Pan African Resources (LON:PAF) is to buy the operating Evander gold mine from Harmony Gold for £139 million (R1.7 billion).

In a consortium with Wits Gold, the firm is to acquire 100 per cent of Harmony's interest in Evander Gold Mines in a 50:50 joint venture.

The company believes that the deal further represents an opportunity for Pan African to materially increase its gold production profile from 95,000 to around 140,000 ounces a year.

The Evander operations are in Mpumalanga, South Africa, and comprise the operating Evander 8 shaft, and several significant development projects namely Rolspruit, Poplar, Evander South, Libra, a surface tailings resource and the Kinross metallurgical processing plant.

The total underground resource represents 32.5 million ounces and a reserve of 7.6 million ounces

The Evander 8 shaft currently has an expected life of mine of more than ten years.

Evander is expected to produce between 85,000 and 95,000 ounces per year and the deal adds significantly to the firm's reserve and resource base, and provides an annual attributable share of production of around 45,000 ounces per annum, said Pan African.

£115 million is due in cash on the closing date of the transaction while four payments of £2 million each will be payable quarterly - beginning three months after the closing date.

A further £8 mln million is payable 19 months after the closing date, today's statement said, provided the average rand gold price exceeds R410,000 per kg over the 12 preceding months.

R100N million will be payable 31 months after the closing date provided the average rand gold price exceeds R450,000 per kg during the preceding 12 months.

The consortium members intend to utilise a combination of debt, equity and operational cash flows to settle the transaction, said the statement.

Chief executive Jan Nelson said this afternoon: "Evander meets our investment criteria in all aspects and has the same ability to yield high margins as our Barberton mining operations. The Evander 8 Shaft orebody has gold grades in excess of 14g /t in the measured and indicated resource category, an extremely experienced
management team and workforce, as well as good infrastructure.

"Together with Barberton, Evander will respectively increase our resource by 304 per cent to 22.9Moz and our reserve by 390 per cent or 4.9Moz."

He added: "The smart solution of a partnership with Wits Gold gives us the necessary momentum to continue to deliver profitable sustainable stakeholder growth and returns and represents a first in the junior gold sector in South Africa."

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Pan African Resources (LON:PAF) shares gained almost 10 per cent in early deals after it revealed strong figures for the six months just ended.

The South African precious metals producer told investors that it expects earnings to double.

Earnings per share and headline earnings per share for the half year to 31 December 2011 are expected to be between 83 per cent and 93 per cent higher than the 0.53p per share in the previous first half, Pan African said.

In rand terms, earnings will be between 97 per cent and 107 per cent higher.

“With a weakening rand the company is well positioned for further strength in 2012,” Collins Stewart’s mining analyst John Mcgloin said in a note to clients today. 

“The company is the highest yielding gold play in the gold sector currently yielding 5.2%. We expect to see the shares up in London today.”

The improvement comes ahead of an expected boost from its first major capital project, Phoenix, which will kick in the second half of the year.

Phoenix, a chrome tailings treatment plant, came on stream in November and will contribute to revenues in the third quarter of the current financial year.

Planned production for the third and fourth quarters taking into consideration a build-up phase, is estimated to be 4,500 ounces of PGM's (platinum group metals). Phoenix is located on the site of International Ferro Metals’ (LON:IFL) Lesedi mine in South Africa.

In November, Pan African also revealed it had entered discussions on a deal that would have a material effect on the share price if successful, though there has been no further developments on this.

Pan African is a gold mining company focused on projects in South Africa and Mozambique and produces around 100,000 ounces per year.

Its strategy is to develop low cost, high margin production or near-production projects. 

At 10:30 on AIM Pan African Resources shares were up 0.75p, or 5 per cent, trading at 16.25p.

Earnings per share and headline earnings per share for the half year to 31 December 2011 are expected to be between 83 per cent and 93 per cent higher than the 0.53p per share in the previous first half, Pan African said.

