Last close As at 05/08/2026
GBP1.04
▲ 6.95 (7.15%)
Market capitalisation
GBP2,539m
Research: Metals & Mining
On 6 November, Pan African (PAF) announced that it had produced 37,729oz gold in Q119 (an annualised production rate of 150,916oz) and that it was confident of achieving its production guidance of c 170,000oz for FY19 (implying a steady state production rate of 44,090oz per quarter for the remaining three quarters of the year). This should be eminently achievable now that Elikhulu has reached its target throughput rate of 1Mt in October to produce c 145kg (4,600oz) gold per month.
Pan African Resources |
On track for 170koz in FY19 |
Q119 quarterly update |
Metals & mining |
12 November 2018 |
Share price performance
Business description
Next events
Analyst
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||
On 6 November, Pan African (PAF) announced that it had produced 37,729oz gold in Q119 (an annualised production rate of 150,916oz) and that it was confident of achieving its production guidance of c 170,000oz for FY19 (implying a steady state production rate of 44,090oz per quarter for the remaining three quarters of the year). This should be eminently achievable now that Elikhulu has reached its target throughput rate of 1Mt in October to produce c 145kg (4,600oz) gold per month.
Year end |
Revenue (£m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
06/17 |
167.8 |
19.4 |
1.22 |
0.45 |
7.0 |
5.3 |
06/18 |
154.2 |
2.4 |
1.60 |
0.00 |
5.3 |
N/A |
06/19e |
160.1 |
31.8 |
1.09 |
0.47 |
7.8 |
5.5 |
06/20e |
187.1 |
58.2 |
1.83 |
0.86 |
4.6 |
10.1 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles and exceptional items.
Barberton leads the charge
Barberton Mines produced 27,201oz in Q119 (annualised 108,804oz), of which 21,278oz (annualised 85,112oz) was from underground operations and 5,923oz (annualised 23,692oz) was from the Barberton Tailings Retreatment Project (BTRP). This compares with our full-year estimates of 84,641oz from underground sources and 20,000oz from the BTRP, ie Barberton is currently performing above our expectations. In contrast, the Evander Tailings Retreatment Project (ETRP) produced 3,819oz (15,276oz annualised) cf our expectation of 20,000oz for the full year – probably owing to a reduction in higher-grade material for processing from surface feedstocks (as in H218) – although this is more than made up for by 3,815oz (annualised 15,260oz) of mining and vamping from Evander underground’s remnant high-grade stopes ahead of preparations for 8 Shaft pillar mining from Q319 (cf our prior expectation of zero production from Evander underground sources in FY19).
Valuation: c 100% price upside potential
Our previous headline absolute valuation of PAF was 12.50p from its five producing assets (including Elikhulu) and 17.01p once new projects and other assets are taken into account, plus the value of c 20.1m underground Witwatersrand ounces, which could lie anywhere in the range of 0.17–4.15p per share, depending on market conditions. While there is an upside risk to our forecasts in the light of PAF’s operational update, for the moment, we have opted to leave them and our valuation unchanged (in part, in recognition of the recent strength of the rand), but will reassess both at the time of PAF’s H119 results in February. In the meantime, if PAF’s historical average price to normalised EPS ratio of 9.4x in the period FY10–18 is applied to our forecasts, its share price could be expected to climb to 10.2p in FY19 and 17.2p in FY20. It also remains cheaper than its South African- and London-listed gold mining peers on at least 91% of valuation measures on the basis of our forecasts, or 94% on the basis of consensus forecasts. Finally, based on our assumptions, its dividend yield is the ninth highest of the 64 precious metals companies expected to pay a dividend over the course of the next 12 months.
