BEEing good

Pan African Resources 18 August 2016 Update

Pan African Resources

BEEing good

Production update

Metals & mining

18 August 2016

Price

22.62p

Market cap

£341m

US$1.3052/£

ZAR18.0286/£

ZAR13.8129/US$

Net debt (£m) at end December 2015

16.2

Shares in issue

1,506.8m*

*Post-Shanduka transaction.

Free float

76%

Code

PAF

Primary exchange

AIM/JSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

7.3

44.3

205.6

Rel (local)

3.7

31.1

193.7

52-week high/low

24.2p

6.8p

Business description

Pan African (PAF) has five major assets in South Africa: Barberton Mines (target output 95koz Au pa), the Barberton Tailings Retreatment Project (20koz), Evander Gold Mines (95koz), the Evander Tailings Retreatment Project (ETRP 10koz + expansion potential) and Phoenix Platinum (12koz).

Next events

FY16 results

21 September 2016

Analyst

Charles Gibson

+44 (0)20 3077 5724

Pan African Resources is a research client of Edison Investment Research Limited

Continuing its tradition, Pan African (PAF) has released a trading statement under paragraph 3.4 (b) of the JSE listing requirements stating that its FY16 results will differ by at least 20% cf FY15. In this case, PAF has indicated that headline EPS (HEPS) will be 114-134% higher at 1.37-1.50p and that normalised HEPS (excluding financial instruments) will be 208-228% higher at 2.00-2.13p.

Year
end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

06/14

154.2

34.0

1.46

0.82

15.5

3.6

06/15

140.4

16.0

0.64

0.54

35.3

2.4

06/16e

164.5

44.7

1.97

0.54

11.5

2.4

06/17e

211.5

68.8

3.10

0.82

7.3

3.6

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments. Excludes Uitkomst.

Actual production numbers very close to forecast

In addition to its earnings guidance, Pan African also released production numbers for the full year. Overall production was 213,267oz of precious metals for the 12-month period, including 204,928oz of gold. This compared with management’s prior guidance of 209,000oz of precious metals for the full year and Edison’s forecast of 213,934oz of precious metals, including 204,653oz of gold. Our interpretation of this is that: 1) the underground head grade at Evander is likely to have been 6.32g/t (the highest since H213, when it was 7.59g/t); and 2) the metallurgical recovery at the BTRP is likely to have remained high, at c 60%.

174% outperformance of the gold price in US dollars

Pan African shares remain the second best performers of the London-listed gold miners (+233% in US dollar terms since March 2010) and one of only four counters to have outperformed the gold price (by 174%). We have reduced our sterling HEPS and EPS forecasts for FY16 and FY17 slightly in the wake of PAF’s trading statement (excluding Uitkomst). However, this is almost exclusively a function of a stronger than expected rand since December 2015. Second half normalised HEPS will nevertheless be comparable to PAF’s erstwhile record half year in H213.

Valuation: Still cheap relative to peers and history

Over the life of operations, our absolute value of PAF declines slightly to 23.59p (vs 25.33p in February), primarily as a result of the rand’s 6.8% appreciation against the US dollar since May. This valuation assumes that the grade profile at Evander averages 6.43g/t from FY17-30 and that the gold price averages US$1,454/oz (real) during FY17-39. Notwithstanding recent rises, at 11.5x, Pan African’s shares remain below their recent peak price:normalised HEPS ratio of 14.83x in FY15. In the meantime, PAF is cheaper than its peers in at least 90% of cases in which P/E and yield measures are considered (whether using Edison or consensus forecasts). It also has the third highest (consensus) forecast dividend yield of dividend-paying gold companies, globally.

Trading statement

Continuing its tradition, Pan African (PAF) has released a trading statement under paragraph 3.4 (b) of the JSE listing requirements in which it states that FY16 results will differ by at least 20% from those of the prior period (ie FY15).

