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Pan African Resources PLC (PAF)

  Print      Mail a friend       Annual reports

Tuesday 19 August, 2008

Pan African Resources PLC

Cons. unaudited prov. results for year ended 30...


Pan African Resources PLC

Consolidated unaudited provisional results for the financial year ended

30 June 2008

Pan African Resources PLC

(`Pan African' or the `Company')

(Incorporated and registered in England and Wales under the Companies Act 1985
with registered number 3937466 on 25 February 2000)

Share code on AIM: PAF

Share code on AltX: PAN

ISIN: GB0004300496

SALIENT FEATURES

- EBITDA of £13,7 million

- Gold sales of 99,078 oz

- Total cash cost of US$ 476/oz sold

- Acquisition of Barberton Mines

- Now an unhedged gold company

- Considerable progress and encouraging results from exploration projects

- Geological footprint in West Africa enhanced through the acquisition of three
gold properties in Ghana

FINANCIAL PERFORMANCE

                                          12 months ended 30 12 months ended 30
                                                   June 2008          June 2007
                                                                    (Unaudited)
                                                 (Unaudited)                   
                                                                               
Revenue                             (GBP)         39,254,557         26,684,796
                                                                               
Cash Mining Profit                  (GBP)         13,710,819          5,804,036
                                                                               
Attributable profit                 (GBP)          5,460,067          2,067,985
                                                                               
EPS                               (pence)               0.52               0.35
                                                                               
HEPS                              (pence)               0.52               0.35
                                                                               
Weighted average number of                     1,043,789,285        593,740,476
shares in issue                                                                

* HEPS - Headline Earnings Per Share - refer to calculation under Consolidated
Income Statement 

Comparative information for the previous year incorporates 12 months of
Barberton in terms of IFRS 3: Business Combinations as the Company's
acquisition of Barberton represents a reverse takeover. The figures for the
year ended 30 June 2008 incorporates 12 months of Barberton and 11 months of
Pan African.

OVERVIEW

Pan African is a gold mining, development and exploration Company on the
African continent with both production ounces and a portfolio of exploration
assets.

The acquisition of Barberton Mines (Pty) Ltd ("Barberton") in South Africa
during 2007 transformed the Company from a junior exploration company to a
mid-tier gold producer with a pipeline of exploration projects. The resultant
cash flow and enhanced metallurgical, engineering and mining skills base enable
the Company to pursue mining and exploration projects to further grow the
Company.

In addition to its 74% stake in Barberton (Shanduka Resources is a 26%
shareholder), Pan African is exploring concessions in Mozambique, the Central
African Republic, South Africa and Ghana. The Company is also actively seeking
partnerships and Joint Ventures with other gold mining companies.

Pan African has been given first right of refusal on any gold project
discovered in Africa by both Pangea Exploration (Pty) Ltd and Metorex Limited
(Metorex Limited owns 55% of Pan African), the Company's largest shareholder.

Pan African is quoted on AIM, the international market for smaller growth
companies operated by the London Stock Exchange under the share code "PAF",
with a secondary listing on the Alternative Exchange (AltX), a division of the
JSE Limited, under the share code "PAN".

OVERALL PERFORMANCE

Pan African today announces that for the year ended 30 June 2008, EBITDA was £
13.7 million, which incorporates 12 months of Barberton and 11 months of Pan
African. The Company has benefited from the robust gold price at its
operations. The EBITDA was reduced by a hedging loss of £ 2.2 million. No
further hedges have been entered into on gold sales after 30 June 2008. Pan
African has accelerated the capital expenditure at Barberton to replace ore
reserves as well as its spending at its projects in Mozambique, Ghana and the
Central African Republic.

SAFETY AND TRAINING

While the Company conducts its activities with due regard for the safety of its
employees and runs approved training programmes through training centres
located at its mining operations, we regret to report that two fatal accidents
occurred during the past 12 months. Both accidents were on the Sheba operation,
one accident involved a contractor on 20 September 2007 and the other, an
employee of the mine on 19 February 2008. Our sincere condolences are extended
to the families of the deceased.

