8th Jun 2015 16:25
LONDON (Alliance News) - Pan African Resources PLC Monday revealed plans to make a ZAR200 million acquisition of a thermal export quality coal deposit, as it said it expects a drop in earnings per share and headline earnings per share in South African rand to drop by between 40% and 60% when it next reports annual financial results.
In a statement, the company said it expects EPS and headline earnings per share of between 9.93 cents and 14.87 cents for the year ended June 30, calculated in South African rand. In sterling, EPS and HEPS are expected to fall by between 43% and 63% to between 0.54 pence and 0.84p.
Pan African said the main reasons for the fall in EPS and HEPS were low grade mining cycle at Evander Gold Mines (Pty) Ltd and difficulties at Barberton Mines' Biox plant.
The executive directors of the company are to forfeit their annual salary increase for the forthcoming financial year due to "challenging economic and operating environment experienced during the current financial year".
The company said it expects gold production in excess of 110,000oz at Barberton Mines, in excess of 100,000oz at Evander Mines, and platinum group metal production of approximately 10,000oz at Phoenix Platinum in the year ended June 30, 2016.
In addition, Pan African said it has agreed to acquire the Uitkomst collier, a "high grade" thermal export quality coal deposit in the Utrecht coalfields in KwaZulu Natal, South Africa, for ZAR200 million from Oakleaf Investments Holding 109 Proprietary Ltd and Shanduka Resources (Proprietary) Ltd.
"The Colliery is an existing operational mine and the acquisition is expected to be immediately earnings and cash flow accretive to Pan African," the company said.
Pan African said it believes there are opportunities to "increase production and improve the operational performance of the mine with a view to improve the long term productivity and economics".
The acquisition, which remains subject to final due diligence, regulatory approvals and other conditions, is to be funded from existing debt and internal cash flows.
Pan African Resource said it has agreed to refinance its existing revolving credit facility, increase the available debt finance to ZAR1.1 billion from ZAR600 million at reduced margin and facility fees for a tenure of five years, as it looks to fund growth of its existing business and by acquisition. Net debt fell is currently at ZAR315 million from ZAR459 million in December 2014.
"The 2015 financial year has been extremely challenging for Pan African, and even though we are disappointed that Evander Mines' turnaround has not happened more rapidly, the operation is now established in higher grade mining areas. Having implemented corrective strategies, the group is well positioned to deliver an improved performance in 2016," Chief Executive Cobus Loots said in a statement.
The company said it doesn't expect its progressive dividend policy to be affected by the trading update or acquisition.
"We remain committed to providing our shareholders with an appropriate cash return on investments and based, on current forecasts, we believe that the company will maintain its dividend pay-out and industry leading dividend yield," the CEO said.
"Pan African remains a precious metal focused company and, in addition to ensuring that our current operations perform in line with shareholders'
expectations, Elikhulu and Evander South present exciting organic growth opportunities for the Group. The acquisition of the Uitkomst colliery does not change our precious metals focus, however our robust financial position in a difficult resources market allows us to take advantage of selective opportunities within South Africa that we believe can be immediately earnings accretive to shareholders whilst not affecting our dividend policy," the CEO added.
Results for the year ended June 30 2015 are expected on or about September 23.
Shares in Pan African closed up 0.1% at 11.51 pence on Monday.
By Samuel Agini; [email protected]; @samuelagini
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