REG-Pan African Resources Plc: Pan African acquires Tennant Consolidated Mining Group Pty Ltd in Australia and Sudanese exploration activities suspended

Pan African ResourcesAnnouncement

05/11/2024 08:45

 

 

 Pan African Resources PLC (Incorporated and registered in England and Wales under the 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')  Pan African Resources Funding Company Limited Incorporated in the Republic of South Africa with limited liability Registration number: 2012/021237/06 Alpha code: PARI  

 

Pan African acquires Tennant Consolidated Mining Group Pty Ltd in Australia
and Sudanese exploration activities suspended

 

 

TRANSACTION HIGHLIGHTS

 
* All scrip acquisition of 92% of Tennant Consolidated Mining Group Pty Ltd
(TCMG) by Pan African via a Share Acquisition Agreement (the `Transaction')	*
Pan African acquired an initial 8% of TCMG in March 2024 and following the
Transaction, TCMG will be a wholly owned subsidiary 
* Consideration represents a total acquisition cost of US$54.2 million  		*
Initial cash investment of US$3.4m during March 2024 for an 8% shareholding in
TCMG
* Issue of PAR shares (the New Ordinary Shares) to the value of US$50.8
million to acquire remaining shares and claims of existing shareholders 
* Consideration constitutes less than 6% of PAR's current issued share capital
		
	
* Payback of initial capital investment expected in less than 3 years at an
average gold price of approximately US$2,600/oz, with base case financial
model also demonstrating returns in line with Group's requirement of circa 20%
per annum
* Low risk, near term, low cost production in a Tier 1 mining jurisdiction	*
Development capital fully funded
* Commissioning expected during June 2025
* Expected production of 50kozpa at AISC of ~US$1,300/oz for first three years
of operation
	
* The Transaction is expected to be fully implemented during December 2024
under the Australian Corporations Act
* Large land package with significant exploration potential
 

STRATEGIC RATIONALE

 
* Complementary to Pan African's current portfolio of high-margin, long-life
surface re-mining operations
* Opportunity to acquire near term, low-cost and low risk production growth
from a Tier 1 mining jurisdiction (Australia's Northern Territory)
* Processing facility will be the largest to ever operate in the region,
providing economies of scale
* Near-term production growth at TCMG's Nobles Gold Project, scheduled to
commission in the second quarter of the 2025 calendar year with a target
initial 8-year life-of-mine (LOM), inclusive of 5 years in current Mineral
Reserves. Additional three years of production currently in the permitting
process
* Access to an attractive asset portfolio in one of Australia's known highest
grade mineral fields 	* A known geological endowment through historic gold
production and current Mineral Resources of 8Moz Au and ~1.2Mt Cu 
* Walk-up brownfields and development drill targets at TCMG's 100% owned
Warrego, Nobles and Juno assets
	
* Region under-explored, with less than 8% of holes drilled below 150m depth
* Significant land position, as TCMG controls 1,700km2 through 100% owned
assets as well as through the Emmerson Resources Limited (ASX: ERM) Joint
Venture (ERM-JV), utilising a hub & spoke growth strategy to process multiple
deposits
* Experienced corporate and project execution team in place to ensure
successful project delivery
* Potential to significantly expand the Mineral Resource and Mineral Reserve
base as well as the LOM beyond 15 years through two-staged gold and copper
strategy, underpinned by an exploration target with up to an additional 800koz
of gold alone
* Represents an increase in Group production by approximately 20% per annum in
the next year
 

KEY PROJECT METRICS

 
* JORC 2012 compliant Feasibility Study completed, herein reported according
to SAMREC 2016 compliance, highlighting Mineral Resources of 1.3 Moz Au
(14.1Mt at 2.83g/t) and Mineral Reserves of 0.4 Moz Au (3.9Mt at 3.1g/t)
* Initial development capital of US$35.7 million fully funded with Australian
debt facilities, including Australian Northern Territory Government funding
* Limited project execution risk, with processing plant construction more than
50% complete	*  Commissioning expected by June 2025 and first gold by July
2025
	
