Last checked at 27 Sep 2012 08:00
Pan African Resources PLC
('Pan African' or the 'Company' or the 'Group')
(Incorporated and registered in England and Wales under Companies Act 1985
with registered number 3937466 on 25 February 2000)
Share code on AIM: PAFShare code on JSE: PANISIN: GB0004300496
Audited Results for the year ended 30 June 2012
Highlights and Key Matters
Group
- Gross revenue for gold sales increased by 27.65% to GBP101.1 million (2011: GBP79.2 million).
- Earnings Before Interest, Taxation, Depreciation and Amortisation ('EBITDA') increased by 57.89% to GBP45.0 million (2011: GBP28.5 million).
- Attributable profit increased by 69.77% to GBP29.2 million (2011: GBP17.2 million).
- Earnings per share ('EPS') increased by 68.33% to 2.02p (2011: 1.20p).
- Headline earnings per share ('HEPS') increased by 69.17% to 2.03p (2011: 1.20p).
- Profit margin* increased by 57.19% to US$ 918/oz (2011: US$ 584/oz).
- Gold resource inventory†increased by 4.41% to 5.92Moz (2011: 5.67Moz).
- Gold reserve inventory†increased by 16.0% to 1.16Moz (2011: 1.0Moz).
- The Group's cash balance increased by 96.04% to GBP19.8 million (2011: GBP10.1 million).
- Group capital expenditure incurred was GBP17.4 million (2011: GBP21.0 million).
Offer accepted for the acquisition of Evander Gold Mines Ltd ('Evander Gold Mines')
- On 30 May 2012 the Group entered into an agreement with Harmony Gold Mining Company Limited ('Harmony') to acquire the entire issued share capital and claims against Evander Gold Mines for a total purchase consideration of GBP116.2 million, subject to certain terms and conditions.
- Evander Gold Mines reported a net profit of GBP21.9 million for the 6 months ended 31 December 2011.
- Evander Gold Mines has an expected life of mine (excluding the reserves fromthe Rolspruit area that is contiguous to the current mining area) of more thanten years.
- Expected production profile of approximately 100,000 oz of gold per annum.
- Evander Gold Mines total underground resource represents 28.74Moz (110Mt @ 8.16g/t) and a reserve of 7.66Moz 28Mt @ 8.45g/t).
Mining Operations - Barberton Mines (Pty) Ltd ('Barberton Mines')
- Gold sold increased by 2.44% to 94,449oz (2011: 92,197oz).- Capital investment of GBP10.7 million (2011: GBP6.8 million).- Sustained a head grade in excess of 10g/t.
- Lost Time Injury Frequency Rate ('LTIFR') increased to 3.26 (2011: 2.2) and Serious Injury Frequency Rate ('SIFR') to 0.74 (2011: 0.66).
Retreatment Operations - Phoenix Platinum Mining (Pty) Ltd ('Phoenix Platinum')
- Sale of concentrate agreement concluded during November 2011.- Hot commissioning completed in April 2012.- Production of 3,384oz PGE 6E#.- Ramp up phase completed by July 2012.
Near-term Production - Barberton Tailings Retreatment Project ('BTRP')
- Capital expenditure of approximately GBP23.2 million approved for project.
- Construction commenced in April 2012.
- Capital expenditure to date of GBP4.5 million.
- Commissioning scheduled for July 2013.
* Profit margin is calculated by deducting the total cash cost in US$/oz sold from the average US$/oz spot price received.
†Movement in the reserve and resource inventory includes Manica but excludes the potential impact of the Evander transaction.
# Platinum, Palladium, Rhodium, Gold, Ruthenium and Iridium.
2012 2011Financial SummaryGold sales (GBP) 101,068,596 79,208,399 EBITDA (GBP) 45,017,891 28,540,323 Attributable profit - Owners of the (GBP) 29,241,634 17,168,665parent EPS (pence) 2.02 1.20 HEPS (pence) 2.03 1.20
Weighted average number of shares in 1,445,202,485 1,432,666,738
issue Jan Nelson, CEO of Pan African commented, "We have produced an excellent set offinancial results and achieved two significant corporate milestones. Barbertonmines produced a consistent 94,449oz gold at a consistently high head grade of10g/t and we started construction on our tailings retreatment plant atBarberton. At Phoenix Platinum, we have seen significant improvement.
We agreed terms to acquire Evander Gold Mines from Harmony, which is a game changing acquisition for us and sets us on a path to mid-tier production status. In addition, post year end we found the right opportunity for Manica in Terranova Minerals NL on the ASX.
The impact on the year is a significantly improved profit margin up by 57.19%to US$918/oz and a 27.65% increase in revenue at just over GBP101.1 million(ZAR 1.2 billion). This was due to an excellent gold price but also as a resultof stringent cost management at the mine. The first quarter sees the businessin excellent health and we are very excited at the prospects
2013 will bring".
Reporting Currency Impact on Material Obligations
Shareholders should take cognisance that the Group's liabilities with regard toits current debt facility arrangements and future obligation in terms ofsettling the R1.5 billion purchase consideration of Evander Gold Mines, aredenominated in South African Rand ('ZAR'). Although the financial informationis reported in Pounds ('GBP') the Group's functional currency is ZAR, as aresult the Group's liabilities above are not subject to the exchange ratemovements.
Nature of Business
Pan African is a precious metals, African focused mining company.
During the reporting period, the Company remained unhedged, debt free, and wasable to fund all its capital expenditure requirements from internally generatedcashflows. It is the Group's intention to increase the current revolving creditfacility to GBP11.62 million (secured in South African Rands ('ZAR') of 150million) to GBP23.2 million (ZAR 300 million) to potentially fund part of theEvander Gold Mines purchase consideration.
The Company's strategy of targeting long life (a life of approximately ten years or more) projects with high grade margins and low cash cost profiles, which are either near or at production stage, enables it to consistently improve not only its resource base but also its profit margins thereby enabling the Group to ensure continued growth in shareholder value.
Offer to acquire Evander Gold Mines
On 30 May 2012 Pan African advised shareholders that it entered into anagreement ('Acquisition Agreement') with Harmony which was amended on 15 August2012 to acquire the entire issued share capital and claims against Evander fora total purchase consideration of GBP116.2 million, subject to certain termsand conditions described below.
Background to Evander Gold Mines and rationale for the transaction
Evander Gold Mines, currently a wholly owned subsidiary of Harmony, mines andproduces gold and related products and is located in Mpumalanga, South Africa.Evander Gold Mines total underground resources represent 28.74Moz (110Mt @8.16g/t) and a reserve of 7.66Moz (28Mt @ 8.45g/t) and its operations comprise,inter alia:
- Evander Gold Mines 8 Shaft which has an expected life of mine of more than ten years and is producing approximately 100,000 oz of gold per annum;
- Various development projects comprising Evander South, Rolspruit and Poplar;
- Evander Gold Mines Surface resources of 1.89Moz (203Mt @ 0.29g/t) comprising existing tailings dumps;
- Kinross Metallurgical processing facility and associated infrastructure and buildings;
- The Evander Gold Mines operations generated production profit, as published by Harmony, for the full year ended 30
June 2012 of GBP52 million, before tax and other charges, up from GBP16.7 million for the previous year. This was mainly
the result of Harmony investing approximately GBP21 million to upgrade and improve the underground rock handling
and ventilation infrastructure at Evander Gold Mines 8 shaft.
Evander Gold Mines meets Pan African's investment criteria of a long life, highgrade, high margin, quality asset. Upon completion of the transaction the Groupwill increase its underground reserve from 1.02Moz (3.9Mt @ 8.0g/t) to 8.8Moz(39.5Mt @ 6.94g/t) and its underground resource from 2.45Moz (8.3Mt @ 9.22g/t)to 34.7Moz (177Mt @ 6.08g/t). The acquisition is expected to be earningsaccretive, and potentially allows the Group to double its current goldproduction profile. Upon completion of the transaction the single mine risk ofthe Group will be removed.
