🕐10.02.10 - 09:23 Uhr
Interim results for Pan African Resources ended 31 Dec 2009
Regulatory Announcement
Interim Results
For the 6 months ended 31 December 2009 and renewal of cautionary
announcement
Pan African Resources PLC (AIM: PAF, JSE: PAN) is pleased to report its
interim results for the 6 months ended 31 December 2009.
Highlights
Corporate
* Earnings before interest, taxes, depreciation and amortisation
(EBITDA) of 8.6 million (2008: 8.6 million).
* Revenue increased by 16.4% to 29 million (2008: 24.9 million).
* Unhedged and debt-free.
Barberton Mines Pty (Ltd) (Barberton Mines) now a wholly-owned
subsidiary (previously 74% held).
Cyril Ramaphosa joined the board as Non-Executive Chairman
Pan African moved from Altx to the main board of the JSE Limited
on 1 December 2009.
Mining Operations
* The Fairview section of Barberton Mines, achieved 2 million fatality
free shifts over a 6 year period.
*
Major progress made on minimising criminal artisanal mining
activity (criminal mining).
4.7% decrease in underground production to 45,385oz (2008:
47,634oz), principally due to non-recurring work stoppage to address
criminal mining.
Headgrade remains sustainable at above 10g/t (2008: 11.40g/t).
Total cash cost of ZAR164,697/kg (2008: ZAR134,581/kg).
Near Term Production
Resource base at Phoenix Platinum Mining (Pty) Ltd (Phoenix
Platinum) increased by 12.5% to 405,000oz (2008: 360,000oz).
* Post period under review
Nature of Business
Pan African is a gold mining group that produces approximately 100,000oz per
year.
Its focus is on developing low cost, high margin production or near
term production projects.
The Group is largely debt free, is unhedged and
is able to fund all of its current on-mine capital expenditure from internal
cash flows.
Financial Performance
For the period under review, gross revenue amounted to 29 million (2008:
24.9 million), with the total cost of production being 18.9 million (2008:
14.1 million).
Tax expense was 2.7 million (2008: 3.7 million), other
expenses were 1.1 million (2008: 0.89 million), and the final Central
African Republic exploration impairment charge was 0.349 million (2008:
1.3 million Ghana exploration impairment charge).
EBITDA for the period under review was 8.6 million (2008: 8.6 million).
Attributable profit increased to 4.5 million (2008: 2.6 million).
Total
cost of production increased by 10.6% in South African Rand (ZAR) terms.
Higher costs expressed in ZAR terms were linked to increased security costs
(up 68%), electricity (up 35%), and salaries and wages (up 19%).
The ZAR
cost per kilogram increase of 22% can be directly attributed to the
additional costs highlighted above as well as a 10% reduction in gold ounces
sold as a result of the mine stoppage detailed in the Criminal Mining
section below.
On a normalised basis, without the additional security costs,
there would have been an increase of 13% in the ZAR cost per kilogram.
The increase in mining profit is a result of the Companys increased holding
in Barberton Mines.
The Companys holding was increased from 74% to 100%
with effect from 21 August 2009, as a result of Shanduka Gold (Pty) Ltd
(Shanduka) exchanging its 26% stake in Barberton Mines for a 21% stake in
Pan African (detailed in the Share Issue section below).
Although the
average US$ spot gold price in the period under review increased by 25% to
US$1032 (2008: US$824), the US$:ZAR exchange rate strengthened by 14% to
ZAR7.64 (2008: ZAR8.88), and the effective ZAR gold price achieved was only
8% higher at ZAR253,510/kg (2008: ZAR235,338/kg).
The profit margin in ZAR
terms decreased by 11.8% to ZAR88,813/kg (2008: ZAR100,757/kg).
Income tax
decreased to 2.7 million (2008: 3.7 million) as a result of a decrease in
profit before tax.
Profit before tax in ZAR terms was 23% lower at ZAR92
million (2008: ZAR119.7 million).
Basic headline earnings per share (HEPS) increased by 2.4% to 0.3638 pence
(2008: 0.3553 pence).
HEPS increased marginally from the comparable period
as result of a 23% increase in total attributable headline earnings, whilst
the weighted average number of shares increased by only 20%.
