Wrap Text
Interim results for the six months ended 31 December 2012
Pan African Resources plc
(Incorporated and registered in England and Wales under Companies Act 1985
with registered number 3937466 on 25 February 2000)
Share code on AIM: PAF
Share code on JSE: PAN
ISIN: GB0004300496
('Pan African' or the 'Company')
Interim results for the six months ended 31 December 2012
1. Key features*
Group
- Revenue increased by 8.15% to ZAR668.14 million (2011: ZAR617.80 million).
- Attributable profit decreased by 4.30% to ZAR166.62 million (2011: ZAR174.10 million)
mainly as a result of once-off transaction costs relating to the proposed acquisition of
Evander Gold Mines Limited ('Evander').
- Basic and Headline Earnings per share decreased by 4.64% to 11.50 cents (2011: 12.06
cents).
- Cash of ZAR661.24 million (30 June 2012: ZAR255.39 million) on hand at 31 December
2012.
Mining operations
Barberton Gold Mining Operations ('BGMO')
- Gold sold decreased 4.26% to 44,926oz (2011: 46,927oz).
- Underground gold production remained consistent at 42,808oz (2011: 43,355oz).
- Tonnes milled from underground decreased by 7.53% to 135,000t (2011: 146,000t).
- Head grade increased by 1.61% to 11.33g/t (2011: 11.15g/t).
- Total cash cost of ZAR233,021/kg (2011: ZAR192,397/kg).
- The Lost Time Injury Frequency rate ('LTIFR') improved to 2.16 (2011: 3.09).
- Reportable Injury Frequency Rate ('RIFR') improved to 0.62 (2011: 1.03).
Phoenix Tailings Retreatment Plant ('Phoenix')**
- First sale of 3,136oz of PGE 6E***.
- Achieved a float head grade of 3.75g/t.
- Total cash costs of USD861/oz PGE 6E.
- Achieved a LTIFR of zero.
- Achieved a RIFR of zero.
Near term development projects
Barberton Tailings Retreatment Project ('BTRP')
- BTRP construction on schedule and within budget.
- Commissioning planned for 30 June 2013.
- Capital expenditure of ZAR83.14 million spent during the period under review ('H1 2013').
Acquisition of Evander
- Shareholders approved the proposed acquisition of Evander from Harmony Gold Mines
Limited ('Harmony').
- Secured ZAR703 million through an oversubscribed rights offer ('Rights Offer') for
purposes of settling a portion of the Evander purchase consideration.
Cash accrued until 31 December 2012 at Evander attributable to Pan African of ZAR237
million.
* To translate amounts in relation to the Statement of Comprehensive Income to GBP, an exchange rate of ZAR13.49 (2011: ZAR12.06) should be applied. To translate
figures in relation to the Statement of Financial Position to GBP, an exchange rate of ZAR13.69 (30 June 2012: ZAR12.91), (31 December 2011: ZAR12.54) should be
applied. See section 3 for further commentary on the effect of exchange rates.
** Phoenix is being reported without prior year comparable figures due to the plant being fully commissioned on 1 July 2012.
*** PGE 6E refers to the Platinum Group Elements.
Commenting on the results, Jan Nelson, CEO said:
"The Group has delivered a solid performance in the first half in spite of severe cost
pressures. We are encouraged by the progress made at BGMO, in particular with the
development of the tailings retreatment project which will add a further 20,000oz per annum
starting in June 2013. The Evander transaction, a game changing project for the Group, is
expected to conclude in the coming weeks, on receipt of Section 11, and the integration of this
project is already well underway, with a view to doubling the Group's gold production to
200,000oz in the next full financial year.
"Our focus in the next six months will be to deliver on volume and grade and driving costs down.
The Group intends to grow the profit margin and resume the dividend payment."
Financial Summary:
Six months ended 31 Six months ended 31
December 2012 December 2011
(Unaudited) (Unaudited)
Revenue (GBP) 49,528,638 51,229,660
EBITDA (GBP) 19,220,142 24,166,658
Attributable profit (GBP) 12,351,483 14,437,217
EPS (pence) 0.85 1.00
HEPS (pence) 0.85 1.00
Weighted average number
of shares in issue 1,449,371,057 1,444,225,674
Net asset value 108,351,501 89,230,393
Six months ended 31 Six months ended 31
December 2012 December 2011
Revenue (ZAR) 668,141,327 617,801,551
EBITDA (ZAR) 259,279,715 291,436,617
Attributable profit (ZAR) 166,621,505 174,104,904
EPS (cents) 11.50 12.06
HEPS (cents) 11.50 12.06
Weighted average number of
shares in issue 1,449,371,057 1,444,225,674
Net asset value 1,341,978,735 1,162,321,778
2. Nature of business
Pan African is a South African based precious metals mining group ('Group') which produces
approximately 95,000oz of gold and approximately 12,000oz of PGE 6E per annum. The
Company's strategic focus remains the exploitation of high-grade ore-bodies that yield high
margins with a low cash cost by skilled and experienced management teams. The Company has
agreed to acquire Evander from Harmony, a transaction that is expected to add approximately
100,000oz of additional gold production per annum and grow the total gold production base to
approximately 200,000oz per annum.
BGMO is currently constructing a 1.2Mt per annum gold tailings retreatment plant that will
produce approximately 20,000 ounces of gold per annum when commissioned in June 2013. The
Group is currently unhedged and is able to fund all on-mine capital expenditure from internal cash
flows generated by its operations. The Group remains one of the lowest cash cost producers of
gold and PGE 6E in South Africa.
3. Financial performance
Pan African is incorporated in England and Wales, its reporting currency is pound sterling (`GBP')
and its functional currency is South African Rand ('ZAR'). All the subsidiary companies within the
Group, with the exception of Explorata Limitada ("Manica")****, are South African and their
financial statements are prepared in ZAR. When subsidiary companies' financial statements are
translated into pound sterling for the purpose of Group consolidation and reporting, the average
and closing ZAR:GBP exchange rates for the period have an effect on the Group consolidated
financial results.
