Pan African Resources — Analysing H224 and looking forward to FY25

Pan African Resources (AIM: PAF)

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Research: Metals & Mining

Pan African Resources — Analysing H224 and looking forward to FY25

Pan African Resources’ (PAF’s) FY24 results, announced on 11 September, were within 1% of our prior forecasts for both EPS (4.14c cf 4.17c) and headline EPS (HEPS; 4.15c cf 4.17c). However, if the contract liability related to its ZAR400m financing facility for Mintails is stripped out, we calculate that PAF would have recorded HEPS of 5.27c, which would have been close to the top of the range of analysts’ expectations and also a record for both 12-month and six-month periods. While arguably academic for FY24, this nevertheless sets the stage for more material EPS and cash flow increases in the future as the Mintails contract liability concludes in February 2025 at the same time that opex stabilises and capex begins to fall away.

Lord Ashbourne

Written by

Lord Ashbourne

Director of Content, Mining

Metals & Mining

Pan African Resources

Analysing H224 and looking forward to FY25

FY24 results

Metals and mining

27 September 2024

Price

33.65p

Market cap

£645m

ZAR23.2165/£, ZAR17.4830/US$, US$1.3279/£

Net debt (US$m) at end-June 2024

104.4

Shares in issue
(effective 1,916.5m postconsolidation, excluding treasury)

2,222.9m

Free float

85%

Code

PAF

Primary exchanges

AIM, JSE

Secondary exchanges

Level 1 ADR, OTCQX Best Market and A2X

Share price performance

%

1m

3m

12m

Abs

8.8

27.3

121.9

Rel (local)

9.4

25.9

102.6

52-week high/low

33.65p

13.02p

Business description

Pan African has four major gold producing assets in South Africa: Barberton (target output 80koz pa), the Barberton Tailings Retreatment Project, or BTRP, (20koz), Elikhulu (55koz) and Evander, incorporating Egoli (currently 30koz, rising to >100koz). One more asset (MTR) is scheduled to enter production imminently at 50koz pa.

Next events

AGM

21 November 2024

Ex-div (LSE)

27 November 2024

FY24 dividend payment

10 December 2024

H125 results

February 2025

Analyst

Lord Ashbourne

+44 (0)20 3077 5700

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

Pan African Resources’ (PAF’s) FY24 results, announced on 11 September, were within 1% of our prior forecasts for both EPS (4.14c cf 4.17c) and headline EPS (HEPS; 4.15c cf 4.17c). However, if the contract liability related to its ZAR400m financing facility for Mintails is stripped out, we calculate that PAF would have recorded HEPS of 5.27c, which would have been close to the top of the range of analysts’ expectations and also a record for both 12-month and six-month periods. While arguably academic for FY24, this nevertheless sets the stage for more material EPS and cash flow increases in the future as the Mintails contract liability concludes in February 2025 at the same time that opex stabilises and capex begins to fall away.

Year end

Revenue (US$m)

PBT*
(US$m)

EPS*
(c)

DPS
(c)

P/E
(x)

Yield
(%)

06/23**

321.6

92.9

3.54

0.95

12.6

2.1

06/24***

373.8

119.8

4.68

1.26

9.5

2.8

06/25e

459.3

182.6

7.28

1.49

6.1

3.3

06/26e

477.3

169.3

6.71

5.16

6.7

11.6

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles and exceptional items. **FY23 not restated. ***FY24 ‘as reported’ not ‘adjusted’ (see Exhibit 4).

Higher production presages higher dividends

As well as increased earnings, PAF increased its dividend for the first time in four years in FY24 and set a target of paying out 40–50% of net cash generated from operating activities to shareholders. As a result, we believe that materially increased dividend payouts are possible in the coming years. Our forecasts are currently in the middle of the range of analysts’ expectations for FY25, but at the top of the range for FY26. If achieved, however, we calculate that PAF would almost certainly have the second highest dividend yield of the 62 precious metals mining companies expected to pay dividends to shareholders globally over the next 12–24 months.

Valuation: Still cheap compared to history and peers

We have pared back our core (absolute) valuation of PAF to its pre-May level of 40.93c per share (31.82p) to reflect both the recent, slightly uncharacteristic ‘above trend’ strength of the rand against both the US dollar and sterling and slightly sticky cost inflation in H224. However, this valuation rises by a further 22.30–27.32c if other assets (eg Egoli and the Soweto cluster) are taken into account. Alternatively, if PAF’s historical average price to normalised HEPS ratio of 8.2x for the period FY10–24 is applied to our FY25 and FY26 forecasts, it implies a value of 44.70p in FY25, followed by 41.17p in FY26. As such, PAF’s current share price of 33.65p could be interpreted as discounting normalised HEPS rising to only 5.48c per share in FY25 and/or FY26 (cf our forecasts of 7.28c and 6.71c, respectively). In the meantime, PAF remains cheaper than its principal London- and South African-listed gold mining peers on at least 80% of commonly used valuation measures, regardless of whether they are based on Edison or consensus forecasts. Performing a relative valuation analysis, its peers imply a comparable valuation for PAF of 61.03p based on our year one EPS estimate and 43.33p based on our year two EPS estimate. Finally, we calculate that PAF is trading at an enterprise value of just US$23.33 per resource ounce of gold.

FY24 and H224 results

PAF’s FY24 results, announced on 11 September, were closely in line with our forecasts for headline EPS (HEPS) and EPS and also guidance, as provided in its announcements of 29 July and 5 September.

Production in H224 was confirmed at 87,581oz, representing a 5.6% increase compared with H223, while guidance for FY25 was reiterated at 215–225koz at an all-in sustaining cost (AISC) of US$1,350–1,400/oz – not more than 3.4% higher than during FY24 – albeit with the proviso that ‘the delay in the commissioning of Evander Mines’ subvertical shaft, scheduled to be completed during September 2024, could impact guidance by approximately 5,000oz’. Exhibit 1, below, shows Pan African’s group production in H224 compared to H223 and H124, and also our forecast for a further 12.1% output growth in FY25.

