Pan African Resources Plc - 2017 Abridged Mineral Resource & Mineral Reserve Report

Pan African Resources PLC
(Incorporated and registered in England and Wales under Companies Act 1985 with registered number 3937466 on 25 February 2000)
Share code on AIM: PAF
Share code on JSE: PAN
ISIN: GB0004300496
(“Pan African Resources” or the “Company” or the “Group”)

2017 Abridged Mineral Resource & Mineral Reserve Report

Pan African Resources, the African focused precious metals producer, is pleased to announce that the 2017 Abridged Mineral Resource and Mineral Reserve Report (“MR&MR”) has been published and is available on the Company's website at www.panafricanresources.com. A summary of the MR&MR, including the Group Mineral Resource and Mineral Reserve statement as at 30 June 2017, has been provided below.

Overview

• 1.2 million ounces (“Moz”) or 12.0% gross annual increase in Group gold reserves to 11.2Moz (2016: 10.0Moz).
• 0.5Moz or 1.4% gross annual decrease in Group gold resources to 34.4Moz (2016: 34.9Moz).
• No material change in Group platinum group elements (“PGE”) resource, 0.6Moz (2016: 0.6Moz).
• No material change in Group PGE reserve, 0.2Moz (2016: 0.2Moz).
• Disposal of Uitkomst Colliery Proprietary Limited to Coal of Africa Limited on 30 June 2017. No Group coal resources and reserves stated.
• Following positive mineral resource (2.0Moz) to mineral reserve (1.7Moz) conversion and the definitive feasibility results of the Evander Gold Mining Proprietary Limited (“Evander Mines”) tailings storage facilities re-mining projects (“Elikhulu Project”), the Company has mandated DRA Projects SA Proprietary Limited (“DRA Projects”) to commence construction of the project. The life of mine (“LOM”) for Elikhulu Project is stated at 14 years, yielding approximately 56 000oz a year for the initial 8 years of production and then approximately 45 000oz per annum for the remaining 6 years.
• Focused mineral reserve conversion at Barberton Mines Proprietary Limited (“Barberton Mines”) through the development of the sub-vertical shaft project at its  Fairview operation,  thereby increasing overall capacity and production from the main reef complex (“MRC”) section by 7 000 – 10 000oz per annum and sustaining the LOM at Barberton Mines to 20 years.
• Surface exploration drilling progressed well at Evander Mines targeting the 2010 Pay Channel.  A feasibility study on exploiting the surrounding pillars at Evander Mines’ No 7 Shaft and the 2010 Pay Channel resources is expected to be completed during the first quarter of the 2018 financial year. Evander Mines and the current Evander Tailings Retreatment Plant (“ETRP”) LOM stated at 15 years.
• SRK Consulting (Pty) Ltd has independently reviewed the Mineral Resources and Mineral Reserves of the Pan African Resources’ gold assets as at 30 June 2017 and signed off on the declared estimates.

Gold

Group Gold Mineral Resources

The Group’s attributable gold Mineral Resources decreased from 34.9Moz at 30 June 2016 to 34.4Moz at
30 June 2017, equating to an annual decrease of 0.5Moz, or 1.4%.

			Contained gold
As at 30 June 2017	Category	Tonnes million	Grade g/t	Tonnes	Moz
Mineral Resources	Measured	5.3	10.94	57.6	1.9
	Indicated	262.2	2.43	636.2	20.4
	Inferred	70.4	5.35	376.5	12.1
Pan African Resources	Total	337.9	3.17	1 070. 3	34.4

Group Gold Mineral Reserves

The Group’s attributable Mineral Reserves increased from 10.0Moz at 30 June 2016 to 11.2Moz at
30 June 2017, equating to an annual increase of 1.2Moz, or 12.0%.

			Contained gold
As at 30 June 2017	Category	Tonnes million	Grade g/t	Tonnes	Moz
Mineral Reserves	Proved	4.1	7.19	29.8	1.0
	Probable	227.7	1.40	317.9	10.2
Pan African Reserves	Total	231.8	1.50	347.7	11.2

The increase can primarily be attributed to the conversion of the Elikhulu Project Mineral Resources to Mineral Reserves.

Platinum Group Elements

Group PGE Mineral Resources

The Group’s attributable PGE Mineral Resources did not change materially for the year under review.

			Contained PGEs 4E
As at 30 June 2017	Category	Tonnes million	Grade g/t	Tonnes	Moz
Mineral Resources	Measured
	Indicated	2.3	2.32	5.4	0.2
	Inferred	3.4	3.67	12.5	0.4
Pan African Resources	Total	5.7	3.12	17.9	0.6

Group PGE Mineral Reserves

The Group’s attributable PGE Mineral Reserves did not change materially for the year under review.