Transaction Terms and Conditions
Conditions Precedent ('Conditions'):
The Transaction is subject to, inter alia, the fulfilment, or where possible, waiver of the following conditions:
- The Transaction being unconditionally approved by the South African competition authorities by no later than 31 August 2012 (condition fulfilled on 26 July 2012);
- Evander Gold Mines entering into a new electricity supply agreement withEskom by no later than 31 October 2012, on terms and conditions acceptable toPan African (condition not yet fulfilled);- Pan African obtaining irrevocable undertakings from Shareholderscontrolling no less than 50% of Pan African's issued share capital, to vote infavour of the Transaction by no later than 31 October 2012 (condition fulfilledon 3 September 2012);- Pan African obtaining all the requisite approvals for the Transaction fromthe stock exchanges upon which it is listed by no later than 30 November 2012(condition not yet fulfilled);- Pan African obtaining approval from Shareholders for the Transaction andall resolutions ancillary to the implementation of the Transaction, by no laterthan 30 November 2012 (condition not yet fulfilled); and- The parties to the Transaction ('Parties') obtaining the necessary consentfor the Transaction from the Department of Mineral Resources ('DMR') in termsof section 11 of the Mineral and Petroleum Resources Development Act 28 of 2002by no later than 30 June 2013 (condition not yet fulfilled). In terms of theAcquisition Agreement, the Purchaser is entitled to waive the Conditionpertaining to Irrevocable Undertakings and each of Harmony and the Purchaser isentitled to extend the relevant date for fulfilment of the Conditionspertaining to Shareholder Approval for a period of 30 days. The closing datefor the Transaction shall be the later of 30 November 2012 or the tenthbusiness day after which all the conditions precedent to the Transaction arefulfilled or waived, as the case may be. The intention of the Parties is thatthe Closing Date shall be 30 November 2012.Except for the condition to enter into a new electricity supply agreement withEskom (expected to occur before 31 October 2012) and obtaining the necessaryconsent from the DMR in terms of section 11, all other conditions not yetfulfilled can only be fulfilled upon shareholders' approval of the transaction.
Purchase Consideration
In terms of the Acquisition Agreement, Pan African shall acquire the entire issued share capital of and claims against Evander Gold Mines for a total consideration of GBP116.2 million (ZAR1.5 billion) to be settled in the following manner:
- Pan African shall pay to Harmony an amount of no less than GBP77.5 million(ZAR1 billion) ('Deposit') upon the fulfilment or waiver of all the Conditions,other than the necessary Consent for the transaction from the Department ofMineral Resources in terms of Section 11 of the Mineral and Petroleum ResourcesDevelopment Act 28 of 2002; and- Pan African shall pay to Harmony the remainder of the PurchaseConsideration, being no more than GBP38.7 million (ZAR500 million), in cash,upon fulfillment of the Consent for the transaction from the Department ofMineral Resources in terms of Section 11 of the Mineral and Petroleum ResourcesDevelopment Act 28 of 2002. In the event that the above condition is notfulfilled and the Transaction is not implemented, Harmony shall be required torepay the Deposit to Pan African, with interest, calculated at 5% per annum,thereon. The Deposit shall be secured by various security cessions and mortgagebonds over the assets of Evander and the gold proceeds earned by Evander GoldMines. All cash and profits generated by Evander Gold Mines from 1 April 2012onwards are for the benefit of Pan African.
Break Fee
- The Parties have agreed to a break fee arrangement in terms of which Pan African shall pay to Harmony a break fee of GBP3.87 million (ZAR50 million);
- The Full Break Fee was payable in two separate tranches and shall be deducted from the Purchase Consideration in the event that the Transaction is successfully implemented;
- The first tranche of the Full Break Fee is an amount of GBP1.55 million(ZAR20 million) and was paid within 5 business days of the Signature Date (paidon 31 May 2012);- The second tranche of the Full Break Fee is an amount of GBP2.32 million(ZAR30 million) which was paid within 5 business days from the date upon whichthe Condition pertaining to Irrevocable Undertakings were fulfilled or waived,as the case may be (paid on 16 August 2012);
- The parties have agreed that the full break fee will be deductible from the GBP77.5 million (ZAR1 billion) deposit;
- If the Condition pertaining to Irrevocable Undertakings were not fulfilled or waived, the First Tranche Break Fee shall be non-refundable;
- The Full Break Fee shall be non-refundable in the event that the Transaction is not concluded as a result of the Condition pertaining to Shareholder Approval not being fulfilled;
- In all other instances, the Full Break Fee shall be refundable to Pan African.
Funding the Transaction
When considering the funding of the Transaction, Pan African has formulated anapproach consistent with its philosophy of ensuring that its business providesprofitable, sustainable stakeholder growth.
With this in mind, Pan African intends funding the Transaction through a combination of:
- Third party debt financing ('Debt Financing');
- Its current cash reserves and cash generated through the operations of and potential strategic disposals of non-core assets by Pan African and Evander Gold Mines until the Closing Date ('Cash Reserves'); and
- To the extent necessary, through the issue of new ordinary shares in the share capital of Pan African for cash.
Debt Financing
Pan African is in the process of securing additional Debt Financing from thirdparty lenders upon terms and conditions acceptable to Pan African to a totalamount not exceeding GBP46.5 million (ZAR600 million) for the Group.
Cash Resources
As at 25 September 2012 Pan African has available cash resources in the amountof approximately GBP20.2 million (ZAR261 million), a portion of which may beutilised for purposes of partially settling the Purchase Consideration.Furthermore, cash generated from Pan African's Barberton Mines and PhoenixPlatinum operations up until the Closing Date may be utilised for purposes ofpartially settling the Purchase Consideration.In addition, the Purchase Consideration shall be reduced by any distributionsmade by Evander Gold Mines from interim period profits. As a result PanAfrican is confident that a considerable contribution towards the partialsettlement of the purchase consideration may arise from a combination of cashresources and distributions.Equity Capital RaisingPan African intends to finance a portion of the Purchase Consideration throughthe issue of new Pan African ordinary shares ('Rights Offer Shares') by way ofa rights offer ('Rights Offer'), as referred to in the announcement publishedon 30 May 2012 ('Announcement').Pan African authorised a bookbuild exercise ('Bookbuild') which was conductedwith, inter alia, the lead institutional shareholders of the Company and PanAfrican's Black Economic Empowerment shareholder, Shanduka Resources,('Bookbuild Participants') with a view to obtaining sufficient capitalsubscription commitment to secure the funding of a portion of the PurchaseConsideration and, in particular, the potential R1 billion deposit ('Deposit')which, at Harmony's election, may become due and payable on 30 November 2012.
On 17 August 2012 Pan African announced that the Bookbuild Participants had collectively and irrevocably committed to:
- subscribe for Rights Offer Shares up to an aggregate amount of GBP54.2 million (ZAR700 million), upon the Rights Offer and the Transaction being approved by Shareholders ('Subscription Commitments'); and
- vote in favour of all the requisite resolutions ('Transaction Resolutions')pertaining to the Transaction, the Rights Offer and matters ancillary thereto('Voting Undertakings').
The Subscription Commitments were given by the Bookbuild Participants at an issue price of R1.90 per Rights Offer Share ('Subscription Price'). The aggregate Voting Undertakings secured by Pan African represent approximately 57% of the current total issued ordinary shares of the Company ('Shares').
In terms of the Subscription Commitments, the Bookbuild Participants have committed to, inter alia:
- follow their rights in terms of the Rights Offer; and/or
- apply for so many excess Rights Offer Shares in terms of the Rights Offer, so as to ensure a total minimum capital commitment to the Rights Offer of GBP54.2 million (ZAR700 million) ('Secured Capital').
