Operational Update

Pan African Resources PLC

(Incorporated and registered in England and Wales under Companies Act 1985 with registered number 3937466 on 25 February 2000)

AIM Code: PAF

JSE Code: PAN

ISIN: GB0004300496

(“Pan African” or the “Company” or the “Group”)

  FURTHER OPERATIONAL UPDATE AND SIGNIFICANT INCREASE IN BARBERTON’S ROYAL SHEBA GOLD RESOURCE

Following the operational update released on 2 March 2018, Pan African is pleased to provide further information on the Group’s operations and growth projects.  Key points can be summarised as follows:

• Barberton Mines is on track to produce approximately 50,000oz of gold in the second half of the 2018 financial year, an increase of approximately 23% from the first half of the 2018 financial year;
• installation of the regrind mill at the Barberton Tailings Retreatment Plant (“BTRP”) remains on schedule and on budget;
• construction of the Elikhulu Tailings Retreatment Plant (“Elikhulu”) remains ahead of schedule, with first gold production expected in August 2018;
• feasibility study completed which confirms viability of post-commissioning capacity increase of Elikhulu to allow the plant to process tailings tonnes currently assigned to the Evander Tailings Retreatment Plant (“ETRP”), with resultant cost and throughput benefits;
• a 100% increase in Mineral Resources at Barberton’s Royal Sheba Project to 720,000oz;
• as previously communicated, Evander Mines’ labour consultation process is in progress, with finalisation expected prior to the end of the financial year; and
• a re-assessment of the feasibility of Evander Mine’s Egoli Project is in progress.

Gold production from Barberton Mines

As anticipated, recent grades as announced on 2 March 2018 from the Fairview Mine’s 11-block MRC 272 and 358 platforms, have resulted in an increase in gold production at Barberton Mines.

Based on current grades and the anticipated mining profile, Barberton Mines is expected to produce approximately 50,0000oz for the second half of the 2018 financial year, an increase of approximately 23% from the first half of the 2018 financial year, in line with production guidance from the full financial year.

To improve future flexibility and sustain gold production, development to the next high grade platform (256 platform), will commence early in the 2019 financial year and average grades of 28.4g/t over 5.2 metres are estimated over the 95 metres strike length. The 256 platform is expected to be in full production in the 2020 financial year to sustain production from the MRC section over the next 5 years. 

BTRP regrind mill construction update

The construction of the regrind mill is proceeding according to schedule, with commissioning anticipated in the last week of April 2018. On commissioning of the regrind mill, production at the BTRP is expected to increase to approximately 21,000oz per annum.

Elikhulu construction and ETRP study updates

Construction at Elikhulu is progressing ahead of schedule with first gold expected in August 2018. Ramp up to full production of approximately 55,000oz per annum is expected to take no longer than two months, after which Elikhulu is estimated to produce gold at an all-in sustaining cost of production of below US$650/oz, at the prevailing ZAR:USD exchange rate of R11.75:1. In conjunction with the ETRP, these two operations are expected to produce more than 70,000oz per annum.

A DRA Global feasibility study has concluded that the ETRP’s throughput of approximately 200,000 tonnes per month can be incorporated into the Elikhulu Project with limited additional capital. This will be done post commissioning of the Elikhulu Project and should result in the existing ETRP throughput benefitting from Elikhulu’s lower cost structure and higher recoveries.

Barberton Mines’ Royal Sheba Project

Pan African previously communicated that the Royal Sheba orebody has the potential to deliver approximately 30,000oz per annum at a relatively low production cost. The Company has mandated DRA Global to undertake a life-of-mine technical feasibility study on the Royal Sheba orebody, which is planned to be completed during 2018.

The Royal Sheba orebody forms part of the Barberton Mine complex and was historically mined on a small scale (approximately 2,000 tonnes per month) to a depth of 340 metres below surface. Due to poor economic returns resulting from the low tonnage mining profile, and the prevailing low gold price at that time, it was closed during 1996.

In the 2010 financial year, a concept study was completed by Turgis Consulting (“Turgis Study”) with the aim of re-opening the mine as a larger, mechanised, stand-alone operation. The Turgis Study found that it was a viable proposition, but required a significant amount of capital expenditure for a new shaft system to be sunk from the surface and the construction of a new gold plant.

