Pan African Regulatory News (PAF)

PAN AFRICAN RESOURCES PLC - Provisional audited results & final div announcement

PR Newswire

London, September 20

Pan African Resources PLC

('Pan African Resources' or the 'company' or the 'group')

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

Provisional audited results for the year ended 30 June 2016 and final dividend announcement

Cobus Loots, CEO of Pan African Resources commented: “The Pan African Resources group delivered an outstanding set of results for the 2016 financial year. These results include a year of record gold production and profits and the largest dividend payment to date.

Our gold mining operations delivered exceptional results, producing in excess of 200,000oz of gold for the financial year. The performance from Evander Mines, in particular, demonstrated the potential of the operation, with production increasing by 30.8% year-on-year. Results were also assisted by the Rand gold price and a full year’s production from the Evander tailings retreatment plant.

Our robust financial position, well-established cash-generative operations, decentralised hands-on management structure and cost-conscious culture differentiate us from our peers. These attributes give Pan African Resources a competitive advantage for further growth through our project pipeline and also position the group to capitalise on potential acquisition opportunities.”

Key features reported in South African Rand (‘ZAR or R’) and Pound Sterling (‘GBP’)

Financial key features

Operational key features

Note 1: The GBP proposed final dividend was calculated based on 1,943,206,554 total shares in issue and an illustrative exchange rate of R18.75:1. Shareholders on the London register are to note that a revised exchange rate will be communicated prior to approval at the AGM.

Note 2: Adjusted EBITDA is represented by earnings before interest, taxation, depreciation and amortisation, impairments and loss on disposal of associate.

CEO STATEMENT

The past year has been an exceptionally successful period for Pan African Resources and for most of our stakeholders. The group has delivered a year of record gold production and profits and successfully concluded the Shanduka Gold transaction. This transaction enables the group to preserve and protect its black economic empowerment (‘BEE’) status on an earnings accretive basis. Despite maintaining our focus on gold assets, the finalisation of the Uitkomst acquisition provides an opportunistic expansion into the coal sector and a natural hedge against rising energy prices. The group also benefitted from the rising USD gold price and rand depreciation, which factors resulted in a bull market in gold at the beginning of 2016. At the end of the financial year, the spot gold price closed at USD1,325/oz – an increase of approximately 25% from the prior year end. The combined impact of the group’s excellent operating performance and favourable economic conditions resulted in an outstanding financial performance. Our share price reflected this positive momentum, with a year-end price of R3.75 and 0.19 pence per share.

We continue to acknowledge our shareholders’ desire for an attractive cash return on their investment. To this end, the Pan African Resources board is pleased to recommend the largest ever dividend payment of R300 million (GBP16.0 million) for approval at the upcoming AGM. We have also revisited our dividend policy, as detailed below, to provide the market with more certainty on future payments and to ensure that our dividend is sustainable.

Notwithstanding the impact of these favourable tailwinds, we continue to be mindful that the local and global mining industry remains a challenging operating environment. Certain analysts believe the higher gold price should not only be attributed to factors such as the market view that interest rates will remain at record lows and the recent decision by the United Kingdom (‘UK’) to exit the European Union (‘EU’), but also predict a continued period of geopolitical uncertainty that could result in increased global instability and volatility. Locally, South Africa faces a possible sovereign credit rating downgrade to sub-investment grade as well as heightened political tension, which could lead to further depreciation in the ZAR. It is therefore vital that we remain vigilant and continue to look for opportunities to differentiate ourselves and continue to further profitably grow our business and provide shareholder returns in the form of dividends and capital appreciation in our share.

Safety

Regrettably, we experienced a regression in our group safety accident rates at Evander Mines. In particular the lost-time injury frequency rate (‘LTIFR’) and reportable-injury frequency rate (‘RIFR’) increased. The safety of our people is our main concern, and we are actively pursuing measures to reduce injury frequency rates by, inter-alia, stepping up management oversight, technological enhancements, training and control of safety across all operations.

Safety remains a focus at all our operations and we endeavour to ensure the group’s culture, behaviour and values align to our safety objectives. However, we regret to report that one of our employees, Mr JA Muxhanga, was fatally injured at Evander Mines on 26 June 2016 following a tramming accident. Pan African Resources’ management and board express their sincere condolences to the family, friends and colleagues of Mr Muxhanga.

Production highlights and challenges

We are pleased to report the excellent operational performance across our gold mining operations. Total gold production was 204,928oz, with Barberton Mines contributing 113,281oz and Evander Mines contributing a total of 91,647oz. Underground head grades at Barberton Mines improved to 11.0g/t (2015: 10.9g/t), while head grades at Evander Mines improved to 5.7g/t (2015: 4.6g/t). We also delivered important operational improvements at Evander Mines, with gold sales and revenue increasing significantly. In addition, the Evander tailings retreatment plant (‘ETRP’) assisted our production growth by achieving full nameplate capacity, producing 18,151oz of gold from tailings and surface feedstock material.

