REG-Pan African Resources PLC: Proposed Financing for Eikhulu Tailings Project <Origin Href="QuoteRef">PAFR.L</Origin> - Part 2

Pan African ResourcesAnnouncement

12/04/2017 07:05

- Part 2: For the preceding part double click  ID:nPRrC1296a 

Placing and represents and warrants that it
has not received and will not receive a prospectus or other offering document
in connection with the Placing or the Placing Shares;

3. acknowledges that none of the Bookrunners, the Company, any of their
respective affiliates, agents, directors, officers or employees or any person
acting on behalf of any of them has provided, nor will provide, it with any
material regarding the Placing Shares, the Company or its Group other than (in
the case of the Company) this Announcement and the Presentation; nor has it
requested any of the Bookrunners, the Company, any of their respective
affiliates or any person acting on behalf of any of them to provide it with
any such information;

4. acknowledges that the Company’s ordinary shares are listed on AIM and the
JSE and that the Company is therefore required to publish certain business and
financial information in accordance with the rules and practices of the FCA,
the AIM Rules for Companies and the JSE Listings Requirements, which includes
a description of the Company’s business and the Company’s financial
information, including balance sheets and income statements, and that it is
able to obtain or access such information, or comparable information
concerning other publicly traded companies, in each case without undue
difficulty;

5. acknowledges that none of the Bookrunners, any person acting on behalf of
any of them, or any of their respective affiliates has or shall have any
liability for any publicly available or filed information or any
representation relating to the Company or its Group, provided that nothing in
this paragraph excludes the liability of any person for fraudulent
misrepresentation made by that person;

6. acknowledges that the content of this Announcement and the Presentation is
exclusively the responsibility of the Company and that none of the
Bookrunners, nor their respective affiliates or any person acting on behalf of
any of them has or shall have any liability for any information,
representation or statement contained in, or omission from, this Announcement,
the Presentation or any information previously published by or on behalf of
the Company or its Group, pursuant to applicable laws, and will not be liable
for any Placee’s decision to participate in the Placing based on any
information, representation or statement contained in this Announcement, the
Presentation or otherwise. Each Placee further represents, warrants and agrees
that the only information on which it is entitled to rely and on which such
Placee has relied in committing itself to acquire Placing Shares is contained
in this Announcement, the Presentation and any information previously
published by the Company by notification to a Regulatory Information Service
(in the United Kingdom) or the Stock Exchange News Service (in the Republic of
South Africa), such information being all that such Placee deems necessary or
appropriate and sufficient to make an investment decision in respect of the
Placing Shares and that it has neither received nor relied on any other
information given, or representations, warranties or statements made, by any
of the Bookrunners or the Company nor any of their respective affiliates and
none of the Bookrunners or the Company will be liable for any Placee’s
decision to accept an invitation to participate in the Placing based on any
other information, representation, warranty or statement, provided that
nothing in this paragraph excludes the liability of any person for fraudulent
misrepresentation made by that person;

7. acknowledges and agrees that it may not rely, and has not relied, on any
investigation that any of the Bookrunners, any of their respective affiliates
or any person acting on their behalf, may have conducted with respect to the
Placing Shares or the Company or its Group, and none of such persons has made
any representation, express or implied, with respect to the Company, its
Group, the Placing Shares or the accuracy, completeness or adequacy of any
publicly available or filed information or any representation relating to the
Company or its Group; each Placee further acknowledges that it has conducted
its own investigation of the Company, its Group and the Placing Shares and has
received all information it believes necessary or appropriate in connection
with its investment in the Placing Shares;

8. acknowledges that it has made its own assessment and has satisfied itself
concerning the relevant tax, legal, currency and other economic considerations
relevant to its investment in the Placing Shares;

9. acknowledges that none of the Bookrunners, their respective affiliates or
any person acting on behalf of any of them has or shall have any liability for
any information made publicly available by or in relation to the Company or
its Group or any representation, warranty or statement relating to the Company
or the Group contained therein or otherwise, provided that nothing in this
paragraph excludes the liability of any person for fraudulent
misrepresentation made by that person;

10. represents and warrants that it is and, at the time the Placing Shares are
acquired, will be located outside the United States and is not a US person (as
defined in Regulation S) and is acquiring the Placing Shares in an “offshore
transaction” in accordance with Rule 903 or Rule 904 of Regulation S; (ii)
if it is acquiring the Placing Shares for the account of one or more other
persons, it has full power and authority to make the representations,
warranties, agreements and acknowledgements herein on behalf of each such
account; (iii) it is not acquiring the Placing Shares as a result of any
“directed selling efforts” as defined in Regulation S or as a result of
any form of general solicitation or general advertising (within the meaning of
Rule 502© of Regulation D under the US Securities Act); and (iv) it will not
publish, distribute or transmit these or any other documents or information
related to the Placing, by any means or media, directly or indirectly, in
whole or in part, in or into the United States;

11. acknowledges that the Placing Shares have not been and will not be
registered under the US Securities Act or the securities laws of any state of
the United States and that the Company has not been and will not be registered
under the Investment Company Act; and the Placing Shares may not be offered or
sold within the United States or to, or for the account or benefit of, US
persons (as defined in Regulation S) except in an “offshore transaction”
in accordance with Regulation S or in a transaction exempt from, or not
subject to, the registration requirements of the US Securities Act and the
Investment Company Act;