REVIEW OF BARBERTON MINING OPERATIONS

The three operating gold mines in the Barberton area; Fairview, Sheba and New
Consort together with the Calcine dump retreatment operation produced 99,078oz
of gold, an improvement on the previous year. Gold production from the mines
was incremented by the retreatment of the Calcine dump. This production,
together with a buoyant gold price and well controlled cost management,
resulted in a strong cash flow from the operations. During the year, Barberton
sold 99,078 oz, of which 10,696 oz were sold against its hedge, realising a
hedging loss of £2.2 million. At the end of the current reporting period all
hedge contracts had been met and gold sales in the new year will be at the spot
price.

                               2008       2007       2006       2005       2004
                                                                               
Tons Milled          (t)    315,305    330,367    313,779    316,094    349,219
                                                                               
Headgrade          (g/t)        8.9        9.2       10.7       11.1       10.4
                                                                               
Overall              (%)         91         92         92         92         91
Recovery                                                                       
                                                                               
Production:         (oz)     82,436     90,022     99,281    103,847    106,258
Underground                                                                    
                                                                               
Production:         (oz)     13,513          -          -          -          -
Calcine Dump                                                                   
                                                                               
Gold Sold           (oz)     99,078     89,572     99,924    102,914    106,773
                                                                               
Average         (USD/oz)        823        640        528        433        397
Price: Spot                                                                    
                                                                               
Average         (USD/oz)        451        415        438        511        455
Price: Hedge                                                                   
                                                                               
Total Cash      (USD/oz)        476        465        429        427        340
Cost USD/oz                                                                    
sold                                                                           
                                                                               
Capital            (GBP)  2,901,792  1,637,359  1,091,965  1,021,041  1,054,288
Expenditure                                                                    
                                                                               
Exchange rate  (ZAR/GBP)      14,68      13,95        n/a        n/a        n/a
- average                                                                      
                                                                               
Exchange rate  (ZAR/GBP)      15,56      14,18        n/a        n/a        n/a
- closing                                                                      

* 74% of the 2008 results are attributable to the equity shareholders of Pan
African

CALCINE SLIMES DAM RETREATMENT PROJECT

The calcine project commenced during the last quarter of 2007, utilising an
existing treatment plant. Capital expenditure of £600,000 was spent on a new
tailings facility for the project. This year it yielded 13,513oz of gold at a
cash cost of US$ 291/oz. The calcine project reached the end of its life during
July 2008.

RESERVE REPLACEMENT PROJECTS

Sheba - Southwell Adit

The re-equipping of the adit, inter-levels and incline shaft was completed and
the necessary development done to access a reserve block of reef. Raising on
this orebody will start in the new financial year.

Sheba - 35 ZK Decline

The decline to access the Zwartkoppies reef below 35 level has commenced. The
headgear section is complete and a winder is in the process of being installed.
During the next financial year sinking will commence and the development of the
first level will take place.

Sheba - Edwin Bray to Thomas & Joe's Luck area

The Edwin Bray adit was re-equipped and the necessary services and
infrastructure were reinstalled. Development of the cross-cut and airway has
commenced to access Joe's Luck and Thomas orebodies. A further 800m of flat
development is required, however it is envisaged that this development will
enable the operation to prospect a number of prospective geological structures
along the way.

Consort - 50 Level Declines

The east and west orebodies below 50 level at Consort are being accessed by two
decline shafts. The headgears, inclines and infrastructure at both declines
have been completed and sinking started. Both these orebodies have been drilled
and evaluated. This new infrastructure to access these orebodies will be
completed in 2010.

Fairview - MRC development

The development of the ramp system at Fairview continues below 60 level to
access the MRC reef and stoping continues. This ramp will take mining to the 62
level, thereafter plans are being investigated to deepen the No. 3 sub-incline
shaft down to 68 level.

POWER SUPPLY

Barberton has been affected by power outages in South Africa, however these
have occurred mainly during off shift periods and this has not had a
significant effect on underground production. In line with the rest of the
mining industry power saving initiatives are being put in place to reduce total
demand by 10%.

