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Record interim profitability

Pan African Resources 3 March 2021 Update
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Pan African Resources

Record interim profitability

H121 results

Metals & mining

3 March 2021

Price

17.35p

Market cap

£388m

ZAR20.1061/£, ZAR14.4578/US$, US$1.3906/£

Net debt (US$m) at end December 2020*

65.2

*Includes US$5.0m in IFRS 16 lease liabilities

Shares in issue*

2,234.7m

*Effective 1,928.3m post-consolidation

Free float

86%

Code

PAF

Primary exchange

AIM/JSE

Secondary exchange (pending)

OTCQX Best Market

Share price performance

%

1m

3m

12m

Abs

(25.2)

(21.9)

50.1

Rel (local)

(26.5)

(24.3)

47.5

52-week high/low

27.1p

9.0p

Business description

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

Next events

Egoli investment decision

Mid-CY21

FY21 results

September 2021

Mintails/Mogale due diligence

Until January 2022

Analyst

Charles Gibson

+44 (0)20 3077 5724

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

Pan African Resources’ (PAF) interim results to end-December 2020 were reported in the context of already known production and were well within the range indicated by its JSE paragraph 3.4(b) announcement of 8 February. EPS and HEPS almost doubled in the period to 2.11c/share, albeit this included an (effectively) exceptional loss from the last of PAF’s hedge programme, which if excluded would have increased EPS and HEPS to (we estimate) 2.46c/share (see Exhibit 2). Moreover, this result was achieved despite a 21.7 percentage point increase in the effective tax rate as a result of a material deferred tax charge for the first time, which if excluded would have increased normalised HEPS still further, to 2.93c/share. Assuming a similar performance in H221 would imply a normalised P/E ratio for PAF of just 5.7x in FY21, well below the average of its peers (see Exhibit 6).

Year end

Revenue (US$m)

PBT*
(US$m)

EPS*
(c)

DPS
(c)

P/E
(x)

Yield
(%)

06/19

218.8

37.1

1.64

0.15

14.7

0.6

06/20

274.1

80.8

3.78

0.84

6.4

3.5

06/21e

357.0

122.2

4.24

1.10

5.7

4.5

06/22e

336.2

151.4

5.43

1.09

4.4

4.5

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

Underground grades back to where they belong

Particularly notable within the detail of the results were the head grade mined from underground operations at Barberton, which we estimate to have been 11.25g/t (cf the 8.79g/t that we estimated in H220 – a 28.0% increase) and the head grade recorded at the BTRP and Elikhulu, which were also both above our expectations, albeit these were partially offset by early teething problems at the Evander 8 Shaft Pillar project (eg a ventilation shaft lining fracture), which have now been rectified. Subject to the unexpected therefore and given that it produced 98.4koz in H121, we regard it as extremely unlikely that PAF will fail to achieve its FY21 production target of 190koz for the current year (see Exhibit 1).

Valuation: 38.41–43.43c (27.62–31.23p) per share

Since our last major note on PAF, the rand has appreciated by 12.4% relative to the US dollar, from ZAR16.5113/US$ to ZAR14.4578/US$, which has contributed to an albeit lesser 5.7% reduction in our valuation of the company to 38.19c (27.46p) based on its four currently producing assets plus Egoli. To this must then be added the value of c 19.2m underground Witwatersrand ounces, which we estimate could lie anywhere in the range of 0.22–5.24c per share, plus PAF's other assets to take the total to 38.41–43.43c/share. As an alternative means of valuation, if PAF’s historical average price to normalised EPS ratio of 9.1x in the period FY10–20 is applied to our FY21 and FY22 forecasts, then it implies a share price of 27.6p in FY21 followed by 35.4p in FY22. On the basis of its FY20 dividend and our forecast FY21e dividend, it is among the top 20 yielding precious metals companies globally. In the meantime, investors can buy the shares on a resource multiple of only US$13.86/oz and a reserve multiple of only US$47.79/oz.