12. acknowledges that in making any decision to acquire Placing Shares it (i)
has such knowledge and experience in financial and business matters to be
capable of evaluating the merits and risks of subscribing for or purchasing
the Placing Shares, (ii) has relied on its own examination, due diligence and
analysis of the Company, including the markets in which the Company and the
Group operates and the terms of the Placing, including the merits and risks
involved, (iii) has had sufficient time to consider and conduct its own
investigation with respect to the Placing and purchase of Placing Shares,
including the legal, regulatory, tax, business, currency and other economic
and financial considerations relevant to such an investigation, (iv) will not
look to any Bookrunner for all or part of any such loss it may suffer, (v) is
experienced in investing in securities of this nature in this sector and is
aware that it may be required to bear, and is able to bear, the economic risk
of an investment in the Placing Shares, (vi) is able to sustain a complete
loss of an investment in the Placing Shares and (vii) has no need for
liquidity with respect to its investment in the Placing Shares;

13. undertakes, unless otherwise specifically agreed with the Bookrunners,
that it is not and at the time the Placing Shares are acquired, neither it nor
the beneficial owner of the Placing Shares will be, a resident of the United
States, Australia, Canada or Japan or any other jurisdiction where it would be
unlawful to offer or subscribe for the Placing Shares, and further
acknowledges that the Placing Shares have not been and will not be registered
under the securities legislation of the United States, Australia, Canada or
Japan or other such jurisdictions and, subject to certain exceptions, may not
be offered, sold, transferred, delivered or distributed, directly or
indirectly, in or into those jurisdictions;

14. acknowledges that the Placing Shares have not been and will not be
registered and that a prospectus will not be cleared in respect of any of the
Placing Shares under the securities laws or legislation of the United States
or any state or jurisdiction thereof, Australia, Canada or Japan and, subject
to certain exceptions, may not be offered, sold, or delivered or transferred,
directly or indirectly, in or into those jurisdictions;

15. acknowledges that the Placing Shares are being subscribed for investment
purposes, and not with a view to offer, resell or distribute within the
meaning of the United States securities laws;

16. acknowledges that no representation has been made as to the availability
of any exemption under the US Securities Act for the reoffer, resale, pledge
or transfer of the Placing Shares;

17. represents and warrants that the issue to it, or the person specified by
it for registration as holder, of Placing Shares will not give rise to a
liability under any of sections 67, 70, 93 or 96 of the Finance Act 1986
(depositary receipts and clearance services) and that the Placing Shares are
not being acquired in connection with arrangements to issue depositary
receipts or to issue or transfer Placing Shares into a clearance service;

18. represents and warrants that it has complied with its obligations under
the Criminal Justice Act 1993, section 118 of the Financial Services and
Markets Act 2000 (the “”) and in connection with money laundering and
terrorist financing under the Proceeds of Crime Act 2002 (as amended), the
Terrorism Act 2000, the Terrorism Act 2006 and the Money Laundering
Regulations 2007 and any related or similar rules, regulations or guidelines,
issued, administered or enforced by any government agency having jurisdiction
in respect thereof (the “”) and the Money Laundering Sourcebook of the FCA
and, if making payment on behalf of a third party, that satisfactory evidence
has been obtained and recorded by it to verify the identity of the third party
as required by the Regulations;

19. represents and warrants that it is acting as principal only in respect of
the Placing or, if it is acting for any other person: (i) it is duly
authorised to do so and has full power to make the acknowledgments,
representations and agreements herein on behalf of each such person; and (ii)
it is and will remain liable to the Company and/or the relevant Bookrunner for
the performance of all its obligations as a Placee in respect of the Placing
(regardless of the fact that it is acting for another person);

20. if a financial intermediary, as that term is used in Article 3(2) of the
EU Prospectus Directive, represents and warrants that the Placing Shares
purchased by it in the Placing will not be acquired on a non-discretionary
basis on behalf of, nor will they be acquired with a view to their offer or
resale to, persons in a Member State of the EEA which has implemented the
Prospectus Directive other than Qualified Investors, or in circumstances in
which the prior consent of the Relevant Bookrunner has been given to the offer
or resale;

21. represents and warrants that it has not offered or sold and will not offer
or sell any Placing Shares to persons in the United Kingdom, except to persons
whose ordinary activities involve them in acquiring, holding, managing or
disposing of investments (as principal or agent) for the purposes of their
business or otherwise in circumstances which have not resulted and which will
not result in an offer to the public in the United Kingdom within the meaning
of section 85(1) of the FSMA;

22. represents and warrants that it has not offered or sold and will not offer
or sell any Placing Shares to persons in the EEA prior to Admission except to
persons whose ordinary activities involve them in acquiring, holding, managing
or disposing of investments (as principal or agent) for the purposes of their
business or otherwise in circumstances which have not resulted in and which
will not result in an offer to the public in any member state of the EEA
within the meaning of the Prospectus Directive;

23. represents and warrants that it has only communicated or caused to be
communicated and will only communicate or cause to be communicated any
invitation or inducement to engage in investment activity (within the meaning
of section 21 of the FSMA) relating to the Placing Shares in circumstances in
which section 21(1) of the FSMA does not require approval of the communication
by an authorised person;

24. represents and warrants that it has complied and will comply with all
applicable provisions of the FSMA with respect to anything done by it in
relation to the Placing Shares in, from or otherwise involving, the United
Kingdom;

25. represents and warrants, if in a Member State of the European Economic
Area, unless otherwise specifically agreed with the relevant Bookrunner in
writing, that it is a “qualified investor” within the meaning of Article
2(1)€ of the Prospectus Directive;

26. represents and warrants, if in the United Kingdom, that it is a person (i)
having professional experience in matters relating to investments who falls
within the definition of “investment professionals” in Article 19(5) of
the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005
(the “”) or (ii) who falls within Article 49(2)(a) to (d) (“High Net
Worth Companies, Unincorporated Associations, etc.”) of the Order, or (iii)
to whom this Announcement may otherwise lawfully be communicated;

