The big one pounds ahead

Pan African Resources 13 December 2016 Update

Pan African Resources

The big one pounds ahead

DFS and trading update

Metals & mining

13 December 2016

Price

16.25p

Market cap

£316m

US$1.2718/£

ZAR17.6281/£

ZAR13.8570/US$

Net debt (£m) at end June 2016

22.8

Shares in issue

(effective 1,506.8m post Shanduka)

1,943.2m

Free float

77%

Code

PAF

Primary exchange

AIM/JSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(18.0)

(13.5)

106.5

Rel (local)

(19.7)

(15.4)

81.7

52-week high/low

24.2p

7.2p

Business description

Pan African has seven major assets in South Africa: Barberton (target output 95koz Au pa), the Barberton Tailings Retreatment Project (20koz), Evander (95koz), the Evander Tailings Retreatment Project (10koz), Elikhulu (53koz), Phoenix Platinum (12koz) and Uitkomst (400kt saleable coal pa).

Next events

Dividend payment date

22 December 2016

HY17 results

February/March 2017

Analyst

Charles Gibson

+44 (0)20 3077 5724

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

On 5 December, Pan African announced the results of the independent definitive feasibility study into its Elikhulu tailings project. Compared to its earlier pre-feasibility study, the capital cost of the project and throughput were ostensibly unchanged, while metallurgical recoveries and output were slightly higher and all-in sustaining costs lower (eg US$523/oz or ZAR243,817/kg vs US$650oz and ZAR300,000/kg previously).

Year end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

06/15

140.4

16.0

0.64

0.54

25.4

3.3

06/16

168.4

45.9

2.08

0.82

7.8

5.0

06/17e

195.8

52.0

2.37

0.98

6.9

6.0

06/18e

201.2

58.7

2.62

1.02

6.2

6.3

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

DFS ups our underlying valuation for Elikhulu 41.8%

Averaged over its life, the project should add approximately 51,769oz gold, or 25%, pa to Pan African’s existing production profile. The DFS calculates an NPV9 for the project of US$75.9m, or 5.0c/share, at US$1,180/oz Au and ZAR14.50/US$, compared to Edison’s valuation of US$77.4m, or 5.1c/share, based on potential dividends at a 9% discount rate and Edison’s long-term gold price forecasts and prevailing forex rates, or US$69.9m, or 4.6c/share, at a 10% discount rate. In terms of earnings, we estimate that Elikhulu will add an average of 1.33p to EPS in the first eight years of the project’s operation and 0.76p in the final five years. Inferred resources also have the potential to extend this by an additional 2.6 years.

Trading update

In addition to its DFS announcement, Pan African also reported that likely gold production for the full year will be 195koz, rather than the 200koz previously indicated, on account of a variety of production disruptions at Barberton and Evander including, in particular, a sharp increase in Section 54 DMR stoppage notices. This, plus the recent weakness in the gold price, has caused us to revise our FY17 normalised EPS forecast from 3.07p/share previously to 2.37p/share, or 2.03p/share in the event that the gold price remains at its current level of US$1,171/oz. These compare with consensus forecasts of 3.18p in FY17 within a range of 2.31-4.20p and 3.16p in FY18 within a range of 1.98-4.30p (source: Bloomberg).

Valuation: 23.25p/share including Elikhulu

Including Elikhulu, our absolute value of PAF is 23.25p. This valuation assumes that the grade profile at Evander averages 6.43g/t from FY17-30 and that the gold price will average US$1,283/oz (real) cf US$1,413/oz previously. In the meantime, at 7.6x Pan African’s shares remain well below their recent price to normalised EPS ratios (with the exception of FY13). It is also cheaper than its peers in at least 60% of cases in which P/E, yield and EV/EBITDA measures are considered (whether using Edison or consensus forecasts). Finally, it also has the third highest (consensus) forecast dividend yield of any dividend-paying gold company, globally.