Exhibit 1: Pan African production, H121–FY25e (oz)

Operation

H121

H221

H122

H222

H123

H223

H124

H224

Change*

(%)

Change**

(oz)

FY24

FY25e

Growth

(%)

Barberton UG

42,350

42,476

39,991

35,747

32,022

32,564

36,780

34,690

+6.5

-5.7

71,470

79,235

+10.7

BTRP

10,004

8,235

9,126

10,434

10,012

9,863

9,864

9,024

-8.5

-8.5

18,888

13,913

-26.3

Barberton

52,354

50,711

49,117

46,181

42,034

42,427

46,644

43,714

+3.0

-6.3

90,358

93,148

+3.1

Evander UG

12,607

23,409

27,312

21,538

19,173

10,359

21,307

16,978

+63.9

-20.3

38,285

42,042

+9.8

Evander surface

6,560

4,677

5,756

3,564

5,270

5,373

2,401

183

-96.6

-92.4

2,584

0

-100.0

Evander

19,169

28,086

33,068

25,102

24,443

15,732

23,708

17,161

+9.1

-27.6

40,869

42,042

+2.9

Elikhulu

26,863

24,596

25,900

26,320

25,830

24,743

28,106

26,706

+7.9

-5.0

54,812

49,143

-10.3

MTR

24,127

N/A

Total

98,386

103,391

108,085

97,603

92,307

82,902

98,458

87,581

+5.6

-11.0

186,039

208,460

+12.1

Source: Edison Investment Research, Pan African Resources. Note: Totals may not add up owing to rounding. UG, underground. BTRP, Barberton Tailings Retreatment Project. *H224 cf H223. **H224 cf H124.

Output for each of PAF’s four producing operations in H224 was exactly in line with guidance, with the exception of a tiny amount of production (183oz) from surface sources at Evander. However, with the exception of the Barberton Tailings Retreatment Project (BTRP) that output was generally achieved via processing slightly higher volumes of tonnage at slightly lower grades than we had anticipated. In the case of the BTRP, both tonnage and grade were lower than our prior expectations, but were offset by the highest metallurgical recoveries since H116, as shown below:

Exhibit 2: PAF mines* operational statistics, H224a cf H224e

Barberton

Elikhulu

Evander

BTRP

Total

H224e

(prior)

H224a

H224e

(prior)

H224a

H224e

(prior)

H224a

H224e

(prior)

H224a

H224e

(prior)

H224a

Total tons milled (t)

173,650

178,163

6,971,392

7,029,072

71,586

102,400

431,442

395,805

7,652,947

7,707,930

Head grade (g/t)

6.72

6.51

0.34

0.34

7.56

5.71

1.54

1.28

0.62

0.60

Contained gold (oz)

37,507

37,267

76,280

76,303

17,410

18,786

21,384

16,297

152,761

148,794

Recovery (%)

92.5

93.1

35.0

35.0

98.0

90.4

42.2

55.4

57.3

58.9

Production (oz)

34,690

34,690

26,706

26,706

17,062

16,978

9,024

9,024

87,581

87,581

Production – other (oz)

Total production (oz)

34,690

34,690

26,706

26,706

17,062

16,978

9,024

9,024

87,581

87,581

Recovered grade (g/t)

6.21

6.06

0.12

0.12

7.41

5.16

0.65

0.71

0.36

0.35

Gold sold (oz)

34,690

33,952

26,706

26,159

17,062

17,170

9,024

8,963

87,581

86,427

Average spot price (US$/oz)

2,206

2,191

2,206

2,069

2,206

1,801

2,206

2,205

2,206

2,077

Average spot price (ZAR/kg)

1,328,243

1,319,008

1,328,243

1,245,741

1,328,243

1,084,493

1,328,243

1,327,800

1,328,243

1,250,775

Total cash cost (US$/oz)

1,412

1,632

840

1,000

1,232

1,336

679

691

1,128

1,297

Total cash cost (ZAR/kg)

849,928

963,016

506,000

601,824

741,918

804,493

408,749

416,118

679,155

769,571

Total cash cost (US$/t)

281.99

311.06

3.22

3.79

293.69

223.84

14.20

15.66

12.91

14.33

Total cash cost (ZAR/t)

5,281.00

5,708.04

60.29

69.66

5,500

4,196

265.91

293.09

241.74

268.39

Implied revenue (US$000)

76,526

74,377

58,913

54,122

37,639

30,926

19,907

19,766

193,204

179,507

Implied revenue (ZAR000)

1,433,136

1,393,210

1,103,295

1,013,594

704,876

579,289

372,805

370,188

3,618,203

3,362,282

Implied revenue (£000)

60,485

57,881

46,565

42,083

29,749

23,948

15,734

15,380

152,706

139,497

Implied cash costs (US$000)

48,968

55,420

22,443

26,661

21,024

22,921

6,126

6,199

98,789

112,077

Implied cash costs (ZAR000)

917,048

1,016,961

420,305

489,662

393,723

429,634

114,726

116,005

1,850,055

2,068,729

Implied cash costs (£000)

38,711

43,139

17,742

20,675

16,620

18,127

4,843

4,897

78,096

87,517

Source: Pan African Resources, Edison Investment Research. Note: *Excludes Evander surface operations.

Relative to a 2.8% year-on-year increase in tonnes milled/processed and a South African inflation rate of 5.1% (June-June), Pan African’s electricity costs (14.1% of the total) increased by 66.4% during the year, while processing and metallurgical costs (21.7%) increased by 59.9% and security costs (3.2% of the total) increased by 27.7%. As a result, unit costs per tonne of ore milled/processed were higher than we had anticipated at Barberton, Elikhulu and the BTRP and, while we still expect these to moderate over time, we now expect them to moderate from a higher base. By contrast, Evander milled 14.2% more ore in H224 compared to H124 for 7.0% less cost in rand terms to result in an 18.6% lower unit cost, enviably demonstrating both economy and the benefits of incremental production on a relatively high fixed cost base. Within this context, the overall increase in the group’s AISC, from US$1,309/oz in FY23 (restated) to US$1,354/oz in FY24 – an increase of only 3.4% – was a creditable achievement.

