PAN AFRICAN RESOURCES PLC
Pan African Resources PLC
(Incorporated and registered in England and Wales under Companies Act 1985 with
registered number 3937466 on 25 February 2000)
AIM Code: PAF
JSE Code: PAN
ISIN: GB0004300496
('Pan African' or 'the Group')
OPERATIONAL UPDATE
Pan African, the African-focused precious metals producer, is pleased to
provide an operational update for the year ended 30 June 2017 ('current
reporting period').
KEY FEATURES AND HIGHLIGHTS
* Gold produced for the current reporting period was approximately 173koz,
4.4% below the production guidance provided. This was due to the slower
than anticipated restart of the underground mine at Evander Gold Mining
Proprietary Limited ('Evander Mines') and operational challenges
experienced at Barberton Mines Proprietary Limited ('Barberton Mines'),
which have now been remedied.
* Evander Mines 7 shaft refurbishment has been successfully completed, and
the restructuring programme is materially complete.
* Elikhulu Tailings Retreatment Plant ('Elikhulu') is fully funded and
construction on-track.
* Feasibility study completed for a sub-vertical shaft at the high-grade
Fairview mining operation at Barberton Mines, with an estimated capital
expenditure of R105 million, to be spent over a two year period. This
project should yield an additional 7-10koz of gold per annum.
* Encouraging high grade drill result at Evander Mines' 2010 Pay Channel
orebody, which has prompted a feasibility study to assess the economic
viability of expanding the underground mining operations.
* Completion of disposal of Uitkomst Colliery Proprietary Limited ('Uitkomst
Colliery') on 30 June 2017.
* Strong statement of financial position with net debt of R66.7 million at 30
June 2017 (30 June 2016: R339.7 million) and available debt facilities of
R880.2 million.
* Production guidance for the 2018 financial year in excess of 190koz.
CEO STATEMENT
Cobus Loots, the CEO of Pan African, commented: "The 2017 financial year was
operationally challenging in many respects, however the Group is now seeing the
benefits of the remedial actions implemented by management. We look forward
to a much improved performance in 2018, with a substantial increase in gold
production. The Elikhulu project is on track for delivering first gold as
originally planned, and is expected to contribute low-cost ounces and profits
in the next 18 months. We are excited about the prospects for the Evander
Mines' 2010 Pay Channel project; the Evander Mines team now has to bring the
project to account in the near term, in a profitable and value-accretive
manner. During the past year, Pan African has reaffirmed our gold focus and
again delivered transactions that crystallise shareholder value."
PRODUCTION PERFORMANCE AND 2018 GUIDANCE
Pan African's gold production for the current reporting period was 4.4% below
its revised gold production guidance (announced on 20 February 2017) at
approximately 173Koz. As per the announcements of 10 March 2017 and
10 April 2017, the Group is pleased to report that the initial Evander Mines
shaft refurbishment has been successfully completed, and the restructuring
programme is materially complete. This will result in substantial cost savings
going forward.
In the next financial year, the following initiatives will continue at Evander
Mines to ensure a sustainable and consistent performance from the operation:
* Continuation of the engineering work plan to improve the reliability of the
shaft and related infrastructure, including:
+ 8 Shaft pump column;
+ 7 Shaft steelwork i.e. buntons and guides; and
+ 7a and 8 Shaft, shaft bottom arrangements.
* Improving the total meters squared blasted per panel and per crew.
* Clean mining programme:
+ Stoping width reduction, with the introduction of improved hanging wall
support;
+ Improved fragmentation resulting from optimisation of the blast design;
and
+ Improve quality of sweepings with the introduction of user-friendly
blasting barricades and additional sweeping tools.
* Old gold vamping, which is the cleaning of mud accumulations in redundant
declines and spillage in and around the belt declines.
* Pillar mining and vamping at 7 Shaft.
Mining in the high-grade areas in Fairview's 11-block is also now established
and expected to continue for the remainder of the 2018 financial year.
Productivity improvements are expected at Fairview following the commissioning
of a new bulk air cooler, which will reduce the ambient temperature at the work
face by approximately 3 to 4 degrees Celsius. To address the flexibility
constraints currently experienced at Fairview, and increase gold production
from this very high-grade and long life ore-body, a feasibility study into a
new sub-vertical shaft has been finalised. The findings of the feasibility
study are detailed in the growth projects section below.
