Trading Statement

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

TRADING STATEMENT AND PRODUCTION UPDATE FOR THE FINANCIAL YEAR ENDED
30 JUNE 2016

TRADING STATEMENT

In terms of paragraph 3.4(b) of the Listings Requirements of the JSE Limited, a listed company is required to publish a trading statement as soon as it is satisfied that a reasonable degree of certainty exists that the financial results for the period to be reported upon next, will differ by at least 20 percent from those of the previous corresponding period.

Pan African is incorporated in England and Wales under the Companies Act 1985 and accordingly, its presentation currency is Pounds Sterling (“GBP”).

The average ZAR:GBP exchange rate affect the reporting of results in GBP. For the reporting period ended 30 June 2016 (“current reporting period”), the average prevailing ZAR:GBP exchange rate will be used to translate earnings per share (“EPS”) and headline earnings per share (“HEPS”) from ZAR to GBP.

For the reporting period ended 30 June 2015 (“prior reporting period”), the average ZAR:GBP exchange rate was ZAR18.00:1. For the current reporting period, the ZAR depreciated against the GBP, with an average exchange rate of ZAR21.45:1. This 19.2 percent year-on-year depreciation in the average exchange rate should be taken into account for the purposes of a comparison with the prior reporting period.

1. EPS and HEPS

Pan African advises shareholders that its EPS and HEPS for the current reporting period are expected to be between:

    1. EPS: 157 percent to 177 percent higher than the 11.48 cents EPS for the prior reporting period (being EPS of 29.47 cents to 31.77 cents).

    2. HEPS: 152 percent to 172 percent higher than the 11.67 cents HEPS for the prior reporting period (being HEPS of 29.45 cents to 31.79 cents).

Using the average ZAR:GBP 21.45:1 exchange rate that prevailed during the current reporting period, the Group’s EPS and HEPS in GBP terms for the current reporting period are expected to be between:

    1. EPS: 114 percent to 134 percent higher than the 0.64 pence EPS for the prior reporting period (being EPS of 1.37 pence to 1.50 pence).

    2. HEPS: 111 percent to 131 percent higher than the 0.65 pence HEPS for the prior reporting period (being HEPS of 1.37 pence to 1.50 pence).

2) Normalised illustrative EPS and HEPS

EPS and HEPS include certain non-operational gains and losses on financial instruments, referred to hereunder. When the Group’s earnings are adjusted for these gains and losses (the “normalised illustrative EPS and HEPS”) are expected to be between:

    1. EPS: 275 percent to 295 percent higher than the 11.48 cents EPS for the prior reporting period (being EPS of 43.10 cents to 45.40 cents).

    2. HEPS: 269 percent to 289 percent higher than the 11.67 cents HEPS for the prior reporting period (being HEPS of 43.08 cents to 45.42 cents).

The normalised illustrative EPS and HEPS in GBP terms for the current reporting period would have been between:

     1. EPS: 213 percent to 233 percent higher than the 0.64 pence EPS for the prior reporting period (being EPS of 2 pence to 2.13 pence).

     2. HEPS: 208 percent to 228 percent higher than the 0.65 pence HEPS for the prior reporting period (being HEPS of 2 pence and 2.13 pence).

The following adjustments were made to EPS and HEPS to derive this normalised illustrative EPS and HEPS:

2.1) Financial instruments

Cost Collar

Barberton Mines entered into a short term strategic hedge (“the Cost Collar”) in July 2015, when the prevailing spot gold price was ZAR440,000/kg, to protect its cash flows and the Group’s annual dividend against severe adverse movements in the ZAR gold price. During the current reporting period, the Group recorded a post-tax unrealised mark-to-market fair value loss of ZAR82 million on the Cost Collar (2015: post-tax realised Cost Collar derivative income of ZAR32.3 million). The economic consequence of the mark-to-market fair value adjustment is to lock in revenue on 25,000oz of gold production from Barberton Mines at ZAR625,000/kg (the closing ZAR gold price at 30 June 2016) for the twelve month period commencing 1 October 2016.

Share options

The share price increased significantly from ZAR1.80 to ZAR3.75 during the current reporting period (an increase of 108 percent), which resulted in an increase in the Group’s cash settled share option costs. The post-tax effect of cash settled share option costs for the current reporting period amounted to ZAR65.2 million (2015: post-tax ZAR4.4 million gain).

The fair value adjustment of the Group’s rehabilitation liability and associated investment resulted in the rehabilitation liability reducing by ZAR38.2 million (2015: increased by ZAR19.7 million) and the rehabilitation investment increased by ZAR9.4 million (2015: ZAR33.9 million).

