Pan African Regulatory News (PAF)

Pan African Resources Plc - BEE Ownership Restructuring

PR Newswire

London, December 15

Pan African Resources PLC

(Incorporated and registered in England and Wales under Companies Act 1985 with registered number 3937466 on 25 February 2000)

AIM Code: PAF

JSE Code: PAN

ISIN: GB0004300496

(“Pan African” or “Company”)

PAN AFRICAN BLACK ECONOMIC EMPOWERMENT (“BEE”) OWNERSHIP RESTRUCTURING

Introduction

Pan African is pleased to announce that it has successfully concluded restructuring agreements, replacing the current BEE equity shareholdings in the Company (held via interests in PAR Gold Proprietary Limited (“PAR Gold”)) with BEE shareholdings in Emerald Panther Investments 91 Proprietary Limited (“SA Holdco”), a subsidiary of the Company (the “Transaction”). SA Holdco will house all Pan African’s South African mining operations, following implementation of the Transaction. Where the previous BEE ownership structure terminates during December 2018, the new BEE structure will only terminate on 31 December 2021, which is a three-year extension of the original BEE transaction.

The rationale and benefits of the Transaction are as follows:

- Extension of the BEE ownership structure for a three-year period with limited IFRS charges to the Company;

- The Transaction provides flexibility to further restructure the BEE ownership of the South African operations, depending on the outcome of the proposed third South African Mining Charter and other relevant regulations;

- The Transaction will avoid BEE ownership dilution, in the event that Pan African raises equity capital in the future;

- The Transaction will not result in a dilution of Group earnings.

Following implementation of the Transaction, Pan African’s BEE ownership is calculated at 26%, comprising 21% in SA Holdco and 5% from its on-mine employee ownership schemes.

Refer to Pan African’s pre and post Transaction Group structures on our website that summarise the BEE holdings. (website link: http://www.panafricanresources.com/about-overview/company-structure/)

BEE shareholdings prior to the Transaction

PAR Gold, which owns 19.53% of Pan African’s issued share capital, is currently Pan African’s primary BEE investor and its shareholders are summarised as follows:

- The Mabindu Development Trust (“Mabindu”) - 49.5%

- K2015200726 Proprietary Limited (“K2015”) - 0.6%

- Pan African Resources Funding Company Proprietary Limited (“Fund Co”) - 49.9%

PAR Gold is currently majority owned by BEE shareholders (50.1%) with the balance held by PAR’s wholly owned subsidiary Fund Co.

Steps to implement the Transaction

1) Establishment of a new BEE entity:

The Group has established a new BEE entity, Concrete Rose Proprietary Limited (“Concrete Rose”). Concrete Rose has not conducted any business since incorporation and has been established for the purpose of housing the interests to be acquired in SA Holdco, as further detailed below. The provisions of the memorandum of incorporation of Concrete Rose do not frustrate or relieve the Company in any way from compliance with its obligations in terms of the JSE Limited Listings Requirements.

The following parties will subscribe for shares in Concrete Rose for a nominal value, as follows:

1) Mabindu - 24.75%

2) Pan African Resources Management Trust - 10.5% (note 1)

3) Pan African Resources Education Trust - 4.95% (note 2)

4) Alpha Investment Group Proprietary Limited - 9.9% (note 3)

The remaining shares in Concrete Rose are held by Fund Co (49.9%).

Note 1: The Pan African Resources Management Trust is a new trust established to hold shares on behalf of black management employees of the group and is controlled by employees of the Group and other historically disadvantaged South Africans (“HDSA’s”).

Note 2: Pan African Resources Education Trust is a new trust established to hold shares that will provide funding for the education of black students and is controlled by employees of the Group and other HDSA’s.

Note 3: Alpha Investment Group Proprietary Limited is the investment vehicle for a BEE entrepreneur.

2) Subscription by Concrete Rose for shares in SA Holdco

Concrete Rose will subscribe for 22.11% of SA Holdco’s shares for notional value through a notional vendor financed (“NVF”) transaction. The BEE shareholders 50.1% share of the NVF at 15 December 2017 is approximately R756 million.

The NVF shares will be issued by SA Holdco to Concrete Rose on similar commercial terms to the original PAR Gold NVF terms with Mabindu, as summarised below.

Comparison of the revised BEE scheme versus the original BEE scheme

SA Holdco’s investments and shareholdings

As previously stated, SA Holdco will house all the Pan African South African mining operations. The Transaction will result in:

- Barberton Mines Proprietary Limited (“Barberton Mines”), which is 95% held by Pan African, being transferred to SA Holdco through an intra-group asset-for-share transaction; and

- Elikhulu Tailings Retreatment Proprietary Limited (“Elikhulu”), which is a wholly owned subsidiary of Pan African, being transferred to SA Holdco through an intra-group asset-for-share transaction.

Following the restructure, SA Holdco will house the following investments:

- Evander Gold Mining Proprietary Limited – 95%

- Barberton Mines – 95%

- Elikhulu – 100%

- Evander Gold Mines Proprietary Limited – 100%

Currently SA Holdco is a wholly owned subsidiary of Pan African. Following the implementation of the Transaction, the shareholders of SA Holdco will be:

- Pan African - 77.89%

- Concrete Rose - 22.11%

The details pertaining to and the net assets and profits attributable to SA Holdco, Evander, Barberton Mines and Elikhulu are contained in the 2017 integrated annual report and the audited consolidated annual financial statements of Pan African for the financial year ended 30 June 2017 available at www.panafricanresources.com. In the year ended 30 June 2017, the entities that are the subject of the transaction produced profit after tax of approximately £18.6 million and as at 30 June 2017 these entities had gross assets of approximately £263.8 million.

3) PAR Gold shareholding post the Transaction

PAR Gold will repurchase Mabindu's 49.5% shareholding for a nominal consideration, due to the NVF currently exceeding the market value of the equity interest. Thereafter PAR Gold will issue new shares to K2015 to the extent of 50.1% for a nominal consideration. In future these new shares will enjoy full voting rights but no economic rights. Following the issue to K2015, Fund Co and K2015 will hold 49.9% and 50.1% of the issued share capital of PAR Gold, respectively.

The 50.1% interest held in PAR Gold by K2015 does not qualify for BEE ownership within the group. The 19.53% of Pan African’s issued equity held by PAR Gold is treated as treasury shares and will still be eliminated on consolidation for purposes of calculating earnings per share as was previously the case.

Conditions precedent

The conditions precedent to the Transaction are customary to transactions of this nature, including any regulatory approvals. The Transaction is likely to be implemented during January 2018.

Categorisation

The value pursuant to the Transaction represents a 21% interest in the mining operations of the Group. Accordingly, the Transaction is considered to be a category 2 transaction, as contemplated in the JSE Listings Requirements.

By order of the Board

Johannesburg

15 December 2017