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PAN AFRICAN RESOURCES PLC - Update on Group Operations amid COVID-19 Lockdown Regulations

Release Date: 11/05/2020 08:59
Code(s): PAN     PDF:  
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Update on Group Operations amid COVID-19 Lockdown Regulations

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 Resources" or "the Company" or "the Group")


Update on Group Operations and COVID-19 National Lockdown Regulations

As previously communicated to shareholders, on 9 April 2020, the South African government
announced an extension of the National Lockdown period (“Lockdown Extension”), enacted in terms
of the South African Disaster Management Act (“the Regulations”) from 16 April 2020 to 30 April 2020,
in an ongoing effort to curtail the spread of the COVID-19 (coronavirus) pandemic.

The Regulations pertaining to the Lockdown Extension provided for a phased ramp-up of mining
capacity to 50% of normalised production during the lockdown period, provided that all the
preventative and mitigating controls were in place to curtail the spread of the COVID-19 virus. In
response to these amendments, the Group implemented plans to recall 50% of its employees at the
Company’s Barberton Mines and Evander Mines surface and underground operations (“Group

On 23 April 2020, the South African government announced that the country would be entering a
period of phased lifting of the lockdown restrictions from 1 May 2020, resulting in the previous Level-
five hard lockdown, that commenced on 27 March 2020, being reduced to a Level-four lockdown.
Level-four lockdown restrictions require a risk-based and gradual approach to recalling employees. It
enables open cast mines and surface operations to operate at up to 100% of normal capacity, and all
other mines at 50% capacity.

In response to this announcement, the Group commenced the recall of permitted employees for the
phased recommencing of Group Operations in compliance with legal requirements, with all the
required safety protocols and procedures in place.

The recall of employees at the Group’s Operations in terms of these Level-four lockdown regulations
is now well advanced, with the surface operations at the Elikhulu Tailings Retreatment Plant and the
Barberton Tailings Retreatment Plant producing at close to full capacity from early May 2020.

Revised FY2020 Production Guidance

As announced on 30 March 2020, the Group suspended its original FY2020 production guidance of
185,000oz as a result of the anticipated COVID-19 impact on the Group’s mining operations.

As expected, production at the Group's operations was severely affected during the lockdown months
of March and April 2020. The Group was however able to mitigate some of the impact through
continued mining activities at its surface operations, which was staffed by a materially reduced
employee complement, and also with limited high-grade underground mining at Barberton Mines.
The Group is now in a position to advise shareholders that it expects the revised gold production for
the 2020 financial year to be approximately 176,000oz, including capitalised production from the #8
Shaft Pillar operation.

The revised production guidance is a decrease of only 5% from the previous guided production of
185,000oz, due to the Group’s ability to increase output from surface toll treatment and low grade
surface stockpile processing initiatives, in substitution of underground production. The substituted
production was however at a reduced margin, when compared to normal margins earned on ounces
produced from underground.

The revised production guidance is based, inter-alia, on the assumptions that the Group can continue
surface operations at close to maximum capacity for the remainder of the 2020 financial year and
underground operations continuing at 50% of personnel capacity, consistent with current Level-four

The approximate split of expected full year gold production between operations is as follows:

                                                    Full Year
 Production ounce profile:
 Barberton Mines – Underground:                       64,000
 Barberton Tailings Retreatment Plant:                21,000
 Evander Mines – Underground and tolling:             31,000
 Elikhulu:                                            59,000
 Total ounces produced:                              175,000

Statement of Financial Position

The Group remained cashflow positive during the lockdown period. Assuming that the prevailing ZAR
gold price of approximately ZAR1 million/kg (approximately USD1,680/oz) can be sustained for the
remainder of the 2020 financial year, the Group is expected to reduce its senior interest-bearing debt
(including the outstanding gold loan balance), net of projected available cash, to approximately ZAR1.3
billion (USD70 million) assuming an exchange rate of ZAR/USD:18.50 from ZAR1.8 billion (USD129
million) at 30 June 2019. This represents a reduction in senior interest-bearing debt of 23% and 28%
relative to the debt levels at 31 December 2019 and 30 June 2019, respectively.

In light of the Group’s elevated senior debt levels at inception of the 2020 financial year, a number of
short-term zero-cost collar hedges were entered into during the course of the 2020 financial year to
underpin the Group’s cashflows and its ability to redeem its senior debt. The remaining hedges for the
2020 and 2021 financial year are detailed hereunder:

                                           2 Months                        6 Months
                                   1 May 2020 – 30 June 2020      1 July 2020 – 31 Dec 2020
 Ounces hedged:                              21,820                          50,000
 Average floor price – R/Kg:                683,226                         708,000
 Average ceiling price – R/Kg:              847,109                         925,829

Importantly, the Group is unhedged post 31 December 2020.

COVID-19 Programme of Relief and Assistance (CPR)

As previously communicated, the Group initiated a CPR programme to assist with alleviating the
adverse impact of the COVID-19 pandemic in its host communities and for its employees. The
   programme commenced at the end of April 2020 with the distribution of food and hygiene hampers
   to its employees, contractors and vulnerable families in communities in close proximity to the Group’s
   operations. The programme’s rollout will continue during May 2020 and approximately 5,400 hampers
   will be provided with a total value of almost R5 million during the current phase of the programme.

   In the light of the ongoing pandemic, the Group will continue its initiatives to assist some of its most
   vulnerable stakeholders in the months ahead.

   "It is crucial for the country’s economy to be restarted and the phased approach adopted by the
   government to achieve this is practical in fighting the pandemic and enabling businesses and
   communities to survive during this tumultuous period. We have implemented preventative and
   precautionary measures at our operations to ensure the health and well-being of employees as they
   return to work, and we look forward to working with all stakeholders in the operational ramp-up. We
   expect that we still have a long battle ahead against COVID-19, however, I wish to commend all of our
   employees for the manner in which they have worked together during this period. The strategic
   repositioning of our Group some years ago, as a safe and high-margin producer with multiple
   operations and the flexibility to withstand short-term external shocks, should continue to serve all
   stakeholders well.” commented Cobus Loots, CEO of Pan African Resources.

   Pan African Resources will continue to provide shareholders with updates on progress at its operations
   as further information becomes available.


   11 May 2020

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

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/Jane Kirton                                 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

Hethen Hira                                             Thomas Rider/Neil Elliot
Pan African Resources PLC                               BMO Capital Markets Limited

Head : Investor Relations                               Joint Broker

Tel: + 27 (0)11 243 2900                                Office: +44 (0)20 7236 1010



Date: 11-05-2020 08:59:00
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