Pan African Resources Plc Operational Update for the year ended 30 June 2020

 
TIDMPAF 
 
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 
 
ADR ticker code: PAFRY 
 
("Pan African" or "the Company" or "the Group") 
 
OPERATIONAL UPDATE FOR THE YEARED 30 JUNE 2020 
 
Pan African is pleased to provide shareholders with the final production 
results, as well as an operational update, for the financial year ended 30 June 
2020 ("reporting period"). 
 
Despite the challenges presented by COVID-19, the Group delivered a robust 
performance, with the salient features being: 
 
  * Gold production increased by 4.1% to 179,575oz, compared with 172,442oz for 
    the financial year ended 30 June 2019 ("prior reporting period") and 2% 
    higher than the revised production guidance of 176,000oz. 
  * The Group maintained an industry leading safety performance, despite a 
    slight regression in lost-time injury frequency rate ("LTIFR") and 
    reportable injury frequency rate ("RIFR"), with the regression largely 
    attributable to reduced man hours worked due to COVID-19, when compared to 
    the prior reporting period. Additionally, Barberton Mines achieved 3 
    million fatality-free shifts during June 2020, a record for the past 
    decade. 
  * Operations have implemented stringent policies and protocols to deal with 
    the ongoing COVID-19 pandemic. 
  * Group net debt decreased by 49% to USD62.5 million from USD123.7 million at 
    December 2019. Net debt at the 2020 year-end was lower than the previously 
    guided USD70 million as a result of better than anticipated production, 
    depreciation in the ZAR/USD exchange rate and disciplined working capital 
    management. 
  * Steady state production was achieved at Evander's 8 Shaft pillar during 
    June 2020, with expected production of 30,000oz per year for the next three 
    years. 
  * Development into the first target block on 42 level of Barberton's New 
    Consort Mine - Prince Consort ("PC") Shaft was completed during June 2020, 
    with highly prospective grades recovered during the last month. 
  * The Pan African board has approved the construction of a 10MW solar power 
    plant at Elikhulu, with the plant expected to materially reduce electricity 
    costs, post its 12-month construction period. 
  * The independent feasibility study review for Evander's Egoli project was 
    completed, with detailed scheduling now underway, and the Group exploring 
    funding options for its development.  The project is expected to contribute 
    incremental annual production of between 60,000oz to 80,000oz for the 
    Group, over its minimum life of 9 years. The feasibility study projects 
    steady state annual production of 72,000oz in year 2, at an all-in 
    sustaining cost ("AISC") of under USD1,000/oz.  This life of mine excludes 
    the Inferred Mineral Resources of 6,26Mt at 9,68 g/t (1.95 Moz), which will 
    be accessed once underground development is in place. 
 
Production guidance for the 2021 financial year has increased to approximately 
190,000oz. 
 
Pan African CEO Cobus Loots commented: 
 
"Pan African has demonstrated the resilience of its operations with an improved 
performance for the year, especially when taking into account the challenges 
posed by the COVID-19 pandemic. The flexibility inherent in our operations 
confirms the quality of these mines and their ability to withstand short term 
disruptions and still deliver on our targets. 
 
We expect that we still have a long battle ahead against COVID-19 and will do 
our part to mitigate the impact as far as possible. Pan African will continue 
to rigorously implement preventative and precautionary measures at our 
operations to ensure the health and well-being of our employees. We will 
respond rapidly and in a considered manner where occurrences of COVID-19 are 
identified.  We will also continue our relief efforts to assist the most 
vulnerable in our areas of operation. 
 
The Group's safety performance is commendable, and I wish to thank all of my 
fellow employees and contractors for ensuring that each and every one of us 
returned home safely during the past year. We need to remain unrelented in the 
pursuit of our ultimate goal of "Zero Harm" in the year ahead.". 
 
The Group has further prioritised its focus on our Environment, Social and 
Governance ("ESG") initiatives, with increased rehabilitation spend and board 
approval for sustainable development projects, including the renewable energy 
solar plant at Elikhulu and large scale agriculture projects at Barberton 
Mines.  A feasibility study for a solar plant has also been initiated at 
Barberton Mines. 
 
Our strategic focus for the year ahead remains on optimising our operations and 
degearing our balance sheet, with the intent of increasing dividends in the 
years ahead. We are especially pleased to report that the rate of degearing has 
exceeded previous guidance and, at prevailing Rand gold prices and guided 
production levels, we expect to be debt free within the next twelve months. 
 
During our 2020 interim results presentation, we outlined detailed plans to 
reduce the costs of our lower margin operations. Despite COVID-19 delays, we 
have delivered on these plans with our annual production profile bolstered by 
the pillar mining at Evander's 8 Shaft, which reached steady state during June 
2020, while the accelerated development at Barberton Mines' Consort operation 
has exceeded our expectations in terms of recovered grades and gold production. 
 The positive feasibility study for Evander's Egoli Project demonstrates that 
this project can add considerably to the Group's production profile and firmly 
entrench Pan African as an established mid-tier gold producer. 
 