			Contained PGEs 4E
As at 30 June 2017	Category	Tonnes million	Grade g/t	Tonnes	Moz
Mineral Reserves	Proved
	Probable	2.3	2.32	5.4	0.2
Pan African Reserves	Total	2.3	2.32	5.4	0.2

Group organic growth

Current exploration drilling as well as activities to access and develop our orebodies was maintained during the financial year. The strategy of converting Mineral Resource to Mineral Reserve was progressed by moving organic projects further up the mining value chain towards feasibility or production. The tables below reflect the progress of near-mine growth projects that have contributed ounces to the Mineral Resource for the year.

Group: Exploring the orebody - exploration drilling

Operation	Total  metres	Number of boreholes	Average channel width cm	Number of intersections above cut-off	Average grade g/t	Total expenditure R’million
Barberton Mines	8,793	106	136	34	17	4.7
Evander Mines	783	14	31	6	28	1.4

Group: Accessing the orebody - on-reef development

Operation	Total  on-reef development metres	Average grade g/t
Barberton Mines	2,533	6.20
Evander Mines	245	28.86

Barberton Mines: Developing the orebody - capital ore reserve projects

Project	2017 metres	2016 metres	2015 metres	Potential resource target oz
Sheba – pillar development	450	540	824	10,101
Sheba – Edwin Bray to Thomas and Joe’s Luck area	8	27	5	18,701
Fairview – 11 Level Royal Reef	–	Equipping	Equipping	826
Fairview – 1# one reserve opening	71	131	84	13,958
Fairview – No 3 Shaft deepening	171	64	26	22,943
Fairview – (64 – 68) Level	451	581	447	851,562
New Consort – (33 – 45) PC	265	387	258	10,000
New Consort – MMR pillar development	8	–	–	66,309
New Consort – No 3 Shaft	–	17	327	5,969
Royal Sheba	143	189	165	309,180
Sheba Western Cross	4	133	295	25,143

Evander Mines: Developing the orebody - capital ore reserve projects

Project	2017 metres	2016 metres	2015 metres	Potential resource target oz
No 2 Decline 24 – 25 Level	73	356	904	1,200,000
25 A block ventilation	222	87	10

Group growth projects

Elikhulu Project

The Elikhulu Project entails establishing facilities and infrastructure at Evander Mines, owned and operated by Pan African Resources, to retreat gold plant tailings at a rate of 1-million tonnes per month. This is in addition to the existing production from the ETRP, which will continue to operate independently of the Elikhulu Project for the next 15 years. Three existing tailings storage facilities will be reclaimed, in the following order: Kinross, Leslie and Winkelhaak. The 3 tailing facilities will, post their processing, be consolidated into a single enlarged Kinross facility, thus reducing Evander Mines’ environmental footprint and associated environmental impact.

The project is expected to yield approximately 56,000oz of gold per annum for the initial 8 years of production (while treating the Kinross and Leslie tailings storage facilities), and then approximately 45,000oz a year for the project’s remaining 6 years from processing the Winkelhaak tailings storage facility. These production figures exclude an inferred resource of 244,398 ounces of gold delineated in the soil material beneath the existing tailing dumps.

Mineral Resource estimate

Mineral Resource category	Tailings storage facility	Tonnes million	Grade g/t	Contained  gold Moz
Indicated	Kinross	51.03	0.31	0.51
	Winkelhaak	72.47	0.24	0.56
	Leslie	70.07	0.32	0.71
		193.57	0.29	1.79
Inferred (soil)	Kinross	9.23	0.33	0.10
	Winkelhaak	8.02	0.27	0.07
	Leslie	4.57	0.45	0.08
Total		21.83	0.33	0.24
Total Mineral Resource*		215.40	0.29	2.03

Mineral reserve estimate

Mineral Reserve category		Tailings storage facility	Tonnes million	Grade g/t	Contained  gold Moz
Probable		Kinross	45.2	0.31	0.4
		Leslie	70.1	0.32	0.7
		Winkelhaak	70.0	0.24	0.6
Total Mineral Reserve*			185.3	0.29	1.7

* Inclusive of ETRP

The Mineral Reserve estimate is a probable 185.3Mt, comprised of the Kinross (45.2Mt), Leslie (70.1Mt) and Winkelhaak (70.0Mt) tailings storage facilities at Evander Mines. The combined 185.3Mt will provide feed material to the existing ETRP at 200,000 tonnes per month, and to the new project process plant at a rate of one million tonnes per month (of which 40,000 tonnes per month will be from run-of-mine tailings).