27. acknowledges that neither the offer referred to herein nor the Placing
constitutes or is intended to constitute an offer to the public in the
Republic of South Africa in terms of the South African Companies Act, 2008
(the “South African Companies Act”) and that in the Republic of South
Africa such offer is only being distributed to, and is only directed at, and
any investment or investment activity to which this announcement relates is
available only to, and will be engaged in only with, persons in South Africa
who (i) fall within the categories of persons set out in section 96(1)(a) of
the South African Companies Act or (ii) are persons who subscribe, as
principal, for Placing Shares at a minimum placing price of R1,000,000, as
envisaged in section 96(1)(b) of the South African Companies Act, in each case
to whom the Placing is specifically addressed;

28. represents and warrants that, if in the Republic of South Africa, it is a
person referred to in clause 27 above;

29. acknowledges and agrees that no action has been or will be taken by either
the Company or any Bookrunner or any person acting on behalf of the Company or
any Bookrunner that would, or is intended to, permit a public offer of the
Placing Shares in any country or jurisdiction where any such action for that
purpose is required;

30. represents and warrants that it and any person acting on its behalf is
entitled to acquire the Placing Shares under the laws of all relevant
jurisdictions and that it has fully observed such laws and obtained all such
governmental and other guarantees, permits, authorisations, approvals and
consents which may be required thereunder and complied with all necessary
formalities to enable it to commit to this participation in the Placing and to
perform its obligations in relation thereto (including, without limitation, in
the case of any person on whose behalf it is acting, it has the necessary
powers and capacity and all necessary consents and authorities to agree to the
terms set out or referred to in this Appendix I) and will honour such
obligations and that it has not taken any action or omitted to take any action
which will or may result in any Bookrunner, the Company or any of their
respective directors, officers, agents, employees or advisers acting in breach
of the legal or regulatory requirements of any jurisdiction in connection with
the Placing;

31. undertakes that it (and any person acting on its behalf) will make payment
in respect of the Placing Shares allocated to it in accordance with this
Appendix I on the due time and date set out herein, failing which the relevant
Placing Shares may be placed with other acquirers or sold as the relevant
Bookrunner may in their sole discretion determine and without liability to
such Placee, who will remain liable for any amount by which the net proceeds
of such sale falls short of the product of the relevant Issue Price and the
number of Placing Shares allocated to it and may be required to bear any stamp
duty, stamp duty reserve tax or other similar taxes (together with any
interest or penalties) which may arise upon the sale of such Placee’s
Placing Shares;

32. that its allocation (if any) of Placing Shares will represent a maximum
number of Placing Shares which it will be entitled, and required, to acquire,
and that the Bookrunners and/or the Company may call upon it to acquire a
lower number of Placing Shares (if any), but in no event in aggregate more
than the aforementioned maximum;

33. acknowledges that none of the Company nor any Bookrunner, nor any of their
respective affiliates, nor any person acting on behalf of them, is making any
recommendations to it, advising it regarding the suitability of any
transactions it may enter into in connection with the Placing and that its
participation in the Placing is on the basis that it is not and will not be a
client of any Bookrunner in connection with its participation in the Placing
and that the Bookrunners have no duties or responsibilities to it for
providing the protections afforded to their respective clients or customers or
for providing advice in relation to the Placing nor in respect of any
representations, warranties, undertakings or indemnities contained in the
Placing Agreement nor for the exercise or performance of any of their
respective rights and obligations thereunder including any rights to waive or
vary any conditions or exercise any termination right. Further, it
acknowledges that any payment by it will not be treated as client money as
governed by the FCA Handbook rules;

34. acknowledges that any money held in an account by the Bookrunners on
behalf of the Placee and/or any person acting on behalf of the Placee will not
be treated as client money within the meaning of the rules and regulations
under FSMA and that the money will therefore not be subject to the protections
conferred by the client money rules. As a consequence, the Placee acknowledges
that its money will not be segregated from the Bookrunners’ money in
accordance with the client money rules and will be used by each of the
Bookrunners in the course of its own business and the Placee will rank only as
a general creditor of the relevant Bookrunner;

35. undertakes that the person whom it specifies for registration as holder of
the Placing Shares will be (i) itself or (ii) its nominee, as the case may be.
Neither the bookrunners nor the Company will be responsible for any liability
to stamp duty or stamp duty reserve tax or other similar taxes resulting from
a failure to observe this requirement (“”). Each Placee and any person
acting on behalf of such Placee agrees to participate in the Placing and it
agrees to indemnify the Company and each Bookrunner on an after-tax basis in
respect of any Indemnified Taxes on the basis that the Placing Shares will be
allotted to the CREST stock account of the relevant Bookrunner who will hold
them as nominee on behalf of such Placee until settlement in accordance with
its standing settlement instructions;

36. acknowledges that these terms and conditions and any agreements entered
into by it pursuant to these terms and conditions set out in this Appendix I,
and all non-contractual or other obligations arising out of or in connection
with them, shall be governed by and construed in accordance with the laws of
England and Wales and it submits (on behalf of itself and on behalf of any
person on whose behalf it is acting) to the exclusive jurisdiction of the
English courts as regards any claim, dispute or matter arising out of any such
contract (including any dispute regarding the existence, validity or
termination of such contract or relating to any non-contractual or other
obligation arising out of or in connection with such contract), except that
enforcement proceedings in respect of the obligation to make payment for the
Placing Shares (together with any interest chargeable thereon) may be taken by
either the Company or any Bookrunner in any jurisdiction in which the relevant
Placee is incorporated or in which any of its securities have a quotation on a
recognised stock exchange;

