| Wed 10 Feb 2010, 9:00 | | PAN - Pan African Resources Plc - Interim Results for the 6 months ended 31 |
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PAN
PAN
PAN - Pan African Resources Plc - Interim Results for the 6 months ended 31
December 2009 and renewal of cautionary announcement
Pan African Resources PLC
(Incorporated and registered in England and Wales under Companies Act 1985
with registered number 3937466 on 25 February 2000)
ISIN: GB0004300496
Share code on AIM: PAF
Share code on JSE: PAN
(`Pan African` or the `Company` or the `Group`)
Interim Results for the 6 months ended 31 December 2009 and renewal of
cautionary announcement
Pan African is pleased to report its interim results for the 6 months ended 31
December 2009.
Highlights
Corporate
- Earnings before interest, taxes, depreciation and amortisation (`EBITDA`)
of GBP8.6 million (2008: GBP8.6 million).
- Revenue increased by 16.4% to GBP29 million (2008: GBP24.9 million).
- Unhedged and debt-free.
- Barberton Mines Pty (Ltd) (`Barberton Mines`) now a wholly-owned
subsidiary (previously 74% held).
- Cyril Ramaphosa joined the board as Non-Executive Chairman.
- Pan African moved from Altx to the main board of the JSE Limited on 1
December 2009.
Mining Operations
- The Fairview section of Barberton Mines, achieved 2 million fatality free
shifts over a 6 year period. *
- Major progress made on minimising criminal artisanal mining activity
(`criminal mining`).
- 4.7% decrease in underground production to 45,385oz (2008: 47,634oz),
principally due to non-recurring work stoppage to address criminal
mining.
- Headgrade remains sustainable at above 10g/t (2008: 11.40g/t).
- Total cash cost of ZAR164,697/kg (2008: ZAR134,581/kg).
Near Term Production
- Resource base at Phoenix Platinum Mining (Pty) Ltd (`Phoenix Platinum`)
increased by 12.5% to 405,000oz (2008: 360,000oz).
* Post period under review
Nature of Business
Pan African is a gold mining group that produces approximately 100,000oz per
year. Its focus is on developing low cost, high margin production or near
term production projects. The Group is largely debt free, is unhedged and is
able to fund all of its current on-mine capital from internal cash flows.
Financial Performance
For the period under review, gross revenue amounted to GBP29 million (2008:
GBP24.9 million), with the total cost of production being GBP18.9 million
(2008: GBP14.1 million). Tax expense was GBP2.7 million (2008: GBP3.7
million), other expenses were GBP1.1 million (2008: GBP0.89 million), and the
final Central African Republic exploration impairment charge was GBP0.349
million (2008: GBP1.3 million Ghana exploration impairment charge).
EBITDA for the period under review was GBP8.6 million (2008: GBP8.6 million).
Attributable profit increased to GBP4.5 million (2008: GBP2.6 million). Total
cost of production increased by 10.6% in South African Rand ("ZAR") terms.
Higher costs expressed in ZAR terms were linked to increased security costs
(up 68%), electricity (up 35%), and salaries and wages (up 19%). The ZAR cost
per kilogram increase of 22% can be directly attributed to the additional
costs highlighted above as well as a 10% reduction in gold ounces sold as a
result of the mine stoppage detailed in the "Criminal Mining" section below.
On a normalised basis, without the additional security costs, there would have
been an increase of 13% in the ZAR cost per kilogram.
The increase in mining profit is a result of the Company`s increased holding
in Barberton Mines. The Company`s holding was increased from 74% to 100% with
effect from 21 August 2009, as a result of Shanduka Gold (Pty) Ltd
(`Shanduka`) exchanging its 26% stake in Barberton Mines for a 21% stake in
Pan African (detailed in the "Share Issue" section below). Although the
average US$ spot gold price in the period under review increased by 25% to
US$1032 (2008: US$824), the US$:ZAR exchange rate strengthened by 14% to
ZAR7.64 (2008: ZAR8.88), and the effective ZAR gold price achieved was only 8%
higher at ZAR253,510/kg (2008: ZAR235,338/kg). The profit margin in ZAR terms
decreased by 11.8% to ZAR88,813/kg (2008: ZAR100,757/kg). Income tax decreased
to GBP2.7 million (2008: GBP3.7 million) as a result of a decrease in profit
before tax. Profit before tax in ZAR terms was 23% lower at ZAR92 million
(2008: ZAR119.7 million).