* Production over initial 3-years of the LOM mostly from surface stockpiles
and tailings storage facilities at circa 50kozpa and with an AISC of
approximately US$1,300/oz
* Financial model demonstrates free cashflow LOM US$420M assuming gold price
US$ 2,600/oz 	* Project NPV US$129.7M and a real ungeared IRR of 144% on
current Mineral Reserves alone
 

For a presentation with further details on the project please visit the
Company's website at: www.panafricanresources.com

 

Cobus Loots, Pan African's CEO, commented: "Pan African has in the past years
successfully executed on our strategy of producing gold safely from low-cost
operations and diversifying our portfolio to include both low-risk and
low-cost surface and underground operations.

 

TCMG represents an opportunity to further expand and diversify our near-term
low-cost production base and the next phase in the growth trajectory of the
Group, in a Tier 1 mining jurisdiction.

 

The Group has been assessing the TCMG portfolio for almost a year, and we are
confident that this acquisition complements our strategy of focusing on safe,
low-cost gold mining opportunities, with the potential to further grow our
business by developing projects that meet our stringent investment criteria."

 
1. INFORMATION ON TRANSACTION
 

Pan African is pleased to announce that the Company has concluded a share
acquisition agreement (the `Agreement') with Tembo Capital Holdings UK Limited
(`Tembo'), Transasia Private Capital Security Agent Ltd (`Transasia'), Catalpa
Management Proprietary Limited (`Catalpa') and Tennant Resources Proprietary
Limited (`Tennant') (together the `Sellers') to acquire 100% of TCMG. In terms
of the Agreement Pan African will acquire the remaining 92% shareholding in
TCMG, resulting in TCMG becoming a wholly owned subsidiary of the Group. The
acquisition was structured as follows:
* Initial cash investment (subscription for new shares) of US$3.4m during
March 2024 
* Issue of PAR shares for US$50.8 million to acquire shares and claims of
existing shareholders,  to be settled by 18 December 2024
 

The total acquisition cost comprise the following:

 

                              US$*        
 Initial investment (Equity)  3,350,000   
 Shareholder loan             11,676,995  
 Equity acquisition           39,091,385  
 Total                        54,118,380  

*Converted at an exchange rate of A$/US$: 0.67

 

The consideration payable in shares will be funded through either the issue of
new equity (pending approval from shareholders at the Annual General Meeting
(AGM), scheduled for 21 November 2024, authorising directors to issue new
equity and the disapplication of pre-emptive rights) or through the treasury
shares held by PAR Gold (Pty) Ltd.

 

The New Ordinary Shares will be issued at a price equal to the 30 day volume
weighted average price of Pan African ordinary shares listed on the AIM market
of the London Stock Exchange (Pan African Shares) converted into AUD using the
AUD / GBP foreign exchange rate of the Reserve Bank of Australia as at the
close of trade on the business day immediately preceding the date the New
Ordinary Shares are issued and/or transferred.

 

If at any time between 4 November 2024 and 17 December 2024, there is a
fluctuation in the 30 day volume weighted average price of Pan African
ordinary shares listed on the AIM market of the London Stock Exchange of more
than 20%, with 4 November 2024 being the reference date, then any one or more
of the Parties shall be entitled to terminate the transaction with immediate
effect upon delivery of written notice to the other Parties.

 

The Agreement contains warranties, undertakings and terms which are standard
for a transaction of this nature.

 

A further announcement in relation to the consideration, including details of
any issue of new equity, will be made in due course.

 

 
1. BACKGROUND OF THE TENNANT CREEK GOLD FIELD
 

Tennant Creek is a town located in the Northern Territory of Australia. It is
the seventh largest town in the Northern Territory, approximately 1,000
kilometres south of the capital Darwin, and 500 kilometres north of Alice
Springs.

