REG-Pan African Resources PLC: Interim Results for the six months ended 31 Dec 2014 <Origin Href="QuoteRef">PAFR.L</Origin> <Origin Href="QuoteRef">PANJ.J</Origin> - Part 1
26/02/2015 07:00
Pan African Resources PLC
('Pan African Resources' or the 'Company' or the 'Group')
(Incorporated and registered on 25 February 2000 in England and Wales under the
Companies Act 1985, registration number 3937466)
Share code on AIM: PAF
Share code on JSE: PAN
ISIN: GB0004300496
Interim unaudited results for the six months ended 31 December 2014
Key features and highlights
Key features reported in South African rand ('ZAR') and pound sterling ('GBP')
- Group headline earnings1 decreased by 62.8% to ZAR102.6 million (2013:
ZAR275.9 million). The low grade mining cycle at Evander Gold Mining (Pty) Ltd
('Evander Mines') is still expected to improve from February 2015, with the
operation returning to a higher grade mining cycle.
- Dividend paid of ZAR0.1410 or 0.82p per share (2013:ZAR0.1314 or 0.80p per
share), which equated to ZAR258 million (2013: ZAR240.3 million) or GBP14.9
million (2013: GBP14.7 million).
- Phoenix Platinum (Pty) Ltd ('Phoenix Platinum') PGE2 production
significantly increased by 57.7% to 4,711oz (2013: 2,987oz).
- Evander Tailings Retreatment Plant ('ETRP') construction was on budget and
schedule and the plant produced its first gold during January 2015, with steady
state production expected by 30 June 2015.
- Barberton Tailings Retreatment Plant ('BTRP') gold sold increased by 0.9% to
11,710oz (2013: 11,603oz).
- Significant improvement on safety with no fatalities reported (2013: three
fatalities).
For the six For the six
months months
Metric
ended 31 ended 31
December 2014 December 2013
Revenue (ZAR millions - GBP millions) 1,217.4 68.1 1,349.1 84.6
Average gold price received (ZAR/kg - USD/oz) 434,403 1,231 424,022 1,311
Cash costs (ZAR/kg - USD/oz) 351,461 996 269,670 834
All-in sustaining cash cost (ZAR/kg - USD/oz) 411,384 1,165 312,219 965
All-in costs7 (ZAR/kg - USD/oz) 453,068 1,283 337,673 1,044
Adjusted EBITDA3 (ZAR millions - GBP millions) 230.6 12.9 450.8 28.3
Attributable earnings (ZAR millions - GBP millions) 99.2 5.5 275.9 17.3
Earnings per share ('EPS') (cents - pence) 5.42 0.30 15.11 0.95
Headline earnings per share ('HEPS') (cents - pence) 5.61 0.31 15.11 0.95
Group capital expenditure (ZAR millions - GBP millions) 214.6 12.0 160.8 10.1
Net asset value per share (cents - pence) 143.4 8.2 142.5 9.4
Weighted average number of shares in issue (millions) 1,830.0 1,830.0 1,825.6 1,825.6
Average exchange rate (ZAR:GBP - ZAR:USD) 17.87 10.98 15.94 10.06
Closing exchange rate (ZAR:GBP - ZAR:USD) 18.03 11.60 17.29 10.49
Metric Movement
Revenue (ZAR millions - GBP millions) (9.8%) (19.5%)
Average gold price received (ZAR/kg - USD/oz) 2.4% (6.1%)
Cash costs (ZAR/kg - USD/oz) 30.3% 19.4%
All-in sustaining cash cost (ZAR/kg - USD/oz) 31.8% 20.7%
All-in costs7 (ZAR/kg - USD/oz) 34.2% 22.9%
Adjusted EBITDA3 (ZAR millions - GBP millions) (48.8%) (54.4%)
Attributable earnings (ZAR millions - GBP millions) (64.0%) (68.2%)
Earnings per share ('EPS') (cents - pence) (64.1%) (68.4%)
Headline earnings per share ('HEPS') (cents - pence) (62.9%) (67.4%)
Group capital expenditure (ZAR millions - GBP millions) 33.5% 18.8%
Net asset value per share (cents - pence) 0.6% (13.0%)
Weighted average number of shares in issue (millions) 0.2% 0.2%
Average exchange rate (ZAR:GBP - ZAR:USD) 12.1% 9.1%
Closing exchange rate (ZAR:GBP - ZAR:USD) 4.3% 10.6%
Ron Holding, CEO of Pan African Resources commented: "Despite a very
challenging six month period, we now have started seeing underground mining
grades at Evander Mines improve as previously predicted. We are also encouraged
by the completion of construction of the ETRP, where gold production has
commenced and will increase Evander Mines' gold output by an additional 10,000
ounces per annum. Our focus in the next six months will be to deliver on volume
and grade at our Evander and Barberton Mines, and to ensure the ETRP reaches
steady state production. We will also maintain our focus on generating cash
flows from our asset base to ensure the continuation of future dividend
payments.
