Assessment 1

This report is prepared based on knowledge related to Pan African Resources PLC using its factual data
listed in the London Stock Exchange, financial/annual information, corporate governance status, and its
capital investments. The report is prepared from an investor’s point of view.

Student ID Number: R1810D6621760

Course name: UU-MBA-710-ZM-44087

Lecturer: Dr. Mary Mandiringana

13th November 2022

Table of contents

Abstract

1.0 Introduction 4

1.1Shareholding structure 4

1.2 Management and Board of Directors 4

1.3 Corporate Governance 5

1.3.0 Human Capital 5

1.3.1 Financial Capital 5

1.3.2 Natural Capital 6

1.3.4 Social and Relationship Capital 6

2.0 Capital Investments 6

2.1 Near Term/ Projected investment projects 7

3.0 Sources of Capital 9

4.0 Financial Condition and Performance 9

5.0 Financial Ratios 9

5.1 Return on shareholder’s funds 10

5.2 Gearing (Leverage) ratio 10
6.0 Investors Ratio 12
7.0 Share Performance 13
Conclusion 14
Appendices 15
References 16
Abstract

The purpose of this report is to assess the financial performance of Pan African Resources Ltd. The report
is prepared in an angle of an investors eye. The information provided gives investors a vivid view of the
company’s operations and financial position for them to make meaningful long-term investment decisions
in Pan African Resources Ltd.

The report highlights on the company challenges and governance status, its sources of finance, capital
investment both existing and projected, and company’s share performance in the stock exchange, and its
performance based on its financial information.
1.0 Background

Pan African Resources Plc is a mid-tier African-engrossed manufacturer of gold listed on London stock
exchange (LSE), AIM-PAF and Johannesburg stock exchange market. The company conducts its business
in South Africa after its incorporation and registration in the year 2000 in England and Wales under the
companies Act 1985.

The company’s strategy and value-creation procedure are to reliably boost the value of its mineral deposits
using advanced technology and human capital, acquisitions and mergers to ultimately spawn the much-
needed returns for its investors while ensuring its long-term sustainability through its operations in high-
standard, low-cost works and projects.

1.1 Shareholding Structure

Shareholding percentage (%)

Barberton Mines Proprietary Limited 95%
Evander Gold mining proprietary Limited 95%
Barberton Green Proprietary Limited 100%
Evander Gold Mines Proprietary limited 100%
PAR Gold Proprietary Limited 49.9%
Source: http://www.panafricanresources.com/about-overview/company-structure/

1.2 Management and Board of Directors

The interests of shareholders are represented by the boards of directors of the company and also is
responsible for monitoring managements’ activity, safeguard shareholder interests, and superintend the
activities of the company (Larcker et al., 2007).

Five independent non-executive directors and two executive directors makes a composition of the board
of directors of Pan African Resources Plc. These executives have varying experiences and background in
the fields of engineering, commerce, accounting and the likes (Pan African Resources, 2022).
1.3 Corporate governance

The United Kingdom Cadbury Report (Cadbury, 1992, p.15) defined corporate governance as “the
structure by which companies are governed and directed”.

The trustees of Pan African Resources PLC bears optimum control for its Group’s compliance to resonate
corporate governance set standards and combines corporate citizenship that is responsible into the Group’s
purpose and values set. It warrants that all business resolutions are made with rational care, skill and aims
to augment continuous stakeholders value (Annual Report, 2018). As defined by Pan African Resources
PLC, its corporate governance strategies’ are intended to boost its stakeholders’ confidence in its handling
of the company and also provide lucidity in the decision-making process of the company (Doni, Gasperini
& Pavone, 2016). The board of Pan African meets at minimum four times in a year and more so if the
situations demand for it. For example, in 2022 the board has met eight times already (Corporate
Governance (AIM-Rule 26) | Pan African Resources, 2022).

Pan African strategic areas of focus include financial capital, human capital, natural capital Social and
relationship capital.

1.3.0 Human capital

This is composed of employees and unions. The strategy here is to employ, keep and grow its workers
and simultaneously create a safe and secure working environment. This responsibility is concentrated in
the hands of the board, SHEQC committee, social and ethics committee, executive committee and
remuneration committee (Pan African Resources Plc | Integrated annual report, 2022).

