FY17 results in line

Pan African Resources 28 September 2017 Update
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Pan African Resources

FY17 results in line

Results review

Metals & mining

28 September 2017

Price

13p

Market cap

£291m

ZAR17.9766/£, ZAR13.2938/US$, US$1.3525/£

Net debt (£m) at end June 2017*

7.0

*Excludes ZAR127.6m (£7.5m) of shares in Coal of Africa

Shares in issue**

2,234.7m

**Effective 1,798.3m post consolidation

Free float

81%

Code

PAF

Primary exchange

AIM/JSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(9.1)

(19.4)

(37.5)

Rel (local)

(8.1)

(18.4)

(42.3)

52-week high/low

21.8p

12.5p

Business description

Pan African Resources has five major precious metals assets in South Africa: Barberton (target output 95koz Au pa), the Barberton Tailings Retreatment Project (20koz), Evander (95koz), the Evander Tailings Retreatment Project (10koz) and Elikhulu (53koz).

Next events

Last cum-div date

Tuesday 5 December

Ex-div date on LSE

Wednesday 6 December

Record date

Friday 8 December

Payment date

Thursday 21 December

Analyst

Charles Gibson

+44 (0)20 3077 5724

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

Notwithstanding a reclassification of both Uitkomst and Phoenix as ‘discontinued operations’ in FY17, PAF’s net profits of £17.9m were within 3% of our estimate, while the proposed dividend was exactly in line. Notable variances compared with our prior expectations included the tax charge, which was materially lower and approximately balanced an equal and opposite deterioration in ‘other income’. All told, the group produced 173koz of gold during the period at a cash cost of US$986/oz.

Year end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

06/16

168.4

45.9

2.08

0.88

6.3

6.8

06/17

167.8

19.4

1.22

0.49

10.7

3.8

06/18e

196.7

51.4

1.91

0.87

6.8

6.7

06/19e

207.9

46.8

1.72

0.86

7.6

6.6

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

FY17 a transition year

FY17 represented a transition year for Pan African at a time when the rand demonstrated unusual strength against both the US dollar and sterling. Non-core assets, such as Uitkomst and Phoenix have been sold, while Evander underwent a major refurbishment that occasioned a two month suspension of mining and processing. Now, however, the spate of DMR Section 54 stoppage notices that has afflicted the industry over the course of the past two years shows signs of abating at the same time that Pan African is developing its next major project, Elikhulu (which is now fully funded and permitted), and putting in place an active strategy to manage the periodic low grade mining cycle at Evander. At the same time, it has completed a feasibility study on a sub-vertical shaft at Barberton’s Fairview mine and is progressing one on Evander Mines’ 7 Shaft No. 3 Decline and 2010 Pay Channel, which is expected to be concluded in the first quarter of CY18.

Valuation: 64% premium to current share price

Updating our long-term forecasts, our absolute value of PAF has increased by 2.2%, from 21.22p/share to 21.69p/share, comprising the discounted value of future dividends from the company’s existing assets of 19.95p plus 0.418p in Coal of Africa shares and 1.32p for the Fairview sub-vertical shaft project at Barberton. More immediately, trading at 6.8x FY18e normalised HEPS, Pan African’s shares remain well below their historic valuation multiples (with the exception of FY13), while also trading at ratios that are lower than its peers in at least 90% of cases in which P/E, yield and EV/EBITDA measures are considered (whether using Edison or consensus forecasts) and only slightly above book value of 12.0p/share. Note that these valuation discrepancies become more pronounced as production from Elikhulu drives EPS towards 3p from FY20 onwards. Finally, PAF also has the tenth highest (consensus) forecast dividend yield of any dividend-paying precious metals company, globally – although, note that it has the highest forecast dividend yield on the basis of Edison’s forecasts.