Exhibit 1: Financial summary
£'000s |
2013 |
2014 |
2015 |
2016 |
2017 |
2018 |
2019e |
2020e |
||
Year end 30 June |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
||||||||||
Revenue |
|
|
133,308 |
154,202 |
140,386 |
168,404 |
167,759 |
154,200 |
160,111 |
187,067 |
Cost of sales |
(71,181) |
(106,394) |
(110,413) |
(108,223) |
(134,007) |
(138,800) |
(104,226) |
(105,200) |
||
Gross profit |
62,127 |
47,808 |
29,973 |
60,181 |
33,752 |
15,400 |
55,885 |
81,867 |
||
EBITDA |
|
|
53,276 |
44,165 |
28,448 |
57,381 |
32,417 |
14,800 |
54,491 |
79,237 |
Operating profit (before GW and except.) |
47,278 |
34,142 |
18,110 |
46,925 |
21,924 |
3,800 |
41,334 |
66,156 |
||
Intangible amortisation |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
||
Exceptionals |
7,232 |
(12) |
(198) |
(12,183) |
(1,248) |
(122,300) |
(1,252) |
(1,252) |
||
Other |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
||
Operating profit |
54,510 |
34,130 |
17,912 |
34,742 |
20,676 |
(118,500) |
40,082 |
64,904 |
||
Net interest |
197 |
(191) |
(2,109) |
(1,006) |
(2,523) |
(1,400) |
(9,555) |
(7,988) |
||
Profit before tax (norm) |
|
|
47,475 |
33,951 |
16,001 |
45,919 |
19,401 |
2,400 |
31,779 |
58,167 |
Profit before tax (FRS 3) |
|
|
54,707 |
33,939 |
15,803 |
33,736 |
18,153 |
(119,900) |
30,527 |
56,915 |
Tax |
(12,133) |
(7,155) |
(4,133) |
(8,234) |
(243) |
26,600 |
(10,774) |
(22,793) |
||
Profit after tax (norm) |
35,342 |
26,796 |
11,868 |
37,685 |
19,158 |
29,000 |
21,004 |
35,374 |
||
Profit after tax (FRS 3) |
42,574 |
26,785 |
11,670 |
25,502 |
17,910 |
(93,300) |
19,753 |
34,122 |
||
Average number of shares outstanding (m) |
1,619.8 |
1,827.2 |
1,830.4 |
1,811.4 |
1,564.3 |
1,809.2 |
1,928.3 |
1,928.3 |
||
EPS - normalised (p) |
|
|
2.18 |
1.46 |
0.64 |
2.08 |
1.22 |
1.60 |
1.09 |
1.83 |
EPS - FRS 3 (p) |
|
|
2.63 |
1.47 |
0.64 |
1.41 |
1.14 |
(5.16) |
1.02 |
1.77 |
Dividend per share (p) |
0.83 |
0.82 |
0.54 |
0.88 |
0.45 |
0.00 |
0.47 |
0.86 |
||
Gross margin (%) |
46.6 |
31.0 |
21.4 |
35.7 |
20.1 |
10.0 |
34.9 |
43.8 |
||
EBITDA margin (%) |
40.0 |
28.6 |
20.3 |
34.1 |
19.3 |
9.6 |
34.0 |
42.4 |
||
Operating margin (before GW and except.) (%) |
35.5 |
22.1 |
12.9 |
27.9 |
13.1 |
2.5 |
25.8 |
35.4 |
||
BALANCE SHEET |
||||||||||
Fixed assets |
|
|
249,316 |
223,425 |
220,150 |
230,676 |
273,635 |
245,100 |
256,840 |
253,124 |
Intangible assets |
38,628 |
37,040 |
37,713 |
38,682 |
41,425 |
49,200 |
50,936 |
52,673 |
||
Tangible assets |
209,490 |
185,376 |
181,533 |
190,725 |
224,687 |
192,800 |
202,803 |
197,352 |
||
Investments |
1,199 |
1,010 |
905 |
1,269 |
7,523 |
3,100 |
3,100 |
3,100 |
||
Current assets |
|
|
26,962 |
23,510 |
17,218 |
22,016 |
37,090 |
