Pan African Resources PLC
('Pan African' or 'the Company' or 'the Group')
(Incorporated and registered in England and Wales under Companies Act 1985 with
registered number 3937466 on 25 February 2000)
Share code on AIM: PAF
Share code on JSE: PAN
ISIN: GB0004300496
TRADING STATEMENT AND PRODUCTION UPDATE FOR THE FINANCIAL YEAR ENDED
30 JUNE 2016
TRADING STATEMENT
In terms of paragraph 3.4(b) of the Listings Requirements of the JSE Limited, a
listed company is required to publish a trading statement as soon as it is
satisfied that a reasonable degree of certainty exists that the financial
results for the period to be reported upon next, will differ by at least 20
percent from those of the previous corresponding period.
Pan African is incorporated in England and Wales under the Companies Act 1985
and accordingly, its presentation currency is Pounds Sterling ('GBP').
The average ZAR:GBP exchange rate affect the reporting of results in GBP. For
the reporting period ended 30 June 2016 ('current reporting period'), the
average prevailing ZAR:GBP exchange rate will be used to translate earnings per
share ('EPS') and headline earnings per share ('HEPS') from ZAR to GBP.
For the reporting period ended 30 June 2015 ('prior reporting period'), the
average ZAR:GBP exchange rate was ZAR18.00:1. For the current reporting period,
the ZAR depreciated against the GBP, with an average exchange rate of ZAR21.45:
1. This 19.2 percent year-on-year depreciation in the average exchange rate
should be taken into account for the purposes of a comparison with the prior
reporting period.
1. EPS and HEPS
Pan African advises shareholders that its EPS and HEPS for the current
reporting period are expected to be between:
1. EPS: 157 percent to 177 percent higher than the 11.48 cents EPS for the
prior reporting period (being EPS of 29.47 cents to 31.77 cents).
2. HEPS: 152 percent to 172 percent higher than the 11.67 cents HEPS for
the prior reporting period (being HEPS of 29.45 cents to 31.79 cents).
Using the average ZAR:GBP 21.45:1 exchange rate that prevailed during the
current reporting period, the Group's EPS and HEPS in GBP terms for the current
reporting period are expected to be between:
1. EPS: 114 percent to 134 percent higher than the 0.64 pence EPS for the
prior reporting period (being EPS of 1.37 pence to 1.50 pence).
2. HEPS: 111 percent to 131 percent higher than the 0.65 pence HEPS for the
prior reporting period (being HEPS of 1.37 pence to 1.50 pence).
2) Normalised illustrative EPS and HEPS
EPS and HEPS include certain non-operational gains and losses on financial
instruments, referred to hereunder. When the Group's earnings are adjusted for
these gains and losses (the 'normalised illustrative EPS and HEPS') are
expected to be between:
1. EPS: 275 percent to 295 percent higher than the 11.48 cents EPS for the
prior reporting period (being EPS of 43.10 cents to 45.40 cents).
2. HEPS: 269 percent to 289 percent higher than the 11.67 cents HEPS for
the prior reporting period (being HEPS of 43.08 cents to 45.42 cents).
The normalised illustrative EPS and HEPS in GBP terms for the current reporting
period would have been between:
1. EPS: 213 percent to 233 percent higher than the 0.64 pence EPS for the
prior reporting period (being EPS of 2 pence to 2.13 pence).
2. HEPS: 208 percent to 228 percent higher than the 0.65 pence HEPS for
the prior reporting period (being HEPS of 2 pence and 2.13 pence).
The following adjustments were made to EPS and HEPS to derive this normalised
illustrative EPS and HEPS:
2.1) Financial instruments
Cost Collar
Barberton Mines entered into a short term strategic hedge ('the Cost Collar')
in July 2015, when the prevailing spot gold price was ZAR440,000/kg, to protect
its cash flows and the Group's annual dividend against severe adverse movements
in the ZAR gold price. During the current reporting period, the Group recorded
a post-tax unrealised mark-to-market fair value loss of ZAR82 million on the
Cost Collar (2015: post-tax realised Cost Collar derivative income of ZAR32.3
million). The economic consequence of the mark-to-market fair value adjustment
is to lock in revenue on 25,000oz of gold production from Barberton Mines at
ZAR625,000/kg (the closing ZAR gold price at 30 June 2016) for the twelve month
period commencing 1 October 2016.
Share options
The share price increased significantly from ZAR1.80 to ZAR3.75 during the
current reporting period (an increase of 108 percent), which resulted in an
increase in the Group's cash settled share option costs. The post-tax effect of
cash settled share option costs for the current reporting period amounted to
ZAR65.2 million (2015: post-tax ZAR4.4 million gain).
The fair value adjustment of the Group's rehabilitation liability and
associated investment resulted in the rehabilitation liability reducing by
ZAR38.2 million (2015: increased by ZAR19.7 million) and the rehabilitation
investment increased by ZAR9.4 million (2015: ZAR33.9 million).
