Interim Results for the six months ended 31 Dec...
Pan African Resources plc
(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
('Pan African' or the 'Company')
Interim Results for the six months ended 31 December 2012
1. Key Features*
Group
Revenue increased by 8.15% to ZAR668.14 million (2011: ZAR617.80 million).
Attributable profit decreased by 4.30% to ZAR166.62 million (2011: ZAR174.10
million) mainly as a result of once-off transaction costs relating to the
proposed acquisition of Evander Gold Mines Limited ('Evander').
Basic and Headline Earnings per share decreased by 4.64% to 11.50 cents (2011:
12.06 cents).
Cash of ZAR661.24 million (30 June 2012: ZAR255.39 million) on hand at 31
December 2012.
Mining Operations
Barberton Gold Mining Operations ('BGMO')
Gold sold decreased 4.26% to 44,926oz (2011: 46,927oz).
Underground gold production remained consistent at 42,808oz (2011: 43,355oz).
Tonnes milled from underground decreased by 7.53% to 135,000t (2011: 146,000t).
Head grade increased by 1.61% to 11.33g/t (2011: 11.15g/t).
Total cash cost of ZAR233,021/kg (2011: ZAR192,397/kg).
The Lost Time Injury Frequency rate ('LTIFR') improved to 2.16 (2011: 3.09).
Reportable Injury Frequency Rate ('RIFR') improved to 0.62 (2011: 1.03).
Phoenix Tailings Retreatment Plant ('Phoenix')**
First sale of 3,136oz of PGE 6E***.
Achieved a float head grade of 3.75g/t.
Total cash costs of USD861/oz PGE 6E.
Achieved a LTIFR of zero.
Achieved a RIFR of zero.
Near Term Development Projects
Barberton Tailings Retreatment Project ('BTRP')
BTRP construction on schedule and within budget.
Commissioning planned for 30 June 2013.
Capital expenditure of ZAR83.14 million spent during the period under review
('H1 2013').
Acquisition of Evander
Shareholders approved the proposed acquisition of Evander from Harmony Gold
Mines Limited ('Harmony').
Secured ZAR703 million through an oversubscribed rights offer ('Rights Offer')
for purposes of settling a portion of the Evander purchase consideration.
Cash accrued until 31 December 2012 at Evander attributable to Pan African of
ZAR237 million.
* To translate amounts in relation to the Statement of Comprehensive Income to
£, an exchange rate of ZAR13.49 (2011: ZAR12.06) should be applied. To
translate figures in relation to the Statement of Financial Position to £, an
exchange rate of ZAR13.69 (30 June 2012: ZAR12.91), (31 December 2011:
ZAR12.54) should be applied. See section 3 for further commentary on the effect
of exchange rates.
** Phoenix is being reported without prior year comparable figures due to the
plant being fully commissioned on 1 July 2012.
*** PGE 6E refers to the Platinum Group Elements
Commenting on the results, Jan Nelson, CEO said:
"The Group has delivered a solid performance in the first half in spite of
severe cost pressures. We are encouraged by the progress made at BGMO, in
particular with the development of the tailings retreatment project which will
add a further 20,000oz per annum starting in June 2013. The Evander
transaction, a game changing project for the Group, is expected to conclude in
the coming weeks, on receipt of Section 11, and the integration of this project
is already well underway, with a view to doubling the Group's gold production
to 200,000oz in the next full financial year.
"Our focus in the next 6 months will be to deliver on volume and grade and
driving costs down. The Group intends to grow the profit margin and resume the
dividend payment."
Financial Summary:
Six months ended Six months ended
31 December 2012 31 December 2011
(Unaudited) (Unaudited)
Revenue (£) 49,528,638 51,229,660
EBITDA (£) 19,220,142 24,166,658
Attributable profit (£) 12,351,483 14,437,217
EPS (pence) 0.85 1.00
HEPS (pence) 0.85 1.00
Weighted average number of shares in issue 1,449,371,057 1,444,225,674
Net Asset Value 108,351,501 89,230,393
Six months ended Six months ended
31 December 2012 31 December 2011
(Unaudited) (Unaudited)
Revenue (ZAR) 668,141,327 617,801,551
EBITDA (ZAR) 259,279,715 291,436,617
Attributable profit (ZAR) 166,621,505 174,104,904
EPS (cents) 11.50 12.06
HEPS (cents) 11.50 12.06
Weighted average number of shares in issue 1,449,371,057 1,444,225,674
Net Asset Value 1,341,978,735 1,162,321,778
2. Nature of Business
Pan African is a South African based precious metals mining group ('Group')
which produces approximately 95,000oz of gold and approximately 12,000oz of PGE
6E per annum. The Company's strategic focus remains the exploitation of
high-grade ore-bodies that yield high margins with a low cash cost by skilled
and experienced management teams. The Company has agreed to acquire Evander
from Harmony, a transaction that is expected to add approximately 100,000oz of
additional gold production per annum and grow the total gold production base to
approximately 200,000oz per annum.
BGMO is currently constructing a 1.2Mt per annum gold tailings retreatment
plant that will produce approximately 20,000 ounces of gold per annum when
commissioned in June 2013. The Group is currently unhedged and is able to fund
all on-mine capital expenditure from internal cash flows generated by its
operations. The Group remains one of the lowest cash cost producers of gold and
PGE 6E in South Africa.
3. Financial Performance
Pan African is incorporated in England and Wales, its reporting currency is
pound sterling (`£') and its functional currency is South African rand ('ZAR').
All the subsidiary companies within the Group, with the exception of Explorata
Limitada ("Manica")****, are South African and their financial statements are
prepared in ZAR. When subsidiary companies' financial statements are translated
into pound sterling for the purpose of Group consolidation and reporting, the
average and closing ZAR:£ exchange rates for the period have an effect on the
Group consolidated financial results.
During the current period, the average ZAR:£ exchange rate was ZAR13.49 (2011:
ZAR12.06) and the closing ZAR:£ exchange rate was ZAR13.69 (2011: ZAR12.54).
The period-on-period average and closing ZAR:£ exchange rates increased by
11.86% and 9.17%, respectively. The effect of exchange rate movements should be
taken into account when comparing the period-on-period results on the Statement
of Financial Position and Statement of Comprehensive Income.