The combination of the Subscription Commitments, the Voting Undertakings andthe Secured Capital allows Pan African and/or Special Purpose Vehicle ('SPV')to:
- discharge its/their obligations to Harmony in respect of a portion of the Purchase Consideration (or the Deposit, as the case may be); and
- extend the Rights Offer to both the JSE and AIM markets and thereby allowthe majority of its Shareholders trading or residing within jurisdictions thatare not restricted from participating in the Rights Offer (further details ofwhich will be set out in the Rights Offer circular to Shareholders) toparticipate in the Rights Offer.On 3 September 2012 Pan African signed the Bookbuild commitment agreements.
The Subscription Price constitutes a discount of approximately:
- 3.7% relative to the closing price of the Shares as traded on the exchange operated by the JSE Limited ('JSE') on 30 May 2012, being the date when the Evander transaction was announced;
- 3.7% relative to the volume weighted average Share price as traded on the JSE for the 30 trading days ended on 30 May 2012; and
- 4.2% relative to the volume weighted average Share price as traded on theJSE over the period from the Announcement date up to and including 15 August2012, being the period during which the Bookbuild was conducted.
Pan African will compensate the Bookbuild Participants for providing the Subscription Commitments by paying them a liquidity fee equal to 2% of the Secured Capital.
The Bookbuild outcome is summarised in the table below.
Voting Subscription undertakings Commitments Bookbuild Participants (Shares) (Rands) Investec Asset Management 141,785,423 231,000,000 Coronation Asset Management 160,000,000 220,000,000 Shanduka Gold 366,168,585 125,000,000 Allan Gray 97,074,447 75,000,000 Public Investment Corporation 39,894,492 19,282,500 Directors and others* 18,942,752 29,717,500
Total voting undertakings/subscription 823,865,699 700,000,000
comments *Including JP Nelson, RG Still and JAJ Loots, being directors of Pan African('Directors') and who hold or represent certain direct and/or other indirect/non-beneficial Shares. No other Directors hold Shares as at the date of thisannouncement.
*\* Total Voting Undertakings will represent 56.9% of the current shares in issue.
Pro Forma Financial Effects and Salient Dates
The pro forma financial effects of the Transaction on the reported financialinformation of Pan African, as well as the salient dates and times relating tothe implementation of the Transaction will be announced by Pan African as soonas they have been determined.
Categorisation and Circular
The Transaction is classified as a category 1 transaction for Pan African inaccordance with Section 9 of the JSE Limited Listings Requirements. A circularcontaining further information pertaining to the Transaction will be posted,together with a notice of a general meeting, to Shareholders in due course.
Financial Performance
Key drivers of the Group's results:
Exchange Rates
Pan African is incorporated in England and Wales, and its reporting currency ispounds sterling ('GBP'). Barberton Mines and Phoenix Platinum are South Africanincorporated companies, and their functional and reporting currency is ZAR.Manica is a Mozambican incorporated company and its functional and reportingcurrency is Meticals ("MZN").When Barberton Mines, Phoenix Platinum and the Company financial statements aretranslated into GBP for the purposes of Group consolidation and reporting, theannual average and year-end closing ZAR:GBP exchange rates affect the Groupconsolidated financial results. In the current financial year, the average ZAR:GBP exchange rate was 12.27:1 (2011: 11.11:1), and the closing ZAR:GBP exchangerate was 12.91:1 (2011: 10.94:1). The year-on-year change in the average andclosing exchange rates of 10.44% and 18.01% respectively must be taken intoaccount for the purposes of comparing year-on-year results.The annual average and year-end closing ZAR:US$ exchange rates were, 7.75:1(2011: 6.99:1), and the closing ZAR:US$ exchange rate was 8.27:1 (2011: 6.83:1). The year-on-year change in the average and closing exchange rates of 10.87%and 21.08% respectively must be taken into account for the purposes ofcomparison.Furthermore, when Manica financial statements are translated into GBP for thepurposes of Group consolidation and reporting, the year-end closing MZN:GBPexchange rate affects the Group consolidated financial results. In the currentfinancial year the average MZN:GBP exchange rate was 42.76:1(2011: 52.64:1) andthe closing MZN:GBP exchange rate was 43.25:1(2011: 45.33:1). The year-on-yearchange in the average and closing exchange rates of 18.77% and 4.59%respectively must be taken into account for the purposes of comparingyear-on-year results.
Commodity Prices
During the year, the Group realised an average gold price of US$ 1,694/oz(ZAR422,215/kg), an increase of 24.01% (37.64%) from US$ 1,366/oz (ZAR306,757/kg). During the reporting period, the gold price varied between a low of US$1,483.00/ oz and a high of US$ 1,985/oz. In ZAR terms the gold price variedbetween a low of ZAR 321,608/kg and a high of ZAR 467,512/kg.Platinum Group Metals ('PGM') prices were lower during the year under reviewaveraging US$ 992/oz primarily because of the slowdown in the global economy,however short-term supply pressure should support prices at current levels forthe next year which will be our first year of reporting PGM revenue fromPhoenix Platinum.
Inflation and cost escalation
The Group experienced cost of production inflation in ZAR terms of 12.39% during the year under review. The impact of inflation on the Group's unit costs was mitigated to some extent by the Group's cost and efficiency improvement initiatives.
Statement of Comprehensive Income
Gross revenue from gold sales increased by 27.65% to GBP101.1 million (2011:GBP79.2 million). The increase in revenue was mainly attributed to a 24.01%increase in the average US$ gold spot price received to US$1,694/oz (2011:US$1,366/oz). The increase in gross revenue was however negatively impacted bythe appreciation of the GBP against the ZAR during the reporting period, theGBP appreciating by 10.44% from ZAR:GBP 11.11 to 12.27. The average US$:ZARexchange rate was 10.87% weaker at ZAR7.75 compared to the previous year (2011:ZAR6.99), which positively impacted revenue received in ZAR. The effective ZARgold price was 37.64% higher at ZAR422,215/kg (2011: ZAR306,757/kg).Group mining profit grew by 67.21% to GBP51.5 million (2011: GBP30.8million).The profit margin in ZAR terms also substantially increased by 74.38%to ZAR228,855/kg (2011: ZAR131,237/kg) due to the favourable gold pricereceived during the year under review.The total cash cost per kilogramincreased by 10.16% to ZAR193,360/kg (2011: ZAR175,520/kg). In US$ terms thetotal cash cost per ounce decreased by 0.64% to US$776/oz (2011: US$781/oz).Cost of production only increased by 1.77% to GBP46.1 million (2011: GBP45.3million). In Rand terms, cost of production in- creased by 12.39% to ZAR566.0million (2011: ZAR503.6 million).This increase is mainly attributable to a27.13% increase in electricity costs to ZAR62.8 million (2011: ZAR49.4million), engineering and technical services costs increasing by 21.65% toZAR50.00 million (2011: ZAR41.1 million) and salary, wages and other staffexpenses increasing by 18.72% to ZAR275.9 million (2011: ZAR232.4million).These increases were offset by the reduction in security costs, whichwere down by 12.76% to ZAR29.4 million (2011: ZAR33.7 million) and processingcosts reducing by 5.11% to ZAR50.1 million (2011: ZAR52.8 million).Other expenses increased 110.71% to GBP5.9 million (2011: GBP2.8 million)largely due to once off costs associated with the Evander Gold Minesacquisition amounting to GBP0.9 million, costs related to the sale of Manicaamounting to GBP0.5 million, community project costs of GBP1.2 million and cashsettled share option expense of GBP0.8 million. The Royalty charge for the yearincreased by 58.33% to GBP3.8 million (2011: GBP2.4 million) due to increasedrevenue.EBITDA for the year under review was GBP45.0 million (2011: GBP28.5 million),an increase of 57.89%. EPS increased by 68.33% to 2.02p (2011: 1.20p) and HEPSwere up 69.17% to 2.03p (2011: 1.20p), supported by increased revenue from goldsales. The HEPS was slightly higher in comparison to the EPS due to animpairment charge of assets of GBP0.05 million. The impairments relates toBarberton Mines Segalla plant which is held for sale, the net book value wasimpaired to the Agreement Sale price. Group income tax increased by 41.30% toGBP13.0 million (2011: GBP9.2 million), in line with the increase in profitsbefore tax. During the year under review South Africa's gold mining income taxformula was reduced upon the introduction of withholding tax on dividends thatreplaced the secondary tax on companies, resulting in the ZAR effective taxrate of Barberton Mines decreasing to 29.1% (2011: 34.5%).
