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PAN AFRICAN RESOURCES PLC - Operational update for the nine months ended 31 March 2019

Release Date: 17/05/2019 08:00
Code(s): PAN     PDF:  
Wrap Text
Operational update for the nine months ended 31 March 2019

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


Pan African is pleased to provide an operational update for the nine months ended 31 March 2019 (“Current
Reporting Period”) as well as detail on progress with internal growth projects and initial production guidance
for the 2020 financial year.

Pan African CEO Cobus Loots commented:

“The Group’s performance over the past nine months reflects our efforts to maintain Pan African’s position
as a safe, low-cost and long-life gold producer. Safe, highly profitable and sustainable ounces at Elikhulu
have replaced those of Evander’s loss-making underground operations. We continue to optimise Elikhulu,
which delivered a throughput of 1.3-million tonnes in March 2019, 100,000 tonnes above the name plate
capacity. The focus is now on maximising sustainable margins from this world-class operation.

We have commenced the development and equipping of Evander Mines’ 8 Shaft Pillar (“Evander Pillar
operation”), with first gold expected in August 2019. The Evander 8 Shaft Pillar is expected to contribute an
additional 20,000oz to 30,000oz per annum for three years, at an all-in sustaining costs (“AISC”) of
approximately US$900 per ounce, therefore making a meaningful contribution to the Group’s near-term
production and profitability. The operation will be mined by a specialised and experienced independent
contractor given the nature of pillar mining.

We have completed extensive feasibility work on Barberton Mines’ Royal Sheba project (“Royal Sheba
Project”). Due to the Group’s disciplined capital allocation criteria and the capital cost estimates to develop
this mine, the Company will not pursue the Royal Sheba Project on a stand-alone basis. The existing
Barberton Mines’ processing plant infrastructure can be upgraded to process ore from this orebody. The
benefits of this approach is the ability to expedite the environmental licencing process, shorten the timeline
to production, enhance returns from mining this orebody and negate the requirement for external capital
funding. We look forward to updating the market on this project in the months ahead.

We are confident the Group remains on track to meet its gold production guidance of 170,000oz for the full
financial year to end 30 June 2019. With Elikhulu producing at a steady state for a full year and the
incremental contribution from Evander’s Pillar operation, we expect to produce approximately 185,000oz of
gold for the 2020 financial year, which is a sizeable increase in our gold production profile.”

Key highlights for the current reporting period

Operational results:

-    Gold production from the Group’s continuing mining operations (note 1) increased by 51.4% to
     123,771oz (2018: 81,729oz), with robust performances from Barberton Mines’ underground operations
     and the Group’s tailings retreatment plants.
         o Gold production from the Barberton complex increased by 11.7% to 72,944oz (2018: 65,297oz)
                 - Underground and surface mining increased by 3.4% to 54,857oz (2018: 53,034oz); and
                 - Barberton tailings retreatment plant (“BTRP”) increased by 47.5% to 18,087oz (2018:
                      12,263oz) due to an improved tonnage throughput and recoveries following the
                      successful commissioning of the BTRP regrind mill in May 2018.
         o The Elikhulu tailings retreatment plant (“Elikhulu”) processed 6,915,113 tonnes from September
             2018 to March 2019 at a recovered grade of 0.135g/t with 29,881oz (929.4kg) of gold sold. This
             excludes the pre-production gold of 736oz (22.9kg) capitalised as pre-production income and
             gold inventory locked-up in the Elikhulu circuit;
         o As previously communicated, the incorporation of the historical Evander tailings retreatment
             plant’s (“ETRP”) throughput of 200,000 tonnes per month into Elikhulu was completed in

              December 2018, which increased Elikhulu’s processing capacity to 1.2-million tonnes per
          o   Elikhulu’s all-in sustaining cost of production continues to be lower than previously anticipated,
              at less than US$600/oz; and
          o   Evander Mines’ remnant mining and surface sources contributed a further 20,946oz (2018:

    Note 1: The continuing mining operations include: Barberton Mines, Evander Mines, Elikhulu and Evander’s tailings retreatment
    plant (“ETRP”) as well as the mining and vamping of the remnant high-grade stopes as part of the phased closure of the
    underground mining operation. The continuing mining operations exclude the discontinued Evander Mines’ large-scale
    underground mining operation, which produced 42,118oz in the corresponding nine months ended 31 March 2018
    (“corresponding reporting period”). The Group’s corresponding reporting period gold production, including discontinued
    operations, was 123,845oz.