In rand terms, earnings will be between 97 per cent and 107 per cent higher.

The improvement comes ahread of an expected boost from its first major capital project, Phoenix, which will kick in the second half of the year.

Phoenix, a chrome tailings treatment plant, came on stream in November and will contribute to revenues in the third quarter of the current financial year.

Planned production for the third and fourth quarters taking into consideration a build-up phase, is estimated to be 4,500 ounces of PGM's (platinum group metals). Phoenix is located on the site of International Ferro Metals’ (LON:IFL) Lesedi mine in South Africa. 

In November, Pan African also revealed it had entered discussions on a deal that would have a material effect on the share price if successful, though there has been no further developments on this.

Pan African is a gold mining company focused on projects in South Africa and Mozambique and produces around 100,000 ounces per year.

Its strategy is to develop low cost, high margin production or near-production projects.

The firm released a cautionary announcement on November 17 this year, which told investors that the firm had entered into negotiations.

Today, in a stock exchange statement, it said: "Shareholders are advised that negotiations are still in progress, which if successfully concluded may have a material effect on the price of the securities of the company. 

"Accordingly, shareholders are advised to exercise caution when dealing in the company's securities, until a full announcement has been made."

Pan African is a gold mining company focused on projects in South Africa and Mozambique and that produces around 100,000 ounces per year.

Its focus is on developing low cost, high margin production or near-production projects.

Phoenix is a chrome tailings retreatment plant located on the site of International Ferro Metals’ (LON:IFL) Lesedi mine in South Africa. 

Once production has ramped up, the plant is expected to produce around 12,000 ounces of PGMs each year. The Phoenix operation has an estimate project life of 17 years.

This morning the group revealed that the plant has produced its first PGM concentrate.

PAF said it plans to produce a combined 4,500 ounces of PGMs in the third and fourth quarter of the financial year (ending June 30 2012).

"We are extremely pleased to announce the production of first concentrate from Phoenix, two months ahead of schedule,” said chief executive Jan Nelson. 

“Being our first major capital project it was imperative that we achieved our milestones on schedule and budget, a testament to the effort of the team and I would like to thank them.” 

Additionally PAF also revealed today that it has now signed an agreement to sell PGM concentrate to Western Platinum Limited (WPL), a subsidiary of Lonmin.

“The conclusion of the five year sale of PGM concentrate agreement with WPL and the early production of PGM concentrates, will provide the company with a platinum revenue stream commencing towards the end of the third quarter of this financial year,” Nelson added.

“We have now completed our transition into a producer of both gold and platinum group metals."

The firm said the completion of construction at the Phoenix CTRP (Chrome Tailings Retreatment Plant) within the planned schedule and budget had surpassed its expectations.

“Our next goal is to complete the commissioning of the plant in order to produce our first concentrate by end December this year," it said.

Pan African owns the Barberton Mine complex, a group of mines in South Africa that produce around 100,000 ounces of gold a year.

The wholly-owned Phoenix Platinum project represents somewhat of a departure from its gold-focused operations.

Located on the southern portion of the Western Limb of the Bushveld Igneous Complex, Phoenix owns the rights to exploit platinum group metals tailings from chromite mining.

Total resources spread over Phoenix’s three tailings locations are 4,646,000 tonnes at an average grade of 3.15g/t for 469,000 ounces of PGM 4E – platinum, palladium, rhodium and gold.  

The project will comprise the 240,000 tonnes per annum CTRP built at the Lesedi Mine operated by International Ferro Metals, which will generate PGM concentrates from chrome tailings at three locations where Phoenix has acquired exploitation rights: the IFM Tailings Dams and Current Arisings, located on the farm Buffelsfontein; the Elandskraal Dumps and Pits, and the Kroondal dump.

Pan African Resources (LON:PAF) has decided to spin out the Manica gold project as a separate entity which will be listed on an appropriate international stock exchange.

The company said it has been exploring optimal ways to bring the Manica gold project ‘to account’. 