37. agrees to indemnify on an after tax basis and hold the Company, each
Bookrunner and their respective affiliates harmless from any and all costs,
claims, liabilities and expenses (including legal fees and expenses) arising
out of or in connection with any breach of the representations, warranties,
acknowledgements, agreements and undertakings in this Appendix I and further
agrees that the provisions of this Appendix I shall survive after completion
of the Placing;

38. represents and warrants that it has neither received nor relied on any
inside information concerning the Company prior to or in connection with
accepting this invitation to participate in the Placing and is not purchasing
Placing Shares on the basis of material non-public information and if it has
received any confidential price sensitive information about the Company in
advance of the Placing, it has neither dealt in securities of the Company,
encouraged or required any other person to deal in securities of the Company
or disclosed any such information to any other person prior to the information
being made publicly and generally available;

39. acknowledges that its commitment to subscribe for Placing Shares on the
terms set out herein and in the trade confirmation or contract note will
continue notwithstanding any amendment that may in future be made to the terms
of the Placing, and that Placees will have no right to be consulted or require
that their consent be obtained with respect to the Company’s conduct of the
Placing;

40. if it is a pension fund or investment company, its purchase of Placing
Shares is in full compliance with applicable laws and regulations;

41. represents and warrants that it is not acting in concert (within the
meaning given in the City Code on Takeovers and Mergers) with any other Placee
or any other person in relation to the Company;

42. represents and warrants that it will provide the Bookrunners with such
relevant documents as they may reasonably request to comply with requests or
requirements that either they or the Company may receive from regulators in
relation to the Placing, subject to its legal, regulatory and compliance
requirements and restrictions;

43. represents and warrants that it has read and understood the risk factors
relating to the Company, its Group and the Placing, set out in Appendix II;
and

44. agrees that the Company, each Bookrunner and their respective affiliates
and others will rely upon the truth and accuracy of the foregoing
representations, warranties, acknowledgements and undertakings which are given
to the Bookrunners on their own behalf and on behalf of the Company and are
irrevocable and irrevocably authorises the Company and each Bookrunner to
produce this Announcement, pursuant to, in connection with, or as may be
required by any applicable law or regulation, administrative or legal
proceeding or official inquiry with respect to the matters set forth herein.

The foregoing representations, warranties and confirmations are given to each
Bookrunner for itself and on behalf of the Company and are irrevocable.

The agreement to allot and issue Placing Shares to Placees (and/or to persons
for whom such Placee is contracting as agent) free of stamp duty and stamp
duty reserve tax relates only to their allotment and issue to Placees, or such
persons as they nominate as their agents, direct from the Company for the
Placing Shares in question. Such agreement also assumes that the Placing
Shares are not being acquired in connection with arrangements to issue
depositary receipts or to issue or transfer the Placing Shares into a
clearance service. If there are any such arrangements, or the settlement
relates to any other dealing in the Placing Shares, stamp duty or stamp duty
reserve tax or other similar taxes may be payable, for which neither the
Company nor any Bookrunner will be responsible and the Placees shall indemnify
the Company and each Bookrunner on an after-tax basis for any stamp duty or
stamp duty reserve tax paid by them in respect of any such arrangements or
dealings. If this is the case, each Placee should seek its own advice and
notify the relevant Bookrunner accordingly.

The Company and the Bookrunners are not liable to bear any transfer taxes that
arise on a sale of Placing Shares subsequent to their acquisition by Placees
or for transfer taxes arising otherwise than under the laws of the United
Kingdom. Each Placee should, therefore, take its own advice as to whether any
such transfer tax liability arises and notify the relevant Bookrunner
accordingly. Furthermore, each Placee agrees to indemnify on an after-tax
basis and hold each of the Bookrunners and the Company and their respective
affiliates harmless from any and all interest, fines or penalties in relation
to stamp duty, stamp duty reserve tax and all other similar duties or taxes to
the extent that such interest, fines or penalties arise from the unreasonable
default or delay of that Placee or its agent.

In addition, Placees should note that they will be liable for any stamp duty
and all other stamp, issue, securities, transfer, registration, documentary or
other duties or taxes (including any interest, fines or penalties relating
thereto) payable outside the UK by them or any other person on the acquisition
by them of any Placing Shares or the agreement by them to acquire any Placing
Shares.

Each Placee, and any person acting on behalf of the Placee, acknowledges that
neither the Company nor any of the Bookrunners owe any fiduciary or other
duties to any Placee in respect of any representations, warranties,
undertakings or indemnities in the Placing Agreement.

Each Placee and any person acting on behalf of the Placee acknowledges and
agrees that each Bookrunner or any of their respective affiliates may, at its
absolute discretion, agree to become a Placee in respect of some or all of the
Placing Shares.

When a Placee or person acting on behalf of the Placee is dealing with a
Bookrunner, any money held in an account with that Bookrunner on behalf of the
Placee and/or any person acting on behalf of the Placee will not be treated as
client money within the meaning of the rules and regulations of the FCA made
under the FSMA. The Placee acknowledges that the money will not be subject to
the protections conferred by the client money rules; as a consequence, this
money will not be segregated from that Bookrunner's money in accordance with
the client money rules and will be used by that Bookrunner in the course of
its own business and the Placee will rank only as a general creditor of that
Bookrunner.

All times and dates in this Announcement may be subject to amendment. Each
Bookrunner shall notify its Placees and any person acting on behalf of the
Placees of any changes.

APPENDIX II

RISK FACTORS

All the information set out in this Appendix II and, in particular, those
risks relating to the Placing described below should be carefully considered
prior to making any investment decision. Accordingly, you are strongly
recommended to consult an investment adviser authorised under the FSMA if you
are in the United Kingdom or, if not, another appropriately authorised
independent financial adviser, who specialises in the acquisition of shares
and other securities before making a decision to invest. In addition to all
the other information contained in this Announcement, potential investors
should carefully consider the following risk factors which the Directors
consider to be all the known material risks in respect of the business of the
Company and its securities, but are not set out in any particular order of
priority.