FY17 results

Pan African’s FY17 and FY16 financial results were restated to reflect both Uitkomst (sold in the FY17 financial year) and Phoenix (expected to be sold in the FY18 financial year) as ‘discontinued operations’. Notwithstanding this change, net profits of £17.9m for the full year were within 3% of Edison’s estimate. In general, gold revenues and costs of production were close to our expectations. Between the top and bottom lines, a negative variance in ‘other expenses’, impairments, the net finance expense and the contribution from discontinued operations was almost exactly offset by positive variances in the depreciation charge, profits on disposals of assets and, in particular, the tax charge. As well as taxation, the other noteworthy variance was that in other expenses – especially within the context of a pre-tax mark-to-market fair-value gain of ZAR94.7m (£5.5m at the average ZAR/GBP forex rate for the year) relating to the company’s hedge positions over the course of the year. In addition, the proposed dividend was exactly in line with our expectations, at 0.49p/share. An analysis of PAF’s FY17 results compared to both the previous, restated FY16 results and Edison’s prior expectations (similarly restated) is as follows:

Exhibit 1: Pan African underlying P&L statement by half-year (H116-FY17) actual and expected

£000s (unless otherwise indicated)

H116

H216

FY16
(restated)

H117

H217e

FY17e

FY17e (restated)

FY17

**Variance
(%)

***Chg
(%)

Mineral sales

75,632

93,728

161,312

105,046

89,974

195,020

170,186

169,585

-0.4

5.1

Realisation costs

(269)

(687)

(957)

(1,548)

(400)

(1,949)

(1,949)

(1,826)

-6.3

90.8

Realisation costs (%)

0.36

0.73

0.6

1.47

0.50

1.00

1.15

1.08

-6.1

80.0

On-mine revenue

75,363

93,041

160,356

103,498

89,573

193,071

168,237

167,759

-0.3

4.6

Gold cost of production

(48,935)

(51,102)

(100,487)

(65,188)

(67,230)

(132,418)

(132,419)

(134,007)

1.2

33.4

Pt cost of production

(1,651)

(1,796)

(2,300)

(2,471)

(4,771)

N/A

N/A

Coal cost of production

0

(4,739)

(10,568)

(5,835)

(16,403)

N/A

N/A

Cost of production

(50,586)

(57,637)

(100,487)

(78,056)

(75,537)

(153,593)

(132,419)

(134,007)

1.2

33.4

Depreciation

(5,277)

(5,180)

(9,996)

(6,450)

(7,008)

(13,457)

(13,457)

(10,493)

-22.0

5.0

Mining profit

19,500

30,225

49,873

18,992

7,029

26,021

22,361

23,259

4.0

-53.4

Other income/(expenses)

(3,486)

(8,697)

(12,167)

2,175

0

2,175

2,175

(2,003)

-192.1

-83.5

Profit/(loss) on group disposal

0

0

0

256

*3,913

*4,169

*4,169

*5,608

34.5

N/A

Loss in associate etc

0

0

0

0

0

0

0

0

N/A

N/A

Impairment costs

0

0

0

0

(3,900)

(3,900)

(3,900)

(6,000)

53.8

N/A

Royalty costs

(1,194)

(1,606)

(2,783)

(968)

(1,077)

(2,045)

(1,801)

(1,335)

-25.9

-52.0

Net income before finance items

14,819

19,923

34,922

20,455

5,965

26,420

23,004

19,530

-15.1

-44.1

Finances income

144

299

433

70

 

292

N/A

-32.6

Finance costs

(558)

(891)

(1,448)

(1,079)

 

(2,815)

N/A

94.4

Net finance income

(414)

(592)

(1,015)

(1,009)

(513)

(1,522)

(1,522)

(2,523)

65.8

148.6

Profit before taxation

14,405

19,331

33,907

19,446

5,452

24,898

21,482

17,007

-20.8

-49.8

Taxation

(3,480)

(4,754)

(8,578)

(5,475)

(1,114)

(6,589)

(6,077)

(243)

-96.0

-97.2

Marginal tax rate (%)

24

26

25

28

20

26

27

1

-96.3

-96.0

Deferred tax

Continuing profit after taxation

10,925

14,577

25,329

13,970

4,338

18,309

15,405

16,764

8.8

-33.8

Profit from discontinued operations

0

0

173

0

0

0

2,903

1,146

-60.5

562.4

Profit after taxation

10,925

14,577

25,502

13,970

4,338

18,309

18,309

17,910

-2.2

-29.8

 

 

EPS (p)

0.60

0.82

1.41

0.93

0.27

1.17

1.17

1.14

-2.6

-19.1

HEPS**** (p)

