PAN AFRICAN RESOURCES PLC - Pan African enters into agreement to acquire Blyvoor Gold Surface Tailings Resources, update on Mintails and Group

Pan African enters into agreement to acquire Blyvoor Gold Surface Tailings Resources, update on Mintails and Group

Pan African Resources PLC
(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 JSE: PAN
ISIN: GB0004300496
ADR ticker code: PAFRY
(“Pan African” or the “Company” or the “Group”)


PAN AFRICAN ENTERS INTO AGREEMENT TO ACQUIRE BLYVOOR GOLD SURFACE TAILINGS
RESOURCES, UPDATE ON MINTAILS AND GROUP PRODUCTION

1.   Highlights and background

Pan African is pleased to advise shareholders that the Company has entered into a conditional
agreement to acquire the entire issued share capital of Blyvoor Gold Operations (Pty) Ltd (Blyvoor
Operations) from Blyvoor Gold (Pty) Ltd (the Transaction).

Highlights of the Transaction include:

         •    Six historical Tailings Storage Facilities (TSFs) with total Mineral Resources of more than 1.4
              million ounces of contained gold;
         •    A technical study to Pre-feasibility (PFS) level indicates potential to produce 25-30k ounces of
              gold by processing 6 million tonnes (Mt) of tailings per annum over a mine life of 15 years
              (extendable to 25 years with inclusion of Inferred Mineral Resources);
         •    Pan African has a demonstrable track record of developing and operating similar high-margin
              tailings processing operations at its Barberton Tailings Retreatment Plant (BTRP), Evander
              Tailings Retreatment Plant (ETRP) and Elikhulu operations; and
         •    Staged acquisition process:
                   o Three-month initial fatal-flaw due diligence period, following which Pan African can
                     elect to proceed with a Definitive Feasibility Study (DFS) over the following nine
                     months, to December 2022.

Pan African may then, following completion of the due diligence and, if applicable, the DFS, at its sole
discretion, elect to acquire Blyvoor Operations for a cash consideration of ZAR110m (US$6.9m at
current exchange rates), to be funded from internal cash resources.

Blyvoor Operations owns a total of six historical TSFs comprising the following:

     •       Blyvooruitzicht TSF No. 1; Blyvooruitzicht TSF No. 6; Blyvooruitzicht TSF No. 7; and
     •       Doornfontein TSF No. 1; Doornfontein TSF No. 2; Doornfontein TSF No. 3.

During 2020, independent consultants Minxcon (Pty) Ltd (Minxcon) completed a technical study to PFS
level for the Blyvoor TSFs and quantified the Mineral Resources at circa 142.9Mt with an in-situ grade
of 0.31g/t gold, for an estimated gold content of more than 1.4Moz gold, as per the table below:

Mineral Resources as estimated by Minxcon* (1 December 2020).

 Mineral Resource             Tonnes               Au                          Gold Content
 Classification               Mt                   g/t                 Kg                     koz


                                                                                                            
 Measured                     48.5                 0.32                15,542                 500
 Indicated                    34.9                 0.33                11.449                 368
 Total Measured
 and Indicated                83.5                 0.32                26,991                 868
 Inferred                     59.5                 0.28                16.855                 542

*The reported Mineral Resources are compliant with the South African Code for the Reporting of Exploration Results, Mineral
Resources and Mineral Reserves, 2016 edition (the SAMREC code). It is noted that the Measured and Indicated Mineral
Resource contribution is represented solely by Blyvooruitzicht TSF No. 6 and Blyvooruitzicht TSF No. 7. Mineral Resources are
reported inclusive of Mineral Reserves.

As part of the technical study to PFS level conducted by Minxcon in 2020, the following SAMREC code
compliant Mineral Reserves has been declared. The Mineral Reserves constitutes only the Measured
and Indicated Mineral Resources of both the Blyvooruitzicht TSF No. 6 and Blyvooruitzicht TSF No. 7.