The Tennant Creek Gold Field (TCGF) was discovered in the early 1930s and was
mined until the early 2000s when the gold price reached lows of ~A$500/oz,
resulting in the termination of mining activities in this region. The TCGF was
one of the highest-grade gold-producing fields in Australia, with production
over the period yielding 156t of gold (5.5Moz), 348,000t of copper, 59.2t
(1.9Moz) of silver, and 21,600t of Bismuth. Following 30 years of mining at
the Nobles underground mine, the crown pillar collapsed in 1967 due to
erosional degradation of the iron oxide lithologies. The broken material was
excavated from the failure zone and stockpiled on the Crown Pillar Stockpile
(`CPS'), with some of this material being treated while the new plant was
being constructed during 1967 and 1968. From this point, Nobles was mined as
an open pit mine, with the remainder of the CPS never being treated. It was
Australia's largest open pit gold mine until 1985.

The mineral deposits in the TCGF are well studied and understood through
historical mining as well as current exploration. These deposits form part of
the hematite and magnetite end members of an Iron Oxide Copper Gold (IOCG)
mineralisation style. The ore bodies tend to express as cone-like,
blanket-like breccia sheets within granitic margins, or as long ribbon-like
breccia or massive iron oxide deposits within faults or shear zones.
Continuity of these deposits is proven with strike lengths more than 50m,
widths of 2m-24m or more and down-dip extents of hundreds of meters.
Typically, these deposits are enriched in copper, gold, cobalt, silver,
uranium and bismuth.

 

Apart from brownfields exploration, the TCGF is also very prospective for
greenfield discoveries such as the Mauretania and Marathon deposits on the
Emmerson Resources exploration joint venture (ERM-JV) ground (a joint venture
agreement between TCMG and Emmerson Resources is in place) and the Bluebird
deposit of Tennant Minerals (Pty) Ltd (ASX: TMS), both listed on the
Australian stock exchange.

In 2022, realising the consolidation opportunity present in the area, TCMG
acquired 100% of the tenements around the historic highest grade and largest
producers of the region, namely, Nobles, Warrego, and Juno, with the intent to
expedite exploration and increase the conversion of Mineral Resources to
Mineral Reserves. The processing plant currently being constructed will be the
only functioning gold processing plant in the region at present, and will be
the largest facility ever operated in the TCGF.

The remaining CPS on surface will form the basis of the production for the
first year.

 
1. NOBLES GOLD PROJECT FEASIBILITY STUDY OVERVIEW AND CONSTRUCTION PROGRESS
	 
Feasibility Study summary

 

TCMG's Feasibility Study (Nobles Gold Project Feasibility Study 2024) is based
on the processing of material through a carbon in leach (CIL) gold plant which
was purchased from the Great Australian Mine (`GAM') in Cloncurry. This plant
has been dismantled and is being reconstructed at Nobles, located in Tennant
Creek, over a 13-month period by EPC contractors, COMO Engineers.
Commissioning of the reconstructed plant is expected by June 2025. The
processing of surface material in the form of the CPS, the Nobles North
tailings and Nobles North Waste Rock Dump will form the initial base ore feed
following the commissioning of this plant. Pan African expects first gold in
July 2025. The plant is rated for a throughput of 840,000 tonnes per annum and
a gold recovery of 94%.

The base ore sources are in proximity to the plant's location and are deemed
low risk production ounces. The Nobles Complex pits, Eldorado (pit and
underground), Juno, Chariot and Golden Forty underground mines will complete
the modelled initial 5-year LOM based on Mineral Reserves alone. An additional
three years of production is targeted through near-term walk-up targets
including Mauretania and White Devil.

The estimated capital cost for commissioning is US$35.7 million and is fully
funded through two debt facilities, consisting of US$6.7 million from the
Northern Territory of Australia and US$31.5 million from Keyview Investment
Management.

