REG-Pan African Resources PLC: Provisional audited results to 30/06/15 & dividend <Origin Href="QuoteRef">PAFR.L</Origin> <Origin Href="QuoteRef">PANJ.J</Origin> - Part 2
16/09/2015 07:00
- Part 2: For the preceding part double click ID:nPRrF59A2a
2014 (oz) 22,885 - 111,623 76,556 188,179
Average ZAR gold price 2015 (ZAR/KG) 447,387 430,797 446,508 445,922 446,274
received
2014 (ZAR/KG) 434,394 - 435,244 430,801 433,437
Average USD gold price 2015 (USD/oz) 1,215 1,113 1,213 1,216 1,212
received
2014 (USD/oz) 1,305 - 1,346 1,295 1,303
ZAR cash cost 2015 (ZAR/KG) 176,734 266,453 278,859 455,896 349,410
2014 (ZAR/KG) 163,977 - 239,496 384,150 298,345
ZAR all-in sustaining cash 2015 (ZAR/KG) 185,280 266,453 332,151 507,980 402,221
costs
2014 (ZAR/KG) 170,111 - 282,716 445,665 349,008
ZAR all-in cost 2015 (ZAR/KG) 185,280 735,262 337,317 557,553 425,084
2014 (ZAR/KG) 227,286 - 302,058 478,933 374,015
USD cash cost 2015 (USD/oz) 480 688 758 1,238 949
2014 (USD/oz) 493 740 1,154 897
USD all-in sustaining cash 2015 (USD/oz) 503 688 902 1,380 1,093
cost
2014 (USD/oz) 511 874 1,339 1,049
USD all-in cost 2015 (USD/oz) 503 1,899 916 1,515 1,155
2014 (USD/oz) 683 934 1,439 1,124
ZAR cash cost per tonne 2015 (ZAR/t) 137 84 744 767 756
(note 3)
2014 (ZAR/t) 143 - 751 1,394 990
Capital expenditure (note 2015 (ZAR 3.3 95.1 112.6 238.2 350.8
4) million)
2014 (ZAR 40.7 - 151.0 210.5 361.5
million)
Average exchange rate 2015 (ZAR/ 11.45 12.04 11.45 11.45 11.45
USD)
2014 (ZAR/ 10.35 - 10.35 10.35 10.35
USD)
Revenue 2015 (ZAR 337.9 87.4 1,469.0 972.0 2,441.0
million)
2014 (ZAR 309.2 - 1,511.1 1,025.8 2,536.9
million)
Cost of production 2015 (ZAR 133.5 54.1 917.4 993.8 1,911.2
million)
2014 (ZAR 116.7 - 831.5 914.7 1,746.2
million)
All-in sustainable cost of 2015 (ZAR 139.9 54.1 1,092.7 1,107.3 2,200.0
production million)
2014 (ZAR 121.1 - 981.6 1,061.2 2,042.8
million)
All-in cost of production 2015 (ZAR 139.9 149.2 1,109.7 1,215.4 2,325.1
million)
2014 (ZAR 161.8 - 1,048.7 1,140.4 2,189.1
million)
Adjusted EBITDA (note 5) 2015 (ZAR 203.7 15.0 505.5 47.4 552.9
million)
2014 (ZAR 193.1 - 614.0 128.3 742.3
million)
Note 1: Surface source tonnes allocated to ETRP from 1 March 2015.
Note 2: ETRP production for January and February 2015 was capitalised
according to IAS16 (204,024t producing 17kg or 547oz gold).
Note 3: Split between ETRP and Surface feedstock cost per tonne is R40.9/t and
R238.3/t respectively, averaging at R84/t.
Note 4: Included in the Evander Mines capital for the prior year is an amount
of ZAR79.2 million relating to the construction of the ETRP.
Note 5: Adjusted EBITDA is represented by earnings before interest, taxation,
depreciation and amortisation, bargain purchase gain, impairments and loss on
disposal of associate.
Review of Barberton Mines
Safety
Safety is our primary priority and we strive to achieve zero fatalities in our
operations. It is therefore with deep regret that we report that one of our
employees, Mr Cyprein Solomon Mkhathswa (a diesel mechanic), was fatally
injured on 23 April 2015. The deceased was replacing a lift cylinder by hitting
the pin into position with a hammer. A tiny piece of the pin splintered and
pierced his chest, resulting in Mr Mkhathswa losing his life. Subsequently,
risk assessments were reviewed and precautionary measures were put in place to
prevent a reoccurrence of this nature. These measures were communicated to
employees and retraining of relevant staff was conducted.
Barberton Mines' total recordable injury frequency rate ('TRIFR') increased to
15.87 (2014: 13.53) per 1,000,000 man hours worked, and the LTIFR increased
marginally to 1.87 (2014: 1.85) per 1,000,000 man hours worked. The RIFR
increased to 0.62 (2014: 0.46) per 1,000,000 man-hours worked. Barberton Mines
safety record over the past three years reflects the management team's focus on
continually improving on their safety performance:
Three year safety trend
Frequency rate per 1,000,000 man 30 June 30 June %
hours 2012 2015
TRIFR 19.22 15.87 17.4%
LTIFR 3.26 1.87 74.3%
RIFR 0.74 0.62 16.2%
Fatality injury frequency rate 0.18 0.16 11.1%
('FIFR')
Operating performance
Barberton Mines' (including BTRP) gold sold decreased by 5.2% to 105,776oz
(2014: 111,623oz). The total combined ZAR cash cost per kilogramme terms,
increased by 16.4% to ZAR278,859 (2014: ZAR239,496/kg). The combined USD cash
costs per ounce increased by 2.4% to USD758/oz (2014: USD740/oz).