Traditionally, PAF reports EPS and headline EPS, or HEPS (which principally excludes impairments), in accordance with South African practice. In this case, however, it has also provided an indication of normalised HEPS, which also excludes certain financial items. A summary of the financial instruments excluded from the normalised HEPS estimate (cf the HEPS estimate) for FY16 is as follows:

Zero cost collar: a mark-to-market loss relating to Barberton Mines’ strategic short-term hedge of ZAR82m (£4.2m, or 0.23p/sh post-Shanduka transaction), as at 30 June 2016.

A ZAR65.2m (£3.0m, or 0.17p/sh post-Shanduka transaction) post-tax cost relating to the cash settled effect of share option costs during the period.

A ZAR38.2m (£2.0m, or 0.11p/sh post-Shanduka transaction) reduction in the group’s rehabilitation liability as at 30 June and a ZAR9.4m (£0.5m, or 0.03p/sh post-Shanduka transaction) increase in its rehabilitation investment during the period.

In this case, PAF has indicated that headline EPS (HEPS) for FY16 will be 114-134% higher than the 0.65p per share reported in FY15 in sterling terms (ie in the range 1.37-1.50p) and that normalised HEPS (excluding financial instruments) will be 208-228% higher (ie in the range 2.00-2.13p). Among other things, the implication of the announcement is that the difference between EPS and HEPS is small and/or negligible.

In addition to its earnings guidance, Pan African also released production numbers for the full year. Overall production was 213,267oz of precious metals for the 12-month period, of which 204,928oz was gold and the balance was platinum group metals. This compared with management’s prior guidance of 209,000oz of precious metals for the full year and Edison’s forecast of 213,934oz of precious metals, including 204,653oz of gold. In addition, management reported 136,102t of coal produced from underground sources at the Uitkomst colliery (ie excluding coal bought in from third parties for blending and further processing). Uitkomst was acquired by Pan African on 1 April 2016 for a consideration of ZAR176m (gross of net working capital of ZAR26m), or £7.1m. Hitherto, Uitkomst has made a post-tax profit and an operational cash flow of c £1.6m (or 0.11p/share, post-the Shanduka transaction; see below) per annum. Production from Uitkomst is consolidated from 1 April 2016, although note that this is specifically excluded from Edison’s forecasts, which consider Pan African solely as a precious metals company.

A summary of Pan African’s individual operations’ outputs for the year compared with Edison’s prior forecasts is as follows:

Exhibit 1: Pan African mining operations’ production summary (actual vs forecast)

Operation

2015

2016e

Change (%)

Prior Edison forecast (oz)

Actual minus expected (oz)

Barberton (oz)

105,776

113,281

+7.1

110,315

+2,966

Evander (oz)

70,081

91,647

+30.8

94,338

-2,691

Total gold (oz)

175,857

204,928

+16.5

204,653

+275

Phoenix (oz)

10,245

8,339

-18.6

9,281

-942

Total precious metals (oz)

186,102

213,267

+14.6

213,934

-667

Source: Edison Investment Research, Pan African Resources

Edison’s interpretation of this production data is twofold:

the underground head-grade at Evander is likely to have been 6.32g/t (below the 6.75g/t expected, but still the highest since H213, when it was 7.59g/t); and

the metallurgical recovery at the Barberton Tailings Retreatment Project (BTRP) is likely to have remained high, at around 60%.

Shanduka transaction & Black Economic Empowerment (BEE)

On 1 June, Pan African advised shareholders that Jadeite had accepted Pan African’s offer to acquire its interest in Shanduka Gold, with the result that PAF purchased substantially all of Jadeite’s interest (33.0% of 33.6%) and Standard Bank’s interest (16.9%) in Shanduka Gold for a consideration of ZAR547m (£25.2m). A diagram of the ownership arrangement between Pan African, Shanduka Gold and the latter’s shareholders prior to the ‘Shanduka transaction’ is as follows:

Exhibit 2: Shanduka Gold shareholding structure (pre-transaction)

Source: Edison Investment Research, Pan African Resources

Shanduka Gold’s 23.8% interest in Pan African Resources is effectively its only asset, with the exception of a c ZAR500m vendor financed loan for Mabindu’s 49.5% interest in Shanduka Gold. As such, Pan African’s acquisition of Standard Bank’s and Jadeite’s interests in Shanduka Gold is, in effect, if not quite in reality, equivalent to a buy-back into treasury of its own shares. At the time of the transaction, the value of Shanduka Gold’s 23.8% shareholding in Pan African Resources would have been approximately ZAR1,391m (£64.3m) and the pro-rata values of Standard Bank’s and Jadeite’s combined interests in Shanduka Gold therefore c ZAR702m (£32.5m).