If any of the circumstances identified in the risk factors were to
materialise, the Group’s business, financial condition and operating results
could be materially affected. Investors should note that the trading price of
the Ordinary Shares could decline due to any of these risks and investors may
lose all or part of their investment.

Additional risks which are not presently known to the Board, or that the Board
currently deems to be immaterial but which may be material, may also have an
effect on the Group’s business, financial condition and operating results.

Risks relating to the Group’s business

The Group’s exploration licences and contracts

The Group’s current exploration operations are dependent upon the grant,
renewal or continuance in force of appropriate surface and/or subsurface use
contracts, licences, permits and regulatory approvals and consents which may
be valid only for a defined time period, may be subject to limitations and may
provide for withdrawal in certain circumstances. There can be no assurance
that such surface and/or subsurface use contracts, licences, permits,
regulatory approvals or consents would be granted, renewed or continue in
force, or, if so, on what terms.

The Group’s surface and/or subsurface use contracts and related work
programmes contain a range of obligations on the Group, and there may be
adverse consequences of breach of these obligations, ranging from penalties
to, in extreme cases, suspension or termination of the Group’s surface
and/or subsurface use licences and/or surface and/or subsurface use contracts.

Withdrawal of licences, termination of surface and/or subsurface use contracts
or failure to secure requisite licences or the cessation thereof in respect of
any of the Group’s operations may have a material adverse impact on the
Group’s business, operating results and financial condition.

Changes to the current political and regulatory environment in the Republic of
South Africa or any other markets in which the Group operates in the future
may adversely affect the Group

Regulatory changes, if any, in extraction or investment policies or shifts in
political attitude may adversely affect the Group’s operations and future
profitability. Operations may be affected in varying degrees by Government
regulations with respect to, but not limited to, restrictions on production,
price controls, export controls, currency remittance, income and other taxes,
foreign investment, maintenance of claims, environmental legislation, water
use, employment and contractor selection.

Funding Requirement

The initiation and construction of the Project will require significant
capital expenditures. As at 31 December 2016, the Company’s cash and cash
equivalents totalled ZAR68 million (US$5 million) and the Group had access to
immediately available undrawn facilities totalling ZAR341 million (US$25
million). The Group estimates that its final capital funding requirement will
be approximately US$120 million. The Placing is expected to raise
approximately US$51 million of the funding requirement with the balance being
funded by the RMB facility. Although the Credit Committee of RMB has granted
approval and has entered into a Mandate Letter with the Group in respect of
the RMB facility, the Mandate Letter does not constitute a binding commitment
to underwrite, provide or secure any financing, which remains subject to
ongoing due diligence, the completion of definitive facility documentation and
other approvals. There can be no assurance that the approvals and conditions
included in the Mandate Letter will be met, that the Group will have secured
committed financing at the time that it intends to draw upon the financing or
that RMB will be willing to lend at that time.

Exchange Control Regulations

South Africa, where the Group operates, employs, or may employ in the future,
exchange control regulations which may adversely affect the Group’s ability
to transfer funds in and from such territories, and therefore the Group’s
ability to carry on its operations in such territories.

Gold Price and Market

The profitability of the Group’s operations and the cash flows generated by
these operations are significantly affected by changes in the market price for
gold. The market price for gold can fluctuate widely. These fluctuations are
caused by numerous factors beyond the Group’s control, including:
speculative positions taken by investors or traders in gold; changes in the
demand for gold use in jewellery, for industrial uses and for investment;
changes in the supply of gold from production, disinvestment, scrap and
hedging; financial market expectations regarding the rate of inflation; the
strength of the US dollar (the currency in which the gold price is
denominated) relative to other currencies; changes in interest rates; actual
or expected gold sales by central banks; gold sales by gold producers in
forward transactions; global or regional political or economic events; and
costs of gold production in major gold-producing nations, such as China, the
United States, South Africa, Australia, Peru and Russia.

The price of gold is often subject to sharp, short-term changes resulting from
speculative activities and general world economic events. While the overall
supply of, and demand for, gold can affect its market price, because of the
considerable size of above ground stocks of the metal, in comparison to other
commodities, these factors typically do not affect the price to the extent
that the supply of, and demand for, other commodities tends to affect their
market prices.

If the gold price falls below the cost of anticipated production for an
extended period, the Group may be forced to curtail or suspend some or all of
its capital projects and/or operations. In addition, the Group would have to
assess the economic impact of low gold prices on its operating results or
financial condition.

Information on Reserves and Resources

The Group’s reported mineral resources and mineral reserves are reported in
accordance with the SAMREC standard and as stated as mineral inventory in the
Company’s Regulatory Information Service announcement. There are numerous
uncertainties inherent in estimating mineral resources, including factors
beyond the control of the Group. The estimation of mineral resources and
mineral reserves is a statistical process and the accuracy of any such
estimation is a function of the quality of available data and of engineering
and geological interpretation and judgement. Results of drilling,
metallurgical testing, production, evaluation of mine plans and exploration
activities subsequent to the date of any estimate may justify revision (up or
down) of such estimates. There is no assurance that mineral resources can be
economically mined. Mineral resources that have not been converted to mineral
reserves do not have demonstrated economic viability. A mineral resource is a
statement of in situ mineralisation. Mineral reserves are a statement of
resources that are considered as commercially mineable according to ruling
economic parameters at the time.