Barberton Mines' (excluding BTRP) gold sold decreased by 8.2% to 81,493oz
(2014: 88,738oz). Tonnes milled from mining operations decreased by 10.7% to
260,749t (2014: 292,121t), due to surface tonnes milled decreased to 6,076t
(2014: 28,547t) and the underground mining operations tonnes decreased to
254,673t (2014: 263,574t). The underground head grade dropped to 10.9g/t (2014:
11.5g/t). The decrease in gold sold from underground and surface mining
operations was largely due to the BIOX® plant oil contamination and operational
Section 54 safety stoppages enforced by the DMR. Operational and maintenance
systems have been implemented to mitigate the risk of future oil
contaminations.
Gold sold from the BTRP was 24,283oz (2014: 22,885oz) for the year. Tonnes
processed improved to 971,627t (2014: 815,736t) at a lower head grade of 1.4g/t
(2014: 1.6g/t) which was off-set by an increase tonnes processed and an
increase in plant recoveries to 57% (2014: 56%).
Barberton Mines' (excluding BTRP) ZAR cash costs per kilogramme increased by
19.4% to ZAR309,289/kg (2014: ZAR258,972/kg), while USD cash costs per ounce
increased by 8.0% to USD840/oz (2014: USD778/oz). The cash cost increases were
worsened by lower gold production due to the BIOX® plant's oil contamination
and the DMR stoppages affecting tonnage production.
The BTRP's ZAR cash costs increased by 7.8% to ZAR176,734/kg (2014: ZAR163,977/
kg) and USD cash costs per ounce were USD480/oz (2014: USD493/oz).
The total cost of production (including off-mine costs) increased by 10.3% to
ZAR917.4 million (2014: ZAR831.5 million). The main year-on-year cost
contributors were the following:
* Salaries and wages increased by 4.7% to ZAR387.2 million (2014: ZAR369.9
million). The salary and wages increased as a result of the wage agreement
settlement, which was average CPI plus 1% (7.15% and 6.6% granted to NUM
and UASA respectively). The total increase in salaries and wages was lower
than the increase in the wage agreement as a result of lower incentives
paid (which are linked to the mine's productivity and profitability). In
addition to this the average number of employees (excluding capital
employees) employed during the year decreased by 1% to 1,675 (2014: 1,690).
* Mining costs increased by 5.3% to ZAR108 million (2014: ZAR102.6 million),
mainly due to an increase in vamping contractor's costs of 6.5%. The mining
costs excluding the vamping contractors' remained flat year-on-year as a
result of the lower tonnages mined.
* Processing costs (excluding the BTRP) decreased by 1.6% to ZAR60.8 million
(2014: ZAR61.8 million) because of the lower tonnages mined and therefore
processed.
* Engineering and technical services costs increased by 12.2% to ZAR71.8
million (2014: ZAR64.0 million). Barberton Mines incurred an additional
cost of ZAR7.4 million for secondary support on Fairview mine to assist in
accessing additional high grade pillars and panels.
* The cost of electricity increased by 11.5% to ZAR95.8 million (2013:
ZAR85.9 million). Electricity costs excluding the BTRP increased by 9.3% to
ZAR83.8 million (2014: ZAR76.7 million), which was lower than the average
12.7% increase in Eskom tariffs due to lower tonnages mined from
underground. The electricity cost of the BTRP increased by 30.4% to ZAR12.0
million (2014: ZAR9.2 million), due to throughput tonnes processed
increasing by 19.1%, combined with Eskom tariff increases of 12.7%.
* Security costs were well controlled and only increased by 3.0% to ZAR27.6
million (2014: ZAR26.8 million).
* Administration and other costs increased by 0.6% to ZAR33.4 million (2014:
ZAR33.2 million).
* The BTRP operating costs increased by 14.4% to ZAR133.5 million (2014:
ZAR116.7 million) as a result of the additional 155,891 tonnes processed
for the year under review. There was an additional increase in the lime
costs of ZAR6.1 million to assist with the BTRP thickener settlement.
Installation and equipping costs also increased by ZAR7.2 million mainly
due to corrosion maintenance performed on the three carbon in leach tanks
at the BTRP to sustain production levels.
Barberton Mines' ZAR combined all-in cash cost per kilogramme increased by
11.7% to ZAR337,317/kg (2014: ZAR302,058/ kg). The total combined USD all-in
cash cost per ounce decreased by 1.9% to USD916/oz (2014: USD934/oz). This
increase in all-in cash costs was mainly as a result of the following:
* Decrease in gold sold by 5.2% to 105,776oz (2014: 111,623oz).
* Cost of production increased by 10.3% to ZAR917.4 million (2014: ZAR831.5
million).
* The increase was off-set by a decrease in capital expenditure to ZAR112.6
million (2014: ZAR151 million) with the finalisation of the BTRP
construction of ZAR40.7 million in the prior year.
Capital expenditure
Total capital expenditure at Barberton Mines decreased by 25.4% to ZAR112.6
million (2014: ZAR151 million). Maintenance capital expenditure of ZAR44.2
million (2014: ZAR33.3 million) and development capital expenditure of ZAR53.7
million (2014: ZAR50.5 million) was incurred.
Expansion capital of ZAR14.7 million (2014: ZAR67.2 million) was spent on the
development of the Fairview ventilation raise borehole project to improve
operating environmental conditions. Expansion capital incurred in the prior
year was ZAR26.5 million for Fairview ventilation raise borehole project and
ZAR40.7 million for the finalisation and commissioning of the BTRP.