Investment summary

PAF’s results for the half-year to end-December 2020 were reported within the context of already known production from its operational update released on 22 January 2021. These are summarised in Exhibit 1, below. Full details are available in its interim results statement. However, particularly notable within the detail of the results were the head grade mined from underground operations at Barberton, which we estimate to have been 11.25g/t (cf the 8.79g/t that we estimate was mined in H220 – a 28.0% increase), and also the head grade recorded at the BTRP and Elikhulu, which were also both above our expectations, albeit to a lesser extent. In addition, Exhibit 1 provides our estimates of production in H221 and therefore also FY21e.

Exhibit 1: PAF production, FY18–21 (oz)

Operation

H118

H218

FY18

H119

H219

FY19

H120

H220

FY20

H121

H221/H220
(%)

H221e

FY21e

Barberton UG

32,159

40,966

73,125

38,550

36,806

75,356

36,737

31,392

68,129

42,350

+34.9

41,551

83,901

BTRP

8,452

9,052

17,504

12,006

12,001

24,007

10,619

9,516

20,135

10,004

+5.1

9,393

19,397

Barberton

40,611

50,018

90,629

50,556

48,807

99,363

47,356

40,908

88,264

52,354

+28.0

50,944

103,298

Evander UG

32,734

15,831

48,565

8,821

8,058

16,879

11,553

9,117

20,670

12,607

+38.3

17,314

29,921

ETRP

11,937

9,313

21,250

6,345

3,654

9,999

4,731

6,176

10,907

6,560

+6.2

0

6,560

Evander

44,671

25,144

69,815

15,166

11,712

26,878

16,284

15,293

31,577

19,169

+25.3

17,314

36,483

Elikhulu

0

0

0

15,292

30,909

46,201

29,301

30,315

59,616

26,863

-11.4

27,582

54,445

Total

85,282

75,139

160,444

81,014

91,428

172,442

92,941

86,516

179,457

98,386

+13.7

95,840

194,226

Source: Edison Investment Research, Pan African Resources. Note: Numbers may not add up owing to rounding.

UG = underground.

While production in H121 was 5.9% higher than in H120, it was 13.7% higher than H220, demonstrating an improving trend. In the case of Barberton underground, the improvement could be attributed to its three cycling production platforms. By contrast, while production at Evander underground exhibited a marked improvement over the previous four half-year periods, output was below expectations as production (now principally relating to the 8 Shaft Pillar project) was restrained by a ventilation shaft lining fracture as well as technical difficulties relating to the pseudo packs used for ground support (albeit these have now been overcome by filling the packs with a mixture dry tailings and fly ash rather than wet tailings). In addition, at 91%, metallurgical recoveries at Evander underground were below historical levels, although this was, to some extent counterbalanced by the head grade, which, at an estimated 8.51g/t, was 11.0% above our prior expectation of 7.67g/t.

H121 financial results and H221 forecasts

The table overleaf presents PAF’s H121 results relative to historical results. Readers are reminded that production from Evander’s 8 Shaft Pillar project was capitalised until June 2020, when steady-state production was achieved. Nevertheless, with that caveat, a number of features of PAF’s financial results are noteworthy. In the first instance, it is apparent that earnings and headline earnings in the half year period are more akin to those typically earned within a full financial year – attributable, in part, to the relatively high gold price during the period (that is US$1,865/oz cf US$1,694/oz in H220). Within that however, there is some evidence of cost pressure in US dollar terms (not least as a result of the strengthening of the rand, which has now appreciated by some 24.2% against the US dollar since its nadir on 23 April 2020) in the form of costs of production rising by more in percentage terms than revenue. However, probably the main two features of the results are the dramatic decline in ‘other’ expenses (in this case principally relating to the rolling off of PAF’s revenue protection hedges, which have now been settled in their entirety), partially offset by a 21.7 percentage point increase in the effective tax charge. In the latter case, it is notable that 47.3% of the entire tax charge in PAF’s P&L was accounted for by a deferred tax charge and that actual cash taxes paid were considerably less, at US$6.7m (cf US$19.2m in the P&L statement – see below).