Since the Turgis Study was completed, several synergies have been identified at the Barberton Mines complex, which indicate that the Royal Sheba orebody could be a viable economic proposition with a materially lower capital investment than previously envisaged.

The Company has revisited the Royal Sheba Mineral Resource, and the process focussed on the geology and mineralisation of the deposit, incorporating a full 3D geological modelling exercise on the structural, lithological and mineralisation components of the deposit. The combination of these three components resulted in a robust and fit for purpose 3D geological model highlighting the increase in the Royal Sheba Mineral Resources, adjacent to and below the current Royal Sheba mine infrastructure.

The 3D geological model and coded composite data set was subjected to full statistical and geostatistical analyses by considering 10 domains within the Royal Sheba deposit. The final output of the 3D geological model and Mineral Resource estimate honours all of the available data. Checks and validation techniques applied to the estimates ensured a robust Mineral Resource estimate of the Royal Sheba orebody, the results of which are tabulated and reconciled against the previous Mineral Resource estimate in the table below. The measured and indicated categories of the Royal Sheba orebody has doubled to 0.48Moz (30 June 2017: 0.24Moz). The increase in the Royal Sheba Mineral Resource is summarised as follows:

	Updated Mineral Resource statement  Royal Sheba Project				Previous Mineral Resource statement Royal Sheba Project
Category	Tonnes	Grade	Contained gold		Tonnes	Grade	Contained gold
	Million	g/t	Moz		Million	g/t	Moz
Measured	2.72	3.91	0.34		0.39	4.15	0.05
Indicated	1.34	3.22	0.14		1.35	4.35	0.19
Inferred	1.83	4.05	0.24		0.86	4.35	0.12
Total	5.89	3.80	0.72		2.60	4.32	0.36

The updated Mineral Resources statement is stated over a larger down dip extent than the previous Mineral Resource statement due to variogram model parameters applied. The updated Mineral Resources statements are reported in accordance with the South African Code for the Reporting of Exploration Results, Mineral Resources and Mineral Reserves, 2016 edition. Cut-off values are calculated at 2.5g/t applying a gold price of R600,000/kg (US$1,435/oz and R13.00:1). Mineral Resources are reported inclusive of Mineral Reserves. All updated Mineral Resources reported exclude geological structures and are reported as in-situ tonnes. Any discrepancies in totals are due to rounding.

The following tonnage discount factors have been applied to the updated Mineral Resources:

•           geological loss of 5% for the Measured category;

•           geological loss of 10% for the Indicated category; and

•           geological loss of 15% for the Inferred category.

Additional effects of mining and recovery losses have been considered in the cut-off grade calculations.

The competent person for Pan African Resources, Mr Barry Naicker, the group mineral resource manager, has reviewed and signed off the updated Mineral Resource for Royal Sheba. He is a member of the South African Council for Scientific Professions (400234/10). Mr Naicker has 17 years of experience in economic geology and mineral resource management. He is based at 1st Floor, The Firs, corner Cradock and Biermann Avenues, Rosebank 2196, Gauteng.

Evander Mines labour consultation process and gold production

As announced on 2 March 2018, Evander Mines is currently in a consultation process with its labour in terms of section 189 of the South African Labour Relations Act, 66 of 1995 (“Section 189 Process”). Further announcements will be made in due course, with the process expected to be finalised before the end of the 2018 financial year.

Gold production from Evander Mines will be dependent on the outcome of the labour consultation process and the review of the 8-shaft operations. As previously communicated, Pan African is prioritising lower cost, high margin ounces in the current weak rand gold price environment.  A reduction in non-paying gold production will therefore benefit Group margins and sustainable cash flows.  

Egoli Project update

Following the recent announcement on the Section 189 Process at Evander Mines, the Group will be re-assessing the feasibility of the Egoli Project as a stand-alone project by the end of the 2018 financial year.

The information contained in this announcement has not been reviewed or reported on by Pan African’s auditors and is the responsibility of the directors of Pan African.