The other noteworthy feature of the group’s results was the price of gold that PAF received for its output, which was reported as US$2,015/oz for the full year (a 3.0% discount to the average gold price of US$2,078/oz during the period) and calculated by Edison as US$2,077/oz for H224 (a 5.8% discount to the average gold price of US$2,206/oz). These discounts arise from the accounting treatment of the contract liability related to the fixed-price forward sales associated with Pan African’s ZAR400m Mintails financing facility, which is different to that relating to ‘normal’ derivatives. Derivatives are subject to mark-to-market fair value accounting, with any adjustment going through the ‘other income/expense’ line in the P&L. By contrast, fixed-price forward gold sales result in the fixed gold price for these ounces being recognised in revenue – there being no equivalent mark-to-market fair value accounting. However, synthetic forward sales of gold, which are composed of a series of options (puts and calls at the same price) are also accounted for as a ‘plain vanilla’ forward sale (and not a derivative instrument), with the fixed gold price recognised in revenue as the ounces are delivered since, despite being a derivative instrument, they are, in substance, identical to a ‘plain vanilla’ fixed price forward sale.

Exhibit 3: PAF aggregate operational results, H222–H224

H222

H123

H223

H124

H224e

H224

Change*
(%)

Variance**
(%)

FY24

FY24e

Total tons milled (t)

8,104,217

8,024,228

7,235,156

7,974,470

7,652,947

7,707,930

-3.3

0.7

15,682,400

15,627,417

Head grade (g/t)

0.65

0.63

0.66

0.65

0.62

0.60

-7.7

-3.2

0.62

0.63

Contained gold (oz)

169,236

162,694

152,462

166,240

152,761

148,794

-10.5

-2.6

315,034

319,001

Recovery (%)

57.7

56.7

54.4

59.2

57.3

58.9

-0.5

2.8

59.1

58.3

Production (oz)

97,603

92,307

82,902

98,458

87,581

87,581

-11.0

0.0

186,039

186,039

Production – other (oz)

0

0

0

0

0

0

N/A

N/A

0

0

Total production (oz)

97,603

92,307

82,902

98,458

87,581

87,581

-11.0

0.0

186,039

186,039

Recovered grade (g/t)

0.37

0.36

0.36

0.38

0.36

0.35

-7.9

-2.8

0.37

0.37

Gold sold (oz)

98,546

90,439

84,321

98,458

87,581

86,427

-12.2

-1.3

184,885

186,039

Average spot price (US$/oz)

1,846

1,725

1,955

1,961

2,206

2,077

5.9

-5.8

2,015

2,076

Average spot price (ZAR/kg)

914,454

960,947

1,143,075

1,178,433

1,328,243

1,250,775

6.1

-5.8

1,212,250

1,248,958

Total cash cost (US$/oz)

1,193

1,106

1,175

1,130

1,128

1,297

14.8

15.0

1,200

1,129

Total cash cost (ZAR/kg)

590,888

616,134

694,824

678,941

679,155

769,571

13.3

13.3

721,293

679,028

Total cash cost (US$/t)

14.51

12.47

13.82

13.95

12.91

14.33

2.7

11.0

14.14

13.44

Total cash cost (ZAR/t)

223.48

216.00

251.87

260.72

241.74

268.39

2.9

11.0

264.49

251.43

Implied revenue (US$000)

181,886

156,011

164,846

193,080

193,204

179,507

-7.0

-7.1

372,587

386,284

Implied revenue (ZAR000)

2,802,891

2,703,093

2,997,891

3,608,788

3,618,203

3,362,282

-6.8

-7.1

6,971,070

7,226,990

Implied revenue (£000)

140,063

132,685

133,653

153,972

152,706

139,497

-9.4

-8.6

293,468

306,678

Implied cash costs (US$000)

117,584

100,488

99,091

111,222

98,789

112,077

0.8

13.5

223,299

210,011

Implied cash costs (ZAR000)

1,811,131

1,733,195

1,822,284

2,079,082

1,850,055

2,068,729

-0.5

11.8

4,147,812

3,929,137

Implied cash costs (£000)

90,375

85,148

80,881

88,721

78,096

87,517

-1.4

12.1

176,238

166,816

Source: Pan African Resources, Edison Investment Research. Note: *H224 cf H124, **H224 cf H224e. Totals may not add up owing to rounding. H123 and H223 ‘as reported’ and not restated as per FY24 results (NB restatement deemed immaterial by Edison).

By contrast, for ease of comparison, Edison forecasts revenue based on the prevailing price of gold with all derivative-type profits/losses being booked through the ‘other’ line. Although this is not strictly in accordance with accounting standards, it allows the underlying performance of the operating company to be distinguished from the volatility created by derivative-type profits and losses, which are then presented as a single line item. In the case of H224, Pan African sold 1,154 fewer ounces than it produced in H224, which cost it c US$2.5m in revenue at the average gold price during the period (albeit we would expect this figure to be recouped in coming quarters). In addition, we estimate that its Mintails financing arrangements depressed revenue by a further c US$11.1m (86,427oz sold at US$2,077/oz in H224 rather than US$2,206/oz). Adding back US$11.1m to reported revenue implies like-for-like revenue of US$191.0m in H224, compared to US$196.8m forecast and US$179.8m actually reported. Note that this adjustment, with revenue presented on a ‘plain vanilla’ basis and derivative-type losses all shown in the ‘other’ line, is shown in the column denoted ‘H224 (adjusted)’ in Exhibit 4, below. On this like-for-like basis, revenue was US$5.8m (or 1.5%) less than we had forecast for both H224 and FY24 (of which c US$2.5m could be accounted for by unsold gold), while costs were US$12.1m (or 5.8%) higher for the full year, leading to a US$17.2m (or 10.8%) negative variance in mining profits. However, this was essentially offset by an US$8.2m positive variance in ‘other’ expenses (the difference between a US$22.5m loss forecast and an underlying US$14.3m loss reported), a US$2.0m positive variance in royalty costs, a US$4.1m positive variance in net finance income and a US$1.9m positive variance in the overall tax charge to result in actual H224 and FY24 attributable profit within US$0.6m, or 1.0%, of our prior forecast.