Elikhulu – ‘the big one’

Elikhulu has a resource of 192.7Mt at a grade of 0.29g/t, containing 1.8Moz gold. A brief comparison of the main parameters of the DFS with their equivalents in the earlier PFS is as follows:

Exhibit 1: Elikhulu DFS and PFS compared

Parameter

DFS

PFS

Initial capex (ZARm)

*1.74

1.70

Throughput (Mtpm)

1.0

1.0

Throughput (Mtpa)

12.0

12.0

Grade (g/t)

0.30 in first eight years

0.24 in final five years

0.29

Metallurgical recovery (%)

47.77

45-50

Production (koz pa)

56koz in first eight years

45koz in final five years

45-50

Life of mine (years)

13

14

Total cash costs (ZAR/kg)

205,123

Total cash costs (US$/oz)

440

AISC (ZAR/kg)

243,817

300,000

AISC (US$/oz)

523

650

Gold price assumption (US$/oz)

1,180

Forex rate (ZAR/US$)

14.50

14.35

NPV9 (US$m)

75.9

NPV9 (ZARm)

1,091

IRR (%)

23.1% real

30.6% nominal

28.6

Edison valuation**

NPV10 (US$m)

69.9

77.7

Ditto (pence per share)

3.6

4.0

Ditto (US$ per resource ounce)

40.95

45.69

Source: Pan African Resources, Edison Investment Research. Note: *Includes ZAR191.2m contingency;
**10% discount rate applied to maximum potential dividends conducted at Edison’s long-term gold prices (which have changed since our note of September 2016) and prevailing forex rates.

An environmental impact assessment (EIA) is already underway and Department of Mineral Resources’ approval for the project is anticipated in late CY17. Power and water infrastructure to site is already well developed. Elikhulu will require 20MVA of installed power, while water will be supplied from existing operations and the Leeuwpan dam, to which end a water use licensing & permitting process (WULA) has also commenced, with Department of Water Affairs’ approval also expected in late CY17.

The project will proceed in three phases. A new CIL plant will be located just to the north of the existing Kinross tailings storage facility (TSF), while the TSF will be located just to the south of, and adjacent to, it (NB the existing Kinross TSF footprint will be re-used). Thereafter, phase 1 of the hydraulic mining at the Kinross TSF is scheduled to commence in the fourth quarter of CY18, with commercial production being achieved in December. Phase 2, at the Leslie TSF, is then scheduled for the end of Q3 CY21 and Phase 3 at Winkelhaak in Q3 CY26. Note that the mine plan, as set out above, excludes an inferred resource of 244,398oz of gold delineated in the soil material below the existing tailings dumps, which could add an additional 2.6 years to operations at Elikhulu at the metallurgical recoveries shown.

Subject to the finalisation of the project financing package, Pan African’s board has approved the construction of the project. In the meantime, Rand Merchant Bank (a division of First Rand) has provided Pan African with the necessary approvals for a ZAR1bn underwritten five-year debt facility in addition to the group’s current ZAR800m revolving credit facility, which can, in any event, be extended to ZAR1.1bn, subject to approval from its lenders. The balance of funding is anticipated to be derived from internal cash flows, such that Pan African’s dividend policy is expected to be unaffected.

Trading update

In addition to its DFS announcement, Pan African also provided a trading update relating to activities in H117. A summary of anticipated output from PAF’s operations relative to previous guidance and Edison’s prior expectations is provided in Exhibit 2, below:

Exhibit 2: Forecast H117 production (oz Au)

Ounces

Trading update

Pro-rata previous guidance

Pro-rata Edison prior expectation

Pro-rata Edison revised expectation

Edison H2 forecast

Edison FY17 total

Barberton

47,321

41,816

47,321

89,136

BTRP

10,000

10,000

10,000

20,000

Total BGMO

49,000

57,321

51,816

57,321

109,136

Evander

36,468

36,468

36,468

72,935

ETRP

5,000

5,000

5,000

10,000

Total EGM

42,000

41,468

41,468

41,468

82,935

PAF total*

91,000

100,000

98,798

93,284

98,789

192,071

Source: Pan African Resources, Edison Investment Research. Note: *Excludes Phoenix and Uitkomst (coal).