For further information on Pan African, please visit the Company’s website at http://www.panafricanresources.com/

28 March 2018

Contact information
Corporate Office The Firs Office Building 1st Floor, Office 101 Cnr. Cradock and Biermann Avenues Rosebank, Johannesburg South Africa Office:   + 27 (0) 11 243 2900 Facsimile: + 27 (0) 11 880 1240	Registered Office Suite 31 Second Floor 107 Cheapside London EC2V 6DN United Kingdom Office:   + 44 (0) 207 796 8644 Facsimile: + 44 (0) 207 796 8645
Cobus Loots     Pan African Resources PLC   Chief Executive Officer Office: + 27 (0) 11 243 2900	Deon Louw Pan African Resources PLC Financial Director Office: + 27 (0) 11 243 2900
Phil Dexter St James's Corporate Services Limited Company Secretary Office: + 44 (0) 207 796 8644	John Prior / Paul Gillam Numis Securities Limited Nominated Adviser and Joint Broker Office: [phone]
Sholto Simpson One Capital JSE Sponsor Office: + 27 (0) 11 550 5009	Ross Allister/James Bavister/David McKeown Peel Hunt LLP Joint Broker Office: [phone]
Julian Gwillim Aprio Strategic Communications Public & Investor Relations SA Office: [phone]	Jeffrey Couch/Neil Haycock/Thomas Rider BMO Capital Markets Limited Joint Broker Office: [phone]
Bobby Morse Buchanan Public & Investor Relations UK Office: [phone] Email: [e-mail]
Website: www.panafricanresources.com

Glossary of technical terms:

Au	Chemical symbol for gold
Cut-off Grade	The lowest grade value that is included in a resource statement
Grade	The proportion of a mineral within a rock or other material. For gold mineralisation this is usually reported as grams of gold per tonne of rock (g/t)
g/t	Grammes per tonne
Indicated Mineral Resource	That part of a mineral resource for which tonnage, densities, shape, physical characteristics, grade and mineral content can be estimated with a reasonable level of confidence. It is based on exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes. The locations are too widely or inappropriately spaced to confirm geological and/or grade continuity but are spaced closely enough for continuity to be assumed
Inferred Mineral Resource	That part of a mineral resource for which tonnage, grade and mineral content can be estimated with a low level of confidence. It is inferred from geological evidence and assumed but not verified geological and/or grade continuity. It is based on information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that may be limited, or of uncertain quality and reliability
Life of Mine	The time in which, through the employment of the available capital, the ore reserves--or such reasonable extension of the ore reserves as conservative geological analysis may justify--will be extracted.
m	metre
Mineral Resource	A concentration or occurrence of material of economic interest in or on the Earth's crust in such a form, quality, and quantity that there are reasonable and realistic prospects for eventual economic extraction. The location, quantity, grade, continuity and other geological characteristics of a Mineral Resource are known, estimated from specific geological knowledge, or interpreted from a well constrained and portrayed geological model
Measured Resource	That part of a Mineral Resource for which tonnage, densities, shape, physical characteristics, grade and mineral content can be estimated with a high level of confidence.  It is based on detailed and reliable exploration, sampling and testing information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes.  The locations are spaced closely enough to confirm geological and grade continuity
Moz	Million troy ounces
Orebody	Mining term to de?ne a solid mass of mineralised rock which can be mined pro?tably under current or immediately foreseeable economic conditions "ore" a mineral deposit that can be extracted and marketed profitably
Ore Reserves	The economically mineable part of a Measured or Indicated Mineral Resource demonstrated by at least a Preliminary Feasibility Study. This Study must include adequate information on mining, processing, metallurgical, economic and other relevant factors that demonstrate, at the time of reporting, that economic extraction can be justified. A Mineral Reserve includes diluting materials and allowances for losses that may occur when the material is mined
Ounce / oz	Troy ounce, equivalent to 31.103477 grams
Probable Mineral Reserve	The economically mineable part of an Indicated and, in some circumstances, a Measured Mineral Resource demonstrated by at least a Preliminary Feasibility Study. This Study must include adequate information on mining, processing, metallurgical, economic, and other relevant factors that demonstrate, at the time of reporting, that economic extraction can be justified
Proven Mineral Reserve	The economically mineable part of a Measured Mineral Resource demonstrated by at least a Preliminary Feasibility Study. This Study must include adequate information on mining, processing, metallurgical, economic, and other relevant factors that demonstrate, at the time of reporting, that economic extraction is justified
t	Tonne (1 million grams)