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Research: Metals & Mining
On 30 June 2022, Pan African announced that it had successfully completed a definitive feasibility study (DFS) on the Mogale assets that it is in the process of acquiring. Highlights from the DFS were that the project has the potential to increase the group’s gold production by c 50koz pa (or c 25% of current group production) over a 13-year life at a capital cost of ZAR2.5bn (US$157.8m) and an all-in sustaining cost US$914/oz, to result in a pre-tax project NPV9.5 of ZAR1,006m (US$64.9m, or 3.3c or 2.8p per share) and a real internal rate of return of 20.1% at a gold price of US$1,750/oz and a forex rate of ZAR15.50/US$. We have now incorporated the results of the DFS into our model, as well as updating our forecasts to reflect recent moves in the gold price and forex rates (only).
Pan African Resources |
Building steam |
Mogale DFS |
Metals and mining |
7 July 2022 |
Share price performance
Business description
Next events
Analyst
Pan African Resources is a research client of Edison Investment Research Limited |
On 30 June 2022, Pan African announced that it had successfully completed a definitive feasibility study (DFS) on the Mogale assets that it is in the process of acquiring. Highlights from the DFS were that the project has the potential to increase the group’s gold production by c 50koz pa (or c 25% of current group production) over a 13-year life at a capital cost of ZAR2.5bn (US$157.8m) and an all-in sustaining cost US$914/oz, to result in a pre-tax project NPV9.5 of ZAR1,006m (US$64.9m, or 3.3c or 2.8p per share) and a real internal rate of return of 20.1% at a gold price of US$1,750/oz and a forex rate of ZAR15.50/US$. We have now incorporated the results of the DFS into our model, as well as updating our forecasts to reflect recent moves in the gold price and forex rates (only).
Year end |
Revenue (US$m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
06/20 |
274.1 |
80.8 |
3.78 |
0.84 |
6.2 |
3.6 |
06/21 |
368.9 |
117.7 |
4.54 |
1.27 |
5.2 |
5.4 |
06/22e |
371.9 |
134.4 |
5.20 |
1.18 |
4.5 |
5.0 |
06/23e |
365.3 |
157.9 |
5.54 |
1.76 |
4.3 |
7.5 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Adding value and enhancing EPS
At Edison’s long-term gold prices and prevailing forex rates, we estimate that Mogale has the potential to add an immediate 2.26c to our valuation of Pan African (post-tax and net of acquisition costs) and to enhance its earnings per share by an average 1.76 US cents per share in FY25–29 and by an average 0.45 US cents per share in FY30–34.
Upside and optionality
As far as investors are concerned, Mogale is potentially another Elikhulu for Pan African. As such, PAF is in a position to acquire for US$2.55/oz (for Mogale alone) an asset that should be worth US$9.88/oz in-situ, could be worth US$53.11/oz (pre-development) and may be worth up to US$94.09/oz, post-initial capex and debt repayment. Additional valuation optionality (potentially of the same order of magnitude – ie 2.26c/share) is then provided by the other half of the resource to be acquired (MSC) for which there is currently no immediate development plan.
Valuation: Up c 22% to (potentially) 65.36c/share
Pan African is cheap relative to both its historical trading record and its peers. Our core valuation of the company is 44.67c/share (37.18p/share), based on projects either sanctioned or already in production, including Mogale. However, this rises by a further 15.67–20.69c (13.04–17.22p) once other assets (eg Egoli) are also taken into account. Alternatively, if Pan African’s historical average price to normalised EPS ratio of 8.9x in the period FY10–21 is applied to our FY22 and FY23 forecasts, it implies a share price of 37.83p in FY22, followed by 40.78p in FY23. In the meantime, it remains cheaper than its principal London- and JSE-listed peers on at least 69% of commonly used valuation measures.