Uitkomst produced 87,538 tonnes of coal from its underground operations, and acquired 48,564 tonnes of coal for further processing and blending, resulting in total coal sold of 136,102 tonnes.

Phoenix Platinum’s performance was hampered by the business rescue proceedings announced by International Ferro Metals Limited in August 2015 regarding its South African subsidiary, International Ferro Metal (SA) Proprietary Limited (‘IFMSA’), as well as the drought and associated water shortages affecting re-mining and processing. In terms of a 2010 agreement between Pan African Resources and IFMSA, Phoenix Platinum, which is situated on IFMSA property, obtained a portion of its feedstock from IFMSA’s processing activities, as well as electricity, water and other services. In terms of the 2015 business rescue proceedings, Samancor Chrome Limited was selected as the successful bidder to acquire IFMSA’s assets and subsequently nominated its subsidiary, TC Smelters Proprietary Limited (‘TC Smelters’), as the acquirer of the IFMSA business and assets. In July 2016, Pan African Resources reached an agreement with TC Smelters, assigning the tailings treatment agreement to TC Smelters. Although the agreement does not guarantee current arising feedstock to Phoenix Platinum– this will be dependent on the manner in which TC Smelters uses the IFMSA assets – it places Phoenix Platinum in a better position where it should be able to continue operations under similar conditions to those prior to the business rescue proceedings. Further, it ensures that Phoenix´s Platinum operations and interests are safeguarded. Phoenix Platinum also has alternative sources of feedstock, which are currently being processed.

Wage negotiations successfully concluded

The group successfully concluded its gold wage negotiations during October 2015, with Barberton Mines securing a two year agreement ending in June 2017 and Evander Mines securing a three year agreement ending in June 2018.

Mineral reserves and resources

We recognise that, together with our people and infrastructure, our mineral reserves and resources are a key asset to the group. In the year under review, the group’s total gold resources increased by 9.4% to 34.9Moz (2015: 31.9Moz).

The group’s mineral resources and reserves are summarised as follows:

- Gold reserves decreased to 10.0Moz (2015: 10.4Moz), we plan to increase these reserves in the next financial year

- Gold resources increased to 34.9Moz (2015: 31.9Moz)

- PGE reserves decreased 0.2Moz (2015: 0.5Moz)

- PGE resources remained at 0.6Moz (2015: 0.6Moz)

- Coal resources were 23.3Mt

We use what we deem to be a conservative ZAR gold price estimate when modelling reserves and resources, and in the current year reserves were modelled at R450,000/kg and gold resources at R550,000/kg.

Corporate activity

Shanduka Gold (now PAR Gold) is Pan African Resources’ primary BEE shareholder, with its sole assets being a 22.5% interest in Pan African Resources’ issued share capital (post conclusion of the Shanduka Gold transaction) and a notional vendor loan of R558 million to its BEE shareholder, the Mabindu Business Development Trust (‘Mabindu Trust’) as at 30 June 2016. Following a merger between Shanduka Group Proprietary Limited and the Pembani Group Proprietary Limited in December 2015, Pan African Resources engaged with Shanduka Gold shareholders and concluded an agreement to assist in preserving the group’s BEE ownership in a meaningful and mutually beneficial manner by means of an acquisition of a material interest in Shanduka Gold. Prior to the transaction with Pan African Resources, Shanduka Gold’s shareholders were Standard Bank of South Africa Limited (‘Standard Bank’) (16.9%), Jadeite Limited (33.6%) and the Mabindu Trust (49.5%). Pan African Resources acquired Standard Bank’s 16.9% and Jadeite Limited’s 33.6% interest in Shanduka Gold for R182.5 million and R364.4 million, respectively. Approximately 0.6% of the Shanduka Gold shares acquired from Jadeite Limited have been retained by Jadeite Limited for sale, at a future date, to an independent third party nominated by Pan African Resources. Pursuant to the transactions, Pan African Resources acquired a 49.9% direct interest in Shanduka Gold but consolidates the full interest in Shanduka Gold for accounting purposes.

Pan African Resources assumed effective control of Uitkomst on 31 March 2016 for a cash purchase consideration of R148 million, which was funded from existing debt facilities and internally generated cash flows. The Uitkomst coal mine is situated in Utrecht, KwaZulu-Natal, South Africa and employs 115 plant and administration employees and 326 contractors. It produces approximately 30,000-35,000 tonnes of saleable coal per month from its underground mining operation and has approximately 23.3Mt of coal resources, with an estimated life-of-mine of 22 years at current production rates.