Note that, for these purposes, all reductions in output anticipated by Edison have been applied to the traditional underground operations at Pan African’s mines at Barberton and Evander, rather than its more contemporary tailings’ retreatment projects, on the grounds that the former are more prone to production disruptions. In this respect, Pan African reported that Evander had lost 13 production days to date during the six-month period (7.1% of the total) owing to Department of Mineral Resources initiated Section 54 safety stoppages cf two in the prior year period and that Barberton had lost eight days (4.3%) of the total in addition to six days (3.2% of the total) as a result of community protests. Barberton also experienced a ‘go slow’ by workers in relation to a number of union demands, while Evander was adversely affected by curtailed hoisting capacity at number seven shaft (typically used for vamping and not Evander’s main production shaft, which is number eight shaft) on account of the dislodgement of a steel shaft guide, which also damaged the shaft infrastructure. Note that, against this background, Evander’s performance, in particular, and its forecast output of 42,000oz during the six months under review might be regarded as something of a success under the circumstances and is consistent with its milling 174.5kt during the period at a grade of 6.5g/t.

Edison’s full-year forecast of 192,071oz now compares with Pan African’s updated guidance of 195,000oz. Note however that the BTRP has consistently outperformed its target output since achieving commercial production by as much 2,830oz during a six-month period and that the ETRP has similarly consistently outperformed by as much as 3,980oz – which is likely to account for the balance.

Earnings forecasts

Edison has revised its normalised EPS forecasts for Pan African on account of three factors since our last note in September, namely 1) the revised Barberton production outlook, 2) foreign exchange rates (the rand has been slightly weak against the US dollar since September and sterling even weaker) and 3) revised gold price forecasts (see Edison’s mining overview, entitled Gold and other metals, published in October 2016). A summary of the effect of these changes is as follows:

Exhibit 3: PAF normalised EPS forecasts’ revision factors (pence per share)

FY17

FY18

Prior normalised EPS estimate

3.07

3.47

Barberton output revision

(0.19)

(0.01)

Forex rates

+0.13

+0.16

Gold price revision

(0.64)

(0.87)

Additional funding costs re Elikhulu

0.00

(0.13)

Current normalised EPS estimate

2.37

2.62

Source: Edison Investment Research

Note that Edison’s 2.37p/share normalised EPS forecast for FY17 is predicated on an H217 gold price forecast of US$1,275/oz. It would fall to 2.03p/share in the event that the gold price remains at its current level of US$1,171/oz. These compare with consensus forecasts of 3.19p in FY17 within a range of 2.31-4.20p and 3.01p in FY18 within a range of 1.98-3.80p. Note that the number of shares used in our EPS and EV/EBITDA calculations is 1,506.8m. The accounting treatment of the mid-year Shanduka Gold transaction is such that the 436.4m shares of Pan African owned by Shanduka are eliminated on consolidation.

Valuation

Updating our long-term forecasts to reflect these changes (and in particular Edison’s revised gold price forecasts), but also including Elikhulu for the first time, our absolute value of PAF moderates slightly, to 23.25p (vs 25.21p ex-div in September), 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).

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 and that the gold price will average US$1,283/oz (real), in which case we forecast an average EPS over the period of 3.32p/share.

In addition, Pan African remains notably cheap (based on our updated estimates) when compared with its immediate peers in Exhibit 5, below.

Exhibit 5: 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

4.1

3.3

9.6

8.0

0.5

2.7

Gold Fields

2.9

2.7

8.5

7.8

3.3

4.0

Sibanye

2.6

2.1

7.8

5.7

6.5

8.1

Harmony

2.1

2.4

5.2

7.0

2.7

2.9

Randgold Resources

11.7

9.6

25.0

19.4

1.0

1.2

Average (excluding PAF)

4.7

4.0

11.2

9.6

2.8

3.8

Pan African (Edison forecasts)

4.2

3.8

6.9

6.2

6.0

6.3

Pan African (consensus)

4.0

4.0

5.4

5.4

6.2

6.8

Source: Edison Investment Research, Bloomberg. Note: Priced at 12 December 2016.

On these measures, it can be seen that Pan African is cheaper than its peers in at least 60% of the instances considered (whether using Edison forecasts or consensus forecasts). In the meantime, Pan African has the third highest (consensus) forecast dividend yield of the 40 gold counters paying dividends to shareholders (including royalty and streaming companies), out of 672 publicly listed gold mining companies, globally.