Basic headline earnings per share (`HEPS`) increased by 2.4% to 0.3638 pence
(2008: 0.3553 pence). HEPS increased marginally from the comparable period as
result of a 23% increase in total attributable headline earnings, whilst the
weighted average number of shares increased by only 20%. Total headline
earnings in Great British Pounds (`GBP`) increased principally due to the
weaker GBP:ZAR exchange rate. In ZAR terms, HEPS decreased by 16% to 4.54
cents (2008: 5.37 cents). The total attributable headline earnings in ZAR
increased in the current year as a result of consolidating 100% of the
earnings from 21 August 2009, but the percentage increase in earnings was
lower than the increase in weighted average numbers of shares in issue, due to
the lower gold ounces sold in the current period.
Earnings per share (`EPS`) increased in the current year both in ZAR and GBP
due to a reduced impairment charge for the period of GBP0.349 million (2008:
GBP1.3 million) and also because of the Group consolidating 100% of the
profits of Barberton Mines from 21 August 2009.
6 months ended 6 months ended
31 Dec 2009 31 Dec 2008
(Unaudited) (Unaudited)
Revenue (GBP) 29,044,934 24,940,383
EBITDA (GBP) 8,597,517 8,552,011
Attributable profit (GBP) 4,467,939 2,569,804
EPS (pence) 0.34 0.23
HEPS (pence) 0.36 0.36
Weighted average number of shares
in issue 1,324,071,776 1,100,517,684
Review of Barberton Mines
Safety and Training
The safety performance at Barberton Mines reflected a marked improvement
during the period under review. Lost time injuries decreased to 10 (2008: 25)
and reportable injuries to 3 (2008: 5). The Lost Time Injury Frequency Rate
improved to 3.6 (2008: 6.4) and the Serious Injury Frequency Rate improved to
1.1 (2008: 1.7). The number of shifts lost decreased to 75 (2008: 106),
however the lost day severity rate increased marginally to 7.5 (2008: 6.2).
The Company is pleased to report that Barberton Mines as a whole achieved 1.2
million fatality free shifts at the end of December 2009, and more recently
the Fairview section has achieved 2 million fatality free shifts post the
period under review on 5 February 2010, accomplished over a six year period.
Operating Performance
A total of 45,971oz (2008: 51,186oz) of gold was sold from Barberton Mines
(which comprises the Fairview, Sheba and New Consort sections), a decrease of
10% from the previous year. Total underground production decreased by 4.7% to
45,385oz (2008: 47,634oz). Tons milled decreased by 4.6% to 152,584 (2008:
159,919). Despite a decrease in the headgrade of 11% to 10.11g/t (2008:
11.4g/t), the head grade achieved was above 10g/t as forecasted and is
sustainable at these levels. The reductions in volumes milled and gold
produced are primarily attributed to certain sections of the mine being
stopped for a period of two weeks in December 2009 to combat criminal mining -
please refer to the "Criminal Mining" section for a more detailed explanation.
6 months 6 months 6 months 6 months 6 months
ended ended ended ended ended
31 Dec 31 Dec 31 Dec 31 Dec 31 Dec
09 08 07 06 05
Tons Milled t 152,584 159,919 161,455 166,377 157,452
Headgrade g/t 10.11 11.40 9.05 9.24 11.44
Overall
Recovery % 91 91 92 92 92
Production Underground oz 45,385 47,634 43,145 45,332 53,369
Calcine
Dump oz - 3,545 3,601 - -
Sold -
Mining
Sources oz 45,971 51,186 47,486 45,749 52,983
Average
Price: Spot
Price USD/
Achieved oz 1,032 824 721 567 464
Average
Price: Hedge
Achieved USD/
oz - - 460 406 430
Average
Price: Spot
Achieved ZAR/
KG 253,510 235,338 165,782 144,564 96,767
Total Cash USD/
cost oz 670 451 521 516 415
Total Cash ZAR/
cost KG 164,697 134,581 114,640 104,471 82,671
GBP
EBITDA `000 8,598 8,552 4,001 3,049 2,153
GBP
Depreciation `000 1,375 1,066 806 1,077 1,042
Capital GBP
Expenditure `000 2,199 2,282 1,532 867 569
Exchange
rate - ZAR/
average GBP 12.48 15.13 14.05 13.68 11.48
Exchange
rate - ZAR/
closing GBP 11.94 13.78 13.77 13.78 11.06
Exchange
rate - ZAR/
average US$ 7.64 8.88 6.94 7.22 6.53
Exchange
rate - ZAR/
closing US$ 7.39 9.55 6.86 6.99 6.31
*74% of the 2007 and 2008 results are attributable to the equity shareholders
of Pan African, 2005 - 2006 results attributable to Metorex Limited
("Metorex"). Effective 21 August 2009, 100% of Barberton Mines` earnings
attributable to Pan African.
