REG-Pan African Resources Plc: BEE Ownership Restructuring <Origin Href="QuoteRef">PAFR.L</Origin>

Pan African ResourcesAnnouncement

15/12/2017 09:05

Pan African Resources PLC

(Incorporated and registered in England and Wales under Companies Act 1985
with registered number 3937466 on 25 February 2000)

AIM Code: PAF

JSE Code: PAN

ISIN: GB0004300496

(“Pan African” or “Company”)

PAN AFRICAN BLACK ECONOMIC EMPOWERMENT (“BEE”) OWNERSHIP RESTRUCTURING

Introduction

Pan African is pleased to announce that it has successfully concluded
restructuring agreements, replacing the current BEE equity shareholdings in
the Company (held via interests in PAR Gold Proprietary Limited (“PAR
Gold”)) with BEE shareholdings in Emerald Panther Investments 91 Proprietary
Limited (“SA Holdco”), a subsidiary of the Company (the
“Transaction”).  SA Holdco will house all Pan African’s South African
mining operations, following implementation of the Transaction.  Where the
previous BEE ownership structure terminates during December 2018, the new BEE
structure will only terminate on 31 December 2021, which is a three-year
extension of the original BEE transaction.

The rationale and benefits of the Transaction are as follows:

-     Extension of the BEE ownership structure for a three-year period
with limited IFRS charges to the Company;

-     The Transaction provides flexibility to further restructure the BEE
ownership of the South African operations, depending on the outcome of the
proposed third South African Mining Charter and other relevant regulations;

-     The Transaction will avoid BEE ownership dilution, in the event that
Pan African raises equity capital in the future;

-     The Transaction will not result in a dilution of Group earnings.

Following implementation of the Transaction, Pan African’s BEE ownership is
calculated at 26%, comprising 21% in SA Holdco and 5% from its on-mine
employee ownership schemes.

Refer to Pan African’s pre and post Transaction Group structures on our
website that summarise the BEE holdings. (website link:
http://www.panafricanresources.com/about-overview/company-structure/)

BEE shareholdings prior to the Transaction

PAR Gold, which owns 19.53% of Pan African’s issued share capital, is
currently Pan African’s primary BEE investor and its shareholders are
summarised as follows:

-     The Mabindu Development Trust (“Mabindu”) - 49.5%

-     K2015200726 Proprietary Limited (“K2015”) - 0.6%

-     Pan African Resources Funding Company Proprietary Limited (“Fund
Co”) - 49.9%

PAR Gold is currently majority owned by BEE shareholders (50.1%) with the
balance held by PAR’s wholly owned subsidiary Fund Co.

Steps to implement the Transaction

1)         Establishment of a new BEE entity:

The Group has established a new BEE entity, Concrete Rose Proprietary Limited
(“Concrete Rose”). Concrete Rose has not conducted any business since
incorporation and has been established for the purpose of housing the
interests to be acquired in SA Holdco, as further detailed below. The
provisions of the memorandum of incorporation of Concrete Rose do not
frustrate or relieve the Company in any way from compliance with its
obligations in terms of the JSE Limited Listings Requirements.

The following parties will subscribe for shares in Concrete Rose for a nominal
value, as follows:

1)   Mabindu - 24.75%

2)   Pan African Resources Management Trust - 10.5% (note 1)

3)   Pan African Resources Education Trust - 4.95% (note 2)

4)   Alpha Investment Group Proprietary Limited - 9.9% (note 3)

The remaining shares in Concrete Rose are held by Fund Co (49.9%).

Note 1: The Pan African Resources Management Trust is a new trust established
to hold shares on behalf of black management employees of the group and is
controlled by employees of the Group and other historically disadvantaged
South Africans (“HDSA’s”).

Note 2: Pan African Resources Education Trust is a new trust established to
hold shares that will provide funding for the education of black students and
is controlled by employees of the Group and other HDSA’s.

Note 3: Alpha Investment Group Proprietary Limited is the investment vehicle
for a BEE entrepreneur.

2)         Subscription by Concrete Rose for shares in SA Holdco

Concrete Rose will subscribe for 22.11% of SA Holdco’s shares for notional
value through a notional vendor financed (“NVF”) transaction. The BEE
shareholders 50.1% share of the NVF at 15 December 2017 is approximately R756
million.

The NVF shares will be issued by SA Holdco to Concrete Rose on similar
commercial terms to the original PAR Gold NVF terms with Mabindu, as
summarised below.