Accounting for the Phoenix project
The construction of the Phoenix CTRP ('Chrome Tailings Retreatment Plant') wascompleted in early November 2011, with hot commissioning commencing thereafterand the first concentrate being produced at the beginning of December 2011. During the testing phase, all the expenditures incurred were capitalised andthe plant was declared to be brought into use for accounting purposes in July2012.
Statement of Financial Position
Statement of financial position improved significantly during the year. Theincrease was however partly offset by the effects of the stronger closing GBPcurrency against the Rand which resulted in a negative translation reserve ofGBP1.9 million in 2012 compared with a positive translation reserve of GBP8.3million in 2011.Current assets, excluding assets held for sale, increased by 80.38% to GBP28.5million (2011: GBP15.8 million). This was primarily as a result of a highercash balance and an increase in debtors due to the higher value of gold shippedon the last day of the financial year compared to the previous year. Net assetvalue ('NAV') per share increased by 13.06% to 7.10p (2011: 6.28p) and tangibleNAV per share increased by 22.83% to 4.73p (2011: 3.85p).
Non-current assets decreased by 11.51% to GBP86.1 million (2011: GBP97.3 million), mainly due to assets which have been classified as held-for-sale.
These assets relate to Manica assets and the Barberton Mines Segalla plant. PanAfrican entered into an agreement with Terranova Minerals NL to sell theGroup's interest in the Manica project, detailed further under'Events after thereporting period' section below. This transaction is expected to be finalisedwithin the next financial year.
Current liabilities increased by 23.33% to GBP11.1 million (2011: GBP9.0 million) due to outstanding income and royalty tax. The Group remains debt free with an untapped revolving credit facility of GBP11.62 million.
Statement of Cash Flow
The Group's cash and cash equivalents increased by 96.04% to GBP19.8 million(2011: GBP10.1 million). This increase was mainly due to increased cashgenerated from operations of GBP30.6 million (2011: GBP16.6 million), up by84.34% from 2011 after making significant payments including dividends ofGBP7.4 million (2011: GBP5.4 million), income tax of GBP8.4 million (2011:GBP8.3 million) and royalty charge of GBP3.3 million (2011: GBP2.4 million).Cash used in investing activities in the amount of GBP17.4 million mainlyrelated to capital expenditures for Barberton's maintenance and developmentcapital expenditures, Phoenix and Barberton Tailings Project.
Review of Barberton Mines
Safety & Training
It is with regret that we have to report that on 29 May 2012 at approximately19h20 an underground general shaft worker, Mr. Christopher Makhosonke Hlela,was fatally injured when a measuring flask of a rock loading station at theFairview No 3 Shaft bottom dislodged and struck him.The failure of the measuring flask could not be foreseen or detected by weeklyinspections and no single action was identified as the reason for the death ofMr. Christopher Makhosonke Hlela. No person contravened the requirements ofthe Act or Regulations, however, the following actions were recommended andhave been implemented at the mine:
- The mine must revise the design, construction, operation and maintenance of box fronts, chutes and measuring flasks;
- The code of practice for the safe operation of draw points, tipping points, rock passes and box fronts must be revised.
The code of practice must include the timely replacement of parts of the equipment that may fail. (Reliability centred maintenance);
- Procedures and training must be amended to provide for the changes in the risk assessment and code of practice. All relevant persons must be re-trained;
- A system of inspections and planned task observations must be implemented to ensure compliance to training, rules and legislation.
The Group remains committed to the safety and health of all its employees andcontinues to review its procedures on a regular basis as part of its focus on abehaviour based safety approach.
The LTIFR increased to 3.26 (2011: 2.2) and the SIFR increased to 0.74 (2011: 0.66).
The Total Recordable Injury Frequency Rate ('RIFR') also increased to 25.1 (2011: 22.6). Although Barberton Mines showed a slight decline on its year-on-year safety performance results are below the 2014 targets as set by the DMR.
In addition to the robust safety, health, environment and community ('SHEC') implemented during the previous year, the strategic focus remains on:
- The improvement of health and safety performance through the setting and achievement of goals, taking into account stakeholder expectations and industry leading practices;
- The implementation and measurement of SHEC systems and their successes to provide a working environment that is conducive to the Company's SHEC charter;
- The management of the day to day operational risks in the workplace and the insurance that employees have to have the relevant skills to perform work related tasks in a safe manner, has taken priority.
Operating Performance
Barberton Mines sold 94,449oz of gold during the year, an increase of 2.44% from the previous year (2011: 92,197oz). Mining operations accounted for 308,095 tons milled, an increase of 4.02% from the prior year (2011: 296,200 tons). The increase in tons milled was mostly due to surface stockpiles totalling 26,054 tons (at a headgrade of 1.8g/t), yielding 1,068oz of gold.
Head grade and overall recoveries remained relatively constant at 10.45g/t (2011: 10.55g/t) and 91.22% (2011: 90.80%) respectively.
Total cash costs per ounce decreased by 0.64% to US$776/oz (2011: US$781/oz). However in Rand per kilogram terms, total cash costs increased by 10.16% to ZAR193,360/kg (2011: ZAR175,520/kg).
Total capital expenditure at Barberton Mine increased by 57.35% to GBP10.7million (2011: GBP6.8 million). Maintenance capital expenditure of GBP3.1million (2011: GBP3.6 million) and development capital expenditure of GBP3.1million (2011: GBP3.2 million) were incurred. The BTRP capital expenditure atthe end of the financial year totalled GBP4.5 million.Production Summary Financial Year: 2012 2011 2010 2009 2008 Tonnes Milled (t) 308,095 296,200 313,167 313,952 315,305 Headgrade (g/t) 10.45 10.55 10.61 10.32 8.90 Overall Recovery (%) 91 91 91 91 91 Production: (oz) 93,381 92,043 97,483 94,909 82,436 Underground Production: Surface (oz) 1,068 - - 3,955 13,513 material Gold Sold (oz) 94,449 92,197 98,091 97,353 99,078
Average Price: Spot (R/kg) 422,215 306,757 267,876 251,740 193,159
Average Price: Hedge (R/kg) - - - - 105,850
Average Price: Spot (US$/ 1,694 1,366 1,098 867 823
oz)
Average Price: Hedge (US$/ - - - - 451
oz)
Total Cash Cost US$/ (US$/ 776 781 650 469 476
oz sold oz) Total Cash Cost R/Kg (R/Kg) 193,360 175,520 158,711 136,178 111,272 sold Total Cost per Ton (R/t) 1,844 1,707 1,537 1,313 1,088
Total Mining Cost per (R/t) 1,830 1,648 1,486 1,256 1,045
Ton Capital Expenditure (GBP) 10,741,230 6,773,729 5,918,271 4,052,665 2,901,792 Exchange rate - (ZAR/ 12.27 11.11 11.93 14.39 14.68 average GBP) Exchange rate - (ZAR/ 12.91 10.94 11.53 12.66 15.56 closing GBP) Exchange rate - (ZAR/ 7.75 6.99 7.59 9.03 7.30 average US$) Exchange rate - (ZAR/ 8.27 6.83 7.65 7.72 7.80 closing US$) Capital ExpenditureOrganic Growth Projects
During the year under review, a total of GBP10.7 million was spent on capital expenditure, of which GBP3.1 million was for capital
development projects.