Financials

Pan African had net debt on its balance sheet of £22.8m as at 30 June 2016 and a reported £14.1m as at the date of its trading statement on 2 August 2016. Edison’s forecasts for Pan African’s immediate capital expenditure commitments related to Elikhulu by financial year are as follows:

Exhibit 6: Estimated Elikhulu capex requirements by financial year

£000s

FY17

FY18

FY19

FY20

FY21

FY22

Total capex*

20,492

49,341

30,515

6,573

15,456

15,456

Source: Pan African Resources, Edison Investment Research. Note: *Includes sustaining capex, but excludes phase 3 capex, which commences in FY26.

Whereas Edison had previously been expecting Pan African to be net debt free ‘by the end of FY17’, the imposition of capital requirements related to Elikhulu will now delay this until FY21.

Maintaining a dividend policy of 40% of free cash flows less sustaining capital, debt repayments and exceptionals, Pan African’s funding requirement, as estimated by Edison, will be as follows in the period from FY16 to FY21:

Exhibit 7: Pan African estimated funding requirement (£000s), FY16 to FY21

Source: Edison Investment Research, Pan African Resources

Note that PAF’s maximum funding requirement of £51.0m in FY19, as estimated by Edison, equates to ZAR899.0m at prevailing forex rates, gearing (debt/equity) of 24.0% and leverage (debt/[debt+equity]) of 19.3%.

Exhibit 8: Financial summary

£000s

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017e

2018e

Year end 30 June

IFRS

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

168,404

195,755

201,200

Cost of sales

(25,164)

(28,505)

(40,554)

(45,345)

(46,123)

(71,181)

(106,394)

(110,413)

(108,223)

(129,116)

(127,234)

Gross profit

13,985

24,355

27,790

33,705

54,783

62,127

47,808

29,973

60,181

66,638

73,965

EBITDA

 

 

13,711

22,890

25,023

28,540

45,018

53,276

44,165

28,448

57,381

63,940

70,945

Operating profit (before GW and except.)

11,745

20,529

21,897

25,655

41,759

47,278

34,142

18,110

46,925

54,064

60,568

Intangible amortisation

0

0

0

0

0

0

0

0

0

0

0

Exceptionals

0

(5,025)

(335)

0

(48)

7,232

(12)

(198)

(12,183)

(127)

(1,082)

Other

0

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

34,742

53,937

59,486

Net interest

200

807

594

762

516

197

(191)

(2,109)

(1,006)

(2,050)

(1,900)

Profit before tax (norm)

 

 

11,945

21,336

22,491

26,417

42,274

47,475

33,951

16,001

45,919

52,014

58,668

Profit before tax (FRS 3)

 

 

11,945

16,311

22,156

26,417

42,226

54,707

33,939

15,803

33,736

51,887

57,586

Tax

(4,367)

(8,219)

(7,656)

(9,248)

(12,985)

(12,133)

(7,155)

(4,133)

(8,234)

(16,329)

(19,149)

Profit after tax (norm)

7,579

13,117

14,835

17,169

29,290

35,342

26,796

11,868

37,685

35,685

39,519

Profit after tax (FRS 3)

7,579

8,091

14,500

17,169

29,242

42,574

26,785

11,670

25,502

35,557

38,437

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

1,506.8

EPS - normalised (p)

 

 

0.52

0.85

1.07

1.20

2.03

2.18

1.46

0.64

2.08

2.37

2.62

EPS - FRS 3 (p)

 

 

0.52

0.40

1.04

1.20

2.02

2.63

1.47

0.64

1.41

2.36

2.55

Dividend per share (p)

0.00

0.26

0.37

0.51

0.00

0.83

0.82

0.54

0.82

0.98

1.02

Gross margin (%)

35.7

46.1

40.7

42.6

54.3

46.6

31.0

21.4

35.7

34.0

36.8

EBITDA margin (%)