2.2) Shanduka Gold Proprietary Limited ('Shanduka Gold') transaction
Shareholders were advised on 26 May 2016 and 1 June 2016 that the Company had
entered into agreements to acquire Standard Bank of South Africa Limited's
('SBSA') 16.9 percent and Jadeite Limited's ('Jadeite') 33.6 percent interest
in Shanduka Gold ('the Transaction'). The Transaction was concluded on
7 June 2016 for a total consideration of ZAR547 million,
which equates to a Pan African share price of ZAR1.25 per share.
Shanduka Gold is, from an accounting perspective, deemed to be controlled by
Pan African and Shanduka Gold's full shareholding of 436,358,059 shares in Pan
African will eliminate upon consolidation for accounting purposes. As the
Transaction only became effective on 7 June 2016, the issued shares are
weighted in the current reporting period resulting in 1,811,427,377 shares
being taken into account for purposes of calculating EPS and HEPS for the 2016
financial year.
Had the Transaction been effective on 1 July 2015, the number of shares taken
into account for calculating EPS and HEPS would have been reduced as follows:
Pan African Shares Shares % Change
Opening balance shares - 1 July 2015 1,831,494,763 -
Issue of shares - vendor placement 111,711,791 6.1%
Elimination of shares held by Shanduka Gold (436,358,059) (23.8%)
Closing balance 1,506,848,495 -
Reduction in number of shares 324,646,268 17.7%
This reduction in the number of shares was incorporated into the normalised
illustrative EPS and HEPS reported above.
PRODUCTION UPDATE
Earnings for the current reporting period improved relative to the prior
reporting period due to the robust operating performances from Barberton Mines
and Evander Mines. The improved operational performance was supported by an
increase in the realised ZAR gold price of 21.6 percent to ZAR542,850/kg (2015:
ZAR446,274/kg) during the current reporting period. The Group's earnings were
further enhanced by consolidating the Uitkomst Colliery's results for the three
months effective from 1 April 2016. Phoenix Platinum production was however
adversely impacted by the curtailment of current arisings following
International Ferro Metals (SA) Proprietary Limited being placed into business
rescue.
Year ended 30 Mining operations production summary
June 2016
Barberton Mines Evander Mines Phoenix Uitkomst Colliery¹
Platinum
(Gold oz) (Gold oz) (PGE oz) (Coal tonnes)
2016 113,281 91,647 8,339 136,102
2015 105,776 70,081 10,245 -
% movement 7% 31% (19%) -
¹The Uitkomst Colliery coal sales relates directly to underground coal
production sales and excludes coal bought in from third parties for blending
and further processing. The Uitkomst Colliery production is consolidated from 1
April 2016.
GROUP NET DEBT
The Group's operations are robust in their cash generation and its net debt
position at 30 June 2016 was ZAR347 million (2015: ZAR321 million), after the
cash share buy-back of ZAR182 million for SBSA's interest in Shanduka Gold, the
acquisition of the Uitkomst Colliery for ZAR148 million in cash and the ZAR210
million dividend payment in December 2015.
At the date of this trading statement, the Group's net debt had reduced to
ZAR255 million, which included an amortising ZAR82 million gold loan entered
into in 2014 to finance the Evander tailings retreatment plant.
ELIKHULU PROJECT UPDATE
Following receipt of a positive high-level assessment of the Elikhulu tailings
retreatment project, the Company has mandated DRA Projects (Pty) Limited to
conduct a definitive feasibility study on the project. The results of the study
will be available in November 2016, where after shareholders will be appraised.
The financial information contained in this trading statement has neither been
reviewed nor audited by the Company`s auditors. Pan African anticipates that it
will release its provisional audited results for the period ended
30 June 2016 on or about 21 September 2016.
For further information on Pan African, please visit the Company's website at
www.panafricanresources.com
2 August 2016
Contact Details
Corporate Office
The Firs Office Building
1st Floor, Office 101
Cnr. Cradock and Biermann Avenues
Rosebank, Johannesburg
South Africa
Office: + 27 (0) 11 243 2900
Facsimile: + 27 (0) 11 880 1240
Registered Office
Suite 31
Second Floor
107 Cheapside
London
EC2V 6DN
United Kingdom
Office: + 44 (0) 207 796 8644
Facsimile: + 44 (0) 207 796 8645
Cobus Loots Deon Louw
Pan African Resources PLC Pan African Resources PLC
Chief Executive Officer Financial Director
Office: + 27 (0) 11 243 2900 Office: + 27 (0) 11 243 2900
Phil Dexter John Prior / Paul Gillam
St James's Corporate Services Limited Numis Securities Limited
Company Secretary Nominated Adviser and Joint Broker
Office: + 44 (0) 207 796 8644 Office: +44 (0) 20 7260 1000
Sholto Simpson Matthew Armitt / Ross Allister
One Capital Peel Hunt LLP
JSE Sponsor Joint Broker
Office: + 27 (0) 11 550 5009 Office: +44 (0) 207 418 8900
Julian Gwillim Daniel Thole
Aprio Strategic Communications Bell Pottinger PR
Public & Investor Relations SA Public & Investor Relations UK
Office: +27 (0)11 880 0037 Office: + 44 (0) 203 772 2500
Jeffrey Couch/Neil Haycock/Thomas Rider
BMO Capital Markets Limited
Joint Broker
Office: +44 (0) 207 236 1010
www.panafricanresources.com