20,000 |
21,942 |
52,037 |
Stocks |
6,596 |
5,341 |
3,503 |
4,399 |
7,583 |
2,700 |
5,344 |
6,244 |
||
Debtors |
15,384 |
12,551 |
10,386 |
14,891 |
14,813 |
14,800 |
11,859 |
13,856 |
||
Cash |
4,769 |
5,618 |
3,329 |
2,659 |
9,447 |
700 |
2,940 |
30,138 |
||
Current liabilities |
|
|
(24,066) |
(24,012) |
(22,350) |
(32,211) |
(31,251) |
(33,400) |
(35,902) |
(43,660) |
Creditors |
(23,202) |
(19,257) |
(17,301) |
(25,230) |
(27,105) |
(28,200) |
(30,702) |
(38,460) |
||
Short-term borrowings |
(864) |
(4,755) |
(5,049) |
(6,981) |
(4,146) |
(5,200) |
(5,200) |
(5,200) |
||
Long-term liabilities |
|
|
(80,004) |
(63,528) |
(67,850) |
(69,506) |
(62,893) |
(115,900) |
(116,298) |
(117,329) |
Long-term borrowings |
(11,133) |
(8,141) |
(16,313) |
(18,456) |
(12,290) |
(86,500) |
(86,500) |
(86,500) |
||
Other long-term liabilities |
(68,871) |
(55,387) |
(51,537) |
(51,049) |
(50,603) |
(29,400) |
(29,798) |
(30,829) |
||
Net assets |
|
|
172,208 |
159,396 |
147,167 |
150,975 |
216,581 |
115,800 |
126,582 |
144,173 |
CASH FLOW |
||||||||||
Operating cash flow |
|
|
61,618 |
45,996 |
26,423 |
47,130 |
29,945 |
(1,900) |
47,068 |
75,285 |
Net Interest |
314 |
(606) |
(2,109) |
(1,006) |
(2,141) |
(1,400) |
(9,555) |
(7,988) |
||
Tax |
(13,666) |
(8,536) |
(3,943) |
(7,777) |
(8,003) |
0 |
(10,377) |
(21,762) |
||
Capex |
(27,197) |
(21,355) |
(19,554) |
(14,097) |
(36,748) |
(94,200) |
(24,897) |
(9,366) |
||
Acquisitions/disposals |
(96,006) |
0 |
(760) |
(30,999) |
8,364 |
4,400 |
0 |
0 |
||
Financing |
47,112 |
349 |
(235) |
15,207 |
34,638 |
9,800 |
0 |
0 |
||
Dividends |
0 |
(14,684) |
(15,006) |
(9,882) |
(13,290) |
(8,200) |
0 |
(8,971) |
||
Net cash flow |
(27,826) |
1,164 |
(15,184) |
(1,425) |
12,764 |
(91,500) |
2,240 |
27,198 |
||
Opening net debt/(cash) |
|
|
(18,913) |
7,228 |
7,278 |
18,033 |
22,778 |
6,989 |
91,000 |
88,760 |
Exchange rate movements |
594 |
(839) |
(276) |
812 |
238 |
(1,447) |
0 |
0 |
||
Other |
1,090 |
(375) |
4,705 |
(4,131) |
2,787 |
8,936 |
0 |
0 |
||
Closing net debt/(cash) |
|
|
7,228 |
7,278 |
18,033 |
22,778 |
6,989 |
91,000 |
88,760 |
61,562 |
Source: Company sources, Edison Investment Research
|
|
The economic and consumer environment in Italy remained challenging in Q3, and Centrale del Latte d’Italia (CLI) also faced tough comparatives as we start to cycle a full year of price increases. The export business continued to be a stand-out performer, albeit from a low base. We leave our forecasts unchanged, but we note the current headwinds are unlikely to abate in the near future. We expected H2 to be more difficult than H1 as the comparatives got tougher, so we leave our estimates unchanged. Our fair value remains €3.35 per share.