0.60

0.82

1.41

0.91

0.27

1.15

1.15

1.17

1.7

-17.0

Diluted EPS (p)

0.60

0.80

1.41

0.93

0.27

1.14

1.14

1.14

0.0

-19.1

Diluted HEPS* (p)

0.60

0.80

1.41

0.91

0.27

1.12

1.12

1.17

4.5

-17.0

Normalised HEPS (p)

2.08

0.27

1.01

1.01

1.30

28.7

-37.5

Diluted normalised HEPS (p)

2.08

0.27

0.99

0.99

1.30

31.3

-37.5

Source: Pan African Resources, Edison Investment Research. Note: As reported basis; *Profit re Uitkomst sale; **FY17/FY17e; ***FY17/FY16; ****HEPS = headline earnings per share (company adjusted basis). Numbers may not add up owing to rounding.

After producing 173koz of gold in FY17, management has now indicated that it expects production in FY18 in excess of 190koz of gold. Edison’s group-wide production estimate is 197koz in FY18, apportioned between its four remaining producing operations (ie excluding Phoenix), as follows:

Exhibit 2: Pan African group-wide production, actual and forecast, FY14-FY18e

Operation

FY14

FY15

FY16

FY17

FY18e

Barberton

88,738

81,493

84,690

71,763

94,641

Evander

76,556

63,558

73,496

43,304

72,700

BTRP

22,885

24,283

28,591

26,745

20,000

ETRP

0

6,523

18,151

29,473

10,000

Total

188,179

175,857

204,928

173,285

197,341

Source: Edison Investment Research, Pan African Resources

Clearly, within the historical context, there must be a degree of risk attached to our production forecasts with respect to PAF’s underground operations (Barberton and Evander). However, this is balanced (in our opinion roughly equally) by the opportunity (or upside risk) presented at its tailings retreatment operations. More significantly, the development of Elikhulu (which is now underway and fully funded) should increase output to c 250koz over the course of the next two financial years, which will underpin our longer-term earnings and cash-flow expectations:

Exhibit 3: Edison estimate of PAF production, FY18e-FY21e (oz)

Source: Edison Investment Research

In the meantime, PAF’s shares remain noticeably cheap, within the historical context, when considered relative to our (ostensibly unchanged) forecasts of normalised headline EPS in FY18 compared to prior years:

Exhibit 4: Pan African historical current year price to normalised HEPS ratio, FY10-FY18e

Source: Edison Investment Research, Bloomberg. Note: *Completed historic years calculated with respect to average share price within the year shown and normalised HEPS; zero normalisation assumed prior to 2016.

Self-evidently, this historical cheapness relative to earnings becomes more apparent as the commissioning of Elikhulu drives EPS towards the 3p mark from FY20 onwards:

Exhibit 5: PAF estimated life of operations diluted EPS and (maximum potential) DPS

Source: Edison Investment Research, Pan African Resources

In relative terms, PAF also remains cheaper than its South African and London-listed peers on 90% of valuation measures (ie 27 out of 30 measures in the table below on an individual company basis) regardless of whether consensus or Edison forecasts are used:

Exhibit 6: Comparative valuation of PAF with respect to South African peers

EV/EBITDA (x)

P/E (x)

Yield (%)

 

Year 1

Year 2

Year 1

Year 2

Year 1

Year 2

AngloGold Ashanti

5.1

3.9

48.6

11.6

0.9

1.1

Gold Fields

4.5

4.3

27.3

24.8

1.3

1.6

Sibanye

6.6

4.3

N/A 

9.8

3.0

3.7

Harmony

3.0

2.6

11.3

12.3

2.4

1.7

Randgold Resources

29.6

25.0

12.6

12.0

2.0

2.5

Average (excluding PAF)

9.8

8.0

24.9

14.1

1.9

2.1

Pan African (Edison)

4.0

3.6

6.9

7.7

6.5

6.5

Pan African (consensus)

4.3

3.4

6.2

5.0

3.9

4.6

Source: Edison Investment Research, Bloomberg. Note: Priced at 21 September 2017.

Note that Edison’s forecasts are based upon an estimated average gold price realised by Pan African of US$1,248/oz in FY18 and US$1,252/oz in FY19.

