- There's a move by individual shareholders into Anglo Pacific
- Should we follow this crowd?
- The key issues are views on the cobalt and coking coal prices
Anglo Pacific Group (LON: APF) shares are proving a popular purchase with individual shareholders presently. It's possible to check this by monitoring the purchases at varied brokers – the importance of individual trades being that often enough the savvy investor can find something currently missed by the institutions. It is always true that in aggregate the crowd knows more than any subgroup of that crowd, of course.
The question for us as traders is whether this is something we wish to also do – get into Anglo Pacific shares. To answer that requires thinking about what APF does and what might be changing within that.
Anglo Pacific owns a portfolio of royalties and streams of income. This is a pretty normal part of the mining industry. Smaller players might have difficulty in raising the capital to explore or exploit a deposit. So, in return for a slug of capital at that early stage they sell off a royalty or potential future income stream. They get the capital now in return for less of the future income on the assumption that the project is successful.
This clearly indicates that there's going to be a series of royalty and income streams out there. At least some of those projects that were funded will succeed and so there must be those incomes. This is what Anglo Pacific holds. Of their 100 holdings, 85 are producing, one is in development, four are “early stage” (this means we don't know whether it will ever produce as yet). The majority of the projects are in cobalt, copper and vanadium – metals required for this 21 st century swerve to electric vehicles and batteries.
However, the issue that is of current interest is probably the coking coal, where Anglo Pacific has 18 income streams running. Both Bisichi and Thungela are reporting very strong prices for their coal output. True, coking and thermal coal are not exactly the same thing but prices do move at least slightly together. It's also true that natural resources firms are price takers, meaning that if sales prices are good and rising for one firm in the market then they are for all.
This gives us what might well be that impetus for individual investors to be buying into Anglo Pacific Group here. Those coking coal royalties are a significant part of income even if not of the number of income streams. So, if coal prices are soaring – they are, we've an energy crisis on, recall – then we might expect those income streams to rise in a satisfactory manner.
The last trading update was near 6 weeks back so we can only infer revenue streams since then. But those Q1 results were indeed boosted by high coking coal prices and there's little indication from those Bisichi and Thungela results that they've fallen as yet.
Given the weighting in those royalty and income streams future – at least, near future – results for Anglo Pacific likely rely upon the cobalt and coking coal prices. Taking a view on those then provides an indication as to what's likely to happen to the value of the income streams. There is that individual buying going on so clearly some think those will remain strong or even move higher.