REG-Pan African Resources Plc: Successful completion of Mintails' Mogale Gold DFS

Pan African ResourcesAnnouncement

30/06/2022 07:15

Pan African Resources PLC

(Incorporated and registered in England and Wales under the Companies Act 1985
with registered number 3937466 on 25 February 2000)

Share code on AIM: PAF

Share code on JSE: PAN

ISIN: GB0004300496

ADR ticker code: PAFRY

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

PAN AFRICAN SUCCESSFULLY CONCLUDES MINTAILS’ MOGALE GOLD DEFINITIVE
FEASIBILITY STUDY (“DFS”)

Pan African is pleased to announce that the Company has successfully completed
a DFS on the Mogale Gold Proprietary Limited (“Mogale Gold”) Tailings
Storage Facilities (“TSFs”) that forms part of the Mintails Mining SA
(Proprietary) Limited (“Mintails SA”) assets, situated near Krugersdorp to
the west of Johannesburg, South Africa (the “Project”). The DFS was
prepared by DRA Projects SA (Pty) Ltd (“DRA”), with reliance on specialist
input from third parties for Mineral Resource and Mineral Reserve estimation,
dump re-mining, tailings pumping and disposal and metallurgical test work. The
parties have provided their consent for the release of the information
contained in this announcement as far as it pertains to the results of the
DFS.

HIGHLIGHTS FROM DFS
* Significant production impact: * The Project has the potential to increase
the Group’s gold production profile over the coming years, with re-mining of
the Mogale Gold TSFs expected to add approximately 50koz/yr of production over
its 13-year life of mine (LOM)
* Equivalent to an increase >25% on Group’s current production

* Compelling project economics: * Pre-tax NPV (at 9.5% real discount rate) of
ZAR1,006 million (US$64,9 million), real ungeared IRR of 20.1% at US$1,750/oz
and US$/ZAR:15.50.
* Forecast AISC of ~US$914/oz and operating cost of ~ZAR78/t (~US$5/t at
US$/ZAR:15.50) over the initial 13-year LOM

* Construction capex: * ~R2.5billion (US$161.3 million at US$/ZAR:15.50)

* Payback: * Construction capital payback estimated within 3.5 years, post
commissioning
* Targeting production within 18-24 months from commencement of construction

* Mineral reserve: * The Mogale Gold TSFs, which comprise various individual
dams, contain a Probable Mineral Reserve of 123.6Mt of re-mineable material at
a head grade of 0.29g/t for an estimated content of 1.14Moz gold

* Further production upside: * Addition of Mintails SA’s Soweto Cluster
resource has potential to extend LOM from 13 years to 21 years and further
increase annual gold production

* Proven technology: * Low unit cost hydro mining with low project execution
risk at 800ktpm (thousand tons per month) carbon in leach (“CIL”) plant,
similar to Pan African’s Elikhulu operation (currently processing ~1.2Mt per
month)

* Project funding: * A number of funding options for the Project are being
considered, including offers of debt finance from financial institutions and
other third party financiers

* Strategic rationale: * Builds on the Group’s track record of bringing
value enhancing surface re-mining operations into production
* Enhanced ESG credentials * Environmental rehabilitation and socio-economic
initiatives for local economic development to run concurrent with operations
* Job creation and skills development in host communities
* Potential to extend the Group’s solar renewable energy PV footprint in
line with its decarbonisation strategy and strategic production cost reduction
initiatives
Cobus Loots, CEO of Pan African, commented: “Pan African has an excellent
track record of successfully commissioning and operating surface tailings
retreatment operations, as evidenced by our BTRP, ETRP and Elikhulu
operations. As originally anticipated, the Mogale Gold DFS has demonstrated a
compelling Project, both operationally and financially. Mintails has the
potential to further improve the Group’s overall AISC, while increased
annual production will move Pan African further up the ranks of mid-tier gold
producers.

Additionally, our re-mining activities will assist with environmental
remediation in this area. We look forward to working with all stakeholders to
further progress the Project in the months ahead.”

Background to the Project

In November 2020, Pan African announced that the Company had entered into
conditional sale of shares agreements to acquire the share capital and
associated shareholder loans and other claims of Mogale Gold and Mintails’
SA Soweto Cluster Proprietary Limited (“MSC”) (together the “Mintails
Transaction”). Both Mogale Gold and MSC are 100% owned by Mintails SA, which
was placed into provisional liquidation during 2018.

The deadline for fulfilment of the conditions to conclude the Mintails
Transaction was extended to August 2022 and included the completion of a fatal
flaw analysis, prefeasibility study (“PFS”) and DFS. The PFS on the Mogale
Gold TSFs was completed during July 2021, followed by the DFS, announced
today. Both studies were led by DRA. Further technical work on the MSC TSFs is
currently in progress.  