During the current period, the average ZAR:GBP exchange rate was ZAR13.49 (2011: ZAR12.06)
and the closing ZAR:GBP exchange rate was ZAR13.69 (2011: ZAR12.54). The period-on-period
average and closing ZAR:GBP exchange rates increased by 11.86% and 9.17%, respectively. The
effect of exchange rate movements should be taken into account when comparing the period-on-
period results on the Statement of Financial Position and Statement of Comprehensive Income.
Statement of Comprehensive Income
Gold operations
Revenue from gold sales expressed in ZAR terms increased by 3.79% to ZAR641.24 million
(2011: ZAR617.80 million). The increase in gold revenue was largely attributable to the average
ZAR gold spot price received increasing by 8.42% to ZAR458,898/kg (2011: ZAR423,276/kg).
The cost of production increased by 15.95% to ZAR324.41 million (2011: ZAR279.79 million). The
increase was primarily due to increases in electricity costs of 19.46% to ZAR38.3 Million (2011:
ZAR32.06 million) and labour costs by 16.97% to ZAR153.74 million (2011: ZAR131.43 million).
The significant increase in labour costs at BGMO is a result of a once-off adjustment made by the
group to bring the pay scales in line with South African Chamber of Mine rates. Security costs
decreased by 12.94% to ZAR13.12 million (2011: ZAR15.07 million).
Group profit margin decreased by 2.17% to ZAR225,877/kg (2011: ZAR230,879/kg). The total unit
production cash cost increased by 21.11% to ZAR233,021/kg (2011: ZAR192,397/kg).Royalty
costs decreased by 27.91% to ZAR17.51 million (2011: ZAR24.29 million) primarily as a result of
increased capital expenditure related to the construction of the BTRP which also contributed to the
Groups effective ZAR tax rate decreasing to 29.98% (2011:36.76%).
**** On 11 January 2013 Manica was sold to Auroch Minerals NL, resulting in an effective holding of 38.01%.
PGE treatment operations
Revenue from PGE 6E sales expressed in ZAR amounted to ZAR26.90 million. The effective PGE
6E price achieved was ZAR8,470/oz, and the cash cost of production achieved was ZAR7,293/oz
PGE 6E.
Total cost of production amounted to ZAR23 million and comprised, inter alia, labour costs
(ZAR6.79 million), consumables (ZAR4.77 million), refinery charges (ZAR2.80 million) and
overhead costs (ZAR 2.50 million).
Group
Mining profit decreased by 8.28% to ZAR292.1 million (2011: ZAR318.46 million).
Earnings before interest, tax, depreciation and amortisation ('EBITDA') decreased by 11.03% to
ZAR259.28 million (2011: ZAR291.44million) and attributable profit decreased by 4.30% to
ZAR166.62 million (2011: ZAR174.10 million). In GBP terms the attributable profit decreased by
14.47% to GBP12.35 million (2011: GBP14.44 million), primarily as a result of the average
ZAR:GBP exchange rate depreciating by 11.86% during H1 2013.
Other expenses increased 101.18% to ZAR42.75 million (2011: ZAR21.25 million) mainly as a
result of once-off transaction costs relating to the Evander acquisition of ZAR9.34 million (2011:
Nil). Corporate and social investment increased by 21.61% to ZAR7.54 million (2011: ZAR6.20
million) which amounted to 4.92% (2011: 3.56%) of the Groups attributable profit.
Income tax decreased by 29.49% to ZAR71.34 million (2011: ZAR101.18 million) primarily as a
result of a significant increase in capital expenditure for the construction of the BTRP. The Group's
effective tax rate in ZAR terms decreased to 29.98% (2011:36.76%).
Basic and headline earnings per share decreased by 4.64% to 11.50 cents (2011: 12.06 cents), in
GBP terms decreased by 15.00% to 0.85 pence (2011: 1.00 pence).
Statement of financial position
Movements in the statement of financial position are calculated with reference to the 30 June
2012 in ZAR terms, due to the functional currency of the Group being ZAR. Accordingly, the
closing ZAR:GBP exchange rate utilised for conversion purposes to GBP would is ZAR13.69 (30
June 2012: ZAR12.91) to translate the amounts to GBP.
Cash on hand increased significantly to ZAR661.24 million (2012: ZAR255.39 million) mainly due
to cash generated by the operations and key shareholder irrevocable deposits received in relation
to the Rights Offer. The cash on hand in relation to the shareholder irrevocable deposits was
ZAR429.99 million and ZAR231.25 million related to the Groups operational cash resources.
Property, Plant and Equipment increased by 12.77% to ZAR908.65 million (2012: ZAR805.74
million) mainly due to construction of the BTRP and on-mine capital expenditure. Trade and other
payables increased by 440.02% to ZAR537.48 million (2012: ZAR99.53 million) mainly due to
cash received in advance from shareholders in relation to the Rights Offer and the accrual of the
associated commitment fees payable. Trade and other receivables increased by 66.49% to
ZAR146.76 million (2012: ZAR88.15 million) due to increased quantities of gold being shipped on
31 December 2012 in comparison to 30 June 2012. Break fees paid to Harmony in relation to the
acquisition of Evander contributed to the increase in trade and other receivables.
4. Operational review
4.1 BGMO
a. Safety and training
It is with regret that BGMO reported one fatality for H1 2013. On 17 November 2012 Mr G Fourie
passed away when the truck he was driving left the road, overturned and rolled down a hill at
Sheba mine. Fatality free shifts for H1 2013 totalled 105,888 (2011: 1,329,723) which decreased
as result of the unfortunate fatality.
The safety performance at BGMO for the first six months of the 2013 financial year as measured
by the All Injury Frequency Rate ('AIFR'), was 14.81 (2011: 21.25), indicating that the total
number of incidents decreased during H1 2013. The LTIFR improved to 2.16 (2011: 3.09) and
RIFR to 0.62 (2011: 1.03).
b. Operating Performance
A total of 44,926oz (2011: 46,927oz) of gold was sold by BGMO (which comprises the Fairview,
Sheba and New Consort sections), a decrease of 4.26% from the previous period mainly as a
result of lock-up in the Biox® plant. This lock-up is expected to be recovered in the third quarter.