Statement of Comprehensive Income
Gold Operations
Revenue from gold sales expressed in ZAR terms increased by 3.79% to ZAR641.24
million (2011: ZAR617.80 million). The increase in gold revenue was largely
attributable to the average ZAR gold spot price received increasing by 8.42% to
ZAR458,898/kg (2011: ZAR423,276/kg).
The cost of production increased by 15.95% to ZAR324.41 million (2011:
ZAR279.79 million). The increase was primarily due to increases in electricity
costs of 19.46% to ZAR38.3 Million (2011: ZAR32.06 million) and labour costs by
16.97% to ZAR153.74 million (2011: ZAR131.43 million). The significant increase
in labour costs at BGMO is a result of a once off adjustment made by the group
to bring the pay scales in line with South African Chamber of Mine rates.
Security costs decreased by 12.94% to ZAR13.12 million (2011: ZAR15.07
million).
Group profit margin decreased by 2.17% to ZAR225,877/kg (2011: ZAR230,879/kg).
The total unit production cash cost increased by 21.11% to ZAR233,021/kg (2011:
ZAR192,397/kg).Royalty costs decreased by 27.91% to ZAR17.51 million (2011:
ZAR24.29 million) primarily as a result of increased capital expenditure
related to the construction of the BTRP which also contributed to the Groups
effective ZAR tax rate decreasing to 29.98% (2011:36.76%).
**** On 11th January 2013 Manica was sold to Auroch Minerals NL, resulting in
an effective holding of 38.01%.
PGE Treatment Operations
Revenue from PGE 6E sales expressed in ZAR amounted to ZAR26.90 million. The
effective PGE 6E price achieved was ZAR8,470/oz, and the cash cost of
production achieved was ZAR7,293/oz PGE 6E.
Total cost of production amounted to ZAR23 million and comprised, inter alia,
labour costs (ZAR6.79 million), consumables (ZAR4.77 million), refinery charges
(ZAR2.80 million) and overhead costs (ZAR 2.50 million).
Group
Mining profit decreased by 8.28% to ZAR292.1 million (2011: ZAR318.46 million).
Earnings before interest, tax, depreciation and amortisation ('EBITDA')
decreased by 11.03% to ZAR259.28 million (2011: ZAR291.44million) and
attributable profit decreased by 4.30% to ZAR166.62 million (2011: ZAR174.10
million). In £ terms the attributable profit decreased by 14.47% to £12.35
million (2011: £14.44 million), primarily as a result of the average ZAR:£
exchange rate depreciating by 11.86% during H1 2013.
Other expenses increased 101.18% to ZAR42.75 million (2011: ZAR21.25 million)
mainly as a result of once-off transaction costs relating to the Evander
acquisition of ZAR9.34 million (2011: Nil). Corporate and social investment
increased by 21.61% to ZAR7.54 million (2011: ZAR6.20 million) which amounted
to 4.92% (2011: 3.56%) of the Groups attributable profit.
Income tax decreased by 29.49% to ZAR71.34 million (2011: ZAR101.18 million)
primarily as a result of a significant increase in capital expenditure for the
construction of the BTRP. The Group's effective tax rate in ZAR terms decreased
to 29.98% (2011:36.76%).
Basic and headline earnings per share decreased by 4.64% to 11.50 cents (2011:
12.06 cents), in £ terms decreased by 15.00% to 0.85 pence (2011: 1.00 pence).
Statement of Financial Position
Movements in the Statement of Financial Position are calculated with reference
to the 30 June 2012 in ZAR terms, due to the functional currency of the Group
being ZAR. Accordingly, the closing ZAR:£ exchange rate utilised for conversion
purposes to £ would is ZAR13.69 (30 June 2012: ZAR12.91) to translate the
amounts to £.
Cash on hand increased significantly to ZAR661.24 million (2012: ZAR255.39
million) mainly due to cash generated by the operations and key shareholder
irrevocable deposits received in relation to the Rights Offer. The cash on hand
in relation to the shareholder irrevocable deposits was ZAR429.99 million and
ZAR231.25 million related to the Groups operational cash resources. Property,
Plant and Equipment increased by 12.77% to ZAR908.65 million (2012: ZAR805.74
million) mainly due to construction of the BTRP and on-mine capital
expenditure. Trade and other payables increased by 440.02% to ZAR537.48 million
(2012: ZAR99.53 million) mainly due to cash received in advance from
shareholders in relation to the Rights Offer and the accrual of the associated
commitment fees payable. Trade and other receivables increased by 66.49% to
ZAR146.76 million (2012: ZAR88.15 million) due to increased quantities of gold
being shipped on 31 December 2012 in comparison to 30 June 2012. Break fees
paid to Harmony in relation to the acquisition of Evander contributed to the
increase in Trade and other receivables.
4. Operational Review
4.1 BGMO
Safety & Training
It is with regret that BGMO reported one fatality for H1 2013. On 17 November
2012 Mr G Fourie passed away when the truck he was driving left the road,
overturned and rolled down a hill at Sheba mine. Fatality free shifts for H1
2013 totalled 105,888 (2011: 1,329,723) which decreased as result of the
unfortunate fatality.
The safety performance at BGMO for the first six months of the 2013 financial
year as measured by the All Injury Frequency Rate ('AIFR'), was 14.81 (2011:
21.25), indicating that the total number of incidents decreased during H1 2013.
The LTIFR improved to 2.16 (2011: 3.09) and RIFR to 0.62 (2011: 1.03).
Operating Performance
A total of 44,926oz (2011: 46,927oz) of gold was sold by BGMO (which comprises
the Fairview, Sheba and New Consort sections), a decrease of 4.26% from the
previous period mainly as a result of lock-up in the Biox® plant. This lock-up
is expected to be recovered in the third quarter.. Total underground production
remained relatively consistent at 42,808oz (2011: 43,355oz), whilst the total
surface production increased to 783oz (2011: 264oz).Tonnes milled from
underground operations decreased by 7.53% to 135,000t (2011: 146,000t) and was
mainly attributable to lower tonnages milled at the Sheba mine due to a
mechanical failure of the ZK winder bull gear and shaft refurbishment at
Fairview limiting hoisting capacity. Tonnes milled from surface operations
increased by 162.50% to 21,000t (2011: 8,000t).
