Peel Hunt said Pan African Resources PLC (LSE:PAF, OTCQX:PAFRY, JSE:PAN) maiden interim dividend came in “a little better than expected”, even as higher costs at the Barberton complex weighed on first-half EBITDA.
The broker reiterated its 'Buy' rating and 180p target after the gold producer reported US$487m of revenue for the period, broadly in line with Peel Hunt’s model. The pinch point was operating performance: EBITDA of US$245m fell short of Peel Hunt’s US$259m expectation, which the analyst attributed to “higher cash costs, particularly at the Barberton complex”.
Below the line, however, the picture improved. Peel Hunt said lower depreciation, finance costs and tax meant headline EPS of USc7.34 landed essentially on its forecast (USc7.36).
More notably for the balance sheet, operating cash flow beat expectations at US$170m (vs US$163m), and with capex also coming in lower than anticipated, Peel Hunt calculated a US$23m beat on net debt: US$46m versus its US$70m estimate.
Cost metrics also surprised positively. Peel Hunt pointed to group AISC of US$1,874/oz, below its US$1,933/oz view, partly because more Evander spend was classified as growth capex than it had assumed. The broker also flagged the interim dividend itself as an upside tick, at USc0.7448 against its USc0.71 estimate.
Looking ahead, Peel Hunt expects momentum to build into the second half, driven by rising output from Evander, Tennant and MTR, which it sees lifting production 17% half-on-half even under its conservative assumptions.
With net debt now looking healthier than forecast, the broker argues Pan African has added flexibility to accelerate growth options such as Royal Sheba, while longer-term ambitions at Tennant could imply faster progression into high-grade underground areas than Peel Hunt currently models.