It subsequently decided that the best option would be to separate the exciting exploration project from its South African mining operations and create a new Mozambique focussed explorer. The process to spin out Manica has already got underway, Pan African said.

“Pan African believes that the separate listing will allow it to focus its capital and human resources on pursuing organic growth opportunities around the company's mining operations in South Africa,” the company said in a stock exchange statement. 

“At the same time, a separate management team, which has been appointed by the company, will have the financial flexibility and focus to grow the Manica Project. Pan African intends to retain an equity stake in the new listed entity." 

The company believes that by creating this new company it will unlock optimal value for its shareholders.

Pan African owns the Barberton Mine complex, a group of mines in South Africa that produce around 100,000 ounces of gold a year. Barberton hosts total mineral resources of 2.55 million ounces of gold, of which 1.9 million ounces are in the measured and indicated resource categories. 

Meanwhile in central Mozambique, the Manica project hosts 2.96 million ounces of gold in all resource categories with a grade of 1.82 grams per tonne. This resource includes 1.38 million ounces in the measured and indicated categories, with a grade of 1.75 grams per tonne. 

The project is currently in the pre-feasibility stage. At the moment it is estimated that for around £50 million capex the project could be developed into a 30,000 ounce a year mining operation. 

In a presentation on the proposed spin-out Pan African explains that through the IPO it hopes to raise sufficient capital to develop a 20,000 tonne mining operation and bring it online by the third quarter of next year. 

It also wants to have enough capital to continue expanding Manica through exploration, with the AIM of establishing a total resource in excess of 5 million ounces of gold.

Once spun out the new company will also have a longer term goal of completing a bankable feasibility study for a much larger mine at the Manica site. In the longer term it wants to grow mining capacity to 125,000 tonnes per year, while also looking for other assets in the region to subsequently grow it mining operation to the 250,000 tonnes a year mark.

Gold miner Pan African Resources (LON:PAF) announced today that it had successfully negotiated with South Africa’s National Union of Mineworkers on wages and other conditions of employment at the firm’s Barberton mines for its 2012 financial year.

The one-year agreement amounts to an average wage increase of 11 per cent across the board.

The employees will also receive an increase to their housing allowance from 1,100 South African rand per month to 1,300 rand. The increases are effective from 1 July 2011.

Pan African also pointed out that it was not a member of the Chamber of Mines, and that as it has successfully concluded wage negotiations it will not be affected by any strike action by the NUM; this week the NUM issued a notice to the Chamber of Mines indicating that workers in the gold sector would this Thursday would join coal workers in a nationwide strike.

Pan African’s Barberton mining operation produces around 315,000 tonnes per annum at a grade of 10 grams of gold per tonne (approximately 100,000 ounces annually).

In May, the firm upgraded its mineral resources and reserves at Barberton. Total mineral resources increased by seven per cent to 2.55 million ounces of gold, while measured and indicated mineral resource increased by four per cent to 1.9 million ounces. 

By 10:24am today, shares in Pan African were sown 1.7 per cent at 13.15 pence each.

Pan African Resources (LON:PAF) has unveiled a significant upgrade to the Berberton mine’s gold reserves.

Reserves have increased 51 percent to around 1 million ounces. Meanwhile the mines total mineral resources increased 7 percent up to 2.55 million ounces. Notably the mine now has 1.9 million ounces in measured and indicated resources, after a 4 percent increase.

Importantly grades are significantly higher at 8.35 grams per tonne, which is a 33 percent improvement.

This upgrade is the results of three years work, as part of a mineral resource management programme. In that time PAF has spent £6 million on almost 38,000 metres of drilling and 5,500 metres of underground development.

It has successfully increased the size of the total resource, it has increased the production profile and importantly it has expanded the Life of Mine and mining flexibility.

"These results confirm that the Barberton ore-body is able to sustain current production rates well into the future,” chief executive Jan Nelson said.