The drilling progress of the projects for the period are summarised below:
2012 2011 Resource Project (metres) (metres) target (oz) Sheba - 36ZK 359 294 6,000
Sheba - Edwin Bray to Thomas and Joe's Luck area 303 491 17,000
54 Level Rossiter orebody 123 0 11,000 Fairview - 3 Shaft Deepening 109 149 278,000
Consort - 40 level station establishment 267 34 10,000 Consort - 50 Level Decline West 197 123 26,000
Sheba - 36 ZK
Good progress was made with this projectand a mineable block has been delineated (36ZK 1030 Hanging Wall 2820tons @ 13.82g/t) and stoping will commence in the next financial year. Further exploration drilling will be conducted during the next financial year to delineate the various Cross Fractures (1010, 990, 970 and 950 X/Fractures).
Sheba - Edwin Bray, Thomas and Joe's Luck area
Incline development towards the high grade surface borehole intersections was carried out during the period under review. Additional infill exploration drilling is in progress for the next financial year.
Fairview - 54 Level Rossiter Orebody
This project has been completed and as a result the indicated resource blockwas converted to a measured resource (50g/t over a 3,8m). On reef mining is
inprogress.Fairview - 3 Shaft Deepening
Good progress was made with this project, where the development of a return airway was designed to provide sufficient ventilation at workable temperature. A further change was made to commence with a decline towards the 68 level downdip of the 11 high grade block.
Consort - 40 Level Development Development to the east through the pegmatitewas successful. Development on the shale will continue in the next financialyear. Further exploration drilling from strategic points will target theposition of the footwall lens/serpentinite to determine the extent ofmineralisation.
Consort - 50 Level Decline West
A station was successfully established on 52 level and the shaft decline will be developed to 53 level in the new financial year.
On-Mine Development
The on-mine development for the period under review is summarised below:
New Consort Fairview Sheba On-Mine Development for 2012 metres g/t metres g/t metres g/t Reef Development 548 4.04 581 8.45 1,057 3.38 Stope Development 357 5.47 229 6.10 73 7.46 Waste Development 1,348 - 1,563 - 2,527 - Total Development 2,253 - 2,363 - 3,657 - Capital 590 - 510 - 1,059 -
Maintenance Capital (excluding BTRP)
The maintenance capital at Barberton Mines amounted to GBP3.1 million.Expenditure on processing plant maintenance capital was GBP0.19 million for theyear, as a result of purchasing of a new concentrator truck in relation to theSheba plant and installation of new pumps at Sheba and Consort Plants. The BIOX® Plant incurred GBP0.27 million in upgrading compressors and blowers. Thetotal metallurgical maintenance and replacement expenditure for the year underreview amounted to GBP0.7 million.
The capital expenditure on the maintenance of engineering equipment and infrastructure totalled GBP1.4 million for the year. Upgrading the mining equipment fleet was a key focus area during the year, with expenditure of GBP0.2 million to re-build load haul dumpers. The purchase of front end loader and tipper truck cost GBP0.2 million. Expenditure on the refurbishment of shafts and headgears amounted to GBP0.2 million.
The balance of the maintenance capital was largely spent on the final implementation of a new financial system for GBP0.24 million and replacement of light vehicles for GBP0.7 million.
Projects
Review of Phoenix Platinum
The Phoenix project has a total South African Code for Reporting of ExplorationResults, Mineral Resources and Mineral Reserves ('SAMREC') compliant resourceof 493,000 ounces PGM 4E's (4,853,000 tons at 3.16g/t PGM 4E's in situ).The project is expected to produce 211,000 ounces PGM 6E's at a plant recoveryof 45% over the 17-year life of the operation with a planned annual retreatmentcapacity of 240,000 tons. The total capital cost required to construct andcommission the plant was GBP8.5 million (ZAR104 million). The cost for theplant was funded from existing cash resources within the Group. A sale ofconcentrate agreement was concluded with Western Platinum Limited ('WPL'), asubsidiary of Lonmin PLC, during November 2011.
The construction of the CTRP was completed in November 2011 with the first low grade concentrate delivered to WPL at the end of January 2012.
During the hot commissioning phase the metallurgists continued with CTRPstabilisation to achieve steady state concentrate production. The InternationalFerro Metals Limited ('IFM') feed source to the CTRP prior to January 2012originated from the IFM Lesedi underground operations and this sulphide richtailings material was the basis of the original CTRP project flotation testwork. Due to financial considerations IFM drastically cut back on the Lesediunderground tons and moved mining operations to the low cost opencast oxidisedore section at Skychrome.This opencast material being highly oxidised, contains poor quality chrome andlow PGE grades. Feeding this current arisings material into the CTRP is notideal as the highly oxidised tailings do not float properly. The metallurgy ofoxidised tailings negatively affects recovery and grade, leading to poor PGEconcentrate production. The oxide to sulphide ratio contained in the run ofmine ore from the IFM opencast pits will reduce proportionately with theincrease in depth of the mining cut. Various options are being investigated toaddress the effect of the highly oxidised feed source, recoveries and finalconcentrate grade.Production Summary Dec Jan Feb Mar Apr May Jun 2011 2012 2012 2012 2012 2012 2012 Plant Feed (t) 11,625 14,239 19,327 18,382 15,616 21,994 23,281 Head Grade (g/t) 4,21 3,32 4,22 4,20 4,63 3,92 4,64
Overall Plant (%) 28 9 20 17 20 27 24
Recovery Percent Cr(2)O (%) 2,46 2,57 2,39 2,4 1,94 2,87 2,81 (3)
Ounces Produced (oz) 439 122 587 405 439 777 705
6E PGE ($/ 961 940 1,048 1,028 990 929 918 oz) Basket Price Received (ZAR/ 7,853 7,523 8,015 7,785 7,733 7,537 7,681 oz) ($/ 727 2,575 577 882 781 586 664 oz) Total Cash Cost (ZAR/ 5,938 20,599 4,414 6,678 6,102 4,756 5,560 oz) ($/ 27 22 18 19 22 21 20 oz) Cash Cost Per Ton (ZAR/ 224 176 134 147 172 168 168 oz) Capital ($/ 195,545 854,882 2,126,370 553,910 271,745 0 958,446Expenditure oz) Exchange Rate- (ZAR/ 8,17 8,00 7,65 7,57 7,81 8,11 8,37 Average oz) BTRP projectAs a consequence of successful metallurgical test work carried out on compositedrill hole samples drilled during the previous financial year, the potential ofretreating the Bramber tailings dam was assessed in a feasibility study. Theproject viability was confirmed in an independent review by Venmyn Rand (Pty)Limited and during November 2011 the Company's board of directors ('Board')approved capital of GBP23.2 million (ZAR300 million) for the BTRP project atBarberton Mines.Detailed engineering process and flow design, to treat approximately 1.2Mt perannum, was carried out by Basil Read Matomo. When in production the BTRP willincrease the annual gold production profile at Barberton Mines by 20,000 to25,000 oz. With a cost structure of US$700/oz this project is well in line withthe Company's strategy of developing low cost-high margin projects.The construction of the BTRP on a site adjoining the Bramber Tailings StorageFacility ('TSF') is well underway and on target to commence cold commissioningin April 2013. Additional land adjacent to the current tailings dam extensionhas been acquired for a TSF and the Environmental Impact Assessment ('EIA') isdue to be completed by December 2012. The TSF will be ready for use when thecommissioning phase of the BTRP begins by end April 2013.
The life of the BTRP project has been augmented by auger drilling on an additional 6Mt of tailings at the Harper dumps (at Fairview) and the Consort Tailings dam, extending the Life of Project from three to ten years.