Mineral Reserves as estimated by Minxcon (1 December 2020).

 Mineral Reserve               Tonnes                      Au                             Gold Content
 Classification                Mt                          g/t                     Kg                       koz
 Probable                      84.3                        0.30                    25,385                   816

Following diagnostic leach results, Minxcon reported expected CIL gold recoveries of circa 54%. The
technical study to PFS level demonstrated projected average gold production of 25-30koz/yr over a life
of mine of 15 years (extendable to 25 years with inclusion of Inferred Mineral Resources), processing
approximately 6Mt of tailings per annum during steady state production. As part of the work to be
undertaken by Pan African, the Group will assess the potential for increasing the rate of processing
and resultant annual gold production.

The proposed mining method for reclamation activities will be hydro-mining, as currently utilised at
the Group’s Elikhulu and BTRP operations.

Pan African Resources CEO, Cobus Loots commented: “Pan African is pleased to have secured the right
to the Blyvoor tailings, which is one of the last remaining large-scale gold tailings resources available
in South Africa. We look forward to progressing our studies on this opportunity in the year ahead, and
we are hopeful that we can ultimately demonstrate a compelling project, for the benefit of all
stakeholders. Pan African is poised to grow its tailings retreatment operations in the years ahead,
adding additional long-life, high-margin production to our already attractive portfolio of assets”.

2.   Pan African’s current tailings retreatment operations

The Group has a track record of successfully bringing tailings retreatment operations to fruition. Pan
African has commissioned three safe and highly profitable gold tailings retreatment operations in the
recent past, namely the BTRP, the ETRP and more recently the Group’s flagship Elikhulu operation
(combined with ETRP). These projects were all commissioned within budget and on schedule, and have
generated compelling returns on the invested capital.

Pan African currently retreats approximately 1.3Mt of tailings per month through its technologically
advanced metallurgical plants to recover gold from the historical TSFs in the Barberton and Evander
regions. The hydro-mining of these historical environmental liabilities is economically robust and have
the added benefit of restoring the environment for the betterment of local communities, with land
reclaimed for alternative economic uses.

Modern tailings retreatment operations are highly automated, with a low labour complement. The
Group produces approximately 70koz per annum of recovered gold from the Elikhulu and BTRP
operations at an all-in sustaining cost (AISC) of less than US$900/oz.

3.   Details of the proposed Transaction

The salient terms of the Transaction are as follows:

     •   Pan African will be afforded a three-month period (commencing in January 2022) to conduct
         a fatal-flaw due diligence on Blyvoor Operations and its tailings resources (DD period).
     •   If Pan African elects to proceed with a definitive feasibility study (DFS), after the DD period,
         the Group will be afforded the right to conduct the DFS over the following nine months (to
         December 2022).

In December 2022, Pan African may, at its sole discretion and subject to fulfilment of suspensive
conditions customary for a transaction of this nature, elect to conclude the Transaction and acquire
all the issued share capital of Blyvoor Operations for a cash consideration of ZAR110m (c.US$6.9m at
current exchange rates), which will be funded from Pan African’s internal cash resources.

4.   Rationale for the proposed Transaction

One of Pan African’s competitive advantages is its success in bringing tailings projects to fruition. The
existing BTRP and Elikhulu operations bear testament to this, contributing materially to the Group’s
financial success.

Given the lower execution risk and the relatively short-term payback periods associated with tailings
projects, these operations lend themselves to higher gearing levels, with commensurate levered
equity returns.

5.   Categorisation of proposed Transaction

The proposed Transaction is an uncategorised transaction and does not involve any related parties in
terms of the JSE Listings Requirements or the AIM Rules for Companies and is therefore not subject to
shareholder approval.

6.   Current status of the Mintails transaction

During November 2020, the Group announced the conditional acquisition of Mintails SA Mogale Gold
and Soweto Cluster (MSC) TSFs with combined Mineral Resources of 243Mt with an in-situ grade of
0.30g/t gold, for an estimated gold content of 2.36Moz of gold.

