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Pan African is a South African based precious metals mining company producing approximately 95,000 ozs of gold and, when in full production in May 2012, 12,000 ozs pgm per annum. In January, the company announced a joint venture with Wits Gold to acquire the Evander Gold Mines from Harmony for a consideration of up to R1.7 billion,...Read more
FinnCap starts Pan African Resources coverage, target price 50 pct above share priceApril 13 2012, 10:27am
FinnCap has initiated coverage of Pan African Resources (LON:PAF) with a price target of 24.6 pence, an upside of just over 50 per cent to the current share price.
The broker has based the valuation principally on the well-established Barberton gold mines complex in South Africa. It consists of three underground mines - New Consort, Sheba and Fairview -, a central processing plant and a tailings retreatment plant for which construction started last week.
In a note, analyst Martin Potts points to considerable upside presented by Pan African’s portfolio, from the recently commissioned Phoenix platinum plant and in particular the massive 24.4 million ounce undeveloped gold resource at Evander, a Harmony Gold mine it is acquiring in a 50/50 consortium with Wits Gold. The deal is scheduled to complete later this year.
The company is also in the process of floating the Manica gold project in Mozambique as a separate entity.
Potts assumes that continuing exploration at Barberton will replace ounces mined on the same basis as the mines have been achieving for many years. “For this reason, we are comfortable in assuming that production will continue for at least the next decade at similar tonnages and grades to those consistently reported,” he said.
In terms of risk, the Barberton and Evander 8 shaft mines are in steady production and have been so for many years. The Phoenix platinum recovery plant has had a successful start-up and is now building up to full capacity which it should reach within the next few months.
“These are all essentially fully de-risked projects within the context of South Africa. This leaves Manica, which will be assigned a value by the market when it floats later this year,” the analyst said.
“Pan African now has a robust and diverse portfolio of assets and a high quality management team that is well equipped to make further acquisitions and grow the business. We see this as being an important attribute, and one that distinguishes it from many others within its peer group,” Potts added.