Mineral Reserves and Resources

Following the initial due diligence on Mogale Gold, the following work was
undertaken to improve the Mineral Resource confidence:
* a highly accurate Light Detection and Ranging (“LIDAR”) survey of the
entire project area to ascertain available tonnages;
* twinning 25 of the historical holes in order to verify grades previously
reported; and
* drilled 82 new boreholes in areas with sparse or no data.
The combined drilling totaled 2,761m resulting in 1,877 samples and 187
control samples; and resulted in the remodeling of all available resources as
reported in the Mineral Resource table below:

Indicated and Inferred

 TSF              Tonnage  Mt  Gold                     
                  g/t                kg      oz         
 Indicated                                              
 Total Indicated  121.62       0.29  35,049  1,126,855  
 Inferred                                               
 Total Inferred   4.64         0.33  1,525   49,040     
* Density of 1.44; Gold conversion: 1kg = 32.1508oz
* No cut-off applied; No geological losses or modifying factors applied
* Mineral Resources are stated inclusive of Mineral Reserves
* Mineral Resources are reported as total Mineral Resources and not attributed
* Mineral Resources are SAMREC Code (2016 Edition) compliant
* The Mineral Resources are signed-off by Charles Muller (BSc (Hons),
Pr.Sci.Nat), an independent Competent Person
The updated three-dimensional Mineral Resource models were subjected to a
hydro-mining and load-and-haul mine design and schedule according to
engineering parameters as defined in the DFS. The same approach was previously
used by Pan African during the design process of the Group’s Elikhulu
operation (Elikhulu).

Scheduling of the available resources was built around achieving a throughput
rate of 800ktpm, as detailed in the July 2021 PFS, as the optimal processing
throughput. The Mineral Resources subjected to the mine design and scheduling
was subsequently converted to Probable Mineral Reserves, as depicted in the
table below:

Mineral Reserves

 Probable Reserves       Tonnage  Gold                     
                         Mt       g/t   kg      oz         
 Total Mineral Reserves  123.58   0.29  35,400  1,140,180  
* Density of 1.44; Gold conversion: 1kg = 32.1508oz
* No cut-off applied; No geological losses or modifying factors applied
* Mineral Reserves includes 1.96Mt of Inferred Mineral Resources, scheduled to
access remaining Indicated Mineral Resources. The Inferred Mineral Resource
represents 3.75% of the total Mineral Reserve and is not deemed a significant
risk
* The Mineral Reserve is signed-off by PAR’s Competent Person, Hendrik
Pretorius
Conceptual MSC resource/reserve and production upside

In the SENS announcement of 6 November 2020, the Company reported that the MSC
TSFs comprise nine separate facilities with resources of 119Mt with an in-situ
grade of 0.31g/t, containing an estimated gold content of 1.20Moz. Although
Pan African currently classifies the MSC Mineral Resources in the Inferred
Mineral Resource category until further technical studies and work is
completed, a conceptual production schedule for this project was applied,
based on available information.

This conceptual production scheduling, entailing the processing of combined
TSFs demonstrates a more robust recovered ounce profile and an extended LOM
for the project, in excess of 20 years. The conceptual MSC TSF model increased
production by an average of 11koz/yr from years 6 to 13 (once the Mogale Gold
TSF resources are depleted), giving rise to a production profile of an average
54koz/yr from year 14 to 20.

No Mineral Reserves or financial valuation for the conceptual MSC scheduling
can be reported on at this stage and the incremental production from this
cluster is included for illustrative purposes only.

Re-mining and processing  

The study envisages hydro-mining to be utilised for the larger dumps, using
hydraulic guns of similar specification as used at Elikhulu, cutting mine
widths of 15m wide and 20m deep. The North Sands and South Sands dumps are
conducive to load-and-haul mining, to extract the resources from these dams.

The re-mined tailings will be processed in a CIL plant of similar design to
the Elikhulu operation, with the addition of a water treatment section to
limit corrosion and potentially improve recoveries. The DFS process plant is
designed for an average throughput of 800ktpm, with up to 900ktpm achievable
without negatively affecting performance.