Mineral Resource and Ore Reserve estimation

 

Mineral Resources

 

The kriged Mineral Resource Estimates (MRE) were depleted for historical
mining using the existing open pit and underground development and stope void
surveyed wireframes. The MRE has been classified as Indicated and Inferred
Mineral Resources in accordance with the guidelines of The Australasian Code
for the Reporting of Exploration Results, Mineral Resources and Ore Reserves
(the JORC Code, 2012) and signed off by a Competent Person, Steve Rose. Steve
is an independent consultant retained by TCMG, and he manages the exploration
and geological departments for the company. Furthermore, Snowden Optiro
(Snowden) has reviewed the MRE's of the TCMG deposits, with no fatal flaw
being identified. The Mineral Resources and Mineral Reserves remain unchanged
if reported according to the South African Code for the Reporting of
Exploration Results, Mineral Resources and Mineral Reserves (the SAMREC Code,
2016).

 

TCMG Mineral Resources as signed off by Steve Rose (2024)

 TCMG Resources as at 30 June 2024  Category   Tonnes  Contained gold               
                                    Grade              Tonnes (Gold)         Moz    
                                    million            g/t            
 Mineral Resources                  Measured   0.0     0.00           0.0    0.00   
                                    Indicated  10.6    3.06           32.5   1.04   
                                    Inferred   3.5     2.14           7.5    0.24   
                                    Total 1    14.1    2.83           40.02  1.29   

1Any discrepancies in totals are due to rounding.

 

Mineral Resources have been classified based on confidence in geological and
grade continuity using the drilling density, geological model confidence,
modelled grade continuity and conditional bias measures (kriging efficiency)
and discounted due to the lack in operational reconciliation data. The
classification is robust with a potential for further optimisation and
extension of geological ore zones.

 

Mineral Reserves

 

The Mineral Reserves, as contained in the TCMG Feasibility Study (2024),
comprises historically created surface stockpiles, waste rock dumps and
tailings storage facilities, open pit and underground deposits. Daniel Donald
is the Competent Person for underground operations and Craig Mann for open pit
and surface deposits. Both are employed by Entech Mining Pty (Ltd) (Entech).
Entech has been engaged by TCMG to prepare the documentation on which the Ore
Reserve Report is based, for the period ended 27/09/2024. Daniel and Craig
have sufficient experience relevant to the style of mineralisation and type of
deposit under consideration and to the activities being undertaken.

 

An integrated schedule was compiled by Entech which specifies that the surface
stockpile material is supplemented from open pit operations, commencing soon
after the commissioning of the plant and will form the feed to the processing
plant over the initial 15-month period. Additionally, underground mines are
being developed to deliver ore to the plant from month 16 onwards. Mining
costs for the open pit and underground operations, as used in the Feasibility
Study, was compiled by Entech and obtained through a request for quotes to
major Australian mining contractors.

 

TCMG Mineral Reserves as signed off by Entech (2024)

 TCMG Reserves as at 30 June 2024  Category  Tonnes  Contained gold               
                                   Grade             Tonnes (Gold)         Moz    
                                   million           g/t            
 Mineral Reserves                  Proved    0.0     0.00           0.0    0.00   
                                   Probable  3.9     3.10           12.1   0.39   
                                   Total 1   3.9     3.10           12.1   0.39   

1Any discrepancies in totals are due to rounding.

 

 

Potential Further Growth

 

The Warrego orebody represents future upside with potential extraction and
sale of a copper and gold concentrate, as it contains high-grade copper
associated with the gold mineralisation. Tailings from the copper flotation
plant can be processed for gold recovery in the Nobles CIL plant. TCMG is in
the process of finalising a Prefeasibility Study on the copper-gold circuit
for processing of the Warrego ore.

 

The geological prospectivity across the TCMG tenements and the ERM-JV is
deemed to be high. The deposits are contained within the hematite and
magnetite end members of the IOCG deposits and can be successfully identified
and explored with up-to-date geomagnetic survey technology.