**Total cash cost excludes depreciation and capital expenditure.
Mineral Resource Management
A full time Mineral Resource Manager has been appointed to Barberton Mines.
The Mineral Resource Management department`s main objective will be to ensure
that a headgrade of above 10g/t is achieved and sustained, therefore improving
mining flexibility and extending the Life of Mine.
Capital and Reserve Projects
At Barberton Mines there are six mining projects and three exploration
development projects aimed at the replacement of reserves. The mine commenced
with two new reserve replacement projects this year and continued with seven
projects from the previous year. The two new projects are the Consort 37 inter-
level exploration drive and the Fairview 54 level re-equipping and
development. The 60/62 level development project at Fairview is estimated to
be completed by the end of the current financial year.
The development advances achieved for the 6 months to 31 December 2009 were a
total of 1,175m (2008: 1,095m). The potential resource target of the reserve
replacement projects increased to a total of approximately 744,000 ounces.
Criminal Mining
Criminal mining activity increased significantly both in frequency and in
severity during the first months of the period under review. Unacceptable
actions by the criminal miners jeopardised the safety of employees and
operations of Barberton Mines. Management therefore made a deliberate
decision to temporarily cease production in certain sections of the mine over
a two-week period in order to directly address the issue. Starting at the
beginning of December the mine initiated a systematic underground sweep
(`Operation Clean Sweep`) of workings, utilising specialised contract security
forces, in co-operation with local and regional law enforcement. In
conjunction with the underground initiative, the contract security presence on
surface was also increased to restrict access to mine property.
As a result of the actions described above security expenditure for the period
under review was increased by 68% to ZAR9.2 million (2008: ZAR 5.5 million).
Management estimates financial losses due to gold theft to be significantly
higher than the costs of increased security efforts, and the recent security
initiatives are expected to improve gold output and profits from the mine.
Operation Clean Sweep has been a resounding success and criminal mining
activity on the mine has been significantly reduced. A total of 326 criminal
miners were arrested during December as a result of Operation Clean Sweep. A
total of 509 criminal miners were arrested for the period under review (2008:
370). The Company has appointed an executive solely dedicated to security at
Barberton Mines, reporting directly to the Chief Executive Officer. The
current approach to security at Barberton Mines will be maintained and further
improved to ensure criminal activity is kept to a minimum.
Review of the Phoenix Platinum Near Term Production Project
Results of metallurgical test work performed to date by Mintek to evaluate the
process indicate recoveries of up to 50% and concentrate grades of
approximately 150g/t. The next phase of metallurgical test work is planned to
optimise the metallurgical process in order to maximise recoveries and improve
concentrate grades.
Update on engineering and design work
Total capital expenditure for the planned 20,000 tons per month Chrome
Tailings Retreatment Plant ("CTRP") is estimated to be ZAR100 million.
The Company is in the process of negotiating a preferred CTRP location, if
completed by Q3 2010 this will allow production to commence in the second half
of 2011. Furthermore, the Company is evaluating other opportunities in an
effort to fast-track production output and grow the project resource base
further.
Review of the Manica Gold Growth Project
The Company is continuing an investigation into the feasibility of a heap
leach operation to exploit the oxide resource at Manica. The focus during the
first half of 2010 is to complete the necessary test work at SGS in South
Africa to ascertain the viability of a heap leach operation at Manica.
Subsequent to obtaining the results from such test work, the feasibility of a
small scale heap-leach gold mine will be assessed.
Capital Expenditure and Commitments
Capital expenditure at Barberton Mines totalled GBP2.199 million of which
development capital was GBP1.266 million and maintenance capital was GBP0.933
million. Capital expenditure on growth projects totalled GBP0.220 million.
There were no material contracted capital commitments at the end of the
period. Operating lease commitments, which fall due within the next year,
amounted to GBP0.156 million.
Shares Issued
On 19 June 2009 the Company announced that it had concluded an agreement with
Shanduka and Shanduka`s holding company, Shanduka Resources (Proprietary)
Limited, whereby Pan African would acquire Shanduka`s 26% shareholding in
Barberton Mines, in exchange for the issue of new ordinary shares in Pan
African to Shanduka. On 21 August 2009 Pan African announced that the
transaction had become unconditional and that the shares had been issued and
allotted to Shanduka. Barberton Mines became a wholly-owned subsidiary of Pan
African from this date. The new shares issued to Shanduka (295,751,549
ordinary shares) represents 21% of the enlarged issued share capital of Pan
African following implementation of this transaction. Shanduka acquired a
further 5% of the issued ordinary share capital of Pan African via the Metorex
book build, thereby increasing its shareholding to 26%.