“The increase in the resource grade clearly demonstrates that there are still significant high grade zones of mineralisation within the mine boundary. In addition, the company's ability to drive costs down has allowed us to convert a significant portion of the resource to reserve.

"Our attention is now focused on our prospecting permit where we have identified a geophysical anomaly close to surface that has a geographic footprint equal in size to the mining footprint at our Fairview Mine that has produced 4 million ounces."

Fairfax analyst John Meyer said that Pan African is one of his firm’ few, favoured South African gold stocks. 

“A good profits report in February saw attributable earnings rise by 70 percent last year to £7.6 million on 46,655 ounces of gold production,” the analyst said in a note to clients. 

“The removal of illegal miners and increase in grades suggests that the mine should have an even better year through 2011 and this gives the company a strong platform for further growth."

Pan African Resources (LON:PAF) told investors that its operating subsidiary, Barberton Mines Ltd, has secured final credit approval for a 150 million rand revolving credit facility.

The three-year facility is being provided by Nedbank Ltd and it will allow the company to fund organic growth at Barberton Mines.

The subsidiary runs the historic Barberton Mine complex in South Africa, which is targeting 100,000 ounces of gold production in this financial year. 

"The Pan African Group continues to be un-hedged and debt free,” chief executive Jan Nelson said.

He added: “The new revolving credit facility from Nedbank Limited does however provide an efficient funding mechanism to take advantage of organic growth opportunities at Barberton Mines. 

“It also demonstrates the confidence of funders in the long-term sustainability of the mine. 

“In this regard, a feasibility study is currently being completed on treating the Bramber tailings dam, which if viable could increase the annual production of the mine by 20,000 ounces. A separate treatment plant will have to be constructed to treat the additional production stream, and this may be funded from the Facility".

Meanwhile Pan African is also developing the Manica gold project in Mozambique and it has started work on the Phoenix platinum project, a chrome tailings retreatment plant (CTRP) at International Ferro Metals’ (LON:IFL) Lesedi mine near Rustenburg. 

This afternoon it told investors that earnings per share (in GBP), for the six months ended 31 December 2010, is expected to have increased by 53 - 63 percent compared with the corresponding period last year. Similarly it said that headline earnings per share is expected to be 41 - 51 percent higher.

The improved performance isn’t likely to catch out investors that have been following Pan African’s impressive growth story. The South African gold company has been getting a lot of attention recently, with its share more than doubling in value on London’s AIM market in the last three months of 2010.

Today’s trading saw PAF add just over 2 percent to its value. Shares were changing hands at 10.5 pence per share - the stock previously surged from 6.5 pence at the end August to hit a new high at 12.5 pence on 31 December 2010.

The junior gold stock is already producing 100,000 ounces of gold a year from Barberton – a group of three mines in South Africa - and it is currently working on increasing output to 125,000 ounces by 2015.

Separately the company is also working to start up the Phoenix project, after it agreed an deal with International Ferro Metals in 2010. Phoenix is being developed on the site of IFM’s Lesedi mine near Rustenburg, South Africa. 

The plant will process the tailings from the IFM mine to produce platinum group metals, and achieving margins as high as US$1,100 per ounce. The chrome tailings retreatment plant (CTRP) is expected to begin commissioning towards the end of the year.

Warren Johnstone, analyst at Edison, reckons the shares could be worth as much as 18.6 pence each - more than 80 percent higher than the current price of 10.25 pence - if it achieves these two objectives.

PAF is already producing 100,000 ounces of gold each year from Barberton – a group of three mines in South Africa - and it is currently working on increasing output to 125,000 ounces by 2015.

Separately the company is also working to start-up the Phoenix project, after it agreed an innovative deal with International Ferro Metals in 2010. Phoenix is being developed on the site of IFM’s Lesedi mine near Rustenburg, South Africa. 

The plant will process the tailings from the IFM mine to produce platinum group metals, and achieving margins as high as US$1,100 per ounce.