Finally, PAF has the tenth-highest consensus, forecast dividend yield of the 56 precious metal mining companies paying dividends to shareholders, globally (including selected royalty companies). Note that, in the event that it achieves Edison’s anticipated performance and dividend pay-out in FY18, PAF will actually have the highest prospective dividend yield of any company in the sector:

Exhibit 7: Global gold mining companies ranked by consensus forecast dividend yield (%)

Source: Bloomberg. Note: Prices as at 21 September 2017.

Note that, in this respect, Pan African’s forecast dividend yield is 1.3 standard deviations above the average yield of the population of 2.2%.

Growth projects

In addition to Elikhulu, which “is progressing according to plan with project completion and first gold expected in the last quarter of the 2018 calendar year”, Pan African has two significant growth projects, namely the Barberton Mines Sub-Vertical Shaft Project at Fairview and the Evander Mines 7 Shaft No. 3 Decline and 2010 Pay Channel project.

Barberton Mines Sub-Vertical Shaft Project at Fairview

The Fairview mining operation is currently restricted by the hoisting capacity of its No. 3 Decline, which is used to access workings below 42 Level. This decline is currently used to transport employees, material and for rock hoisting and, with no modifications, future mining at depth will be compromised by increased travelling distances, reduced employee face time and a lack of sufficient capacity to ensure both adequate ore replacement and exploration development. With this in mind, Pan African has now completed a study with DRA to investigate the feasibility of constructing a raise-bored, sub-vertical shaft from Fairview’s 42 Level to 64 Level and, potentially, in future, to 68 Level (Note that resources extend down to 74 Level). The sub-vertical shaft will then be used to transport employees and material to the working areas, while No. 3 Decline will be used exclusively for rock hoisting, thereby significantly increasing overall capacity and production from this high grade mining area.

Estimated capex for the project (including contingencies) is ZAR105m (£6.1m) and would result in estimated, additional output of 7,000oz gold per annum, which “can be optimised further to more than 10,000oz per annum.”

Assuming that construction takes place in CY18 and CY19 and that production begins in CY20 with cash costs of c US$800/oz over 15 years, we estimate that this project could be worth in the order of US$29.3m (1.63c/share) to Pan African, rising to US$43.5m (2.42p/share) in the event of optimisation (at Edison’s standard 10% discount rate) – which compares with a current valuation in the order of US$1.0m if valued at PAF’s current group-wide resource multiple.

Evander Mines 7 Shaft No. 3 Decline and 2010 Pay Channel

The 2010 Pay Channel contains an estimated 2.19Moz of resources and is c 4.5km in tramming distance from 7 Shaft, which is currently used by EGM for hoisting to the Kinross metallurgical plant (cf 8 Shaft, which is c 12km distant). Harmony Gold Mining had previously developed the 7 Shaft mine working towards the 2010 Pay Channel, but discontinued the initiative in 2009, allowing the controlled flooding of the development ends and 7 Shaft’s No. 3 Decline, from 21 Level to 18 Level.

To date, two boreholes have successfully been drilled into the 2010 Pay Channel, intersecting the Kimberley reef at a depth of c 2km. The first yielded a reef intersection with a width of 49cm and a grade of 36.04g/t (a metal content factor of 1,766cm.g/t), while the more recent recorded a width of 6cm and a grade of 36.8g/t (a metal content factor of 221cm.g/t). Additional drilling deflections will be performed to further delineate the orebody. In the meantime, in order for mining to commence, the infrastructure would need to be dewatered and only standard footwall and on-reef development (with associated engineering infrastructure) completed. With this in mind, a Pan African project team has been created and has commenced a feasibility study relating to the 7 Shaft No. 3 Decline and 2010 Pay Channel resource, which will initially consider the following issues:

Collation of geological data from drill hole intersections and deflections.

The cost and timing of dewatering and re-equipping the 7 Shaft No. 3 Decline from 18 Level to 21 Level.

The development cost and timing to access the 2010 Pay Channel.

The economic viability of the project.

The feasibility study is expected to be completed in the first quarter of the 2018 calendar year (ie H218). In the meantime, Pan African’s management is of the opinion that, “The 2010 Pay Channel can potentially increase Evander Mines’ underground gold production significantly at a relatively low capital cost, using Evander Mines’ established shaft and metallurgical facilities.”