Total underground production remained relatively consistent at 42,808oz (2011: 43,355oz), whilst
the total surface production increased to 783oz (2011: 264oz).Tonnes milled from underground
operations decreased by 7.53% to 135,000t (2011: 146,000t) and was mainly attributable to lower
tonnages milled at the Sheba mine due to a mechanical failure of the ZK winder bull gear and
shaft refurbishment at Fairview limiting hoisting capacity. Tonnes milled from surface operations
increased by 162.50% to 21,000t (2011: 8,000t).
The headgrade from underground operations increased by 1.61% to 11.33g/t (2011:11.15g/t).
c. BGMO Production Summary
6 months 6 months 6 months 6 months 6 months
ended ended ended ended ended
31-Dec-12 31-Dec-11 31-Dec-10 31-Dec-09 31-Dec-08
Tonnes Milled Underground (t'000) 135 146 149 153 160
Tonnes Milled Surface (t'000) 21 8 - - -
Tonnes Milled Total (t'000) 156 155 149 153 160
Headgrade Underground (g/t) 11.33 11.15 10.55 10.11 11.40
Headgrade Surface (g/t) 1.65 1.65 - - -
Recovered Grade (g/t) 8.95 9.44 9.57 9.25 10.36
Overall Recovery (%) 90 89 91 91 91
Production: Underground (oz) 42,808 43,355 45,209 45,385 47,634
Production: Surface/Calcine (oz) 783 264 - - 3,545
Gold Sold (oz) 44,926 46,927 46,655 45,971 51,186
Average price: spot (US$/oz) 1,685 1,736 1,286 1,032 824
Average price: spot (ZAR/KG) 458,898 423,276 295,281 253,510 235,338
Total cash cost (US$/oz) 856 786 767 670 451
Total cash cost (ZAR/KG) 233,021 192,397 176,199 164,697 134,581
Total cost per ton (ZAR/t) 2,086 1,816 1,713 1,543 1,340
EBITDA ZAR'000 281,038 291,437 144,752 107,297 129,372
Depreciation ZAR'000 21,404 18,529 21,341 17,157 16,122
Capital Expenditure ZAR'000 121,641 55,070 45,567 27,449 34,517
Exchange rate average ZAR/GBP 13.49 12.06 11.18 12.48 15.13
Exchange rate closing ZAR/GBP 13.69 12.54 10.28 11.94 13.78
Exchange rate average (R/US$) 8.47 7.58 7.14 7.64 8.88
Exchange rate closing (R/US$) 8.47 8.12 6.65 7.39 9.55
d. Capital expenditure Growth projects
%
Metres/ % Completed Potential
Project Equipping of budget resource Comments
completed (Progressive Oz
YTD)
Sheba Edwin Bray The Thomas Reef Structure was
Thomas intersected and current development is
sections focusing on determining the strike extent
of this structure.
70 116.7% 10,000 Sampling of the structure has yielded
results of 12g/t. The elevation of this reef
drive is around 168m above the 7 level
elevation. The mining configuration of this
block is being finalised.
Sheba Pillar Positive progress was made developing
development and equipping the area. Mining began in
99.2 82.7% 9,000
the ore resource blocks that were exposed
during the first H1 2013.
Consort 50 West 1 The shaft was sunk to 53 level elevation,
decline west and equipping of the 52 level reef box will
now be completed. This will be followed by
the waste development on 52 level to
73 104.3% 26,000
expose the reef structure. Only once the
reef structure has been exposed on 52
level, will development resume on 53
level.
Consort 40 Level Development is progressing towards the
development serpentinite footwall contact.
137.4 114.5% 10,000
Consort MMR The exploration drilling platform was
pillar development completed and drilling commenced in
January 2013.
The team was moved up to 20 level where
86.8 86.8% 3,200 the Consort SI 2 Shaft must be equipped
for ore and a separate travelling way.
Once this is complete, development will
commence westward between the Consort
Ivaura and MMR faults.
Fairview 62 Level Excellent progress is being made with this
development 278.8 116.2% 49,580 project, which will access additional high
grade areas.
Fairview 3# The shaft is being refurbished from 62
deepening and level to 64 level. The final track alignment
refurbishment is on-going.
Development of the return airway from 64
10 33.3% 344,920
level to 62 level commenced in December
2012. The return airway has been
shotcreted from 64 level to the face
position.
Fairview 11 Level Only This project is progressing well and on
Royal Reef 100.0% 13,000 plan.
Equipping
Fairview 1# 80m of Development is currently being done on
opening up Development 100.0% 24,000 22 level in order to expose the down-dip
& Equipping extension of the Fairview Geel reef.