Following receipt of a positive high-level economic and technical assessment of the Elikhulu tailings retreatment project (‘Elikhulu’) at Evander Mines, the company has mandated DRA Projects (Pty) Limited to complete a definitive feasibility study on the project. The results of the study will be available in November 2016, at which time shareholders will be appraised. Elikhulu will potentially treat slimes at a processing capacity of up to 12 million tonnes per annum, at a head grade of 0.29g/t from the Winkelhaak, Leslie and Kinross tailings storage facilities. The total mineral resource for Elikhulu is 178.7 million tonnes at 0.29g/t (1.7M in-situ ounces) with a life-of-operation of approximately 14 years and 1.7Moz of contained gold. The project is estimated to yield approximately 50,000oz of gold per annum in the initial 8 years of production while treating the Kinross and Leslie tailings storage facilities and then approximately 38,000oz per annum for the remaining 6 years from processing the Winkelhaak tailings storage facility.

The Evander 2010 pay channel is a potentially attractive ore body that runs parallel to the Kinross pay channel and is accessible via Evander Mines 7 Shaft. Harmony Gold historically developed towards the orebody before halting all mining operations on 7 Shaft and allowing flooding of the infrastructure to 18 level. The Evander Mines’ 2010 pay channel resources are classified in an inferred category and surface drilling is currently underway to improve confidence in the resource. The initial results of the drilling programme will also be available during November 2016. The 2010 pay channel may offer Evander Mines the possibility of establishing a new mine area without having to incur the cost of sinking a new shaft from surface.

During the next year we will also investigate further medium- to long-term underground production increases from sources such as 9 Shaft and projects such as Evander South at Evander Mines.

Outlook

The group is well positioned to increase profitable production through organic and acquisitive growth, while continuing to create shareholder value.

In the next year, the key focus areas for the group, from an operational perspective, include:

From an internal growth perspective, the following opportunities will be prioritised:

The group will also continue to evaluate acquisitive gold opportunities. Any project considered will however be subject to the group’s stringent capital allocation criteria, which requires any investment to be in a position to contribute profitable production ounces within a short- to medium-term timeframe and deliver the requisite returns to our shareholders.

FINANCIAL PERFORMANCE

Exchange rates and their impact on results

All of the group’s subsidiaries are incorporated in South Africa and their functional currency is ZAR. The group’s business is conducted in ZAR and the accounting records are maintained in this same currency, with the exception of precious metal product sales, which are conducted in USD prior to conversion into ZAR. The ongoing review of the operational results by executive management and the board is also performed in ZAR.

The group’s presentation currency is GBP due to its ultimate holding company, Pan African Resources, being incorporated in England and Wales and being dual-listed in the UK and South Africa.

In the year under review the average ZAR/GBP exchange rate was R21.45:1 (2015: R18.00:1) and the closing ZAR/GBP exchange rate was R19.78:1(2015: R19.30:1). The year-on-year change in the average and closing exchange rates of 19.2% and 2.5%, respectively, must be taken into account for the purposes of translating and comparing year-on-year results.

The group records its revenue from precious metals sales in ZAR, and the deterioration in the value of the ZAR/USD exchange rate during the year had a compensating effect on the weaker USD metals revenue received. The average ZAR/USD exchange rate was 26.7% weaker at R14.51:1 (2015: R11.45:1).

The commentary below analyses the current and prior period’s results. Key aspects of the group’s ZAR results appear in the body of this commentary and have been used as the basis against which its financial performance is measured. The gross GBP equivalent figures can be calculated by applying the exchange rates as detailed above.

Analysing the group’s financial performance

Revenue

The group’s revenue, year-on-year, increased by 43.1% to R3,632.8 million (2015: R2,539.4 million). The increase was predominantly due to:

The increase in the average ZAR gold price was due to the following movements:

Cost of production and realisation costs

The group’s total cost of production increased by 16.8% to R2,321.4 million (2015: R1,987.4 million). The group’s cost of production incorporated a full year’s production costs for the ETRP of R154.8 million (2015: R54.1 million), and Uitkomst coal production costs of R91.8 million (2015: nil).

Pan African Resources’ gold cost of production per the statement of comprehensive income increased by 12.3% to R2,155.5 million (2015: R1,919.6 million) as a result of the following:

The gold cost of production excluding ETRP and surface feedstock was well controlled and increased by 7.2% to R2,000.7 million (2015: R1,865.5 million).

The group’s gold cost of production per kilogramme declined by 3.2% to R338,242/kg (2015: R349,410/kg). The decline is attributed to:

The group’s gold all-in sustaining cost of production per kilogram (including direct cost of production, royalties, associated corporate costs and overheads and sustaining capital expenditure) increased by 0.9% to R405,847/kg (2015: R402,221/kg). The group’s all-in sustaining costs were primarily impacted by an increase in gold production and the improved head grades, compared to the prior year.

The all-in gold cost per kilogram (sustaining cost of production and once-off expansion capital) declined by 3.5% to R410,206/kg (2015: R425,084/kg), due to the increase in gold production and the completion of the ETRP in the prior year, which contributed R95.1 million in capital costs to the 2015 cost base.