Mabindu is a black owned and controlled trust and is a “Historically Disadvantaged South African (HDSA)” entity for the purposes of South Africa’s BEE legislation. Shanduka Gold (and, indirectly, Mabindu) is Pan African’s primary BEE shareholder. Pursuant to legislation governing BEE and the granting and retention of South African mining licences and rights, Pan African is required to have a minimum level of HDSA ownership, to which Shanduka Gold contributes. The Shanduka transaction therefore ensures that Pan African’s current HDSA ownership structure is unaffected by retaining Shanduka Gold (and, indirectly, Mabindu) as shareholders.

From an accounting perspective, however, Shanduka Gold (post-transaction) is now deemed to be controlled by Pan African, with the result that Shanduka Gold’s full shareholding of 436,358,059 shares in Pan African will be eliminated upon consolidation for accounting purposes.

Mabindu’s 49.5% interest in Shanduka Gold was acquired at a discounted value, but created a notional loan, to be settled by Mabindu, in the amount of ZAR536m as at 11 December 2015. The notional loan accrues notional interest at the South African prime rate (currently 10.5%) plus 5% and is required to be notionally settled on 11 December 2018. While the notional loan is outstanding, 95% of dividends payable to Mabindu are waived and the notional loan is reduced by the aggregate value of all dividends paid and payable to Mabindu (estimated to be c ZAR24.7m relating to Pan African’s FY15 dividend, payable in December 2015).

At ostensibly the same time as the details of the Shanduka transaction became public, Pan African also announced a placing of 111,711,791 shares at ZAR3.25 (c 14.25p) per share – being a premium to the 30-day volume-weighted average traded price of Pan African shares as at 25 May 2016 – to raise a maximum of ZAR363m.

As a result of the above two transactions (the Shanduka transaction and the share placing), Pan African reports that the weighted number of shares in issue in FY16 was 1,811,427,377 (vs 1,831.5m previously) and that, all other things being equal, the number in issue in FY17 will be 1,506,848,495.

Investors should note that a draft Mining Charter has been published by the minister of mineral resources, which is intended to form the basis of future mining legislation. Comments by interested parties were submitted before 31 May and it is anticipated that there may be a number of significant amendments to this draft version of the charter following the submissions made by the mining industry. As a result, it is unclear in what form the final version of the charter will be published. Nevertheless, the Shanduka transaction should provide Pan African with flexibility in terms of ensuring compliance with any future BEE regulations.

Trading statement effects

Pan African’s interim results having already been reported, Edison’s prior forecasts for FY16 were predicated on H216 forecasts of ZAR22.5969/£ and ZAR16.0841/US$ and an average gold price for the period of US$1,224/oz. In the event, actual averages for H216 were ZAR22.0942/£, ZAR15.4132/US$ and a gold price of US$1,221.4/oz – ie (somewhat unusually) the South African rand was stronger than expected against both sterling and the US dollar and the gold price was fractionally weaker. Adjusting for these factors alone reduces Edison’s prior estimate for FY16 EPS and HEPS of 1.74p/share to 1.62p/share. In addition, the rand has been markedly strong against both sterling and the US dollar since the UK’s ‘Brexit’ vote on 23 June 2016, which resulted in the rand rising to ZAR19.4908/£ and ZAR14.6890/US$ and the gold price rising to US$1,320.75/oz as at 30 June. In particular, this will have had an effect on the mark-to-market loss relating to Pan African’s strategic short-term hedge at Barberton Mines. Including these effects on financial instruments as well (see above) reduces our FY16 EPS estimate further to 1.47p/share for the year (note that the effect of normalisation is approximately 0.5p/sh post-Shanduka transaction, see page 2). As a result, our revised forecasts for FY16 are as shown overleaf (note that changes to our forecasts on account of differences between actual and expected production were negligible).

