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Pan African Resources PLC (PAF)

  Print      Mail a friend       Annual reports

Wednesday 10 February, 2010

Pan African Resources PLC

Interim Results for the 6 months ended 31 Decem...

Regulatory Announcement                                                        
Company                           Pan African Resources plc                    
TIDM                              PAF                                          
Headline                          Interim Results                              
Released                          10 February 2010                             

                           Pan African Resources PLC                           

                (`Pan African' or the `Company' or the `Group')                

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

                            Share code on AIM: PAF                             

                            Share code on JSE: PAN                             

                              ISIN: GB0004300496                               

                                Interim Results                                

For the 6 months ended 31 December 2009 and renewal of cautionary announcement 

Pan African Resources PLC (AIM: PAF, JSE: PAN) is pleased to report its interim
results for the 6 months ended 31 December 2009.



  * Earnings before interest, taxes, depreciation and amortisation (`EBITDA')
    of £8.6 million (2008: £8.6 million).
  * Revenue increased by 16.4% to £29 million (2008: £24.9 million).
  * Unhedged and debt-free.
  * Barberton Mines Pty (Ltd) (`Barberton Mines') now a wholly-owned subsidiary
    (previously 74% held).
  * Cyril Ramaphosa joined the board as Non-Executive Chairman
  * Pan African moved from Altx to the main board of the JSE Limited on 1
    December 2009.
Mining Operations

  * The Fairview section of Barberton Mines, achieved 2 million fatality free
    shifts over a 6 year period. *
  * Major progress made on minimising criminal artisanal mining activity
    (`criminal mining').
  * 4.7% decrease in underground production to 45,385oz (2008: 47,634oz),
    principally due to non-recurring work stoppage to address criminal mining.
  * Headgrade remains sustainable at above 10g/t (2008: 11.40g/t).
  * Total cash cost of ZAR164,697/kg (2008: ZAR134,581/kg).
Near Term Production

  * Resource base at Phoenix Platinum Mining (Pty) Ltd (`Phoenix Platinum')
    increased by 12.5% to 405,000oz (2008: 360,000oz).
* Post period under review

Nature of Business

Pan African is a gold mining group that produces approximately 100,000oz per
year. Its focus is on developing low cost, high margin production or near term
production projects. The Group is largely debt free, is unhedged and is able to
fund all of its current on-mine capital expenditure from internal cash flows.

Financial Performance

For the period under review, gross revenue amounted to £29 million (2008: £24.9
million), with the total cost of production being £18.9 million (2008: £14.1
million). Tax expense was £2.7 million (2008: £3.7 million), other expenses
were £1.1 million (2008: £0.89 million), and the final Central African Republic
exploration impairment charge was £0.349 million (2008: £1.3 million Ghana
exploration impairment charge).

EBITDA for the period under review was £8.6 million (2008: £8.6 million).
Attributable profit increased to £4.5 million (2008: £2.6 million). Total cost
of production increased by 10.6% in South African Rand ("ZAR") terms. Higher
costs expressed in ZAR terms were linked to increased security costs (up 68%),
electricity (up 35%), and salaries and wages (up 19%). The ZAR cost per
kilogram increase of 22% can be directly attributed to the additional costs
highlighted above as well as a 10% reduction in gold ounces sold as a result of
the mine stoppage detailed in the "Criminal Mining" section below. On a
normalised basis, without the additional security costs, there would have been
an increase of 13% in the ZAR cost per kilogram.