Mogale DFS
On 6 November 2020, Pan African announced it had entered into a conditional agreement with the liquidator of the Mintails group for the purchase of the total share capital and associated loans of Mogale Gold and Mintails SA Soweto Cluster (MSC), comprising a number of tailings storage facilities (TSFs) to the west of Johannesburg, for ZAR50.0m (US$3.0m at prevailing forex rates) and the assumption of a closure environmental liability of c ZAR120m. Since then, Pan African has successfully concluded both a fatal flaw analysis and a high-level financial evaluation of the project (which is similar in nature to Pan African’s flagship Elikhulu project at Evander). In July 2021, it subsequently completed a pre-feasibility study (PFS) on the Mogale Gold assets. On 30 June 2022, it announced that it had successfully completed a DFS on the same assets. Highlights of the DFS were as follows:
■
The project has the potential to increase the group’s gold production by c 50koz pa (or c 25% of current group production) over a 13 year life.
■
A pre-tax NPV (at a 9.5% real discount rate) of ZAR1,006m (US$64.9m, or 3.3c or 2.8p per share) and a real internal rate of return of 20.1% at a gold price of US$1,750/oz and a forex rate of ZAR15.50/US$.
■
A forecast all-in sustaining cost (AISC) of c US$914/oz and a (nominal) operating cost of c ZAR78/t (c US$5/t).
■
Construction capex of c ZAR2.5bn (US$157.8m).
■
A payback period of 3.5 years.
The operation would use a combination of proven low-cost hydro-mining coupled with a 0.8Mtpm carbon-in-leach (CIL) plant, similar in principle to that used at Elikhulu, albeit slightly smaller (cf Elikhulu’s 1.2Mptm throughput rate, for example). In general, the results of the DFS were similar to, or slightly better than, those of its prior PFS (see below):
Exhibit 1: Mogale gold assets DFS results cf PFS results
DFS* |
PFS** |
|
Throughput rate (Mtpm) |
0.8 |
0.8 |
Pre-tax NPV |
ZAR1,006m |
ZAR849m |
US$64.9 |
US$56.6m |
|
Pre-tax NPV/share |
ZAR0.53/share |
ZAR0.44/share |
US$0.033/share |
US$0.029/share |
|
£0.028/share |
£0.022/share |
|
Production (koz pa) |
c 50 |
40-50 |
AISC (US$/oz) |
914 |
1,087 |
Life of mine (years) |
13 |
11 |
Real pre-tax IRR (%) |
20.1 |
22 |
Initial capex |
ZAR2,460m |
ZAR1,991m |
US$158.7m |
US$132.7m |
|
Life of mine capex |
ZAR3,301m |
ZAR3,022m |
US$213.0m |
US$201.5m |
Source: Pan African Resources, Edison Investment Research. Note: *Conducted in June 2022 at a gold price of US$1,750/oz, a forex rate of ZAR15.50/US$ and a discount rate of 9.5%. **Conducted in July 2021 at a gold price of US$1,690/oz, a forex rate of ZAR15.00/US$ and a discount rate of 10.71%.
PAF’s due diligence on the project has been extended to 31 August. Assuming no impediments and that the project is sanctioned in September, PAF would hope to bring the Mogale TSFs into production 18–24 months from the start of construction between July and December 2024. Addition of Mintails’ wider Soweto Cluster of resources into the project also has the potential to extend the life of the operation from 13 years to 21 years and further increase annual gold production.
Mogale DFS detail and assumptions
On 6 November 2020, PAF announced that it was to acquire 100% of Mogale Gold and MSC from the liquidator of the Mintails group for ZAR50.0m (then US$3.2m, now US$3.0m) and the assumption of a closure environmental liability of c ZAR120m. The deadline for fulfilment of the conditions to conclude the transaction (originally six to nine months) was later extended to August 2022 and included the completion of a fatal flaw analysis, PFS and DFS (compiled by DRA).
In addition to the technical outcome of the DFS, the due diligence process has also sought to update Mintails and Mogale’s 7 February 2013 mineral resource declaration, to which end the following work was completed:
■
a highly accurate light detection and ranging (LIDAR) survey of the entire project area to ascertain available tonnages,
■
twinning of 25 of the historical holes to verify grades previously reported, and
■
the drilling of 82 new boreholes in areas with sparse or no data.