1.3.1 Financial Capital

The board, audit and risk committee and the executive committee is responsible for the oversight of this
initiative. They ensure sufficient, competitively priced and thoroughly controlled financial resources for
the funding of its operations and growth projects and disciplined capital allocation for continual long-term
value creation. Some providers of capital include investors, shareholders, fund managers, analysts and
financial institutions (Pan African Resources Plc | Integrated annual report, 2022).
1.3.2 Natural Capital

This responsibility is concentrated in the hands of the board, SHEQC committee, social and ethics
committee, executive committee and remuneration committee. They help ensure the company conducts
its business operations in an environmentally friendly manner to reduce harm to the environment (Pan
African Resources Plc | Integrated annual report, 2022).

1.3.4 Social and Relationship Capital

The focus here is on communities, the government and regulatory bodies as a whole. Stakeholders such
as the south African government, the government of Sudan, JSE, LSE, OTCQX and regulatory authorities
are all concerned parties when it comes to this initiative. The ultimate aim is to be a responsible corporate
citizen, create continual value for stakeholders with its business management strategies (Pan African
Resources Plc | Integrated annual report, 2022).

2.0 Capital Investments

Pan African Resources Plc, has investments in existing projects and also planned projects. Some of its
investments include;

1. Elikhulu Tailings retreatment plant.

This project is Pan African’s flagship project because it was built within budget, commissioned
ahead of proposed time, made of technologically advanced automated plant and attained balanced
state creation within two years at an AISC of US$614/oz. In every month, the plant operations
bring off 1.2mt of tailings from its already existing slimes dams at, kinross, bracken and
winkelhaak. Residues from reprocessed tailings is re-deposed to a tailing storage facility which in
turns reduces ecological footprints (Pan African Resources, 2022).

2. Barberton mines
This mine consists of Fairview, Consort and Sheba Mines and its operations forms the Group’s
Baberton mines which has been in operation for over 100 years. This well-established mine
 manufactures some 80,000oz of gold annually with the best safety record being a milestone of 3
million death or injury free shifts in June 2020. (Pan African Resources, 2022).

3. Barberton tailings retreatment plant

The Barberton Tailings Retreatment Plant (BTRP) is located inside the Fairview Mine’s trail area.
BTRP has been outlined to tend 100,000 tons of tailings monthly and includes high margin and
low risk ounces to the company’s production profile, with production of some 20,000oz yearly at
an AISC of US$795/oz. The operations lifespan is anticipated to last 6 years and has the added
advantage of turning Barberton environmental rehabilitation onus into profits and simultaneously
also rehabilitating ground for more continuous uses. (Pan African Resources, 2022).

4. Evander mines’ 8 shaft pillar began in the year 1956 and is a 66-year-old mine. This project is still
ongoing with a planned extension to a 24 Level to access the deeper 25 and 26 Levels. This
projected idea began in the first quarter of 2022 financial year and is currently ongoing. The No.
2 decline was constructed in the 1990s to add to the economic life of No. 8 shaft. The addition will
give access to the deeper levels of the orebody in the northwest, towards Rolspruit – a multi-
million-ounce orebody situated at depth, which is yet to be mined as it would be in need of sinking
a brand-new shaft from surface to a depth of some 2,5 km and as such would require tremendous
amount of capital and time. Pan African resources plans to bang the development ends on 25 Level
in the present financial year, and mine the first stope in the year 2025. This activity will prolong
Evander No. 8’s life for additional 14 years. The layout is that, as mining at No. 8 shaft pillar takes
off in around 2024, Evander 24 level will take charge until 2026, and in turn will be replaced by
Evander 25-26 level. This addon project will mine about 600 000 oz during its lifespan (Pan
African Resources, 2022).