New ore reserve and exploration drilling projects have yielded positive
results, confirming the down dip extension of the high grade 11 Block of the
MRC ore body by a further 170 metres. This extension to the MRC orebody has
resulted in an annual increase in Barberton's Mine mineral reserves by 236,162
ounces, thereby extending the life of mine of Barberton Mines to 20 years.
The Fairview MRC orebody has been the primary gold contributor towards gold
produced at Barberton Mines. This orebody is an epigenetic hydrothermal
lode-gold deposit with a strike length that ranges between 70 - 120 metres and
also extending to depth. Gold mineralisation is associated with arsenopyrite
and pyrite with an average reserve grade of 35 g/t that has been declared for
the MRC. The mineralised widths range between 7 - 15 metres.
Recent borehole results of the 11 Block are detailed hereunder:
Borehole number Channel width Grade (g/t)
(cm)
Bh 5940 687 53.30
Bh 5816 691 120.03
Bh 5849 1626 50.22
Bh 5864 1383 43.82
Looking ahead
Barberton aims to improve levels of production by focussing on BIOX®
recoveries, increased tonnages aligned with our incentive system, in
conjunction with cost containment in order to avoid margin erosion. The
management team remains committed to improving their safety performance and
working with the DMR to reduce safety stoppages.
The Sheba and New Consort tailings dams will provide potential future sources
of tailings which has supported the increased BTRP life of operation to 15
years (2014: 12 years) The BTRP has a mineral reserve of 0.6Moz (13.4Mt @ 1.5 g
/t). The BTRP payback period was 18 months since commissioning on 1 July 2013,
therefore the increase in the BTRP life of operation will result in further
surplus free cash flows.
Review of Evander Mines
Safety
The in-house training programme Vuka-Sizwe (Vuka means "wake up" and Sizwe
means "people") continued to promote an ongoing culture of safety awareness and
teamwork. All employees at the mine completed phase four of the programme
during the year, which focused on behaviour and associated consequences and
choices in safety.
Evander Mines' TRIFR increased to 6.87 (2014: 6.04) per 1,000,000 man hours
worked, and the LTIFR improved to 2.66 (2014: 4.08) per 1,000,000 man hours
worked. The RIFR improved to 1.54 (2014: 2.57) per 1,000,000 man hours worked.
Evander Mines safety record over the past three years reflects management's
focus on continually improving on their safety performance:
Three year safety trend
Frequency rate 30 June 2012 30 June 2015 %
per 1,000,000 man
hours
TRIFR 7.99 6.87 14.0%
LTIFR 4.00 2.66 33.5%
RIFR 3.07 1.54 99.4%
FIFR 0.77 - 100%
Operating performance
Pan African Resources previously communicated that Evander Mines was in a low
grade mining cycle. This cycle had reduced gold production and resulted in
reduced profit margins and net profits generated by Evander Mines, in
comparison to the previous corresponding reporting period.
In June 2015 Pan African Resources informed shareholders that Evander Mines had
now exited the low grade mining cycle and was returning to a higher grade
mining areas. The turnaround at the mine has been slower than previously
anticipated.
For the year under review Evander Mines' gold sold decreased by 8.5% to
70,081oz (2014: 76,556oz). Underground and surface sources tonnes milled
decreased by 1.2% to 648,209t (2014: 656,028t). The decrease in tonnes milled
was largely due to challenges related to underground mining operations and
infrastructure constraints, Eskom power interruptions and DMR safety stoppages.
These issues adversely impacted production output. The mine has implemented
corrective actions, including improved maintenance protocols on the underground
conveyor belt system, thereby improving availability of the conveyor belts from
60% to 80%. The mine also improved the monitoring and pump infrastructure of
its 8 Shaft dewatering pumps, thereby reducing the risk of shaft flooding. The
on-site management team has been strengthened with a renewed management focus
on achieving operational and production targets.
The total cost of production (including off-mine costs) increased by 8.6% to
ZAR993.8 million (2014: ZAR914.7 million). The cost of production includes
additional cost in relation to the new ETRP plant and related surface
feedstock. The cost of production (excluding the ETRP costs) therefore only
increased by 2.7% to ZAR939.7 million.
The combined ZAR cash costs per kilogramme increased by 18.7% to ZAR455,896/kg
(2014: ZAR384,150/kg). USD cash costs per ounce increased by 7.3% to USD1,238/
oz (2014: USD1,154/oz). This increase was mainly as a result of the lower grade
cycle which led to gold sales decreasing by 8.5% to 70,081oz (2014: 76,556oz)
and the cost of production increasing by 8.6% to ZAR993.8 million (2014:
ZAR914.7 million).
The main year-on-year cost contributors were the following:
* Salaries and wages increased by 5.4% to ZAR473.0 million (2014: ZAR448.9
million). The salaries and wages costs increased as a result of the chamber
of mines wage agreement which was average CPI plus 1% (7.15% and 6.6%
granted to NUM and UASA respectively). The increase was lower than the
average chamber increase, due to the implementation of a voluntary
separation programme to optimise employee numbers. The average number of
employees (excluding capital employees) employed during year decreased by
2.8% to 2,247 (2014: 2,312). The ETRP employed an additional 13 employees
during the year. The cost of the voluntary separation programme was ZAR12.9
million and was recorded in other income and expenses on the statement of
comprehensive income and factored into Evander Mines all-in sustaining
costs per kilogramme.
* Mining costs increased by 6.2% to ZAR120.3 million (2014: ZAR113.3 million)
due to additional vamping in No. 2 and 3 declines, and inflationary linked
cost increases.
