PAN AFRICAN RESOURCES PLC - Update regarding the disposal of the Manica gold project and withdrawal of cautionary announcement

Release Date: 14/12/2012 11:30
Code(s): PAN PANN
 
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Update regarding the disposal of the Manica gold project  and withdrawal of cautionary announcement

Pan African Resources PLC
(Incorporated and registered in England and Wales under Companies Act 1985
with registered number 3937466 on 25 February 2000)
AIM Code: PAF
JSE Code: PAN
ISIN: GB0004300496
ISIN for Nil Paid Rights: GB00B85FJG40 (JSE Code: PANN)
ISIN for Fully Paid Rights: GB00B8RCBP62
(“Pan African” or the “Company”)

UPDATE REGARDING THE DISPOSAL OF THE MANICA GOLD PROJECT (“MANICA”) TO AUROCH
          MINERALS NL (“AUROCH”) AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT

1. INTRODUCTION

Pan African shareholders (“Shareholders”) are referred to the announcement published by the Company on
29 August 2012 (“Announcement”) regarding the disposal of 100% of Manica to Auroch Minerals Mozambique
(Pty) Ltd, a wholly owned subsidiary of Auroch (Auroch was previously named Terranova Minerals NL)
(“Transaction”). Certain terms of the Transaction have now been amended as detailed below and the unaudited
pro forma financial effects of the Transaction (“Financial Effects”) are set out below.

Jan Nelson, CEO of Pan African commented:
“The board of Pan African believes that the management team at Auroch will add significant value to this project
and that Pan African shareholders will realise value from this transaction in time.”

2. AMENDMENT TO THE TRANSACTION TERMS

Pan African and Auroch have agreed to amend the terms and conditions of the Transaction as follows:
•       Pan African was to receive the first portion of the Purchase Consideration comprising AUD2 million (“Initial
        Cash Consideration”) and 25 million shares in Auroch (“Consideration Shares”) upon the fulfilment or,
        where possible, waiver of the conditions precedent to the Transaction (“Completion”). However, payment
        of the cash portion of the Initial Cash Consideration has now been deferred for a period of up to 18 months
        from Completion and the issue of 4,100,000 of the Consideration Shares shall only be issued to Pan African
        upon the receipt by Auroch of the requisite approval by its shareholders to issue such shares
        (“Shareholder Approvals”). Auroch has undertaken to obtain the Shareholder Approvals by the end of
        February 2013; and
•       the total purchase consideration payable by Auroch in terms of the Transaction (“Purchase
        Consideration”) to Pan African in cash and new shares in Auroch (“AOU Shares”), shall be limited to a
        maximum of AUD80 million. The value of the Purchase Consideration shall be calculated with reference to
        the aggregate value of the cash paid and the value of the AOU Shares (calculated with reference to the
        closing price of such shares the day before their issue) issued to Pan African as payment of the Purchase
        Consideration. Any adjustment required shall only be made through a reduction in the number of AOU
        Shares issued to Pan African i.e. the cash portion of the Purchase Consideration shall remain unchanged
        and only the number of AOU Shares to be issued in terms of the Transaction may be adjusted.

The adjustments to the Transaction terms described above were agreed so as to allow Auroch to comply fully with
its obligations in terms of the Transaction agreements whilst obtaining further certainty with respect to the extent
that its shareholders would be diluted through the future issue of AOU Shares for purposes of settling the Purchase
Consideration.

3. FINANCIAL EFFECTS OF THE TRANSACTION

The table below sets out the Financial Effects. The Financial Effects have been prepared for illustrative purposes
only, in order to provide information about how the Transaction might have affected Shareholders had the
Transaction been implemented on the dates indicated in the notes below.


Due to their nature, the Financial Effects may not fairly present the financial position or the effect on earnings of
Pan African after the Transaction. The preparation of the Financial Effects is the responsibility of Pan African’s
directors.


The Financial Effects have been prepared using accounting policies that comply with International Financial
Reporting Standards (“IFRS”) and that are consistent with those applied in the published audited results of Pan
African for the year ended 30 June 2012.


The figures included in the “Before the Transaction” column of the Financial Effects have been extracted from the
“After the Transaction and Rights Offer” column of the pro forma financial effects pertaining to the acquisition of
Evander Gold Mines Limited and the related rights offer (“Acquisition and Rights Offer”) by the Company as
contained in the announcement published by the Company on 7 November 2012 (“Evander Announcement”). The
Financial Effects are therefore presented after accounting for the pro forma financial effects of the Acquisition and
Rights Offer.