A complete analysis of PAF’s H224 and FY24 results on both an ‘as reported’ and an ‘adjusted’ basis (with all derivative-type losses taken through the ‘other’ line) is provided in Exhibit 4, below:

Exhibit 4: PAF P&L statement by half year (H124–H224)

US$000s*

H124

H224e

H224

(as reported)

H224

(adjusted)

Change***

(%)

Variance****
(%)

FY24

(adjusted)

FY24

(as reported)

FY24e
(prior)

Revenue

193,947

196,763

179,849

190,998

-7.3

-2.9

384,945

373,796

390,710

Cost of production

(110,292)

(98,789)

(110,891)

(110,891)

0.5

12.3

(221,183)

(221,183)

(209,081)

Depreciation

(10,768)

(11,144)

(10,476)

(10,476)

-2.7

-6.0

(21,244)

(21,244)

(21,912)

Mining profit

72,887

86,831

58,482

69,631

-19.8

-19.8

142,518

131,369

159,718

Other income/(expenses)

(7,231)

(22,474)

(3,144)

(14,293)

-56.5

-36.4

(21,524)

(10,375)

(29,705)

Loss in associate etc

0

0

0

0

N/A

N/A

0

0

0

Loss on disposals

0

0

0

0

N/A

N/A

0

0

0

Impairments

0

0

0

0

N/A

N/A

0

0

0

Royalty costs

(1,242)

(2,465)

(445)

(445)

-64.2

-81.9

(1,687)

(1,687)

(3,707)

Net income before finance

64,414

61,891

54,893

54,893

-14.8

-11.3

119,307

119,307

126,305

Finance income

760

1,124

1,124

47.9

N/A

1,884

1,884

Finance costs

(5,594)

(6,190)

(6,190)

10.7

N/A

(11,784)

(11,784)

Net finance income

(4,834)

(9,201)

(5,066)

(5,066)

4.8

-44.9

(9,900)

(9,900)

(14,035)

Profit before taxation

59,580

52,691

49,827

49,827

-16.4

-5.4

109,407

109,407

112,271

Taxation

(17,223)

(15,297)

(13,358)

(13,358)

-22.4

-12.7

(30,581)

(30,581)

(32,520)

Effective tax rate (%)

28.9

29.0

26.8

26.8

-7.3

-7.6

28.0

28.0

29.0

PAT (continuing ops)

42,357

37,393

36,469

36,469

-13.9

-2.5

78,826

78,826

79,750

Minority interest

(224)

0

(328)

(328)

46.4

N/A

(552)

(552)

(224)

Ditto (%)

(0.5)

0.0

(0.9)

(0.9)

80.0

N/A

(0.7)

(0.7)

(0.3)

Attributable profit

42,581

37,393

36,797

36,797

-13.6

-1.6

79,378

79,378

79,974

Headline earnings

42,581

37,393

36,903

36,903

-13.3

-1.3

79,484

79,484

79,974

Est. normalised headline earnings

49,812

59,867

40,047

51,196

-19.6

-14.5

101,008

89,859

109,679

EPS (c)

2.22

1.95

1.92

1.92

-13.5

-1.5

4.14

4.14

4.17

HEPS** (c)

2.22

1.95

1.93

1.93

-13.1

-1.0

4.15

4.15

4.17

Normalised HEPS (c)

2.60

3.12

2.09

2.67

-19.6

-14.4

5.27

4.68

5.72

Source: Pan African Resources, Edison Investment Research. Note: *Unless otherwise indicated. **HEPS, headline earnings per share (South African reporting standard). ***H224 cf H124. ****H224 (adjusted) cf H224e. Exhibit 19 presented on an ‘as reported’ basis.

Note that the effect of the Mintails contract liability on prior periods was small to the point of being negligible given that the contracted price of gold was close to the actual price of gold. The exclusion of US$4.1m in ‘other income’ from ‘H224 (adjusted)’ results would also have brought Edison’s forecast of a US$22.5m loss more closely into line with the US$14.3m loss imputed. Otherwise, on this comparative (ie ‘adjusted’) basis, normalised HEPS were 7.9% lower than our estimate for the full year. However, they were still nevertheless a record for Pan African for both a full-year and half-year period and well to the top end of the range of analysts’ expectations of 3.0–5.7c/share with a mean of 4.5c/share (source: LSEG Data & Analytics, 6 September 2024).

From the perspective of PAF’s four principal operations (ie excluding the negligible contribution from Evander surface sources), performance held steady at both Barberton and Elikhulu, but fell away at Evander (which is the operation most affected by the Mintails contract liability – see Exhibit 2), while the BTRP announced record adjusted EBITDA in both rand and US dollar terms:

Exhibit 5: Pan African adjusted EBITDA, by business unit, H115–H224

Source: Pan African Resources, Edison Investment Research

Growth projects

PAF has two organic growth projects currently underway (namely the MTR project within the Mintails Soweto Cluster and the Evander 24 to 26 Level expansion project) and one more immediately in prospect (the Sheba Fault project). Beyond these, it has the Egoli and Fairview sub-vertical shaft projects at feasibility study stage followed by Rolspruit, Poplar and Evander South also available for eventual development.

Mintails Soweto Cluster

Mogale (MTR)

On 1 August 2023, PAF announced that all conditions precedent for its ZAR1.3bn senior debt facility, designated for funding the group’s MTR project, had been fulfilled, thereby completing the full upfront funding package of ZAR2.5bn. Since then, PAF has reported that construction has been progressing on time and within budget, with commissioning and steady state production still on track for December 2024.

