--adds more comment--
Lower grades at one of its mines and a weak gold price took the gloss off South African gold miner Pan African (LON:PAF) last year.
Revenue rose by 16% to £155mln in the year to June, but tonnages sold rose by 44% to 188,000 ounces.
The difference was accounted for by the slide in the gold price, with Pan African receiving 16% less than the previous year at US$1,303 per oz on average.
Adjusted profits (EBITDA) fell by 17% to £44.2mln with net earnings 1.47p (2.63p). The group proposed a final dividend of approximately 0.7898p.
Ron Holding, chief executive, said the performance at Barberton was satisfactory, though Evander was affected by the low grade mining cycle.
“Increased dividends and a new progressive dividend policy demonstrate the board and management's confidence in the quality of our assets and Evander Mine's future performance.
"Our statement of financial position remains strong, whilst cash generative assets and internal projects will provide the platform for further profitable growth".
Broker VSA added: “This current half will not look as good year-on-year at Evander on costs and gold output due to the fall in grade while gold output at Barberton we expect will continue to rise.
“Next year will improve,” it added. Shares rose 2% to 14p.
Canaccord added although production was weaker than expected, all-in sustaining costs were well controlled and driven by better than expected unit costs at Barberton (despite flooding) and tailings business BTRP.
Pan African’s all-in-costs remain below the peer average of US$1,150/oz and the broker expects the company’s costs to improve following commissioning of the new tailings plant (ETRP) and operational improvements at Barberton and Evander.
The temporary nature of the operational issues is also highlighted by the fact that management has increased dividends in rand terms by 7%, a strong signal of the company’s confidence in operational delivery.
The proposed dividend translates into a sector leading yield of around 6%. Buy it says.