The Group's gold production guidance for the financial year ending 30 June 2018
is in excess of 190Koz, an increase of approximately 10% on 2017 gold
production.
GROWTH PROJECTS
ELIKHULU PROJECT UPDATE
The Elikhulu project is progressing according to plan with project completion
and first gold expected in the last quarter of the 2018 calendar year.
Following the successful US$50 million equity raise on 12 April 2017, Pan
African has commenced funding the initial capital expenditure on the Elikhulu
project's civil engineering works and the procurement of long-lead-time items,
such as the tower crane and the carbon-in-leach tanks, which are critical to
ensuring construction deadlines are met.
Capital expenditure of approximately R175 million has been incurred on the
Elikhulu project during the current reporting period, and capital spend remains
on track relative to the total initial forecast capital expenditure of R1.74
billion.
Pan African is also pleased to announce that the facility agreement for the R1
billion Elikhulu term debt facility has been signed. The facility was
underwritten by Rand Merchant Bank, a division of FirstRand Bank Limited, and
the syndication has closed successfully, with an over-subscription of more than
50%. The appetite shown by the banking market highlights the quality of the
project, which prevailed despite the negative sentiment at the time of the
release of the new Mining Charter. Utilisation of the facility is subject to
the fulfilment of customary conditions precedent, and the first drawings under
the seven-year facility are scheduled for the final quarter of the 2017
calendar year.
Together with the Group's existing R1 billion revolving credit facility, these
facilities comprise the core debt instruments for funding the Group's capital
expenditure programmes. The low-cost, long-life Elikhulu project is expected to
increase the Group's annual gold production by more than 50koz per annum and
reduce the Group's average all-in cost of production.
BARBERTON MINES SUB-VERTICAL SHAFT PROJECT AT FAIRVIEW
The Fairview mining operation is currently restricted by the hoisting capacity
of its No.3 Decline, which is used to access workings below 42 Level. This
decline is currently used to transport employees, material, and for rock
hoisting. The 11-block, or MRC, orebody has an average grade of 31.3 g/t and
current life-of-mine of 22 years. With no intervention, future mining at depth
will result in increased travelling distance, reduce employee face time and
cause a lack of capacity to ensure both ore replacement and exploration
development.
Pan African, with the assistance of DRA Projects SA Proprietary Limited
('DRA'), has completed a feasibility study on the construction of a
raise-bored, sub-vertical shaft from Fairview's' 42 Level to 64 Level, with the
potential of continuing the vertical shaft in future to 68 Level. This
sub-vertical shaft will be used to transport employees and material to the
working areas, which will allow the No.3 Decline to be used exclusively for
rock hoisting, increasing overall capacity and production from this mining
area.
DRA has reviewed the technical and commercial aspects of the project and the
supporting feasibility study has yielded very positive results. The estimated
capital expenditure for the project, including contingencies, is approximately
R105 million, to be incurred over a two-year period. The productivity
improvements for Fairview are estimated to yield an additional 7,000oz of gold
per annum, which can be optimised further to more than 10,000oz per annum.
EVANDER MINES 7 SHAFT NO. 3 DECLINE AND 2010 PAY CHANNEL
The 2010 Pay Channel resource is adjacent to the 7 Shaft infrastructure and
extends from the boundary of Taung Gold International Limited's 6 Shaft project
and mining rights. As previously reported, Evander Mines embarked on an
exploration programme to drill a further exploration borehole from surface, to
increase geological confidence in the 2010 Pay Channel orebody, for which
resources are summarised in the table below:
7 Shaft: No.3 Decline and 2010 Pay Channel
resources
Category Tonnes Grade Contained gold
million g/t tonnes Moz
Measured 0.52 11.02 5.80 0.19
Indicated 0.34 10.02 3.50 0.11
Inferred 5.41 10.85 58.70 1.89
Total 6.27 10.82 68.00 2.19
On 6 July 2017, the exploration borehole successfully intersected the Kimberley
reef at a depth of approximately two kilometres, highlighting a reef
intersection with a 6cm width at 36.8g/t. Additional drilling deflections will
be performed to further delineate the ore body. The previous borehole into the
2010 Pay Channel yielded a reef intersection with a 49 cm width at 36.04g/t.
Harmony Gold Mining Company Limited previously developed the 7 Shaft mine
workings towards the 2010 Pay Channel, however due to financial constraints and
a reassessment of capital priorities, all development on the Evander Mines'
shafts (other than 8 Shaft) was halted in 2009. This resulted in the controlled
flooding of the development ends and 7 Shaft's No.3 Decline, from 22 level up
to 18 Level. Following the dewatering, only standard footwall and on-reef
development would need to be completed, with the associated engineering
infrastructure, before mining can commence.