Exhibit 2: PAF P&L statement by half-year (H119–H221e)

US$000s
(unless otherwise indicated)

H119
(restated)

H219

FY19

H120

H220

FY20

H121

H121/
H220 (%)

H221e

FY21e

FY21e
(previous)

Revenue

97,531

121,287

218,818

132,849

141,258

274,107

183,751

30.1

173,216

356,967

307,883

Cost of production

(70,847)

(82,133)

(152,980)

(86,501)

(71,956)

(158,457)

(98,245)

36.5

(97,564)

(195,808)

(152,913)

Depreciation

(6,840)

(9,388)

(16,228)

(10,526)

(10,977)

(21,503)

(12,741)

16.1

(16,012)

(28,753)

(18,997)

Mining profit

19,844

29,767

49,611

35,821

58,325

94,146

72,766

24.8

59,640

132,406

135,972

Other income/(expenses)

(2,077)

(5,181)

(7,258)

(962)

(27,720)

(28,682)

(6,704)

-75.8

0

(6,704)

(8,905)

Loss in associate etc

0

0

0

0

0

0

0

N/A

0

0

Loss on disposals

0

0

0

0

0

0

0

N/A

0

0

Impairments

0

17,854

17,854

109

(20)

89

0

-100.0

0

0

Royalty costs

(474)

120

(354)

(208)

(266)

(474)

(2,404)

803.8

(1,678)

(4,083)

(1,418)

Net income before finance

17,293

42,559

59,852

34,761

30,319

65,079

63,657

110.0

57,962

121,619

125,649

Finances income

443

407

850

207

258

465

300

16.3

Finance costs

(5,699)

(7,343)

(13,042)

(7,760)

(5,587)

(13,346)

(3,946)

-29.4

Net finance income

(5,256)

(6,936)

(12,192)

(7,553)

(5,329)

(12,881)

(3,646)

-31.6

(2,507)

(6,153)

(5,015)

Profit before taxation

12,037

35,623

47,660

27,208

24,990

52,198

60,011

140.1

55,455

115,466

120,635

Taxation

(2,325)

(5,850)

(8,174)

(5,303)

(2,602)

(7,905)

(19,239)

639.4

(21,224)

(40,462)

(5,709)

Effective tax rate (%)

19.3

16.4

17.2

19.5

10.4

15.1

32.1

208.7

38.3

35.0

4.7

PAT (continuing ops)

9,712

29,774

39,486

21,906

22,388

44,293

40,773

82.1

34,231

75,004

114,926

Loss from discontinued ops

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

N/A

Profit after tax

9,712

29,774

39,486

21,906

22,388

44,293

40,773

82.1

34,231

75,004

114,926

Headline earnings

9,712

14,586

24,298

21,742

22,416

44,158

40,772

81.9

34,231

75,003

114,926

Est. normalised headline earnings

11,789

19,766

31,556

22,704

50,136

72,840

47,476

-5.3

34,231

81,708

123,831

EPS (c)

0.50

1.54

2.05

1.14

1.16

2.30

2.11

81.9

1.78

3.89

5.96

HEPS* (c)

0.50

0.76

1.26

1.13

1.16

2.29

2.11

81.9

1.78

3.89

5.96

Normalised HEPS (c)

0.61

1.03

1.64

1.18

2.60

3.78

2.46

-5.4

1.78

4.24

6.42

EPS from continuing ops (c)

0.50

1.54

2.05

1.14

1.16

2.30

2.11

81.9

1.78

3.89

5.96

Source: Pan African Resources, Edison Investment Research. Note: As reported basis. *HEPS = headline earnings per share (company adjusted basis).

From an operational perspective, cost pressures were most apparent at Evander underground, where the shortfall of tonnes milled relative to prior expectations, superimposed on a cost base that is largely (c 90%) fixed, resulted in a material increase in unit costs from ZAR5,671/t (H220e) to ZAR6,496/t, rather than the decline as had anticipated. Even so, in the six-month period, we note that EBITDA at Evander underground of ZAR49.0m was its second highest (half year) level since H216, which bodes well for the future. In addition, Elikhulu experienced an increase in unit cash costs from an estimated ZAR36.33/t in H220 to ZAR45.63/t in H121 as plant throughput was constrained by preventative maintenance and improvement work to sections of the lower Elikhulu tailings storage facility compartment and the installation of elevated drains in this area. This work is anticipated (by management) to be completed this month, whereafter throughput tonnage is expected to increase once again.