The headgrade from underground operations increased by 1.61% to 11.33g/t (2011:
11.15g/t).
BGMO Production Summary
6 months ended 6 months ended 6 months ended
31-Dec-12 31-Dec-11 31-Dec-10
Tonnes Milled - Underground (t'000) 135 146 149
Tonnes Milled - Surface (t'000) 21 8 -
Tonnes Milled - Total (t'000) 156 155 149
Headgrade - Underground (g/t) 11.33 11.15 10.55
Headgrade - Surface (g/t) 1.65 1.65 -
Recovered Grade (g/t) 8.95 9.44 9.57
Overall Recovery (%) 90 89 91
Production: Underground (oz) 42,808 43,355 45,209
Production: Surface/Calcine (oz) 783 264 -
Gold Sold (oz) 44,926 46,927 46,655
Average price: spot (US$/oz) 1,685 1,736 1,286
Average price: spot (ZAR/KG) 458,898 423,276 295,281
Total cash cost (US$/oz) 856 786 767
Total cash cost (ZAR/KG) 233,021 192,397 176,199
Total cost per ton (ZAR/t) 2,086 1,816 1,713
EBITDA ZAR '000 281,038 291,437 144,752
Depreciation ZAR '000 21,404 18,529 21,341
Capital Expenditure ZAR '000 121,641 55,070 45,567
Exchange rate - average ZAR/GBP 13.49 12.06 11.18
Exchange rate - closing ZAR/GBP 13.69 12.54 10.28
Exchange rate - average (R/US$) 8.47 7.58 7.14
Exchange rate - closing (R/US$) 8.47 8.12 6.65
6 months ended 6 months ended
31-Dec-09 31-Dec-08
Tonnes Milled - Underground (t'000) 153 160
Tonnes Milled - Surface (t'000) - -
Tonnes Milled - Total (t'000) 153 160
Headgrade - Underground (g/t) 10.11 11.40
Headgrade - Surface (g/t) - -
Recovered Grade (g/t) 9.25 10.36
Overall Recovery (%) 91 91
Production: Underground (oz) 45,385 47,634
Production: Surface/Calcine (oz) - 3,545
Gold Sold (oz) 45,971 51,186
Average price: spot (US$/oz) 1,032 824
Average price: spot (ZAR/KG) 253,510 235,338
Total cash cost (US$/oz) 670 451
Total cash cost (ZAR/KG) 164,697 134,581
Total cost per ton (ZAR/t) 1,543 1,340
EBITDA ZAR '000 107,297 129,372
Depreciation ZAR '000 17,157 16,122
Capital Expenditure ZAR '000 27,449 34,517
Exchange rate - average ZAR/GBP 12.48 15.13
Exchange rate - closing ZAR/GBP 11.94 13.78
Exchange rate - average (R/US$) 7.64 8.88
Exchange rate - closing (R/US$) 7.39 9.55
Capital Expenditure - Growth Projects
% Completed Potential
Project Metres/ % Equipping Completed of Budget Resource Comments
(Progressive Oz
YTD)
Sheba Edwin The Thomas
Bray - Thomas Reef
Sections Structure was
intersected
and current
development
is focusing
on
determining
the strike
extent of
this
structure.
Sampling of
70 116.7% 10,000 the structure
has yielded
results of
12g/t. The
elevation of
this reef
drive is
around 168m
above the 7
level
elevation.
The mining
configuration
of this block
is being
finalised.
Sheba Pillar Positive
Development progress was
made
developing
and equipping
the area.
99.2 82.7% 9,000 Mining began
in the ore
resource
blocks that
were exposed
during the
first
H1 2013.
Consort 50 The shaft was
West 1 sunk to 53
Decline West level
elevation,
and equipping
of the 52
level reef
box will now
be completed.
This will be
followed by
the waste
73 104.3% 26,000 development
on 52 level
to expose the
reef
structure.
Only once the
reef
structure has
been exposed
on 52 level,
will
development
resume on 53
level.
Consort 40 Development
Level is
Development progressing
137.4 114.5% 10,000 towards the
serpentinite
footwall
contact.
Consort MMR The
Pillar exploration
Development drilling
platform was
completed and
drilling
commenced in
January 2013.
The team was
moved up to
20 level
where the
Consort SI 2
86.8 86.8% 3,200 Shaft must be
equipped for
ore and a
separate
travelling
way. Once
this is
complete,
development
will commence
westward
between the
Consort
Ivaura and
MMR faults.
Fairview 62 Excellent
Level progress is
development being made
with this
278.8 116.2% 49,580 project,
which will
access
additional
high grade
areas.
Fairview 3# The shaft is
Deepening and being
Refurbishment refurbished
from 62 level
to 64 level.
The final
track
alignment is
on-going.
Development
of the return
10 33.3% 344,920 airway from
64 level to
62 level
commenced in
December
2012. The
return airway
has been
shotcreted
from 64 level
to the face
position.
Fairview 11 This project
Level Royal is
Reef Only Equipping 100.0% 13,000 progressing
well and on
plan.
Fairview 1# Development
Opening Up is currently
being done on
22 level in
80m of Development & Equipping 100.0% 24,000 order to
expose the
down-dip
extension of
the Fairview
Geel reef.
Totals 835.2 98.3% 489,700
Maintenance Capital
The major capital expenditure per discipline is summarised as follows:
6 months 6 months
ended 31 Dec ended 31 Dec
Description 2012 2011 Impact on Production
Cost ZAR'000 Cost ZAR'000
Mining Capital 2,982 4,082 To sustain current production levels
Engineering Capital 10,351 7,396 To sustain current production levels
Metallurgical Plants and Biox © Capital 3,169 7,341 To sustain current production levels
Safety and Environment Capital 590 1,314 To sustain current production levels
General Capital 1,365 5,204 To sustain current production levels
Total 18,457 25,337
Mineral Resources Management
Exploration Drilling
During H1 2013 a total of 8,443.5m (2011: 7,740m) of exploration drilling was
completed underground at BGMO and the following significant intersections are
reported:
Section Borehole Number Drill Width (cm) Grade (g/t) Description
Fairview Bh 5899 100 7.02 Strike extension to the North-East of the MRC 11 block at depth.
