[miningmx.com] – PAN African shares gained marginally in trading on the JSE after the release of interim results for the six months to end-December which were in line with market expectations and were backed by an upbeat forecast for the second half of the financial year from CEO Ron Holding.
Holding told analysts at a presentation in Johannesburg that “… this is a year of two halves. The first six months were extremely challenging but it’s already starting to look much better.
“We would not have paid out the dividend in December if we were not confident about the future of Pan African,’ he commented.
Financial director Cobus Loots – who takes over as CEO from Holding on March 1 – added: “On current forecasts there is no reason why we cannot maintain last year’s dividend”.
Pan African declared an annual dividend of 14.1 South African cents – amounting to a total of R258m – for its financial year to end-June 2014 which was paid out during the six months to end-December.
But the latest interim figures reveal that Pan African has effectively borrowed the money to pay that dividend with the balance sheet showing a jump in net debt to R458.6m at end December from R101m a year previously.
During the six months to December gold sales dropped 13.5% and headline earnings fell 62.8% while cash costs increased 30.3%.
The main reason was the “low grade mining cycle’ at the Evander mine while production was also hit by lower recoveries at the Biox recovery plant at Barberton – which Holding said has now been stabilised – and Section 54 work stoppages imposed by the Department of Mineral Resources.
Evander’s operations are now back into a “high grade mining cycle’ and the Phoenix platinum tailings project is also now making profits.
However, some analysts remain concerned about other issues such as the sudden changes in top management as well as the influence of black economic empowerment partner Shanduka on the group.
The market was surprised by the announcement of Holding’s resignation which follows the equally unexpected resignation of former CEO, Jan Nelson, some two years ago which was never properly explained.
Nelson at the time said he was leaving for “personal reasons’. Subsequent market speculation was that he had been forced out by Shanduka.
In reply to a question from an analyst at today’s presentation, Holding commented: “There is nothing untoward about my decision. It’s been on the cards for some time. It was planned for nearly two years ago and I will still be involved for the next year.’
Analysts are also concerned that Shanduka might try to vend some of its marginal mining assets into Pan African.
Said Loots: “From a Pan African perspective, Shanduka would be unable to vote on any such deal. It would be a decision for the other shareholders. We simply will not do any deal that is not massively value accretive to our shareholders.”