Totals 835.2 98.3% 489,700
e. Maintenance capital
The major capital expenditure per discipline is summarised as follows:
six months six months ended
ended 31 Dec 31 Dec 2011
Description 2012 Impact on production
Cost ZAR'000 Cost ZAR'000
To sustain current production
Mining capital 2,982 4,082 levels
To sustain current production
Engineering capital 10,351 7,396 levels
Metallurgical Plants and Biox To sustain current production
Capital 3,169 7,341 levels
To sustain current production
Safety and environment capital 590 1,314 levels
To sustain current production
General capital 1,365 5,204 levels
Total 18,457 25,337
f. Mineral resources management
Exploration drilling
During H1 2013 a total of 8,443.5m (2011: 7,740m) of exploration drilling was completed
underground at BGMO and the following significant intersections are reported:
Borehole Drill Width Grade
Section number (cm) (g/t) Description
Fairview Bh 5899 100 7.02 Strike extension to the North-East of the MRC 11 block at depth
EBR 19 72 162.50 Free gold on Thomas Reef
36 ZK 990-02 87 28.47 Intersection on hanging wall of 990 Cross fracture
STOCK 07 71 27.02 Down-dip extension of Stock work body
22-480-01 118 22.04 Strike extension of current working in old area
STOCK 07 90 21.54 Down-dip extension of Stock work body
STOCK 07 65 18.28 Down-dip extension of Stock work body
SW 07 52 14.21 Mineralisation in the foot wall of the porphyry dyke in Sheba West area
33ZKH 12 61 7.73 Mineralisation on ZK Formation contact
SW 06 100 12.85 Mineralisation in the foot wall of the porphyry dyke in Sheba West area
Sheba 33ZKH 15 93 10.46 Mineralisation on ZK Formation contact
3#7-25 261 60.80 Confirming mineralised structure position for mining design
3#7-29 94 50.30 Confirming mineralised structure position for mining design
3#7-27 188 48.05 Confirming mineralised structure position for mining design
Footwall Lens Mineralisation of the updip of the 45 body East of
40L6 91 36.70 pegmatite
3#7-28 94 31.50 Confirming mineralised structure position for mining design
3#7-25 261 30.92 Confirming mineralised structure position for mining design
3#7-29 94 29.40 Confirming mineralised structure position for mining design
3#7-29 94 28.00 Confirming mineralised structure position for mining design
3#7-26 87 20.00 Confirming mineralised structure position for mining design
3#7-24 261 11.71 Confirming mineralised structure position for mining design
3#7-28 94 11.30 Confirming mineralised structure position for mining design
New
Consort 3#7-26 87 10.00 Confirming mineralised structure position for mining design
Development results
New Consort Fairview Sheba
Metres g/t Metres g/t Metres g/t
Reef 261.9 3.43 437.6 10.99 547.9 4.07
Stope development 227.6 8.44 62.4 19.15 221.1 5.97
Capital 288.4 - 438.9 - 167.0 -
Waste working cost 355.7 - 246.8 - 597.1 -
Waste total 644.1 - 685.7 - 764.1 -
Total 1,777.7 - 1871.4 - 2,297.2 -
4.2 Phoenix
The chrome tailings retreatment plant ('CTRP') was designed to treat sulphide material from
International Ferrous Metals Limited's ('IFM') Lesedi Mine. IFM initially supplied Phoenix with
sulphide-rich material from its Lesedi underground operations. However, IFM cut back
drastically on operations at Lesedi in January 2012 and started mining oxidised material from
the open cast section. This resulted in oxidised tailings being blended into the Phoenix
feedstock.
The metallurgy of oxidised tailings negatively affects recovery and concentrate grade in the
CTRP. This in turn results in poor PGM concentrate production. The oxide versus sulphide
ratio has increased since beginning November 2012 and 100% oxide material is now being
mined by IFM. The Group is currently expediting an additional Tailings Storage Facility ('TSF')
that will allow management at Phoenix to bypass oxidised tailings. The TSF will be completed
within the next seven months and the Group will expect recoveries and revenue to increase
significantly at this time.
Phoenix is currently implementing the following to address the issue of oxidised feedstock:
- increase of feed tonnages into the plant to increase PGE 6E content;
- investigating methods to improve oxide material recoveries;
- complete the new TSF to bypass oxide tailings; and
- focus on further operating cost reductions.
a. Safety and training
Phoenix continues to achieve excellent safety targets with the LTIFR and RIFR remaining at
zero. All employees were trained to ensure safety risk compliance.
b. Operating performance
A total of 3,136oz of PGE 6E were sold. The ounces produced are lower than anticipated due
to a reduction in head grade of 16.67% to 3.75g/t versus the budgeted head grade of 4.50g/t.
Recoveries also reduced by 42.42% to 19% versus a budget of 33%. The oxidised tailings
received from IFM is the main contributing factor to this decrease.
c. Phoenix Production Summary
six Months Ended
31 December 2012
Sales (ZAR) 26,904,459
Oz dispatched (oz) 3,136
DMT tonnages (t) 893
Plant recoveries (%) 19
Head grade (g/t) 3.75
Float feed tonnes (t) 121,160
Basket price ($/oz) 1,013
Exchange rate ($/ZAR) 8.47
Cost per plant feed ton ($/t) 19.60
Cost per PGE 6E ($/oz) 861
Plant feed tonnes (t) 138,561
Total operating cost (ZAR'000) 23
Depreciation (ZAR'000) 6,024
EBITDA (ZAR'000) 1,946
Capital expenditure (ZAR'000) 1,042
d. Growth Projects
% Completed of Potential Amount
Project budget resource spent Comments
(Progressive YTD) Oz ZAR'000
The scoping document has been
submitted according to the Mineral and
Petroleum Resources Development Act
TSF EIA
application 44% 0 656 (MPRDA) and the National
Environmental Development Act
(NEMA).
e. Maintenance capital
Cost
CTRP Impact on production
ZAR'000
Re-mining enclosure 104 Safety and health improvement
Construction works 66 Environmental compliance
Telescopic handler 778 Maintenance
Batch float machine 81 To improve float recoveries
Laboratory equipment 14 To improve float recoveries
Total 1,043
5. Near-term development projects
5.1 BTRP
Construction of the BTRP on a site adjoining the Bramber TSF began in April 2012,
and the following major construction milestones were achieved:
a. Construction update
Civils construction
All civil work has been completed. The thickener, furnace room, change house and
offices are progressing according to schedule.
Structural, mechanical erection and piping
Construction of the carbon in leach ('CIL') tanks has progressed well and all nine
tanks have been constructed to their full height. Mechanical strengthening remains to
be completed.
Electrical Installations
The substation design was finalised and documentation submitted for quality review.
Quotations were received and orders placed to move the Eskom overhead lines that
are currently running through the planned TSF area.