 

The competent person for Pan African, Hendrik Pretorius, the Executive:
technical services and new business, has signed off on the estimated Mineral
Resources and Mineral Reserves reported in this announcement. Hendrik is a
member of the South African Council for Natural Scientific Professions
(SACNASP No. 400051/11 - Management Enterprise Building, Mark Shuttleworth
Street, Innovation Hub, Pretoria, South Africa), as well as a fellow in good
standing of the Geological Society of South Africa (GSSA No. 965978 - CSIR
Mining Precinct, corner Rustenburg and Carlow Roads, Melville, South Africa).
Hendrik has 21 years' experience in economic geology, mineral resource
management and mining (surface mining and shallow to ultra-deep underground
mining). He is based at The Firs Building, 2nd Floor, Office 204, corner
Cradock and Biermann Avenues, Rosebank, Johannesburg, South Africa. He holds a
BSc (Hons) degree in Geology from the University of Johannesburg as well as a
Graduate Diploma in Mining Engineering (GDE) from the University of the
Witwatersrand. Hendrik has reviewed and approved the information contained in
this document as it pertains to estimated Mineral Resources and Mineral
Reserves and confirms that the information is compliant with the SAMREC Code
and, where applicable, the relevant requirements of section 12 of the JSE
Listings Requirements and Table 1 of the SAMREC Code and may be published in
the form and context in which it appears.

 
1. PROJECT EXECUTION PLAN
 

Dismantling of the GAM CIL plant in Cloncurry, as well as early works at the
Nobles plant site in Tennant Creek, commenced during March 2024. As of
September 2024, the dismantling work packages in Cloncurry have been completed
and all equipment transported to the Nobles plant site. At the end of
September 2024, the plant construction progress was on schedule at more than
50% complete.

 

Commissioning of the plant and the dry-stack tailings storage facility is
expected during June 2025, with first gold expected in July 2025. The ore feed
to the plant during the initial 5-year LOM is composed of the following
sources which will be sourced for the following periods after the plant
commissioning date:

 

 Source                                                                               Month (Start)  Month (End)  
 Crown Pillar Stockpile                                                               1              29           
 Smaller open pit areas (Rising Sun, Nobles, Weabers Find, Black Snake and Eldorado)  4              13           
 Eldorado Underground                                                                 16             25           
 Juno Underground                                                                     17             53           
 Golden Forty Underground                                                             30             57           
 Chariot Underground                                                                  39             66           
 Nobles North Tailings                                                                29             39           

 

The initial LOM detailed above excludes further open pit potential currently
being permitted or optimised.

 

Labour onboarding to operate the processing plant is currently in progress.
Mobilisation of the relevant mining contractors are planned in advance of
start of mining for the different deposits.

 

Exploration drilling will be conducted throughout the LOM to extend the life
of the different operations and will focus on brownfields and greenfields
exploration.

 

Permitting and approval, including a cultural heritage management plan,
indigenous land access permits and sacred site clearance certification for the
initial four years of production has been obtained. Permitting of additional
Mineral Resources, not yet converted to Mineral Reserves, will be conducted
during the LOM and in such a manner as to not impact the overall production
output. Mine rehabilitation on closure is planned sequentially to mining
depletion. The rehabilitation and closure provision of US$ 1.9 million has
been approved by the Northern Territory government.

 

The Prefeasibility Study on the Warrego copper and gold deposit is scheduled
to be completed during Q2 FY2025 and will inform further studies and a
possible execution strategy.

 
1. PROJECT FINANCIAL ANALYSIS
 

The financial metrics for the Nobles Project based on the Mineral Reserve
production profile is as follows:

 

 Description                       Values           
 LOM (months, years)               66, 5.5          
 Tonnes processed (Mt)             4.4              
 Au produced (Koz)                 390.4            
 Gold price (US$/oz)               2,214.0          
 Working cost (US$/oz)             1,191            
 Margin (US$/oz)                   1,023            
 Capital cost (US$'m)              171.2            
 FCF (excl. capital cost) (US$'m)  329              
 NPV (15% real) (US$'m)            79.3             
 Real Project IRR (%)              108.2            
 Project payback date              31 October 2025  
 Real shareholder IRR (%)          27.1             

*Conversion rate of US$/AU$: 0.67

 

Pan African has approved lines in place to hedge approximately 75% of the TCMG
production for the first two years of production to secure the return on its
initial investment, should the Group deem this necessary. Indicative pricing
at a spot gold price of A$3,947/oz* (US$2,644/oz) for a zero-cost collar
structure is a floor price of A$3,600/oz* (US$2,412/oz) and a cap price of
A$4,800/oz* (US$3,216/oz).