In the light of H121 results, we have amended our FY21 results to those shown in Exhibit 2, now forecast on a half yearly basis, rather than the full yearly basis previously. Included among a number of changes in our assumptions are the following:

The gold price, after falling US$245/oz since its high of US$2,063/oz on 6 August 2020, remaining at US$1,818/oz for the remainder of the financial year.

The rand (after appreciating from ZAR19.0857/US$ on 23 April 2020) remaining at ZAR14.4578/US$ for the remainder of the financial year.

Elikhulu unit cash costs of ZAR38.13/t in H221 – lower than in H121, but higher than our prior FY21 forecast of ZAR34.76/t.

Production of 29,921oz from Evander underground in FY21 (cf 35,667oz previously) and output of 17,314oz in H221 (cf 12,607oz in H121).

The increase in the deferred tax charge in H121 could be attributed to 1) a change in the tax structure of the group’s share incentive scheme (liabilities transferred to PAR Gold) and 2) an increase in the deferred tax rate at Evander Mines, from 15.66% to 23.02%, the utilisation of the assessed loss and the realisation of the previously unrealised gains arising from the group’s cost collar derivatives. Whereas in the past Edison has not attempted to forecast deferred tax, in the light of H121 results, we have now started to attempt to do so (with appropriate caveats) for the remainder of FY21 along with FY22 and FY23, after which we assume that all unredeemed capital will have been recouped and all taxes payable will be cash taxes, rather than deferred. Note that while this treatment of deferred tax in H221, FY22 and FY23 adversely affects the appearance of EPS and headline earnings per share (HEPS) in those years, it has a negligible effect on cash flows (on which we base our absolute valuation of PAF).

On the basis of these assumptions, our updated normalised FY21 HEPS forecast of 4.24c/share compares with a consensus EPS forecast for FY21 of 1.89c/share, within a range 0.06–3.72c/share (source: Refinitiv, 3 March 2021).

Updated valuation

In the light of our revised assumptions, our absolute value of PAF (based on its existing four producing assets plus Egoli) has moderated to 36.42c/share ex-dividend (cf 39.03c/share cum-dividend previously), on the basis of the present value of our estimated maximum potential stream of dividends payable to shareholders over the life of its mining operations (applying a 10% discount rate):

Exhibit 3: PAF estimated life of operations’ diluted EPS and (maximum potential) DPS*

Source: Pan African Resources, Edison Investment Research. Note: *From FY23. Excludes discretionary exploration investment.

Including its other potential growth projects (eg the Fairview sub-vertical shaft project) and assets (ie the residual Evander underground resource and its shareholding in MC Mining), our updated total valuation of PAF is as follows:

Exhibit 4: PAF absolute valuation summary

Project

Current valuation
(cents/share)

Previous valuation
(cents/share)

Existing producing assets (including Egoli)

36.42

38.19

FY20 dividend

N/A

0.84

Fairview Sub-Vertical Shaft project

1.13

1.00

Royal Sheba (resource-based valuation)

0.40

0.40

Mintails/Mogale

0.17

N/A

MC Mining shares

0.07

0.06

Sub-total

38.19

40.48

EGM underground resource

0.22–5.24

0.22–5.24

Total

38.41–43.43

40.70–45.72

Source: Edison Investment Research. Note: Numbers may not add up owing to rounding.

Note that the increase in the value of PAF’s shareholding of 13.1m MC Mining shares relative to our previous valuation in October reflects the continued rise in the latter’s share price from ZAR1.38/share to ZAR1.60/share currently (adjusted into US dollars at the appropriate forex rate).

Readers should note that the 5.7% decline in Edison’s valuation of the company, to 38.19c/share (excluding the value of PAF’s other underground Witwatersrand assets at Evander), should be seen within the context of a spot rand rate that is 12.4% stronger than that prevailing at the time of our last major note on the company (see The sun rises over Egoli’s city of gold, published on 14 October 2020) and the geared effect that the rand rate has on PAF’s mining operations’ margins – that is, it represents fundamental outperformance on an underlying basis.