The increase in mining profit is a result of the Company's increased holding in
Barberton Mines. The Company's holding was increased from 74% to 100% with
effect from 21 August 2009, as a result of Shanduka Gold (Pty) Ltd (`Shanduka')
exchanging its 26% stake in Barberton Mines for a 21% stake in Pan African
(detailed in the "Share Issue" section below). Although the average US$ spot
gold price in the period under review increased by 25% to US$1032 (2008:
US$824), the US$:ZAR exchange rate strengthened by 14% to ZAR7.64 (2008:
ZAR8.88), and the effective ZAR gold price achieved was only 8% higher at
ZAR253,510/kg (2008: ZAR235,338/kg). The profit margin in ZAR terms decreased
by 11.8% to ZAR88,813/kg (2008: ZAR100,757/kg). Income tax decreased to £2.7
million (2008: £3.7 million) as a result of a decrease in profit before tax.
Profit before tax in ZAR terms was 23% lower at ZAR92 million (2008: ZAR119.7

Basic headline earnings per share (`HEPS') increased by 2.4% to 0.3638 pence
(2008: 0.3553 pence). HEPS increased marginally from the comparable period as
result of a 23% increase in total attributable headline earnings, whilst the
weighted average number of shares increased by only 20%. Total headline
earnings in Pounds sterling (`GBP') increased principally due to the weaker
GBP:ZAR exchange rate. In ZAR terms, HEPS decreased by 16% to 4.54 cents (2008:
5.37 cents). The total attributable headline earnings in ZAR increased in the
current year as a result of consolidating 100% of the earnings from 21 August
2009, but the percentage increase in earnings was lower than the increase in
weighted average numbers of shares in issue, due to the lower gold ounces sold
in the current period.

Earnings per share (`EPS') increased in the current year both in ZAR and GBP
due to a reduced impairment charge for the period of £0.349 million (2008: £1.3
million) and also because of the Group consolidating 100% of the profits of
Barberton Mines from 21 August 2009.

                                          6 months ended    6 months ended 31
                                                                     Dec 2008
                                             31 Dec 2009                     
Revenue                   (GBP)               29,044,934           24,940,383
EBITDA                    (GBP)                8,597,517            8,552,011
Attributable profit       (GBP)                4,467,939            2,569,804
EPS                       (pence)                   0.34                 0.23
HEPS                      (pence)                   0.36                 0.36
Weighted average number                    1,324,071,776        1,100,517,684
of shares in issue                                                           

Review of Barberton Mines

Safety and Training

The safety performance at Barberton Mines reflected a marked improvement during
the period under review. Lost time injuries decreased to 10 (2008: 25) and
reportable injuries to 3 (2008: 5). The Lost Time Injury Frequency Rate
improved to 3.6 (2008: 6.4) and the Serious Injury Frequency Rate improved to
1.1 (2008: 1.7). The number of shifts lost decreased to 75 (2008: 106), however
the lost day severity rate increased marginally to 7.5 (2008: 6.2).

The Company is pleased to report that Barberton Mines as a whole achieved 1.2
million fatality free shifts at the end of December 2009, and more recently the
Fairview section has achieved 2 million fatality free shifts post the period
under review on 5 February 2010, accomplished over a six year period.

Operating Performance

A total of 45,971oz (2008: 51,186oz) of gold was sold from Barberton Mines
(which comprises the Fairview, Sheba and New Consort sections), a decrease of
10% from the previous year. Total underground production decreased by 4.7% to
45,385oz (2008: 47,634oz). Tons milled decreased by 4.6% to 152,584 (2008:
159,919). Despite a decrease in the headgrade of 11% to 10.11g/t (2008: 11.4g/
t), the head grade achieved was above 10g/t as forecasted and is sustainable at
these levels. The reductions in volumes milled and gold produced are primarily
attributed to certain sections of the mine being stopped for a period of two
weeks in December 2009 to combat criminal mining - please refer to the
"Criminal Mining" section for a more detailed explanation.