The PGE cost of production increased by 9.3% to R74.1 million (2015: R67.8 million), predominately due to:

The groups’ realisation costs increased by 65.3% to R20.5 million (2015: R12.4 million) due to additional refining costs associated with the extraction and recovery of gold contained at Evander Mines’ processing plants floors.

Depreciation increased by 20.5% to R224.3 million (2015: R186.1 million), following increased charges associated with the commissioning of the ETRP and Evander Mines’ 8 Shaft 25 level development.

Other expenditure and income

Barberton Mines entered into a short-term strategic hedge (‘the Cost Collar’) in July 2015, when the prevailing spot gold price was R440,000/kg, to protect its cash flows and the group’s annual dividend against severe adverse movements in the ZAR gold price. During the current reporting period, the group recorded a pre-tax net unrealised mark-to-market fair value loss of R117.6 million on the Cost Collar, offset by a realised Cost Collar derivative income of R3.8 million, resulting in a net pre-tax fair value Cost Collar loss for the year of R113.8 million (2015: pre-tax realised Cost Collar derivative income of R44.8 million). The economic consequence of the mark-to-market fair value adjustment is to lock in revenue on 25,000oz of gold production from Barberton Mines at R625,000/kg (the closing ZAR gold price at 30 June 2016) for the twelve month period commencing 1 October 2016. The group currently only has this gold collar derivative in place.

Pan African Resources’ share price increased significantly by 108% to R3.75 from R1.80 during the current reporting period, which resulted in an increase in the group’s cash settled share option costs. The pre-tax effect of cash settled share option costs for the current reporting period amounted to R100.6 million (2015: pre-tax R6.1 million gain).

The fair value adjustment of the group’s rehabilitation liability resulted in the liability reducing by R38.2 million (2015: increased by R19.7 million). The rehabilitation investment increased by R9.2 million (2015: R33.9 million).

Finance costs decreased to R31.1 million (2015: R44.2 million), following improved cash flows generated to reduce net debt during the year.

Profit after tax and headline earnings

Profit after taxation increased by 160.2% to R547.0 million (2015: R210.2 million) and the corresponding headline earnings increased by 156.1% to R547.1 million (2015: R213.6 million), primarily impacted by the following:

EPS and HEPS

The group’s EPS in ZAR increased by 163.1% to 30.20 cents (2015: 11.48 cents). The group’s HEPS in ZAR increased by 158.8% to 30.20 cents (2015: 11.67 cents). The difference between the EPS and HEPS resulted from adjusting the profit after taxation for the loss on the disposal of fixed assets and the associated impairment on the sale of Auroch Minerals Limited in the prior reporting period. Refer to the statement of comprehensive income for the reconciliation between EPS and HEPS.

The EPS and HEPS is calculated by applying the group’s weighted average number of shares to the attributable and headline earnings, which decreased by 1% to 1,811.4 million shares (2015:1,830.0 million shares). The decrease in shares was attributed to eliminating the PAR Gold shares held in Pan African Resources with effect from 7 June 2016.

Headline earnings per share is calculated as follows:

Note 1: The adjustments accounted for, did not have any taxation impact to the group.

Had the Shanduka Gold transaction been effective on 1 July 2015, the number of shares that would have been taken into account for calculating EPS and HEPS would have been reduced as follows:

Taxation

The group’s total taxation charge increased by 137.4% to R176.6 million (2015: R74.4 million) due to higher gold revenues and improved profit margins.

The taxation charge comprised of:

Historical dividends

The group paid a final dividend of R210 million or GBP9.7 million (2014: R258 million or GBP14.9 million) on 24 December 2015 relating to the 2015 financial year, equating to R0.11466 per share or 0.53 pence per share (2014: R0.14100 per share or 0.82 pence per share).

Dividend policy

Pan African Resources aspires to pay a regular dividend to shareholders. In balancing this cash return to shareholders with the group’s strategy of generic and acquisitive growth, it believes that a target pay-out ratio of 40% of net cash generated from operating activities, after allowing for the cash flow impact of sustaining capital, contractual debt repayments and also the cash flow impact of once-off items, is appropriate. This measure aligns dividend distributions with the cash generation potential of the business. In proposing a dividend, the board will also take into account the company’s financial condition, future prospects, satisfactory solvency and liquidity assessments and other factors deemed by the board to be relevant at the time.

Proposed dividend for approval at the AGM

The board has proposed a final dividend of R300 million or approximately GBP16.0 million, equating to R0.15438 per share or approximately 0.82338 pence per share. This dividend is subject to approval at the AGM, which will take place on Friday, 25 November 2016.

Assuming the final dividend is approved by the shareholders, the following salient dates would apply:

The GBP proposed final dividend was calculated based on 1,943,206,554 total shares in issue and an illustrative exchange rate of R18.75:1. Shareholders on the London register should note that a revised exchange rate will be communicated prior to approval at the AGM.