Mintails/Mogale

One of the assets with the most immediate optionality in the company’s portfolio is Mintails/Mogale, which could yet prove very similar in nature to Elikhulu and into which PAF is currently conducting due diligence with a view to acquiring. By way of comparison, Mintails’ and Mogale’s aggregate resource of 2.36Moz compares favourably to Elikhulu’s original resource of 1.7Moz and its initial reserve of 1.5Moz, but at a fractionally higher grade of 0.30g/t (cf Elikhulu’s 0.29g/t). PAF announced the results of an independent definitive feasibility study (DFS) on Elikhulu on 5 December 2016, which demonstrated an NPV9 of US$75.9m (or, then, 5.0c/share, or US$40.95 per resource oz) at a gold price of US$1,180/oz and a forex rate of ZAR14.50/US$. At the time, Edison estimated Elikhulu to be worth US$69.9m (or 4.6c/share) at a 10% discount rate and to be capable of adding 1.33p to EPS in the first eight years of its operation (albeit there are now 28.0% more shares in issue). Now however, with capex having been expended (but with not all associated debt repaid), we estimate a current valuation for Elikhulu of c US$151.32 per initial resource oz or US$184.08 per remaining resource oz. As such, and albeit with suitable caveats such as the Mintails/Mogale assets developing in a similar fashion to Elikhulu, PAF could be on the verge of acquiring for US$1.31/oz an asset that might be worth US$9.88/oz, could be worth US$40.95/oz (pre-production) and may be worth US$159.33/oz (post-debt repayment, albeit after c US$71/oz in initial capex). For more information, readers should see our note, Entailed, published on 17 November 2020).

Historical relative and current peer group valuation

Historical relative valuation

Exhibit 5, below, depicts PAF’s average share price in each of its financial years from FY10 to FY20, and compares this with normalised HEPS in the same year. For FY21 and FY22, the current share price (of 17.35p) is compared with our forecast normalised HEPS for FY21 to FY22. As is apparent from the graph, PAF’s price to normalised HEPS ratio of 5.7x and 4.4x for FY21 and FY22, respectively (based on our forecasts – see Exhibit 6, below) is very close to the bottom of its recent historical range of 4.1–14.8x for the period FY10–20:

Exhibit 5: PAF historical price to normalised HEPS** ratio, FY10–FY22e

Source: Edison Investment Research. Note: *Completed historical years calculated with respect to average share price within the year shown and normalised HEPS; zero normalisation assumed before 2016. **HEPS shown in pence prior to 2018 and US cents thereafter.

Stated alternatively, if PAF’s average contemporary price to normalised EPS ratio of 9.1x in the period FY10–20 is applied to our normalised earnings forecasts, then it implies that PAF’s share price could be expected to rise to c 27.6p in FY21 and 35.4p in FY22.

Note that, within this context, our normalised FY22 HEPS forecast of 5.43 US cents compares with a consensus forecast of 2.74c, within a range 0.05–5.42c (source: Refinitiv, 3 March 2021).

Relative peer group valuation

Over the next two years, PAF remains cheaper than its South Africa- and London-listed gold mining peers on 63% of comparable common valuation measures (19 out of 30 individual measures in the table below) if Edison forecasts are applied or 43% if consensus forecasts are applied. Note: in this case, readers should note that the consensus appears to be discounting negligible normalised HEPS in H221 (c 0.05c/share) as well as a cut in the dividend which, at the current juncture, would appear unduly pessimistic, in our view.

Exhibit 6: Comparative valuation of PAF with South African and London peers

 

EV/EBITDA (x)

P/E (x)

Yield (%)

Year 1

Year 2

Year 1

Year 2

Year 1

Year 2

AngloGold Ashanti

3.2

3.4

6.0

6.9

3.0

2.8

Gold Fields

3.3

3.5

6.6

7.7

4.5

4.4

Sibanye

3.3

4.3

5.4

6.9

6.4

4.8

Harmony

2.4

2.0

4.5

3.7

2.7

4.2

Centamin

3.1

3.5

11.7

9.9

6.8

6.2

Average (excluding PAF)

3.1

3.3

6.8

7.0

4.7

4.5

PAF (Edison)

3.3

2.8

5.7

4.4

4.5

4.5

PAF (consensus)

2.7

2.4

9.6

6.8

2.3

2.3

Source: Edison Investment Research, Refinitiv. Note: Consensus and peers priced at 17 February 2021.