Final commissioning is scheduled to be completed in June 2013 and production build up is planned from July 2013.
Review of Manica Gold
During the period under review the Group entered into negotiations with certainstrategic partners to divest of the project. A separate management team was putin place to (a) assist the Group with its divestment strategy and (b) ensurecompliance with its current obligations on the project. The Group's divestmentstrategy allows for the project to be disposed for a consideration of cash andshares over a period of 3 years. During this period the Group will remain anon-controlling shareholder and will not assume management nor financialresponsibility for advancing the project. Further details of the status ofthis strategy are provided in the 'Events after the reporting period' sectionbelow.Capital Expenditure
Capital expenditure at Barberton Mines totalled GBP10.7 million, of which development capital was GBP3.1 million, maintenance capital was GBP3.1 million and BTRP Capital was GBP4.5 million.
Capital expenditure on Phoenix Platinum totalled GBP6.7 million.
There was GBP12.3 million in outstanding orders contracted for capital commitments at the end of the period at Barberton Mines and GBPnil outstanding at Phoenix Platinum.
Operating lease commitments, which fall due within the next year, amounted to GBP0.12 million (2011: GBP0.19 million).
Basis of Preparation of Financial Statements
Investors should consider non-Generally Accepted Accounting Principles ('GAAP')financial measures shown in this preliminary announcement in addition to, andnot as a substitute for or as superior to, measures of financial performancereported in accordance with International Financial Reporting Standards('IFRS'). The IFRS results reflect all items that affect reported performanceand therefore it is important to consider the IFRS measures alongside thenon-GAAP measures.
JSE Limited listing
The Company has a dual primary listing on JSE Limited ('JSE') and the AIM Market ('AIM') of the London Stock Exchange.
The preliminary announcement has been prepared in accordance with the frameworkconcepts and the measurement and recognition requirements of IFRS, the AC 500standards as issued by the Accounting Practices Board ('APB') and theinformation as required by International Accounting Standards ('IAS') 34:Interim Financial Reporting.The Group's South African external auditors, Deloitte & Touche, have issuedtheir opinion on the Group's Annual Financial Statements for the year ended 30June 2012. The audit was conducted in accordance with International Standardson Auditing.They have expressed an unmodified opinion on the Annual FinancialStatements from which the Group's preliminary announcement was derived. A copyof their audit report is available for inspection at the Company's registeredoffice. Any reference to future financial performance included in these GroupFinancial Statements has not been reviewed or reported on by the Group's SouthAfrican external auditors.AIM ListingThe financial information for the year ended 30 June 2012 does not constitutestatutory accounts as defined in sections 435 (1) and (2) of the United Kingdom('UK') Companies Act 2006 but has been derived from those accounts. Statutoryaccounts for the year ended 30 June 2011 have been delivered to the Registrarof Companies and those for 2012 will be delivered following the Company'sannual general meeting. The UK external auditors (Deloitte LLP) have reportedon these accounts for the year ended 30 June 2012. Their report wasunqualified, did not include a reference to any matters to which auditors drawattention by way of emphasis of matter and did not contain a statement undersection 498 (2) or (3) of the Companies Act 2006. These statutory accounts havebeen prepared in accordance with IFRS and IFRS Interpretations Committee('IFRIC') interpretations adopted for use by the European Union, with thoseparts of the Companies Act 2006
applicable to companies reporting under IFRS.
Directorship Change
The following changes took place in the financial year ended 30 June 2012:
Non-Executive Directors
- Mr Cyril Ramaphosa resigned as chairman of the board. (14 December 2011)
- Mr Keith Spencer replaced Mr Cyril Ramaphosa as chairman of the board. (14 December 2011)
- Ms Phuti Mahanyele replaced Mr Keith Spencer as Deputy Chairman of the board. (14 December 2011)
- Ms Hester Hickey was appointed to the board as chairperson of the audit committee. (12 April 2012)
Executive Directors
- Mr Cobus Loots resigned as Financial Director and remained as a non-executive director. (14 December 2011)
- Ms Busi Sitole was appointed as Financial Director. (14 December 2011)
Shares Issued
During the year under review, the Company announced the issue and allotment of 4,221,650 new ordinary shares in respect
of share options exercised:
- On 28 October 2011 200,000 shares issued to F. Chadwick at 7 pence per share.
- On 24 November 2011 723,650 shares issued to D Negri at 6 pence per share.
- On 3 April 2012 500,000 shares issued to N. Spruijt at 7 pence per share.
- On 27 April 2012 450,000 shares issued to C. Strydom at 7 pence per share.
- On 27 April 2012 850,000 shares issued to C. Strydom at 5 pence per share.
- On 27 April 2012 288,000 shares issued to P. Human at 7 pence per share.
- On 27 April 2012 850,000 shares issued to P. Human at 5 pence per share.
- On 27 April 2012 360,000 shares issued to R. Le Roux at 7 pence per share.
Dividend
The Pan African board previously stated that the company's policy is to pay anannual dividend, subject to the capital requirements of the company. Thispolicy has not changed. However, taking into account the funding required toimplement the Evander Gold Mines transaction and the concomitant proposedrights offer, and following discussions with major shareholders, the board ofdirectors has decided to forego the declaration of a dividend in respect of the2012 financial year. A final dividend for the year ended 30 June 2011 ofGBP7.4 million was paid.The board remains committed to continue with the company's dividend policy andintends to resume the dividend payment in the 2013 financial year, normal legaland commercial considerations permitting. Pan African is positive that theEvander Gold Mines transaction, once implemented, will further support theGroup's cash flows and drive to enhance shareholder
returns through dividends.
Going Concern
The Group is currently generating significant levels of cash from itsoperations, is debt free and has a revolving credit facility of GBP11.62million with a major bank which it has not yet utilised. However, the terms ofits agreement to acquire Evander Gold Mines from Harmony will require it tomake a significant cash payment (approximately GBP116 million) once all theoutstanding conditions precedent have been met. The directors currentlyenvisage that the required funding will be met by a combination of existingcash, additional equity (for which irrevocable shareholder undertakings ofGBP54 million have been obtained), cash held by Evander Gold Mines and debtfunding. The level of debt funding required is expected to exceed the capacityof the current revolving credit facility but we have secured credit committeeapproval from a major bank for the required increase in the size of thefacility secured and the Company is satisfied that the remaining steps toobtain final approval are procedural in nature.The Group's ability to fund the transaction and meet the working capital needsof the enlarged Group thereafter is also sensitive to a number of other factorsincluding, but not limited to, changes in gold price, production rates and costlevels. We have therefore produced cash flow forecasts and run sensitivities inrespect of the above factors as well as considering the potential impact on ourfunding position of a national strike in the South African mining sectorbetween now and the completion of the transaction. In the event there areunexpected adverse changes to the Group's cash flows, the directors areconfident that the Group could manage its financial affairs in a number ofways, including a reduction in discretionary capital expenditure, obtainingadditional debt funding and, in the event of a short term downturn, a focus onhigher grade ores and working capital management.Having taken into consideration the above factors, the diretors believe thatthe Group's forecasts and projections show that the Company and Group will beable to complete the Evander Gold Mines acquisition, meet all its othercontractual commitments and have adequate resources to continue in operationalexistence for the foreseeable future, being 12 months from the date of thisreport. Accordingly, the directors continue to adopt the going concern basis inpreparing the results for the year ended 30 June 2012.