No transfers between the Johannesburg and London registers between the commencement of trading on Monday, 5 December 2016 and close of business on Friday, 9 December 2016 will be permitted.

No shares may be dematerialised or rematerialised between Wednesday, 7 December 2016 and Friday, 9 December 2016, both days inclusive.

The South African dividends tax rate is fifteen percent per ordinary share for shareholders who are liable to pay the dividends tax, resulting in a net dividend of R0.13123 per share for these shareholders. Foreign investors may qualify for a lower dividend tax rate, subject to completing a dividend tax declaration and submitting it to Computershare Limited or Capita Plc who manage the SA and UK register, respectively. The company's South African income tax reference number is 9154588173 and it has 1,943,206,554 shares currently in issue.

Debt facilities

The group’s net debt increased marginally to R339.6 million (2015: R321.1 million) following the dividend payment of R210 million, the Uitkomst acquisition of R148 million and the cash funded portion of the Shanduka Gold transaction of R182.5 million.

Summary of the long-term debt liabilities:

Cash flow summary

Net cash flow generated by operations (after dividends) and before investing and financing activities increased to R581.4 million (2015: R95.7 million).

The cash outflows from investing activities increased to R969.0 million (2015: 366.0 million), predominately due to:

Net cash flows from financing activities increased to R375.9 million (2015: R233.4 million), predominately due to:

OPERATIONAL PERFORMANCE

The groups operational and production summaries are disclosed on the Pan African Resources website at http://www.panafricanresources.com/investors/financial-reports/

Review of Barberton Mines

Safety

- The operation reported no fatalities (2015: one fatality).

- Total recordable injury frequency rate per 1,000,000 man hours worked (‘TRIFR’) improved to 15.00 (2015: 15.87).

- LTIFR improved to 1.86 (2015: 1.87).

- RIFR remained at 0.62 (2015: 0.62).

Operational performance

- Average underground head grade achieved of 11.0g/t (2015: 10.9g/t).

- Gold sold increased by 7.1% to 113,281oz (2015: 105,776oz).

- Revenue increased by 30.8% to R1,921.8 million (2015: R1,469.0 million), as a result of the improved gold sales and the higher effective ZAR gold price.

- Cash cost per kilogramme increased marginally to R279,226/kg (2015: R278,859/kg), and in USD term the cash cost per ounce decreased to USD599/oz (2015: USD758/oz), due to improved gold ounce production.

- All-in sustaining cost per kilogramme increased by 4.8% to R348,231/kg (2015: R332,151/kg), and in USD terms the all-in sustaining cost per ounce decreased to USD746/oz (2015:USD902/oz).

- All-in cost per kilogramme increased by 5.1% to R354,417/kg (2015: R337,317/kg), and in USD terms the all-cost per ounce decreased to USD760/oz (2015: USD916/oz).

- Adjusted EBITDA increased to R729.8 million (2015: R505.5 million).

- Capital expenditure increased to R139.7 million (2015: R112.6 million) summarised in the following categories:

- Sustaining development capital expenditure was R63.4 million (2015: R53.7 million).

- Sustaining maintenance capital expenditure was R54.5 million (2015: R44.2 million).

- Once-off expansion capital was R21.8 million (2015 R14.7 million), which relates to the Royal Sheba development costs and the completion of the BTRP power line extension and installation. In the prior year R14.7 million was spent on the development of the Fairview ventilation raise borehole project to improve operating conditions.

- Effective from 1 July 2016 the life-of-mine of respective operations at Barberton Mines are:

- Fairview mine 22 years (2015: 20 years)

- Sheba mine 18 years (2015: 20 years)

- New Consort mine 5 years (2015: 7 years)

- BTRP 14 years (2015: 15 years)

Review of Evander Mines

Safety

- The operation reported one fatality detailed above in the CEO statement (2015: nil).

- TRIFR increased to 14.18 (2015: 6.87).

- LTIFR increased to 4.96 (2015: 2.66).

- RIFR increased to 3.31 (2015: 1.54).

Operational performance

- Underground head grade improved to 5.7g/t (2015: 4.6g/t), principally due to establishing mining on 8 Shaft’s new 25 level.

- Gold sold increased substantially by 30.8% to 91,647oz (2015: 70,081oz), primarily due to improved production associated with an increase in tonnages mined and head grades.

- Revenue increased by 58.3% to R1,538.3 million (2015: R972.0 million) as a result of improved gold production and an increase in the effective ZAR gold price.

- The ETRP produced 18,151oz (2015: 16,336oz), following an increase in gold produced from tailings to 6,724oz (2015: 2,494oz) and surface feedstock contributing 11,427oz (2015: 13,842oz).