EXPLORATION PROJECTS

Manica gold project, Mozambique

Geological work continued on the Fairbride prospect area. Work comprised
exploration drilling and orebody outline drilling on both the Fairbride East &
West orebodies. Drilling results confirmed orebody continuation in both dip and
strike extension down to a depth of 350m below surface. Resource remodelling
was completed during April 2008 defining a total resource of 1.7Moz (11.45mt@
4.61g/t), which forms the basis for the Pre-Feasibility study which is
currently underway. In this study the size of the possible mine, the location
and the future economic factors are being considered. The relevant departments
within the Government of Mozambique are being engaged so as to understand the
financial parameters under which mining could take place. Further studies are
currently underway to assess the availability and reliability of power, water
and other requirements within the country.

Bogoin & Dekoa gold projects, Central African Republic

At Bogoin the 8,200m Rotary Air Blast (`RAB') drilling programme was completed
leading to the narrowing down of the soil geochemical anomaly. A widely spaced
29,062m Reverse Circulation (`RC') programme has commenced over an area in
excess of 800km² to test the geochemical anomalies identified. To date 2,062 m
of RC drilling has been completed.

The Company successfully concluded a mining convention with the government of
the Central African Republic for the Dekoa prospecting area. Subsequent
geological work identified several large soil geochemical anomalies at Dekoa. A
60,000 RC drilling programme to test the identified anomalies is due to
commence during 2009.

Akrokerri gold project, Ghana

An infill soil sampling programme was completed and 7,600 m of core drilling
commenced to define possible extensions to the historical Akrokerri underground
mine workings. To date 2,978m of drilling has been completed. Laboratory
results are expected by Q1 of the new financial year.

Kyereboso gold project, Ghana

A 7,400 m RC drilling programme was initiated to test the proposed
mineralisation model. To date 3,600 m of drilling has been completed. Final
results of the first phase of the drilling programme are expected in Q2 of the
new financial year.

U&N gold project, Ghana

Pan African has concluded an Earn-In Agreement to acquire 85% of an exploration
property, the U&N property in Ghana from the U&N Company Limited.

The U&N property lies approximately 45km south-west of the town of Kumasi in
volcanics, interbedded with clastic and chemical sediments of the early
Proterozoic Birimian Supergroup. This is considered a highly prospective area
with several known gold occurrences.

Pan African can earn-in 40% of the project by spending not less than US$
290,000 on a soil sampling exploration phase. Should the Company wish to
continue work after this phase, it must spend not less than US$ 300,000 to earn
a further 45%. On completion of the BFS (`Bankable Feasibility Study') the
Company may, at it's election acquire the remaining 15% at a cost based on the
Net Present Value (`NPV').

Barberton gold project, South Africa

All available historical exploration & geological information was collated into
a spatially referenced database. This database has been used to define several
exploration targets. A comprehensive airborne geophysical survey of the project
will be completed to further refine these targets. Planned fieldwork for the
area during the remainder of 2008 and into the first half of 2009, includes;
detailed geological field mapping, stream sediment sampling as well as a
comprehensive soil sampling programme. Should the results of this work prove
positive, it will be followed by a drilling programme.

CAPITAL EXPENDITURE AND COMMITMENTS

Capital expenditure at Barberton totalled £2.9 million, which was mainly spent
on underground development.

Exploration expenditure at the Company's projects in Mozambique, Central
African Republic and Ghana totalled £3.1 million for the financial year.

Contracted capital commitments at the end of the financial year amounted to £
187,643.

Operating lease commitments, which fall due within the next year, amount to £
89,269 whilst commitments of £16,822 fall due during the following four years.

