Anglo Pacific (TSX: APY) this morning completed the acquisition of a 70% interest in a stream of cobalt production. The production comes from Voisey’s Bay, one of the largest sources of cobalt production in the world outside of the Congo, with the transaction marking the beginning of a transition to battery metals for the firm.
The cobalt production stream was acquired for cash consideration of US$205 million, with certain contingent considerations of up to US$27 million also being applicable. In connection with the acquisition, the company is entitled to receive 22.82% of all cobalt production from the mine until 7,600 tonnes of finished cobalt has been delivered, after which the stream reduces to 11.41% of production. The stream was acquired from a private equity group.
In connection with the stream, Anglo Pacific will be required to pay 18% of the industry cobalt reference price, until the US$300 million original upfront payment is recovered. After it is recovered, the company will pay just 22% of the reference price for cobalt.
The transaction effectively enables the company to reposition to “materials of the 21st century,” with 61% of its pro-forma royalty portfolio now to be related to battery materials rather than that of coal.
The transaction was reportedly funded via a US$180 million credit facility recently entered into by the firm, as well as monetization of a portion of an iron ore royalty investment, and an equity financing of US$66.0 million.
Anglo Pacific Group last traded at $2.41 on the TSX.
Information for this briefing was found via Sedar and Anglo Pacific Group. The author has no affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