- Cash costs per kilogramme decreased by 9.8% to R411,168/kg (2015: R455,896/kg), and in USD terms the cash cost per ounce decreased to USD881/oz (2015:USD 1,238/oz), due to additional gold production from the ETRP and higher grades mined at 8 Shaft.

- All-in sustaining cost per kilogramme decreased by 6.1% to R477,044/kg (2015: R507,980/kg), and in USD terms the all-in sustaining cost per ounce decreased to USD1,023/oz (2015:USD1,380/oz), in line with the decrease in cash costs.

- All-in cost per kilogramme decreased by 14.1% to R479,145/kg (2015: R557,553/kg), and in USD terms the all-in cost per ounce decreased to USD1,027/oz (2015:USD1,515/oz), in addition to the factors detailed above, the prior year included once-off ETRP expansionary capital of R95.1 million during the prior reporting period.

- Adjusted EBITDA increased to R357.7 million (2015: R47.4 million).

- Capital expenditure decreased to R153.8 million (2015: R238.2 million) summarised in the following categories:

- Sustaining development capital expenditure was R118.4 million (2015: R104.4 million).

- Sustaining maintenance capital expenditure was R29.4 million (2015: R38.7 million).

- Once-off expansion capital expenditure was R6.0 million (2015 R95.1 million), relating to development costs associated with 8 Shafts’ 26 level in the current financial year and the completion of the ETRP, which contributed R95.1 million in capital costs to the 2015 cost base.

- On 1 July 2015, Evander Mines implemented an employee share ownership programme, which is similar to the scheme implemented at Barberton Mines in June 2015. A newly established employee trust acquired 5% of the issued share capital of Evander Mines.

- Effective from 1 July 2016, the life-of-mine of 8 Shaft and the ETRP remained at 16 years (2015: 16 years).

Review of Phoenix Platinum

Safety

No safety incidents were reported during the financial year.

Operational performance

- Phoenix Platinum’s profitability was negatively impacted during the reporting period due to a curtailment in current arisings from IFMSA Lesedi mine, following the initiation of business rescue proceedings by IFMSA. Tonnages processed were also adversely impacted by the drought and associated water shortages affecting re-mining and processing.

- Phoenix Platinum’s loss after taxation was R9.6 million (2015: R12.3 million profit after taxation).

- PGE production decreased by 18.6% to 8,339oz (2015: 10,245oz).

- Revenue decreased by 24.1% to R74.7 million (2015: R98.4 million) due to lower tonnages processed as result of the operational challenges highlighted above and the lower effective PGE net revenue price received of R8,952/oz (2015: R9,603/oz).

- The average PGE net revenue price received decreased by 6.8% to R8,952/oz (2015: R9,603/oz), and in USD terms the average PGE net revenue per ounce decreased to USD617/oz (2015: USD839/oz).

- Cost per tonne increased by 15.1% to R298/t (2015: R259/t), mainly due to tonnages processed decreasing by 5.0% to 248,981t (2015: 262,119t).

- Cost per ounce of production increased by 34.3% to R8,890/oz (2015: R6,621/oz), and in USD terms the cost per ounce increased to USD613/oz (2015: USD578/oz).

- Adjusted EBITDA decreased to a loss of R4.8 million (2015: R27.7 million).

- Capital expenditure incurred was R6.8 million (2015: R0.6 million).

- Effective from 1 July 2016 the life-of-operation decreased to 9 years (2015: 28 years) as a result of taking into account surface material available to process, excluding current arisings.

Review of Uitkomst

Pan African Resources completed the acquisition of Uitkomst from Oakleaf Investments Holding 109 Proprietary Limited (‘Oakleaf’) and Shanduka Resources Proprietary Limited for a final net cash consideration of R148 million on 31 March 2016. Uitkomst is located close to the town of Utrecht in KwaZulu-Natal, South Africa, and is a high grade thermal export quality coal deposit with metallurgical applications.

The acquisition was funded from an existing revolving credit facility and internally generated cash flows. Uitkomst is, for accounting and production reporting purposes, consolidated effectively from 1 April 2016.

Summary of the purchase price allocation:

Safety

- The operation reported no fatalities.

- TRIFR per 200,000 man hours for the three month period was 5.59.

- LTIFR per 200,000 man hours for the three month period was 2.79.

- RIFR per 200,000 man hours for the three month period was 0.93.

Operational performance

- Profit after taxation for the period 1 April 2016 to 30 June 2016 was R11.4 million.

- Underground coal plant feed was 128,022t and also acquired third party coal for processing of 38,354t.

- Coal sold was 136,102t.

- Revenue amounted to R98 million.

- Cost of production of R91.8 million.

- The average revenue per ton received was R720/t or USD48/t.

- Cost per tonne was R674/t or USD45/t.

- All-in sustaining costs and all-costs per tonnes were R657/t or USD44/t. The all-in sustaining costs and all-in costs were marginally lower than the direct cost per tonne as result of other income earned by the logistics department of Uitkomst.