The forecast schedule of the BTRP Project is summarised below:
Description Date
Construction completion 1 April 2013
Cold commissioning 1 May 2013
Wet commissioning 1 June 2013
Hot commissioning 30 June 2013
b. BTRP capital expenditure
Historical capital Forecasted capital
Prior Full
Capital Spent
Description Financial - 31 Capital Forecasted Project Date of final
year December spent to capital to forecasted completion
capital 2012 date complete capital
spent costs
ZAR'000 ZAR'000 ZAR'000 ZAR'000 ZAR'000
Construction and
infrastructure 42,819 81,716 124,535 107,626 232,161 September 2013
Quantity surveying - 550 550 1,759 2,309 September 2013
Environmental 503 223 726 237 963 February 2013
BTRP tailings storage
Facility - 652 652 57,598 58,250 October 2013
Harper dumps
Purchased 10,000 - 10,000 - 10,000 Completed
TSF land purchased 2,095 - 2,095 - 2,095 Completed
Total 55,417 83,141 138,558 167,220 305,778
6. Acquisition of Evander
Pan African entered into an agreement in terms of which Emerald Panther Investments 91
Proprietary Limited ("EP"), a wholly owned subsidiary of the Company, will purchase all the
shares of and claims against Evander from Harmony for ZAR1.5 billion during May 2012
("Evander Transaction"). The Evander Transaction remains subject to the consent of the
Minister of Mineral Resources in accordance with section 11 of the MPRDA. Once the
Evander Transaction becomes unconditional, EP will be required to pay the purchase
consideration in cash to Harmony. The aggregate cash flows accumulated at Evander from
April 2012 will be acquired by EP, and totalled ZAR237 million as at the end of December
2012.
Refer to Harmony's website for the most recent results of Evander at
http://www.harmony.co.za/investors.
7. Disposal of Manica
Pan African announced on 29 August 2012 that it had entered into an agreement to dispose of
100% of its Manica Gold Project ("Manica") to ASX quoted Auroch Minerals Mozambique (Pty)
Limited, a wholly owned subsidiary of Auroch Minerals NL ("Auroch), for a total potential purchase
consideration of AUD6 million (GBP4 million/ZAR52.4 million) payable in cash and
96,666,668 shares in Auroch, subject to certain terms and conditions.
On the 31 December 2012, all the conditions precedent to the agreement were met and as a
result on 11 January 2013 20,900,000 Auroch ordinary shares were issued to Pan African,
and a further 4,100,000 Auroch ordinary shares are expected to be issued to the Company in
February 2013. Payment of the balance of the purchase consideration in shares and cash is
deferred until the achievement of certain milestones in accordance with the agreement
between Pan African and Auroch.
On 11 January 2013 the Company held an effective holding of 38.01% in Auroch.
8. Capital Expenditure and Commitments
Capital expenditure at BGMO totalled GBP9.02 million (2011: GBP4.57 million) and
comprised, development capital of GBP1.49 million (2011: GBP2.47 million), maintenance
capital of GBP1.39 million (2011: GBP2.10 million) and BTRP capital of GBP6,16 million
(2011:Nil).
Capital expenditure on Phoenix totalled GBP0.08 million (2011:GBP4.57 million).
There was GBP24.43 million (2011: GBP0.57 million) of outstanding orders contracted for
capital commitments at the end of H1 2013 at BGMO and GBPNil (2011: GBP0.5 million)
outstanding at Phoenix.
Operating lease commitments, which fall due within the next year, amounted to GBP0.038
million (2011: GBP0.179 million) as at 31 December 2013.
In ZAR terms the Capital expenditure and commitments were:
Capital expenditure at BGMO totalled ZAR121.64 million (2011: ZAR55.07 million) and
comprised, development capital of ZAR20.04 million (2011: ZAR29.73 million), maintenance
capital of ZAR18.46million (2011: ZAR25.34 million) and BTRP capital of ZAR83.14 million
(2011: Nil).
Capital expenditure on Phoenix totalled ZAR1.05 million (2011: ZAR55.11 million).
There was ZAR334.5 million (2011: ZAR6.87 million) of outstanding orders contracted for
capital commitments at the end of H1 2013 at BGMO and ZAR Nil (2011: ZAR6.0 million)
outstanding at Phoenix.
Operating lease commitments, which fall due within the next year, amounted to ZAR0.46
million (2011: ZAR2.16million) as at 31 December 2013.
9. Directorship change
There were no directorship changes during H1 2013.
10. Shares issued
During H1 2013 the Company announced the issue and allotment of 3,000,000 new ordinary
shares in respect of share options issued on 16 August 2007 which were exercised at a price
of 7pence for a total consideration of GBP0.21 million.
Furthermore, the Company obtained approval from its shareholders to issue 370,071,902 new
Pan African ordinary shares in terms of the Rights Offer so as to raise funds for the settlement
of a portion of the Evander Transaction purchase consideration. The Rights Offer was
successfully concluded during January 2013.
11. Dividend
The Company has adopted a policy whereby dividends are considered and, if deemed
appropriate by the board of directors of the Company ('Board'), declared on an annual basis.
Pan African will consider a final dividend subsequent to the finalisation of financial year-end
results. The consideration of any dividend will take account of cash flow requirements and
growth plans, whilst recognising that where possible, the payment of a dividend on a
consistent basis increases shareholder value.
During H1 2013 the Company has not declared a dividend as result of raising equity capital to
fund the Evander Transaction. The dividend for the previous financial year was 0.5135 pence
per share totalling GBP7.42 million.
12. Going concern
The Board is satisfied that the Group is a going concern for the foreseeable future, and have
adopted the going-concern basis in preparing these interim results
13. Accounting policies
The accounting policies applied in compiling the interim results are in terms of International
Financial Reporting Standards ('IFRS') and consistent with those applied in preparing the
Group's annual financial statements for the year ended 30 June 2012.
The financial information set out in this announcement does not constitute the Company's
statutory accounts for the half-year ended 31 December 2012.
The interim results have been prepared and presented in accordance with, and containing the
information required by IFRS on Interim Financial Reporting, International Accounting
Standards ('IAS') 34. The financial information included in the interim results has been
prepared in accordance with the recognition and measurement criteria of IFRS. This
announcement does not itself contain sufficient disclosure information to comply fully with
IFRS.
The interim results have not been reviewed or reported on by the Company's external
auditors.