Combined drilling totalled 2,761m and resulted in 1,877 samples and 187 control samples and the re-modelling of all available resources as shown below:
Exhibit 2: Mogale and Mintails Soweto Cluster (MSC) reserve and resource estimates
Asset/category |
Resources |
Reserves |
Conversion |
|||||||||||||
Tonnage |
Grade |
Contained gold (koz) |
Category |
Tonnage |
Grade |
Contained gold (koz) |
Tonnage |
Grade |
Contained gold (%) |
|||||||
Mogale |
||||||||||||||||
Measured |
0.00 |
0.00 |
0 |
Proven |
0.00 |
0.00 |
0 |
N/A |
N/A |
N/A |
||||||
Indicated |
121.62 |
0.29 |
1,127 |
Probable |
123.58 |
0.29 |
1,140 |
101.6 |
100.0 |
101.2 |
||||||
Inferred |
4.64 |
0.33 |
49 |
Possible* |
0.00 |
0.00 |
0 |
0.0 |
0.0 |
0.0 |
||||||
Total |
126.26 |
0.29 |
1,176 |
Total |
123.58 |
0.29 |
1,140 |
97.9 |
100.0 |
96.9 |
||||||
Mintails Soweto Cluster (MSC) |
||||||||||||||||
Measured |
0.00 |
0.00 |
0 |
|||||||||||||
Indicated |
0.00 |
0.00 |
0 |
|||||||||||||
Inferred |
119.00 |
0.31 |
1,186 |
|||||||||||||
Total |
119.00 |
0.31 |
1,186 |
|||||||||||||
Total |
||||||||||||||||
Measured |
0.00 |
0.00 |
0 |
Proven |
0.00 |
0.00 |
0 |
|||||||||
Indicated |
121.62 |
0.29 |
1,127 |
Probable |
123.58 |
0.29 |
1,140 |
|||||||||
Inferred |
123.64 |
0.31 |
1,235 |
Possible* |
0.00 |
0.00 |
0 |
|||||||||
Total |
245.26 |
0.30 |
2.362 |
Total |
123.58 |
0.29 |
1,140 |
Source: Pan African Resources, Edison Investment Research. Note: *Archaic.
While the overall size of the resource was barely changed as a result of the re-modelling, confidence in the resource in terms of its categorisation (ie 95.8% of the Mogale resource being in the indicated category), increased markedly. In the meantime, further technical work is being undertaken on the MSC TSFs.
The Mogale DFS envisages hydro-mining the larger dumps, using hydraulic guns of similar specification to those used at Elikhulu, cutting mine widths of 15m wide and 20m deep. By contrast, the smaller dumps (the North Sands and South Sands dumps) will be mined by load-and-haul techniques. The re-mined tailings will then be processed in an 800–900ktpm CIL plant similar in design to Elikhulu, with the addition of a water treatment section to limit corrosion and potentially improve recoveries.
For the purposes of our analysis of Mogale, we have made the following main (real terms) assumptions regarding throughput, costs, capex etc:
Exhibit 3: Mogale valuation assumptions
FY23e |
FY24e |
FY25e |
FY26e |
FY27e |
FY28e |
FY29e |
FY30e |
FY31e |
FY32e |
FY33e |
FY34e |
|
Throughput (kt) |
8,131 |
9,467 |
9,461 |
9,572 |
9,569 |
9,597 |
9,466 |
9,481 |
9,609 |
9,529 |
||
Grade (g/t) |
0.32 |
0.32 |
0.34 |
0.32 |
0.32 |
0.28 |
0.27 |
0.26 |
0.27 |
0.26 |
||
Recovery (%) |
54.6 |
54.7 |
54.9 |
57.5 |
58.0 |
58.1 |
57.3 |
54.6 |
53.7 |
54.5 |
||
Gold produced (oz) |
45,247 |
52,849 |
57,156 |
56,134 |
56,272 |
49,596 |
46,260 |
43,457 |
44,655 |
43,913 |
||
Gold price (US$/oz) |
1,649 |
1,585 |
1,539 |
1,524 |
1,524 |
1,524 |
1,524 |
1,524 |
1,524 |
1,524 |
||
Unit costs (ZAR/t) |
56.72 |
53.81 |
53.70 |
60.38 |
61.83 |
62.47 |
65.65 |
69.02 |
66.42 |
66.26 |
||
Capex (ZAR000s) |
615,332 |
1,845,126 |
133,981 |
103,879 |
351,166 |
282,273 |
88,836 |
189,391 |
195,644 |
108,019 |
78,080 |
91,945 |
Source: Edison Investment Research, Pan African Resources
Readers should be aware that the schedule presented in Exhibit 3 does not reflect the full life of operations at Mogale owing to space constraints, but only the first 10 of 13 years.