5. The Elikhulu solar PV plant. The Elikhulu solar PV plant is contributing a remarkable part of the
mine’s energy needs. It will manufacture 25 000 MWh of electricity yearly and save 26 000 t of
Carbon dioxide emissions yearly. This plant will save the company some millions both in cash and
electricity bills per month (Pan African Resources, 2022).
2.1 Near Term/projected Investment Projects

1. The Egoli Project is a long creation, high-end project, that will take advantage of the Evander
mine’s existing entrenched framework during its growth and utilization. This harmony has
substantially lessened Egoli’s capital investment beforehand, when gauged against other
development projects of comparable scale, and subscribed to its riveting and vigorous of about
72koz at an average head grade of 6.61g/t (LOM gold production of 17,771 kg (c.570koz)). First
gold production is in anticipation to be produced in about 1 year 8 months after production
commences, with ramped up to balanced state production over the next 1year 4 months. Egoli is
being dewatered and will be developed and furnished for mining as the 25-26 Level mining starts,
further adding life to the Evander complex. Egoli has a lifespan of mine of 9 years with room to
increase to 14 years and enough mineral resource of about half a million ounces (Pan African
Resources, 2022).

2. One facility is temporarily acquired from Mintails SA is the Magole Gold tailings storage. It is
expected the mintails tailings could stump up to 60,000 low-cost ounces per year over 20 years.
Pan African Resources will obtain share capital and related shareholder loans and other claims by
august 2022 and move towards production by 2025 (Pan African Resources, 2022).

3. 8 MW solar PV plant at Barberton mines. This project is targeted to have 30 MW of solar

magnitude by the year 2024, which would churn out about 75 000 MWh of power yearly,
eventually save about R100 million yearly in electricity bills and minimize carbon emissions by
80 000 t/CO₂ yearly (Pan African Resources, 2022).
3.0 Sources of capital

There are various sources of business financing such as overdrafts, trade credit, factoring, hire purchase,
leasing, venture capital, angel financing etc. (Temple, 2017).

Pan African Resources finances its business operations mainly from equity financing and debt financing.
Debt financing involves borrowing money or funds with the condition of repaying the borrowed funds
plus interest at an agreed period (Chowdhury & Maung, 2013).

Equity financing means trading off a portion of the possession of the business for a financial investment
in the business. According to Ou and Haynes (2006), equity capital is that funds or money invested in the
company without any repayment date specifically set, where the creditor of the capital is constructively
investing in the business”

4.0 Financial Condition and Performance

Financial performance is the extent to which financial targets are attained (Dyson, 2010). Monitoring
business performance is imperative for stakeholders so as to determine the financial standing of
companies. Stakeholders need a measuring instrument to find if their interest is fulfilled in accordance to
their needs. These needs are measurable through the use of financial ratios. Both present and potential
investors are interested in information that is useful in making buy/sell/hold decisions.

5.0 Financial Ratios

According to Ross et al., (2007) majority of researchers split up the financial ratios into four groups i.e.,
profitability, solvency, liquidity and activity ratios.

According to Brigham and Ehrhardt (2010), financial ratios are created to help assess financial
statements. Financial ratios are used as a financial control mechanism. To gauge the performance of
companies, financial ratios are used.
5.1 Return on shareholders’ funds

This ratio measures returns to equity shareholders as a percentage of the capital invested in the company.
It is calculated as profit/(loss) after tax expressed as a percentage of the total equity the financial year.

5.1.0 Return on capital employed

This ratio quantifies gains to equity shareholders as a percentage of the funds invested in the company. It
is calculated as profit or loss after taxation expressed as a percentage of the average total equity for the
current and previous financial year.

2022 2021

=32.6% =36.3%

This shows lower profitability and lower capital efficiency in 2022 as compared to that in 2021.

5.1.2 Dividend yield

This quantifies the yearly value of dividends received parallel to the market value per share of a security

2022 2021

18 / 394 18 / 341

=4.6% =5.3%

This shows an ideal dividend yield from the year 2021 to 2022. This help investors evaluate the potential
profit for every dollar they invest, and judge the risks of investing in the future.

5.2 Gearing (Leverage)

5.2.1 Net debt-to-equity ratio

This ratio calculates the extent to which the company finances its business through debt relative to equity
and is calculated as net debt divided by total equity.
2022 2021

12,991 / 294,609 39,004 / 283,631

=0.04 =0.13

The above data shows Pan African Resources financing was more of equity from shareholders as
compared to that of 2021.

5.2.2 Net debt-to-net adjusted EBITDA ratio

This ratio measures the number of years it would take the company to pay off its net debt from net adjusted
EBITDA.