Total headline
earnings in Pounds sterling (GBP) increased principally due to the weaker
GBP:ZAR exchange rate.
In ZAR terms, HEPS decreased by 16% to 4.54 cents
(2008: 5.37 cents).
The total attributable headline earnings in ZAR
increased in the current year as a result of consolidating 100% of the
earnings from 21 August 2009, but the percentage increase in earnings was
lower than the increase in weighted average numbers of shares in issue, due
to the lower gold ounces sold in the current period.
Earnings per share (EPS) increased in the current year both in ZAR and GBP
due to a reduced impairment charge for the period of 0.349 million (2008:
1.3 million) and also because of the Group consolidating 100% of the
profits of Barberton Mines from 21 August 2009.
6 months ended 31 Dec 2009
(Unaudited)
6 months ended 31 Dec 2008
(Unaudited)
Revenue
(GBP)
29,044,934
24,940,383
EBITDA
(GBP)
8,597,517
8,552,011
Attributable profit
(GBP)
4,467,939
2,569,804
EPS
(pence)
0.34
0.23
HEPS
(pence)
0.36
0.36
Weighted average number of shares in issue
1,324,071,776
1,100,517,684
Review of Barberton Mines
Safety and Training
The safety performance at Barberton Mines reflected a marked improvement
during the period under review.
Lost time injuries decreased to 10 (2008:
25) and reportable injuries to 3 (2008: 5).
The Lost Time Injury Frequency
Rate improved to 3.6 (2008: 6.4) and the Serious Injury Frequency Rate
improved to 1.1 (2008: 1.7).
The number of shifts lost decreased to 75
(2008: 106), however the lost day severity rate increased marginally to 7.5
(2008: 6.2).
The Company is pleased to report that Barberton Mines as a whole achieved
1.2 million fatality free shifts at the end of December 2009, and more
recently the Fairview section has achieved 2 million fatality free shifts
post the period under review on 5 February 2010, accomplished over a six
year period.
Operating Performance
A total of 45,971oz (2008: 51,186oz) of gold was sold from Barberton Mines
(which comprises the Fairview, Sheba and New Consort sections), a decrease
of 10% from the previous year.
Total underground production decreased by
4.7% to 45,385oz (2008: 47,634oz).
Tons milled decreased by 4.6% to 152,584
(2008: 159,919).
Despite a decrease in the headgrade of 11% to 10.11g/t
(2008: 11.4g/t), the head grade achieved was above 10g/t as forecasted and
is sustainable at these levels.
The reductions in volumes milled and gold
produced are primarily attributed to certain sections of the mine being
stopped for a period of two weeks in December 2009 to combat criminal mining
please refer to the Criminal Mining section for a more detailed
explanation.
6 months ended
31 Dec 09
6 months ended
31 Dec 08
6 months ended
31 Dec 07
6 months ended
31 Dec 06
6 months ended
31 Dec 05
Tons Milled
t
152,584
159,919
161,455
166,377
157,452
Headgrade
g/t
10.11
11.40
9.05
9.24
11.44
Overall Recovery
%
91
91
92
92
92
Production
Underground
oz
45,385
47,634
43,145
45,332
53,369
Calcine Dump
oz
-
3,545
3,601
-
-
Sold - Mining Sources
oz
45,971
51,186
47,486
45,749
52,983
Average Price: Spot Price Achieved
USD/oz
1,032
824
721
567
464
Average Price: Hedge Achieved
USD/oz
-
-
460
406
430
Average Price: Spot Achieved
ZAR/KG
253,510
235,338
165,782
144,564
96,767
Total Cash cost
USD/oz
670
451
521
516
415
Total Cash cost
ZAR/KG
164,697
134,581
114,640
104,471
82,671
EBITDA
GBP 000
8,598
8,552
4,001
3,049
2,153
Depreciation
GBP 000
1,375
1,066
806
1,077
1,042
Capital Expenditure
GBP 000
2,199
2,282
1,532
867
569
Exchange rate average
ZAR/GBP
12.48
15.13
14.05
13.68
11.48
Exchange rate closing
ZAR/GBP
11.94
13.78
13.77
13.78
11.06
Exchange rate average
ZAR/US$
7.64
8.88
6.94
7.22
6.53
Exchange rate closing
ZAR/US$
7.39
9.55
6.86
6.99
6.31
* 74% of the 2007 and 2008 results are attributable to the equity
shareholders of Pan African, 2005 - 2006 results attributable to Metorex
Limited (Metorex).