Only a certain proportion of estimated mineral resources will be translated
into reserves and recovered as the Group proceeds to production on its
development and exploration sites. There is no guarantee that they will be
recovered at the volume, grade and rates estimated. The failure of the Group
to achieve its production estimates is likely to have a material and adverse
effect on any or all of its future cash flows, profitability, results of
operations and financial condition. These production estimates are dependent
on, among other things, the accuracy of mineral resource and reserve
estimates, the accuracy of assumptions regarding mineral grades and recovery
rates, ground conditions (including hydrology), physical characteristics of
ores, such as hardness, the presence or absence of particular metallurgical
characteristics and the accuracy of estimated rates and costs of mining, ore
haulage and processing.

Changes in the Group’s capital costs and operating costs are likely to have
a significant impact on its profitability. Its main planned production
expenses will be mining contracting costs, transport costs, treatment costs
and overheads. Changes in costs of the Group’s mining and processing
operations can occur as a result of unforeseen events and could result in
changes in profitability or resource estimates, including rendering certain
mineral resources uneconomic to mine. Many of these changes may be beyond the
Group’s control.

The volume and grade of the ore the Group recovers may not conform to current
expectations. Lower market prices, increased production costs, reduced
recovery rates and other factors may render the Group’s mineral resources
and mineral reserves uneconomic to exploit and may result in revision of its
mineral reserve estimates from time to time. Mineral reserve data is not
necessarily indicative of future results of operations. If the Group’s
actual mineral reserves are less than current estimates, the Group’s results
of operations and financial condition may be materially impaired.

Estimates in financial statements

Preparation of consolidated financial statements requires the Group to use
estimates and assumptions. Accounting for estimates requires the Group to use
its judgement to determine the amount to be recorded in its financial
statements in connection with these estimates. The Group’s accounting
policies regarding exploration and evaluation require management to make
certain estimates and assumptions as to future events and circumstances, in
particular, the assessment of whether economic quantities of ore reserves or
mineral resources have been found. In addition, the carrying amounts of
certain assets and liabilities are often determined based on estimates and
assumptions of future events. If the estimates and assumptions are inaccurate,
the Group could be required to write down the value of certain assets. On an
ongoing basis, the Group re-evaluates its estimates and assumptions. However,
the actual amounts could differ from those based on estimates and assumptions.

Holding company structure and restrictions on dividends

The Company’s operating results and its financial condition are dependent on
the trading performance of members of the Group. The Company’s ability to
pay dividends in the future will depend on the level of distributions, if any,
received from the Company’s subsidiaries. The Group’s members may, from
time to time, be subject to restrictions on their ability to make
distributions to the Company, as a result of factors such as restrictive
covenants contained within loan agreements, foreign exchange limitations and
regulatory or fiscal restrictions. There can be no assurance that such
restrictions will not have a material adverse effect on the Group’s
business, operating results and financial condition.

Uninsured risks

It is not always possible to obtain insurance against all risks facing the
Group and the Group may decide not to insure against certain risks because of
high premiums or other reasons. Moreover, insurance against risks such as
environmental pollution or other hazards as a result of exploration and
production is not generally available to the Group or to other companies in
the mining industry on acceptable terms. Although the Group maintains
insurance to protect against certain risks in such amounts as it considers
reasonable, its insurance will not cover all potential risks associated with
its operations and insurance coverage may not continue to be available or may
not be adequate to cover any resulting liability. Should such liabilities
arise, they could reduce or eliminate any further profitability and result in
increasing costs and a decline in the value of the Ordinary Shares.

Working Capital

The Company may need to raise additional funds in the future in order to
develop exploration and development programmes. Whether as a result of
fluctuating market conditions, lack of market interest in the Company’s
industry sector or otherwise, this additional financing may not be available
to the Company on acceptable terms. Additional equity financing may be
dilutive to Shareholders and could contain rights and preferences superior to
those of the New Ordinary Shares, while debt financing may involve
restrictions on the Company’s financing and operating activities or may not
be available at reasonable cost. If the Company is unable to raise additional
funds as needed, the scope of its operations may be reduced and or its
interest in concessions may be diluted or may expire and, as a result, the
Company may be unable to fulfil its medium to long-term exploration and
development programme.

Currency risks

Currency fluctuations may affect the Group’s revenue from its operations.
The Placing and other financing activities will be received in pounds
sterling, while a significant portion of its operating expenses will be
incurred in other currencies, particular those of the countries in which it
operates, namely the Republic of South Africa. Accordingly, foreign currency
fluctuations may adversely affect the Group’s financial position and
operation results.

As the Group makes limited use of commodity or derivative instruments to
protect against a fall in gold prices, the Group is exposed to the impact of
any significant drop in the gold price. In general, hedging in this manner
reduces the risk of exposure to a fall in the gold price. As the Group does
not make extensive use of transactions to hedge against the future price at
which its gold production is sold and does not expect to in the near future,
the Group can realise the positive impact of any increase in the gold price.
However, this also means that the Group is not protected against decreases in
the gold price and, if the gold price decreases significantly, the Group’s
revenues will be materially adversely affected.

Risks relating to key personnel

The Group’s prospects depend in part on the ability of its executive
officers, senior management and key consultants to operate effectively, both
independently and as a group. To manage its growth, the Group must attract and
retain additional highly qualified management and technical personnel and
continue to implement and improve operational, financial and management
information systems. Investors must be willing to rely to a significant extent
on management’s discretion and judgement, as well as the expertise and
competence of outside contractors.