We look forward to presenting our year-end financial results and demonstrating 
the value we have created for our shareholders and our other stakeholders, 
amidst the challenges faced in the last half of the financial year as a result 
of COVID-19." 
 
Group annual production 
 
Group annual gold production for the 2020 financial year increased by 4.1% to 
179,575oz (2019: 172,442oz), exceeding the revised production guidance of 
176,000oz, as announced to shareholders on 11 May 2020 by means of SENS/RNS. 
Gold production, especially at Barberton Mines, was severely affected during 
March and April 2020 as a result of the COVID-19 pandemic and resultant 
lockdown restrictions imposed. The gold production split per operation is as 
follows: 
 
                                    Year ended 30  Year ended 30 
                                      June 2020*     June 2019 
 
Production ounce profile: 
 
Barberton Mines - underground           68,302         75,356 
 
Barberton Tailings Retreatment          20,153         24,007 
Plant 
 
Evander Mines - underground and         31,541         26,878 
tolling 
 
Elikhulu                                59,579         46,201 
 
Total ounces produced:                 179,575         172,442 
 
* Values subject to final refinery adjustments 
 
Safety achievements 
 
The Group maintained an industry leading safety performance following a number 
of safety initiatives and interventions: 
 
  * The Group reported a marginal regression in the RIFR from 0.51 per million 
    man hours for the year ended 30 June 2019 to 0.8 per million man hours for 
    the year ended 30 June 2020; 
  * Group LTIFR rate regressed marginally from 1.62 per million man hours for 
    the prior reporting period to 1.70 per million man hours for the reporting 
    period; 
  * The regression in the RIFR and LTFR rates are principally due to a 
    reduction in the man hours worked in the reporting period relative to the 
    prior reporting period.  Reduced hours, as a result of the COVID-19 
    pandemic, during the reporting period, and completion of Elikhulu's 
    construction in the prior reporting period contributed to the decrease in 
    hours worked. The Group's safety performance however still exceeds industry 
    norms; 
  * Barberton Mines achieved 3 million fatality-free shifts in June 2020 - a 
    record for the mine in the past decade; 
  * Fairview Mine achieved 2 million fatality free shifts in April 2020; and 
  * Elikhulu experienced no lost-time injuries during the past 11 months, 
    contributing to the Group's commendable safety performance. 
 
Pan African will continue to pursue further improvements to its safety 
performance in the years ahead. 
 
Statement of financial position 
 
The Group materially reduced its senior interest-bearing debt (including the 
outstanding gold loan balance of 5,000 ounces), net of available cash, to 
ZAR1.1 billion (USD62.5 million at an exchange rate of ZAR/USD:17.33) from 
ZAR1.8 billion (USD129.0 million at an exchange rate of ZAR/USD:14.08) at 30 
June 2019. 
 
In USD terms, senior interest-bearing debt reduced by 49% relative to the debt 
levels at 31 December 2019 of ZAR 1.7 billion (USD123.7 million at an exchange 
rate of ZAR/USD:14.08). 
 
Operational improvements and cost reductions 
 
The Group has undertaken a number of initiatives to improve production and 
reduce unit costs at its higher cost operations. These initiatives include: 
 
Evander Mine's 8 shaft pillar project ('8 shaft pillar') 
 
Despite a delay, as a result of the COVID-19 pandemic and subsequent national 
lockdown restrictions impacting underground mining operations, the Group is 
pleased to report that steady state production at the 8 shaft pillar was 
attained during June 2020, when the shaft tower construction was completed 
between 14 and 16 level at this shaft. 
 
The 8 shaft pillar is expected to produce 30,000oz of gold per year for the 
next 3 years, at an AISC of below USD1,000 per ounce. Mining of the 8 shaft 
pillar significantly reduces the risk profile of Evander's underground 
operations, with simplified logistics, modern underground mining support and 
reduced travelling times to the workplace expected to contribute to improved 
production costs. 

 
Barberton's New Consort Operation 
 
In the Group's interim results presentation, detailed plans were provided on 
the development into new stoping areas around the PC Shaft. Development into 
the first target block on 42 level of this shaft has been completed, with a 
proved mineral reserve of 5,000 tons at an average grade of 25g/t delineated. 
The ore body was intersected in early May 2020, following delays due to 
COVID-19 disruptions, and initial sampling revealed grades in certain areas in 
excess of 300g/t, containing large amounts of visible gold. Production from 
this resource block at the New Consort Mine is expected to reduce the mine's 
AISC and ensure the operation's future profitability. The Group's on-site 
exploration team has identified a number of additional potential targets using 
advanced exploration techniques, which will be further explored and developed, 
if viable, in the next year. 
 