Tax is assumed to be levied according to the standard mining tax formula in South Africa:
Y = 34 - 170/x, where Y is the tax rate to be determined and x is the ratio of taxable income to the total income (expressed as a percentage). Note that these tailings dumps are largely pre-1 May 2004 dumps and, as such, are exempt from royalties.
Assets are presumed to depreciate in a straight line over the life of operations.
Mogale valuation
On the basis of the above assumptions, Edison has calculated the following valuation and financial parameters with respect to Mogale:
■
A valuation – based on the net present value of dividends payable to Pan African from the Mogale operation discounted at Edison’s customary rate of 10% pa – of US$62.5m, or 3.26 US cents per share, which equates to US$53.11 per Mogale resource ounce, US$54.77 per reserve ounce, US$59.44 per ounce of gold mined and US$109.14 per ounce of gold recovered. The profile of value evolution over the period of Mogale’s operational life is presented in the graph below:
Exhibit 4: Mogale life of mine free cash flow and dividend NPV (US$000s and US$ per residual resource oz) |
Source: Edison Investment Research |
■
Note that, at the currently prevailing (real) gold price of US$1,761/oz, we calculate a value for Mogale of US$107.8m, or 5.62 US cents per share, which equates to US$91.66 per Mogale resource ounce, US$94.53 per reserve ounce, US$102.58 per ounce of gold mined and US$188.35 per ounce of gold recovered (ie an uplift of 72.5%).
■
At the end of operations, reserves will have been, to all intents and purposes, fully depleted. We estimate that 37,622oz of resources (ie less than one year’s worth of production) will remain unmined. The gold content of re-deposited tailings will amount to 478,472oz.
■
On this basis, we calculate that the project will enhance Pan African’s earnings per share by an average 1.76 US cents per share in (production) years one to five of the operation and by an average 0.45 US cents per share in years six to 10. Over the first 10 years of operations, it will enhance EPS by an average 1.10 US cents per share, as shown below:
Exhibit 5: Mogale life of mine contribution to PAF EPS and valuation (US cents per share) |
Source: Edison Investment Research |
Note that, although we calculate a negative EPS contribution from Mogale in FY36–38, we also calculate that it will be cash flow positive during this period.
Although Pan African does not currently include MSC mineral resources in the Mogale mine schedule, a conceptual production schedule for this project was applied, based on available information, entailing the processing of reserves of the combined Mogale and MSC TSFs and demonstrated a more robust recovered ounce profile and an extended life of mine for the project in excess of 20 years. The conceptual MSC TSF model increased production by an average of 11koz pa from years six to 13, giving rise to a production profile of an average 54koz pa from year 14 to 20. However, confirmation of the feasibility of including the MSC dumps in the Mogale mine schedule will require further technical studies to be completed and no attempt has therefore been made to model this contingency in this report.
Comparison with Elikhulu
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, albeit at a fractionally higher grade of 0.30g/t (cf Elikhulu’s 0.29g/t).