                                       6       6     6 months  6 months    6   
                                    months  months    ended     ended   months 
                                     ended   ended                       ended 
                                                    31 Dec 07   31 Dec         
                                    31 Dec  31 Dec                06    31 Dec 
                                      09      08                          05   
Tons Milled                   t     152,584 159,919    161,455  166,377 157,452
Headgrade                    g/t      10.11   11.40       9.05     9.24   11.44
Overall                       %          91      91         92       92      92
Production     Underground    oz     45,385  47,634     43,145   45,332  53,369
               Calcine        oz          -   3,545      3,601        -       -
Sold - Mining                 oz     45,971  51,186     47,486   45,749  52,983
Average Price:              USD/oz    1,032     824        721      567     464
Spot Price                                                                     
Average Price:              USD/oz        -       -        460      406     430
Hedge Achieved                                                                 
Average Price:              ZAR/KG  253,510 235,338    165,782  144,564  96,767
Spot Achieved                                                                  
Total Cash                  USD/oz      670     451        521      516     415
Total Cash                  ZAR/KG  164,697 134,581    114,640  104,471  82,671
EBITDA                     GBP '000   8,598   8,552      4,001    3,049   2,153
Depreciation               GBP '000   1,375   1,066        806    1,077   1,042
Capital                    GBP '000   2,199   2,282      1,532      867     569
Exchange rate              ZAR/GBP    12.48   15.13      14.05    13.68   11.48
- average                                                                      
Exchange rate              ZAR/GBP    11.94   13.78      13.77    13.78   11.06
- closing                                                                      
Exchange rate              ZAR/US$     7.64    8.88       6.94     7.22    6.53
- average                                                                      
Exchange rate              ZAR/US$     7.39    9.55       6.86     6.99    6.31
- closing                                                                      

* 74% of the 2007 and 2008 results are attributable to the equity shareholders
of Pan African, 2005 - 2006 results attributable to Metorex Limited
("Metorex"). Effective 21 August 2009, 100% of Barberton Mines' earnings
attributable to Pan African.

** Total cash cost excludes depreciation and capital expenditure.

Mineral Resource Management

A full time Mineral Resource Manager has been appointed to Barberton Mines. The
Mineral Resource Management department's main objective will be to ensure that
a headgrade of above 10g/t is achieved and sustained, therefore improving
mining flexibility and extending the Life of Mine.

Capital and Reserve Projects

At Barberton Mines there are six mining projects and three exploration
development projects aimed at the replacement of reserves. The mine commenced
with two new reserve replacement projects this year and continued with seven
projects from the previous year. The two new projects are the Consort 37
inter-level exploration drive and the Fairview 54 level re-equipping and
development. The 60/62 level development project at Fairview is estimated to be
completed by the end of the current financial year.

The development advances achieved for the 6 months to 31 December 2009 were a
total of 1,175m (2008: 1,095m). The potential resource target of the reserve
replacement projects increased to a total of approximately 744,000 ounces.

Criminal Mining

Criminal mining activity increased significantly both in frequency and in
severity during the first months of the period under review. Unacceptable
actions by the criminal miners jeopardised the safety of employees and
operations of Barberton Mines. Management therefore made a deliberate decision
to temporarily cease production in certain sections of the mine over a two-week
period in order to directly address the issue. Starting at the beginning of
December the mine initiated a systematic underground sweep (`Operation Clean
Sweep') of workings, utilising specialised contract security forces, in
co-operation with local and regional law enforcement. In conjunction with the
underground initiative, the contract security presence on surface was also
increased to restrict access to mine property.

As a result of the actions described above security expenditure for the period
under review was increased by 68% to ZAR9.2 million (2008: ZAR 5.5 million).
Management estimates financial losses due to gold theft to be significantly
higher than the costs of increased security efforts, and the recent security
initiatives are expected to improve gold output and profits from the mine.

Operation Clean Sweep has been a resounding success and criminal mining
activity on the mine has been significantly reduced. A total of 326 criminal
miners were arrested during December as a result of Operation Clean Sweep. A
total of 509 criminal miners were arrested for the period under review (2008:
370). The Company has appointed an executive solely dedicated to security at
Barberton Mines, reporting directly to the Chief Executive Officer. The current
approach to security at Barberton Mines will be maintained and further improved
to ensure criminal activity is kept to a minimum.