The chrome tailings retreatment plant (CTRP) is expected to begin commissioning towards the end of the year. Johnstone thinks it could then start production in 2012 and production could reach 12,000 ounces of platinum per week by 2014.

“Assuming Pan African Resources executes to plan on Barberton and commissions Phoenix by the end of 2011, we value the shares at 18.60p at consensus prices for gold and PGMs,”  Johnstone said.

He adds: “Our valuation excludes the Royal Sheba ounces and the Manica gold property in Mozambique; Manica alone could be worth up to $48 million (£30m) or a further 2 pence per share.”  

The analyst rates the stock as a ‘Buy’ with a 16p target.

“We believe that PAF is trading well below fair value,” Davidson said. “In our view, PAF is also attractive for its strong gold price leverage, potential for acquisitions and for its dividend payment - a rarity amongst gold miners.”

Davidson highlighted PAF’s established and solid production base, as well as its exploration upside and M&A potential.

The analyst emphasised that the Barberton mine, in South Africa, provides a solid production base of 100,000 ounces per year.

Davidson said that PAF has a strong sensitivity to the gold price, and with a bullish outlook for gold, he sees this as a positive.

Furthermore the analyst also expects the Phoenix chrome tailings re-treatment project to be commissioned at the start of 2012.

“Although production will be relatively modest - we expect up to 20koz p.a. of 4E platinum group metal (PGM) production - the unit costs are very low and returns are very attractive”, Davidson said.

“We believe there is good upside potential from expansion at Barberton with the recent discovery of a new, potentially low cost, resource at the Royal Sheba ore zone. We also see potential to expand at Phoenix with additional resources.”

Davidson believes that PAF is undervalued.

“PAF is currently trading firmly in the lower half of its peer group at around 0.7x NAV versus the average 1.2x; making it, in our view, strongly undervalued.”

The stake will be sold to fellow AIM listed miner GoldStone Resources (LON:GRL), which believes that the permit is prospective. Goldstone is the party that announced the deal this mornming.

The permit area is located in proximity of AngloGold Ashanti’s (NYSE:AU, LON:AGG, ASX:AGG, JSE:ANG) 50 million ounce (Moz) Obuasi gold mine, adjoining AngloGold's Obuasi eastern border and the southern boundary of GoldStone's Homase permit.

The Akrokerri license area contains at least two sites with known gold mineralisation.

A 2.8 kilometre (km) gold in soil anomaly indicates that the Homase structure and gold deposit extend into the northern portion of the Akrokerri permit, which was confirmed from the drilling of 110 boreholes for a total of 7,303 metres along the soil anomaly by Shea Gold Limited from 1998 to 2000.

Some of the most significant intersects include 15 metres grading 2.27 grammes per tonne (g/t) gold, 20 metres grading 2.09 g/t gold, 10 metres grading 2.14 g/t gold, 11 metres grading 4.76 g/t gold and 10 metres grading 2.47 g/t gold.

GoldStone is hoping to enhance the value and potential of its Homase permit through the drilling between the drill sections and below the known extend of mineralisation to add resource potential to Akrokerri.

The company has said it believes that Akrokerri is prospective because the structure which controlled the formation of the Obuasi and Homase gold deposits also trends through the permit and that drilling programmes to find extensions of the dormant gold mine in the central part of the permit area by previous operators have been inconclusive.

According to GoldStone, a small code compliant resource based on historical exploration data may be achievable after limited due diligence.

In the first stage of the exploration campaign, GoldStone will confirm the quality and integrity of the historical exploration data base.

Drilling on the permit area to add further ounces to the initial resource will commence during 2010.

An airborne geophysical survey and a soil sampling programme are planned to identify additional regional exploration targets.

In early 2009 Pan African withdrew from all its projects and activities in Ghana and decided to focus exclusively on its recently acquired platinum and gold producing projects in South Africa and Mozambique.