By way of comparison, Pan African announced the results of an independent 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 ounce) at a gold price of US$1,180/oz and a forex rate of ZAR14.50/US$. At the time, we 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 27% more shares in issue). Now, however, with capex having been expended (albeit with not all associated debt having quite been repaid), we estimate a valuation for Elikhulu of c US$145.97 per initial resource ounce or US$213.19 per remaining resource ounce. As such, and with appropriate caveats, Pan African could acquire for US$2.55/oz (for Mogale alone) an asset that should be worth US$9.88/oz as an in-situ resource (see Gold stars and black holes, published in January 2019), could be worth US$53.11/oz (pre-development) and may be worth up to US$171.05 per remaining ounce (see Exhibit 4) or US$94.09 per initial ounce, post-initial capex and debt repayment; that is, it could be worth approximately an additional c 75% of Elikhulu to the company on the basis of the development of only half the resource and with the remaining (MSC) half providing additional valuation optionality (potentially of the same order of magnitude as Mogale) around subsequent development.
Timelines
Pan African reports that it has received a number of offers from financing institutions and third-party financiers for project funding and expects to finalise a funding package for Mogale later this year. Following in-principle approval by Pan African’s board to further progress the project, the company will commence with the environmental authorisation process and stakeholder engagements. Other critical path timelines are anticipated to be achieved approximately as follows:
Exhibit 6: Mogale timeline to commissioning
Activity |
Approximate date |
Engineering optimisation activities |
June – August 2022 |
Likely project commencement |
September 2022 |
Detailed engineering study |
September 2022 – March 2023 |
Funding package finalised |
October/November 2022 |
Environmental approvals |
March 2023 |
Construction commences |
April 2023 |
Commissioning |
July – December 2024 |
Activity |
Engineering optimisation activities |
Likely project commencement |
Detailed engineering study |
Funding package finalised |
Environmental approvals |
Construction commences |
Commissioning |
Approximate date |
June – August 2022 |
September 2022 |
September 2022 – March 2023 |
October/November 2022 |
March 2023 |
April 2023 |
July – December 2024 |
Source: Pan African Resources, Edison Investment Research
ESG/social impact
As part of the DFS, the Pan African has already conducted extensive engagements with community representatives and other interested organisations from the affected area, including regulatory authorities. This information and the associated Environmental Management Programme Report (EMPR) is being used to compile an action plan to remediate past environmental damage and restore the surface for productive land use, while at the same time investigating effective socio-economic development projects to stimulate the local economy.
PAF will also conduct feasibility studies into the merits of using renewable energy for the new tailings retreatment plant’s energy requirements (as at Elikhulu).
Group production profile
As a result of the inclusion of Mogale’s production profile into our group financial model, whereas we had forecast that group production at Pan African would reach 235.8koz in FY26 previously, we now forecast that it will reach 288.6koz and remain at approximately this level until at least FY30 (with production from Egoli still pending):
Exhibit 7: Estimated Pan African group gold production profile, FY18–26e |
Source: Edison Investment Research, Pan African Resources |
Updated (absolute) valuation
In the light of our inclusion of Mogale into the Pan African production profile (as well as revised external factors such as the gold price and forex rates), our absolute value of Pan African (based on its existing four producing assets including the 24 Level and 25 & 26 Level projects and Mogale) has increased by 10.78c (or 31.9%) from 33.79c/share to 44.67c (albeit excluding any contribution from Egoli, which we are valuing separately, for the moment, as a standalone project at 12.64c/share), 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 8: Pan African estimated life of operations’ diluted EPS and (maximum potential*) DPS |
Source: Pan African Resources, Edison Investment Research. Note: *From FY24. Excludes discretionary exploration investment. |
A bridge chart of the evolution in our valuation is as follows:
Exhibit 9: Bridge chart of PAF valuation evolution, April 2022 to July 2022 (US cents per share) |
Source: Edison Investment Research. |
Notable within the context of the above bridge chart is the material effect of forex on our valuation under the influence of a weak rand and an even weaker sterling versus the US dollar compared with our last note (in particular, the rand-dollar rate has increased by 13.0%, from ZAR14.5595/US$ in April to ZAR16.4531/US$ currently). Including all of its other growth projects and assets as well, our updated total valuation of Pan African as a whole is as follows:
Exhibit 10: Pan African absolute valuation summary (US cents per share)
Project |
Current valuation |
Previous valuation |
Existing producing assets (inc 24 Level and 25 & 26 Level and Mogale projects) |
*44.67 |
33.79 |
FY22 dividend |
1.20 |
N/A |
Fairview Sub-Vertical Shaft project |
0.76 |
0.76 |
Royal Sheba (resource-based valuation) |
0.79 |
0.86 |
Mintails/Mogale* |
N/A |
2.77 |
MC Mining shares |
0.06 |
0.06 |
Sub-total |
47.48 |
38.24 |
EGM underground resource |
0.22–5.24 |
0.22–5.24 |
Sub-total |
47.70–52.72 |
38.46–43.48 |
Egoli |
12.64 |
10.40 |
Total |
60.34–65.36 |
48.86–53.88 |
Source: Edison Investment Research. Note: Numbers may not add up owing to rounding. *Acquisition of Mintails/Mogale is agreed, subject to due diligence.