On 9 May, PAF reported that it had updated its financial model for Mogale (relative to the initial definitive feasibility study model) to reflect the latest operating cost updates, as well as a ZAR19.00/US$ forex rate and a US$2,200/oz gold price. The result was:

A near threefold increase in pre-tax NPV from US$63m to US$183m (9.5c/share).

A doubling of the ungeared real internal rate of return from 20.1% to 41.7%.

A two-year payback on upfront capital investment of c US$135.1m (cf an initial DFS model estimate of 3.5 years), post commissioning.

Soweto cluster

In addition to its update on the MTR, in May PAF also announced the results of an internal pre-feasibility study (PFS) for the Soweto cluster that was completed in March 2024, based on drill results from the 2L16 and 2L24 tailings storage facilities. The PFS considered a number of options, of which the most feasible was considered to be the processing of the Soweto cluster material at the MTR plant. In this case, the MTR plant’s capacity could be expanded to process 1Mtpm of feed material (cf the current design capacity of 800ktpm) to result in a mine life of 21 years for the combined Mogale and Soweto cluster resources. The resultant tailings could then be deposited into the expanded Mogale tailings storage facility at the West Wits pit and 1L23-25 footprint.

Other specific results of the PFS were as follows:

The MTR plant infrastructure could be expanded to treat 1Mtpm from year six of the MTR operation’s mine life (ie approximately 2030).

The addition of the 110Mt Soweto cluster mineral resource has the potential to increase MTR production to approximately 60koz pa over a 21-year mine life.

Total additional capex for the project would be US$113m, of which c US$83m would be incurred in years 4–6 of the MTR project timeline and US$29m would be incurred in year 10 of the timeline.

At US$2,200/oz and a forex rate of ZAR19.00/US$, the pre-tax NPV for the combined Mogale-Soweto cluster is US$283m (or 14.8c, or 11.1p, per share), representing a >50% increase relative to the MTR project alone.

The real, ungeared internal rate of return of the combined project increases to 44.0% (cf 41.7% for the MTR project alone).

These changes have already been incorporated into our financial model since May. In the meantime, Pan African is proceeding with the necessary permitting and servitudes required for the re-mining and processing of the Soweto cluster, with a final investment decision anticipated ‘in due course’.

Evander 24 to 26 Level expansion project

Progress at Evander’s 24 to 26 Level underground expansion project remains on track, with the following notable achievements during H224:

Ramped-up mining operations on 24 Level are continuing.

Significant capital expenditure has been invested in these mining levels to improve and optimise infrastructure and to ensure sustainable production of approximately 65,000oz annually over the mine’s life of c 11 years.

Although delayed, equipping of the existing 17 Level underground ventilation shaft to hoist at a rate of up to 40,000tpm is now imminent, improving efficiencies and circumventing the ageing conveyor belt system.

The newly commissioned 24 Level refrigeration plant will provide chilled water to a bulk air cooler on 24 Level, with a nominal cooling capacity of 3.5MW, to create improved working conditions on both 24 and 25 Levels.

Development of the existing 24 Level footwall infrastructure to access 25 Level, through an on-reef decline layout, is planned to commence in FY25 (NB access to 25 Level mining areas is expected to be completed in FY26).

BTRP life of mine extension and Royal Sheba

Following an internal process to consider feedstock sources for the BTRP, final drilling and metallurgical test work results were recently retrieved from Bramber’s dormant tailings storage facility (TSF), which will increase the life of the BTRP from two to seven years.

The BTRP has deposited its residues on the Bramber dormant footprint since inception (in 2013). In November 2017, a regrind mill was added to the slurry receiving section and, in CY23, phase 2 of the Aachen Assisted Leach (AAL) reactor was commissioned.

The Bramber dormant TSF contains 6Mt of previously treated BTRP and Fairview Mine residue at an average grade of 1.0g/t.

The impact on expected gold recoveries following the addition of the regrind mill and AAL was used to test the Bramber dormant mine residue. To date:

Metallurgical test work indicates that recoveries of 18–27% of the remaining gold content in this resource are achievable.

Utilising the 90th percentile of the recoveries achieved (25% recovery) in the financial model, Pan African estimated that this source of tailings material will extend the BTRP’s tailings feed life from two to seven years, producing approximately 11,000oz per year at an average real AISC of US$1,485/oz.

In the meantime, Pan African will focus on developing the Sheba Fault decline to access high grade mineral reserves to supplement Barberton Mines’ production in the medium term and longer term. Preliminary optimisation work at Sheba and Western Cross indicates:

An eight-year lifespan at Royal Sheba, with production of around 235,000oz of gold at an average mining grade of 3g/t over the life of mine, with the potential for further extensions as the orebody remains open at depth. First stoped ore is planned at a rate of 5,000t per month, ramping up to 10,000t, 30,000t and 45,000t per month, every 12 months thereafter in line with a set lateral and vertical development schedule.

The Western Cross orebody at the Sheba Mine is a lower-grade (3–4g/t) 10m wide free-milling orebody that is currently accessed via the South Wall Adit and forms part of the mine’s production profile. The orebody is amenable to bulk mining, similar to that planned at Royal Sheba. Drilling in FY25 is planned to update the geological model, confirm available mineral resource blocks and update the existing feasibility study.

Egoli

The Egoli project at Evander Mines’ 7 Shaft is a standalone underground operation that will utilise existing mining and metallurgical infrastructure, including 7 Shaft’s hoisting systems and processing facilities at Kinross’s metallurgical plant.

First phase development, involving the dewatering of the project’s 7 Shaft number 3 Decline to below 20 Level has now been completed and permanent pumping infrastructure installed.

Egoli will be accessed directly from 7 Shaft’s 15 Level using existing declines to 19 Level, where a new on-reef decline will be established to access the orebody to 23 Level.

All the required permits for the Egoli project, including Evander Mines’ mining right (valid until 2038) have been approved.