Events After the reporting period
Acquisition of Evander Gold Mines from Harmony
On 17 August 2012 Pan African issued an update on the Evander acquisitionstatus. Pan African announced that 57% of the shareholders had committed tovote in favour of the transaction and that it had secured GBP54.2 million(ZAR700 million) through rights offer commitments. Pan African has made afurther payment of GBP2.5 million (ZAR30 million) to Harmony in respect of thesecond tranche of the break fee in terms of the Agreement. Therefore, the fullBreak Fee, being an amount of GBP4.1 million (ZAR50 million), has been paid byPan African to Harmony. Pan African and Harmony have furthermore agreed thatthe Break Fee shall be set off against the GBP77.5 million (ZAR1 billion)Deposit. The balance of the Deposit (if it becomes payable, at Harmony'selection) shall therefore constitute a total amount of GBP73.6 million (ZAR950million).As discussed earlier in this document the Secured Capital, in addition to PanAfrican's existing cash funds available and, to the extent necessary,draw-downs by Pan African from existing debt funding facilities, will besufficient to allow Pan African to make payment of the Deposit. Pan Africanintends to fund the balance of the Purchase Consideration through a combinationof, inter alia, third party debt financing and funds generated from PanAfrican's existing operations. Further details are outlined in the SENSannouncement dated 17 August 2012.
The Group is in the process of finalising the debt component of GBP46.5 million (ZAR600 million) required for part of the financing of the Evander transaction.
Disposal of Manica Gold Project
On 29 August 2012 Pan African announced that it entered into an agreement todispose of 100% of its Manica Gold Project ('Manica') to Auroch MineralsMozambique (Pty) Ltd, a wholly owned subsidiary of Terranova Minerals NL, for atotal potential purchase consideration of AUD 6 million (GBP 4 million / ZAR52.4 million) payable in cash and 96,666,668 shares in Terranova, subject tocertain terms and conditions more fully described in the SENS announcementdated 29 August 2012.
Accounting Policies
The preliminary announcement has been prepared using accounting policies thatcomply with the International Financial Reporting Standards ('IFRS') adopted bythe European Union and South Africa, which are consistent with those applied inthe financial statements for the year ended 30 June 2012 and prior year end
30June 2011.Directors' Dealings
The Company was notified on Tuesday 18 October 2011 that Pangea Exploration (Pty) Ltd ('Pangea'), a private company of which Mr Rob Still is a director, had declared a dividend in specie (the "Dividend") to its shareholders on 1 October 2011.
The Alexandra Trust, of which Mr Still is a trustee, is a major shareholder ofPangea and accordingly received 12,430,900 ordinary shares of 1 pence each inthe Company at a price of ZAR1.46 per share, with a total value ofZAR18,149,114 as a consequence of the dividend in specie.
The Company was notified between Friday 28 October and Tuesday 1 November 2011, that Pangea had sold the shares at the following prices:
277,863 shares at R1.7056 per share
322,137 shares at R1.7131 per share
45,708 shares at R1.72 per share
54,292 shares at R1.70 per share
300,000 shares at R1.70 per share
The Company was notified on Friday 30 March 2012 that Pangea had disposed of1,530,612 ordinary shares of 1 pence each in the Company at ZAR1.96 per sharefor a total value of ZAR3,000,000.
The above mentioned shares were sold by Pangea in order to finance new business. Following these off market transactions, Pangea holds 1,793,796 shares, representing 0.12% of the issued share capital of the Company.
Mr Still's total direct, beneficial interest in Pan African remains unchangedat 2,000,000 shares, representing 0.14% of the issued share capital of theCompany as well as his total indirect, non-beneficial interest of 14,224,696shares representing 0.98% of the issued share capital of the Company.
Segment Reporting
A segment is a distinguishable component of the Group that is engaged inproviding products or services in a particular business sector (operatingsegment), which is subject to risk and rewards that are different to those ofother segments. The segments which the Group reviews the business activities ofare: Mining Operations (Barberton Mines), Near-Term Mining Operations (PhoenixPlatinum) and Development Projects (Manica).
Renewal of cautionary announcement
Shareholders are referred to the announcements published by the Company on 17August 2012 and 29 August 2012 wherein Shareholders were advised to continueexercising caution when dealing in the Company's shares until such time as thepro forma financial effects relating to the acquisition of Evander Gold Minesand the disposal of Manica have been published,
respectively.
Accordingly, Pan African shareholders are advised to continue exercising caution when dealing in the Company's shares until such time as the pro forma financial effects relating to the acquisition of Evander Gold Mines and the disposal of Manica have been published.
Pan African Outlook - The Future
The offer to acquire Evander Gold Mines from Harmony marks a significantmilestone in the future growth of the company. On successful completion thetransaction will allow the Group to double gold production output. Mineralreserves will increase from just over 1Moz to close 9Moz ensuring a sustainablefuture. A pipeline of brownfield projects will become available around currentmining areas that can be developed to unlock future value. Such developmentwill be funded from internal cash flows without impeding on future dividendpayments.No major project development will be undertaken without shareholder approvaland the Group will continue through strategic partnerships to exploit furthergrowth opportunities within the precious metals sector in South Africa. TheGroup believes that significant opportunities will become available in the goldand platinum sectors in South Africa as the major mining houses start divestingof their South African assets to gain a more international footprint.The Group will continue to differentiate itself from its peer group and pursueits strategy of investment into ore bodies with high grades, high margins and along life. Our people, through their actions, will produce the results and wewill continue to invest in their well-being and skills upliftment.I would like to offer my sincere thanks to my fellow Directors and to all theStaff at the Corporate Office and the Operations for their tireless effortsduring a very successful year. We would also like to thank all the shareholdersfor their continued support and we look forward to continuing our journey as anemerging mid-tier precious metals producer.Jan NelsonChief Executive OfficerBusi SitoleFinancial DirectorCondensed Consolidated Statement of Comprehensive Income for the year ended 30June 2012 Group 30 June 2012 30 June 2011 (Audited) (Audited) GBP GBP Revenue Gold sales 101,068,596 79,208,399 Realisation costs (163,217) (157,763) On-mine revenue 100,905,379 79,050,636 Cost of production (46,122,811) (45,345,417) Depreciation (3,259,010) (2,885,243) Mining Profit 51,523,558 30,819,976 Other expenses (5,916,227) (2,796,657) Impairment (48,238) - Royalty costs (3,848,450) (2,368,239)
Net income before finance income and finance costs 41,710,643 25,655,080
Finance income 652,267 802,022 Finance costs (136,765) (40,128) Profit before taxation 42,226,145 26,416,974 Taxation (12,984,511) (9,248,309) Profit after taxation 29,241,634 17,168,665 Other comprehensive income:
Foreign currency translation differences (10,248,051) 3,814,677 Total comprehensive income for the year 18,993,583 20,983,342
Profit attributable to: Owners of the parent 29,241,634 17,168,665 Non-controlling interest - - 29,241,634 17,168,665