EBR 19 72 162.50 Free gold on Thomas Reef
36 ZK 990-02 87 28.47 Intersection on hanging wall of 990 Cross Fracture
STOCK 07 71 27.02 Down-dip extension of Stock work body
22-480-01 118 22.04 Strike extension of current working in old area
STOCK 07 90 21.54 Down-dip extension of Stock work body
STOCK 07 65 18.28 Down-dip extension of Stock work body
SW 07 52 14.21 Mineralisation in the foot wall of the porphyry dyke in Sheba West area
33ZKH 12 61 7.73 Mineralisation on ZK Formation contact
SW 06 100 12.85 Mineralisation in the foot wall of the porphyry dyke in Sheba West area
Sheba 33ZKH 15 93 10.46 Mineralisation on ZK Formation contact
3#7-25 261 60.80 Confirming mineralized structure position for mining design
3#7-29 94 50.30 Confirming mineralized structure position for mining design
3#7-27 188 48.05 Confirming mineralized structure position for mining design
40L6 91 36.70 Footwall Lens Mineralisation of the updip of the 45 body East of pegmatite
3#7-28 94 31.50 Confirming mineralised structure position for mining design
3#7-25 261 30.92 Confirming mineralised structure position for mining design
3#7-29 94 29.40 Confirming mineralised structure position for mining design
3#7-29 94 28.00 Confirming mineralised structure position for mining design
3#7-26 87 20.00 Confirming mineralised structure position for mining design
3#7-24 261 11.71 Confirming mineralised structure position for mining design
3#7-28 94 11.30 Confirming mineralised structure position for mining design
New Consort 3#7-26 87 10.00 Confirming mineralised structure position for mining design
Development results
New Consort Fairview Sheba
Metres g/t Metres g/t Metres g/t
Reef 261.9 3.43 437.6 10.99 547.9 4.07
Stope Development 227.6 8.44 62.4 19.15 221.1 5.97
Capital 288.4 - 438.9 - 167.0 -
Waste working cost 355.7 - 246.8 - 597.1 -
Waste Total 644.1 - 685.7 - 764.1 -
Total 1,777.7 - 1871.4 - 2,297.2 -
Phoenix
The chrome tailings retreatment plant ('CTRP') was designed to treat sulphide
material from International Ferrous Metals Limited's ('IFM') Lesedi Mine. IFM
initially supplied Phoenix with sulphide-rich material from its Lesedi
underground operations. However, IFM cut back drastically on operations at
Lesedi in January 2012 and started mining oxidised material from the open cast
section. This resulted in oxidised tailings being blended into the Phoenix
feedstock.
The metallurgy of oxidised tailings negatively affects recovery and concentrate
grade in the CTRP. This in turn results in poor PGM concentrate production. The
oxide versus sulphide ratio has increased since beginning November 2012 and
100% oxide material is now being mined by IFM. The Group is currently
expediting an additional Tailings Storage Facility ('TSF') that will allow
management at Phoenix to bypass oxidised tailings. The TSF will be completed
within the next 7 months and the Group will expect recoveries and revenue to
increase significantly at this time.
Phoenix is currently implementing the following to address the issue of
oxidised feedstock:
increase of feed tonnages into the plant to increase PGE 6E content;
investigating methods to improve oxide material recoveries;
complete the new TSF to bypass oxide tailings; and
Focus on further operating cost reductions.
a. Safety & Training
Phoenix continues to achieve excellent safety targets with the LTIFR and RIFR
remaining at zero. All employees were trained to ensure safety risk compliance.
b. Operating Performance
A total of 3,136oz of PGE 6E were sold. The ounces produced are lower than
anticipated due to a reduction in head grade of 16.67% to 3.75g/t versus the
budgeted head grade of 4.50g/t. Recoveries also reduced by 42.42% to 19% versus
a budget of 33%. The oxidised tailings received from IFM is the main
contributing factor to this decrease.
c. Phoenix Production Summary
6 Months Ended
31 Dec 2012
Sales (ZAR) 26,904,459
Oz Dispatched (oz) 3,136
DMT Tonnages (t) 893
Plant Recoveries (%) 19
Head Grade (g/t) 3.75
Float Feed Tonnes (t) 121,160
Basket Price ($/oz) 1,013
Exchange Rate ($/ZAR) 8.47
Cost Per Plant Feed Ton ($/t) 19.60
Cost Per PGE 6E ($/oz) 861
Plant Feed Tonnes (t) 138,561
Total Operating Cost (ZAR'000) 23
Depreciation (ZAR'000) 6,024
EBITDA (ZAR'000) 1,946
Capital Expenditure (ZAR'000) 1,042
d. Growth Projects
% Completed Potential Amount
Project of Budget Resource Spent Comments
(Progressive Oz ZAR'000
YTD)
The scoping document has been
submitted according to the Mineral
TSF EIA 44% 0 and Petroleum Resources Development
application 656 Act (MPRDA) and the National
Environmental Development Act
(NEMA).
e. Maintenance Capital
Cost
CTRP Impact on production
ZAR'000
Re-mining enclosure 104 Safety and Health improvement.
Construction works 66 Environmental compliance.
Telescopic handler 778 Maintenance
Batch Float machine 81 To improve float recoveries.
Laboratory equipment 14 To improve float recoveries.
Total 1,043
5. Near-Term Development Projects
5.1 BTRP
Construction of the BTRP on a site adjoining the Bramber TSF began in April
2012, and the following major construction milestones were achieved:
Construction Update
Civils Construction
All civil work has been completed. The thickener, furnace room, change house
and offices are progressing according to schedule.
Structural, Mechanical Erection and Piping
Construction of the carbon in leach ('CIL') tanks has progressed well and all
nine tanks have been constructed to their full height. Mechanical strengthening
remains to be completed.
Electrical Installations
The substation design was finalised and documentation submitted for quality
review. Quotations were received and orders placed to move the Eskom overhead
lines that are currently running through the planned TSF area.