Exhibit 3: Pan African underlying P&L statement by half-year (H114-H216) actual vs expected

£000s (unless otherwise indicated)

H114

H214

H115

H215

H116

H216e (previous)

H216e (current)

FY16e (previous)

FY16e (current)

Precious metal sales

84,637

69,914

68,126

72,951

75,632

91,632

89,456

167,265

165,088

Realisation costs

(191)

(159)

(295)

(396)

(269)

(326)

(319)

(596)

(588)

Realisation costs (%)

0.23

0.23

0.43

0.54

0.36

0.36

0.36

0.36

0.36

On-mine revenue

84,447

69,755

67,831

72,555

75,363

91,306

89,137

166,669

164,500

Gold cost of production

(52,519)

(52,727)

(48,935)

(45,509)

(52,643)

Platinum cost of production

(1,590)

(1,797)

(1,651)

(1,524)

(1,448)

Cost of production

(54,109)

(52,285)

(54,524)

(55,889)

(50,586)

(47,032)

(54,091)

(97,618)

(104,677)

Depreciation

(5,088)

(4,935)

(4,676)

(5,661)

(5,277)

(5,661)

(5,652)

(10,938)

(10,929)

Mining profit

25,249

12,535

8,631

11,005

19,500

38,612

29,394

58,112

48,894

Other income/(expenses)

(223)

(1,227)

523

(273)

(3,486)

(6,773)

(5,430)

(10,259)

(8,917)

Loss in associate

(89)

(84)

(128)

0

0

0

0

Loss on associate disposal

(140)

0

0

0

0

Impairment costs

0

(12)

(56)

(2)

0

Royalty costs

(1,747)

(272)

(795)

(852)

(1,194)

(2,587)

(1,760)

(3,782)

(2,955)

Net income before finance items

23,191

10,940

8,034

9,878

14,819

29,252

22,204

44,071

37,023

Finances income

381

306

321

28

144

Finance costs

(725)

(153)

(498)

(1,960)

(558)

Net finance income

(344)

153

(177)

(1,932)

(414)

(811)

(832)

(1,226)

(1,247)

Profit before taxation

22,847

11,093

7,857

7,946

14,405

28,441

21,371

42,845

35,776

Taxation

(5,537)

(1,618)

(2,310)

(1,823)

(3,480)

(7,435)

(5,587)

(10,915)

(9,067)

Marginal tax rate (%)

24.2

14.6

29.4

22.9

24.2

26.1

26.1

25.5

25.3

Deferred tax

 

 

Profit after taxation

17,310

9,475

5,548

6,122

10,925

21,006

15,784

31,930

26,709

EPS (p)

0.95

0.52

0.30

0.33

0.60

0.89

0.89

1.74

1.47

Normalised EPS (p)

1.19

1.97

HEPS* (p)

0.95

0.52

0.31

0.33

0.60

0.89

0.89

1.74

1.47

Normalised HEPS (p)

1.19

1.97

Source: Pan African Resources, Edison Investment Research. Note: *HEPS = headline earnings per share. Excludes Uitkomst (consolidated from 1 April 2016).

Since 30 June, the rand has continued to strengthen against both sterling and the US dollar, to ZAR17.5976/£ (the same as January 2014) and ZAR13.5455/US$ (the same as March 2015), at the time of writing. At US$1.2993/£, sterling is at its weakest since June 1985. For FY17 therefore, our HEPS and EPS forecasts have moderated from 3.04p/share to 2.94p/share – mostly on account of increased costs as a result of the less favourable forex rate. Note that this forecast is made on the basis of an unchanged average gold price assumption of US$1,372/oz (note: the effect of normalisation in FY17 is predicted to be 0.16p/sh). In the event that the gold price remains at US$1,337/oz (the price at the time of writing), these forecasts moderately reduce to 2.76p/share.

