REG-Pan African Resources Plc: Provisional summarised audited year end results

Pan African ResourcesAnnouncement

15/09/2021 07:05

Pan African Resources PLC

(Incorporated and registered in England and Wales under the UK Companies Act
2006 with registration number 3937466 on 25 February 2000)

Share code on AIM: PAF

Share code on JSE: PAN

ISIN: GB0004300496

ADR ticker code: PAFRY

(“Pan African” or the “Company” or the “Group”)

(Key features are reported in United States (US) dollar (US$) and South
African (SA) rand (ZAR))

Provisional summarised audited results for the year ended 30 June 2021 –
SHORT FORM ANNOUNCEMENT

HIGHLIGHTS*
* 12.4% increase in Group gold production to 201,777oz
* 36.0% increase in operating profit to US$128.0 million
* 14% improvement in all-in sustaining cost (AISC) margin to 30.9%
* Record profit after tax of US$74.7 million
* 68.3% increase in earnings per share (EPS) to US 3.87 cents per share and
69.0% increase in headline earnings per share (HEPS)
* 28.5% increase in final proposed dividend of ZAR402.2 million (or
US$28.3million at the prevailing exchange rate)
* 45.6% decrease in net senior debt to US$33.7 million (2020: US$62.0 million)
* compared to the prior corresponding period.

CHIEF EXECUTIVE OFFICER’S STATEMENT

Overview

“We are, once again, pleased to report major positive strides in Pan
African’s operational and financial performance, despite the challenges of
the ongoing COVID-19 pandemic. The operational flexibility afforded by our
multiple producing assets has enabled the Group to improve margins, achieve
record profits and realise our second-highest annual gold production. We are
also proposing our highest-ever dividend for approval at the upcoming annual
general meeting (AGM).

Financial performance

Our excellent financial performance has improved HEPS by 69.0% and enabled a
45.6% reduction in Group net senior debt. We remain on track with our forecast
degearing, while continuing to invest in our assets and increasing dividends
to shareholders.

Above-inflation increases in electricity tariffs and the marginal
strengthening of the South African rand have resulted in Group AISC increasing
by 9.9% to US$1,261/oz (2020: US$1,147). Included in the current financial
year, AISC is a realised hedge loss of US$7.2 million which, if excluded,
reduces the Group’s AISC to US$1,226/oz. The Group’s low-cost operations
(Barberton Mines’ underground, Elikhulu and the Barberton Tailings
Retreatment Plant), which account for more than 75% of the Group’s total
production, achieved an AISC of US$1,151/oz, resulting in an AISC margin of
37.0% on the average gold price of US$1,826/oz earned by the Group from these
operations.

Health and safety and COVID-19

The health and safety of our employees remains our overriding priority and we
have again achieved an overall reduction in recordable injuries across the
Group. Especially commendable was the safety performance at Evander Mines,
where safety rates improved despite an increase in the number of underground
crews deployed. The ongoing and targeted safety campaigns and incentives to
encourage and reward safe practices support our ultimate goal of achieving
zero harm. The Group has prioritised the challenges posed by the COVID-19
pandemic, with enhancements to our operating protocols that are targeted at
mitigating the constantly evolving characteristics of the virus. As we manage
the impacts of the pandemic, our operations have partnered with nearby
healthcare facilities to support the national roll-out of COVID-19 vaccines.

Operational and growth projects overview

Operationally, the Group has performed exceptionally well, particularly at our
underground operations, as a result of the development initiatives and
innovations implemented over the past years.

The availability, for the first time, of four high-grade mining platforms and
expanded footprints in the mining areas at Fairview Mine have contributed to
in an increase of 29.4% in annual production from Barberton Mines’
underground operations. Ramp up of production at Evander Mines’ 8 Shaft
pillar operation highlights the potential of this high-grade underground
orebody, with production now in line with mining plans. The AISC at the 8
Shaft pillar decreased substantially to US$995/oz in the second half of the
financial year, after we resolved the production difficulties experienced in
the first half of the financial year. The sub-US$1,000/oz AISC achieved in the
second half of the current financial year is indicative of the expected mining
cost for the remainder of the 8 Shaft pillar’s life-of-mine (LoM).

The renewal of Barberton Mines’ mining rights by the Department of Mineral
Resources and Energy for a further 30 years endorses our technical work and
the long-term LoM plans submitted for these Mineral Resources.