The forecast schedule of the BTRP Project is summarised below:
Description Date
Construction Completion 1 April 2013
Cold Commissioning 1 May 2013
Wet Commissioning 1 June 2013
Hot Commissioning 30 June 2013
BTRP Capital Expenditure
Historical Capital Forecasted Capital
Prior Capital Full
Financial Spent - 31 Capital Forecasted Project Date of
Description Year December Spent Capital to Forecasted Final
Capital 2012 to Date Complete Capital Completion
Spent Costs
ZAR'000 ZAR'000 ZAR'000 ZAR'000 ZAR'000
Construction September
and 42,819 81,716 124,535 107,626 232,161 2013
Infrastructure
Quantity - 550 550 1,759 2,309 September
Surveying 2013
Environmental 503 223 726 237 963 February
2013
BTRP Tailings October
Storage - 652 652 57,598 58,250 2013
Facility
Harper Dumps 10,000 - 10,000 - 10,000 Completed
Purchased
TSF Land 2,095 - 2,095 - 2,095 Completed
Purchased
Total 55,417 83,141 138,558 167,220 305,778
6. Acquisition of Evander
Pan African entered into an agreement in terms of which Emerald Panther
Investments 91 Proprietary Limited ("EP"), a wholly owned subsidiary of the
Company, will purchase all the shares of and claims against Evander from
Harmony for ZAR1.5 billion during May 2012 ("Evander Transaction"). The
Evander Transaction remains subject to the consent of the Minister of Mineral
Resources in accordance with section 11 of the MPRDA. Once the Evander
Transaction becomes unconditional, EP will be required to pay the purchase
consideration in cash to Harmony. The aggregate cash flows accumulated at
Evander from April 2012 will be acquired by EP, and totalled ZAR237 million as
at the end of December 2012.
Refer to Harmony's website for the most recent results of Evander at http://
www.harmony.co.za/investors.
7. Disposal of Manica
Pan African announced on 29 August 2012 that it had entered into an agreement
to dispose of 100% of its Manica Gold Project ("Manica") to ASX quoted Auroch
Minerals Mozambique (Pty) Ltd, a wholly owned subsidiary of Auroch Minerals NL
("Auroch), for a total potential purchase consideration of AUD 6 million (£4
million / ZAR52.4 million) payable in cash and 96,666,668 shares in Auroch,
subject to certain terms and conditions.
On the 31 December 2012 all the conditions precedent to the agreement were met
and as a result on 11 January 2013 20,900,000 Auroch ordinary shares were
issued to Pan African, and a further 4,100,000 Auroch ordinary shares are
expected to be issued to the Company in February 2013. Payment of the balance
of the purchase consideration in shares and cash is deferred until the
achievement of certain milestones in accordance with the agreement between Pan
African and Auroch.
On 11th January 2013 the Company held an effective holding of 38.01% in Auroch.
8. Capital Expenditure and Commitments
Capital expenditure at BGMO totalled £9.02 million (2011: £4.57 million) and
comprised, development capital of £1.49 million (2011: £2.47 million),
maintenance capital of £1.39 million (2011: £2.10 million) and BTRP capital of
£6,16 million (2011:Nil).
Capital expenditure on Phoenix totalled £0.08 million (2011:£4.57 million).
There was £24.43 million (2011: £0.57 million) of outstanding orders contracted
for capital commitments at the end of H1 2013 at BGMO and £Nil (2011: £0.5
million) outstanding at Phoenix.
Operating lease commitments, which fall due within the next year, amounted to £
0.038 million (2011: £0.179 million) as at 31 December 2013.
In ZAR terms the Capital Expenditure and Commitments were:
Capital expenditure at BGMO totalled ZAR121.64 million (2011: ZAR55.07 million)
and comprised, development capital of ZAR20.04 million (2011:
ZAR29.73 million), maintenance capital of ZAR18.46million (2011: ZAR25.34
million) and BTRP capital of ZAR83.14 million (2011: Nil).
Capital expenditure on Phoenix totalled ZAR1.05 million (2011: ZAR55.11
million).
There was ZAR334.5 million (2011: ZAR6.87 million) of outstanding orders
contracted for capital commitments at the end of H1 2013 at BGMO and ZAR Nil
(2011: ZAR6.0million) outstanding at Phoenix.
Operating lease commitments, which fall due within the next year, amounted to
ZAR0.46 million (2011: ZAR2.16million) as at 31 December 2013.
9. Directorship Change
There were no directorship changes during H1 2013.
10. Shares Issued
During H1 2013 the Company announced the issue and allotment of 3,000,000 new
ordinary shares in respect of share options issued on 16 August 2007 which were
exercised at a price of 7p for a total consideration of £0.21 million.
Furthermore, the Company obtained approval from its shareholders to issue
370,071,902 new Pan African ordinary shares in terms of the Rights Offer so as
to raise funds for the settlement of a portion of the Evander Transaction
purchase consideration. The Rights Offer was successfully concluded during
January 2013.
11. Dividend
The Company has adopted a policy whereby dividends are considered and, if
deemed appropriate by the board of directors of the Company ('Board'), declared
on an annual basis. Pan African will consider a final dividend subsequent to
the finalisation of financial year-end results. The consideration of any
dividend will take account of cash flow requirements and growth plans, whilst
recognising that where possible, the payment of a dividend on a consistent
basis increases shareholder value.
During H1 2013 the Company has not declared a dividend as result of raising
equity capital to fund the Evander Transaction. The dividend for the previous
financial year was 0.5135 pence per share totalling £7.42 million.
12. Going Concern
The Board is satisfied that the Group is a going concern for the foreseeable
future, and have adopted the going-concern basis in preparing these interim
results
13. Accounting Policies
The accounting policies applied in compiling the interim results are in terms
of International Financial Reporting Standards ('IFRS') and consistent with
those applied in preparing the Group's annual financial statements for the year
ended 30 June 2012.
The financial information set out in this announcement does not constitute the
Company's statutory accounts for the half year ended 31 December 2012.
The interim results have been prepared and presented in accordance with, and
containing the information required by IFRS on Interim Financial Reporting,
International Accounting Standards ('IAS') 34. The financial information
included in the interim results has been prepared in accordance with the
recognition and measurement criteria of IFRS. This announcement does not itself
contain sufficient disclosure information to comply fully with IFRS.
