Pan African Resources Share Discussion Threads

[stonedyou] 03/3/2023 16:23

As per its mine plan, the 8 Shaft pillar now has a remaining life of approximately six months, during which it is expected to produce c 22koz gold. Mining at 24 Level will then extend 8 Shaft’s production profile, post cessation of the 8 Shaft pillar mining, for an additional two and a half years from FY23, as the current pillar mining reaches completion, after which the board has also now approved the development capital for Evander’s 25 & 26 Level project, which is expected to increase the 8 Shaft’s mine life to 13 years at an expected annual production rate of approximately c 65,000oz.

For the moment, the 24 Level project remains in its construction phase, with all development and infrastructure placement for mining progressing according to plan, with the equipping of the existing vent shaft from 17 to 24 Level to enable hoisting via the vertical shaft currently underway. The construction of Phase 1 of the underground refrigeration plant on 24 Level is complete and has been commissioned, and will be expanded to provide cooling on 24 Level for steady-state production (Phase 2) in Q423. Phase 1 will allow mining of both the 24 Level F raise line stopes and 24 Level B, C and D raise lines. Phase 2 will allow for additional mining crews to be placed on 24 Level as well as mining on 25 Level in subsequent years. Thereafter, the board has approved the continued mining of the down-dip extent of this orebody on 25 and 26 Levels, using the 24 Level infrastructure. Development leading from the existing 24 Level footwall infrastructure will allow access to both 25 and 26 Levels, with an on-reef decline layout. The mining of 25 and 26 Levels will thereby extend Evander Mines’ 8 Shaft production, post extraction of the 8 Shaft pillar and 24 Level, at an annual production rate of approximately 65,000oz pa. Access development on 25 and 26 Levels is reported to be on schedule. Dewatering on 25 Level is in progress and blasting of development ends will commence this year, with mining of the first stope planned for FY25.

In the meantime, preliminary work has commenced on the Egoli project, where dewatering of the Number 3 Decline started in June 2022. This decline is anticipated to be dewatered to below 19 Level in Q323, after which reserve delineation drilling will commence to accurately define the Egoli pay-shoot for early mining.

Capex for the 24 and 25 & 26 Level projects at 8 Shaft and equipping costs for Evander Mines’ 7 Shaft infrastructure is estimated at c US$50m, including steel work and development costs, which will be funded from existing cash flows.

[stonedyou] 03/3/2023 16:21

Evander underground (21% of production; 30% of adjusted EBITDA)

Underground production at Evander decreased by 29.8% to 19,173oz (cf 27,312oz in H122) despite an increase in processed tonnes of 6.0% to 73,946t (cf 69,790t). While slightly larger than anticipated, the decrease resulted from:

■
normalisation of mining face grades to c 8g/t (cf 13g/t in H122), in line with planned grades of 7g/t, and

■
reduced mining rates and face availability, which reduced ore tonnes delivered for processing, following depletion of mineral reserves in accordance with geotechnical parameters for the safe extraction of the pillar.

At the same time, unit working costs reduced by almost a third in rands per tonne processed terms relative to H222, to ZAR4,460/t. In part this reduction was achieved as a result of lower production bonuses, but it also arose as a consequence of a number of energy efficiency and management initiatives in FY22, including high efficiency motors and compressors, and pumps, geysers and motors replaced with power-saving models. Similarly, the recycling of underground water continues to reduce the amount of energy consumed. The reduction in costs was also helped by the capitalisation of salaries, mining and processing and electricity costs related to 24 Level development. As a result, adjusted EBITDA increased 50.5% relative to H222 (despite a US$149/oz lower gold price) to a level that was its third highest on record for a six-month period since Evander was acquired by Pan African in February 2013.

[stonedyou] 03/3/2023 16:19

Note that Edison’s production forecast of 41.5koz for H223 is in the middle of management’s guided range of 40–43koz.

In the meantime, Barberton is maintaining its exploration focus on the down-dip extensions of its existing orebodies. In FY22, Barberton Mines conducted underground diamond core drilling programmes in excess of 9,000m and exploration metres drilled will remain at these levels in the foreseeable future. Specific focus is being placed on near-mine in-fill drilling, as well as down-dip reserve delineation drilling of underground mineral resources. Drilling into the down-dip extensions of the orebodies was reported to have yielded excellent results and improved the geological understanding of operations at Barberton as well as demonstrating their extent and quality, while continued drilling has also provided the opportunity for the grade control modelling protocols of the various operations to be upgraded to allow for improved mine design and orebody extraction in conjunction with the roll-out of more advanced and interconnected mining-related software packages to further optimise production. In the meantime, broader-scale exploration drilling is focused on the Hope, Main Muiden and Golden Quarry reefs, with desktop studies being conducted on various known but unmined lower-grade blocks in all orebodies.

