Panaf to buy R545m stake in Shanduka Gold; issues shares

Cobus Loots, CEO, Pan African Resources

PAN African Resources (Panaf) is to raise R363.1m through a bookbuild with shareholders in South Africa and the UK in order to part pay the R545.6m purchase of a 49.9% stake in Shanduka Gold.

Shanduka Gold is one of Panaf’s empowerment partners with a 23.8% stake in the company. It is controlled by Standard Bank (16.9%), Jadeite Limited (33.6%) and The Mabindu Business Development Trust (49.5%).

A transaction announced to the Johannesburg Stock Exchange (JSE) today confirmed that Panaf would buy shares in Shanduka Gold owned by Standard Bank – first announced in February – and added that it would also buy Jadeite’s stake in terms of a tag-along clause to the sale of Standard Bank’s shares. Mabinda will retain its stake in Shanduka Gold.

Panaf is therefore buying back a total of 49.9% in Shanduka Gold which takes account of an agreement allowing Jadeite to hold back 0.5% of its shares for disbursement at a later time provided it has Panaf’s approval.

The outcome is that Panaf is buying back roughly a 12% stake in itself because Shanduka Gold owns 23.8% in Panaf. The remainder of the R545.6m consideration in Shanduka Gold will be sourced out of Panaf’s cash resources.

A 12% stake in Panaf is worth about R654.8m given the firm’s current market capitalisation of 5.5bn.

Panaf will issue about 111.7 million new shares – equal to 5.7% of its enlarged share capital – for around R3.25 (approximately 14.25 pence) per share. This represents a premium of 5.1% to the 30-day volume weighted average traded price of Panaf’s shares as at May 25.

Panaf said in its JSE announcement that the share issue would enable it to work with Mabindu to further Panaf’s black economic empowerment (BEE) ownership as well as “… retain the company’s funding headroom necessary for swift access to potential future organic and acquisitive growth opportunities”.

Panaf said at its November interim results announcement that it had cut net debt to R70m.

BEE is a burning issue in South Africa at the moment following the surprise publication of a new charter in Parliament in April which asked for continuing empowerment even though an earlier charter set down a target of 26%.

Negotiations on the new charter are underway between the Department of Mineral Resources and the Chamber of Mines, due to be completed by May 31, but Panaf said there was no clarity on how the proposed charter would change. The transaction with Shanduka Gold would give it continued flexibility, it said.

Mabindu, which is a black-owned trust, has the option of selling its 49.5% stake in Panaf in 2018.