CORPORATE ACTIVITY

Effective 27 July 2007, the Company acquired 74% of Barberton, for £35.6
million satisfied by the issue of 593,740,476 new shares at 6p per share. The
transaction constituted a reverse takeover in terms of IFRS 3: Business
Combinations. Accordingly, Barberton has been treated for accounting purposes
as acquiring Pan African, the current year results incorporate a full year of
Barberton and 11 months of Pan African and prior year comparatives represent

the results of Barberton for 12 months prior to the transaction. IFRS 3 also
requires the cost of the transaction to represent the fair value of Pan African
immediately prior to the deal, being £25,7 million. The fair value of the
acquired net assets of Pan African amounted to £5.9 million at acquisition,
which gave rise to the recognition of goodwill amounting to £19.8 million,
which is to be tested for impairment on an annual basis against the net asset
value of the new Pan African group. In addition, transaction costs of £1.1
million formed part of the cost of acquisition and allocated to goodwill.

The net loss from Pan African since the date of acquisition was £ 1.9 million.
If the above transaction had taken place at the beginning of the year, the
impact on the group's net profit for the year would have been immaterial.

DIRECTORSHIP CHANGE

The board announced the resignation of Mr Nathan Steinberg, effective 21
February 2008, and in accordance with the undertaking given to shareholders on
the acquisition of Barberton in the Readmission document, announced the
appointment of Mr Maritz Smith as his successor. In addition, Mr John Hopwood
was appointed to the Board as an Independent, Non-Executive Director.

The board welcomes the two new directors to the board.

SHARES ISSUED: July 2007 - June 2008

1. 593,740,476 shares issued to Metorex at 6p per share for the acquisition of
Barberton.

2. 60,000,000 shares issued to Pangea Exploration (Pty) Ltd at 6p per share for
the balance of Manica and the Central African Republic projects.

3. 28,122,727 share options exercised by past and current directors at an
average price of 2.79p per share.

ACCOUNTING POLICIES AND BASIS OF PREPARATION

The financial information set out in this announcement does not constitute the
Company's statutory accounts for the year ended 30 June 2008.

In the current year, the Group adopted International Financial Reporting
Standards as adopted in the UK (`IFRS'). Barberton, which was acquired on 27
July 2007, applied IFRS for the year ended 30 June 2008.

While the financial information included in this preliminary announcement 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. Expect for share capital, share premium
and the merger reserve, comparative information was extracted from the audited
financial statements of Barberton for the year ended 30 June 2007. The Company
expects to publish full financial statements which comply with IFRS in October
2008.

This preliminary announcement was approved by the board on 18 August 2008.

DIVIDEND

No dividend is proposed or declared (2007: nil).

FUTURE PROSPECTS

Subsequent to the acquisition of Barberton, the Company moved from being a
junior exploration company, to a self-funding mining group with a substantial
pipeline of exploration projects. Through the ongoing relationship with Metorex
and Pangea Exploration (Pty) Ltd, the Company has first right of refusal on any
gold projects discovered by these world-class companies.

Despite current turbulent markets, the Company has, through the Barberton
acquisition secured cash flow to not only continue its current exploration
activity, but to accelerate the exploration timetable. The exploration of
highly prospective areas together with a competent management team provides
significant opportunities going forward.

By Order of the Board

KC Spencer JP Nelson

Chairman Chief Executive Officer

19 August 2008

CONSOLIDATED INCOME STATEMENT

                                             12 months ended    12 months ended
                                                                               
                                                30 June 2008       30 June 2007
                                                 (Unaudited)        (Unaudited)
                                                                               
                                                           £                  £
                                                                               
Revenue                                                                        
                                                                               
Gold sales                                        39,254,557         26,684,796
                                                                               
Realisation costs                                  (106,277)           (60,783)
                                                                               
On - mine revenue                                 39,148,280         26,624,013
                                                                               
Cost of production                              (25,163,675)       (21,623,538)
                                                                               
Depreciation                                     (1,965,872)        (1,865,997)
                                                                               
Mining Profit                                     12,018,733          3,134,478
                                                                               
Other (expenses)/income                            (273,786)            803,561
                                                                               
Operating income before finance costs             11,744,947          3,938,039
                                                                               
Finance income                                       217,288             49,018
                                                                               
Finance costs                                       (17,006)           (35,893)
                                                                               