Operational
Barberton Mines (Pty) Ltd ('Barberton Mines')6
- Production was negatively affected by oil contamination within the BIOX®
plant and by a Section 54 safety stoppage as reported during November 2014.
- Gold sold decreased by 7.1% to 52,942oz8 (2013: 57,008oz).
- Revenue decreased by 5.5% to ZAR714.3 million (2013: ZAR755.5 million).
- Adjusted EBITDA3 decreased by 25.6% to ZAR235.5 million (2013: ZAR316.7 million).
- Cash cost per kilogram increased by 20.0% to ZAR279,150/kg(2013: ZAR232,611/kg).
- All-in sustaining cash cost per kilogram increased by 22.6% to ZAR330,340/kg
(2013: ZAR269,526/kg).
- All-in cost per kilogram increased by 14.5% to ZAR337,814/kg (2013: ZAR295,134/kg).
- Average underground head grade of 11.6g/t (2013: 11.5g/t).
- The operation reports no fatalities for the period (2013: two fatalities).
Evander Mines
- Gold sold decreased by 21.8% to 33,733oz (2013: 43,164oz) due to the
expected low grade mining cycle and a Section 54 safety stoppage during
November 2014.
- Revenue decreased by 19.2% to ZAR456.8 million (2013: ZAR565.6 million).
- Construction of the ETRP is on schedule and budget, with production having
commenced in January 2015.
- Cash costs per kilogram increased by 45.9% to ZAR464,955/kg (2013: ZAR318,616/kg).
- All-in sustaining cash costs per kilogram increased by 46.1% to ZAR538,584/
kg (2013: ZAR368,604/kg).
- All-in cost7 per kilogram increased due to the low grade mining cycle and
capital spent on the ETRP by 61.0% to ZAR633,9607 (2013: ZAR393,854/kg).
- Adjusted EBITDA3 of ZAR6.2 million (2013: ZAR123.1 million).
- As result of the lower grade mining cycle the underground head grade
decreased to 4.3g/t (2013: 6.2g/t).
- The operation reports no fatalities for the period (2013: one fatality).
Phoenix Platinum
- Phoenix Platinum profitability and cash generation increased significantly
during the period under review.
- Phoenix Platinum headline earnings increased to ZAR6.1 million (2013: ZAR2.6
million headline loss).
- Cash generated by the operation before working capital changes amounted to
ZAR12.5 million (2013: ZAR1.9 million).
- PGE 2 production increased by 57.7% to 4,711oz (2013: 2,987oz).
- Revenue increased by 65.0% to ZAR46.2 million (2013: ZAR28.0 million).
- The average PGE net revenue price received increased by 4.6% to ZAR9,815/oz5
(2013: ZAR9,380/oz5).
- Cost per ton increased by 10.3% to ZAR236/t (2013: ZAR214/t).
- Cost per ounce of production decreased by 19.6% to ZAR6,817/oz (2013:
ZAR8,484/oz).
- Adjusted EBITDA3 increased by 694.1% to ZAR13.5 million (2013: ZAR1.7
million).
Notes:
Refer to the profit after taxation to headline earnings reconciliation in the
statement of profit or loss and other comprehensive income.
PGE's are platinum, palladium, rhodium, iridium, ruthenium and gold.
Adjusted EBITDA is represented by earnings before interest, taxation,
depreciation and amortisation, impairments, and loss on disposal of associate.
Barberton Mines surface mining operations refer to historical surface waste
rock dumps located at Fairview and Sheba Mines that are currently being
processed.
Phoenix Platinum's average PGE net revenue price received represents the value
received per ounce following refining and is therefore net of refining charges.
Combined Barberton Mines operations include Barberton Mines underground and
surface mining operations and the BTRP.