Historical relative and current peer group valuation
Historical relative valuation
Exhibit 11 below depicts Pan African’s average share price in each of its financial years from FY10 to FY21 and compares this with normalised headline earnings per share (HEPS) in the same year. For FY22 and FY23, the current share price (19.60p) is compared with our forecast normalised HEPS for FY22 to FY23. As is apparent from the graph, Pan African’s price to normalised HEPS ratios of 5.2x and 5.5x for FY22 and FY23, respectively, (based on our forecasts, see Exhibit 15) are very close to the bottom of its recent historical range of 4.1–14.8x for the period FY10–21:
Exhibit 11: Pan African historical price to normalised HEPS** ratio, FY10–FY23e |
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 Pan African’s average year one price to normalised EPS ratio of 8.9x for FY10–21 is applied to our normalised earnings forecasts, then it implies a share price for Pan African of c 37.83p in FY22 followed by 40.78p in FY23.
Relative peer group valuation
In the meantime, it may be seen that Pan African remains cheaper than its South Africa- and London-listed gold mining peers on 72% of comparable common valuation measures (26 out of 36 individual measures in the table below) if our forecasts are applied or 69% (25 out of 36 individual measures) if consensus forecasts are applied.
Exhibit 12: Comparative valuation of Pan African 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 |
3.8 |
3.2 |
8.0 |
6.3 |
2.2 |
2.7 |
Gold Fields |
3.9 |
3.5 |
8.7 |
8.8 |
3.8 |
3.4 |
Sibanye |
2.0 |
1.9 |
3.3 |
3.0 |
10.7 |
12.2 |
Harmony |
3.9 |
2.9 |
8.6 |
6.5 |
0.9 |
1.6 |
Centamin |
2.6 |
2.1 |
10.7 |
8.9 |
6.0 |
7.5 |
Endeavour Mining (consensus) |
7.3 |
8.0 |
12.3 |
11.0 |
3.0 |
3.3 |
Average (excluding Pan African) |
3.9 |
3.6 |
8.6 |
7.4 |
4.4 |
5.1 |
Pan African (Edison) |
2.9 |
2.5 |
4.5 |
4.3 |
5.0 |
7.5 |
Pan African (consensus) |
3.7 |
3.1 |
5.6 |
4.3 |
5.2 |
7.0 |
Source: Edison Investment Research, Refinitiv. Note: Consensus and peers priced at 5 July 2022.
Alternatively, applying Pan African’s peers’ average year one P/E ratio of 8.6x to our forecast normalised HEPS forecast of 5.20c/share for FY22 implies a share price for the company of 36.9p at prevailing forex rates. Applying its peers’ average year two P/E ratio of 7.4x to our forecast normalised HEPS forecast of 5.54c/share implies a share price of 33.7p.
