Pan African Resources Share Discussion Threads

[coxsmn] 29/9/2016 19:45

Edison report, 26p target.http://c3352932.r32.cf0.rackcdn.com/content/pdfed0b904dcd0a7d7bbbb002807a1f79a2.pdf

[srpactive] 28/9/2016 16:56

Good rns, re directors buying, nice move up to 24p is my
target.

dyor

regards

active

[2vdm] 28/9/2016 15:46

Yes, me too. Thanks.

[scottishfield] 28/9/2016 11:42

And me also, thank you

[srpactive] 28/9/2016 10:58

DS2 and Bev

Keep the very intelligent posts coming for the
likes of me.

regards

active

[dangersimpson2] 28/9/2016 10:53

Hi JJHBev,

Yes I think you are right. This is the full statement:

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.

That they booked an unrealised loss on the 440k/kg collar at 30th June means that they hadn't fully delivered into this at Y/E. Originally I thought this would be probably half the 25koz = 778kg.

778/2 x (581,000 - 440,000) = ZAR55m

Which is what I modelled. (581k/kg was spot at the time of analysis.)

However I assumed they would deliver physical gold at a constant rate over time (hence the half delivered) but in reality it but sounds like they will cash settle at the end of the contract. As detailed further in the results:

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).

Hence the full unrealised loss at Y/E.

The cash impact will fall in FY17 and is a liability in the balance sheet. At current spot it is likely to be c.ZAR110m.

However the cash impact isn't what the P&L statement presents. Effectively they have already taken the loss through the P&L at FY16 Y/E. The 625k/kg is not a new contract for a collar but the price used to mark the collar to market as required by accounting. The effect of taking the mark to market loss to P&L has the effect of resetting the collar from a FY17 P&L point of view at 625k/kg even though the cash settlement is still based on 440k/kg.

With current spot at 575k/kg then the P&L impact on FY17 will be positive:

778 x (625,000 - 575,000) = ZAR38.7m

In my model this would give FY17 EPS of 3.00p and a P/E of 6.7 @20p.

OCF analysis I'll save for another day!

[jjhbev] 27/9/2016 17:14

Hi DS

And thanks for the projection.

One small observation re the Collar Impact. I think that based on the comment in the PAF results this will have minimal or no cost in 2017. The comment =

"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."

So, based on the current gold price in ZAR per kilo there should be no cost.

Any thoughts on the potential level of dividend per share based on the new policy of targeting the payout at 40% of cash generated from operating activities?

Thanks again.

[dangersimpson2] 27/9/2016 14:45

The results have enabled me to improve my PAF model to more than just the gold operations:


2015A 2016A 2017E Gold price ZAR/Kg 446274 542850 581446 SpotAll in costs ZAR/Kg 425084 410206 410206 FlatKg produced 5690 6374 6374 FlatGold PBT (ZARm) 121 845 1091 Platinum PBT(ZARm) 21.3 -11.5 0 Assume B/E after IFM Issues resolvedBarberton Collar Imapct (ZARm) -55.0 Assume 50% delivered in 2016.Uitkomst PBT (ZARm) 15.4 61.6 4x16Q4Royalties (ZARm) 29.7 60.1 60.1 Finance Costs (ZARm) 38.0 21.6 21.6 Similar DebtPBT (ZARm) 53 768 1017 FX rate (ZAR/GBP) 18.00 21.45 17.51 SpotPBT (£m) 2.94 35.79 58.05 PAT (£m) 2.18 26.49 42.96 shares in issue (m) 1831 1811 1506 EPS (p) 0.12 1.46 2.85 SP (p) 20.50 20.50 P/E 14.0 7.2



Historic EPS doesn't exactly match reported figures due to minor adjustments, fx on debt/cash etc. but gives a good approx of the underlying profit performance.

Interestingly consensus EPS on S'Pedia is now increased to 2.91 for FY17 which is slightly higher than my estimate. Although I have modelled flat production. Even a 2% increase here would see the consensus hit.

Strangely the FY18 consensus drops to 2.70p. Think this can only come from modelling a drop in gold price or production since the Barberton collar would drop out and if Phoenix Platinum returns to historic profitability then we would be looking at 3.07p EPS from flat gold price/fx/production.

The other news is the resource/reserve upgrades giving higher LOM. Long LOM's makes it more relevant to use P/E as a valuation metric.

In summary the analyst consensus for FY17 EPS does seem reasonable and with this giving a forward P/E of c.7 the market does seem to continue to undervalue the business. The Analyst consensus for FY18 now looks too low unless there are material adverse moves in gold price, FX or reduced production in that FY so has the potential to be upgraded going forward.