2022 2021

12,991 / 137,721 39,004/140,334

=0.1 =0.3

The data above shows how many years it will take Pan African Resources to payback its debt. The above
data shows the company has a higher probability of paying off its debts in 2022 and as such is acceptable
as the company is financially sound.

5.2.3 Interest cover ratio

This proportion measures the Group’s ability to reclaim interest on its arrears in the form of debt from net
adjusted EBITDA and is calculated as total net adjusted EBITDA divided by finance costs.

2022 2021

137,721 / 4042 140,334 / 6107

=34.1 =23.0

The above shows a higher interest coverage ratio in 2022, which means a higher operating profit which
can cater for interest payments
5.2.4 Debt service cover ratio

This ratio calculates the cash flow readily available to defray debt in relation to the Group’s mandatory
principal and interest debt commitments and is calculated as cash flow available for debt payment divided
by principal and interest debt commitments.

2022 2021

55761 / 7653 67687 / 22332

=7.3 =3.0

A higher ratio means that the entity is more creditworthy as they have sufficient funds to service their debt
obligations.

6.0 Investors Ratio

6.0.1 Price-Earnings Ratio (PE)

Calculates percentage of how much an investor should pay for the share based on its current earning.

2022 2021

=6.19 =6.44

This shows investors have a high probability to get back their investments increased by 6.44 times
7.0 Share Performance

Source: https://www.londonstockexchange.com/stock/PAF/pan-african-resources-plc/company-page

From the above diagram, the share price increased from 20.20 in May 2022 to 20.75 in June 2022. The
share price as at June 2022 closed at 20.75 as compared to 16.39 as at June 2021. This trend stipulates a
tremendous increase over the period. This result translates into its declaration and payment of dividends
to shareholder over the period.
Conclusion

Pan African Resources Plc, has made significant headway in relation to their operational performance and
growth projects. It made a mark in a record production of gold of 205,688 oz from it varied packet of
assets. Mining of the 8-shaft pillar has been a success with favorable working conditions.

Other investments include that at Evander mines underground operations. Pan African Resources
strengthened its financial position as compared to that of last year with payment of a record dividend and
incurring notable growth and sustaining capital expenditure.

Pan African Resources Plc, has embarked on a number of initiatives to reduce its cost of production with
cost savings expected from its solar PV renewable energy projects. The project at Barberton mines’ (8MV
solar PV renewable energy plant) is expected to be completed by fourth quarter in 2023. The company
also plans to generate 30MV of solar PV renewable energy by 2024 to boost cost savings and also a
significant reduction in carbon emissions.
APPENDICES
Appendix 1: Organization Structure of Pan African Resources Plc as at 30 June 2022

Source: http://www.panafricanresources.com/about-overview/company-structure/
References

Annual Report (2022)., Retrieved from https://www.panafricanresources.com/wp-content/uploads/pan-

africanresources-integrated-annual-report-2022.pdf

Brigham, E. F., & Ehrhardt, M. C. (2013). Financial management: Theory & practice. Cengage Learning.

Chowdhury, R. H., & Maung, M. (2013). Corporate entrepreneurship and debt financing: evidence from
the GCC countries. International Journal of Managerial Finance.

Federica, D., Andrea, G., & Pasquale, P. (2016). Early adopters of integrated reporting: The case of the
mining industry in South Africa. African Journal of Business Management, 10(9), 187-208.

Larcker, D. F., Richardson, S. A., & Tuna, I. R. (2007). Corporate governance, accounting outcomes, and
organizational performance. The accounting review, 82(4), 963-1008.

Wilhelm, A. (2008). Gold Coast calling: Pan African Resources: exploration. Inside Mining, 1(4), 26-31.

Ou, C., & Haynes, G. W. (2006). Acquisition of additional equity capital by small firms–findings from
the national survey of small business finances. Small Business Economics, 27(2), 157-168.

https://www.panafricanresources.com/african-mines-mining-in-africa/mintails/#

https://www.panafricanresources.com/about/the-team/

https://www.panafricanresources.com/about/strategy/company-structure/

https://www.panafricanresources.com/african-mines-mining-in-africa/