Pro-rata to its resource of 1.48Moz, at Pan African’s group-wide average resource multiple, the 2010 Pay Channel project should be worth in the order of US$13.1m, or c 0.7c/share. In all probability, management would hope and expect that this project would yield an NPV10 to the company of several times this value in the event that its development is sanctioned by the board, subject to capex, opex etc.

Dividend

Pan African has a target dividend pay-out ratio of 40% of net cash generated by operating activities, after allowing for the cash-flow effect of sustaining capital, contractual debt repayments and one-off items. In FY17, the board took the view that the proceeds from the sale of Uitkomst were eligible to contribute to the dividend payout on the grounds that they constituted a return to shareholders of the profits realised on the original investments. Hitherto, Edison had assumed that the same would apply to proceeds from the sale of Phoenix Platinum in FY18. However, we have now tentatively revised this viewpoint to exclude Phoenix proceeds from inclusion in the FY18 dividend (at least for the moment) pending developments throughout the course of the remainder of the year, including Competition Commission approval for the transaction. We have therefore for now lowered our FY18 dividend estimate from 1.14p/share to 0.87p/share. We have also introduced our FY19 financial estimates for the first time (see Exhibit 8).

Exhibit 8: Financial summary

£'000s

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018e

2019e

Year end 30 June

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

52,860

68,344

79,051

100,905

133,308

154,202

140,386

168,404

167,759

196,745

207,879

Cost of sales

(28,505)

(40,554)

(45,345)

(46,123)

(71,181)

(106,394)

(110,413)

(108,223)

(134,007)

(131,562)

(136,559)

Gross profit

24,355

27,790

33,705

54,783

62,127

47,808

29,973

60,181

33,752

65,183

71,320

EBITDA

 

 

22,890

25,023

28,540

45,018

53,276

44,165

28,448

57,381

32,417

62,046

68,153

Operating profit (before GW and except.)

20,529

21,897

25,655

41,759

47,278

34,142

18,110

46,925

21,924

52,041

49,615

Intangible amortisation

0

0

0

0

0

0

0

0

0

0

0

Exceptionals

(5,025)

(335)

0

(48)

7,232

(12)

(198)

(12,183)

(1,248)

(1,293)

(1,252)

Other

0

0

0

0

0

0

0

0

0

0

0

Operating profit

15,504

21,562

25,655

41,711

54,510

34,130

17,912

34,742

20,676

50,748

48,363

Net interest

807

594

762

516

197

(191)

(2,109)

(1,006)

(2,523)

(629)

(2,794)

Profit before tax (norm)

 

 

21,336

22,491

26,417

42,274

47,475

33,951

16,001

45,919

19,401

51,412

46,821

Profit before tax (FRS 3)

 

 

16,311

22,156

26,417

42,226

54,707

33,939

15,803

33,736

18,153

50,119

45,569

Tax

(8,219)

(7,656)

(9,248)

(12,985)

(12,133)

(7,155)

(4,133)

(8,234)

(243)

(17,009)

(15,859)

Profit after tax (norm)

13,117

14,835

17,169

29,290

35,342

26,796

11,868

37,685

19,158

34,403

30,962

Profit after tax (FRS 3)

8,091

14,500

17,169

29,242

42,574

26,785

11,670

25,502

17,910

33,110

29,710

Average number of shares outstanding (m)

1,104.4

1,366.3

1,432.7

1,445.2

1,619.8

1,827.2

1,830.4

1,811.4

1,564.3

1,798.3

1,798.3

EPS - normalised (p)

 

 

0.85

1.07

1.20

2.03

2.18

1.46

0.64

2.08

1.22

1.91

1.72

EPS - FRS 3 (p)

 

 

0.40

1.04

1.20

2.02

2.63

1.47

0.64

1.41

1.14

1.84

1.65

Dividend per share (p)

0.26

0.37

0.51

0.00

0.83

0.82

0.54

0.88

0.49

0.87

0.86

Gross margin (%)

46.1

40.7

42.6

54.3

46.6

31.0

21.4

35.7

20.1

33.1

34.3

EBITDA margin (%)