* Processing costs increased by 174.3% to ZAR88.6 million (2014: ZAR32.3
million), due to the additional ETRP costs of ZAR51 million.
* Engineering and technical services costs increased by 1.6% to ZAR64.9
million (2014: ZAR63.9 million).
* Electricity and water costs increased by 7.1% to ZAR175.8 million (2014:
ZAR164.2 million). The electricity costs that related to the ETRP amounted
to ZAR2.1 million for the four months ended 30 June 2015. The increase in
electricity and water excluding the ETRP increased by 5.8% to ZAR173.7
million (2014: ZAR164.2 million). The electricity Eskom tariff increase
implemented for the period under review was 12.7%, however Evander Mines
electricity consumption decreased due to power optimisation projects, load
clipping, and Section 54 safety stoppages issued by the DMR.
* Security costs decreased by 11.8% to ZAR11.2 million (2014: ZAR12.7
million) as a result of re-negotiated rates.
* Administration and other costs decreased by 13.1% to ZAR51.3 million (2014:
ZAR59.0 million) as result of management's drive to reduce unnecessary
overheads during the low grade cycle.
* ETRP cost of production which is incorporated in the production costs
listed above amounted to ZAR54.1 million. The ETRP costs comprises of ZAR51
million for processing costs, ZAR2.1 million for electricity and ZAR1
million for salaries.
Evander Mines' ZAR combined all-in cash cost per kilogramme increased by 16.4%
to ZAR557,553/kg (2014: ZAR478,933/kg). The total combined USD all-in cash cost
per ounce decreased by 5.3% to USD1,515/oz (2014: USD1,439/oz). This increase
in all-in cash costs was mainly as a result of the following:
* Decrease in gold produced by 8.5% to 70,081oz (2014: 76,556oz);
* cost production increased by 8.6% to ZAR993.8 million (2014: ZAR914.7
million); and
* once-off expansion capital related to the ETRP plant construction of
ZAR95.1 million (2014: ZAR79.2 million), equating to ZAR43,597/kg (2014:
ZAR33,268/kg).
ETRP
Pan African Resources remains focused on creating stakeholder value through
unlocking the potential of its organic surface and brownfields exploration
projects. In this regard, Evander Mines successfully commissioned its ETRP and
the first gold was eluted in January 2015. The ETRP has now ramped-up
processing to its capacity of 180,000 to 200,000 tonnes per month at 0.3g/t of
tailings and 1.1g/t of surface feedstock. Gold production from the ETRP was on
target and its recoveries from tailings sources are currently above plan at 48%
(plan 42%), while additional surface sources aided in increasing the ETRP
overall recovery to 53.7%.
The ETRP was operational for four months of the current financial year and its
ZAR cash costs per kilogramme amounted to ZAR266,453/kg, equating to USD cash
costs per ounce of USD688/oz. The ETRP contributed an additional 2,494 ounces
of gold from its tailings sources and 4,029 ounces from surface feedstock.
The total construction capital spend on the ETRP was approximately ZAR174.3
million, which was substantially below the original ZAR200 million project
budget.
Capital expenditure
Total capital expenditure at Evander Mines was ZAR238.2 million (2014: ZAR210.5
million). Maintenance capital expenditure was ZAR38.6 million (2014: ZAR27.9
million) and development capital expenditure was ZAR104.5 million (2014:
ZAR103.4 million). Expansion capital related to the ETRP plant construction was
ZAR95.1 million (2014: ZAR79.2 million).
Looking ahead
Evander Mines will assess the merits of developing the Evander South brownfield
project ('Evander South Project') to further boost production levels.
Evander Mines will continue to investigate the viability of constructing the
Elikhulu tailings retreatment plant to treat slimes at about 12 million tonnes
per annum at a headgrade of 0.28g/t, with a specific focus on reducing the
overall project capital.
Review of platinum tailings operations
Review of Phoenix Platinum
Year ended 30 Units Tailings
June operations
Phoenix Platinum
Tonnes processed - 2015 (t) 262,119
tailings
2014 (t) 251,182
Headgrade - tailings 2015 (g/t) 3.31
2014 (g/t) 3.65
Overall recovery 2015 (%) 44%
2014 (%) 29%
PGE Sold 2015 (oz) 10,245
2014 (oz) 7,204
Average ZAR PGE price 2015 (oz) 9,603
received
2014 (oz) 9,987
Average USD PGE price 2015 (USD/oz) 839
received
2014 (USD/oz) 965
ZAR cash cost 2015 (ZAR/Oz) 6,621
2014 (ZAR/Oz) 7,723
ZAR all-in sustaining 2015 (ZAR/KG) 7,016
cash costs
2014 (ZAR/KG) 7,977
ZAR all-in cost 2015 (ZAR/KG) 7,016
2014 (ZAR/KG) 7,977
USD cash cost 2015 (USD/oz) 578
2014 (USD/oz) 746
USD all-in sustaining 2015 (USD/oz) 613
cash cost
2014 (USD/oz) 771
USD all-in cost 2015 (USD/oz) 613
2014 (USD/oz) 771
ZAR cash cost per 2015 (ZAR/t) 259
tonne
2014 (ZAR/t) 222
Capital expenditure 2015 (ZAR million) 0.6
2014 (ZAR million) 0.4
Average exchange rate 2015 (ZAR/USD) 11.45
2014 (ZAR/USD) 10.35
Revenue 2015 (ZAR million) 98.4
2014 (ZAR million) 71.9
Cost of Production 2015 (ZAR million) 67.8
2014 (ZAR million) 55.6
All-in sustainable 2015 (ZAR million) 71.9
cost of production
2014 (ZAR million) 57.5
All-in cost of 2015 (ZAR million) 71.9
production
2014 (ZAR million) 57.5
Adjusted EBITDA 2015 (ZAR million) 27.7
2014 (ZAR million) 16.0
Safety
Phoenix maintained its excellent safety record, with no injuries recorded.