The 2010 Pay Channel is approximately three kilometres in tramming distance
from 7 Shaft, which is currently used by Evander Mines for hoisting to the
Kinross metallurgical plant. This compares favourably with the 8 Shaft mining
areas, which are approximately 10 kilometres in tramming distances from 7
Shaft.
The Pan African project team has commenced a feasibility study related to the 7
Shaft No.3 Decline and 2010 Pay Channel resource, which will address the
following critical issues:
* Collation of geological data from the drill hole intersection and
deflections;
* The cost and timing of dewatering and re-equipping the 7 Shaft No.3 Decline
from 18 Level to 22 Level;
* The development cost and timing to access the 2010 Pay Channel; and
* The economic viability of the project.
The 2010 Pay Channel can potentially increase Evander Mines' underground gold
production significantly at a relatively low capital cost, using Evander Mines'
established shaft and metallurgical facilities. The feasibility study for the
project is expected to be completed during Q1 2018.
DISPOSAL OF UITKOMST COLLIERY
The Uitkomst Colliery disposal to Coal of Africa Limited ('CoAL') became
effective on 30 June 2017 ("effective date"). On the effective date CoAL took
ownership, control and management of Pan African Resources Coal Holdings
Proprietary Limited, the holding company of Uitkomst Colliery. Pan African
received its consideration on conclusion of the disposal on the effective date
as follows:
* R125 million in cash
* R125 million through the issue of 261,287,625 new ordinary shares in CoAL
* R25 million in interest bearing deferred consideration which may be paid by
CoAL at any time prior to the second anniversary of the effective date.
GROUP NET DEBT POSITION AND INVESTMENTS
The Group's statement of financial position is robust with net debt at 30 June
2017 of R66.7 million
(30 June 2016: R339.7 million). Available debt facilities at 30 June 2017 were
R880.2 million (30 June 2016: R624.6 million).
The Group net debt is comprised of R161.2 million in cash and cash equivalents,
and R227.9 million of drawn debt facilities.
The groups holding in CoAL shares, which is classified as an investment, was
valued at approximately R127.5 million at 30 June 2017.
FINAL RESULTS
The final audited results for the year ended 30 June 2017 are expected to be
published on or about
20 September 2017.
Shareholders are advised that the financial information contained in this
announcement has not been reviewed or reported on by Pan African's external
auditors.
By order of the Board
Johannesburg
20 July 2017
Contact information
Corporate Office Registered Office
The Firs Office Building Suite 31, Second Floor
1st Floor, Office 101 107 Cheapside
Cnr. Cradock and Biermann Avenues London
Rosebank, Johannesburg EC2V 6DN
South Africa United Kingdom
Office: + 27 (0) 11 243 2900 Office: + 44 (0) 207 796 8644
Facsimile: + 27 (0) 11 880 1240 Facsimile: + 44 (0) 207 796 8645
Cobus Loots Deon Louw
Pan African Resources PLC Pan African Resources PLC
Chief Executive Officer Financial Director
Office: + 27 (0) 11 243 2900 Office: + 27 (0) 11 243 2900
Phil Dexter John Prior / Paul Gillam
St James's Corporate Services Limited Numis Securities Limited
Company Secretary Nominated Adviser and Joint Broker
Office: + 44 (0) 207 796 8644 Office: +44 (0) 20 7260 1000
Sholto Simpson Matthew Armitt / Ross Allister
One Capital Peel Hunt LLP
JSE Sponsor Joint Broker
Office: + 27 (0) 11 550 5009 Office: +44 (0) 207 418 8900
Julian Gwillim Jeffrey Couch/Neil Haycock/Thomas
Aprio Strategic Communications Rider
Public & Investor Relations SA BMO Capital Markets Limited
Office: +27 (0)11 880 0037 Joint Broker
Office: +44 (0) 207 236 1010
Bobby Morse/Chris Judd
Buchanan Communications
Public & Investor Relations UK
Office: +44 (0) 207 466 5000
http://www.panafricanresources.com/Pan African Resources : Operational Update
July 20, 2017 at 06:01 am EDT
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© PRNewswire - 2017