[srpactive] 26/9/2016 07:50

Fantastic results at hgm, as were paf's.

The sector is now proven growth with growing income
because of the profits. Hgm interim dividend 5p up
from 2p.

dyor

Sector should zoom.

regards

active

[master rsi] 23/9/2016 13:12

Some good size buys on the ticker the last one not long ago 100K

article in IC today with a buy tip

[dilbert dogbreadth] 23/9/2016 11:59

Yes great results and should continue to grind higher.

HGM should follow suit on Monday and is even cheaper.

[pixi] 23/9/2016 11:46

I doubled my holding this morning.

[srpactive] 23/9/2016 11:36

Super duper right up for paf in the ic, next years
target rofit of £68.8m and 3.1p eps.

Forward pe of 6-7.

This can double and still remain cheap.

Income and growth.

The dividend next year should rocket as 40% of profits back in dividends.

I continue to buy.

dyor

regards
a
ctive

[srpactive] 23/9/2016 08:10

Closed (just) above the 50dma last night which is very positive indeed,
as it had already crossed 100 and 200dma. Rsi is at a good level to
see a sustained rise which being concerned about being stretched.
In my honest opinion 26 - 30p is a very low target in the next few days/weeks.
I continue to buy.

dyor

regards

active

[coincall] 22/9/2016 22:27

Some interesting points made by Ned Naylor-Leyland regarding Investors about gold – the original denominator – and about return-free risk in the negative yielding bond markets in the second half of the Keiser Report No.969

[pixi] 22/9/2016 19:56

Now that the uncertainty has been removed over interest rates, I expect precious metals to make up for lost ground. It is unlikely that they will put them up this year on weak growth.

[bikwik] 22/9/2016 18:49

No, i just had a scroll though all the UK listed gold stock charts and they all mostly look good. PAF as I said bounced from the 61.8% level. Wouldn't have liked to have seen it retrace any more than that, so has scope to test the highs at least. So thats 24.5p. I expect it will break higher at some point. Whether PAF goes straight up to 24.5p I don't know. Personally, I'd run it for that.

Gold has a lot of resistance over $1350 and thats ony 10 bucks away, so maybe some choppy trading very soon. That will obviously affect gold stocks. It could punch through it life a knife through butter. Personally I don't know the answer to that!

[dilbert dogbreadth] 22/9/2016 18:20

cheers bikwik.

Do you have a chart to post and targets?

[bikwik] 22/9/2016 18:18

I have just started my own thread called BIKWIK and Technical Analysis. The first postings are on VLK. I will post lots more stuff as time goes by. I'll do my best to get it right, but no doubt i'll slip up sometimes. Still, hope it helps.

The gold and silver miners looking nice. A-B-C (i.e. down-up-down from the summer highs) look to be well over. Bullish breakaway gaps today from the majors.....RRS, CEY, FRES and HOC for example. An A-B-C downward correction for PAF completed last Friday at 17.25p (61.8% of the May-June advance). New highs probably to follow.

[chipperfrd] 22/9/2016 13:20

coincall

Yes, it all adds up to a pretty high probability of even better results going forward.

All the best
Chip

[coincall] 22/9/2016 13:13

chipperfrd,

Thanks for your response. I'm also expecting an increase in gold production and POG to add to the numbers. The divi is already very welcome!

[chipperfrd] 22/9/2016 11:37

coincall,

Yes, your point about the Shanduka Gold transaction is an important one.

All things being equal, if that transaction had occurred before the Financial year end, a larger proportion of the dividend would have been apportioned to PAF shareholders rather than non-controlling interests.

As it is, our dividend was calculated on 1,943m shares, whereas the resultant after the transaction is 1,506m shares, ie c. 22.5% fewer shares in issue.

Another point regarding the transaction is that (assuming no issuance of new shares) the EPS will be boosted in the interims & finals for FY17 by the overall reduction in shares:

no. shares used for FY16 EPS calculation was 1,811.4m
no. shares used for 6m FY17 EPS will be c. 1,506.8m
which is a reduction of c. 16.8%

Given the predilection of city analysts to focus on EPS one would expect a positive response to such a boost (effectively by the share buyback) at the next financials, even without any increase in actual earnings - which, in itself, looks unlikely given the strength of the new gold bull.

Chip

[master rsi] 22/9/2016 10:26

a delayed trade just reported paying large premium at the time 20.89p for 100K buy

09:18:03
20.8916p
100,000
£20.89k