43.3

36.6

36.1

44.6

40.0

28.6

20.3

34.1

19.3

31.5

32.8

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

38.8

32.0

32.5

41.4

35.5

22.1

12.9

27.9

13.1

26.5

23.9

BALANCE SHEET

Fixed assets

 

 

67,198

74,324

97,281

86,075

249,316

223,425

220,150

230,676

273,635

324,317

350,415

Intangible assets

35,397

36,829

38,229

23,664

38,628

37,040

37,713

38,682

41,425

43,161

44,897

Tangible assets

31,801

37,495

59,052

62,412

209,490

185,376

181,533

190,725

224,687

273,634

297,995

Investments

0

0

0

0

1,199

1,010

905

1,269

7,523

7,523

7,523

Current assets

 

 

4,949

17,677

15,835

41,614

26,962

23,510

17,218

22,016

37,090

26,385

27,580

Stocks

358

1,126

1,457

1,869

6,596

5,341

3,503

4,399

7,583

6,566

6,937

Debtors

2,201

3,795

4,254

6,828

15,384

12,551

10,386

14,891

14,813

14,571

15,395

Cash

2,389

12,756

10,124

19,782

4,769

5,618

3,329

2,659

9,447

0

0

Current liabilities

 

 

(6,101)

(7,084)

(8,960)

(11,062)

(24,066)

(24,012)

(22,350)

(32,211)

(31,251)

(52,337)

(64,043)

Creditors

(6,080)

(7,084)

(8,960)

(11,062)

(23,202)

(19,257)

(17,301)

(25,230)

(27,105)

(33,580)

(34,514)

Short-term borrowings

(21)

0

0

0

(864)

(4,755)

(5,049)

(6,981)

(4,146)

(18,757)

(29,529)

Long-term liabilities

 

 

(9,686)

(11,431)

(13,410)

(14,001)

(80,004)

(63,528)

(67,850)

(69,506)

(62,893)

(64,248)

(65,620)

Long-term borrowings

0

0

(181)

(869)

(11,133)

(8,141)

(16,313)

(18,456)

(12,290)

(12,290)

(12,290)

Other long-term liabilities

(9,686)

(11,431)

(13,228)

(13,132)

(68,871)

(55,387)

(51,537)

(51,049)

(50,603)

(51,958)

(53,329)

Net assets

 

 

56,360

73,487

90,746

102,626

172,208

159,396

147,167

150,975

216,581

234,117

248,332

CASH FLOW

Operating cash flow

 

 

25,420

25,207

31,968

49,092

61,618

45,996

26,423

47,130

29,945

61,668

66,719

Net Interest

807

594

762

516

314

(606)

(2,109)

(1,006)

(2,141)

(629)

(2,794)

Tax

(10,886)

(7,476)

(10,743)

(11,616)

(13,666)

(8,536)

(3,943)

(7,777)

(8,003)

(15,653)

(14,487)

Capex

(5,705)

(6,764)

(21,712)

(17,814)

(27,197)

(21,355)

(19,554)

(14,097)

(36,748)

(65,898)

(44,635)

Acquisitions/disposals

(4,205)

0

0

(1,549)

(96,006)

0

(760)

(30,999)

8,364

5,210

0

Financing

0

48

1,545

259

47,112

349

(235)

15,207

34,638

0

0

Dividends

(6,774)

0

(5,376)

(7,416)

0

(14,684)

(15,006)

(9,882)

(13,290)

(8,757)

(15,574)

Net cash flow

(1,343)

11,609

(3,557)

11,471

(27,826)

1,164

(15,184)

(1,425)

12,764

(24,059)

(10,772)

Opening net debt/(cash)

 

 

(5,313)

(2,369)

(12,756)

(9,943)

(18,913)

7,228

7,278

18,033

22,778

6,989

31,047

Exchange rate movements

(2,642)

(281)

925

(1,813)

594

(839)

(276)

812

238

0

0

Other

1,041

(940)

(181)

(688)

1,090

(375)

4,705

(4,131)

2,787

0

0

Closing net debt/(cash)

 

 

(2,369)

(12,756)

(9,943)

(18,913)

7,228

7,278

18,033

22,778

6,989

31,047

41,819

Source: Company sources, Edison Investment Research

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. 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 2017 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 2017. “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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. 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 2017 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 2017. “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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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