[stonedyou] 03/3/2023 16:18

H123 operational analysis

Barberton underground (35% of production; 20% of adjusted EBITDA)

Full details of Barberton’s performance in H123 are available in Pan African’s results announcement. In summary however, the decline in production at Barberton relative to previous periods could be attributed to increased travelling times to the deeper production stope platforms at Fairview, which resulted in reduced face-time and associated logistical constraints, adversely affecting productivity within the high-grade MRC section and depletion of the high-grade 42 Level block at Consort. In addition, the reduced strike lengths on the high-grade MRC platforms at Fairview (owing to geological complexity) resulted in a reduction in grades and a decrease in mined tonnes. Of particular note at Barberton during the first six-month period of the financial year was the close control of costs, with unit working costs declining by 4.6% in rand terms, to ZAR4,523/t in H123 relative to the prior year period, against a background of otherwise generally rising costs in the industry. This was achieved as a result of cost-saving initiatives such as the implementation of new time and attendance software and a reduction in production bonuses and despite an increase in vamping and toll treatment costs and a 15.4% increase in engineering & technical costs (9.7% of the group total) owing to repairs and maintenance on its load, haul and dump (LHD) vehicles.

Nevertheless, multiple mining platforms remain available at the MRC and Rossiter orebodies at Fairview Mine. At a site visit attended by the analyst, it was confirmed that the shift cycles at the Fairview and Sheba Mines will be reconfigured from this month (February) to continuous (24 hour) operations, seven days a week (cf five previously), while the Consort Mine will be converted to a contract mining model. Agreements have been reached with representative unions at both Fairview and Consort, with the result that management is anticipating a materially improved second half, with output guided in the range 41–43koz for H223, as shown in the exhibit below. At the same time, a new, modern computerised mine planning system will allow mine planning to be conducted as often as every 20 minutes (cf annually previously) and will allow weekly reconciliations between gold mined and expected gold mined.

[stonedyou] 03/3/2023 16:18

HY23 results

A summary of both half year results for the period to 31 December and our expectations for H223e and FY23e relative to earlier and forecast periods is provided in the exhibit below:
Most apparent in H123 were the concurrent declines in output at both Barberton and Evander underground. In the case of the former, this could be attributed to increased travelling time to the deeper production stope platforms at Fairview, which resulted in reduced face-time and associated logistical constraints, adversely affecting productivity within the high-grade Main Reef Complex (MRC) section and depletion of the high-grade 42 Level block at Consort. In addition, the reduced strike lengths on the high-grade MRC platforms at Fairview (owing to geological complexity) resulted in a reduction in grades and a decrease in mined tonnes. In the case of the latter, the decrease in 8 Shaft pillar production resulted from the normalisation of mining face grades to c 8g/t (cf 13g/t in H121), in line with planned grades of 7g/t and reduced mining rates and face availability, which affected ore tonnes delivered for processing, following depletion of the mineral reserves in accordance with the geotechnical parameters for the safe extraction of the pillar. As a result, Evander overtook Barberton once again as the second largest contributor towards Pan African’s adjusted EBITDA:

[stonedyou] 03/3/2023 16:16

Overview

Pan African announced its FY23 interim results in the context of known production results, which were released to the market on 30 January and a JSE listing requirement paragraph 3(b) trading statement that indicated both earnings per share and HEPS in the range 1.40–1.64c at the interim stage. The operational review of 30 January provided both H123 output results as well as H223 guidance. Overall, output of 92,307oz for H123 was towards the lower end of the range of what would ordinarily be expected from full-year guidance of 195–205koz (on a pro-rata basis), but was consistent with our expectations, the normal variance in production at PAF’s operations in half-year periods and the fact that the company is still guiding towards production of 103–112koz gold for H223 and 195–205koz for FY23. The improvement in production in H223 will arise from a change in labour practices at Barberton, in particular, which will see the shift cycles at Fairview and Sheba reconfigured to continuous (24-hour) operations, seven days a week (cf five previously), while the Consort Mine will be converted to a contract mining model – a change that was the ostensible subject of a site visit to the Fairview mine on 1 February attended by the analyst and author of this report. At the same time, a new, modern computerised mine planning system will allow mine planning to be conducted as often as every 20 minutes (cf annually previously) and will allow weekly reconciliations between gold mined and expected gold mined.

Subject to the normal permitting process, Pan African will embark upon the development of its Mogale project later this year, which we believe will increase the group’s medium-term production to c 250koz pa in 2026 and push normalised HEPS to close to 6.00c/share.

[stonedyou] 03/3/2023 16:15

Valuation: Closer to 30p than 20p

Pan African is cheap!*!*!

relative to both its historical trading record and its peers. Our core (absolute) valuation of the company has risen by 4.1% to 32.59c (cf 31.30c previously), based on projects either sanctioned or already in production. However, this valuation rises by a further 16.09–21.11c (13.30–17.45p) once other assets (eg Egoli) are also taken into account. Alternatively, if Pan African’s historical average price to normalised HEPS ratio of 8.6x in the period FY10–22 is applied to our FY23 and FY24 forecasts, it implies a share price of 29.53p in FY23, followed by 30.49p in FY24. As such, PAF’s current share price of 14.60p could be interpreted as discounting normalised HEPS falling to 2.13c/share (cf 4.44c recorded in FY22 and 4.17c forecast in FY23). In the meantime, PAF remains cheaper than its principal London- and JSE-listed gold mining peers on at least 86% of commonly used valuation measures, which collectively imply a share price of 36.8p in FY23 and one of 33.3p in FY24. Finally, in FY23, Pan African still has the 11th highest dividend yield of any precious metals mining company, globally.