Financials
Pan African reported cash flow from operating activities in excess of US$100m in both FY20 and FY21 and we forecast that it will continue generating cash at or above these levels into the foreseeable future. At the same time, it reported net debt to financial institutions of only US$13.3m at end-December 2021, which equated to a gearing ratio (net debt/equity) of only 4.9% and a leverage ratio (net debt/[net debt+equity]) of just 4.6%. Notwithstanding its capex (now including Mogale), share buyback and dividend commitments over the course of the next two years, we are continuing to forecast that the company will be, to all intents and purposes, free of net debt to financial institutions by the end of FY22 and will remain so by the end of FY24, when capex relating to Mogale is scheduled to decline sharply:
Exhibit 13: Pan African previous estimated net debt* profile forecast, FY17 to FY24e (US$000) |
Exhibit 14: Pan African current net debt* profile forecast, FY17 to FY24e (US$000) |
Source: Edison Investment Research, Pan African Resources. Note: *To financial institutions. |
Source: Edison Investment Research, Pan African Resources. Note: *To financial institutions. |
Exhibit 13: Pan African previous estimated net debt* profile forecast, FY17 to FY24e (US$000) |
Source: Edison Investment Research, Pan African Resources. Note: *To financial institutions. |
Exhibit 14: Pan African current net debt* profile forecast, FY17 to FY24e (US$000) |
Source: Edison Investment Research, Pan African Resources. Note: *To financial institutions. |
Note that, including all other components, total net debt as at end-December 2021 amounted to US$28.2m.
Exhibit 15: Financial summary
US$'000s |
2018 |
2019 |
2020 |
2021 |
2022e |
2023e |
||
Year end 30 June |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
||||||||
Revenue |
|
|
145,829 |
218,818 |
274,107 |
368,915 |
371,949 |
365,271 |
Cost of sales |
(107,140) |
(152,980) |
(158,457) |
(208,815) |
(198,078) |
(169,586) |
||
Gross profit |
38,689 |
65,838 |
115,650 |
160,100 |
173,871 |
195,685 |
||
EBITDA |
|
|
38,131 |
65,484 |
115,176 |
156,646 |
167,603 |
191,000 |
Operating profit (before GW and except.) |
|
|
31,506 |
49,256 |
93,673 |
124,572 |
136,701 |
158,206 |
Intangible amortisation |
0 |
0 |
0 |
0 |
0 |
0 |
||
Exceptionals |
(16,521) |
10,596 |
(28,593) |
(12,819) |
(11,911) |
(1,504) |
||
Other |
0 |
0 |
0 |
0 |
0 |
0 |
||
Operating profit |
14,985 |
59,852 |
65,079 |
111,753 |
124,790 |
156,703 |
||
Net interest |
(2,222) |
(12,192) |
(12,881) |
(6,919) |
(2,344) |
(298) |
||
Profit before tax (norm) |
|
|
29,284 |
37,064 |
80,791 |
117,653 |
134,356 |
157,909 |
Profit before tax (FRS 3) |
|
|
12,763 |
47,660 |
52,198 |
104,834 |
122,445 |
156,405 |
Tax |
2,826 |
(8,174) |
(7,905) |
(30,141) |
(34,152) |
(51,818) |
||
Profit after tax (norm) |
32,110 |
28,890 |
72,887 |
87,511 |
100,204 |
106,090 |
||
Profit after tax (FRS 3) |
15,589 |
39,486 |
44,293 |
74,692 |
88,293 |
104,586 |
||
Average number of shares outstanding (m) |
1,809.7 |
1,928.3 |
1,928.3 |
1,928.3 |
1,925.4 |
1,916.5 |
||
EPS - normalised (c) |
|
|
1.31 |
1.64 |
3.78 |
4.54 |
5.20 |
5.54 |
EPS - FRS 3 (c) |
|
|
