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Anglo Pacific Group completes Voisey’s Bay Cobalt Stream acquisition

Published by , Editor
Global Mining Review,

Further to the announcement on 24 February 2021, Anglo Pacific Group has announced the completion of the acquisition of a 70% net interest in a stream on cobalt production from the Voisey's Bay mine in Canada from private equity sellers for cash consideration of US$205 million at closing and further contingent consideration of up to US$27 million (the acquisition).

The acquisition was financed through an oversubscribed equity placing and retail offer of approximately US$66 million, the previously announced profitable monetisation of a portion of the Group's Labrador Iron Ore Royalty Corporation (LIORC) investment, and the completion of the new US$180 million credit facility from a syndicate of leading Canadian banks, comprising Scotiabank, RBC Capital Markets, and Canadian Imperial Bank of Commerce.

Julian Treger, CEO of the company, commented: "I am extremely pleased to announce the completion of the Voisey's Bay cobalt stream acquisition. This transaction is not only the largest in our company's history, but it also marks the start of a fundamental transformation, as we reposition the business towards 21st century commodities and become an increasingly battery metals focused royalty and streaming company.

“The transaction provides Anglo Pacific with significant exposure to a strategic mineral coupled with additional scale with which to undertake similar transactions to further expand our commodity exposure in high growth sectors. We have a US$20 million funding commitment (subject to the satisfaction of certain conditions) with Incoa and a further US$70 million of optionality within our business with Piauí, along with several prospective deals within our pipeline for similar commodities aligned to the battery storage and electric vehicle (EV) revolutions.

“This is the ideal time to proactively redeploy capital from the iron ore sector and invest in cobalt. Since the start of 2021, the cobalt price has increased approximately 60% reaching two2year highs at US$24.95/lb; and has increased approximately 4% since Anglo Pacific announced the acquisition, whilst the iron ore price has fallen approximately 4%. The increase has been driven by continued demand from the lithium-ion battery sector as electric vehicle sales reached record highs in 2020, with projected EV battery demand growth of 17% per annum forecast over the period to 2040.

“Fundamentals of the cobalt market and future outlook for the commodity are firmly backed by the financial stimulus and policy frameworks adopted by western governments in order to aid the green revolution through emissions free transport, as well as the ambitious goals set out by individual automakers to become fully electric; most recently joined by Volvo and Jaguar.

“Again, I would like to thank all of our stakeholders for their continued support; this new cornerstone asset will help underpin Anglo Pacific's ability to deliver further growth and sustainable future returns for our shareholders."

Transaction highlights

  • A new cornerstone asset: Voisey's Bay is an established nickel-cobalt-copper mine, located in Canada, a well-established mining jurisdiction, and is an important operation of Vale Canada Ltd (a subsidiary of Vale S.A., one of the world's largest mining companies). It is a long-life operation, supporting the group's sustainable, through-the-cycle cash flow generation.
  • Strong cobalt fundamentals: The long-term fundamentals of the cobalt market are expected to be very favourable and benefit from the accelerating trend toward the adoption of EVs.
  • Repositioning to materials of the 21st century: 61% of the pro-forma royalty portfolio will be attributable to battery related materials and significantly reduces the company's exposure to coal.
  • World class operation: Voisey's Bay is a world class nickel-cobalt-copper mine, positioned in the second lowest quartile of the industry cost curve and provides exposure to one of the largest sources of cobalt outside of the Democratic Republic of the Congo (DRC).
  • Environmental credentials: Within the industry, Voisey's Bay ranks amongst the lowest global emitters of carbon dioxide, supported by a leading sustainability and safety track record.
  • Accretive transaction for Anglo Pacific's shareholders: The acquisition is expected to be immediately accretive and to provide a platform for long term earnings growth, as Kestrel's contribution to the portfolio declines.
  • Stream details:
  • Anglo Pacific is entitled to receive 22.82% of all cobalt production from Voisey's Bay up until 7600 t of finished cobalt has been delivered, which then reduces the stream to an 11.41% entitlement thereafter.
  • Anglo Pacific will make ongoing payments equal to 18% of an industry cobalt reference price for each pound of cobalt delivered under the cobalt stream, until Anglo Pacific has recovered the US$300 milllion original upfront amount paid for the stream (through accumulating credit from 82% of the cobalt reference price) through cobalt deliveries; thereafter, the ongoing payments will increase to 22% of the cobalt reference price.
  • Downside protection: The stream agreement provides that if mill throughput does not reach 85% of targeted levels by 31 December 2025, some or all of the original upfront amount may be refunded or the applicable cobalt stream percentages may be increased, providing downside protection.

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