14. Johannesburg Stock Exchange listing
The Company has a dual primary listing on the main board of the JSE Limited ('JSE') and the
Alternative Investment Market ('AIM') of the London Stock Exchange.
The preliminary announcement has been prepared in accordance with the framework
concepts and the measurement and recognition requirements of IFRS, the AC 500 standards
as issued by the Accounting Practices Board and the information as required by IAS 34:
Interim Financial reporting.
15. AIM listing
The financial information for the period ended 31 December 2012 does not constitute statutory
accounts as defined in sections 435(1) and (2) of the United Kingdom Companies Act, 2006.
The Group announcement ('the Group's financial statements') has been prepared in
accordance with IFRS and International Financial Reporting Interpretation Committee
interpretations adopted for use by the European Union, with those parts of the Companies Act
2006 applicable to companies reporting under IFRS.
16. Segmental reporting
A segment is a distinguishable component of the Group that is engaged in providing products
or services in a particular business sector (operating segment), which is subject to risk and
rewards that are different to those of other segments. The segments which the Group reviews
the business activities of are: mining operations, near-term mining operations and
development projects.
17. Directors' dealings
No director dealings occurred during period under review other than certain directors of the
Company disclosing their intention to deal in the Company's shares for purposes of the Rights
Offer.
The following directors' dealings were committed to during H1 2013 and subsequently taken
up after in January 2013 in respect of the Rights Offer:
- On 14 January 2013 Mr JAJ Loots was issued 16,575 shares at ZAR1.90 for a total
consideration of ZAR31,492.50.
- On 14 January 2013 Mr JP Nelson was issued 13,157 shares at ZAR1.90 for a total
consideration of ZAR24,998.30.
- On 14 January 2013 Mr RG Still was issued 510,000 shares at ZAR1.90 for a total
consideration of ZAR969,000.00.
- On 14 January 2013 the Alexandra Trust of which Mr. RG Still is a trustee was issued
3,169,880 shares at ZAR1.90 for a total consideration of ZAR6,022,772.10.
- On 14 January 2013 Pangea Exploration (Pty) Ltd of which Mr. RG Still is a director
was issued 457,418 shares at ZAR1.90 for a total consideration of ZAR869,094.20.
- On 16 January 2013 The Alexandra Family Trust of which Mr. RG Still is a trustee
took up shares pursuant to the excess shares in terms of the Company's R703 million
rights offer. The trust was issued 72,836 shares at R1.90 for a total consideration of
R138,388.40.
Shanduka Gold (Pty) Limited subscribed for 70,189,473 shares in the Rights offers resulting in a
shareholding of 23.96% post the Right offer.
18. Significant events post the reporting period
Evander Transaction funding
The Group completed the raising of ZAR703 million through the Rights Offer. Pan African
implemented the Rights Offer through the issue of 370,071,902 new Pan African ordinary
shares at a subscription price of ZAR1.90 or 14 pence per Rights Offer share. The Rights
Offer closed on Friday, 11 January 2013. Pan African received subscription applications for a
total of 645,898,862 Rights Shares, equating to 175% of the available Rights Shares.
Pan African has successfully agreed the terms for a new revolving credit facility ("RCF") of
ZAR600 million during January 2013 which shall replace the previous RCF currently held at
BGMO when the Evander Transaction becomes unconditional.
The Groups cash resources on hand at 31 December 2012 was ZAR231.25 million for the
Group excluding the shareholder irrevocable cash held, and Evander had a further ZAR237
million on hand, of which ZAR150 million is planned to be utilised to settle a portion of the
Evander Transaction purchase consideration due to Harmony.
Disposal of Manica
On 11 January 2013 Auroch issued 20,900,000 ordinary shares to the Company, resulting in
an effective holding of 38.01%.
Jan Nelson was also appointed as a Non-Executive Director to Auroch on 11 January 2013.
With effect from 11 January 2013, Auroch will be accounted for within the Group as an
investment in an associate.
19. The future
Despite rising cost pressures and lower output mainly as a result of gold lock-up in the BIOX
plant at BGMO, a higher gold price and continued high grades resulted in a solid performance
from the Group. The Group continued to fund the construction of the BTRP from cash flow
amounting to ZAR83 million with a further investment of ZAR38 million allocated to
maintenance of infrastructure and finding new ore-bodies.
The Group successfully obtained shareholder approval for the Evander transaction and
secured irrevocable undertakings from key institutional investors to fund part of the acquisition
of Evander to a total of ZAR703 million. In addition a RCF of ZAR600 million was signed with
two South African banks. Since 1 April 2012 Evander generated ZAR237 million in free cash
flow attributable to Pan African. In addition the Group had a cash balance of ZAR661 million
as at the end of the reporting period. The Evander transaction will double Group gold
production, significantly increase revenue and profits and impact positively on market
capitalisation.
The Group furthermore divested of the Manica project to Auroch Minerals NL for cash and
shares and the board believes that its shareholding in this project will add significant
shareholder value in the future.
The focus in the coming six months will be to:
- conclude the Evander transaction and successfully integrate the operation; and
- complete the construction of the BTRP and commission the plant.
The Group and managements main focus will be on the safe delivery of production targets
(volume and grade) and cost reductions.