In order to comply with the requirements of the JSE Limited Listings Requirements, the Financial Effects have been
prepared on the assumption that all the milestones (as more fully described in the Announcement), in terms of
which the deferred portions of the Purchase Consideration shall be paid to Pan African, are met. The Financial
Effects therefore account for the entire Purchase Consideration, comprising AOU Shares and cash, being received
by Pan African on 1 July 2011 for purposes of the Statement of Comprehensive Income and 30 June 2012 for
purposes of the Statement of Financial Position. This results in Auroch being consolidated as a subsidiary of Pan
African in accordance with IFRS for purposes of the Financial Effects. The resultant effect is that any profit on the
sale of Manica is not accounted for in the Financial Effects. Pan African therefore emphasises that it is highly
unlikely that Auroch will become a subsidiary of Pan African in the near future and as such, the Financial Effects
presented below may not truly reflect the actual outcome of the Transaction.

                                               Before the Transaction    After the Transaction       Change
                                                                                                         %
 Earnings per share (pence)                                       5.32                    5.23         (1.69)
 Diluted earnings per share (pence)                               5.30                    5.21         (1.70)
 Headline earnings per share (pence)                              2.37                    2.28         (3.80)
 Diluted headline earnings per share (pence)                      2.36                    2.27         (3.81)
 Net asset value per share (pence)                               10.02                    9.93         (0.90)
 Tangible net asset value per share (pence)                       8.14                    7.91         (2.83)
 Number of shares in issue                               1 818 334 263            1 818 334 263            -
 Weighted average number of shares in issue              1 815 274 388            1 815 274 388            -
 Diluted number of shares in issue                       1 823 359 844            1 823 359 844            -

Notes:
    1.   The “Before the Transaction” column has been extracted from the “After the Transaction and Rights Offer” column contained in the
         Evander Announcement.
    2.   The Financial Effects have been prepared on the assumption that the Transaction was concluded and all the deferred payments were
         paid in full on 1 July 2011 for purposes of the Statement of Comprehensive Income and by 30 June 2012 for purposes of the
         Statement of Financial Position.
    3.   The Financial Effects are prepared on the assumption that Pan African received 96 666 668 AOU Shares at an average price of
         AUD0.29 (GBP0.19) per share (being the closing price for an AOU Share the day before the Announcement) and cash in the amount
         of AUD6 000 000 (GBP3 900 000) as full payment of the Purchase Consideration. The Financial Effects have therefore been prepared
         on the assumption that the total value of the Purchase Consideration amounts to AUD34 033 334 (GBP22 121 667).
    4.   The Financial Effects have been prepared on the assumption that Pan African controls Auroch following the issue of AOU Shares to
         the Company as part payment of the Purchase Consideration. Auroch has therefore been consolidated by Pan African in accordance
         with IFRS.
    5.   For purposes of this announcement and the Financial Effects, Australian Dollars have been converted to British Pounds using an
         exchange rate of AUD1.54:GBP1.00.


4. CATEGORISATION AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT

The Transaction has been categorised as a category 2 transaction in accordance with the JSE Limited Listings
Requirements.


Holders of Pan African securities are referred to the cautionary announcement published by the Company on
7 November 2012 and are advised that caution is no longer required to be exercised when dealing in the
Company’s securities.



Johannesburg
14 December 2012

Sponsor
One Capital
     
Enquiries

       South Africa                                       UK

       Pan African Resources                              Canaccord Genuity Limited – Nomad and Joint Broker
       Jan Nelson, Chief Executive Officer                Rob Collins / Peter Stewart / Sebastian Jones / Joe
       +27 (0) 11 243 2900                                Weaving
                                                          +44 (0) 20 7523 8350

       One Capital                                        finnCap Limited – Joint Broker
       Sholto Simpson / Megan Young                       Elizabeth Johnson / Joanna Weaving
       +27 (0) 11 550 5000                                +44 (0) 20 7220 0500

       Vestor Investor Relations                          St James’s Corporate Services Limited
       Louise Brugman                                     Phil Dexter
       +27 (0) 11 787 3015                                +44 (0) 20 7499 3916
       +27 83 504 1186
                                                          Gable Communications
                                                          Justine James
                                                          +44 (0) 20 7193 7463 / +44 (0) 7525 324431

For further information on Pan African, please visit the website at www.panafricanresources.com

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