Review of the Phoenix Platinum Near Term Production Project

Results of metallurgical test work performed to date by Mintek to evaluate the
process indicate recoveries of up to 50% and concentrate grades of
approximately 150g/t. The next phase of metallurgical test work is planned to
optimise the metallurgical process in order to maximise recoveries and improve
concentrate grades.

Update on engineering and design work

Total capital expenditure for the planned 20,000 tons per month Chrome Tailings
Retreatment Plant ("CTRP") is estimated to be ZAR100 million.

The Company is in the process of negotiating a preferred CTRP location, if
completed by Q3 2010 this will allow production to commence in the second half
of 2011. Furthermore, the Company is evaluating other opportunities in an
effort to fast-track production output and grow the project resource base

Review of the Manica Gold Growth Project

The Company is continuing an investigation into the feasibility of a heap leach
operation to exploit the oxide resource at Manica. The focus during the first
half of 2010 is to complete the necessary test work at SGS in South Africa to
ascertain the viability of a heap leach operation at Manica. Subsequent to
obtaining the results from such test work, the feasibility of a small scale
heap-leach gold mine will be assessed.

Capital Expenditure and Commitments

Capital expenditure at Barberton Mines totalled £2.199 million of which
development capital was £1.266 million and maintenance capital was £0.933
million. Capital expenditure on growth projects totalled £0.220 million. There
were no material contracted capital commitments at the end of the period.
Operating lease commitments, which fall due within the next year, amounted to £
0.156 million.

Shares Issued

On 19 June 2009 the Company announced that it had concluded an agreement with
Shanduka and Shanduka's holding company, Shanduka Resources (Proprietary)
Limited, whereby Pan African would acquire Shanduka's 26% shareholding in
Barberton Mines, in exchange for the issue of new ordinary shares in Pan
African to Shanduka. On 21 August 2009 Pan African announced that the
transaction had become unconditional and that the shares had been issued and
allotted to Shanduka. Barberton Mines became a wholly-owned subsidiary of Pan
African from this date. The new shares issued to Shanduka (295,751,549 ordinary
shares) represent 21% of the enlarged issued share capital of Pan African
following implementation of this transaction. Shanduka acquired a further 5% of
the issued ordinary share capital of Pan African via the Metorex book build,
thereby increasing its shareholding to 26%.

For accounting purposes the Group consolidated 100% of profits from Barberton
Mines from 21 August 2009. The accounting treatment for the Shanduka and Pan
African transaction was in terms of IAS 27 Changes in the ownership interests.
Changes in a parent's ownership interest in a subsidiary that do not result in
a loss of control are accounted for as equity transactions (i.e. transactions
with owners in their capacity as owners).

Therefore the additional investment of £14,760,214 through the Pan African
share issue to Shanduka and non-controlling interest of £4,059,121 as at 21
August 2009 were eliminated on consolidation, and the Group's merger reserve
increased by £10,701,093.

Directorship Change

During the period under review, Mr Maritz Smith resigned as Financial Director
with effect from 21 August 2009 and was replaced by Mr Cobus Loots with effect
from 17 September 2009.

Mr Cyril Ramaphosa was appointed as the Company's Non-Executive Chairman and Mr
Rowan Smith was appointed as a Non-Executive Director, both with effect from 17
September 2009.


The Company has adopted a policy whereby dividends are considered, and where
deemed appropriate by the 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 cashflow
requirements and growth plans, whilst recognising that, where possible, a
consistent dividend policy increases shareholder value.

Accounting Policies

The financial information set out in this announcement does not constitute the
Company's statutory accounts for the half year ended 31 December 2009. The
financial information has been prepared in accordance with the recognition and
measurement criteria of the International Financial Reporting Standards
(`IFRS') and the JSE Limited listing requirements.