Profit before taxation                            11,945,229          3,951,164
                                                                               
Taxation                                         (4,366,543)        (1,156,590)
                                                                               
Profit after taxation                              7,578,686          2,794,574
                                                                               
Attributable to:                                                               
                                                                               
Equity holders of the parent                       5,460,067          2,067,985
                                                                               
Minority interests                                 2,118,619            726,589
                                                                               
                                                   7,578,686          2,794,574
                                                                               
Earnings per share (pence)                              0.52               0,35
                                                                               
Diluted earnings per share (pence)                      0.51               0,35
                                                                               
Weighted average number of shares in issue     1,043,789,285        593,740,476
                                                                               
Diluted number of shares in issue              1,073,789,285        593,740,476
                                                                               
Headline earnings per share is calculated                                      
using the following:                                                           
                                                                               
Headline earnings                                  5,460,067          2,067,985
                                                                               
Headline earnings per share (pence)                     0.52               0.35
                                                                               
Diluted headline earnings per share (pence)             0.51               0.35

CONSOLIDATED BALANCE SHEET

                                                   30 June 2008    30 June 2007
                                                                               
                                                    (Unaudited)     (Unaudited)
                                                                               
                                                              £               £
                                                                               
ASSETS                                                                         
                                                                               
Non-current assets                                                             
                                                                               
Property, plant and equipment                        20,069,814      20,731,502
                                                                               
Rehabilitation trust fund                             1,739,522       1,743,648
                                                                               
Intangible assets                                    12,837,045               -
                                                                               
Goodwill                                             21,000,714               -
                                                                               
                                                     55,647,095      22,475,150
                                                                               
Current assets                                                                 
                                                                               
Inventories                                             377,974         125,498
                                                                               
Trade and other receivables                           2,972,776       2,185,552
                                                                               
Cash and cash equivalents                             5,419,489         422,416
                                                                               
                                                      8,770,239       2,733,466
                                                                               
TOTAL ASSETS                                         64,417,334      25,208,616
                                                                               
EQUITY AND LIABILITIES                                                         
                                                                               
Capital and reserves                                                           
                                                                               
Share capital and premium                            48,266,139       8,256,801
                                                                               
Hedging reserve, translation and option               (956,948)     (1,449,423)
reserves                                                                       
                                                                               
Retained income                                       9,450,853       3,990,786
                                                                               
Merger Reserve                                     (10,622,892)       (116,560)
                                                                               
Equity attributable to equity holders of parent      46,137,152      10,681,604
                                                                               
Minority interest                                     4,231,619       2,113,000
                                                                               
Total equity                                         50,368,771      12,794,604
                                                                               
Non - Current liabilities                                                      
                                                                               
Long term liabilities - Interest bearing                 16,822         115,665
                                                                               
Long term Provisions                                  2,219,954       2,284,142
                                                                               
Deferred Taxation                                     5,201,245       5,526,973
                                                                               
                                                      7,438,021       7,926,780
                                                                               
Current liabilities                                                            
                                                                               
Trade and other payables                              2,754,795       1,926,944
                                                                               
Short term liabilities - Interest bearing                89,269         170,017
                                                                               
Short term Provisions                                   711,085         711,903
                                                                               
Financial instruments                                         -       1,092,232
                                                                               
Taxation                                              3,055,393         586,136
                                                                               
                                                      6,610,542       4,487,232
                                                                               
TOTAL EQUITY AND LIABILITIES                         64,417,334      25,208,616

CONSOLIDATED CASH FLOW STATEMENT

                                            12 months ended     12 months ended
                                                                               
                                               30 June 2008        30 June 2007
                                                                               
                                                (Unaudited)         (Unaudited)
                                                                               
                                                          £                   £
                                                                               
Cash Generated by operations                     11,971,149           5,731,600
                                                                               
Taxation paid                                     (899,743)            (16,703)
                                                                               
Finance costs,net                                   201,282              13,125
                                                                               
Cash inflow from operating activities            11,272,688           5,728,022
                                                                               
Capital Expenditure - Barberton Mines           (2,901,792)         (1,578,056)
                                                                               
