Pan African eyes gain from SA’s pain

[miningmx.com] — UPHEAVALS in South Africa’s mining industry wouldn’t
deter Pan African Resources from growing its asset portfolio in the country, according
to CEO Jan Nelson, even though the company claims to have enough on its plate for
the time being.

Releasing annual results to end-June on Thursday, Nelson said that Pan African was
not looking to make more acquisitions in the year ahead.

“We’re not embarking on a shopping spree,’ he said. “It’s more about bedding down
what we have.’ Pan African is in the process of finalising the acquisition of Evander
from Harmony Gold, a mine that would double the company’s annual gold production
profile from the current 95,000 ounces to more than 200,000 oz.

The group is also developing a 20,000 oz-per-annum gold tailings treatment plant at
its Barberton mine, due for commissioning in June 2013, while its recently
commissioned Phoenix surface platinum operations are still progressing towards
steady-state production.

Nelson said that the company would continue to pursue opportunities in both gold and
platinum. “It’s a bit rough out there at the moment, but South Africa very much
remains our focus point,’ he said. “There’s still some good orebody available to be
mined,’ adding that he expected more assets to come to market as some of the
multi-national players evaluate their options.

Asked whether Barberton and Phoenix were at risk of disruptions over labour-unrest,
Nelson described the situation as “fluid’. “I can’t stand here and guarantee that there
is no strike tomorrow,’ he said. “What we can do is to talk to our employees and
that’s what we’re doing. So far we haven’t had any disruptions but the situation
remains fluid.’

RIGHTS ISSUE

Nelson said that all shareholders would be able to take part in the R1.90/share right
issue scheduled for later this year. Pan African’s biggest institutional shareholders
have already committed to subscribe to R700m worth of new shares. The proceeds
are earmarked to fund the R1.5bn Evander transaction, to be complemented by debt
funding and existing cash reserves (£19.8m at the end of June).

Pan African would take over management responsibility of Evander once its
shareholders have approved the transaction – Nelson said that circulars would be
posted within the next month – while the transfer of Harmony’s Eskom electricity
supply agreement also has to be finalised.

FINANCIALS

During the year under review, Pan African reported a 69.17% increase in headline
earnings per share to 2.03p, on the back of 27.65% higher revenue of £101.1m. The
higher prevailing gold price, as well as some cost control measures, enabled to
company to improve its margin by 57.1% to $918/oz.

The usual dividend was passed this year in lieu of the Evander transaction, but Nelson
said that it would be resumed in 2013.