The unaudited interim results have been prepared and presented in accordance
with, and containing the information required by IFRS on Interim Financial
Reporting, IAS 34. The accounting policies are consistent with the prior year's
annual financial statements and deal with new disclosure requirements by IFRS,
specifically IAS 1 (Presentation of Financial Statements) and IFRS 8 (Operating

Operating Segments

IFRS 8 requires an entity to report financial and descriptive information about
its reportable segments. Reportable segments are operating segments or
aggregations of operating segments. The Group considers gold mining to be its
material operating segment as this is the main business activity which the
Group earns revenues and incurs expenses. The operating segments allocation of
assets and liabilities have been summarised as follows:

  * Gold mining total assets of £37,757,322 (2008: £34,925,555) and total
    liabilities £15,783,514 (2008: £15,215,748).
  * Corporate and Growth Projects total assets £41,451,632 (2008: £36,612,907)
    and total liabilities £237,019 (2008: £351,972).
Future Prospects

  * Focus on productivity and efficiency improvements to counter cost pressures
    and increase margins.
  * Encouraging production forecast for the next 6 months.
  * Significant progress in eliminating criminal mining activities will yield
    future benefit to all stakeholders.
  * Phoenix project value expected to further increase.
  * Strong balance sheet to take advantage of opportunities.
Renewal of cautionary Announcement

Further to the cautionary announcement first released on 26 November 2009 and
renewed on 7 January 2010 and in terms of the Listings Requirements of the JSE,
shareholders are advised that the discussions in respect of a possible
transaction are still in progress. If successfully concluded, the outcome of
the discussions may have a material effect on the price of the Company's
securities. Accordingly, shareholders are advised to continue exercising
caution when dealing in the Company's securities until a full announcement in
respect of the possible transaction is made.

By order of the Board,

J P Nelson                C Loots                  
Chief Executive Officer   Financial Director       

10 February 2010

Consolidated Statement of Comprehensive Income

                                         31 Dec 09            31 Dec 08      
                                        (Unaudited)          (Unaudited)     
                                             £                    £          
Gold sales                                    29,044,934           24,940,383
Realisation costs                               (82,410)             (63,532)
On - mine revenue                             28,962,524           24,876,851
Cost of production                          (18,898,789)         (14,099,512)
Depreciation                                 (1,374,753)          (1,065,720)
Mining Profit                                  8,688,982            9,711,619
Other expenses                               (1,117,303)            (885,413)
Operating income before finance                7,571,679            8,826,206
Finance income                                   152,607              434,700
Finance costs                                    (1,588)              (6,007)
Impairment                                     (348,915)          (1,339,915)
Profit before taxation                         7,373,783            7,914,984
Taxation                                     (2,683,201)          (3,705,065)
Profit after taxation                          4,690,582            4,209,919
Other comprehensive income:                                                  
Foreign currency translation                   2,216,274            2,164,635
Total comprehensive income for                 6,906,856            6,374,554
the 6 months                                                                 
Profit attributable to:                                                      
Owners of the parent                           4,467,939            2,569,804
Non-controlling interest                         222,643            1,640,115
                                               4,690,582            4,209,919
Total comprehensive income                                                   
attributable to:                                                             
Owners of the parent                           6,836,312            4,734,439
Non-controlling interest                          70,544            1,640,115
                                               6,906,856            6,374,554
Earnings Per Share                                                           
Earnings per share (pence)                          0.34                 0.23
Diluted earnings per share                          0.34                 0.23
Weighted average number of                 1,324,071,776        1,100,517,684
shares in issue                                                              
Diluted number of shares in                1,329,710,617        1,111,517,684
Headline earnings per share is                                               
calculated :                                                                 
Earnings as reported :                         4,467,939            2,569,804
Adjustments : Impairment costs                   348,915            1,339,915
Headline earnings                              4,816,854            3,909,719
Headline earnings per share                         0.36                 0.36
Diluted headline earnings per                       0.36                 0.35
share (pence)                                                                

