Interim Results for the 6 months ended 31 Decem...
Regulatory Announcement
Company Pan African Resources plc
TIDM PAF
Headline Interim Results
Released 10 February 2010
Pan African Resources PLC
(`Pan African' or the `Company' or the `Group')
(Incorporated and registered in England and Wales under Companies Act 1985 with
registered number 3937466 on 25 February 2000)
Share code on AIM: PAF
Share code on JSE: PAN
ISIN: GB0004300496
Interim Results
For the 6 months ended 31 December 2009 and renewal of cautionary announcement
Pan African Resources PLC (AIM: PAF, JSE: PAN) 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 £8.6 million (2008: £8.6 million).
* Revenue increased by 16.4% to £29 million (2008: £24.9 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 expenditure from internal cash flows.
Financial Performance
For the period under review, gross revenue amounted to £29 million (2008: £24.9
million), with the total cost of production being £18.9 million (2008: £14.1
million). Tax expense was £2.7 million (2008: £3.7 million), other expenses
were £1.1 million (2008: £0.89 million), and the final Central African Republic
exploration impairment charge was £0.349 million (2008: £1.3 million Ghana
exploration impairment charge).
EBITDA for the period under review was £8.6 million (2008: £8.6 million).
Attributable profit increased to £4.5 million (2008: £2.6 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 £2.7
million (2008: £3.7 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 Pounds sterling (`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 £0.349 million (2008: £1.3
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 2008
31 Dec 2009
(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 1,324,071,776 1,100,517,684
of shares in issue
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 6 6 months 6 months 6
months months ended ended months
ended ended ended
31 Dec 07 31 Dec
31 Dec 31 Dec 06 31 Dec
09 08 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 % 91 91 92 92 92
Recovery
Production Underground oz 45,385 47,634 43,145 45,332 53,369
Calcine oz - 3,545 3,601 - -
Dump
Sold - Mining oz 45,971 51,186 47,486 45,749 52,983
Sources
Average Price: USD/oz 1,032 824 721 567 464
Spot Price
Achieved
Average Price: USD/oz - - 460 406 430
Hedge Achieved
Average Price: ZAR/KG 253,510 235,338 165,782 144,564 96,767
Spot Achieved
Total Cash USD/oz 670 451 521 516 415
cost
Total Cash ZAR/KG 164,697 134,581 114,640 104,471 82,671
cost
EBITDA GBP '000 8,598 8,552 4,001 3,049 2,153
Depreciation GBP '000 1,375 1,066 806 1,077 1,042
Capital GBP '000 2,199 2,282 1,532 867 569
Expenditure
Exchange rate ZAR/GBP 12.48 15.13 14.05 13.68 11.48
- average
Exchange rate ZAR/GBP 11.94 13.78 13.77 13.78 11.06
- closing
Exchange rate ZAR/US$ 7.64 8.88 6.94 7.22 6.53
- average
Exchange rate ZAR/US$ 7.39 9.55 6.86 6.99 6.31
- closing
* 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 £2.199 million of which
development capital was £1.266 million and maintenance capital was £0.933
million. Capital expenditure on growth projects totalled £0.220 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 £
0.156 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) represent 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 £14,760,214 through the Pan African
share issue to Shanduka and non-controlling interest of £4,059,121 as at 21
August 2009 were eliminated on consolidation, and the Group's merger reserve
increased by £10,701,093.
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 £37,757,322 (2008: £34,925,555) and total
liabilities £15,783,514 (2008: £15,215,748).
* Corporate and Growth Projects total assets £41,451,632 (2008: £36,612,907)
and total liabilities £237,019 (2008: £351,972).
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 C Loots
Chief Executive Officer Financial Director
10 February 2010
Consolidated Statement of Comprehensive Income
31 Dec 09 31 Dec 08
(Unaudited) (Unaudited)
£ £
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 7,571,679 8,826,206
costs
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 2,216,274 2,164,635
differences
Total comprehensive income for 6,906,856 6,374,554
the 6 months
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 0.34 0.23
(pence)
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 0.36 0.36
(pence)
Diluted headline earnings per 0.36 0.35
share (pence)
Consolidated Statement of Financial Position
31 Dec 2009 30 June 2009
(Unaudited) (Audited)
£ £
ASSETS
Non-current assets
Property, plant and equipment and Mineral 34,280,999 31,801,235
Rights
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 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 the parent 63,188,421 52,371,825
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 bearing - 20,669
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)
£ £
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)
£ £
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
ENDS
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
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