Earlier this year, we announced the reassessment of our organic growth
opportunities and resultant reprioritisation of capital expenditure. This gave
rise to a reschedule of the Egoli project’s development timelines, as well
as a re-evaluation of existing underground mining opportunities at Evander
Mines’ 8 Shaft 24, 25 and 26 Levels, post cessation of mining at the 8 Shaft
pillar. Independent reviews have confirmed that no fatal flaws exist in the
Group’s internal technical and economic studies, which indicate compelling
recovered grades and gold production from these areas. Mining at the Egoli
project and 25 and 26 Levels will now be phased in, following the cessation of
underground operations at 24 Level. The capital expenditure on these projects
will be funded from internal sources, subject to the current gold price
environment prevailing.

At Barberton Mines, steady progress has been made with underground development
at Project Dibanisa, which connects Sheba Mine to Fairview Mine at the top of
the Main Reef Complex Shaft. The extraction of a 10,000t bulk sample is also
currently in progress at the Royal Sheba project. These projects are expected
to improve Barberton Mines’ production profile in the coming years, and
together with other initiatives, reduce the operation’s AISC.

Environmental, social and governance

Our focus on environmental, social and governance (ESG) initiatives has
intensified over the past years, with good progress on all fronts in pursuit
of a ‘beyond compliance’ ESG approach, through collaboration and
partnerships with specialists in community, conservation and sustainability
initiatives. This year, Pan African will publish its first environmental,
social and governance report, where details of our initiatives and ESG
approach are reported in line with global ESG reporting standards.

Progress at the Blueberries project in Barberton has received widespread
attention from the media and from other stakeholders. Approximately 96,000
plants have been delivered to site as part of phase 1, from which first
production is expected by June 2022. Social benefits of this project in the
surrounding communities are already evident with the creation of employment
and increased trading opportunities for local small businesses. Also in
Barberton, we have partnered with the Barberton Nature Reserve and
conservation agencies to protect and preserve the biodiversity and natural
resources of the region, including funding the care of orphaned rhinos.

At Evander Mines, the construction of the 9.975MW solar photovoltaic renewable
energy plant is advancing on schedule for commissioning by November 2021. A
feasibility study on an extension of this facility to an estimated capacity of
26MW has also commenced, where the additional 16MW will be utilised by Evander
Mines’ underground operations. A feasibility study for a 10MW solar
photovoltaic renewable energy plant at Barberton Mines is also being
conducted. These renewable energy initiatives will contribute to meaningful
reductions in greenhouse gas emissions for the Group. At Evander Mines, a
bankable feasibility study on a reverse osmosis water retreatment plant that
will produce potable water for daily consumption from recycled underground
mine water was completed, with substantial anticipated cost savings and a
positive environmental impact. We expect to complete the construction of this
plant within the next financial year.

Outlook for the 2022 financial year

The Group remains on track to produce a minimum of 195,000oz of gold for the
financial year ending 30 June 2022, which is in line with existing planned
production profiles, until the growth projects currently being progressed are
brought into production.

The Pan African board has approved the initiation of a share buy-back
programme (Buy-back programme). The Buy-back programme will be executed in
accordance with the Company’s general authority to make on-market purchases
which was approved by shareholders at the Company’s AGM on 26 November 2020.
The Company will make further announcements in due course.

We are committed to continuing to create value for our stakeholders with an
increased focus on ESG through our ‘beyond compliance’ philosophy, while
maintaining our track record as a sustainable, safe, high-margin and long-life
gold producer with excellent growth potential through exploration, organic
growth and acquisition initiatives.”

PROPOSED DIVIDEND FOR THE FINANCIAL YEAR ENDED 30 JUNE 2021

The board has proposed a final dividend of ZAR402.2 million for the 2021
financial year (approximately US$28.3 million), equal to ZA 18.00000 cents per
share or approximately US 1.26671 cents per share (0.91556 pence per share).
The dividend is subject to approval by shareholders at the AGM, which is to be
convened for Thursday, 25 November 2021.

In light of the robust current financial year results and the favourable
financial prospects for the next financial year, the board has applied its
discretion and has proposed a dividend in excess of the Company’s dividend
policy guidelines, which provide for a 40% payout ratio of net cash generated
from operating activities.

Assuming shareholders approve the final dividend, the following salient dates
would apply:

 Annual general meeting                                        Thursday, 25 November 2021  
 Currency conversion date                                      Thursday, 25 November 2021  
 Currency conversion announcement released by 11:00 (SA time)  Friday, 26 November 2021    
 Last date to trade on the JSE                                 Tuesday, 30 November 2021   
 Last date to trade on the LSE                                 Wednesday, 1 December 2021  
 Ex-dividend date on the JSE                                   Wednesday, 1 December 2021  
 Ex-dividend date on the LSE                                   Thursday, 2 December 2021   
 Record date on the JSE and LSE                                Friday, 3 December 2021     
 Payment date                                                  Tuesday, 14 December 2021   

The pound sterling (GBP) and US$ proposed final dividend was calculated based
on a total of 2,234,687,537 shares in issue and an illustrative exchange rate
of US$/ZAR:14.21 and GBP/ZAR:19.66, respectively.