The interim results have not been reviewed or reported on by the Company's
external auditors.
14. Johannesburg Stock Exchange listing
The Company has a dual primary listing on the main board of the JSE Limited
('JSE') and the Alternative Investment Market ('AIM') of the London Stock
Exchange.
The preliminary announcement has been prepared in accordance with the framework
concepts and the measurement and recognition requirements of IFRS, the AC 500
standards as issued by the Accounting Practices Board and the information as
required by IAS 34: Interim Financial Reporting.
15. AIM Listing
The financial information for the period ended 31 December 2012 does not
constitute statutory accounts as defined in sections 435 (1) and (2) of the
United Kingdom Companies Act 2006.
The Group announcement (the Group's financial statements) has been prepared in
accordance with IFRS and International Financial Reporting Interpretation
Committee interpretations adopted for use by the European Union, with those
parts of the Companies Act 2006 applicable to companies reporting under IFRS.
16. Segmental Reporting
A segment is a distinguishable component of the Group that is engaged in
providing products or services in a particular business sector (operating
segment), which is subject to risk and rewards that are different to those of
other segments. The segments which the Group reviews the business activities of
are: Mining Operations, Near-Term Mining Operations and Development Projects.
17. Directors' Dealings
No director dealings occurred during period under review other than certain
directors of the Company disclosing their intention to deal in the Company's
shares for purposes of the Rights Offer.
The following directors' dealings were committed to during H1 2013 and
subsequently taken up after in January 2013 in respect of the Rights Offer:
On 14 January 2013 Mr. JAJ Loots was issued 16,575 shares at ZAR1.90 for a
total consideration of ZAR31,492.50.
On 14 January 2013 Mr. JP Nelson was issued 13,157 shares at ZAR1.90 for a
total consideration of ZAR24,998.30.
On 14 January 2013 Mr. RG Still was issued 510,000 shares at ZAR1.90 for a
total consideration of ZAR969,000.00.
On 14 January 2013 the Alexandra Trust of which Mr. RG Still is a trustee was
issued 3,169,880 shares at ZAR1.90 for a total consideration of
ZAR6,022,772.10.
On 14 January 2013 Pangea Exploration (Pty) Ltd of which Mr. RG Still is a
director was issued 457,418 shares at ZAR1.90 for a total consideration of
ZAR869,094.20.
On 16 January 2013 The Alexandra Family Trust of which Mr. RG Still is a
trustee took up shares pursuant to the excess shares in terms of the Company's
R703 million rights offer. The trust was issued 72,836 shares at R1.90 for a
total consideration of R138,388.40.
Shanduka Gold (Pty) Ltd subscribed for 70,189,473 shares in the Rights offers
resulting in a shareholding of 23.96% post the Right offer.
18. Significant events post the reporting period
Evander Transaction Funding
The Group completed the raising of ZAR703 million through the Rights Offer. Pan
African implemented the Rights Offer through the issue of 370,071,902 new Pan
African ordinary shares at a subscription price of ZAR1.90 or 14 pence per
Rights Offer share. The Rights Offer closed on Friday, 11 January 2013. Pan
African received subscription applications for a total of 645,898,862 Rights
Shares, equating to 175% of the available Rights Shares.
Pan African has successfully agreed the terms for a new revolving credit
facility ("RCF") of ZAR600 million during January 2013 which shall replace the
previous RCF currently held at BGMO when the Evander Transaction becomes
unconditional.
The Groups cash resources on hand at 31 December 2012 was ZAR231.25 million for
the Group excluding the shareholder irrevocable cash held, and Evander had a
further ZAR237 million on hand, of which ZAR150 million is planned to be
utilised to settle a portion of the Evander Transaction purchase consideration
due to Harmony.
Disposal of Manica
On 11th January 2013 Auroch issued 20,900,000 ordinary shares to the Company,
resulting in an effective holding of 38.01%.
Jan Nelson was also appointed as a Non-Executive Director to Auroch on 11th
January 2013.
With effect from 11th January 2013, Auroch will be accounted for within the
Group as an investment in an associate.
19. The Future
Despite rising cost pressures and lower output mainly as a result of gold
lock-up in the BIOX® plant at BGMO, a higher gold price and continued high
grades resulted in a solid performance from the Group. The Group continued to
fund the construction of the BTRP from cash flow amounting to ZAR83 million
with a further investment of ZAR38 million allocated to maintenance of
infrastructure and finding new ore-bodies.
The Group successfully obtained shareholder approval for the Evander
transaction and secured irrevocable undertakings from key institutional
investors to fund part of the acquisition of Evander to a total of ZAR703
million. In addition a RCF of ZAR600 million was signed with two South African
banks. Since 1 April 2012 Evander generated ZAR237 million in free cash flow
attributable to Pan African. In addition the Group had a cash balance of ZAR661
million as at the end of the reporting period. The Evander transaction will
double Group gold production, significantly increase revenue and profits and
impact positively on market capitalisation.
The Group furthermore divested of the Manica project to Auroch Minerals NL for
cash and shares and the board believes that its shareholding in this project
will add significant shareholder value in the future.
The focus in the coming six months will be to:
conclude the Evander transaction and successfully integrate the operation
complete the construction of the BTRP and commission the plant
The Group and Managements main focus will be on the safe delivery of production
targets (volume and grade) and cost reductions.