For accounting purposes the Group consolidated 100% of profits from Barberton
Mines from 21 August 2009. The accounting treatment for the Shanduka and Pan
African transaction was in terms of IAS 27 Changes in the ownership interests.
Changes in a parent`s ownership interest in a subsidiary that do not result in
a loss of control are accounted for as equity transactions (i.e. transactions
with owners in their capacity as owners).
Therefore the additional investment of GBP14,760,214 through the Pan African
share issue to Shanduka and non-controlling interest of GBP4,059,121 as at 21
August 2009 were eliminated on consolidation, and the Groups merger reserve
increased by GBP10,701,093.
Directorship Change
During the period under review, Mr Maritz Smith resigned as Financial Director
with effect from 21 August 2009 and was replaced by Mr Cobus Loots with effect
from 17 September 2009.
Mr Cyril Ramaphosa was appointed as the Company`s Non-Executive Chairman and
Mr Rowan Smith was appointed as a Non-Executive Director, both with effect
from 17 September 2009.
Dividends
The Company has adopted a policy whereby dividends are considered, and where
deemed appropriate by the Board, declared, on an annual basis. Pan African
will consider a final dividend subsequent to the finalisation of financial
year-end results. The consideration of any dividend will take account of
cashflow requirements and growth plans, whilst recognising that, where
possible, a consistent dividend policy increases shareholder value.
Accounting Policies
The financial information set out in this announcement does not constitute the
Company`s statutory accounts for the half year ended 31 December 2009. The
financial information has been prepared in accordance with the recognition and
measurement criteria of the International Financial Reporting Standards
(`IFRS`) and the JSE Limited listing requirements.
The unaudited interim results have been prepared and presented in accordance
with, and containing the information required by IFRS on Interim Financial
Reporting, IAS 34. The accounting policies are consistent with the prior
year`s annual financial statements and deal with new disclosure requirements
by IFRS, specifically IAS 1 (Presentation of Financial Statements) and IFRS 8
(Operating Segments).
Operating Segments
IFRS 8 requires an entity to report financial and descriptive information
about its reportable segments. Reportable segments are operating segments or
aggregations of operating segments. The Group considers gold mining to be its
material operating segment as this is the main business activity which the
Group earns revenues and incurs expenses. The operating segments allocation of
assets and liabilities have been summarised as follows:
- Gold mining total assets of GBP37,757,322 (2008: GBP34,925,555) and total
liabilities GBP15,783,514 (2008: GBP15,215,748).
- Corporate and Growth Projects total assets GBP41,451,632 (2008:
GBP36,612,907) and total liabilities GBP237,019 (2008: GBP351,972).
Future Prospects
- Focus on productivity and efficiency improvements to counter cost
pressures and increase margins.
- Encouraging production forecast for the next 6 months.
- Significant progress in eliminating criminal mining activities will yield
future benefit to all stakeholders.
- Phoenix project value expected to further increase.
- Strong balance sheet to take advantage of opportunities.
Renewal of cautionary Announcement
Further to the cautionary announcement first released on 26 November 2009 and
renewed on 7 January 2010 and in terms of the Listings Requirements of the
JSE, shareholders are advised that the discussions in respect of a possible
transaction are still in progress. If successfully concluded, the outcome of
the discussions may have a material effect on the price of the Company`s
securities. Accordingly, shareholders are advised to continue exercising
caution when dealing in the Company`s securities until a full announcement in
respect of the possible transaction is made.