 
1. CATEGORISATION OF THE TRANSACTION AND OTHER REGULATORY DISCLOSURE
 

The initial investment was an uncategorised transaction and did not involve
any related parties in terms of the JSE Listings Requirements or the AIM Rules
for Companies and is therefore not subject to shareholder approval. 

 

This Transaction constitutes a category 2 transaction in terms of the JSE
Listings Requirements. It is not classified as a material transaction in terms
of the AIM Rules for Companies and does not involve any related parties and
are not subject to Pan African shareholder approval.

 

For the purposes of Schedule Four of the AIM Rules, TCMG reported a net loss
of AUD$1,6 million for the financial year ended 30 June 2023.

 

The value of the net assets of TCMG as at 30 June 2023 for the financial year
ended 30 June 2023 are AU$44.8 million. The financial information of TCMG has
been extracted from the audited financial report for the year ended 30 June
2023, which were prepared in terms of the International Financial Reporting
Standards.

 

Tembo and Transasia are private equity funds. The ultimate beneficial owners
of Catalpa are Peter Robert Main, Karina Gaye Main, Martin John Costello, Kate
Hensler, Samuel James Morton, Steve Murdoch, Andrew Alexander Fantela, Rohan
Erwin, Neil Thomas O'Loughlin and the ultimate beneficial owner of Tennant is
Alexander Stanislas Bajada.    

 
1. SUDANESE EXPLORATION ACTIVITIES SUSPENDED
 

Given the ongoing political unrest prevailing in Sudan, the decision has been
taken to suspend exploration activities in Sudan's Red Sea state. All of the
Group's assets will be safeguarded and a notice of Force Majeure has been
issued to the Sudanese Mineral Resources Company in order to maintain the
validity of the exploration concessions.  

 

The information contained within this announcement is deemed by the Company to
constitute inside information as stipulated under the Market Abuse
Regulations (EU) No. 596/2014 as it forms part of UK Domestic Law by virtue
of the European Union (Withdrawal) Act 2018. Upon the publication of this
announcement via Regulatory Information Service ('RIS'),
this inside information is now considered to be in the public domain.

 

 

Johannesburg

5 November 2024

 

For further information on Pan African please visit the Company's website at:

www.panafricanresources.com

 Corporate information                                                                                                                                                                                                                                                                             
 Corporate office The Firs Building 2nd Floor, Office 204 Cnr. Cradock and Biermann Avenues Rosebank, Johannesburg South Africa Office: + 27 (0)11 243 2900 info@paf.co.za  Registered office 2 nd Floor 107 Cheapside London EC2V 6DN United Kingdom Office: + 44 (0)20 3869 0706 info@paf.co.za  
 Chief executive officer  Cobus Loots    Office: + 27 (0)11 243 2900                                                                                                        Financial director and debt officer Marileen Kok    Office: + 27 (0)11 243 2900                                        
 Head: Investor relations Hethen Hira                                                                                                                                       Website: www.panafricanresources.com                                                                                   
  Tel: + 27 (0)11 243 2900                                                                                                                                                                                                                                                                         
  E-mail: hhira@paf.co.za                                                                                                                                                                                                                                                                          
 Company secretary Jane Kirton St James's Corporate Services Limited Office: + 44 (0)20 3869 0706                                                                           Nominated adviser and joint broker Ross Allister/Georgia Langoulant Peel Hunt LLP Office: +44 (0)20 7418 8900          
 JSE Sponsor and JSE debt sponsor Ciska Kloppers Questco Corporate Advisory Proprietary Limited Office: + 27 (0) 63 482 3802                                                Joint broker Thomas Rider/Nick Macann BMO Capital Markets Limited Office: +44 (0)20 7236 1010                          
                                                                                                                                                                            Joint broker Matthew Armitt/Jennifer Lee Joh. Berenberg, Gossler & Co KG Office: +44 (0)20 3207 7800                   

 



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