Comparison of the revised BEE scheme versus the original BEE scheme

 Description                                               Revised BEE scheme                                                                                                                                                                                                                                                                                               Original BEE Scheme                                                                                                                                       
 Strategic BEE shareholder:                                Concrete Rose                                                                                                                                                                                                                                                                                                    PAR Gold                                                                                                                                                  
 Term expiry:                                              31 December 2021                                                                                                                                                                                                                                                                                                 31 December 2018                                                                                                                                          
 Repayment mechanism:                                      90% of dividends utilised to fund NVF repayments                                                                                                                                                                                                                                                                 95% of dividends utilised to fund NVF repayments                                                                                                          
 Trickle dividends:                                        10% of attributable dividends                                                                                                                                                                                                                                                                                    5% of attributable dividends. Mabindu received R5.6 million in trickle dividends over the term of the BEE scheme relating to two dividend distributions.  
 NVF finance rate:                                         SA prime rate plus a margin of five percent                                                                                                                                                                                                                                                                      SA prime rate plus a margin of five percent                                                                                                               
 BEE ownership on mining operations (direct and indirect)  Total of 26%                                                                                                                                                                                                                                                                                                     Total of approximately 26%                                                                                                                                
 Conversion right:                                         On expiry of the scheme, BEE shareholders of Concrete Rose will be entitled to exchange their shares in Concrete Rose for Pan African shares based on the market value of their holding, less the outstanding NVF balance. The conversion rights remains subject to regulatory, PAR shareholder and other        On expiry of the scheme, BEE shareholders of PAR Gold were entitled to sell their shares to Fund Co for cash.                                             
                                                           approvals if required.                                                                                                                                                                                                                                                                                                                                                                                                                                                     

SA Holdco’s investments and shareholdings

As previously stated, SA Holdco will house all the Pan African South African
mining operations. The Transaction will result in:

-     Barberton Mines Proprietary Limited (“Barberton Mines”), which
is 95% held by Pan African, being transferred to SA Holdco through an
intra-group asset-for-share transaction; and

-     Elikhulu Tailings Retreatment Proprietary Limited (“Elikhulu”),
which is a wholly owned subsidiary of Pan African, being transferred to SA
Holdco through an intra-group asset-for-share transaction.

Following the restructure, SA Holdco will house the following investments:

-     Evander Gold Mining Proprietary Limited – 95%

-     Barberton Mines – 95%

-     Elikhulu – 100%

-     Evander Gold Mines Proprietary Limited – 100%

Currently SA Holdco is a wholly owned subsidiary of Pan African. Following the
implementation of the Transaction, the shareholders of SA Holdco will be:

-     Pan African - 77.89%

-     Concrete Rose - 22.11%

The details pertaining to and the net assets and profits attributable to SA
Holdco, Evander, Barberton Mines and Elikhulu are contained in the 2017
integrated annual report and the audited consolidated annual financial
statements of Pan African for the financial year ended 30 June 2017
available at www.panafricanresources.com. In the year ended 30 June 2017, the
entities that are the subject of the transaction produced profit after tax of
approximately £18.6 million and as at 30 June 2017 these entities had gross
assets of approximately £263.8 million.

3)         PAR Gold shareholding post the Transaction

PAR Gold will repurchase Mabindu's 49.5% shareholding for a nominal
consideration, due to the NVF currently exceeding the market value of the
equity interest.  Thereafter PAR Gold will issue new shares to K2015 to the
extent of 50.1% for a nominal consideration. In future these new shares will
enjoy full voting rights but no economic rights. Following the issue to K2015,
Fund Co and K2015 will hold 49.9% and 50.1% of the issued share capital of PAR
Gold, respectively.

The 50.1% interest held in PAR Gold by K2015 does not qualify for BEE
ownership within the group. The 19.53% of Pan African’s issued equity held
by PAR Gold is treated as treasury shares and will still be eliminated on
consolidation for purposes of calculating earnings per share as was previously
the case.   

Conditions precedent

The conditions precedent to the Transaction are customary to transactions of
this nature, including any regulatory approvals. The Transaction is likely to
be implemented during January 2018.

Categorisation

The value pursuant to the Transaction represents a 21% interest in the mining
operations of the Group. Accordingly, the Transaction is considered to be a
category 2 transaction, as contemplated in the JSE Listings Requirements.

By order of the Board

Johannesburg

15 December 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) 207 796 8644 Facsimile: + 44 (0) 207 796 8645  
 Cobus Loots Pan African Resources PLC Chief Executive Officer Office: + 27 (0) 11 243 2900                                                                                                          Deon Louw Pan African Resources PLC Financial Director Office: + 27 (0) 11 243 2900                                                                  
 Phil Dexter St James's Corporate Services Limited Company Secretary Office: + 44 (0) 207 796 8644                                                                                                   John Prior / Paul Gillam Numis Securities Limited Nominated Adviser, Joint Broker Office: +44 (0) 20 7260 1000                                       
 Sholto Simpson One Capital JSE Sponsor Office: + 27 (0) 11 550 5009                                                                                                                                 Ross Allister / Chris Burrows Peel Hunt LLP Joint Broker Office: +44 (0) 207 418 8900                                                                
 Jeffrey Couch/Neil Haycock/Thomas Rider BMO Capital Markets Limited Joint Broker Office: +44 (0) 207 236 1010                                                                                       Bobby Morse/Chris Judd Buchanan Communications Public & Investor Relations UK Office: + 44 (0) 207 466 5000                                          
 Julian Gwillim Aprio Strategic Communications Public & Investor Relations SA Office: +27 (0)11 880 0037   www.panafricanresources.com                                                               Gareth Driver/Huneiza Goolam Webber Wentzel Legal Advisers Office: +27 (0) 11 530 5000                                                               



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