REG-Pan African Resources Plc: Proposed acquisition of Tailings Retreatment Projects

Pan African ResourcesAnnouncement

06/11/2020 12:05

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)

PAN AFRICAN ENTERS INTO CONDITIONAL AGREEMENTS TO ACQUIRE TAILINGS RETREATMENT
PROJECTS

1. INTRODUCTION AND STRATEGIC RATIONALE

Pan African is pleased to announce that the Company has entered into
conditional sale-of-shares agreements (Sale Agreements) to acquire the total
share capital and associated shareholder loans and other claims of Mogale Gold
Proprietary Limited (Mogale Gold) and Mintails SA Soweto Cluster Proprietary
Limited (MSC), (collectively, the Proposed Transactions).  Both Mogale Gold
and MSC are 100% owned by Mintails Mining SA Proprietary Limited (Mintails
SA), which was placed in provisional liquidation during 2018. 

The aggregate cash consideration for the Proposed Transactions will be a
maximum of ZAR50.0 million (approximately $3.1 million).

The combined Mineral Resources of Mogale Gold and MSC comprise historic
tailings storage facilities (TSFs) that contain an estimated 243Mt of tailings
with an in-situ grade of 0.30g/t gold, for an estimated gold content of
2.36Moz of gold, constituted as follows:
* The Mogale Gold TSFs, which comprise various individual dams, containing an
estimated 123Mt of re-mineable material at a head grade of 0.29g/t, for an
estimated content of 1.16Moz of gold; and
* The MSC TSFs which comprise nine separate facilities with resources of 119Mt
at 0.31g/t, containing an estimated gold content of 1.20Moz.
Pan African has successfully executed on its strategy of producing gold safely
from low-cost operations and diversifying its operations to include both
underground and low-risk surface operations.

Pan African and its subsidiaries have a proven track record of successfully
commissioning and operating tailings retreatment projects, as demonstrated by
the Barberton tailings re-treatment plant, the Evander tailings re-treatment
plant and most recently its flagship Elikhulu operation. 

The Proposed Transactions are conditional on due diligence and feasibility
studies over a period of six to nine months (to Pan African’s sole and
absolute satisfaction) and other conditions precedent typical for a
transaction of this nature, including, inter-alia, consent for the transfer of
the mining right by the Department of Mineral Resources and Energy (DMRE),
approval from the South African Competition Commission authorities if
applicable, and approval for the provisional liquidators to implement the
Proposed Transactions.

Cobus Loots, Pan African’s CEO, commented: “The opportunity to acquire
these surface resources 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”.

2. BACKGROUND AND HISTORY OF THE ENTITIES TO BE ACQUIRED

The provisional liquidation of Mintails SA has resulted in an opportunity for
Pan African to acquire gold tailings Mineral Resources not previously
retreated.  As part of the due diligence examination and planned feasibility
work, Pan African will evaluate the merits of constructing a large-scale
tailings retreatment operation, similar to its Elikhulu operation at
Evander. 

Details of the legal entities to be acquired under the Proposed Transactions
are as follows:
* Mogale Gold - the holding company of the TSFs located on the West Rand in
South Africa; and
* MSC – the holding company of the TSFs located within the Soweto cluster in
South Africa.
The Mineral Resources of Mogale Gold and MSC were declared as at 7 February
2013 and reported according to the Australasian Code for Reporting of
Exploration Results, Mineral Resources and Ore Reserves (the JORC Code) of
2004 by Mr Peter Camden-Smith, a South African Council for Natural Scientific
Professions registered geologist (Registration No. 400078/94 – Management
Enterprise Building, Mark Shuttleworth Street, Innovation Hub, Pretoria, South
Africa), who acted as the Competent Person for this declaration. Mr Peter
Camden-Smith is the owner of an independent geological consultancy firm,
Camden Geoserve, based in Boksburg, Gauteng province, South Africa
(www.geoserveafrica.com) and was appointed as an independent consultant by
Mintails SA for the declaration of the Mineral Resources at the time. Mintails
SA has publicly reported these Mineral Resources in its annual Mineral
Resources and Mineral Reserves declaration. It is assumed that no significant
mining has taken place on these TSF dams since the time of that report due to
the effective date of the provisional liquidation. The due diligence will aim
to confirm and update the 7 February 2013 Mineral Resource declaration.  

3. DETAILS OF THE PROPOSED TRANSACTIONS

Key commercial terms and conditions of the Sale Agreements include the
following:
* The acquisition of Mogale Gold, inclusive of the assets, surface rights
permits, deposition rights, mining right, water use licence, rehabilitation
liabilities and shareholder loans for a cash consideration of ZAR37.5 million
(approximately $2.3 million at an exchange rate of US$/ZAR:16.25);
* The acquisition of MSC, inclusive of its assets, rehabilitation liabilities
and shareholder loans for a cash consideration of ZAR12.5 million
(approximately $0.8 million at an exchange rate of US$/ZAR:16.25);
* Pan African is afforded a six-month period (with a three-month extension
option) for purposes of conducting a due diligence to its sole and absolute
satisfaction;
* The Mogale Gold transaction is subject to an approval by the DMRE in terms
of Section 11 of the South African Mineral and Petroleum Resources Development
Act for the transfer of the issued share capital of Mogale Gold to Pan
African; and
* The Proposed Transactions are subject to other regulatory approvals typical
for a transaction of this nature and of South African companies in provisional
liquidation, including that the provisional liquidators of Mintails SA obtain
the necessary approval from the Master of the South African High Court to
implement the Proposed Transactions.
The Sale Agreements are not inter-conditional, and Pan African can accordingly
acquire either Mogale Gold and/or MSC, at its sole discretion.

The Proposed Transactions are subject to the fulfilment and/or waiver, where
appropriate, of the relevant conditions precedent which are to be fulfilled by
no later than 5 November 2021, failing which, the Proposed Transactions will
be terminated.

The effective date of the Proposed Transactions is expected to be the date by
which all conditions precedent have been fulfilled.

4. CATEGORISATION OF PROPOSED TRANSACTIONS

The Proposed Transactions are, separately and collectively, uncategorised
transactions and do not involve any related parties in terms of the JSE
Listings Requirements or the AIM Rules for Companies and are therefore not
subject to shareholder approval. 

Rosebank

6 November 2020

Certain information communicated in this announcement was, prior to its
publication, inside information for the purposes of Article 7 of Regulation
596/2014.

For further information on Pan African, please visit the Company's website at
www.panafricanresources.com

 Contact information                                                                                                                                                                                                                                                                                  
 Corporate Office The Firs Office 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 Suite 31 Second Floor 107 Cheapside London EC2V 6DN United Kingdom Office: + 44 (0)20 7796 8644  
 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/Jane Kirton St James's Corporate Services Limited Company Secretary Office: + 44 (0)20 7796 8644                                                                      Ross Allister/David McKeown Peel Hunt LLP Nominated Adviser and Joint Broker Office: +44 (0)20 7418 8900           
 Ciska Kloppers Questco Corporate Advisory Proprietary Limited JSE Sponsor Office: + 27 (0)11 011 9200                                                                             Thomas Rider/Neil Elliot BMO Capital Markets Limited Joint Broker Office: +44 (0)20 7236 1010                      
 Hethen Hira Pan African Resources PLC Head: Investor Relations Tel: + 27 (0)11 243 2900 E-mail: hhira@paf.co.za                                                                   Huneiza Goolam CMS RM Partners Transaction Legal Advisors Office: + 27 (0)87 210 0711                              
 Website: www.panafricanresources.com                                                                                                                                                                                                                                                                 



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