- Adjusted EBITDA was R10.8 million.

- Capital expenditure incurred was R0.9 million.

- Effective from 1 July 2016 the life-of-operation was 22 years for a run-of-mine coal production profile of 600,000t per annum.

COMMITMENTS REPORTED IN RAND AND GBP

The group had identified no contingent liabilities in the current or prior financial period.

The group had outstanding open orders contracted for at year end of R12.7 million (2015: R22.8 million) or GBP0.6 million (2015: GBP1.2 million).

Authorised commitments for the new financial year, not yet contracted for, totalled R345.9 million (2015: R271.1 million) or GBP17.5 million (2015: GBP14 million).

At 30 June 2016, the group had guarantees in place of R24.6 million (2015: R24.6 million) or GBP1.2 million (2015: GBP1.3 million) in favour of Eskom, R20.3 million (2014: R14.0 million) or GBP1.0 million (2015: GBP0.8 million) in favour of the Department of Mineral Resources, and R6.6 million (2015: Nil) or GBP0.3 (2015: nil) in favour of Transnet SOC Limited.

Operating lease commitments, which fall due within the next year, amounted to R3.5 million (2015: R4.0 million) or GBP0.2 million (2015: GBP0.2 million).

FAIR VALUE INSTRUMENTS

Financial instruments that are measured at fair value grouped into levels 1 to 3 based on the extent to which fair value is observable.

The levels are classified as follows:

Level 1 - fair value is based on quoted prices in active markets for identical financial assets or liabilities;Level 2 - fair value is determined using inputs other than quoted prices included within level 1 that are observable for the asset or liability; andLevel 3 - fair value is determined on inputs not based on observable market data.

Level 1 financial instruments:

The group’s rehabilitation trust funds are valued at R321.5 million (2015: R312.3 million) or GBP16.3 million (2015: GBP16.2 million), which comprise of investments in guaranteed equity-linked notes, government bonds and equities, according to quoted prices in an active market.

During the prior financial year, the company purchased 1,750,850 shares for R18.9 million (GBP1 million) in a listed available-for-sale investment. The investment is valued according to quoted prices in an active market currently valued at R25.1 million (GBP1.3 million).

Level 2 financial instruments:

During the financial period, the company entered into a Cost Collar derivative with a financial institution. At the end of the period under review the financial instrument was not closed out and settled, therefore resulting in a financial exposure to be fair value on a mark-to-market basis. The financial instrument was valued according to quoted prices in an active market resulting in a Cost Collar mark-to-market liability of R117.6 million (2015: Nil).

The group’s cash settled share option liability which is valued on a mark-to-market basis according to the Pan African Resources quoted share price amounted to R104.0 million (2015: R23.7 million).

Level 3 financial instruments:

The group’s ESOP liability is accounted on a cash settled share option basis and valued on a mark-to-market on the net present value of the discounted future cash flows applicable to the beneficiaries to the schemes. The ESOP liability was R5.6 million (2015: R0.2 million).

BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS AND ACCOUNTING POLICIES

Investors should consider non-Generally Accepted Accounting Principles ('non-GAAP') financial measures shown in this provisional announcement in addition to, and not as a substitute for or as superior to, measures of financial performance reported in accordance with International Financial Reporting Standards ('IFRS'). The IFRS results reflect all items that affect reported performance and therefore it is important to consider the IFRS measures alongside the non-GAAP measures.

The provisional announcement has been prepared using accounting policies that comply with the IFRS adopted by the European Union and South Africa, which are consistent with those applied in the financial statements for the prior years ended 30 June 2015 and 30 June 2014.

The provisional audited results announcement is only a summary of the information in the Integrated Report and does not contain full or complete details. Any investment decision by investors and/or shareholders should be based on consideration of the final Integrated Report to be published on SENS and the company’s website as a whole.

JSE LIMITED LISTING

The company has a dual primary listing on JSE Limited ('JSE') in South Africa and the AIM market ('AIM') of the London Stock Exchange (‘LSE’).

This provisional announcement has been prepared in accordance with the framework concepts and the measurement and recognition requirements of IFRS and SAICA Financial Reporting Guides as issued by the Accounting Practice Committee and the Financial Pronouncements as issued by the Financial Reporting Standards Council, and the minimum information as required by International Accounting Standards 34: Interim Financial Reporting.

The group's South African external auditors, Deloitte & Touche, have issued their opinions on the group's consolidated financial statements and the provisional summarised consolidated financial statements for the year ended 30 June 2016. The audits were for both the summarised and full set of financial statements conducted in accordance with International Standards on Auditing. Deloitte & Touche have expressed unmodified opinions on the group’s consolidated financial statements and the provisional summarised consolidated financial statements. The copies of their audit reports are available for inspection at the company's registered office. Any reference to future financial performance included in this provisional report has not been reviewed or reported on by the group's South African external auditors.