Consolidated Statement of Financial Position

                                                    31 Dec 2009  30 June 2009
                                                    (Unaudited)   (Audited)  
                                                         £            £      
Non-current assets                                                           
Property, plant and equipment and Mineral             34,280,999   31,801,235
Rehabilitation trust fund                              2,499,886    2,357,266
Intangible assets                                     13,191,556   12,038,616
Goodwill                                              21,000,714   21,000,714
                                                      70,973,155   67,197,831
Current assets                                                               
Inventories                                            1,525,057      358,363
Trade and other receivables                            2,475,265    2,201,213
Cash and cash equivalents                                235,477    2,389,301
                                                       8,235,799    4,948,877
TOTAL ASSETS                                          79,208,954   72,146,708
EQUITY AND LIABILITIES                                                       
Capital and reserves                                                         
Share capital                                         14,083,406   11,125,891
Share Premium                                         49,696,830   37,899,997
Translation Reserve                                    4,180,278    1,964,004
Share Option Reserve                                     628,818      549,690
Retained income                                       16,005,490   11,537,551
Merger Reserve                                      (21,406,401) (10,705,308)
Equity attributable to owners of the parent           63,188,421   52,371,825
Non controlling interest                                       -    3,988,577
Total equity                                          63,188,421   56,360,402
Non - Current liabilities                                                    
Long term Provisions                                   3,103,001    2,933,105
Deferred Taxation                                      7,461,262    6,752,432
                                                      10,564,263    9,685,537
Current liabilities                                                          
Trade and other payables                               3,805,235    3,719,787
Short term liabilities - Interest bearing                      -       20,669
Short term Provisions                                  1,420,208    1,151,895
Payable to another Group Company                               -      954 759
Current Tax Liabilities                                  230,827      253,659
                                                       5,456,270    6,100,769
TOTAL EQUITY AND LIABILITIES                          79,208,954   72,146,708

Consolidated Cash Flow Statement

                                                6 months ended 6 months ended
                                                  31 Dec 09      31 Dec 08   
                                                 (Unaudited)    (Unaudited)  
                                                      £              £       
Cash generated by operations                         7,776,767     10,401,503
Non controlling interest distributions                       -      (890,831)
Taxation Paid                                      (2,537,000)    (4,240,562)
Finance income net                                     151,019        428,693
Cash inflow from operating activities                5,390,786      5,698,803
Cash outflow from investing activities             (2,429,578)    (4,056,420)
Cash outflow from finance activities                 (954,759)       (44,374)
Net increase in cash equivalents                     2,006,449      1,598,009
Cash at the beginning of period                      2,389,301      5,419,489
Effect of Foreign Currency rate changes              (160,273)        700,227
Cash at end of period                                4,235,477      7,717,725

Statement in changes of equity

                                               6 months ended  6 months ended
                                                 31 Dec 2009    31 Dec 2008  
                                                 (Unaudited)    (Unaudited)  
                                                      £              £       
Shareholders' equity at start of period             56,360,402     50,368,771
Share Issue                                         14,754,348         39,749
Share Option Reserve                                    79,128         78,500
Other Comprehensive Income                           2,216,274      2,164,635
Profit for the period                                4,467,939      2,569,804
Merger Reserve                                    (10,701,093)              -
Non-controlling interest                           (3,988,577)        749,284
Total Equity                                        63,188,421     55,970,743


For further information on Pan African Resources PLC, please visit the website

Pan African Resources                                                          
Jan Nelson, Chief Executive Officer                                            
+27 (0) 11 243 2900                                                            
Nicole Spruijt, Public Relations                                               
+27 (0) 11 243 2900                                                            
RBC Capital Markets                                                            
Martin Eales                                                                   
+44 (0) 20 7029 7881                                                           
Macquarie First South (Pty) Ltd                                                
Melanie de Nysschen / Thembeka Mgoduso                                         
+27 (0) 11 583 2000                                                            
St James's Corporate Services Limited                                          
Phil Dexter                                                                    
+44 (0) 20 7499 3916

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