By order of the Board,
J P Nelson JAJ Loots
Chief Executive Officer Financial Director
10 February 2010
Consolidated Statement of Comprehensive Income
31 Dec 09 31 Dec 08 (Unaudited)
(Unaudited) GBP
GBP
Revenue
Gold sales 29,044,934 24,940,383
Realisation costs (82,410) (63,532)
On - mine revenue 28,962,524 24,876,851
Cost of production (18,898,789) (14,099,512)
Depreciation (1,374,753) (1,065,720)
Mining Profit 8,688,982 9,711,619
Other expenses (1,117,303) (885,413)
Operating income before finance
costs 7,571,679 8,826,206
Finance income 152,607 434,700
Finance costs (1,588) (6,007)
Impairment (348,915) (1,339,915)
Profit before taxation 7,373,783 7,914,984
Taxation (2,683,201) (3,705,065)
Profit after taxation 4,690,582 4,209,919
Other comprehensive income:
Foreign currency translation
differences 2,216,274 2,164,635
Total comprehensive income for
the 6 months 6,906,856 6,374,554
Profit attributable to:
Owners of the parent 4,467,939 2,569,804
Non-controlling interest 222,643 1,640,115
4,690,582 4,209,919
Total comprehensive income
attributable to:
Owners of the parent 6,836,312 4,734,439
Non-controlling interest 70,544 1,640,115
6,906,856 6,374,554
Earnings Per Share
Earnings per share (pence) 0.34 0.23
Diluted earnings per share
(pence) 0.34 0.23
Weighted average number of 1,324,071,776 1,100,517,684
shares in issue
Diluted number of shares in 1,329,710,617 1,111,517,684
issue
Headline earnings per share is
calculated :
Earnings as reported : 4,467,939 2,569,804
Adjustments : Impairment costs
348,915 1,339,915
Headline earnings 4,816,854 3,909,719
Headline earnings per share
(pence) 0.36 0.36
Diluted headline earnings per
share (pence) 0.36 0.35
Consolidated Statement of Financial Position
31 Dec 2009 30 June 2009
(Unaudited) (Audited)
GBP GBP
ASSETS
Non-current assets
Property, plant and equipment and
Mineral Rights 34,280,999 31,801,235
Rehabilitation trust fund 2,499,886 2,357,266
Intangible assets 13,191,556 12,038,616
Goodwill 21,000,714 21,000,714
70,973,155 67,197,831
Current assets
Inventories 1,525,057 358,363
Trade and other receivables 2,475,265 2,201,213
Cash and cash equivalents 4,235,477 2,389,301
8,235,799 4,948,877
TOTAL ASSETS 79,208,954 72,146,708
EQUITY AND LIABILITIES
Capital and reserves
Share capital 14,083,406 11,125,891
Share Premium 49,696,830 37,899,997
Translation Reserve 4,180,278 1,964,004
Share Option Reserve 628,818 549,690
Retained income 16,005,490 11,537,551
Merger Reserve (21,406,401) (10,705,308)
Equity attributable to owners of 63,188,421 52,371,825
the parent
Non controlling interest - 3,988,577
Total equity 63,188,421 56,360,402
Non - Current liabilities
Long term Provisions 3,103,001 2,933,105
Deferred Taxation 7,461,262 6,752,432
10,564,263 9,685,537
Current liabilities
Trade and other payables 3,805,235 3,719,787
Short term liabilities - Interest - 20,669
bearing
Short term Provisions 1,420,208 1,151,895
Payable to another Group Company - 954 759
Current Tax Liabilities 230,827 253,659
5,456,270 6,100,769
TOTAL EQUITY AND LIABILITIES 79,208,954 72,146,708
Consolidated Cash Flow Statement
6 months ended 6 months ended
31 Dec 09 31 Dec 08
(Unaudited) (Unaudited)
GBP GBP
Cash generated by operations 7,776,767 10,401,503
Non controlling interest distributions
- (890,831)
Taxation Paid (2,537,000) (4,240,562)
Finance income net 151,019 428,693
Cash inflow from operating activities 5,390,786 5,698,803
Cash outflow from investing activities
(2,429,578) (4,056,420)
Cash outflow from finance activities (954,759) (44,374)
Net increase in cash equivalents 2,006,449 1,598,009
Cash at the beginning of period 2,389,301 5,419,489
Effect of Foreign Currency rate
changes (160,273) 700,227
Cash at end of period 4,235,477 7,717,725
Statement in changes of equity
6 months ended 6 months ended
31 Dec 2009 31 Dec 2008
(Unaudited) (Unaudited)
GBP GBP
Shareholders` equity at start of
period 56,360,402 50,368,771
Share Issue 14,754,348 39,749
Share Option Reserve 79,128 78,500
Other Comprehensive Income 2,216,274 2,164,635
Profit for the period 4,467,939 2,569,804
Merger Reserve (10,701,093) -
Non-controlling interest (3,988,577) 749,284
Total Equity 63,188,421 55,970,743
For further information on Pan African Resources PLC, please visit the website
at www.panafricanresources.com
Enquiries:
Pan African Resources
Jan Nelson, Chief Executive Officer
+27 (0) 11 243 2900
Nicole Spruijt, Public Relations
+27 (0) 11 243 2900
RBC Capital Markets
Martin Eales
+44 (0) 20 7029 7881
Macquarie First South (Pty) Ltd
Melanie de Nysschen / Thembeka Mgoduso
+27 (0) 11 583 2000
St James`s Corporate Services Limited
Phil Dexter
+44 (0) 20 7499 3916
Date: 10/02/2010 09:00:02 Produced by the JSE SENS Department.
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