Leveraging existing infrastructure, Egoli can increase Evander Mines’ production profile for a relatively low capital cost and within a relatively short time frame.

The second phase of Egoli’s development will involve establishing a drilling platform on 19 Level in Q125, from which long-inclined boreholes will be drilled to accurately define short-term grade variability and geological structures.

Group

In the light of these developments (including PAF’s unchanged guidance for FY25), we continue to forecast that group production at PAF will reach c 250koz per year in 2026 and push normalised headline EPS (HEPS) to beyond 7.00c per share (see Exhibit 10).

Exhibit 6: Estimated Pan African group gold production profile, FY18–29e

Source: Edison Investment Research, Pan African Resources

Dividend and dividend policy

After three years of holding its dividend at ZAR0.18/share, PAF declared a dividend of ZAR0.22/share (c 1.2584 US cents or 0.9476 pence per share at prevailing forex rates) for FY24 for approval at its forthcoming annual general meeting (AGM) on 21 November. In addition, the company explicitly set out a dividend policy targeting a payout ratio of 40–50% of net cash generated from operating activities, after providing for the cash flow impact of capital expenditure (reduced by externally funded capital), contractual debt repayments and the cash flow impact of one-off items (discretionary rand cash flow). In proposing a dividend, the board will also take account of the company’s financial position, prospects, satisfactory solvency and liquidity assessments and other factors deemed by the board to be relevant at the time.

FY24’s dividend of ZAR0.22/share followed three years of a static dividend at ZAR0.18/share, during which time the company was either in the midst of, or anticipating, a period of material capital investment. Within this context, FY25 should be the last year in the foreseeable future of material capital outlay for PAF. Where before we had assumed that Pan African would pay out a flat dividend in FY25, followed by its maximum potential dividend from FY26 (for valuation purposes), in the light of the company’s dividend policy statement, we have now assumed that it will declare a dividend according to its restated policy in FY25–28 followed by its maximum potential dividend from FY29. In FY25 we believe that this will continue to be relatively conservative as capex remains elevated at the same time that PAF will be required to make debt capital repayments. For FY26 and beyond, however, we believe that the possibility exists for materially increased dividend payouts as production increases, operating costs flatten and capital expenditure falls away.

Updated (absolute) valuation

In deriving our longer-term estimates for PAF over the life of its operations, we have made a number of changes, the most material of which are summarised below:

We have adjusted the production profiles of Evander 25 Level, the BTRP, Elikhulu and Mogale to reflect PAF’s guidance for FY25 and beyond (see PAF’s results presentation).

We have updated our assumed profits and losses from the hedge relating to its synthetic forward sale of gold as part of the financing package for Mintails/Mogale. We have also added to this profits and losses from its separate zero-cost collars, which form part of the company’s discretionary hedging policy. As in FY24, we include all these in ‘other income/expenses’ on the group’s income statement.

We have brought capex into line with company guidance of ZAR2,273m for FY25.

We have increased our estimate of long-term unit costs at Elikhulu by 12.1% from ZAR60.29/t (in real FY24 terms) to ZAR67.58/t in real FY25 terms over the life of its operations (cf a figure of ZAR67.00/t in FY24).

Exhibit 7: Elikhulu cash cost per tonne (ZAR/t, H119–H224)

Source: Pan African Resources

We have increased our forecast of working costs at Barberton by 12.6% from ZAR5,281/t (real FY24 terms) to ZAR5,947/t in real FY25 terms (cf a figure of ZAR5,493/t in FY24).

Exhibit 8: Barberton cash cost per tonne (ZAR/t, FY09–24)

Source: Pan African Resources

In addition to changes to our immediate operational assumptions, we have adjusted our long-term foreign exchange rates (in real terms), to reflect the recent ‘above trend’ strength of the rand (and to a lesser extent sterling) against the US dollar:

From ZAR23.5894/£ at the time of our last note to ZAR23.2165/£ (-1.6%), being that prevailing at the time of writing.

From ZAR18.3996/US$ to ZAR17.4830/US$ (-5.0%).

From US$1.2833/£ to US$1.3279/£ (+3.5%).

Exhibit 9: South African rand (ZAR) per US dollar (H113–H225e)

Source: Edison Investment Research, Pan African Resources

In the aftermath of these changes, our absolute valuation of PAF (based on its existing four producing assets plus the 25 and 26 Level project and Mogale) has reverted to its pre-May 2024 level of 40.93c (cf 49.39c in July – see Exhibit 12), which is based on the present value of the estimated potential dividend stream payable to shareholders over the life of its mining operations (applying a 10% discount rate to US dollar dividends).

Exhibit 10: PAF estimated life of operations’ diluted EPS and (maximum potential*) DPS

Source: Pan African Resources, Edison Investment Research. Note: *From FY29. Excludes discretionary exploration investment.

This may be compared with the equivalent graph from July 2024, as follows:

Exhibit 11: Pan African estimated life of operations’ EPS and (maximum potential*) DPS (at July 2024)

Source: Pan African Resources, Edison Investment Research. Note: Excludes discretionary exploration investment. *From FY26.

Readers’ attention is drawn to the flattened profile of dividends assumed in FY25–28 in our updated valuation relative to our July 2024 valuation, which have been calculated with due regard to PAF’s dividend policy, but which has resulted in a reduction in valuation of 3.02c/share as a result of the deferral of higher dividends.

Including its other growth projects and assets, our updated total valuation of PAF as a whole is provided in Exhibit 12, below.

Exhibit 12: PAF group absolute valuation summary

Project

Current valuation
(USc/share)

July 2024 valuation
(USc/share)

February 2024 valuation

(US$/share)

Existing producing assets*

39.67

48.41

41.15

Cum-FY24 dividend

1.26

0.98

-

Royal Sheba**

1.30

0.98

0.63

Other**

2.24

1.70

1.14

Sub-total

44.47

52.07

42.92

EGM underground resource

0.22–5.24

0.22–5.24

0.22–5.24

Sub-total

44.69-49.71

52.29–57.31

43.14–48.16

Egoli

16.59

16.98

17.09

Soweto cluster

1.95

1.49

1.93

Total

63.23-68.25

70.76–75.78

62.16–67.18

Source: Edison Investment Research. Note: *Including 24 Level and 25 & 26 Level and Mogale projects. **Resource based valuations. Numbers may not add up owing to rounding.