No transfers between the Johannesburg and London registers, between the
commencement of trading on Wednesday, 1 December 2021 and close of business on
Friday, 3 December 2021 will be permitted.

No shares may be dematerialised or rematerialised between Wednesday, 1
December 2021 and Friday, 3 December 2021, both days inclusive.

The South African dividends taxation rate is 20% per ordinary share for
shareholders who are liable to pay dividends taxation, resulting in a net
dividend of ZA 14.40000 cents per share for these shareholders. Foreign
investors may qualify for a lower dividend taxation rate, subject to
completing a dividend taxation declaration and submitting it to Computershare
Investor Services Proprietary Limited or Link Asset Services, who manage the
South African and UK registers, respectively. The Company's South African
income taxation reference number is 9154588173. The proposed dividend will be
paid out of the Company's retained earnings, without drawing on any other
capital reserves.

AUDIT OPINION

The Group's external auditor, PricewaterhouseCoopers LLP (PwC), have issued
their opinion on the consolidated annual financial statements for the year
ended 30 June 2021.

There have been two key audit matters identified by PwC which relate to the
Impairment assessments of goodwill, intangible assets and property, plant and
equipment and mineral rights – Group, and the Impact of COVID-19 – Group
and Parent Company. Further details on these key audit matters can be found in
the full auditor’s report which is available on the Company’s website
https://www.panafricanresources.com/wp-content/uploads/Pan-African-Resources-integrated-annual-report-2021.pdf.

The audit of the consolidated annual financial statements was conducted in
accordance with the International Standards on Auditing. PwC has expressed an
unmodified opinion on the consolidated annual financial statements. A copy of
the audited annual financial statements and the audit report is available for
inspection at the issuer's registered office. Any reference to future
financial performance included in this provisional summarised audited results
announcement has not been reviewed or reported on by the Group's external
auditor.

DIRECTORS’ RESPONSIBILITY

The information in this announcement has been extracted from the provisional
summarised audited results for the year ended 30 June 2021, but this
short-form announcement itself has not been reviewed by the Company’s
auditors. The provisional summarised audited results have been prepared under
the supervision of the financial director, Deon Louw. This short-form
announcement is the responsibility of the directors of Pan African and is only
a summary of the information contained in the full announcement.

Any investment decisions should be based on the full announcement and the
Group’s detailed operational and financial summaries.

AVAILABILITY OF THE FULL ANNOUNCEMENT

The full announcement has been released on SENS and is available for viewing
via the JSE link at
https://senspdf.jse.co.za/documents/2021/jse/isse/pan/FYE2021.pdf

and via the Company’s website at
https://www.panafricanresources.com/wp-content/uploads/Pan-African-Resources-year-end-results-SENS-announcement-2021.pdf

Copies of the full announcement may also be requested by emailing
ExecPA@paf.co.za.  

The Company has a dual primary listing on the JSE Limited (JSE) in South
Africa and the Alternative Investment Market (AIM) market of the London Stock
Exchange (LSE) as well as a sponsored Level 1 American Depository Receipt
(ADR) programme in the US through the Bank of New York Mellon

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

www.panafricanresources.com

 Contact information                                                                                                                                                                                                                                                                          
 Corporate office The Firs Building 2nd Floor, Office 204 Corner Cradock and Biermann Avenues Rosebank, Johannesburg South Africa Office: + 27 (0)11 243 2900 info@paf.co.za  Registered office Suite 31 2nd Floor 107 Cheapside London EC2V 6DN United Kingdom Office: + 44 (0)20 7796 8644  
 Cobus Loots Pan African Resources PLC Chief executive officer Office: + 27 (0)11 243 2900                                                                                    Deon Louw Pan African Resources PLC Financial director Office: + 27 (0)11 243 2900                              
 Hethen Hira Pan African Resources PLC Head: Investor relations Tel: + 27 (0)11 243 2900 Email: hhira@paf.co.za                                                               Ross Allister/David McKeown Peel Hunt LLP Nominated adviser and joint broker Office: +44 (0)20 7418 8900        
 Phil Dexter/Jane Kirton St James's Corporate Services Limited Company secretary Office: + 44 (0)20 7796 8644                                                                 Thomas Rider/Nick Macann BMO Capital Markets Limited Joint broker Office: +44 (0)20 7236 1010                   
 Ciska Kloppers Questco Corporate Advisory Proprietary Limited JSE sponsor Office: + 27 (0)11 011 9200                                                                        Website: www.panafricanresources.com                                                                            



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