All of the borehole samples were utilised to refine and test the expected gold
recoveries from the processed material, under the direct supervision and
management of Pan African. The modelled recoveries are presented in the table
below:

 Resource material TSF   % Recovery modelled 
 1L23-25                              54.70% 
 1L13-15                              48.90% 
 1L28                                 34.40% 
 1L8                                  53.56% 
 1L10                                 50.85% 
 North Sand Dump                      71.00% 
 South Sand Dump                      75.71% 

Key financial assumptions and outputs (as per DFS)

 Description                                                                      
 Net Present Value ((9.4))                     R1,006 million (US$64,9 million)   
 Real Ungeared Internal Rate of Return         20.1%                              
 Total construction capex requirement          R2,460 million (US$158,7 million)  
 Forecast payback period (post commissioning)  38 months                          
 Average AISC                                  ~US$ 914/oz                        
 LOM operating cost                            ~ZAR 78/t (~US$5/t)                
 Average annual gold production                ~50koz                             
 LOM                                           13 years                           
* Long term gold price US$1,750/oz
* Long term US$/ZAR:15.50
Envisaged project financing

The Group has received a number of offers from financing institutions and
third party financiers for the Project funding and expects to finalise the
funding package later this year, if the Company was to proceed to project
execution.

Way forward and possible project execution timeline

Following in-principle approval by Pan African’s board to further progress
the Project, the Company will commence with the environmental authorisation
process and stakeholder engagements.

Activity                                                         
Estimated date

Completion and finalisation of DFS                Completed

Engineering optimisation activities               June –
August 2022

Detailed engineering
study                            September 2022 –
March 2023

Likely project commencement date               September 2022

Funding package
finalised                             
October/November 2022

Environmental
approvals                               March
2023

Construction commences               
              April 2023

Commissioning                                              
July 2024 – December 2024

ESG/Social Impact

As part of the DFS, the Company has already conducted extensive engagements
with community representatives and other interested and affected organisations
based in the area, including regulatory authorities. This information and the
EMPR is being utilised to compile an action plan to remediate past
environmental damage and restore the surface for productive land use, while at
the same time investigating impactful socio-economic development projects
intended to stimulate the local economy.

The Company will also conduct feasibility studies into the merits of renewable
energy for the new tailings retreatment plant’s energy requirements.

Competent Person

The competent person for Pan African Resources, Hendrik Pretorius, the manager
for Group mineral resource management, signs off the Mineral Resources and
Mineral Reserves for the Group. He is a member of the South African Council
for Natural Scientific Professions (SACNASP 400051/11 – Management
Enterprise Building, Mark Shuttleworth Street, Innovation Hub, Pretoria,
Gauteng Province, South Africa), as well as a member in good standing of the
Geological Society of South Africa (GSSA – CSIR Mining Precinct, Corner
Rustenburg and Carlow Roads, Melville, Gauteng Province, South Africa).
Hendrik has 18 years' experience in economic geology and mineral resource
management (MRM). He is based at The Firs Office Building, 2nd Floor, Office
204, Corner Cradock and Biermann Avenues, Rosebank, Johannesburg, South
Africa. He holds a BSc (Hons) degree in Geology from the University of
Johannesburg as well as a Graduate Diploma in Mining Engineering from the
University of the Witwatersrand. Hendrik has reviewed, and approved, in
writing the information contained in this document as it pertains to Mineral
Resources and Mineral Reserves.

The information contained in this announcement is the responsibility of the
Company’s board of directors and has not been reviewed or reported on by the
Group’s external auditors.

Rosebank

30 June 2022

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

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

www.panafricanresources.com

 Corporate information                                                                                                                                                                                                                                                                                 
 Corporate Office The Firs Office Building 2nd Floor, Office 204 Cnr. Cradock and Biermann Avenues Rosebank, Johannesburg South Africa Office: + 27 (0)11 243 2900 info@paf.co.za  Registered Office Suite 31 Second Floor 107 Cheapside London EC2V 6DN United Kingdom Office: + 44 (0)20 7796 8644   
 Chief Executive Officer  Cobus Loots Office: + 27 (0)11 243 2900                                                                                                                  Financial Director Deon Louw Office: + 27 (0)11 243 2900                                                            
 Head: Investor Relations Hethen Hira Tel: + 27 (0)11 243 2900 E-mail: hhira@paf.co.za                                                                                             Website: www.panafricanresources.com                                                                                
 Company Secretary Phil Dexter/Jane Kirton  St James's Corporate Services Limited Office: + 44 (0)20 7796 8644                                                                     Nominated Adviser and Joint Broker Ross Allister/Alexander Allen  Peel Hunt LLP Office: +44 (0)20 7418 8900         
 JSE Sponsor Ciska Kloppers  Questco Corporate Advisory Proprietary Limited Office: + 27 (0)11 011 9200                                                                            Joint Broker Thomas Rider/Nick Macann  BMO Capital Markets Limited Office: +44 (0)20 7236 1010                      
                                                                                                                                                                                   Joint Broker Matthew Armitt/Jennifer Lee  Joh. Berenberg, Gossler & Co KG (Berenberg)  Office: +44 (0)20 3207 7800  



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