REG-Pan African Resources Plc: Update on Operations

Pan African ResourcesAnnouncement

11/05/2020 08:05

Pan African Resources PLC

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

Share code on AIM: PAF

Share code on JSE: PAN

ISIN: GB0004300496

("Pan African Resources" or "the Company" or "the Group")

UPDATE ON OPERATIONS AMID COVID-19 NATIONAL LOCKDOWN REGULATIONS, NEW FY2020
PRODUCTION GUIDANCE AND UPDATE ON GROUP DEBT REDUCTION

Update on Group Operations and COVID-19 National Lockdown Regulations

As previously communicated to shareholders, on 9 April 2020, the South African
government announced an extension of the National Lockdown period (“Lockdown
Extension”), enacted in terms of the South African Disaster Management Act
(“the Regulations”) from 16 April 2020 to 30 April 2020, in an ongoing
effort to curtail the spread of the COVID-19 (coronavirus) pandemic.

The Regulations pertaining to the Lockdown Extension provided for a phased
ramp-up of mining capacity to 50% of normalised production during the lockdown
period, provided that all the preventative and mitigating controls were in
place to curtail the spread of the COVID-19 virus. In response to these
amendments, the Group implemented plans to recall 50% of its employees at the
Company’s Barberton Mines and Evander Mines surface and underground
operations (“Group Operations”).

On 23 April 2020, the South African government announced that the country
would be entering a period of phased lifting of the lockdown restrictions from
1 May 2020, resulting in the previous Level-five hard lockdown, that commenced
on 27 March 2020, being reduced to a Level-four lockdown. Level-four lockdown
restrictions require a risk-based and gradual approach to recalling employees.
It enables open cast mines and surface operations to operate at up to 100% of
normal capacity, and all other mines at 50% capacity.

In response to this announcement, the Group commenced the recall of permitted
employees for the phased recommencing of Group Operations in compliance with
legal requirements, with all the required safety protocols and procedures in
place.

The recall of employees at the Group’s Operations in terms of these
Level-four lockdown regulations is now well advanced, with the surface
operations at the Elikhulu Tailings Retreatment Plant and the Barberton
Tailings Retreatment Plant producing at close to full capacity from early May
2020.

Revised FY2020 Production Guidance

As announced on 30 March 2020, the Group suspended its original FY2020
production guidance of 185,000oz as a result of the anticipated COVID-19
impact on the Group’s mining operations.

As expected, production at the Group's operations was severely affected during
the lockdown months of March and April 2020. The Group was however able to
mitigate some of the impact through continued mining activities at its surface
operations, which was staffed by a materially reduced employee complement, and
also with limited high-grade underground mining at Barberton Mines.

The Group is now in a position to advise shareholders that it expects the
revised gold production for the 2020 financial year to be approximately
176,000oz, including capitalised production from the #8 Shaft Pillar
operation.

The revised production guidance is a decrease of only 5% from the previous
guided  production of 185,000oz, due to the Group’s ability to increase
output from surface toll treatment and low grade  surface stockpile
processing initiatives, in substitution of underground production. The
substituted production was however at a reduced margin, when compared to
normal margins earned on ounces  produced from underground.

The revised production guidance is based , inter-alia, on the assumptions that
the Group can continue surface operations at close to maximum capacity for the
remainder of the 2020 financial year and underground operations continuing at
50% of personnel capacity, consistent with current Level-four restrictions.  

The approximate split of expected full year gold production between operations
is as follows:

                                             Full Year    
 Production ounce profile:                                
 Barberton Mines – Underground:                64,000     
 Barberton Tailings Retreatment Plant:         21,000     
 Evander Mines – Underground and tolling:      31,000     
 Elikhulu:                                     59,000     
 Total ounces produced:                       175,000     

Statement of Financial Position

The Group remained cashflow positive during the lockdown period. Assuming that
the prevailing ZAR gold price of approximately ZAR1 million/kg (approximately
USD1,680/oz) can be sustained for the remainder of the 2020 financial year,
the Group is expected to reduce its senior interest-bearing debt (including
the outstanding gold loan balance), net of projected available cash, to
approximately ZAR1.3 billion (USD70 million) assuming an exchange rate of
ZAR/USD:18.50 from ZAR1.8 billion (USD129 million) at 30 June 2019. This
represents a reduction in senior interest-bearing debt of 23% and 28% relative
to the debt levels at 31 December 2019 and 30 June 2019, respectively.