Effective 21 August 2009, 100% of Barberton Mines
earnings attributable to Pan African.
** Total cash cost excludes depreciation and capital expenditure.
Mineral Resource Management
A full time Mineral Resource Manager has been appointed to Barberton Mines.
The Mineral Resource Management departments main objective will be to
ensure that a headgrade of above 10g/t is achieved and sustained, therefore
improving mining flexibility and extending the Life of Mine.
Capital and Reserve Projects
At Barberton Mines there are six mining projects and three exploration
development projects aimed at the replacement of reserves.
The mine
commenced with two new reserve replacement projects this year and continued
with seven projects from the previous year.
The two new projects are the
Consort 37 inter-level exploration drive and the Fairview 54 level
re-equipping and development.
The 60/62 level development project at
Fairview is estimated to be completed by the end of the current financial
year.
The development advances achieved for the 6 months to 31 December 2009 were
a total of 1,175m (2008: 1,095m).
The potential resource target of the
reserve replacement projects increased to a total of approximately 744,000
ounces.
Criminal Mining
Criminal mining activity increased significantly both in frequency and in
severity during the first months of the period under review.
Unacceptable
actions by the criminal miners jeopardised the safety of employees and
operations of Barberton Mines.
Management therefore made a deliberate
decision to temporarily cease production in certain sections of the mine
over a two-week period in order to directly address the issue.
Starting at
the beginning of December the mine initiated a systematic underground sweep
(Operation Clean Sweep) of workings, utilising specialised contract
security forces, in co-operation with local and regional law enforcement.
In
conjunction with the underground initiative, the contract security presence
on surface was also increased to restrict access to mine property.
As a result of the actions described above security expenditure for the
period under review was increased by 68% to ZAR9.2 million (2008: ZAR 5.5
million).
Management estimates financial losses due to gold theft to be
significantly higher than the costs of increased security efforts, and the
recent security initiatives are expected to improve gold output and profits
from the mine.
Operation Clean Sweep has been a resounding success and criminal mining
activity on the mine has been significantly reduced.
A total of 326
criminal miners were arrested during December as a result of Operation Clean
Sweep.
A total of 509 criminal miners were arrested for the period under
review (2008: 370).
The Company has appointed an executive solely dedicated
to security at Barberton Mines, reporting directly to the Chief Executive
Officer.
The current approach to security at Barberton Mines will be
maintained and further improved to ensure criminal activity is kept to a
minimum.
Review of the Phoenix Platinum Near Term Production Project
Results of metallurgical test work performed to date by Mintek to evaluate
the process indicate recoveries of up to 50% and concentrate grades of
approximately 150g/t.
The next phase of metallurgical test work is planned
to optimise the metallurgical process in order to maximise recoveries and
improve concentrate grades.
Update on engineering and design work
Total capital expenditure for the planned 20,000 tons per month Chrome
Tailings Retreatment Plant (CTRP) is estimated to be ZAR100 million.
The Company is in the process of negotiating a preferred CTRP location, if
completed by Q3 2010 this will allow production to commence in the second
half of 2011.
Furthermore, the Company is evaluating other opportunities in
an effort to fast-track production output and grow the project resource base
further.
Review of the Manica Gold Growth Project
The Company is continuing an investigation into the feasibility of a heap
leach operation to exploit the oxide resource at Manica.
The focus during
the first half of 2010 is to complete the necessary test work at SGS in
South Africa to ascertain the viability of a heap leach operation at Manica.
Subsequent to obtaining the results from such test work, the feasibility of
a small scale heap-leach gold mine will be assessed.
Capital Expenditure and Commitments
Capital expenditure at Barberton Mines totalled 2.199 million of which
development capital was 1.266 million and maintenance capital was 0.933
million.
Capital expenditure on growth projects totalled 0.220 million.
There were no material contracted capital commitments at the end of the
period.
Operating lease commitments, which fall due within the next year,
amounted to 0.156 million.
