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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