The combined Mineral Reserve contains an estimated 1.7Moz, of which an estimated 688,000oz will be recovered over the life of the project. This estimate excludes the inferred resource 244,398oz of gold leached and contained in the soil beneath the existing tailing dumps, which could potentially increase the project life.

The Mineral Reserve estimate assumes a non-selective mining method whereby the whole of the mineral deposit is mined in a predetermined sequence. The mining method allows for 100% extraction of the targeted mineral deposit. Hydraulic mining has been selected as the mining method as it is a proven technology, cost effective and technically and operationally well understood.

The overall average gold recovery over the life of the project is forecast at 47.8%. Using modelled recoveries, the gold dissolution value estimated for Kinross is 51.4%, Leslie 48.3% and Winkelhaak 53.8%.

The Elikhulu Project is progressing according to plan with project completion and first gold expected in the last quarter of the 2018 calendar year.

Barberton Mines sub-vertical shaft project at Fairview mine

The Fairview mining operation is currently restricted by the hoisting capacity of its No 3 Decline, which is used to access workings below 42 Level. This decline is currently used to transport employees and material, and for rock hoisting. The 11-Block, or MRC, orebody has an average grade of 31.3 g/t and current LOM of 20 years. With no intervention, future mining at depth will result in increased travelling distance, reduce employee face time and cause a lack of capacity to ensure both ore replacement and exploration development.

Pan African Resources, with the assistance of DRA Projects, has completed a feasibility study on the construction of a raise-bored, sub-vertical shaft from Fairviews’ 42 Level to 64 Level, with the potential of continuing the vertical shaft to 68 Level in future. This sub-vertical shaft will be used to transport employees and material to the working areas, which will allow the No 3 Decline to be used exclusively for rock hoisting, increasing overall capacity and production from this mining area.

DRA Projects has reviewed the technical and commercial aspects of the project and the supporting feasibility study has yielded very positive results. The estimated capital expenditure for the project, including contingencies, is approximately R105 million, to be incurred over a 2-year period. The productivity improvements for Fairview are estimated to yield an additional 7,000oz of gold per annum, which can be optimised further to more than 10,000oz per annum.

			Contained gold
	Category	Tonnes million	Grade g/t	Tonnes	Moz
Mineral Resource	Measured	1.08	10.92	11.26	0.38
	Indicated	1.06	14.13	14.97	0.48
	Inferred	2.68	14.90	39.93	1.28
Fairview Mine	Total	4.82	13.79	66.16	2.14

   

			Contained gold
	Category	Tonnes million	Grade g/t	Tonnes	Moz
Mineral Reserve	Proved	0.51	10.05	6.68	0.21
	Probable	1.50	13.89	18.28	0.58
Fairview Mine	Total	2.01	12.42	24.96	0.79

Evander mines No 7 Shaft No 3 decline and 2010 Pay Channel

The 2010 Pay Channel resource is adjacent to the No 7 Shaft infrastructure and extends from the boundary of Taung Gold International Limited’s No 6 Shaft project and mining rights. As previously reported, Evander Mines embarked on an exploration programme to drill a further exploration borehole from surface, to increase geological confidence in the 2010 Pay Channel orebody, for which resources are summarised in the table below:

			Contained gold
Category	Tonnes million	Grade g/t	Tonnes	Moz
Measured	0.45	8.94	4.0	0.13
Indicated	0.70	7.11	5.0	0.16
Inferred	4.13	8.93	36.9	1.19
Total	5.28	8.69	45.9	1.48

On 6 July 2017, the exploration borehole successfully intersected the Kimberley reef at a depth of approximately two kilometres, highlighting a reef intersection with a 6cm width at 36.8g/t. Additional drilling deflections will be performed to further delineate the ore body. The previous borehole into the 2010 Pay Channel yielded a reef intersection with a 49cm width at 36.04g/t.

			Grades
Borehole	Depth m	Core width cm	g/t	cmg/t
2245	2 059.3	49.0	36.04	1 766
EGM PAR 1	2 014.6	5.7	36.8	210
EGM PAR 1-Deflection 1	2014.9	5.7	33.2	189
EGM PAR 1-Deflection 2	2 014.8	4.8	144.7	694

Harmony Gold Mining Company Limited previously developed the No 7 Shaft mine workings towards the 2010 Pay Channel. However due to financial constraints and a reassessment of capital expenditure priorities, it halted all development on the Evander Mines’ shafts (other than No 8 Shaft) in 2009. This resulted in the controlled flooding of the development ends and No 7 Shaft’s No 3 Decline, from 22 Level up to 18 Level. Following the dewatering, only standard footwall and on-reef development would need to be completed, with the associated engineering infrastructure, before mining can commence.