[stonedyou] 03/3/2023 16:12

Pan African Resources — Forecast upgrade

"We estimate that development of additional productive assets will increase PAF’s production to c 250koz in 2026"


Pan African Resources (PAF) announced its FY23 interim results in the context of

known production results and a JSE listing requirement paragraph 3(b) trading

statement that indicated both earnings per share and headline earnings per share

(HEPS) in the range 1.40–1.64c at the interim stage. In the event, HEPS and EPS for

the six-month period were exactly in the middle of the guided range at 1.52c/share.

In the wake of the H123 results, we have upgraded our forecast for normalised HEPS

for FY23 from 3.82c/share to 4.17c/share (assuming the gold price remains at

US$1,835/oz for the remainder of the year). NB Our upgrade would have been to

3.91c/share had our gold price forecast for the balance of the year remained

unchanged at US$1,749/oz. Further out, we estimate that development of additional

productive assets will increase PAF’s production to c 250koz in 2026 and its

normalised HEPS to c 6.00c/share.

[ih_103516] 03/3/2023 14:41

tuscan4, fyi, it's 'Ukraine' not 'the Ukraine' (unless you are a Russian).

[tuscan4] 03/3/2023 13:45

Cinoib,
You obviously have no knowledge of what is going on in the Ukraine.
May I suggest that you listen to Johm Mearsheimer/ Colonel Douglas Mcgregor/ Scott Ritter and THe Duran to try and learn the truth of the situation.

[cinoib] 03/3/2023 13:23

Hope you all got topped up yesterday when it was in the 13's as I am guessing that was the bottom for the time being, unless war breaks out in Europe that is. Depends how crazy Putin gets. Would be better if some one put a bullet in his head, so we can all breathe easy again.

[pooldar] 01/3/2023 16:48

Mcssupt. Yes apparently the best you could do is get it down to 10% for any future dividends.

SLP is also in SA but no tax is deducted, you get the full dividends.
So not sure what's the difference between them.

[ih_103516] 01/3/2023 15:58

Creditcrunchies, Pooldar, thanks for the feedback. If I am understanding correctly, following your procedures I should be able to get the Withholding tax from 20% down to 10%.

[justiceforthemany] 01/3/2023 10:10

Trading at a steep discount to SA yet again.
2x large buys today
400K+

[pooldar] 28/2/2023 15:15

Re PAF withholding tax see,

bluemango 3Nov21 post 12363.

Email, [e-mail]

Link, 0371 664 0300

[creditcrunchies] 28/2/2023 08:07

The easiest way around it is to sell just before exdiv when it rises then buy back on the exdiv drop.

[creditcrunchies] 28/2/2023 08:03

I've never bothered to be honest. There are ways to do it somebody explained the process a while back. It looked like a lot of effort if they in a nominee account. I think you have to message your broker first they can give some guidance. I've only just bought back in a 14.44p after a break. The way this is dropping it might have been too high a price.

[astjgroom] 28/2/2023 07:29

https://invezz.com/news/2023/02/22/pan-african-resources-share-price-is-extremely-oversold/

[divmad] 27/2/2023 23:01

Getting into bed with Russia.

[ih_103516] 27/2/2023 22:39

CreditCrunchies, how are you getting the UK tax back on dividends? I have the same issue, being a UK resident and have taken a heavy tax hit for the last two years.

[justiceforthemany] 27/2/2023 18:46

EMAIL
[e-mail]
Head of Investor Relations

[pooldar] 27/2/2023 18:42

See also ,

'Mining Elites in Africa 2023: Leadership profile - Cobus Loots'

Feb21,2023

www.miningreview.com

PAF diversifying its activities to Sudan.

[pooldar] 27/2/2023 18:24

This may help...

'Pan African Resources share price is extremely oversold'

Feb22,2023

invezz.com

Can't put up the link as I'm on mobile.

[justiceforthemany] 27/2/2023 17:34

A frankly astonishing collapse in the share price.
1. Is the valuation too high?
Certainly not. Even if the first half is repeated we are at just 5x earnings.
If H2 meets expectations we are at just 3x earnings.
2. Is the company saddled with debt?
Again the answer is no.
3. Is the ZAR gold price falling?
No again. Up 15% year on year.
4. Is the CEO new and inexperienced?
No. Cobus has been CEO for several years now.

So why are shares down almost 30% in 4 weeks?
Really really bizarre.