The all-in cost per kilogram includes once-off capital expenditure of ZAR88.3
million, spent on the construction of the ETRP. The capital expenditure
amounted to ZAR32,756/kg and ZAR84,163/kg of the Groups and Evander Mines
all-in cost per kilogram respectively. The construction of the ETRP is
currently funded by a gold loan facility (initially ZAR200 million) with a
remaining term of 3 years.
Barberton Mines gold sold during the current period includes 200 kilograms
(6,430oz) of gold sold to Rand Merchant Bank in concentrate form.
Nature of business
Pan African Resources is a mid-tier African-focused precious metals producer
with a production capacity in excess of 200,000oz gold and 12,000oz platinum
per annum. The Group's assets include:
Barberton : three gold mines and the BTRP in Mpumalanga
Mines
Evander Mines : a gold mine and the ETRP in Mpumalanga
Phoenix : a Chrome Tailing Retreatment Plant ('CTRP') in the North West
Platinum province
Pan African Resources' growth strategy is aimed at achieving and improving
margins while driving on-going growth in our Mineral Reserve base. We aim to
capture the full precious metals mining value chain and maximise shareholder
value by exploiting opportunities within the Group and in the broader sector.
The Group remains profitable and cash generative at the current gold price,
with the ability to fund all on-mine sustaining capital expenditure internally
and also meet its other funding and growth commitments.
Financial Performance
Key external drivers of the Group's results
Exchange rates and their impact on results
All of the Group's subsidiaries are incorporated in South Africa and their
functional currency is the ZAR. The Group's business is conducted in ZAR and
the accounting records are maintained in this same currency, with the exception
of precious metal product sales, which are conducted in USD prior to conversion
into ZAR. The on-going review of the operational results conducted by executive
management and the board is also performed in ZAR.
The Group's presentation currency is GBP due to its ultimate holding company,
Pan African Resources plc, being incorporated in England and Wales and also
being dual-listed in the United Kingdom and South Africa.
During the period under review the average ZAR/GBP exchange rate was ZAR17.87:1
(2013: ZAR15.94:1) and the closing ZAR/GBP exchange rate was ZAR18.03:1 (2013:
ZAR17.29:1). The period-on-period change in the average and closing exchange
rates of 12.1% and 4.3%, respectively, must be taken into account for the
purposes of translating and comparing period-on-period results.
The Group converts and records its revenue from precious metals sales in ZAR,
and the deterioration in the value of the ZAR/USD exchange rate during the
period had a compensating effect on the weaker USD metals price revenue
received. The average ZAR/USD exchange rate was 9.1% weaker at ZAR10.98:1
(2013: ZAR10.06:1).
The commentary below analyses the current and prior period's results. Key
aspects of the Group's ZAR results appear in the body of this commentary and
have been used as the basis against which its financial performance is
measured. The gross GBP equivalent figures can be calculated by applying the
exchange rates as detailed above.
Commodity prices
During the period under review, a lower average USD gold price was achieved
relative to the prior period. The Group realised an average gold price of
USD1,231/oz, a decrease of 6.1% from the USD1,311/oz achieved in the prior
period.
The market PGE basket price received (applying the Phoenix Platinum prill
split) during the period decreased by 3.8% to USD1,079/oz (2013: USD1,122/oz).
Phoenix Platinum's average PGE price received decreased by 4.1% to USD894/oz
(2013: USD932/oz), after taking into account the terms of its off-take
agreement with Western Platinum Limited.
The weakening of the ZAR against the USD also contributed to a higher gold
price being achieved. The average ZAR gold price received by the Group
increased by 2.4% to ZAR434,403/kg (2013: ZAR424,022/kg).
The average ZAR PGE price received by the Group increased by 4.6% to ZAR9,815/
oz (2013: ZAR9,380/oz), attributable, in part, to the weaker ZAR/USD exchange
rate.
Statement of Profit or Loss and Other Comprehensive Income
For the six months For the six months
ended 31 December ended 31 December Movement
2014 2013
ZAR GBP ZAR GBP ZAR GBP
(millions) (millions) (millions) (millions)
Revenue 1,217.4 68.1 1,349.1 84.6 (9.8%) (19.5%)
Cost of production (974.3) (54.5) (862.5) (54.1) 13.0% 0.7%
Mining profit 154.2 8.6 402.5 25.2 (61.7%) (65.9%)
EBITDA 230.6 12.9 450.8 28.3 (48.8%) (54.4%)
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