Shares Issued
On 19 June 2009 the Company announced that it had concluded an agreement
with Shanduka and Shandukas holding company, Shanduka Resources
(Proprietary) Limited, whereby Pan African would acquire Shandukas 26%
shareholding in Barberton Mines, in exchange for the issue of new ordinary
shares in Pan African to Shanduka.
On 21 August 2009 Pan African announced
that the transaction had become unconditional and that the shares had been
issued and allotted to Shanduka.
Barberton Mines became a wholly-owned
subsidiary of Pan African from this date.
The new shares issued to Shanduka
(295,751,549 ordinary shares) represent 21% of the enlarged issued share
capital of Pan African following implementation of this transaction.
Shanduka acquired a further 5% of the issued ordinary share capital of Pan
African via the Metorex book build, thereby increasing its shareholding to
26%.
For accounting purposes the Group consolidated 100% of profits from
Barberton Mines from 21 August 2009.
The accounting treatment for the
Shanduka and Pan African transaction was in terms of IAS 27 Changes in the
ownership interests.
Changes in a parents ownership interest in a
subsidiary that do not result in a loss of control are accounted for as
equity transactions (i.e.
transactions with owners in their capacity as
owners).
Therefore the additional investment of 14,760,214 through the Pan African
share issue to Shanduka and non-controlling interest of 4,059,121 as at 21
August 2009 were eliminated on consolidation, and the Groups merger reserve
increased by 10,701,093.
Directorship Change
During the period under review, Mr Maritz Smith resigned as Financial
Director with effect from 21 August 2009 and was replaced by Mr Cobus Loots
with effect from 17 September 2009.
Mr Cyril Ramaphosa was appointed as the Companys Non-Executive Chairman and
Mr Rowan Smith was appointed as a Non-Executive Director, both with effect
from 17 September 2009.
Dividends
The Company has adopted a policy whereby dividends are considered, and where
deemed appropriate by the Board, declared, on an annual basis.
Pan African
will consider a final dividend subsequent to the finalisation of financial
year-end results.
The consideration of any dividend will take account of
cashflow requirements and growth plans, whilst recognising that, where
possible, a consistent dividend policy increases shareholder value.
Accounting Policies
The financial information set out in this announcement does not constitute
the Companys statutory accounts for the half year ended 31 December 2009.
The financial information has been prepared in accordance with the
recognition and measurement criteria of the International Financial
Reporting Standards (IFRS) and the JSE Limited listing requirements.
The unaudited interim results have been prepared and presented in accordance
with, and containing the information required by IFRS on Interim Financial
Reporting, IAS 34.
The accounting policies are consistent with the prior
years annual financial statements and deal with new disclosure requirements
by IFRS, specifically IAS 1 (Presentation of Financial Statements) and IFRS
8 (Operating Segments).
Operating Segments
IFRS 8 requires an entity to report financial and descriptive information
about its reportable segments.
Reportable segments are operating segments or
aggregations of operating segments.
The Group considers gold mining to be
its material operating segment as this is the main business activity which
the Group earns revenues and incurs expenses.
The operating segments
allocation of assets and liabilities have been summarised as follows:
Gold mining total assets of 37,757,322 (2008: 34,925,555) and
total liabilities 15,783,514 (2008: 15,215,748).
Corporate and Growth Projects total assets 41,451,632 (2008:
36,612,907) and total liabilities 237,019 (2008: 351,972).
Future Prospects
Focus on productivity and efficiency improvements to counter cost
pressures and increase margins.
Encouraging production forecast for the next 6 months.
Significant progress in eliminating criminal mining activities
will yield future benefit to all stakeholders.
Phoenix project value expected to further increase.
* Strong balance sheet to take advantage of opportunities.
Renewal of cautionary Announcement
Further to the cautionary announcement first released on 26 November 2009
and renewed on 7 January 2010 and in terms of the Listings Requirements of
the JSE, shareholders are advised that the discussions in respect of a
possible transaction are still in progress.
If successfully concluded, the
outcome of the discussions may have a material effect on the price of the
Companys securities.
Accordingly, shareholders are advised to continue
exercising caution when dealing in the Companys securities until a full
announcement in respect of the possible transaction is made.
By order of the Board,
J P Nelson C Loots
Chief Executive Officer Financial Director
10 February 2010
Please view SENS for financial numbers
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media & investor relations
louise brugman
managing director
T: 011 787 3015
C: 083 504 1186
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