Operating performance
Phoenix Platinum made good progress on improving operations in the year under
review, with PGE ounces sold increased by 42.2% to 10,245oz PGE (2014: 7,204oz
PGE). Overall plant recoveries increased significantly to 44% (2014: 29%). The
cessation of International Ferro Metals Limited ('IFL') operations at
Skychrome, which mined mainly oxidised material, was replaced with sulphide
material from its underground operation at Lesedi mine. This increase in
sulphide material resulted in an improvement in the quality of feedstock being
treated and was the main contributor to the higher plant recoveries achieved.
Pan African Resources' shareholders are referred to the regulatory announcement
published on 26 August 2015 by IFL, and a follow-on announcement by Pan African
Resources on the 27 August 2015, whereby IFL announced that as a result of
deteriorating business conditions, its South African subsidiary, International
Ferro Metals (SA) Proprietary Limited ('IFMSA'), has entered into Business
Rescue. Business Rescue is a statutory means of enabling a financially
distressed company to continue business, under the supervision of a Business
Rescue Practitioner, protected from its creditors.
Phoenix Platinum is situated on the IFMSA property and a portion of the
feedstock for the Phoenix Platinum's operation (currently approximately 20%) is
obtained from tailings arising from IFMSA's current processing activities.
Phoenix Platinum is not solely reliant on material from IFMSA and has
alternative sources of feedstock. Phoenix Platinum sources electricity, water
and certain other services from IFMSA.
At this stage, Phoenix Platinum is not in a position to fully assess the impact
of the Business Rescue proceedings in relation to the operation. Phoenix
Platinum and Pan African Resources will work closely with the IFMSA Business
Rescue Practitioner to ensure that the operations and interests of Phoenix
Platinum are safeguarded, which includes the services currently provided by
IFMSA. All stakeholders will be kept informed as these discussions progress.
Phoenix Platinum will be looking at alternative feedstock from its Elandskraal
and Kroondal tailings dams to maintain production and mitigate any shortfalls
arising from IFMSA.
The effective average ZAR PGE basket price received decreased by 3.8% to
ZAR9,603/oz (2014: ZAR9,987/oz). Cost per ounce of production decreased by
14.3% to ZAR6,621/oz (2014: ZAR7,723/oz). In USD terms the PGE basket price
received decreased by 13.1% to USD839/oz (2014: USD965/oz). The USD cash costs
per ounce decreased by 22.5% to USD578/oz (2014: USD746/oz).
The total cost of production increased by 21.9% to ZAR67.8 million (2014:
ZAR55.6 million). The main year-on-year cost contributors were the following:
* Salary and wages increased by 10.7% to ZAR19.6 million (2014: ZAR17.7
million), comprising a standard increase of 7.5% granted to the employees
and also incentive bonus scheme for achieving production and profit
targets.
* Processing costs increased by 30.9% to ZAR43.6 million (2014: ZAR33.3
million). The plant produced concentrate with a higher chrome content, this
together with increased tonnages delivered to the smelter, resulted in
additional chrome and refining charges of ZAR13.7 million (2014: ZAR7.2
million).
* Electricity costs increased by 2.8% to ZAR3.7 million (2014: ZAR3.6
million). Phoenix Platinum electricity costs increases were below Eskom's
tariff increase of 12.7% due to the optimisation of the plants mill to
reduce power consumption.
Capital expenditure
Total capital expenditure at Phoenix Platinum remained steady at ZAR0.6 million
(2014: ZAR0.4 million).
Looking ahead
Phoenix Platinum aims to optimise resources from Elandskraal and Kroondal to
maintain production and profitability. On 29 June 2015 Phoenix Platinum signed
a new agreement to secure the PGE rights to the Elandskraal surface resource.
The haulage contract to transport the Elandskraal material to Phoenix Platinum
has been awarded and processing will commence during September 2015. During the
new financial year the Elandskraal material will be batch treated in the CTRP
to conduct re-agent suite test work.
During the 2016 financial year, 60,000 tonnes of the Kroondal surface resource
will be processed in the CTRP. Re-agent test work will be conducted on this
material during the latter part of year.
Group expansion/growth projects
An internal technical team from Evander Mines has been assigned to assess the
merits of developing the Evander South Project to the level of a preliminary
economic assessment. The Evander South Project is an attractive mining
opportunity whereby the Kimberley reef can potentially be exploited at shallow
depths, commencing at 300 metres below surface. Evander South has an estimated
mineral resource of 4.9Moz (20.1Mt @ 7.7g/t).
In light of the positive results of the ETRP, Pan African Resources will
undertake a preliminary economic assessment on the viability of constructing
'Elikhulu', a tailings retreatment plant at Evander Mines which can potentially
treat slimes at a processing capacity of up to 12 million tonnes per annum and
at a headgrade of 0.28g/t from the Winkelhaak, Leslie and Kinross tailings
storage facilities. The total mineral resource for Elikhulu is 165 million
tonnes at 0.28g/t (1.5Moz).