Jan Nelson Neal Reynolds
Chief Executive Officer Acting Financial Director
13 February 2013
20. Consolidated statement of comprehensive income for the period ended 31 December
2012
Group
31 December 2012 31 December 2011
(Unaudited) (Unaudited)
GBP GBP
Revenue
Gold sales 47,534,238 51,229,660
Platinum Sales 1,994,400 -
Realisation costs (89,012) (84,965)
On - mine revenue 49,439,626 51,144,695
Cost of production - gold (24,048,124) (23,201,120)
Cost of production - platinum (1,705,022) -
Depreciation (2,033,201) (1,536,448)
Mining profit 21,653,279 26,407,127
Other expenses (3,168,636) (1,762,357)
Royalty costs (1,297,702) (2,014,560)
Net income before finance income and finance
costs 17,186,941 22,630,210
Finance income 547,668 223,324
Finance costs (94,718) (26,069)
Profit before taxation 17,639,891 22,827,465
Taxation (5,288,408) (8,390,248)
Profit after taxation 12,351,483 14,437,217
Other comprehensive income:
Foreign currency translation differences (4,501,247) (8,533,732)
Total comprehensive income for the year 7,850,236 5,903,485
Profit attributable to:
Owners of the parent 12,351,483 14,437,217
12,351,483 14,437,217
Earnings per share 0.85 1.00
Diluted earnings per share 0.85 0.99
Weighted average number of shares in issue 1,449,371,057 1,444,225,674
Diluted number of shares in issue 1,456,619,851 1,452,808,064
Net asset value 108,351,501 89,230,393
Headline earnings per share is calculated :
Basic earnings 12,351,483 14,437,217
Adjustments: - -
Headline earnings 12,351,483 14,437,217
Headline earnings per share 0.85 1.00
Diluted headline earnings per share 0.85 0.99
21. Consolidated statement of financial position as at 31 December 2012
Group
31 December 31 December 30 June
2012 2011 2012
(Unaudited) (Unaudited) (Audited)
GBP GBP GBP
ASSETS
Non-current assets
Property, plant and equipment and
mineral rights 66,373,510 59,516,827 62,411,655
Other intangible assets - 13,332,945 -
Goodwill 21,000,714 21,000,714 21,000,714
Rehabilitation trust fund 2,574,825 2,669,022 2,662,934
89,949,049 96,519,508 86,075,303
Current assets
Inventories 2,023,413 1,487,066 1,868,735
Trade and other receivables 10,720,089 7,000,352 6,828,047
Cash and cash equivalents 48,301,167 4,994,854 19,782,179
61,044,669 13,482,272 28,478,961
Assets held for sale 12,145,808 - 13,135,215
TOTAL ASSETS 163,139,526 110,001,780 127,689,479
EQUITY AND LIABILITIES
Capital and reserves
Share capital 14,512,623 14,449,643 14,482,623
Share premium 48,940,879 50,982,790 51,149,299
Translation reserve (6,438,756) (223,190) (1,937,509)
Share option reserve 958,932 799,227 904,902
Retained income 71,784,224 44,628,324 59,432,741
Realisation of equity reserve (10,701,093) (10,701,093) (10,701,093)
Merger reserve (10,705,308) (10,705,308) (10,705,308)
Equity attributable to owners of the parent 108,351,501 89,230,393 102,625,655
Total equity 108,351,501 89,230,393 102,625,655
Non-Current liabilities
Long-term provisions 2,939,853 2,994,493 3,043,954
Long-term liabilities 652,356 237,357 868,881
Deferred taxation 11,428,288 9,320,441 10,088,530
15,020,497 12,552,291 14,001,365
Current liabilities
Trade and other payables 39,260,503 6,947,074 7,709,729
Current tax liability 507,025 1,272,022 3,352,730
39,767,528 8,219,096 11,062,459
TOTAL EQUITY AND LIABILITIES 163,139,526 110,001,780 127,689,479
22. Consolidated cash flow statement for the period ended 31 December 2012
Six months ended Six months ended
31 December 2012 31 December 2011
(Unaudited) (Unaudited)
GBP GBP
Cash generated by operations 15,500,905 23,585,992
Taxation paid (5,675,218) (6,824,551)
Royalty paid (1,187,205) (1,724,084)
Dividends paid - (7,416,176)
Net finance income 452,950 197,255
Cash inflow from operating activities 9,091,432 7,818,436
Cash outflow from investing activities (9,104,868) (9,140,205)
Cash inflow from financing activities 31,626,645 59,197
Net increase/(decrease) in cash equivalents 31,613,209 (1,262,572)
Cash at the beginning of period 19,782,179 10,123,822
Effect of foreign currency rate changes (3,094,221) (3,866,396)
Cash at end of year 48,301,167 4,994,854
23. Consolidated statement of changes in equity for the period ended 31 December 2012
Six months Six months
ended 31 ended 31
December 2012 December 2011
(Unaudited) (Unaudited)
GBP GBP
Shareholders' equity at start of period 102,625,655 90,746,110
Net share (costs)/issues (2,178,420) 59,197
Share option reserve 54,030 (62,223)
Other comprehensive income (4,501,247) (8,533,732)
Profit for the period 12,351,483 14,437,217
Dividend - (7,416,176)
Total equity 108,351,501 89,230,393
24. Consolidated segment report for the period ended 31 December 2012
31 December 2012 31 December 2011
BGMO Phoenix Corporate Group BGMO Phoenix Corporate Group
and growth and growth
projects projects
GBP GBP GBP GBP GBP GBP GBP GBP
Revenue
Gold sales 47,534,238 - - 47,534,238 51,229,660 - - 51,229,660
Platinum Sales - 1,994,400 - 1,994,400 - - - -
(89,012) - - (89,012) (84,965) - - (84,965)
Realisation costs
On - mine revenue 47,445,226 1,994,400 - 49,439,626 51,144,695 - - 51,144,695
(24,048,124) - - (24,048,124) (23,201,120) - - (23,201,120)
Cost of production gold
Cost of production platinum - (1,705,022) - (1,705,022) - - - -
Depreciation (1,586,655) (446,546) - (2,033,201) (1,536,448) - - (1,536,448)
Mining Profit 21,810,447 (157,168) - 21,653,279 26,407,127 - - 26,407,127
Other expenses (1,266,372) (145,153) (1,757,111) (3,168,636) (1,203,656) (131,801) (426,900) (1,762,357)
(1,297,702) - - (1,297,702) (2,014,560) - - (2,014,560)
Royalty costs
Net income before finance 19,246,373 (302,321) (1,757,111) 17,186,941 23,188,911 (131,801) (426,900) 22,630,210
income and finance costs
Finance income 38,851 - 508,817 547,668 29,227 4,998 189,099 223,324
Finance costs (94,718) - - (94,718) (26,069) - - (26,069)
Profit before taxation 19,190,506 (302,321) (1,248,294) 17,639,891 23,192,069 (126,803) (237,801) 22,827,465
Taxation (5,336,644) 48,236 - (5,288,408) (8,392,325) 2,077 - (8,390,248)
Profit after taxation 13,853,862 (254,085) (1,248,294) 12,351,483 14,799,744 (124,726) (237,801) 14,437,217
31 December 2012 30 June 2012
Segmental assets* 59,061,456 18,352,064 64,725,292 142,138,812 48,864,455 19,617,673 38,206,637 106,688,765
Segmental liabilities 20,881,848 62,098 33,844,079 54,788,025 23,552,791 275,378 1,235,655 25,063,824
Goodwill - - - 21,000,714 - - - 21,000,714
Net assets (excluding
goodwill) 38,179,608 18,289,965 30,881,213 87,350,787 25,311,664 19,342,295 36,970,982 81,624,941
Capital expenditure 9,017,135 77,457 10,276 9,104,868 10,739,237 6,672,468 13,202 17,424,906
* All assets are held within South Africa, with the exception of assets relating to Manica GBP 9,179,774 (2011: GBP 9,983,544) which are held in Mozambique.
