Pan African Resources


£408.8m market cap

21.2p last close

Pan African Resources has three major producing precious metals assets in South Africa: Barberton (target output 95koz Au pa), Barberton Tailings Retreatment Project (20koz) and Elikhulu (55koz), now incorporating Evander Tailings Retreatment Project (10koz).

Investment summary

Notwithstanding COVID-19, Pan African’s (PAF) normalised financial results for FY20 were materially ahead of our expectations, driven by a US$9.9m positive variance in the direct cost of production (see Exhibit 3). In consequence, the group announced a more than fivefold increase in its proposed dividend for the year in US dollar terms to a record ZAR312.9m, putting it among the top 14 dividend-paying precious metals companies globally in terms of yield (see Exhibit 15). While FY20 represented a step change in PAF’s profitability compared with FY19, we believe that another step change is possible in FY21 under the influence of higher gold prices, close control of costs as new projects come on stream, a benign foreign exchange environment, a rising production profile and the maturity of all remaining hedging contracts prior to December 2020.

Y/E Jun
Revenue (US$m)
PBT (US$m)
EPS (c)
P/E (x)
P/CF (x)
2019A 218.8 65.5 37.1 1.64 16.7 8.8
2020A 274.1 115.2 80.8 3.78 7.2 7.2
2021E 307.9 153.6 129.5 6.42 4.3 4.1
2022E 316.0 164.5 142.4 6.43 4.3 3.3
Industry outlook

With the 8 Shaft pillar project having achieved steady state in May, near-term development opportunities for PAF include Egoli (ZAR2.01bn NPV and 50.1% IRR), which has now been sanctioned by the board, the Prince Consort shaft pillar, the Fairview sub-vertical shaft (adding 7–10koz to production pa) and the Royal Sheba project (c 30koz pa). In July, we valued PAF at US$0.4214/share plus the value of c 19.2m underground Witwatersrand oz (which we estimated at 0.22–5.24c/share).

Last updated on 21/10/2020
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Share price graph
Balance sheet
Forecast net debt (US$m) 13.3
Forecast gearing ratio (%) 5
Price performance
Actual (14.5) (9.8) 88.3
Relative* (13.5) (5.8) 124.7
52-week high/low 27.1p/9.0p
*% relative to local index
Key management
Keith Cousens Spencer Chairman
Cobus Loots CEO
Deon Louw FD

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