Note that current consensus forecasts for earnings per share are 1.737p in FY16 within the range 1.38-2.00p and 3.132p in FY17 within the range 1.77-4.58p (source: Bloomberg, 10 August 2016).

Valuation

Updating our long-term forecasts to reflect these changes, our absolute value of PAF moderates slightly, to 23.59p (from 25.33p in February), based on the present value of our estimated maximum potential stream of dividends payable to shareholders over the life of mining operations (applying a 10% discount rate), the change being primarily a function of Edison’s policy of applying the current, real £/ZAR forex rate to future costs, rather than assuming future rand weakness.

Exhibit 4: PAF estimated life of operations diluted EPS and (maximum potential) DPS

Source: Edison Investment Research, Pan African Resources

The above profile assumes that the grade profile at Evander will average 6.43g/t from FY17-30, in which case we forecast an average EPS over the period of 3.06p/share (vs 3.10p/share previously). We assume gold prices of US$1,372/oz in FY17 and US$1,378/oz in FY18.

Pan African remains the second best performer of the London-listed gold miners and one of only four counters to have outperformed the gold price since March 2010, its share price having risen by 233% in US dollar terms, outperforming the gold price by 174% (see graph) and being more than one standard deviation in excess of the average share price performance of its peers (-25.9% in US dollar terms) over the same period:

Exhibit 5: PAF share price performance vs gold price and peers, March 2010-present (underlying data US$)

Source: Thomson Datastream, Edison Investment Research

Nevertheless, within the historical context, it remains below its peak current year P/E ratio of 14.83x HEPS in FY15:

Exhibit 6: Pan African historical current year price:normalised HEPS ratio

Source: Edison Investment Research, Bloomberg. Note: Zero normalisation assumed prior to 2016.

In addition, it remains notably cheap (based on our updated estimates) when compared with its immediate peers in Exhibit 7, below.

Exhibit 7: Comparative valuation of PAF with respect to South African peers

 

EV/EBITDA (x)

P/E (x)

Yield (%)

Yr 1

Yr 2

Yr 1

Yr 2

Yr 1

Yr 2

AngloGold Ashanti

6.0

5.4

14.3

13.2

0.0

1.4

Gold Fields

5.1

4.6

18.6

14.4

1.6

2.0

Sibanye

4.9

3.9

12.8

10.3

2.8

3.3

Harmony

6.6

3.9

30.3

8.9

0.0

0.5

Randgold Resources

16.9

13.9

35.7

27.4

0.6

0.7

Average (excluding PAF)

7.9

6.3

22.3

14.8

1.0

1.6

Pan African (Edison)

6.3

4.5

11.5

7.3

2.4

3.6

Pan African (consensus)

8.5

5.4

13.8

7.6

3.0

4.3

Source: Edison Investment Research, Bloomberg. Note: Priced at 9 August 2016.

On these measures, it can be seen that Pan African is cheaper than its peers in at least 90% of cases in which P/E and yield measures are considered (whether using Edison forecasts or consensus forecasts). In the meantime, Pan African has the third highest (consensus) forecast dividend yield of the 40 ostensibly gold counters paying dividends to shareholders (including royalty and streaming companies), out of 679 publicly listed gold mining companies, globally:

Exhibit 8: Global gold mining companies ranked by forecast dividend yield (%)

Source: Bloomberg (consensus data, priced 9 August 2016), Edison Investment Research

Financials

Pan African had £16.2m of net debt on its balance sheet as at 31 December 2016, since which time it has raised an estimated £14.9m (net) via its share placing and expended £7.7m on acquiring Uitkomst and £25.2m on acquiring its 49.5% stake in Shanduka Gold. According to its trading statement, Pan African had net debt on its balance sheet of ZAR347m (£17.8m) as at 30 June, thereby implying a cash inflow from operations of c £16.4m in H216 (in line with Edison’s expectations).