Acquisition of Uitkomst Colliery
In executing our strategy of creating shareholder value by identifying and
acquiring attractive, cash generative operating mining assets, the group
entered into agreements to acquire the Uitkomst colliery (the 'Colliery')
during June 2015. The Colliery, located close to the town of Utrecht in KwaZulu
Natal in South Africa, is a high grade thermal export quality coal deposit with
metallurgical applications. Once all the conditions precedent to the agreement
are met, the Colliery will be acquired from Oakleaf Investments Holding 109
Proprietary Limited ('Oakleaf') and Shanduka Resources Proprietary Limited
('Shanduka') for a cash consideration of ZAR200 million. The Colliery is an
existing operational mine and the acquisition is expected to be earnings and
cash flow accretive to Pan African Resources. It contains a coal resource of
25.7 million tonnes, of which 22.1 million tonnes can be classed as measured or
indicated, in accordance with the SAMREC code. The area also has additional
exploration potential. Current operations at the Colliery demonstrate that it
can readily produce yields of high grade coal suitable for export or local
metallurgical markets. The Colliery currently sells approximately 400,000
tonnes of coal per annum.
The acquisition will be funded from an existing RCF and internally generated
cash flows. The acquisition still remains subject to approval by the DMR in
terms of section 11 of the Mineral and Petroleum Resources Development Act
('MPRDA'). The group's exposure to coal, through this acquisition, also
provides a natural hedge against an anticipated increase in rising energy
prices in South Africa. The Colliery acquisition is not a divergence of the
group's strategy and precious metals focus, but rather an opportunity to add to
the group's cash flow and earnings base.
Auroch Mineral NL ('Auroch')
Auroch is an exploration company focusing on developing and exploring the
Manica Gold Project ('Manica') in Mozambique. Pan African Resources previously
owned Manica. Manica was sold to Auroch during January 2013 and, as part of the
transaction consideration, Pan African Resources was issued 42% of the total
issued share capital of Auroch.
On 17 November 2014, the Group announced the completion of the disposal of its
interest in Auroch for a total amount of ZAR8.1 million (AUD0.85 million) in
full and final settlement of all amounts owing.
Even though the total settlement was less than the AUD2 million settlement
previously agreed upon, the transaction allowed for earlier payment and
provided completion certainty for the group, enabling it to maintain its focus
on the core asset portfolio.
During the reporting period prior to the date of disposal, the group
consolidated ZAR2.3 million (2014: ZAR2.9 million) of Auroch's exploration and
corporate costs, which is disclosed in the statement of profit or loss and
other comprehensive income under 'Loss in Associate'. In derecognising the 42%
investment in Auroch the group further recognised an impairment of ZAR1.0
million and a loss on disposal of investment of ZAR2.4 million in the statement
of profit or loss and other comprehensive income.
Commitments reported in ZAR and GBP
The group had identified no contingent liabilities in the current or prior
financial period.
The group had outstanding open orders contracted for at year end of ZAR22.8
million (2014: ZAR89.8 million) or GBP1.2 million (2014: GBP5 million).
Authorised commitments for the new financial year not yet contracted for
totalled ZAR271.1 million (2014: ZAR343.3 million) or GBP14 million (2014:
GBP19 million).
The group had guarantees in place of ZAR24.6 million (2014: ZAR24.6 million) or
GBP1.3 million (2014: GBP1.4 million) in favour of Eskom and ZAR14.0 million
(2014: ZAR14.0 million) or GBP0.8 million (2014: GBP0.8 million) in favour of
the DMR.
Operating lease commitments, which fall due within the next year, amounted to
ZAR4.0 million (2014: ZAR2.6 million) or GBP0.2 million (2014: GBP0.1 million).
The group has committed ZAR200 million (GBP10.4 million) in the financial year
to Oakleaf and Shanduka, upon completion of the conditions precedent to the
purchase agreement.
Fair value investments
Financial instruments that are measured at fair value grouped into levels 1 to
3 based on the extent to which fair value is observable.
The levels are classified as follows:
Level 1 - fair value is based on quoted prices in active markets for identical
financial assets or liabilities;
Level 2 - fair value is determined using inputs other than quoted prices
included within level 1 that are observable for the asset or liability; and
Level 3 - fair value is determined on inputs not based on observable market
data.
The group values its ZAR312.3 million (2014: ZAR278.4 million) or GBP16.2
million (2014:GBP15.5 million) rehabilitation trust funds which comprise of
investments in guaranteed equity linked notes, government bonds and equities
according to level 1 quoted prices in an active market.
During the year, the company purchased 1,750,850 shares for ZAR18.9 million
(GBP1 million) in a listed available-for-sale investment. The investment is
valued according to level 1 quoted prices in an active market.
Basis of preparation of the provisional summarised consolidated financial
statements
Investors should consider non-Generally Accepted Accounting Principles
('non-GAAP') financial measures shown in this provisional announcement in
addition to, and not as a substitute for or as superior to, measures of
financial performance reported in accordance with International Financial
Reporting Standards ('IFRS'). The IFRS results reflect all items that affect
reported performance and therefore it is important to consider the IFRS
measures alongside the non-GAAP measures.
The provisional audited results announcement is only a summary of the
information in the Integrated Report and does not contain full or complete
details. Any investment decision by investors and/or shareholders should be
based on consideration of the final Integrated Report to be published on SENS
and the Company's website as a whole.
JSE Limited listing
The Company has a dual primary listing on JSE Limited ('JSE') in South Africa
and the AIM market ('AIM') of the London Stock Exchange ('LSE').
This provisional announcement has been prepared in accordance with the
framework concepts and the measurement and recognition requirements of IFRS and
SAICA Financial Reporting Guides as issued by the Accounting Practice Committee
and the Financial Pronouncements as issued by the Financial Reporting Standards
Council, and the minimum information as required by International Accounting
Standards ('IAS') 34: Interim Financial Reporting.