A presentation containing  technical details of the abovementioned PC shaft 
project is available on the Group's website at www.panafricanresources.com 
 
Barberton's Fairview operation 
 
Improved flexibility, resulting from accelerated underground development 
programs implemented during the past year, has resulted in increased face 
length availability (over 130m of high-grade face length), which will assist 
the Group in delivering into its production guidance for the next financial 
year. Geological complexity, as experienced on the 256 platform of the MRC ore 
body at Fairview Mine, has been mitigated with increased mineral reserve 
delineation drilling, increasing the confidence and predictability of 
geological models. Mining has now also commenced on the 257 platform of the MRC 
ore body. 
 
Elikhulu Solar Plant 
 
The Group's board has approved the development of a 10MW solar photovoltaic 
("PV") project (the "Project") at Elikhulu's operation in Evander, following 
the finalisation of a positive bankable feasibility study undertaken by 
independent consultants ARUP. The Project will initially provide up to 30% of 
Elikhulu's annual power requirements and aims to reduce the operation's 
dependency on the national grid, whilst also reducing exposure to above 
inflation annual power cost increases. Additionally, the Project will promote a 
more sustainable renewable energy solution for the green economy of the country 
and reduce Elikhulu's carbon footprint. 
 
The Project, with an expected minimum life of at least 20 years, is expected to 
generate electricity at a cost lower than Eskom power, which also makes this 
investment economically compelling. Additional positive environmental and 
social aspects include the generation of carbon credits and job creation within 
the local communities. This investment in renewable energy by the Group will 
result in improved efficiencies, a further reduction in operating costs and the 
long term sustainability of the Elikhulu operations. 
 
The EPC (Engineering, Procurement, Construction) contract for the Project has 
been awarded to an independent contractor and the Group is now in the process 
of finalising the necessary legal and contractual agreements, as well raising 
dedicated funding for the project. 
 
Evander's Egoli Project 
 
During the reporting period, DRA Global completed a feasibility study on the 
Egoli Project, which was subject to an independent review by The Mineral 
Corporation.  The study concluded that the project has a life of 9 years with 
potential upside, through the conversion of inferred mineral resources, as 
underground development proceeds. The Egoli Project is expected to contribute 
average annual gold production of 72,000oz, with 20 months to first gold from 
commencement of development, at an expected AISC of under USD1,000/oz. 
 
The project initially requires approximately 560 meters of underground 
development and will benefit from existing infrastructure such as vertical 
shafts, hoisting capacity and an operating metallurgical processing plant, as 
well as the existing experienced management team. 
 
The Group has mandated DRA Global as consultants to complete the detailed 
project scheduling and planning as the next phase in the development of the 
project. Non-dilutive funding options are currently being explored for the 
finance of the project. 
 
Production guidance for the 2021 financial year 
 
The Group is pleased to be in a position to increase its production guidance 
for the 2021 financial year to approximately 190,000oz. This increase is 
attributable to the abovementioned operational optimisation initiatives and 
resumption of full scale mining activities, following the lifting of COVID-19 
restrictions, and assumes that the Group will not experience material COVID-19 
disruptions in the coming year. 
 
The financial information on which this operational update has been based has 
not been reviewed or reported on by the Company's external auditors. 
 
Hendrik Pretorius reviewed and approved the information contained in this 
document as it pertains to Mineral Resources and Mineral Reserves. He is Pan 
African's Mineral Resource Manager, a member of the South African Council for 
Natural Scientific Professions as well as a member in good standing of the 
Geological Society of South Africa. 
 
Rosebank 
 
10 July 2020 
 
For further information on Pan African, please visit the Company's website at 
 
www.panafricanresources.com 
 
Contact information 
 
Corporate Office                              Registered Office 
The Firs Office Building                      Suite 31 
2nd Floor, Office 204                         Second Floor 
Cnr. Cradock and Biermann Avenues             107 Cheapside 
Rosebank, Johannesburg                        London 
South Africa                                  EC2V 6DN 
Office:   + 27 (0)11 243 2900                 United Kingdom 
[e-mail]                                Office: + 44 (0)20 7796 8644 
 
Cobus Loots                                   Deon Louw 
Pan African Resources PLC                     Pan African Resources PLC 
Chief Executive Officer                       Financial Director 
Office: + 27 (0)11 243                        Office: + 27 (0)11 243 2900 
2900 
 
Phil Dexter/Jane Kirton                       John Prior 
St James's Corporate Services Limited         Numis Securities Limited 
Company Secretary                             Nominated Adviser and Joint Broker 
Office: + 44 (0)20 7796 8644                  Office: [phone] 
 
Ciska Kloppers                                Ross Allister/David McKeown 
Questco Corporate Advisory Proprietary        Peel Hunt LLP 
Limited                                       Joint Broker 
JSE Sponsor                                   Office: [phone] 
Office: + 27 (0)11 011 9200 
 
Hethen Hira                                   Thomas Rider/Neil Elliot 
Pan African Resources PLC                     BMO Capital Markets Limited 
Head : Investor Relations                     Joint Broker 
Tel: + 27 (0)11 243 2900                      Office: [phone] 
E-mail: [e-mail] 
 
Website: www.panafricanresources.com 
 
 
 
END 
 

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July 10, 2020 03:00 ET (07:00 GMT)