GoldStone will attain ownership of the 85.1% stake for a nominal US$1, subject to a 10% free carried interest in favour of the government of Ghana and a 4.9% holding in favour of Volta Resources and on the basis that Pan African’s Ghanaian subsidiary that holds the rights to the permit has no environmental rehabilitation liabilities, outstanding statutory requirements, future or existing contractual liabilities or pending legal proceedings, which may amount to more than US$25,000.

The government is also entitled to receive a mining royalty of 3% to 6% of the total revenue.

Pan African is focused on projects in South Africa and Mozambique, producing approximately 100,000 ounces of gold per year.

The company has no debt, is unhedged and is able to fund all of its current on-mine capital from current cashflows.

In late August, Pan African released its results for the year to 30 June, which showed a 30% jump in revenues to £68.5 million as underground production increased by 2.71% to 97,483 ounces.

Production is expected to continue to grow as a result of increased capital investment and the implementation of an integrated Mineral Resource Management (MRM) programme.

Gold revenues in the year to 30 June jumped nearly 30% to £68.5 million as underground production increased by 2.71% to 97,483 oz (ounces) despite a marginal 0.25% decline in tons mined, which was offset by a headgrade improvement of 2.81% to 10.61 g/t. EBITDA (earnings before interest, tax, depreciation, amortisation and impairments) improved 9.17% to £25 million.

Production is expected to continue to grow as a result of increased capital investment and the implementation of an integrated Mineral Resource Management (MRM) programme.

The increase in revenues was due to a 26.64% hike in the average gold spot price received to US$1,098/oz as well as the depreciation of the sterling against the South African dollar.

Cost of production climbed 42.46% to £40.6 million, largely due to a 42.86% rise in electricity costs, while security costs soared 176.92% and staff expenses including salaries and wages were up 18.41%.

The amount of gold from the Barberton mine sold during the year was roughly the same as last year, going up by just 0.76% to 98,091 oz. Pan African noted that all gold production was attributable to underground mining operations. The production increase was despite a two week halt of mining operations in December 2009 due to illegal mining activity.

Other operational highlights included a 30.22% increase in measured and indicated resource base to 1.81 Moz (million ounces) and a 15.8% PGM (platinum group of minerals) resource upgrade at Pan African’s wholly owned Phoenix Platinum project to 469,000 oz. Current feasibility work indicates a life of mine of 25 years, producing an estimate of 11,000 oz 4E (platinum, palladium, rhodium and gold) per annum.

As a result of additional drilling and underground development at Barberton Mines, the total resource inventory for the group increased, when measured in terms of gold content, by 1.16% to 4.635 Moz (million ounces) compared to 4.582 Moz in 2009. The reserve in gold content attributable to Barberton Mines has increased by 6.79% to 661,000 oz from last year’s 619,000.

During the period, Pan African managed to buy the remaining stake in its then 74% owned Barbeton Mines to turn it into a wholly owned subsidiary, while Shanduka Gold acquired a 26% stake in Pan African. The company has also converted Barberton Mines’ old order mining rights to new order mining rights.

Cash and cash equivalents soared 435.56% to £12.8 million, allowing the company to propose a final dividend of £5.26 million, or 0.3723 pence per share compared to last year’s interim dividend of 0.2555 pence.

Pan African is aiming to conclude and submit the assessment of the oxide mining potential as the first phase of the investigation of the project’s viability by the end of October 2010. The phase will be completed as part of the definitive feasibility study (DFS) and submitted as part of an application to convert the current exploration license to a mining concession towards the end of October.

The DFS is expected to be released in the second half of the current year.

During the year, the company reviewed 43 projects, none of which fulfilled its investment criteria.

“Although we remain committed to growing our asset base, such growth will not come at the expense of the statement of financial position.

”This is a strategy that has set the company apart from its peer group and will continue to do so going forward,” the company said in the statement.

The results were ahead of expectations, which was reflected by a 7% rise in Pan African’s share price.