Exploration Expenditure - Pan African           (3,111,018)                   -
                                                                               
Shares Issued                                       784,909                   -
                                                                               
Proceeds of disposal of assets                            -              17,302
                                                                               
Barberton Transaction Costs                     (1,156,630)                   -
                                                                               
Cash outflow from financing activities              146,379         (3,710,295)
                                                                               
Net increase in cash equivalents                  5,034,536             456,973
                                                                               
Cash at the beginning of period                     422,416            (27,590)
                                                                               
Effect of foreign exchange rates                   (37,463)             (6,967)
                                                                               
Cash at end of year                               5,419,489             422,416

STATEMENT OF CHANGES IN EQUITY

                                             12 months ended    12 months ended
                                                                               
                                                30 June 2008       30 June 2007
                                                                               
                                                 (Unaudited)        (Unaudited)
                                                                               
                                                           £                  £
                                                                               
Share capital & premium                                                        
                                                                               
Balance at beginning of                            8,256,801          8,055,710
year                                                                           
                                                                               
Issue of shares                                   40,009,338            201,091
                                                                               
                                                  48,266,139          8,256,801
                                                                               
Hedging Reserve,                                                               
Translation & Option                                                           
Reserves                                                                       
                                                                               
Balance at beginning of                          (1,449,423)        (4,019,207)
year                                                                           
                                                                               
Fair value losses for the                          1,092,172          2,765,674
year                                                                           
                                                                               
Share option expense for                             338,240             34,265
the year                                                                       
                                                                               
Foreign Exchange Reserve                           (937,937)          (230,155)
                                                                               
                                                   (956,948)        (1,449,423)
                                                                               
Minority Interest                                                              
                                                                               
Balance at beginning of                            2,113,000          1,386,411
year                                                                           
                                                                               
Attributable profit                                2,118,619            726,589
                                                                               
                                                   4,231,619          2,113,000
                                                                               
Retained Income                                                                
                                                                               
Balance at beginning of                            3,990,786          1,922,861
year                                                                           
                                                                               
Net income for the year                            5,460,067          2,067,985
                                                                               
                                                   9,450,853          3,990,786
                                                                               
Merger Reserve                                                                 
                                                                               
Balance at beginning of                            (116,560)                  -
the year                                                                       
                                                                               
Reverse acquisition                             (10,506,332)          (116,560)
                                                                               
                                                (10,622,892)          (116,560)
                                                                               
TOTAL                                             50,368,771         12,794,604

CONTACT DETAILS

Jan Nelson

Pan African Resources PLC

Chief Executive Officer

E-mail: jnelson@paf.co.za

Office: + 27 (0) 11 777 7840

Keith Spencer

Pan African Resources PLC

Executive Chairman

E-mail: keith@metorexgroup.com

Office: + 27 (0) 11 880 3155

Nicole Spruijt

Pan African Resources PLC

Public Relations & Administration

E-mail: nicole@paf.co.za

Office: + 27 (0) 11 777 7840

Corporate Office

Viewpoint House

Cnr. Main Street & Orchard Avenue

Bordeaux, Randburg

South Africa

Office: + 27 (0) 11 777 7840

Facsimile: + 27 (0) 11 777 7843

Phil Dexter

St James's Corporate Services

Company Secretary & Investor Relations

E-mail: phil.dexter@corpserv.co.uk

Office: + 44 (0) 207 499 3916

Martin Eales / Andrew Smith

RBC Capital Markets

Nominated Advisor & Broker (UK)

E-mail: martin.eales@rbccm.com

Office: + 44 (0) 207 029 7881

Amanda Markman / Thato Morojele

MacQuarie First South Corporate Finance

Sponsor (RSA)

Office: + 27 (0) 11 583 2000

E-mail: amanda.markman@macquarie.com

Registered Office

St James's Corporate Services

6 St James's Place

London

SW1A 1NP

Office: + 44 (0) 207 499 3916

Facsimile: + 44 (0) 207 491 1989