2.2) Shanduka Gold Proprietary Limited (“Shanduka Gold”) transaction

Shareholders were advised on 26 May 2016 and 1 June 2016 that the Company had entered into agreements to acquire Standard Bank of South Africa Limited’s (“SBSA”) 16.9 percent and Jadeite Limited’s (“Jadeite”) 33.6 percent interest in Shanduka Gold (“the Transaction”). The Transaction was concluded on                   7 June 2016 for a total consideration of ZAR547 million, which equates to a Pan African share price of ZAR1.25 per share.

Shanduka Gold is, from an accounting perspective, deemed to be controlled by Pan African and Shanduka Gold’s full shareholding of 436,358,059 shares in Pan African will eliminate upon consolidation for accounting purposes. As the Transaction only became effective on 7 June 2016, the issued shares are weighted in the current reporting period resulting in 1,811,427,377 shares being taken into account for purposes of calculating EPS and HEPS for the 2016 financial year.  

Had the Transaction been effective on 1 July 2015, the number of shares taken into account for calculating EPS and HEPS would have been reduced as follows:

Pan African Shares	Shares	% Change
Opening balance shares - 1 July 2015	1,831,494,763	-
Issue of shares – vendor placement	111,711,791	6.1%
Elimination of shares held by Shanduka Gold	(436,358,059)	(23.8%)
Closing balance	1,506,848,495	-
Reduction in number of shares	324,646,268	17.7%

This reduction in the number of shares was incorporated into the normalised illustrative EPS and HEPS reported above.

PRODUCTION UPDATE

Earnings for the current reporting period improved relative to the prior reporting period due to the robust operating performances from Barberton Mines and Evander Mines. The improved operational performance was supported by an increase in the realised ZAR gold price of 21.6 percent to ZAR542,850/kg (2015: ZAR446,274/kg) during the current reporting period. The Group’s earnings were further enhanced by consolidating the Uitkomst Colliery’s results for the three months effective from 1 April 2016. Phoenix Platinum production was however adversely impacted by the curtailment of current arisings following International Ferro Metals (SA) Proprietary Limited being placed into business rescue.

Year ended  30 June 2016	Mining operations production summary
	Barberton Mines	Evander Mines	Phoenix Platinum	Uitkomst Colliery¹
	(Gold oz)	(Gold oz)	(PGE oz)	(Coal tonnes)
2016	113,281	91,647	8,339	136,102
2015	105,776	70,081	10,245	-
% movement	7%	31%	(19%)	-

¹The Uitkomst Colliery coal sales relates directly to underground coal production sales and excludes coal bought in from third parties for blending and further processing. The Uitkomst Colliery production is consolidated from 1 April 2016.

GROUP NET DEBT

The Group’s operations are robust in their cash generation and its net debt position at 30 June 2016 was ZAR347 million (2015: ZAR321 million), after the cash share buy-back of ZAR182 million for SBSA’s interest in Shanduka Gold, the acquisition of the Uitkomst Colliery for ZAR148 million in cash and the ZAR210 million dividend payment in December 2015.

At the date of this trading statement, the Group’s net debt had reduced to ZAR255 million, which included an amortising ZAR82 million gold loan entered into in 2014 to finance the Evander tailings retreatment plant.

ELIKHULU PROJECT UPDATE

Following receipt of a positive high-level assessment of the Elikhulu tailings retreatment project, the Company has mandated DRA Projects (Pty) Limited to conduct a definitive feasibility study on the project. The results of the study will be available in November 2016, where after shareholders will be appraised.

The financial information contained in this trading statement has neither been reviewed nor audited by the Company`s auditors. Pan African anticipates that it will release its provisional audited results for the period ended
30 June 2016 on or about 21 September 2016.

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

2 August 2016

Contact Details

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	Deon Louw
Pan African Resources PLC	Pan African Resources PLC
Chief Executive Officer	Financial Director
Office: + 27 (0) 11 243 2900	Office: + 27 (0) 11 243 2900
Phil Dexter	John Prior / Paul Gillam
St James's Corporate Services Limited	Numis Securities Limited
Company Secretary	Nominated Adviser and Joint Broker
Office: + 44 (0) 207 796 8644	Office: [phone]
Sholto Simpson	Matthew Armitt / Ross Allister
One Capital	Peel Hunt LLP
JSE Sponsor	Joint Broker
Office: + 27 (0) 11 550 5009	Office: [phone]
Julian Gwillim	Daniel Thole
Aprio Strategic Communications	Bell Pottinger PR
Public & Investor Relations SA	Public & Investor Relations UK
Office: [phone]	Office: + 44 (0) 203 772 2500

Jeffrey Couch/Neil Haycock/Thomas Rider

BMO Capital Markets Limited

Joint Broker

Office: [phone]

www.panafricanresources.com