Litigation

While the Group currently has no material outstanding litigation or dispute
not already disclosed, there can be no guarantee that the current or future
actions of the Group will not result in litigation since there have been a
number of cases where the rights and privileges of mining companies have been
the subject of litigation. The mining industry, as with all industries, may be
subject to legal claims, both with and without merit, from time to time. The
Directors cannot preclude that such litigation may be brought against the
Group in the future. Defence and settlement costs can be substantial, even
with respect to claims that have no merit. Due to the inherent uncertainty of
the litigation process, there can be no assurance that the resolution of any
particular legal proceeding will not have a material adverse effect on the
Group’s financial position, results or operations. The Group’s business
may be materially adversely affected if the Group and/or its employees or
agents are found not to have met the appropriate standard of care or not
exercised their discretion or authority in a prudent or appropriate manner in
accordance with accepted standards.

Competition

Whilst the Group will not experience competition for its future sales, as gold
is a worldwide commodity, it may encounter competition in identifying and
acquiring exploration and development rights for attractive gold properties in
Africa.

For the Group to expand its operations, it is likely to face competition from
both domestic gold mining companies in such countries and any international
gold mining companies which already have significant operations in these
countries, together with potential new entrants into such markets, any of
which might have greater financial, technological and other resources than the
Group.

There is a high degree of competition for the discovery and acquisition of
properties considered to have a commercial potential. The Group competes with
other mining companies for the acquisition of mineral claims, leases and other
mineral interests as well as for the recruitment and retention of qualified
employees and other personnel.

Risks relating to the gold mining industry

PAF is the holding company for a group of companies engaged in gold mining and
exploration activities. Gold mining companies face many risks related to their
operations (including their exploration and development activities) that may
affect their cash flows and overall profitability.

Production of gold

Gold mining is susceptible to numerous events that may have an adverse impact
on the Group’s business, as well as the Group’s ability to produce gold
and to meet its future production targets. The material risks faced by the
Group are:
* environmental hazards, including discharge of metals, pollutants or
hazardous chemicals;
* industrial accidents;
* labour disputes;
* activities of illegal or artisanal miners;
* mechanical breakdowns;
* electrical power interruptions;
* encountering unexpected geological formations;
* grade dilution
* unanticipated ground and water conditions;
* unanticipated increases in gold lock-up and inventory levels at the
Group’s metallurgical operations;
* unexpectedly lower metallurgical recoveries
* geotechnical issues affecting pit stability or strip ratio; legal and
regulatory restrictions and changes to such restrictions;
* safety-related stoppages;
* seismic activity; and
* other natural phenomena, such as floods or inclement weather conditions.
Uncertainty and cost of mineral exploration and acquisitions

As part of its mine development, PAF must undertake exploration activities in
order that it can fully understand the geology across its mining and
prospecting rights areas and successfully develop the mining operations to
fully exploit its resources. Exploration activities are speculative and are
often unproductive. These activities also often require substantial
expenditure to establish gold resources or reserves through drilling and
metallurgical and other testing techniques, determine appropriate recovery
processes to extract gold from the ore and construct, renovate or expand
mining and processing facilities.

Once gold mineralisation is discovered it can take several years to determine
whether gold reserves exist. During this time the economic viability of
production may change.

The Group may consider from time to time the acquisition of gold reserves,
development properties and operating mines, either as stand-alone assets or as
to be integrated into existing Group companies or operations. Its decisions to
acquire these properties will be based on a variety of factors including
historical operating results, estimates of and assumptions about future
reserves, cash and operating costs, the gold price and projected economic
returns and evaluations of existing or potential liabilities associated with
each property and its operations. Other than historical operating results, all
of these parameters may differ significantly from the Group’s estimates and
assumptions.

Mining companies are subject to extensive health, safety and environmental
laws and regulations

Gold mining operations are subject to a variety of industry-specific health
and safety laws and regulations depending upon the jurisdiction in which they
are located. These laws and regulations are formulated to improve and to
protect the safety and health of employees. Should compliance with any new
standards require a material increase in expenditure or material interruptions
to production, the Group’s results in respect of operations and financial
condition may be adversely affected.

Mining companies are also subject to extensive environmental laws and
regulations in the various jurisdictions in which they operate. These
regulations establish limits and conditions on companies’ ability to conduct
their operations. The cost of the Group’s compliance with environmental laws
and regulations has been, and is expected to continue to be, significant.
Environmental laws and regulations are continually changing and are generally
becoming more restrictive. If environmental compliance obligations alter as a
result of changes in laws and regulations, or in certain assumptions on the
basis of which the Group estimates liabilities, or if unanticipated conditions
arise at the Group’s operations, expenses and provisions would increase. If
material, these expenses and provisions could adversely affect the Group’s
results and financial condition.

Mining companies are required to close their operations and rehabilitate the
lands that they mine in accordance with environmental laws and regulations.
Estimates of the total ultimate closure and rehabilitation costs for gold
mining operations are significant. Environmental liabilities are accrued when
they become known, probable and can be reasonably estimated. Regulators are
continuously reviewing these regulations and any amendments could result in
additional financial guarantees being required, negatively impacting on Group
working capital. Costs associated with rehabilitating land disturbed by the
mining processes and addressing the environmental, health and community issues
are estimated and financial provision made based upon information available
currently.

Estimates may however, be insufficient and further environmental issues may be
identified at any stage. Any underestimated or unidentified rehabilitation
costs would reduce earnings and could materially and adversely affect the
Group’s asset values, earnings and cash flows.

Security risks and loss control issues

Whilst mine security and loss control procedures have been implemented, the
risk remains of illegal mining, theft, threats to mine workers’ lives and
safety as well as industrial espionage, information loss and the loss of the
operational efficiency of the mine.