As at the date of its trading statement (2 August 2016), Pan African reported that the group’s net debt had reduced to ZAR255m (£14.1m), which implies an approximate £3.7m inflow from operations over the course of approximately one month, or approximately £44.4m on an annualised basis, which is again consistent with Edison’s forecasts for FY17. All other things being equal therefore (and in the absence of any further, major acquisitions) we would expect Pan African to be in a net cash position once again by the end of FY17, notwithstanding an additional dividend payment for FY16.

Exhibit 9: Financial summary

£'000s

2008

2009

2010

2011

2012

2013

2014

2015

2016e

2017e

Year end 30 June

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

39,148

52,860

68,344

79,051

100,905

133,308

154,202

140,386

164,500

211,462

Cost of sales

(25,164)

(28,505)

(40,554)

(45,345)

(46,123)

(71,181)

(106,394)

(110,413)

(104,677)

(127,767)

Gross profit

13,985

24,355

27,790

33,705

54,783

62,127

47,808

29,973

59,823

83,696

EBITDA

 

 

13,711

22,890

25,023

28,540

45,018

53,276

44,165

28,448

56,868

80,110

Operating profit (before GW and except.)

11,745

20,529

21,897

25,655

41,759

47,278

34,142

18,110

45,939

70,339

Intangible amortisation

0

0

0

0

0

0

0

0

0

0

Exceptionals

0

(5,025)

(335)

0

(48)

7,232

(12)

(198)

(8,917)

(2,413)

Other

0

0

0

0

0

0

0

0

0

0

Operating profit

11,745

15,504

21,562

25,655

41,711

54,510

34,130

17,912

37,023

67,926

Net interest

200

807

594

762

516

197

(191)

(2,109)

(1,226)

(1,552)

Profit before tax (norm)

 

 

11,945

21,336

22,491

26,417

42,274

47,475

33,951

16,001

44,714

68,788

Profit before tax (FRS 3)

 

 

11,945

16,311

22,156

26,417

42,226

54,707

33,939

15,803

35,797

66,374

Tax

(4,367)

(8,219)

(7,656)

(9,248)

(12,985)

(12,133)

(7,155)

(4,133)

(9,072)

(22,015)

Profit after tax (norm)

7,579

13,117

14,835

17,169

29,290

35,342

26,796

11,868

35,641

46,772

Profit after tax (FRS 3)

7,579

8,091

14,500

17,169

29,242

42,574

26,785

11,670

26,725

44,359

Average number of shares outstanding (m)

1,043.8

1,104.4

1,366.3

1,432.7

1,445.2

1,619.8

1,827.2

1,830.4

1,811.4

1,506.8

EPS - normalised (p)

 

 

0.52

0.85

1.07

1.20

2.03

2.18

1.46

0.64

1.97

3.10

EPS - FRS 3 (p)

 

 

0.52

0.40

1.04

1.20

2.02

2.63

1.47

0.64

1.48

2.94

Dividend per share (p)

0.00

0.26

0.37

0.51

0.00

0.83

0.82

0.54

0.54

0.82

Gross margin (%)

35.7

46.1

40.7

42.6

54.3

46.6

31.0

21.4

36.4

39.6

EBITDA margin (%)

35.0

43.3

36.6

36.1

44.6

40.0

28.6

20.3

34.6

37.9

Operating margin (before GW and except.) (%)

30.0

38.8

32.0

32.5

41.4

35.5

22.1

12.9

27.9

33.3

BALANCE SHEET

Fixed assets

 

 

55,647

67,198

74,324

97,281

86,075

249,316

223,425

220,150

228,709

229,108

Intangible assets

35,577

35,397

36,829

38,229

23,664

38,628

37,040

37,713

47,674

49,410

Tangible assets

20,070

31,801

37,495

59,052

62,412

209,490

185,376

181,533

180,131

178,793

Investments

0

0

0

0

0

1,199

1,010

905

905

905

Current assets

 