An analysis of the change in valuation according to each separate adjustment to our assumptions is provided in the graph below:

Exhibit 13: Pan African Resources valuation change by item (September 2024 cf July 2024)

Source: Edison Investment Research

Historical relative and current peer group valuation

Historical relative valuation

Exhibit 14 below depicts PAF’s average share price in each of the financial years from FY10 to FY24 and compares this with HEPS in the same year. For FY25 and FY26, the current share price (33.65p) is compared with our forecast normalised HEPS for those years. As is apparent from the chart, PAF’s price to normalised HEPS ratios of 6.1x and 6.7x for FY25 and FY26, respectively, remain close to the bottom of its recent historical range of 4.1–14.8x for the period FY10–24 and consistent with its range of 4.1–7.0x for the period FY19–24:

Exhibit 14: PAF historical price to normalised HEPS** ratio, FY10–26e

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.

If PAF’s average year one price to normalised EPS ratio of 8.2x for the period FY10–24 is applied to our normalised earnings forecasts, it implies a share price for PAF of 44.70p in FY25 followed by one of 41.17p in FY26. Stated alternatively, PAF’s current share price of 33.65p, at prevailing foreign exchange rates, appears to be discounting FY25 and/or FY26 normalised HEPS of 5.48c per share (cf our forecasts of 7.28c and 6.71c, respectively).

Relative peer group valuation

In the meantime, it may be seen that PAF remains cheaper than its London- and South African-listed gold mining peers on 80% of comparable common valuation measures (29 out of 36 individual measures in the table below) regardless of whether Edison or consensus forecasts are used.

Exhibit 15: Comparative valuation of PAF with South African and London peers

Company

EV/EBITDA (x)

P/E (x)

Yield (%)

Year 1

Year 2

Year 1

Year 2

Year 1

Year 2

AngloGold Ashanti

5.0

4.6

11.1

9.3

2.1

1.9

Gold Fields

5.5

4.1

12.4

8.0

3.2

4.7

Sibanye Stillwater

3.8

3.1

10.7

5.5

5.2

6.0

Harmony

4.4

4.3

8.1

8.2

1.9

2.1

Centamin

4.0

3.4

10.2

11.0

2.5

3.9

Endeavour Mining (consensus)

5.1

4.0

14.4

9.4

3.3

4.0

Average (excluding PAF)

4.6

3.9

11.1

8.6

3.0

3.8

PAF (Edison)

4.1

4.2

6.1

6.7

3.3

11.6

PAF (consensus)

4.1

3.5

6.7

5.5

3.5

5.9

Source: Edison Investment Research, LSEG Data & Analytics. Note: Consensus and peers priced at 24 September 2024.

Alternatively, applying PAF’s peer average year one P/E ratio of 11.1x to our normalised HEPS forecast of 7.28c per share for FY25 implies a share price for the company of 61.03p at prevailing foreign exchange rates. Applying its peer average year two P/E ratio of 8.6x to our normalised HEPS forecast of 6.71c per share for FY26 implies a share price of 43.33p.

Financials

Pan African reported net debt of US$104.4m on its balance sheet as at end-June 2024 (cf US$61.7m as at end-December 2023 and US$22.1m as at end-June 2023), which equated to a gearing ratio (net debt/equity) of 28.6% (cf 18.8% at end-December 2023 and 7.5% at end-June 2023) and a leverage ratio (net debt/[net debt+equity]) of just 22.2% (cf 15.8% at end-December 2023 and 7.0% at end-June 2023), after cash flow from operating activities of US$109.1m before dividends (cf US$45.5m in H124, US$88.5m in H223 and US$31.6m in H123). Capex guidance for FY25 is ZAR2.27bn (c US$130.0m at prevailing foreign exchange rates). Beyond that, we forecast that PAF will continue to generate cash from operations comfortably above the US$100m pa level (and potentially close to US$200m pa) into the foreseeable future, such that we calculate that net debt will peak in CY24 (in reality at end-December 2024), before being eliminated in FY26, by which time we assume that capex will once again have returned to near-sustaining levels.

Exhibit 16: Pan African current estimated net debt* profile forecast, FY17–26e (annually)

Source: Edison Investment Research, Pan African Resources. Note: *Excluding ‘other’ (see Exhibits 17 and 19).

Note that, for the purposes of these forecasts, we have assumed that FY24’s dividend will be paid in FY25 and that our newly increased FY25 dividend estimate will be paid in FY26.

Including all other components, total net debt as at end-June was US$106.4m (cf US$64.3m at end-December, US$22.0m at end-June and US$53.7m at end-December 2022), as shown below:

Exhibit 17: Pan African components of total net debt (US$m)

US$m

FY20

H121

FY21

H122

FY22

H123

FY23

H124

FY24

Long-term debt to financial institutions

28.0

48.2

Short-term debt to financial institutions

30.7

0.3

Total debt to financial institutions

89.2

87.8

58.7

48.5

26.2

75.0

53.4

89.8

127.8

Cash

33.5

28.0

35.1

35.2

27.0

33.9

34.8

31.3

26.3

Net debt to financial institutions

55.7

59.8

23.6

13.3

(0.8)

41.1

18.6

58.5

101.5

RedInk Rentals loan facility

9.9

8.9

8.4

7.5

-

-

-

Other*

6.6

0.3

0.2

1.7

1.7

1.3

0.3

1.6

1.3

Net senior debt

62.3

60.1

33.7

23.9

9.3

49.9

18.9

60.1

102.8

Lease liabilities

14.1

5.0

5.3

4.5

4.4

4.3

3.5

3.3

3.0

Other

0.0

0.0

0.0

(0.2)

(0.7)

(0.5)

(0.4)

0.9

0.7

Total net debt

76.4

65.2

39.0

28.2

13.0

53.7

22.0

64.3

106.4

Change

N/A

(11.2)

(26.2)

(10.8)

(15.2)

(40.7)

(31.7)

42.3

42.1

Source: Pan African Resources. Note: Totals may not add up owing to rounding. *Including restricted cash.