Jan Nelson Neal Reynolds
Chief Executive Officer Acting Financial Director
13 February 2013
20. Consolidated Statement of Comprehensive Income for the period ended 31
December 2012
Group
31 December 2012 31 December 2011
(Unaudited) (Unaudited)
£ £
Revenue
Gold sales 47,534,238 51,229,660
Platinum Sales 1,994,400 -
Realisation costs (89,012) (84,965)
On - mine revenue 49,439,626 51,144,695
Cost of production - Gold (24,048,124) (23,201,120)
Cost of production - Platinum (1,705,022) -
Depreciation (2,033,201) (1,536,448)
Mining Profit 21,653,279 26,407,127
Other expenses (3,168,636) (1,762,357)
Royalty costs (1,297,702) (2,014,560)
Net income before finance income and finance costs 17,186,941 22,630,210
Finance income 547,668 223,324
Finance costs (94,718) (26,069)
Profit before taxation 17,639,891 22,827,465
Taxation (5,288,408) (8,390,248)
Profit after taxation 12,351,483 14,437,217
Other comprehensive income:
Foreign currency translation differences (4,501,247) (8,533,732)
Total comprehensive income for the year 7,850,236 5,903,485
Profit attributable to:
Owners of the parent 12,351,483 14,437,217
12,351,483 14,437,217
Earnings per share 0.85 1.00
Diluted earnings per share 0.85 0.99
Weighted average number of shares in issue 1,449,371,057 1,444,225,674
Diluted number of shares in issue 1,456,619,851 1,452,808,064
Net Asset Value 108,351,501 89,230,393
Headline earnings per share is calculated :
Basic earnings 12,351,483 14,437,217
Adjustments: - -
Headline earnings 12,351,483 14,437,217
Headline earnings per share 0.85 1.00
Diluted headline earnings per share 0.85 0.99
21. Consolidated Statement of Financial Position as at 31 December 2012
Group
31 December 2012 31 December 2011 30 June 2012
(Unaudited) (Unaudited) (Audited)
£ £ £
ASSETS
Non-current assets
Property, plant and equipment and mineral rights 66,373,510 59,516,827 62,411,655
Other intangible assets - 13,332,945 -
Goodwill 21,000,714 21,000,714 21,000,714
Rehabilitation trust fund 2,574,825 2,669,022 2,662,934
89,949,049 96,519,508 86,075,303
Current assets
Inventories 2,023,413 1,487,066 1,868,735
Trade and other receivables 10,720,089 7,000,352 6,828,047
Cash and cash equivalents 48,301,167 4,994,854 19,782,179
61,044,669 13,482,272 28,478,961
Assets held for sale 12,145,808 - 13,135,215
TOTAL ASSETS 163,139,526 110,001,780 127,689,479
EQUITY AND LIABILITIES
Capital and reserves
Share capital 14,512,623 14,449,643 14,482,623
Share premium 48,940,879 50,982,790 51,149,299
Translation reserve (6,438,756) (223,190) (1,937,509)
Share option reserve 958,932 799,227 904,902
Retained income 71,784,224 44,628,324 59,432,741
Realisation of equity reserve (10,701,093) (10,701,093) (10,701,093)
Merger reserve (10,705,308) (10,705,308) (10,705,308)
Equity attributable to owners of the parent 108,351,501 89,230,393 102,625,655
Total equity 108,351,501 89,230,393 102,625,655
Non - Current liabilities
Long term provisions 2,939,853 2,994,493 3,043,954
Long term liabilities 652,356 237,357 868,881
Deferred taxation 11,428,288 9,320,441 10,088,530
15,020,497 12,552,291 14,001,365
Current liabilities
Trade and other payables 39,260,503 6,947,074 7,709,729
Current tax liability 507,025 1,272,022 3,352,730
39,767,528 8,219,096 11,062,459
TOTAL EQUITY AND LIABILITIES 163,139,526 110,001,780 127,689,479
22. Consolidated Cash flow Statement for the period ended 31 December 2012
Six months ended Six months ended
31 December 2012 31 December 2011
(Unaudited) (Unaudited)
£ £
Cash Generated by operations 15,500,905 23,585,992
Taxation paid (5,675,218) (6,824,551)
Royalty paid (1,187,205) (1,724,084)
Dividends paid - (7,416,176)
Net Finance Income 452,950 197,255
Cash inflow from operating activities 9,091,432 7,818,436
Cash outflow from investing activities (9,104,868) (9,140,205)
Cash inflow from financing activities 31,626,645 59,197
Net increase/(decrease) in cash equivalents 31,613,209 (1,262,572)
Cash at the beginning of period 19,782,179 10,123,822
Effect of foreign currency rate changes (3,094,221) (3,866,396)
Cash at end of year 48,301,167 4,994,854
23. Consolidated Statement of Changes in Equity for the period ended 31
December 2012
Six months ended Six months ended
31 December 2012 31 December 2011
(Unaudited) (Unaudited)
£ £
Shareholders' equity at start of period 102,625,655 90,746,110
Net Share (Costs)/Issues (2,178,420) 59,197
Share Option Reserve 54,030 (62,223)
Other Comprehensive Income (4,501,247) (8,533,732)
Profit for the period 12,351,483 14,437,217
Dividend - (7,416,176)
Total Equity 108,351,501 89,230,393
24. Consolidated Segment Report for the period ended 31 December 2012
31 December 2012
BGMO Phoenix Corporate Group
and Growth
Projects
£ £ £ £
Revenue
Gold sales 47,534,238 - - 47,534,238
Platinum Sales - 1,994,400 - 1,994,400
Realisation costs (89,012) - - (89,012)
On - mine revenue 47,445,226 1,994,400 - 49,439,626
Cost of production gold (24,048,124) - - (24,048,124)
Cost of production platinum - (1,705,022) - (1,705,022)
Depreciation (1,586,655) (446,546) - (2,033,201)
Mining Profit 21,810,447 (157,168) - 21,653,279
Other expenses (1,266,372) (145,153) (1,757,111) (3,168,636)
Royalty costs (1,297,702) - - (1,297,702)
Net income before finance income and finance costs 19,246,373 (302,321) (1,757,111) 17,186,941
Finance income 38,851 - 508,817 547,668
Finance costs (94,718) - - (94,718)
Profit before taxation 19,190,506 (302,321) (1,248,294) 17,639,891
Taxation (5,336,644) 48,236 - (5,288,408)
Profit after taxation 13,853,862 (254,085) (1,248,294) 12,351,483
31 December 2012
Segmental Assets* 59,061,456 18,352,064 64,725,292 142,138,812
Segmental Liabilities 20,881,848 62,098 33,844,079 54,788,025
Goodwill - - - 21,000,714
Net Assets (excluding goodwill) 38,179,608 18,289,965 30,881,213 87,350,787
Capital Expenditure 9,017,135 77,457 10,276 9,104,868
31 December 2011
BGMO Phoenix Corporate Group
and Growth
Projects
£ £ £ £
Revenue
Gold sales 51,229,660 - - 51,229,660
Platinum Sales - - - -
Realisation costs (84,965) - - (84,965)
On - mine revenue 51,144,695 - - 51,144,695
Cost of production gold (23,201,120) - - (23,201,120)
Cost of production platinum - - - -
Depreciation (1,536,448) - - (1,536,448)
Mining Profit 26,407,127 - - 26,407,127