The auditor’s report does not necessarily report on all of the information contained in this announcement/financial results. Shareholders are therefore advised that in order to obtain a full understanding of the nature of the auditor’s engagement they should obtain a copy of that report, together with the accompanying financial information, from the company’s registered office.

These provisional summarised consolidated financial statements are extracted from the audited group consolidated financial statements. The directors take full responsibility for the preparation of the provisional summarised audited results and confirm that the financial information and related commentary has been correctly extracted from the underlying group consolidated financial statements.

AIM LISTING

The financial information for the year ended 30 June 2016 does not constitute statutory accounts as defined in sections 435(1) and 435(2) of the UK Companies Act 2006 (‘Companies Act 2006’) but has been derived from those accounts. Statutory accounts for the year ended 30 June 2015 have been delivered to the Registrar of Companies and those for 2016 will be delivered following the company's AGM. Deloitte LLP, the external auditor registered in the UK, have reported on these accounts for the year ended 30 June 2016. Their report was unqualified, did not include a reference to any matters to which auditors draw attention by way of emphasis of matter and did not contain a statement under section 498(2) or 498(3) of the Companies Act 2006. These statutory accounts have been prepared in accordance with IFRS and IFRS Interpretations Committee interpretations adopted for use by the EU, with those parts of the UK Companies Act 2006 applicable to companies reporting under IFRS.

DIRECTORSHIP CHANGES AND DEALINGS

No changes took place during the year and there were no director dealings in securities during the period under review.

SHARES ISSUED

On 3 June 2016 Pan African Resources issued 111,711,791 shares for R339.8 million to fund the Shanduka Gold transaction.

GOING CONCERN

The board confirms that the business is a going concern and that it has reviewed the group’s working capital requirements in conjunction with its future funding capabilities for at least the next 12 months and has found them to be adequate. The group has a R800 million revolving credit facility from a consortium of South African banks (and a two year accordion option, subject to the bank’s credit committee approval, for an additional R300 million facility), as well as access to general banking facilities of R100 million. At 30 June 2016 the group had borrowing capacity on the revolving credit facility and general banking facilities of R490 million (GBP24.8 million) and R50 million (GBP2.5 million), respectively, to assist in funding working capital requirements. On 1 July 2016 the group finalised the general banking facility of R85 million (GBP4.3 million) for Uitkomst. Management is not aware of any material uncertainties which may cast significant doubt on the group’s ability to continue as a going concern. Should the need arise the group can cease discretionary exploration and certain capital expenditure activities to conserve cash on the short to medium term.

EVENTS AFTER THE REPORTING PERIOD

No material events occurred after the reporting period.

21 September 2016

Corporate OfficeThe Firs Office Building1st Floor, Office 101Cnr. Cradock and Biermann AvenuesRosebank, JohannesburgSouth AfricaOffice: + 27 (0) 11 243 2900Facsimile: + 27 (0) 11 880 1240

Registered OfficeSuite 31Second Floor107 CheapsideLondonEC2V 6DNUnited KingdomOffice: + 44 (0) 207 796 8644Facsimile: + 44 (0) 207 796 8645

Jeffrey Couch/Neil Haycock/Thomas RiderBMO Capital Markets LimitedJoint BrokerOffice: +44 (0) 207 236 1010

http://www.panafricanresources.com/

Summarised audited GBP consolidated statement of changes in equity for the year ended 30 June 2016

Summarised audited GBP consolidated statement of changes in equity for the year ended 30 June 2016

Summarised unaudited ZAR consolidated statement of changes in equity for the year ended 30 June 2016

Summarised unaudited ZAR consolidated statement of changes in equity for the year ended 30 June 2016

Summarised audited consolidated GBP segment report for the year ended 30 June 2016

Note 1: All gold sales were made in the Republic of South Africa and the majority of revenue was generated from selling gold to South African institutions through the group's Funding Company.

Note 2: Other expenses exclude inter-management fees and dividend received

Note 3: Pan African Resources Funding Company (Pty) Ltd (‘Funding Company’) manages the group’s treasury function.

Summarised unaudited consolidated ZAR segment report for the year ended 30 June 2016

Note 1: All gold sales were made in the Republic of South Africa and the majority of revenue was generated from selling gold to South African institutions through the group's Funding Company.

Note 2: Other expenses exclude inter-management fees and dividend received

Note 3: Pan African Resources Funding Company (Pty) Ltd (‘Funding Company’) manages the group’s treasury function.

Summarised unaudited consolidated ZAR segment report for the year ended 30 June 2016

Note 1: All gold sales were made in the Republic of South Africa and the majority of revenue was generated from selling gold to South African institutions through the group's Funding Company.

Note 2: Other expenses exclude inter-management fees and dividend received

Note 3: Pan African Resources Funding Company (Pty) Ltd (‘Funding Company’) manages the group’s treasury function.