Note that applying PAF’s peers’ average year 2 P/E ratio of 7.0x to Edison’s forecast normalised HEPS forecast of 5.43c/share for FY22 would similarly imply a share price for the company of 27.4p at prevailing forex rates.

Financials

Considering its liabilities to financial institutions, PAF had net debt of US$59.6m on its balance sheet as at 31 December 2020, which equates to a gearing ratio (net debt/equity) of 24.5% and a leverage ratio (net debt/[net debt+equity]) of 19.7% (cf 64.8% and 39.3% as at end December 2019, respectively). This figure includes gross debt and cash and is reflected in our financial summary (see Exhibit 11, below); however, it excludes a number of other items, which are summarised below.

Exhibit 7: Pan African net debt, by type (US$m)

Type

H121

FY20

Gross debt

87.8

89.2

Cash & restricted cash

(28.0)

(33.5)

Net senior debt (sub-total)

59.8

55.7

Restricted cash

0.1

0.4

Gold loan

0

5.7

Less refinance adjustment

0

(0.3)

Arranging fees

0

0.5

Sub-total

59.9

62.0

Derivative financial liability

0

9.6

IFRS 16 lease

5.0

4.5

Instalment sale liability

0.2

0.3

Sub-total

65.2

76.4

Source: Pan African Resources. Note: Totals may not add up owing to rounding.

Most notable within the context of the above table is the extinction of the liabilities relating to PAF’s gold loan and derivative financial instruments in H121, which represented the last vestiges of the company’s revenue protection hedging contracts, which have now all been terminated.

Notwithstanding the start of capex relating to the Egoli project, we continue to forecast that the company will achieve net debt free status during the FY22 financial year (NB on a post-FY21 dividend basis):

Exhibit 8: PAF current estimated net debt profile forecast, FY17 to FY22e (US$000)

Exhibit 9: PAF previous net debt profile forecast, FY17 to FY22e (US$000)

Source: Edison Investment Research, Pan African Resources

Source: Edison Investment Research, Pan African Resources

Exhibit 8: PAF current estimated net debt profile forecast, FY17 to FY22e (US$000)

Source: Edison Investment Research, Pan African Resources

Exhibit 9: PAF previous net debt profile forecast, FY17 to FY22e (US$000)

Source: Edison Investment Research, Pan African Resources

Debt is principally financed via a US$47.6m term loan facility plus a US$40.4m revolving credit facility and a general banking facility. Principal on the Elikhulu facility is payable in equal instalments until maturity in June 2024, while the revolving credit facility (RCF) has a maturity beyond mid-2024. The group’s RCF debt covenants and their actual recorded levels within recent history are as follows:

Exhibit 10: PAF group debt covenants

Measurement

Constraint

H121

FY20

H120

FY19
(actual)

H119
(actual)

FY18*
(actual)

H118
(actual)

FY17
(restated)

Net debt:equity

Must be less than 1:1

0.3

0.4

0.6

0.71

0.85

0.78

0.19

0.02

Net debt:EBITDA

Must be less than 2.5:1 falling to 1.5:1 by December 2022

0.5

0.7

1.6

2.2

3.24

3.73

2.25

0.08

Interest cover ratio

Must be greater than 4 times rising to 5.1 times by December 2022

17.7

10.1

5.8

4.1

3.64

4.61

4.62

19.32

Debt service cover ratio

Must be greater than 1.3:1

3.3

3.4

3.0

1.4

2.85

3.84

1.85

9.11

Source: Pan African Resources. Note: *Subsequently restated.

Exhibit 11: Financial summary

US$'000s

2018

2019

2020

2021e

2022e

Year end 30 June

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

145,829

218,818

274,107

356,967

336,217

Cost of sales

(107,140)

(152,980)

(158,457)

(195,808)

(154,482)

Gross profit

38,689

65,838

115,650

161,159

181,735

EBITDA

 

 

38,131

65,484

115,176

157,076

177,075

Operating profit (before GW and except.)