Risks relating to emerging markets generally

Investors in companies whose assets are located in emerging economies such as
the Republic of South Africa should be aware that these economies are subject
to greater risk than more developed economies, including in some cases
significant legal, regulatory, economic and political risks. Investors should
also note that emerging economies are subject to rapid change and that the
information set out in this document may become outdated. Accordingly,
investors should exercise particular care in evaluating the risks involved and
must decide for themselves whether, in light of these risks, investing in the
New Ordinary Shares is appropriate. Generally, investment in a company whose
assets are located in an emerging economy is only suitable for sophisticated
investors who fully appreciate the significance of the risks involved and
investors are urged to consult with their own legal and financial advisers
before making an investment in the New Ordinary Shares.

The legal system in many emerging markets countries is less certain than more
developed legal systems

Many emerging markets countries have a less developed legal system than more
established economies, particularly with respect to mining operations, which
may result in risks such as: (i) potential difficulties in obtaining effective
legal redress in their courts, whether in respect of a breach of law or
regulation, or in an ownership dispute; (ii) a higher degree of discretion on
the part of Governmental authorities; (iii) the lack of judicial or
administrative guidance when interpreting applicable rules and regulations;
(iv) inconsistencies or conflicts between and within various laws,
regulations, decrees, orders and resolutions; or (v) relative inexperience of
the judiciary and courts in such matters. In addition, the commitment of local
business people, government officials and agencies and the judicial system to
abide by legal requirements and negotiated agreements may be uncertain,
creating particular concerns with respect to licences and agreements for
business. These may be susceptible to revision or cancellation and legal
redress may be uncertain or delayed. Any difficulties faced by the Group
arising from these uncertainties could have an adverse effect on the Group’s
business and financial condition and prospects.

Any downgrading of prevailing debt rating by an international rating agency
could have a negative impact on the Group

Any adverse revision to the prevailing credit rating for domestic and
international debt by any of the international rating agencies may adversely
impact the Group’s ability to raise future project financing and the
interest rates and other commercial terms at which such additional financing
may be available. This could have an adverse effect on the Group’s financial
performance and its ability to obtain financing to fund its growth on
favourable terms or at all.

National or regional instability could disrupt the Group’s business and
affect the price of the Ordinary Shares

Exploration and Mining Risks

The business of exploration for minerals is highly speculative in nature,
involves a high degree of risk and is frequently unsuccessful. Few properties
that are explored are ultimately developed into producing mines. There can be
no assurance that any mineralisation discovered by the Group will result in
proven and probable reserves nor that any mineral deposits determined by the
Group will contain economically recoverable volumes of resources. Should the
mineral deposits contain economically recoverable resources then delays in the
construction and commissioning of mining projects or other technical
difficulties may result in the Group’s current or future projected target
dates for production being delayed or further capital expenditure being
required or the resource becoming uneconomic.

The operations of the Group may be disrupted by a variety of risks and hazards
which are beyond the control of the Company, including geological,
geotechnical and seismic factors, environmental hazards, industrial accidents,
occupational and health hazards, technical failures, labour disputes, unusual
or unexpected rock formations, explosions, flooding and extended interruptions
due to inclement or hazardous weather conditions and other acts of God such as
natural disasters and outbreaks of highly contagious diseases. These risks and
hazards could also result in damage to, or destruction of, production
facilities, personal injury, environmental damage, business interruption,
monetary losses and possible legal liability. No assurance can be given that
the Group will be able to obtain insurance coverage at reasonable rates (or at
all), or that any coverage it obtains will be adequate and available to cover
any such claims.

The occurrence of any of these hazards can delay activities of the Group and
may result in liability. The Group may become subject to liability for
pollution or other hazards against which it has not insured or cannot insure,
including those in respect of past mining activities for which it was not
responsible.

Substantial expenditures are required to establish ore reserves through
drilling, and, in the cases of new properties, to construct mining and
processing facilities. As a result of these uncertainties, no assurance can be
given that the exploration programmes undertaken by the Group will result in
any new commercial mining operations being brought into operation. In
addition, delays in the construction and commissioning of any of the Group’s
mining projects or drilling projects or other technical difficulties may
result in projected target dates for related production being delayed and/or
further capital expenditure being required. In common with all mining and
drilling operations, there is uncertainty, and therefore risk, associated with
operating parameters and costs resulting from the scaling up of extraction
methods tested in laboratory conditions. The Group’s ability to raise
further funds will depend on the success of existing and acquired operations.
The Group may not be successful in procuring the requisite funds and, if such
funding is unavailable, the Group may be required to reduce the scope of its
operations or anticipated expansion. In the event that financing is successful
it may mean that new Ordinary Shares need to be issued on a non pre-emptive
basis, thus diluting the interests of investors at that time.

Operational Targets and Delays

The Group’s operational targets will be subject to the completion of planned
operational goals on time and according to budget, and are dependent on the
effective support of the Group’s personnel, systems, procedures and
controls. Any failure of these may result in delays in the achievement of
operational targets with a consequent material adverse impact on the business,
operations and financial performance of the Group. The Group will not generate
any material income until mining has successfully commenced. In the meantime
the Group will continue to expend its cash reserves.

Bribery and corruption

The Group operates in a range of regions where its representatives may be
exposed to potentially corrupt practices. There is no guarantee that the
Group’s policies will successfully protect the Group from such practices and
their legal and financial consequences.

Risks relating to the Placing

Future sales of Ordinary Shares could adversely affect the share sale price

Sales of additional Ordinary Shares into the public market following the
Placing could adversely affect the market price of the Ordinary Shares if
there is insufficient demand for the Ordinary Shares at the prevailing market
price.

Share price may fluctuate

Publicly traded securities from time to time experience price and volume
fluctuations that may be unrelated to the operating performance of the
companies that have issued them. In addition, the market price of the Ordinary
Shares may prove to be volatile. The market price of the Ordinary Shares may
fluctuate in response to a number of factors, many of which are beyond the
Group’s control, including: variations in operating results in the Group’s
reporting 

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