35.0

43.3

36.6

36.1

44.6

40.0

28.6

20.3

34.1

32.7

35.3

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

30.0

38.8

32.0

32.5

41.4

35.5

22.1

12.9

27.9

27.6

30.1

BALANCE SHEET

Fixed assets

 

 

55,647

67,198

74,324

97,281

86,075

249,316

223,425

220,150

230,676

251,615

301,357

Intangible assets

35,577

35,397

36,829

38,229

23,664

38,628

37,040

37,713

38,682

40,418

42,154

Tangible assets

20,070

31,801

37,495

59,052

62,412

209,490

185,376

181,533

190,725

209,928

257,933

Investments

0

0

0

0

0

1,199

1,010

905

1,269

1,269

1,269

Current assets

 

 

8,770

4,949

17,677

15,835

41,614

26,962

23,510

17,218

22,016

24,345

20,578

Stocks

378

358

1,126

1,457

1,869

6,596

5,341

3,503

4,399

6,533

6,714

Debtors

2,973

2,201

3,795

4,254

6,828

15,384

12,551

10,386

14,891

13,423

13,797

Cash

5,419

2,389

12,756

10,124

19,782

4,769

5,618

3,329

2,659

4,323

0

Current liabilities

 

 

(6,611)

(6,101)

(7,084)

(8,960)

(11,062)

(24,066)

(24,012)

(22,350)

(32,211)

(33,568)

(55,129)

Creditors

(6,521)

(6,080)

(7,084)

(8,960)

(11,062)

(23,202)

(19,257)

(17,301)

(25,230)

(26,587)

(26,108)

Short-term borrowings

(89)

(21)

0

0

0

(864)

(4,755)

(5,049)

(6,981)

(6,981)

(29,021)

Long-term liabilities

 

 

(7,438)

(9,686)

(11,431)

(13,410)

(14,001)

(80,004)

(63,528)

(67,850)

(69,506)

(70,630)

(71,925)

Long-term borrowings

(17)

0

0

(181)

(869)

(11,133)

(8,141)

(16,313)

(18,456)

(18,456)

(18,456)

Other long-term liabilities

(7,421)

(9,686)

(11,431)

(13,228)

(13,132)

(68,871)

(55,387)

(51,537)

(51,049)

(52,174)

(53,469)

Net assets

 

 

50,369

56,360

73,487

90,746

102,626

172,208

159,396

147,167

150,975

171,762

194,880

CASH FLOW

Operating cash flow

 

 

12,762

25,420

25,207

31,968

49,092

61,618

45,996

26,423

47,130

64,504

68,828

Net Interest

200

807

594

762

516

314

(606)

(2,109)

(1,006)

(2,050)

(1,900)

Tax

(1,723)

(10,886)

(7,476)

(10,743)

(11,616)

(13,666)

(8,536)

(3,943)

(7,777)

(15,205)

(17,854)

Capex

(5,680)

(5,705)

(6,764)

(21,712)

(17,814)

(27,197)

(21,355)

(19,554)

(14,097)

(30,815)

(60,118)

Acquisitions/disposals

226

(4,205)

0

0

(1,549)

(96,006)

0

(760)

(30,999)

0

0

Financing

785

0

48

1,545

259

47,112

349

(235)

15,207

0

0

Dividends

0

(6,774)

0

(5,376)

(7,416)

0

(14,684)

(15,006)

(9,882)

(14,771)

(15,319)

Net cash flow

6,571

(1,343)

11,609

(3,557)

11,471

(27,826)

1,164

(15,184)

(1,425)

1,664

(26,363)

Opening net debt/(cash)

 

 

(136)

(5,313)

(2,369)

(12,756)

(9,943)

(18,913)

7,228

7,278

18,033

22,778

21,114

Exchange rate movements

(1,394)

(2,642)

(281)

925

(1,813)

594

(839)

(276)

812

0

0

Other

0

1,041

(940)

(181)

(688)

1,090

(375)

4,705

(4,131)

0

0

Closing net debt/(cash)

 

 

(5,313)

(2,369)

(12,756)

(9,943)

(18,913)

7,228

7,278

18,033

22,778

21,114

47,477

Source: Pan African Recourses sources, Edison Investment Research

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

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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

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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