www.panafricanresources.com
Pan African is a gold mining company, focussed on projects in South Africa and Mozambique, that produces approximately 100,000oz per year.
Its focus is on developing low cost, high margin production or near production projects. The Company has no debt, is unhedged and is able to fund all of its current on-mine capital from current cashflows.
The recent acquisition of Phoenix Platinum Mining (Pty) Ltd (Phoenix Platinum) does not change the gold focus of the Company. Preliminary sampling and recovery results have exceeded expectations and management’s proactive actions could see plant construction as early as the first half of 2010, with production likely in first half of 2011. However, this production outlook is sensitive to management’s ability to secure plant location.
Jan Nelson of Pan African Resources talks to Proactiveinvestors
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Hello, this is Harry Norman for Proactive Investors and welcome to another Proactive audio interview. Today I’m talking with Jan Nelson, CEO of Pan African Resources listed on the AIM Market Mining Sector, Stock ticker PAF, share price 5.5p, market cap £61.19 million sterling. Pan African resources shares also trade on the Alt X Market in South Africa Stock Ticker PAN, web address panafricanresources.com.
A lot of water has passed under the bridge since we spoke in March, Jan, so thank you for giving us this update.
Thank you very much for giving us the opportunity.
Pan African Resources has just exercised its option to acquire the Phoenix Platinum project, what are you expectations of this project Jan?
Harry, our expectations are to develop this project into production within 24 months, it doesn’t involve any underground mining, it’s literally the treatment of current filings on surface where we extract the PGE’s; the platinum group elements. We believe the bankable feasibility study will be concluded in six months, then it’s another 18 months for the plant construction so within 24 months we are up and running and the pay back on this project is less than two years. So it’s really a great project and then it generates significant amount of revenue, almost half the revenue that Barberton generates.
Pan African has increased its holding in the Barberton gold mines in South Africa and that changes the company’s black empowerment status. What would be the benefits to the company of owning the Barberton mines outright and of having Shanduka Resources as a shareholder in the company rather than as a stakeholder in one of the company’s projects?
Well Harry, the first thing that outright ownership does is increase our underlying value in terms of our financial results. Our earnings per share increased by 30%, our headline earnings per share by about 12% and 100% of that profit attributable from Barberton can now be applied to our growth project.
Shanduka empowers us on a corporate level and this gives us a strategic advantage in picking up more projects in South Africa. We don’t have to go and look for black economic empowerment on any project, we already have it as it flows through from the holding company to the individual project.
Then thirdly, Shanduka is intended to play a more strategic role in the company, they’ve got quite a lot of technical skills that can be applied to us and they’ve also got a significant network into Africa and you know that we are now becoming the gold vehicle of choice. So all in all very good for the company.
Will you be making any changes to the Board soon?
Yes, with Metorex selling their stake in Pan African Resources, the Metorex Directors in terms of Charles Needham and Maritz Smith are stepping down .Rowan Smith and Cyril Ramaphosa from Shanduka are joining the board and it is the Board’s intention at the next Board meeting to nominate Cyril Ramaphosa as the chairman of the company.
What is happening with Pan African’s relationship with Metorex?
Well you know we’ve had a very good relationship with Metorex but they have now sold the 54% stake in Barberton, we have been managing the mine on our own for the last two years so effectively we are tying up the management agreement and then really I there will be no further interaction between the two groups. Metorex has been very good in helping us with Barberton mines but all children at some stage have to leave the house.
Are you still exploring at Barberton Jan?
Yes we are, we’ve shifted our focus from surface exploration to underground exploration, we’ve got some very good targets close to our current development, we’ve made some intersections of over 40 grammes a tonne over ten metres, significant intersections close to our development and we are putting our money into bringing those or what is close to our current infrastructure to account.
How is Pan African’s institutional support and liquidity now?
Well Harry since Metorex’s exit our biggest shareholder is now Shanduka Resources who will own 26% once certain conditions precedent have been met, then we’ve got Coronation Fund Managers, Allan Gray, JP Morgan Securities from the United Kingdom and Investec, so we’ve got a very good institutional shareholder base and our liquidity has improved from under 15% to close to 70%.
You recently announced the results for the scoping study for the company’s Manica project in Mozambique, what are your thoughts about Manica at this stage and what is the next step with Manica?
Recent results show that the project has got a positive NPV but for a project that’s requiring about US$100 million dollars worth of capital, the margins are not as good as we would like them to be. Therefore we are looking at areas around us to consolidate more resources and the plan is to acquire them, drill them and then in a year’s time rerun our numbers and see if the project is robust enough to continue to bankable feasibility stage.
What is Pan African’s current financial situation Jan?
Harry, as of the end of February we had close to US$10 million in the bank. We have purchased Phoenix recently but Barberton is generating between US$1-2 million profit a month so our balance sheet, despite the acquisition is still strong and we remain cash positive.
What is Pan African’s dividend policy going forward Jan?
I think it remains the intention of the Board to continue to pay a dividend. Our evidence will be subject to any growth projects and cash requirements from those, but at the next board meeting I believe the Board will finalise a dividend policy .
What can investors expect from Pan African over the next 12 months Jan?
Well Harry I think we’ve now grown up and become a mining company and our intention is to focus on projects with the ability to yield near term cash. Barberton started out at 12 ounces and has got good margins and is generating very good cash for us. Our intention is to look at expanding the resources around Barberton in the next 12 months, and within the next 24 months we are looking at getting Phoenix Platinum into production. It will generate additional cash flow and then we are looking at other projects in both the gold sector and also in the platinum sector but focused on surface tailings that can add to our resource base and also the near term cash generation position of the company.
This interview was recorded on 29th June 2009. Remember Proactive Investors is not an investment advice service; make sure you register at proactiveinvestors.co.uk for our weekly newsletter which will keep you informed about our articles, interviews and events. Thank you for listening.
Please note, Harry Norman who conducted this interview, currently holds shares in Pan African Resources.