Appendix 1: Consolidated statement of comprehensive income in ZAR terms for the
period ended 31 December 2012
Group
31 December 2012 31 December 2011
(Unaudited) (Unaudited)
ZAR ZAR
Revenue
Gold sales 641,236,871 617,801,551
Platinum Sales 26,904,456 -
Realisation costs (1,200,772) (1,024,631)
On - mine revenue 666,940,555 616,776,920
Cost of production Gold (324,409,193) (279,792,759)
Cost of production Platinum (23,000,747) -
Depreciation (27,427,881) (18,528,719)
Mining Profit 292,102,734 318,455,442
Other expenses (42,744,900) (21,253,057)
Royalty costs (17,506,000) (24,294,487)
Net income before finance income and
finance costs 231,851,834 272,907,898
Finance income 7,388,041 2,693,165
Finance costs (1,277,746) (314,378)
Profit before taxation 237,962,129 275,286,685
Taxation (71,340,624) (101,181,781)
Profit after taxation 166,621,505 174,104,904
Other comprehensive income:
Foreign currency translation differences (60,721,822) (102,912,119)
Total comprehensive income for the year 105,899,683 71,192,785
Profit attributable to:
Owners of the parent 166,621,505 174,104,904
166,621,505 174,104,904
Earnings per share 11.50 12.06
Diluted earnings per share 11.44 11.98
Weighted average number of shares in issue 1,449,371,057 1,444,225,674
Diluted number of shares in issue 1,456,619,851 1,452,808,064
Net asset value 1,341,978,735 1,162,321,778
Headline earnings per share is calculated :
Basic earnings 166,621,505 174,104,904
Adjustments: - -
Headline earnings 166,621,505 174,104,904
Headline earnings per share 11.50 12.06
Diluted headline earnings per share 11.44 11.98
1. Contact details
Pan African Resources
Jan Nelson, Chief Executive Officer
Office: +27 (0) 11 243 2900
Canaccord Genuity Limited
Peter Stewart
Office: +44 (0) 20 7523 8350
One Capital (Pty) Limited
Sholto Simpson/Megan Young
Office: +27 (0) 11 550 5000
St James's Corporate Services Limited
Phil Dexter
Office: +44 (0) 20 7499 3916
Gable Communications
Justine James
Office: +44 (0)20 7193 7463
Mobile: +44 (0) 7525 324431
Vestor Media and Investor Relations
Louise Brugman
Office: +27 (0) 11 787 3015
2. Disclaimer
Statements in this presentation, other than historical facts, that address, without limitation,
exploration activities, mining potential and future plans and objectives of Pan African Resources
plc ("Pan African") are "forward-looking statements" and "forward-looking information" that involve
various risks. Assumptions and uncertainties are not statements of fact. The directors and
management of Pan African are of the belief that the expectations expressed in such forward-
looking statements or forward-looking information are based on reasonable assumptions,
expectations, estimates and projections, however such statements should not be construed as
being guarantees or warranties (whether express or implied) of future performance.
There can be no assurance that such statements will prove to be accurate and actual values,
results and future events could differ materially from those anticipated in such statements.
Important factors that could cause actual results to differ materially from statements expressed in
this presentation include, among others, the actual results of exploration activities, technical
analysis, the lack of availability to Pan African of necessary capital on acceptable terms, general
economic, business and financial market conditions, political risks, industry trends, competition,
changes in government regulations, delays in obtaining governmental approvals, interest rate
fluctuations, currency fluctuations, changes in business strategy or development plans and other
risks. Although Pan African has attempted to identify important factors that could cause actual
results to differ materially, there may be other factors that cause results not to be as anticipated,
estimated or intended.
Neither Pan African nor its directors, management and its affiliates represent guarantee that the
assumptions underlying such statements are free from errors nor do they accept any responsibility
for the future accuracy of the opinions expressed in this presentation. Any statements in this
presentation speak only at the time of issue. Pan African does not undertake to update any
forward-looking statements that are included in this presentation, or revise any changes in events,
conditions or circumstances on which any such statements are based, except in accordance with
applicable securities laws and stock exchange requirements.
No representation or warranty, expressed or implied, is made and no reliance should be placed on
the accuracy, actuality, fairness, or completeness of the information presented. None of Pan
African or any of its affiliates, directors, officers, employees and advisers or any other person shall
have any liability whatsoever for any losses arising, directly or indirectly, from any information
contained in the presentation. This presentation does not constitute an offer or invitation to
purchase or subscribe for any shares of Pan African and no part of this presentation shall form the
basis of or be relied upon in connection with any contract or commitment.
By accepting this presentation the recipient acknowledges that it will be solely responsible for its
own assessment of the market position of Pan African and that it will conduct its own analysis and
be solely responsible for forming its own view of the potential future performance of Pan African.
Date: 13/02/2013 09:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
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indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
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