The US$2.0m difference between net debt of US$106.4 and net debt of US$104.4m as per Exhibit 19 is accounted for by the US$2.0m of ‘other’ items included in Exhibit 17.

In the meantime, the group remains very comfortably within its revolving credit facility debt covenants:

Exhibit 18: Pan African group debt covenants

Measurement

Constraint

H119

FY19

H120

FY20

H121

FY21

H122

FY22

H123

FY23

H124

FY24

Net debt:equity

Must be less than 1:1

0.85

0.71

0.6

0.4

0.3

0.1

0.1

0.04

0.2

0.07

0.2

0.29

Net debt:adjusted EBITDA

Must be less than 2:1

3.24

2.2

1.6

0.7

0.5

0.3

0.2

0.1

0.5

0.2

0.5

0.8

Interest cover ratio

Must be greater than 4x

3.64

4.1

5.8

10.1

17.7

23.0

29.0

34.1

26.9

18.4

16.7

12.2

Debt service cover ratio

Must be greater than 1:3

2.85

1.4

3.0

3.4

3.3

3.0

3.0

7.3

8.5

7.5

4.6

3.8

Source: Pan African Resources

Exhibit 19: Financial summary

US$'000s

2022

2023

2024

2025e

2026e

Year end 30 June

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

376,371

321,606

373,796

459,298

477,347

Cost of sales

(226,445)

(198,790)

(221,183)

(223,459)

(246,390)

Gross profit

149,926

122,816

152,613

235,840

230,958

EBITDA

 

 

147,830

121,853

150,926

231,257

227,384

Operating profit (before amort. and excepts.)

 

 

121,402

101,454

129,682

192,042

178,152

Intangible amortisation

0

0

0

0

0

Exceptionals

(10,295)

(7,347)

(10,375)

(16,214)

(1,662)

Other

0

0

0

0

0

Operating profit

111,107

94,107

119,307

175,828

176,489

Net interest

(4,231)

(8,553)

(9,900)

(9,396)

(8,785)

Profit Before Tax (norm)

 

 

117,171

92,901

119,782

182,645

169,367

Profit before tax (FRS 3)

 

 

106,876

85,554

109,407

166,432

167,705

Tax

(31,924)

(24,817)

(30,581)

(43,079)

(40,823)

Profit after tax (norm)

85,247

68,084

89,201

139,566

128,544

Profit after tax (FRS 3)

74,952

60,737

78,826

123,353

126,882

Average Number of Shares Outstanding (m)

1,926.1

1,916.5

1,916.5

1,916.5

1,916.5

EPS - normalised (c)

 

 

4.44

3.54

4.68

7.28

6.71

EPS - FRS 3 (c)

 

 

3.90

3.19

4.14

6.44

6.62

Dividend per share (c)

1.04

0.95

1.26

1.49

5.16

Gross margin (%)

39.8

38.2

40.8

51.3

48.4

EBITDA margin (%)

39.3

37.9

40.4

50.4

47.6

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

32.3

31.5

34.7

41.8

37.3

BALANCE SHEET

Fixed assets

 

 

401,139

439,676

625,678

712,692

687,665

Intangible assets

44,210

44,429

42,454

44,747

47,053

Tangible assets

355,802

395,247

579,851

664,571

637,239

Investments

1,127

0

3,373

3,373

3,373

Current assets

 

 

55,953

61,263

57,938

48,541

66,758

Stocks

9,977

9,567

16,431

15,321

15,921

Debtors

17,546

15,182

15,175

32,740

34,024

Cash

26,993

34,771

26,332

480

16,813

Current liabilities

 

 

(58,989)

(77,386)

(84,864)

(99,207)

(192,485)

Creditors

(57,117)

(65,884)

(79,344)

(93,687)

(186,965)

Short-term borrowings

(1,872)

(11,502)

(5,520)

(5,520)

(5,520)

Long-term liabilities

 

 

(103,494)

(128,957)

(237,104)

(205,527)

(77,480)

Long-term borrowings

(37,088)

(45,334)

(125,214)

(92,566)

36,242

Other long-term liabilities

(66,406)

(83,623)

(111,890)

(112,961)

(113,722)

Net assets

 

 

294,609

294,596

361,648

456,499

484,457

CASH FLOW

Operating Cash Flow

 

 

142,879

132,941

134,310

169,635

228,487

Net Interest

(2,794)

(5,121)

(9,731)

(9,396)

(8,785)

Tax

(8,520)

(7,722)

(15,476)

(16,781)

(21,855)

Capex

(81,951)

(109,952)

(169,521)

(126,229)

(24,205)

Acquisitions/disposals

563

(2,779)

141

0

0

Financing

(3,222)

0

0

0

0

Dividends

(21,559)

(19,975)

(18,302)

(18,302)

(28,501)

Net cash flow

25,396

(12,608)

(78,579)

(1,074)

145,141

Opening net debt/(cash)

 

 

23,553

11,967

22,065

104,402

97,606

Exchange rate movements

(4,401)

(4,481)

1,160

0

0

Other

(9,409)

6,991

(4,918)

7,870

0

Closing net debt/(cash)

 

 

11,967

22,065

104,402

97,606

(47,535)

Source: Company sources, Edison Investment Research. Note: FY24 on ‘as reported’ basis cf ‘adjusted’ basis (see Exhibit 4). FY23 ‘as reported’ and not restated as per FY24 results (NB restatement deemed immaterial by Edison).

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Australia

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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.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

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London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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 £60,000 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 2024 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.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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