Shanduka won’t leave Pan African in lurch

[miningmx.com] – PAN African Resources did not believe it would be left without an empowerment partner in the event Cyril Ramaphosa, head of its key shareholder, Shanduka Resources, took a position in the South African government post national elections on May 7.

Ramaphosa was last year elected deputy president of the African National Congress (ANC) which is 100% certain to be returned to power. It is thought Ramaphosa will take a senior position within the new cabinet.

As a result, Ramaphosa has indicated that he will seek to distance himself from his business activities in the Shanduka Group of which Shanduka Resources is a part. In terms of South African empowerment legislation, companies are required to find new empowerment partners if they lose existing ones.

Cobus Loots, financial director of Pan African Resources, said it was unlikely, however, that the company would suddenly lose Shanduka Resources as a shareholder. “Shanduka Resources has always been supportive; they followed their rights in the acquisition of Evander Gold Mines.

“They will be responsible. We won’t be without an empowerment partner overnight. Even though the situation is fluid, it won’t change overnight,” Loots said. Shanduka Resources has a 26% stake in Pan African Resources worth R1.34bn at the firm’s current market capitalisation of R5.3bn.

Pan African Resources has achieved a near 20% positive return over the past 12 months which clearly out-performs its gold industry peers, a performance focused on running its Barberton Gold Mines, two surface retreatment operations, and Evander Gold Mines which it acquired from Harmony Gold for R1.5bn in 2012.

In the six months ended December, the company posted a 31% improvement in headline share earnings of 15.1 cents and paid a dividend of R13.14/share, equal to 80 UK pence representing a 6% yield.

This was on the back of gold sales of a shade over 100,000 ounces, a 123% increase compared to the interim period of the previous 2012 financial year owing to the incorporation of production from Evander for the full period, and the commissioning of a surface retreatment operation, Barberton Tailings Retreatment Plant.

Loots said the company’s operations generated R130m after paying the dividend, and had reduced net debt to only R100m. The company was also leveraged to the effects of the weaker rand/dollar exchange rate without the threat of significant inflation over the longer term as the firm didn’t operate heavy yellow machinery, he said.

Pan African CEO, Ron Holding, said the company hoped to achieve 250,000 oz in gold production by the interim stage of the 2015 financial year and added the company was looking for partners to exploit expansions at Evander Gold, namely its Rolspruit prospect.