The group's South African external auditors, Deloitte & Touche, have issued
their opinions on the group's consolidated financial statements and the
provisional summarised consolidated financial statements for the year ended 30
June 2015. The audit was conducted in accordance with International Standards
on Auditing. Deloitte & Touche have expressed unmodified opinions on the
group's consolidated financial statements and the provisional summarised
consolidated financial statements. The copies of their audit reports are
available for inspection at the Company's registered office. Any reference to
future financial performance included in this provisional report have not been
reviewed or reported on by the group's South African external auditors.
The auditor's report does not necessarily report on all of the information
contained in this announcement/financial results. Shareholders are therefore
advised that in order to obtain a full understanding of the nature of the
auditor's engagement they should obtain a copy of that report together with the
accompanying financial information from the issuer's registered office.
These provisional summarised consolidated financial statements are extracted
from the audited group consolidated financial statements. The directors take
full responsibility for the preparation of the provisional summarised audited
results and confirm that the financial information has been correctly extracted
from the underlying group consolidated financial statements.
AIM listing
The financial information for the year ended 30 June 2015 does not constitute
statutory accounts as defined in sections 435 (1) and (2) of the United Kingdom
('UK') Companies Act 2006 but has been derived from those accounts. Statutory
accounts for the year ended 30 June 2014 have been delivered to the Registrar
of Companies and those for 2015 will be delivered following the Company's AGM.
Deloitte LLP, the external auditor registered in the UK, have reported on these
accounts for the year ended 30 June 2015. Their report was unqualified, did
not include a reference to any matters to which auditors draw attention by way
of emphasis of matter and did not contain a statement under section 498 (2) or
(3) of the Companies Act 2006. These statutory accounts have been prepared in
accordance with IFRS and IFRS Interpretations Committee interpretations adopted
for use by the European Union, with those parts of the UK Companies Act 2006
applicable to companies reporting under IFRS.
Directorship changes
The following changes took place during the period under review:
Appointments:
- Mr RM Smith was appointed as an independent non-executive director effective
from 8 September 2014.
- Mr JAJ Loots was appointed the Chief executive officer effective 1 March
2015.
- Mr GP Louw was appointed Financial director effective 1 March 2015.
Resignations:
- Mr RG Still resigned as a non-executive director effective 1 July 2014.
- Ms P Mahanyele resigned as a non-executive director effective 30 June 2015.
- Mr RA Holding resigned as Chief executive officer effective 1 March 2015. To
ensure that MR RA Holdings experience and knowledge is retained by the group,
an exclusive consulting agreement was concluded with him, effective 1 March
2015. This arrangement will be for a minimum period of one year.
Shares issued
On 19 March 2015 1,500,000 shares were issued at 5 pence per share to Mr KC
Spencer's family trust ('Strode Trust') upon exercising historical share
options.
During the prior financial year 7,160,500 shares were issued in relation to
share options exercised:
* 9 September 2013 : 3,000,000 shares issued at 5 pence per share.
* 16 October 2013 : 2,063,000 shares were issued as follows:
+ 1,213,000 shares issued at 5 pence per share.
+ 850,000 shares issued at 4 pence per share.
* 10 February 2014 : 282,500 shares were issued at 4 pence per share.
* 20 February 2014 : 965,000 shares were issued at 4 pence per share.
* 5 June 2014 : 850,000 shares were issued at 4 pence per share.
Directors' dealings
Financial Year 30 June 2015
On 19 March 2015 1,500,000 shares were issued at 5 pence per share to Mr KC
Spencer's Strode Trust, upon exercising historical share options.
At 30 June 2015 the Strode Trust held a total of 3,000,000 shares (2014:
1,500,000).
During the year under review Mr T Mosololi participated in the following
transactions in the Company's shares:
- On 6 March 2015, purchased 2,000 shares at ZAR2.04 per share.
- On 9 March 2015, purchased 28,000 shares at ZAR2.07 per share
At 30 June 2015 Mr T Mosololi held a total of 30,000 shares (2014: nil).
Financial Year 30 June 2014
Mr JAJ Loots had purchased 50,000 shares at ZAR2.23 per share 17 September
2013. At 30 June 2014 Mr JAJ Loots held a total of 231,575 shares (2013:
181,575).
Mr RG Still is a trustee of a family trust ('The Alexandra Trust'). Mr RG Still
is therefore deemed to have an indirect, non-beneficial interest in The
Alexandra Trust's holding in the Company.
The Alexandra trust had the following dealings in shares:
- 01 October 2013, sold 360,916 shares at ZAR2.70 per share.
- 02 to 06 May 2014, sold 4,312,700 shares at an average price of ZAR2.70 per
share.
At 30 June 2014 the Alexandra Trust held a total of 7,000,000 shares (2013:
11,673,616).
Dividend
The group paid a final dividend of ZAR258 million or GBP14.9 million (2013:
ZAR240.3 million or GBP14.7 million) during December 2014 relating to the 2014
financial year, equating to ZAR0.1410 or 0.82p (2013: ZAR0.1314 or 0.80p per
share).
Proposed final dividend for approval at the AGM
In light of market uncertainties, the board has proposed a reduced dividend of
ZAR210 million or GBP9.9 million (2014: ZAR258 million or GBP14.9 million),
equating to ZAR0.11466 per share or 0.53958p per share (2014: ZAR0.1410 per
share or 0.82p per share). This proposed final dividend is subject to approval
at the AGM which will take place on 27 November 2015. The reduced dividend is
not a departure from the group's progressive dividend policy and the board will
consider an interim dividend in the 2016 financial year.