In light of the Group’s elevated senior debt levels at inception of the 2020
financial year, a number of short-term zero-cost collar hedges were entered
into during the course of the 2020 financial year to underpin the Group’s
cashflows and its ability to redeem its senior debt.  The remaining hedges
for the 2020 and 2021 financial year are detailed hereunder:

                                            2 Months                     6 Months           
                                  1 May 2020 – 30 June 2020    1 July 2020 – 31 Dec 2020    
 Ounces hedged:                              21,820                       50,000            
 Average floor price – R/Kg:                683,226                      708,000            
 Average ceiling price – R/Kg:              847,109                      925,829            

Importantly, the Group is unhedged post 31 December 2020.

COVID-19 Programme of Relief and Assistance (CPR)

As previously communicated, the Group initiated a CPR programme to assist with
alleviating the adverse impact of the COVID-19 pandemic in its host communites
and for its employees. The programme commenced at the end of April 2020 with
the distribution of food and hygiene hampers to its employees, contractors and
vulnerable families in communities in close proximity to the Group’s
operations. The programme’s rollout will continue during May 2020 and
approximately 5,400 hampers will be provided with a total value of almost R5
million during the current phase of the programme. 

In the light of the ongoing pandemic, the Group will continue its initiatives
to assist some of its most vulnerable stakeholders in the months ahead.

"It is crucial for the country’s economy to be restarted and the phased
approach adopted by the government to achieve this is practical in fighting
the pandemic and enabling businesses and communities to survive during this
tumultuous period. We have implemented preventative and precautionary measures
at our operations to ensure the health and well-being of employees as they
return to work, and we look forward to working with all stakeholders in the
operational ramp-up.  We expect that we still have a long battle ahead
against COVID-19, however, I wish to commend all of our employees for the
manner in which they have worked together during this period. The strategic
repositioning of our Group some years ago, as a safe and high-margin producer
with multiple operations and the flexibility to withstand short-term external
shocks, should continue to serve all stakeholders well.” commented Cobus
Loots, CEO of Pan African Resources.

Pan African Resources will continue to provide shareholders with updates on
progress at its  operations as further information becomes available.

Rosebank

11 May 2020

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

www.panafricanresources.com

 Contact information                                                                                                                                                                                                                                                                                  
 Corporate Office The Firs Office Building 2nd Floor, Office 204 Cnr. Cradock and Biermann Avenues Rosebank, Johannesburg South Africa Office: + 27 (0)11 243 2900 info@paf.co.za  Registered Office Suite 31 Second Floor 107 Cheapside London EC2V 6DN United Kingdom Office: + 44 (0)20 7796 8644  
 Cobus Loots Pan African Resources PLC Chief Executive Officer Office: + 27 (0)11 243 2900                                                                                         Deon Louw Pan African Resources PLC Financial Director Office: + 27 (0)11 243 2900                                 
 Phil Dexter/Jane Kirton St James's Corporate Services Limited Company Secretary Office: + 44 (0)20 7796 8644                                                                      John Prior Numis Securities Limited Nominated Adviser and Joint Broker Office: +44 (0)20 7260 1000                 
 Ciska Kloppers Questco Corporate Advisory Proprietary Limited JSE Sponsor Office: + 27 (0)11 011 9200                                                                             Ross Allister/David McKeown Peel Hunt LLP Joint Broker Office: +44 (0)20 7418 8900                                 
 Hethen Hira Pan African Resources PLC Head : Investor Relations Tel: + 27 (0)11 243 2900 E-mail: hhira@paf.co.za                                                                  Thomas Rider/Neil Elliot BMO Capital Markets Limited Joint Broker Office: +44 (0)20 7236 1010                      
 Website: www.panafricanresources.com                                                                                                                                                                                                                                                                 



Copyright (c) 2020 PR Newswire Association,LLC. All Rights Reserved