 

8,770

4,949

17,677

15,835

41,614

26,962

23,510

17,218

18,930

55,925

Stocks

378

358

1,126

1,457

1,869

6,596

5,341

3,503

3,502

7,057

Debtors

2,973

2,201

3,795

4,254

6,828

15,384

12,551

10,386

11,307

14,501

Cash

5,419

2,389

12,756

10,124

19,782

4,769

5,618

3,329

4,121

34,368

Current liabilities

 

 

(6,611)

(6,101)

(7,084)

(8,960)

(11,062)

(24,066)

(24,012)

(22,350)

(22,760)

(26,555)

Creditors

(6,521)

(6,080)

(7,084)

(8,960)

(11,062)

(23,202)

(19,257)

(17,301)

(17,711)

(21,507)

Short-term borrowings

(89)

(21)

0

0

0

(864)

(4,755)

(5,049)

(5,049)

(5,049)

Long-term liabilities

 

 

(7,438)

(9,686)

(11,431)

(13,410)

(14,001)

(80,004)

(63,528)

(67,850)

(66,347)

(67,942)

Long-term borrowings

(17)

0

0

(181)

(869)

(11,133)

(8,141)

(16,313)

(16,313)

(16,313)

Other long-term liabilities

(7,421)

(9,686)

(11,431)

(13,228)

(13,132)

(68,871)

(55,387)

(51,537)

(50,034)

(51,629)

Net assets

 

 

50,369

56,360

73,487

90,746

102,626

172,208

159,396

147,167

158,532

190,535

CASH FLOW

Operating cash flow

 

 

12,762

25,420

25,207

31,968

49,092

61,618

45,996

26,423

46,020

74,743

Net Interest

200

807

594

762

516

314

(606)

(2,109)

(1,226)

(1,552)

Tax

(1,723)

(10,886)

(7,476)

(10,743)

(11,616)

(13,666)

(8,536)

(3,943)

(8,616)

(20,420)

Capex

(5,680)

(5,705)

(6,764)

(21,712)

(17,814)

(27,197)

(21,355)

(19,554)

(9,245)

(10,169)

Acquisitions/disposals

226

(4,205)

0

0

(1,549)

(96,006)

0

(760)

(32,957)

0

Financing

785

0

48

1,545

259

47,112

349

(235)

14,946

(0)

Dividends

0

(6,774)

0

(5,376)

(7,416)

0

(14,684)

(15,006)

(8,131)

(12,356)

Net cash flow

6,571

(1,343)

11,609

(3,557)

11,471

(27,826)

1,164

(15,184)

792

30,246

Opening net debt/(cash)

 

 

(136)

(5,313)

(2,369)

(12,756)

(9,943)

(18,913)

7,228

7,278

18,033

17,241

Exchange rate movements

(1,394)

(2,642)

(281)

925

(1,813)

594

(839)

(276)

0

0

Other

0

1,041

(940)

(181)

(688)

1,090

(375)

4,705

0

0

Closing net debt/(cash)

 

 

(5,313)

(2,369)

(12,756)

(9,943)

(18,913)

7,228

7,278

18,033

17,241

(13,006)

Source: Pan African Resources sources, Edison Investment Research. Note: Excludes Uitkomst (consolidated from 1 April 2016).

Edison, the investment intelligence firm, is the future of investor interaction with corporates. Our team of over 100 analysts and investment professionals work with leading companies, fund managers and investment banks worldwide to support their capital markets activity. We provide services to more than 400 retained corporate and investor clients from our offices in London, New York, Frankfurt, Sydney and Wellington. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2016 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Pan African Resources and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2016. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

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Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

Edison, the investment intelligence firm, is the future of investor interaction with corporates. Our team of over 100 analysts and investment professionals work with leading companies, fund managers and investment banks worldwide to support their capital markets activity. We provide services to more than 400 retained corporate and investor clients from our offices in London, New York, Frankfurt, Sydney and Wellington. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2016 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Pan African Resources and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2016. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

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