A PFS was completed on Mogale Gold’s TSFs during July 2021. The MSC TSFs were excluded from the
study’s scope as their Mineral Resources requires additional technical and due diligence analysis,
which will be addressed in forthcoming studies. The PFS results were disseminated with the Group’s
2021 FY annual results. Average production of between 40-50koz/yr over an 11-year life of mine was
foreseen.

Following the positive PFS findings, the Group is currently finalising a DFS, led by DRA Global (DRA),
which is scheduled to be completed in Q1 of the 2022 calendar year. A concept study on the Soweto
Cluster is also progressing under the auspices of DRA.

As previously reported, finalisation of the Mintails transaction was delayed by ongoing legal action,
which could have seen Mintails revert to either business rescue or remain in provisional liquidation.
Judgement on the legal action has now been received, and Mintails will remain in provisional
liquidation. Pan African remains optimistic on the Mintails transaction’s potential, and will now
engage with the provisional liquidator on progressing the transaction, as well as continue with the
finalisation of the DFS.

7.   Production update for the first six months of the 2022 financial year

Pan African expects to produce circa 105,000oz (2021: 98,386oz) of gold during the first six months of
the 2022 financial year, ending December 2021, representing a 6.7% production increase relative to
the corresponding period.

Gold production per operation is expected as follows:

     •   Barberton Mines: ~50,000oz (2021: 52,354oz)
     •   Elikhulu: ~27,000oz (2021: 26,863oz)
     •   Evander Mines’ 8 Shaft pillar operation and Evander’s surface sources: ~28,000oz (2021:
         19,169oz)

The Group is now well positioned to meet and exceed its full year production guidance of more than
195,000oz.

The Competent Person for Pan African, Mr Hendrik Pretorius, the Group Technical Services Manager,
has reviewed and approved the information contained in this announcement. Mr Pretorius is a
member of the South African Council for Natural Scientific Professions as well as a member in good
standing of the Geological Society of South Africa. Additionally, Mr Daan van Heerden, Director of
Minxcon, has independently reviewed and approved the information contained in this
announcement where it relates to Blyvoor Operations.

Certain information communicated in this announcement was, prior to its publication, inside
information for the purposes of Article 7 of Regulation 596/2014.

Rosebank

15 December 2021

For further information on Pan African, please visit the Company's website at

www.panafricanresources.com

                                                                                                     
Contact information

Corporate Office                                 Registered Office
The Firs Office Building                         Suite 31
2nd Floor, Office 204                            Second Floor
Cnr. Cradock and Biermann Avenues                107 Cheapside
Rosebank, Johannesburg                           London
South Africa                                     EC2V 6DN
Office: + 27 (0)11 243 2900                      United Kingdom
info@paf.co.za                                   Office: + 44 (0)20 7796 8644

Cobus Loots                                      Deon Louw
Pan African Resources PLC                        Pan African Resources PLC
Chief Executive Officer                          Financial Director
Office: + 27 (0)11 243 2900                      Office: + 27 (0)11 243 2900

Phil Dexter/Jane Kirton                          Ross Allister/David McKeown
St James's Corporate Services Limited            Peel Hunt LLP
Company Secretary                                Nominated Adviser and Joint Broker
Office: + 44 (0)20 7796 8644                     Office: +44 (0)20 7418 8900

Ciska Kloppers                                   Thomas Rider/Nick Macann
Questco Corporate Advisory Proprietary Limited   BMO Capital Markets Limited
JSE Sponsor                                      Joint Broker
Office: + 27 (0)11 011 9200                      Office: +44 (0)20 7236 1010

Hethen Hira                                      Website: www.panafricanresources.com
Pan African Resources PLC
Head: Investor Relations
Tel: + 27 (0)11 243 2900
E-mail: hhira@paf.co.za




                                                                                      

Date: 15-12-2021 09:00:00
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