The 2010 Pay Channel is approximately 4.5 kilometres in tramming distance from No 7 Shaft, which is currently used by Evander Mines for hoisting to the Kinross metallurgical plant. This compares favourably with the No 8 Shaft mining areas, which is approximately 12 kilometres in tramming distances from No 7 Shaft.

The Pan African Resources’ project team has commenced a feasibility study related to the No 7 Shaft No 3 Decline and the 2010 Pay Channel resource, which will address the following critical issues:

• Collation of geological data from the drill-hole intersection and deflections.
• The cost and timing of dewatering and re-equipping the No 7 Shaft No 3 Decline from 18 Level to 22 Level.
• The development cost and timing to access the 2010 Pay Channel.
• The economic viability of the project.

The 2010 Pay Channel can potentially increase Evander Mines’ underground gold production materially at a relatively low capital cost, using Evander Mines’ established shaft and metallurgical facilities. The feasibility study for the project is expected to be completed during the first quarter of the 2018 financial year.

Reporting in compliance with SAMREC Code

To meet the requirement of the South African Code for the Reporting of Exploration Results, Mineral Resources and Mineral Reserves (“SAMREC Code”) that the material reported as a Mineral Resource should have “reasonable and realistic prospects for eventual economic extraction”, Pan African Resources has determined an appropriate cut-off grade which has been applied to the quantified mineralised body. In determining the cut-off grade, Pan African Resources uses a gold price of R600 000/kg. At Pan African Resources’ underground mines, the optimal cut-off is defined as the lowest grade at which an orebody can be mined such that the total profits, under a specified set of mining parameters, are maximised. The Mineral Resource optimiser tool that was accordingly developed in-house was applied to the Mineral Resource inventory.

The optimiser programme requires the following inputs to convert the Mineral Resource to the Mineral Reserve:

• the database inventory of all mineral resource blocks;

• an assumed gold price – ZAR550 000/kg;

• planned production rates for each mine;

• mine call factor;

• plant recovery factors; and

• planned cash operating costs.

The Mineral Reserves represent that portion of the Measured and Indicated Mineral Resources above cut-off in the LOM plan, and have been estimated after consideration of the modifying factors affecting extraction. A range of disciplines has been involved at each mine in the LOM planning process including geology, surveying, planning, mining engineering, rock engineering, metallurgy, financial management, human resources management and environmental management.

Note: Mineral Resources are inclusive of the Mineral Reserve, unless otherwise stated. Rounding of numbers contained in this announcement may result in minor computational discrepancies.

Competent Person

The competent person for Pan African Resources, Mr Barry Naicker, the group Mineral Resource Manager, signs off the MR&MR for the Group and has reviewed and approved the information contained in this announcement in writing. He is a member of the South African Council for Scientific Professions (400234/10). Mr Naicker has 16 years of experience in economic geology and mineral resource management.

He is based at 1st Floor, The Firs, cnr. Cradock and Biermann Avenues, Rosebank, 2196, Gauteng.

Johannesburg
20 September 2017

Contact Information

Corporate Office
The Firs Office Building
1st Floor, Office 101
Cnr. Cradock and Biermann Avenues
Rosebank, Johannesburg
South Africa
Office:   + 27 (0) 11 243 2900
Facsimile: + 27 (0) 11 880 1240

Registered Office
Suite 31
Second Floor
107 Cheapside
London
EC2V 6DN
United Kingdom
Office:   + 44 (0)20 7796 8644
Facsimile: + 44 (0)20 7796 8645

Cobus Loots	Deon Louw
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

   

Phil Dexter	John Prior / Paul Gillam / James Black
St James's Corporate Services Limited	Numis Securities Limited
Company Secretary	Nominated Adviser & Joint Broker
Office: + 44 (0)20 7796 8644	Office: [phone]

   

Sholto Simpson	Matthew Armitt / Ross Allister
One Capital	Peel Hunt LLP
JSE Sponsor	Joint Broker
Office: + 27 (0)11 550 5009	Office: [phone]

Jeffrey Couch / Neil Haycock / Thomas Rider
BMO Capital Markets Limited
Joint Broker
Office: [phone]

Julian Gwillim
Aprio Strategic Communications
Public & Investor Relations SA
Office: [phone]

www.panafricanresources.com

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