source for Anglo Pacific and materially progresses our ambition to focus on 21st century commodities that support a more sustainable world,” Treger said.

“We believe that this transaction largely solves Anglo Pacific’s two major strategic challenges: it addresses the medium-term declining income at Kestrel and significantly repositions the Company’s portfolio away from coal.

“We are delivering on our promise to recycle our short-term coal cash flow into clean commodities whose use is largely in facilitating cleaner energy and technology.”

Funding the deal

Anglo Pacific noted that it had taken advantage of a recent strong rebound in the iron ore price to sell a large portion of its holding in LIORC, to partially finance the acquisition.

It also has support from a syndicate of leading Canadian banks. Meanwhile, there’s also an equity component with the company today conduct a bookbuild for a share placing.

The company noted that it will seek to sell new shares to existing and new institutional investors through the placing. A bookbuild process will be run by brokers at RBC, Peel Hunt and Berenberg.

It is planned that the bookbuild will close by 4:30pm today.

A separate retail share offer will be pursued via the PrimaryBid platform, to raise up to €8mln.

“While the Placing structure has been chosen due to its reduced timeframe to completion which enables Anglo Pacific to execute a strategically transformational acquisition as part of its growth strategy, the company highly values its retail investor base which has supported the Company alongside institutional investors,” Anglo Pacific said.

“Given the longstanding support of retail shareholders, the company believes that it is appropriate to provide retail investors the opportunity to participate in the equity fundraise.”

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