-   The Group’s focus on safety and related ongoing improvements continues to bear fruit, with material
    improvements in all categories of safety statistics during the current reporting period:
        o The Group had no fatalities in this quarter (2018: no fatalities);
        o The Group’s lost-time injury frequency rate improved substantially to 1.75 (2018: 3.79); and
        o The reportable injury frequency rate improved substantially to 0.58 (2018: 1.17).

Evander 8 Shaft Pillar:

-   The feasibility study into the merits of mining the Evander 8 Shaft Pillar and high-grade areas in proximity
    to the pillar has been completed and the Pan African board of directors has approved the development
    of the project.
-   Development and equipping of this area has already commenced, with first gold expected during August
-   The Evander 8 Shaft Pillar will replace the current remnant underground mining and vamping production
    and is expected to contribute, on average, 30,000oz per annum over the next three financial years, with
    approximately 20,000oz of production forecast for FY2020.

-   The Evander 8 Shaft Pillar mining feasibility highlights are:
       o An average all-in sustaining cost of approximately R415,000/kg or US$900/oz over the life of
           the project (assuming US$/ZAR1:14.30);
       o The existing Kinross processing plant and Evander’s 7 Shaft infrastructure will be used to treat
           and hoist the mined ore from the Evander 8 Shaft Pillar;
       o Capital expenditure of approximately R70 million is to be incurred over the life of the project, of
           which R40 million is to be incurred upfront. All capital for the Evander 8 Shaft Pillar’s
           development will be funded from existing Group facilities; and
       o A forecast payback period on the initial capital investment of less than one year, from
           commencement of mining, and a net present value of R369 million (US$25.8 million) at a 10%
           real discount rate and an assumed gold price of R600,000/kg or US$1,305/oz.

Royal Sheba Project:

-   The Group has completed the Royal Sheba project feasibility study and concluded that the merits of
    mining the near-surface resource, using an opencast mining method, did not meet the Group’s
    disciplined capital allocation criteria. This was as a result of higher than anticipated capital expenditure,
    largely due to the challenging topography of the Sheba valley.

-   The emphasis is now to assess the merits of using an underground sub-level open stoping mining
    method by developing haulages from surface into the orebody. The existing Barberton Mines’ processing
    plant infrastructure can be upgraded to process ore from this orebody, which will substantially reduce
    the originally contemplated capital expenditure, and shorten the environmental licensing approval

-   Shareholders will be updated on progress with Royal Sheba development plans in the coming months.

Restructure of Revolving Credit Facility (“RCF”):

-   The Group has received final credit approvals from its consortium of bankers and is finalising the legal
    agreements with the intent of having the restructured facility effective by 30 June 2019. The proposed
    restructured RCF will amortise according to the following repayment profile:

                                   RCF available
      Amortisation profile         balance                   Repayments
                                   (R million)               (R million)
      Up to 15 June 2020                            1,000                       250
      15 June 2020                                     750                       25
      15 December 2020                                 725                       25
      15 June 2021                                     700                       50
      15 September 2021                                650                      50
      15 December 2021                                 600                      50
      15 March 2022                                    550                      50
      15 June 2022                                     500                      500

-   The repayment profile of the Elikhulu project’s term debt facility, comprising 10 semi-annual, equal
    principal instalments of R100 million, commencing in December 2019, is unaffected by the restructuring
    of the RCF.

The financial and other information contained in this announcement has neither been reviewed nor audited
by the Company’s external auditors.

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

17 May 2019

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
                                                 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                                      John Prior
St James's Corporate Services Limited            Numis Securities Limited
Company Secretary                                Nominated Adviser and Joint Broker
Office: + 44 (0)20 7796 8644                     Office: +44 (0)20 7260 1000
Ciska Kloppers                                   Ross Allister/David McKeown
Questco Corporate Advisory Proprietary Limited   Peel Hunt LLP
JSE Sponsor                                      Joint Broker
Office: + 27 (0)11 011 9200                      Office: +44 (0)20 7418 8900
Julian Gwillim                                   Jeffrey Couch/Thomas Rider/Neil Elliot
Aprio Strategic Communications                   BMO Capital Markets Limited
Public & Investor Relations SA                   Joint Broker
Office: +27 (0)11 880 0037                       Office: +44 (0)20 7236 1010
Bobby Morse/Chris Judd                           Website:
Public & Investor Relations UK
Office: +44 (0)20 7466 5000


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