Total comprehensive income attributable to:
Owners of the parent 18,993,583 20,983,342 Non-controlling interest - - 18,993,583 20,983,342 Condensed Consolidated Statement of Comprehensive Income for the year ended 30June 2012 (continued) Group 30 June 2012 30 June 2011 (Audited) (Audited) GBP GBP Earnings per share 2.02 1.20 Diluted earnings per share 2.01 1.19
Weighted average number of shares in issue 1,445,202,485 1,432,666,738
Diluted number of shares in issue 1,453,287,941 1,438,824,573
Headline earnings per share is calculated Basic earnings 29,241,634 17,168,665 Adjustments Impairments 48,238 - Loss of sale of asset 17,922 - Headline earnings 29,307,794 17,168,665 Headline earnings per share 2.03 1.20
Diluted headline earnings per share 2.02 1.19
Condensed Consolidated Statement of Financial Position at 30 June 2012
Group 30 June 2012 30 June 2011 (Audited) (Audited) GBP GBP ASSETS Non-current assets
Property, plant and equipment and mineral rights 62,411,655 59,052,015
Other intangible assets - 14,214,426 Goodwill 21,000,714 21,000,714 Rehabilitation trust fund 2,662,934 3,013,385 86,075,303 97,280,540 Current assets Inventories 1,868,735 1,457,202 Trade and other receivables 6,828,047 4,254,401 Cash and cash equivalents 19,782,179 10,123,822 28,478,961 15,835,425 Assets held for sale 13,135,215 - TOTAL ASSETS 127,689,479 113,115,965 EQUITY AND LIABILITIES Capital and reserves Share capital 14,482,623 14,440,406 Share premium 51,149,299 50,932,830 Translation reserve (1,937,509) 8,310,542 Share option reserve 904,902 861,450 Retained income 59,432,741 37,607,283
Realisation of equity reserve (10,701,093) (10,701,093) Merger reserve (10,705,308) (10,705,308) Equity attributable to owners of the parent 102,625,655 90,746,110
Total equity 102,625,655 90,746,110 Non - Current liabilities Long term provisions 3,043,954 3,386,591 Long-term liabilities 868,881 181,285 Deferred taxation 10,088,530 9,841,695 14,001,365 13,409,571 Current liabilities Trade and other payables 7,709,729 8,193,750 Current tax liability 3,352,730 766,534 11,062,459 8,960,284
TOTAL EQUITY AND LIABILITIES 127,689,479 113,115,965 Condensed Consolidated Statement Of Cash Flows For the year ended 30 June 2012 Group 30 June 2012 30 June 2011 (Audited) (Audited) GBP GBP NET CASH GENERATED FROM OPERATING ACTIVITIES 30,575,270 16,610,289 INVESTING ACTIVITIES Additions to property, plant and equipment, mineral (17,424,906) (21,033,991)rights Evander break-fee deposit (1,548,779) - Additions to intangibles (505,273) (800,619)
Funding of rehabilitation trust fund 115,970 122,145 NET CASH USED IN INVESTING ACTIVITIES (19,362,988) (21,712,465) FINANCING ACTIVITIES Shares issued 258,686 1,545,000 NET CASH FROM FINANCING ACTIVITIES 258,686
1,545,000
NET INCREASE / (DECREASE) IN CASH AND CASH 11,470,968 (3,557,176) EQUIVALENTS Cash and cash equivalents at the beginning of the 10,123,822 12,756,262 year
Effect of foreign exchange rate changes (1,812,611) 924,736
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR 19,782,179 10,123,822
Condensed Consolidated Statement of Changes in Equity for the year ended 30June 2012 Share Share Translation Share Retained Realisation Merger Total Capital Premium reserve option earnings of equity reserve GROUP account reserve reserve GBP GBP GBP GBP GBP GBP GBP GBP Balance at 14,095,406 49,732,830 4,495,865 754,394 25,814,783 (10,701,093) (10,705,308) 73,486,877 30June 2010 Issue of 345,000 1,200,000 - - - - - 1,545,000 shares Total - - 3,814,677 - 17,168,665 - - 20,983,342 comprehensive income Dividends - - - - (5,376,165) - - (5,376,165)paid Share Based - - - 107,056 - - - 107,056 payment - Charge for the year Balance at 14,440,406 50,932,830 8,310,542 861,450 37,607,283 (10,701,093) (10,705,308) 90,746,110 30June 2011 Issue of 42,217 216,469 - - - - - 258,686 shares Total - - (10,248,051) - 29,241,634 - - 18,993,583 comprehensive income Dividends - - - - (7,416,176) - - (7,416,176)paid Share Based - - - 43,452 - - - 43,452 payment - Charge for the year Balance at 14,482,623 51,149,299 (1,937,509) 904,902 59,432,741 (10,701,093) (10,705,308) 102,625,65530June 2012
Consolidated Segmented Report for the year ended 30 June 2012
30 June 30 June 2012 2011 Barberton Phoenix Corporate Group Barberton
Phoenix Corporate Group Mines Platinum and Growth Mines Platinum and Growth * * Projects Projects GBP GBP GBP GBP GBP GBP GBP GBP Revenue
Gold sales 101,068,596 - - 101,068,596 79,208,399 - - 79,208,399 Realisation (163,217) - - (163,217) (157,763) - - (157,763) costs On - mine 100,905,379 - - 100,905,379 79,050,636
- - 79,050,636 revenue Cost of (46,122,811) - - (46,122,811) (45,345,417) - - (45,345,417)
production Depreciation (3,259,010) - - (3,259,010) (2,885,243) - - (2,885,243) Mining Profit 51,523,558 - - 51,523,558 30,819,976 - - 30,819,976 Other (1,484,792) (59,957) (4,371,478) (5,916,227) (288,930) (12,943) (2,494,784) (2,796,657) expenses ** Impairment (48,238) - - (48,238) - - - - costs Royalty costs (3,848,450) - - (3,848,450) (2,368,239) - - (2,368,239) Net income / 46,142,078 (59,957) (4,371,478) 41,710,643 28,162,807 (12,943) (2,494,784) 25,655,080 (loss)before finance income and finance costs Finance 96,202 4,911 551,154 652,267 29,065 - 772,957 802,022 income Finance costs (136,765) - - (136,765) (40,128) - - (40,128) Profit / 46,101,515 (55,046) (3,820,324) 42.226.145 28,151,744 (12,943) (1,721,827) 26,416,974 (loss) before taxation Taxation (13,058,128) 73,617 - (12,984,511) (9,251,933) 3,624 - (9,248,309) Profit / 33,043,387 18,571 (3,820,324) 29,241,634 18,899,811 (9,319) (1,721,827) 17,168,665 (loss) after taxation Other comprehensive income: Foreign (3,840,331) 550,605 (6,958,325) (10,248,051) 1,737,540 269,848 1,807,289 3,814,677 currency translation differences Total 29,203,056 569,176 (10,778,649) 18,993,583 20,637,351 260,529 85,462 20,983,342 comprehensive income / (loss) for the year
*Costs directly attributable to Phoenix Platinum, along with attributable overheads, are capitalised to capital under construction
** Other expenses are excluding inter-company management fees and dividends
Segmental 48,864,455 19,617,673 38,206,637 106,688,765 43,333,140 16,990,521 31,791,590 92,115,251 Assets
Segmental 23,552,791 275,378 1,235,655 25,063,824 20,212,973 1,556,006 600,876 22,369,855Liabilities Goodwill - - - 21,000,714 - - - 21,000,714 Net Assets 25,311,664 19,342,295 36,970,982 81,624,941 23,120,167 15,434,515 31,190,714 69,745,396(excluding goodwill) Capital 10,739,237 6,672,468 13,202 17,424,907 6,773,729 14,079,722 180,540 21,033,991Expenditure Contact DetailsCorporate OfficeThe Firs Office Building1st Floor, Office 101
cnr. Cradock and Biermann Avenues
Rosebank, Johannesburg
South Africa
Office: + 27 (0) 11 243 2900
Facsmile: + 27 (0) 11 880 1240
Registered Office6 St James's PlaceLondonSW1A 1NPUnited Kingdom
Office: + 44 (0) 207 499 3916
Facsmile: + 44 (0) 207 491 1989
Jan Nelson Busi Sitole
Pan African Resources PLC Pan African Resources PLC
Chief Executive Officer Financial Director
Office: + 27 (0) 11 243 2900 Office: + 27 (0) 11 243 2900
Justine James Phil Dexter Gable Communications St James's Corporate Services Limited Public Relations - UK Company Secretary Office: +44 (0)207 193 7463 Office: + 44 (0) 207 499 3916 John Prior Elizabeth Johnson Canaccord Genuity Limited finnCap Ltd Nominated Adviser and Joint Broker Joint Broker Office: +44 (0)207 523 8350 Office: + 44 (0) 207 220 0500 Nigel Gordon Sholto Simpson Fasken Martineau LLP One Capital Solicitors in the UK JSE Sponsor Office: +44 (0)207 917 8500 Office: + 27 (0) 11 550 5009 Louise Brugman
Vestor Media & Investor Relations
Public & Investor RelationsOffice: +27 (0) 11 787 3015www.panafricanresources.com
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