0.87 |
2.05 |
2.30 |
3.87 |
4.59 |
5.46 |
Dividend per share (c) |
0.00 |
0.15 |
0.84 |
1.27 |
1.18 |
1.76 |
||
Gross margin (%) |
26.5 |
30.1 |
42.2 |
43.4 |
46.7 |
53.6 |
||
EBITDA margin (%) |
26.1 |
29.9 |
42.0 |
42.5 |
45.1 |
52.3 |
||
Operating margin (before GW and except.) (%) |
21.6 |
22.5 |
34.2 |
33.8 |
36.8 |
43.3 |
||
BALANCE SHEET |
||||||||
Fixed assets |
|
|
315,279 |
361,529 |
314,968 |
398,533 |
456,105 |
503,799 |
Intangible assets |
56,899 |
49,372 |
43,466 |
50,548 |
51,703 |
53,789 |
||
Tangible assets |
254,247 |
305,355 |
270,286 |
346,922 |
403,338 |
448,946 |
||
Investments |
4,134 |
6,802 |
1,216 |
1,064 |
1,064 |
1,064 |
||
Current assets |
|
|
29,009 |
31,601 |
53,648 |
84,558 |
95,298 |
145,236 |
Stocks |
4,310 |
6,323 |
7,626 |
11,356 |
12,453 |
12,186 |
||
Debtors |
22,577 |
18,048 |
11,245 |
37,211 |
26,612 |
26,042 |
||
Cash |
922 |
5,341 |
33,530 |
35,133 |
55,375 |
106,150 |
||
Current liabilities |
|
|
(44,395) |
(63,855) |
(78,722) |
(105,978) |
(111,044) |
(136,644) |
Creditors |
(37,968) |
(39,707) |
(62,806) |
(75,303) |
(80,370) |
(117,069) |
||
Short-term borrowings |
(6,426) |
(24,148) |
(15,916) |
(30,675) |
(30,675) |
(19,575) |
||
Long-term liabilities |
|
|
(152,906) |
(145,693) |
(106,276) |
(93,482) |
(94,515) |
(95,786) |
Long-term borrowings |
(112,827) |
(109,618) |
(73,333) |
(28,011) |
(28,011) |
(28,011) |
||
Other long-term liabilities |
(40,078) |
(36,076) |
(32,943) |
(65,471) |
(66,504) |
(67,774) |
||
Net assets |
|
|
146,988 |
183,582 |
183,620 |
283,632 |
345,844 |
416,605 |
CASH FLOW |
||||||||
Operating cash flow |
|
|
5,345 |
59,822 |
73,399 |
124,549 |
156,341 |
178,858 |
Net Interest |
(6,076) |
(14,685) |
(10,834) |
(5,623) |
(2,344) |
(298) |
||
Tax |
(1,634) |
(4,497) |
(5,804) |
(18,902) |
(13,588) |
(13,510) |
||
Capex |
(127,279) |
(52,261) |
(30,849) |
(44,151) |
(88,474) |
(80,488) |
||
Acquisitions/disposals |
6,319 |
466 |
207 |
3 |
0 |
0 |
||
Financing |
11,944 |
(0) |
0 |
0 |
(3,393) |
0 |
||
Dividends |
(11,030) |
(2,933) |
(2,933) |
(17,782) |
(28,300) |
(22,688) |
||
Net cash flow |
(122,411) |
(14,088) |
23,186 |
38,095 |
20,242 |
61,874 |
||
Opening net debt/(cash) |
|
|
3,138 |
118,332 |
128,424 |
55,719 |
23,553 |
3,311 |
Exchange rate movements |
(619) |
537 |
1,663 |
7,979 |
0 |
0 |
||
Other |
7,836 |
3,459 |
47,856 |
(13,907) |
0 |
0 |
||
Closing net debt/(cash) |
|
|
118,332 |
128,424 |
55,719 |
23,553 |
3,311 |
(58,564) |
Source: Company sources, Edison Investment Research
|
|
Research: Metals & Mining
Alkane Resources has made a number of seminal announcements since our last note. The first concerned a 244koz (or 37%) increase in the resource at Roswell, which brings the underground Roswell life extension in FY29â31 ever closer to fruition. However, by far the more important is the announcement of a maiden resource at Boda in the Northern Molong Porphyry Project of a globally significant 5.2Moz, or 10.1Moz AuE (cf a prior Edison estimate of 5.5Moz Au or 9.8Moz AuE â see Exhibit 1). This note looks at Boda in the wake of this announcement, including its potential valuation and development options.
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