Other expenses (1,203,656) (131,801) (426,900) (1,762,357)
Royalty costs (2,014,560) - - (2,014,560)
Net income before finance income and finance costs 23,188,911 (131,801) (426,900) 22,630,210
Finance income 29,227 4,998 189,099 223,324
Finance costs (26,069) - - (26,069)
Profit before taxation 23,192,069 (126,803) (237,801) 22,827,465
Taxation (8,392,325) 2,077 - (8,390,248)
Profit after taxation 14,799,744 (124,726) (237,801) 14,437,217
30 June 2012
Segmental Assets* 48,864,455 19,617,673 38,206,637 106,688,765
Segmental Liabilities 23,552,791 275,378 1,235,655 25,063,824
Goodwill - - - 21,000,714
Net Assets (excluding goodwill) 25,311,664 19,342,295 36,970,982 81,624,941
Capital Expenditure 10,739,237 6,672,468 13,202 17,424,906
Appendix 1: Consolidated Statement of Comprehensive Income in ZAR terms for the
period ended 31 December 2012
Group
31 December 2012 31 December 2011
(Unaudited) (Unaudited)
ZAR ZAR
Revenue
Gold sales 641,236,871 617,801,551
Platinum Sales 26,904,456 -
Realisation costs (1,200,772) (1,024,631)
On - mine revenue 666,940,555 616,776,920
Cost of production - Gold (324,409,193) (279,792,759)
Cost of production - Platinum (23,000,747) -
Depreciation (27,427,881) (18,528,719)
Mining Profit 292,102,734 318,455,442
Other expenses (42,744,900) (21,253,057)
Royalty costs (17,506,000) (24,294,487)
Net income before finance income and finance costs 231,851,834 272,907,898
Finance income 7,388,041 2,693,165
Finance costs (1,277,746) (314,378)
Profit before taxation 237,962,129 275,286,685
Taxation (71,340,624) (101,181,781)
Profit after taxation 166,621,505 174,104,904
Other comprehensive income:
Foreign currency translation differences (60,721,822) (102,912,119)
Total comprehensive income for the year 105,899,683 71,192,785
Profit attributable to:
Owners of the parent 166,621,505 174,104,904
166,621,505 174,104,904
Earnings per share 11.50 12.06
Diluted earnings per share 11.44 11.98
Weighted average number of shares in issue 1,449,371,057 1,444,225,674
Diluted number of shares in issue 1,456,619,851 1,452,808,064
Net Asset Value 1,341,978,735 1,162,321,778
Headline earnings per share is calculated :
Basic earnings 166,621,505 174,104,904
Adjustments: - -
Headline earnings 166,621,505 174,104,904
Headline earnings per share 11.50 12.06
Diluted headline earnings per share 11.44 11.98
1. Contact Details
Pan African Resources
Jan Nelson, Chief Executive Officer
Office: +27 (0) 11 243 2900
Canaccord Genuity Limited
Peter Stewart
Office: +44 (0) 20 7523 8350
One Capital (Pty) Ltd
Sholto Simpson/Megan Young
Office: +27 (0) 11 550 5000
St James's Corporate Services Limited
Phil Dexter
Office: +44 (0) 20 7499 3916
Gable Communications
Justine James
Office: +44 (0)20 7193 7463
Mobile: +44 (0) 7525 324431
Vestor Media and Investor Relations
Louise Brugman
Office: +27 (0) 11 787 3015
2. Disclaimer
Statements in this presentation, other than historical facts, that address,
without limitation, exploration activities, mining potential and future plans
and objectives of Pan African Resources plc ("Pan African") are
"forward-looking statements" and "forward looking information" that involve
various risks. Assumptions and uncertainties are not statements of fact. The
directors and management of Pan African are of the belief that the expectations
expressed in such forward-looking statements or forward-looking information are
based on reasonable assumptions, expectations, estimates and projections,
however such statements should not be construed as being guarantees or
warranties (whether express or implied) of future performance.
There can be no assurance that such statements will prove to be accurate and
actual values, results and future events could differ materially from those
anticipated in such statements. Important factors that could cause actual
results to differ materially from statements expressed in this presentation
include, among others, the actual results of exploration activities, technical
analysis, the lack of availability to Pan African of necessary capital on
acceptable terms, general economic, business and financial market conditions,
political risks, industry trends, competition, changes in government
regulations, delays in obtaining governmental approvals, interest rate
fluctuations, currency fluctuations, changes in business strategy or
development plans and other risks. Although Pan African has attempted to
identify important factors that could cause actual results to differ
materially, there may be other factors that cause results not to be as
anticipated, estimated or intended.
Neither Pan African nor its directors, management and its affiliates represent
guarantee that the assumptions underlying such statements are free from errors
nor do they accept any responsibility for the future accuracy of the opinions
expressed in this presentation. Any statements in this presentation speak only
at the time of issue. Pan African does not undertake to update any
forward-looking statements that are included in this presentation, or revise
any changes in events, conditions or circumstances on which any such statements
are based, except in accordance with applicable securities laws and stock
exchange requirements.
No representation or warranty, expressed or implied, is made and no reliance
should be placed on the accuracy, actuality, fairness, or completeness of the
information presented. None of Pan African or any of its affiliates, directors,
officers, employees and advisers or any other person shall have any liability
whatsoever for any losses arising, directly or indirectly, from any information
contained in the presentation. This presentation does not constitute an offer
or invitation to purchase or subscribe for any shares of Pan African and no
part of this presentation shall form the basis of or be relied upon in
connection with any contract or commitment.
By accepting this presentation the recipient acknowledges that it will be
solely responsible for its own assessment of the market position of Pan African
and that it will conduct its own analysis and be solely responsible for forming
its own view of the potential future performance of Pan African.
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