Assuming the dividend is approved by the shareholders, the following salient
dates would apply:
Currency conversion date Friday, 27 November
Last date to trade on the exchanges Friday, 4 December
Ex-Dividend date on the JSE Monday, 7 December
Ex-Dividend date on the LSE Thursday, 10 December
Record date Friday, 11 December
Payment date Thursday, 24 December
The GBP proposed dividend was calculated based on an exchange rate of ZAR21.25:
1. The UK shareholders are to note that a revised exchange rate will be
communicated prior to final approval at the AGM. Therefore the proposed
dividend is approximately 0.53958p per share.
The local dividends tax rate is fifteen percent per ordinary share for
shareholders who are liable to pay the dividends tax would receive a net
dividend of ZAR0.09746 per share (0.45864p per share). The Company's South
African income tax reference number is 9154588173 and it has 1,831,494,763
shares currently in issue.
Going concern
The board confirms that the business is a going concern and that it has
reviewed the business' working capital requirements in conjunction with its
future funding capabilities for at least the next 12 months, and has found them
to be adequate. The group has a ZAR800 billion revolving credit facility
('RCF') from a consortium of South African banks (and a two year accordion
option subject to the banks credit committee approval of ZAR300 million), and
access to general banking facilities ('GBF') of ZAR100 million. At 30 June 2015
the group had capacity on the RCF and GBF facilities of ZAR555.0 million and
ZAR100.0 million, respectively, and cash on hand of ZAR64.2 million to assist
in funding working capital requirements. Management are not aware of any
material uncertainties which may cast significant doubt on the group's ability
to continue as a going concern. Should the need arise the group can cease most
exploration and capital expenditure activities to conserve cash.
Events after the reporting period
Evander Mines employee share ownership programme
In the 2016 financial year, Evander Mines implemented an employee share
ownership programme which is similar to that implemented at Barberton Mines in
June 2015. A newly established employee trust will effectively own 5% of the
issued share capital of Evander Mines. The transaction was financed by Evander
Mines with preference share funding attracting a real return of 2% per annum
and with limited dilution to Pan African Resources' shareholders. A portion of
dividends declared is retained to repay the notional financing. The portion
retained ranges from 50% to 80%, over the 10 year vesting period of the scheme.
IFL announcement regarding business rescue
Pan African Resources' shareholders are referred to the regulatory announcement
published on 26 August 2015 by IFL, whereby IFL announced that as a result of
deteriorating business conditions, its South African subsidiary IFMSA, has
entered into Business Rescue. Business Rescue is a statutory means of enabling
a financially distressed Company to continue business, under the supervision of
a Business Rescue Practitioner, protected from its creditors.
Phoenix Platinum is situated on the IFMSA property, and a portion of the
feedstock for the Phoenix Platinum's operation (currently approximately 20%) is
obtained from tailings arising from IFMSA's current processing activities.
Phoenix Platinum is not solely reliant on material from IFMSA, and has
alternative sources of feedstock. Phoenix Platinum sources electricity, water
and certain other services from IFMSA.
At this stage, Phoenix Platinum is not in a position to fully assess the impact
of the Business Rescue proceedings on the operation. Phoenix Platinum and Pan
African Resources will work closely with the IFMSA Business Rescue Practitioner
to ensure that the operations and interests of Phoenix Platinum are
safeguarded, which includes the services currently provided by IFMSA. All
stakeholders will be kept informed as these discussions progress.
Acquisition of Uitkomst colliery
As detailed above, the group entered into agreements to acquire the Colliery
during June 2015. Once all the conditions precedent to the agreement are met,
the Colliery will be acquired from Oakleaf and Shanduka for a cash
consideration of ZAR200 million. The Colliery is an existing operational mine
and the acquisition is expected to be earnings and cash flow accretive to Pan
African Resources. It contains a coal resource of 25.7 million tonnes, of which
22.1 million tonnes can be classed as measured or indicated, in accordance with
the SAMREC code. The area also has additional exploration potential. Current
operations at the Colliery demonstrate that it can readily produce yields of
high grade coal suitable for export or local metallurgical markets. The
Colliery currently sells approximately 400,000 tonnes of coal per annum.
The acquisition still remains subject to approval by the DMR in terms of the
MPRDA section 11 mining rights transfer to Pan African Resources.
Accounting policies
The provisional announcement has been prepared using accounting policies that
comply with the IFRS adopted by the European Union and South Africa, which are
consistent with those applied in the financial statements for the year ended 30
June 2015 and prior year end 30 June 2014.
Segment reporting
A segment is a distinguishable component of the group that is engaged in
providing products or services in a particular business sector or segment,
which is subject to risk and rewards that are different from those of other
segments. The group's business activities were conducted through five business
segments:
- Barberton Mines (including BTRP), located in Barberton South Africa;
- Evander Mines (including ETRP), located in Evander South Africa;
- Phoenix Platinum, located near Rustenburg South Africa;
- Corporate and growth projects and;
- Funding Company.
The Executive committee reviews the operations in accordance with the
disclosures presented above.
Pan African Resources outlook
Pan African Resources remains focused on creating stakeholder value through
unlocking the potential of its organic surface and brownfields development
projects. Some of the initiatives to positively enhance the life of mine of our
assets include:
* Continued exploration at the Fairview Mine in Barberton, which has yielded
positive results, confirming the down dip extension of the high grade 11
Block of the MRC ore body by a further 170 metres. This extension has
resulted in an increase in the gold mineral reserves by 236,162 ounces,
thereby extending the life of mine to
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