11th March: Anglo Asian Mining 2020 guidance and Duke Royalty update and dividend

Anglo Asian Mining (AIM All-Share, Market capitalisation: £144m, 125.5p and 6.1% of JIC Portfolio and 12.4% of JIC Top 10):

Conclusion: Once again we are being asked to be patient about its plans for future growth. For the time being, revenue and profit forecasts are dependent on the gold price, which, luckily for AAZ shareholders, is strong. I think patience will eventually be rewarded but it would be nice to hear about more concrete news on its plans for increasing production. In the meantime, based on last year’s dividend the shares are on a dividend yield of 4.4%. Quite attractive as UK interest rates are slashed to 0.25%! I have it as Medium Risk/High Reward, pointing to a 5.0% position. Following the small purchase on 28th Feb at 117p, I’m at 6.1%. There might be a little disappointment reflected in the share price today but I remain a Happy Holder!

Anglo Asian announces that it expects to produce between 75,000 and 80,000 gold equivalent ounces (GEO) in 2020. That is down slightly on 2019’s 81,399 geos. It says lower production is due to reduced mining from Ugur open pit which has lower gold grades.

It expects revenue, however, to be over $100m due to the higher gold price. It looks like it is being conservative in its assumptions; for instance, it is budgeting $1,480 per oz v the current price of $1,650 per oz.

CEO Reza Vaziri is confident about being able to increase future production and “looks forward to keeping the market informed of future developments”.

Anglo Asian CEO Reza Vaziri commented,

“Once again, 2020 is set to be another year of solid performance from Anglo Asian Mining with forecast revenue of over 100 million dollars and production between 75,000 to 80,000 gold equivalent ounces. Despite the marginal reduction on the previous year’s production, due to lower production from the Ugur mine, the increased metal prices seen so far this year should enable the Company to maintain its financial performance as we progress into exploiting our recently reported new mineral deposits.

“Future growth in both production and our resources and reserves continue to be highly important to Anglo Asian. We are continuing at pace with our exploration programme to identify possible further production expansion in our three existing contract areas. In this respect, we recently released the highly encouraging results from our exploration programme which highlights their potential. We also continue to look at other opportunities for expansion. I look forward to keeping the market informed of future developments.”

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Duke Royalty (DUKE.L, Market Cap £96m, 37.75p, 4.5% of JIC Portfolio and 7.7% of JIC Top 10)

Duke announces that it will pay a dividend of 0.75p per share on 14th April. The ex-dividend day is 26th March.

It goes on to say: “In light of the market turbulence that has been affecting all public companies recently, the Company would like to reaffirm to shareholders that it believes that the cash flow generated from its royalty and loan portfolio for the financial year ending 31 March 2020 will be in line with market expectations and hence, it has the confidence to maintain its quarterly dividend payment”

Duke notes that its business model allows it to cope with challenging macroeconomic events due to the Company’s consistently low operating costs versus its monthly cash flows and high operational leverage.  A more detailed trading update will be released in April following the end of the Company’s financial year.

Conclusion: In itself re-assuring. It would be amazing however if it did not see some impact on royalty cash flow in the year to March 2021. For instance, it would be surprising if the Dutch riverboat cruise company was not impacted to some extent. Hopefully, Coronavirus will be well past its peak before the summer tourist season. Having said that, Duke points out, that even if there is a temporary slowdown in cash flows, its low operating costs should allow it to cope. The shares have been hit in the last week or so, leaving it on an 8.0% dividend yield based on forecast dividends for the year ending 31st March 2020, of 3.0p, (4×0.75p payments). I have it as Medium Risk/High Return pointing towards a 5.0% position. For now, I’ll stick with that rating, but it needs watching closely. If starting a new, I think I would probably be a little more cautious and perhaps rate it High Risk. Time for thought but for now, Happy Holder! 


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