 

31,506

49,256

93,673

128,323

154,043

Intangible amortisation

0

0

0

0

0

Exceptionals

(16,521)

10,596

(28,593)

(6,704)

(1,741)

Other

0

0

0

0

0

Operating profit

14,985

59,852

65,079

121,619

152,302

Net interest

(2,222)

(12,192)

(12,881)

(6,153)

(2,680)

Profit before tax (norm)

 

 

29,284

37,064

80,791

122,170

151,363

Profit before tax (FRS 3)

 

 

12,763

47,660

52,198

115,466

149,622

Tax

2,826

(8,174)

(7,905)

(40,462)

(46,705)

Profit after tax (norm)

32,110

28,890

72,887

81,708

104,658

Profit after tax (FRS 3)

15,589

39,486

44,293

75,004

102,917

Average number of shares outstanding (m)

1,809.7

1,928.3

1,928.3

1,928.3

1,928.3

EPS - normalised (c)

 

 

1.31

1.64

3.78

4.24

5.43

EPS - FRS 3 (c)

 

 

0.87

2.05

2.30

3.89

5.34

Dividend per share (c)

0.00

0.15

0.84

1.10

1.09

Gross margin (%)

26.5

30.1

42.2

45.1

54.1

EBITDA margin (%)

26.1

29.9

42.0

44.0

52.7

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

21.6

22.5

34.2

35.9

45.8

BALANCE SHEET

Fixed assets

 

 

315,279

361,529

314,968

353,978

396,879

Intangible assets

56,899

49,372

43,466

45,802

48,217

Tangible assets

254,247

305,355

270,286

306,960

347,445

Investments

4,134

6,802

1,216

1,216

1,216

Current assets

 

 

29,009

31,601

53,648

98,211

116,399

Stocks

4,310

6,323

7,626

11,952

11,216

Debtors

22,577

18,048

11,245

25,541

23,969

Cash

922

5,341

33,530

59,471

79,967

Current liabilities

 

 

(44,395)

(63,855)

(78,722)

(108,417)

(86,458)

Creditors

(37,968)

(39,707)

(62,806)

(92,501)

(110,542)

Short-term borrowings

(6,426)

(24,148)

(15,916)

(15,916)

24,084

Long-term liabilities

 

 

(152,906)

(145,693)

(106,276)

(106,297)

(107,415)

Long-term borrowings

(112,827)

(109,618)

(73,333)

(73,333)

(73,333)

Other long-term liabilities

(40,078)

(36,076)

(32,943)

(32,964)

(34,082)

Net assets

 

 

146,988

183,582

183,620

237,475

319,404

CASH FLOW

Operating cash flow

 

 

5,345

59,822

73,399

136,267

169,264

Net Interest

(6,076)

(14,685)

(10,834)

(6,153)

(2,680)

Tax

(1,634)

(4,497)

(5,804)

(17,710)

(19,008)

Capex

(127,279)

(52,261)

(30,849)

(67,763)

(65,932)

Acquisitions/disposals

6,319

466

207

0

0

Financing

11,944

(0)

0

0

0

Dividends

(11,030)

(2,933)

(2,933)

(18,700)

(21,148)

Net cash flow

(122,411)

(14,088)

23,186

25,941

60,496

Opening net debt/(cash)

 

 

3,138

118,332

128,424

55,719

29,778

Exchange rate movements

(619)

537

1,663

0

0

Other

7,836

3,459

47,856

0

0

Closing net debt/(cash)

 

 

118,332

128,424

55,719

29,778

(30,718)

Source: Company sources, Edison Investment Research.


General disclaimer and copyright

This report has been commissioned by Pan African Resources and prepared and issued by Edison, in consideration of a fee payable by Pan African Resources. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: 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 and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. 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.

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Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. 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, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2021 Edison Investment Research Limited (Edison).

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Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

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. 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 (i.e. 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.

United Kingdom

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Frankfurt +49 (0)69 78 8076 960

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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

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Pan African Resources and prepared and issued by Edison, in consideration of a fee payable by Pan African Resources. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: 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 and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. 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.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, 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 securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. 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, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2021 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

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. 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 (i.e. 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.

United Kingdom

This document is prepared and provided by Edison 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.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison 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. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

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

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, 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

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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