Our opinion on the current state of PAN

Pan African Resources (PAN) is a London- and JSE-listed re-treatment gold producer. With its Elikhulu plant it will be able to produce about 700 000 ounces of gold a year at a cost of about R450 564 per kilogram against a current gold price of close to R1m. This means that over its life it will produce revenue of approximately R15bn of which R5,3bn will go back into the economy in the form of mine expenses, creating a highly profitable entity with minimal risks. It will also employ 350 people. The company has approved the construction of a 10mw solar power plant. In its results for the six months to 31st December 2022 the company reported gold production of 92307 ounces down from 2021's 108085 ounces. All-in sustaining costs were $1291 per ounce compared with $1173 in the previous period. Headline earnings per share (HEPS) fell to 1,52c (US) compared to 2,39c in the previous period. The company said, "Reduced gold production over the past six months can primarily be attributed to the performance of Barberton Mines’ underground operations". In a revised production forecast on 26th May 2023 the company said that it would produce only 175 000 ounces (down from 195 000 ounces) due to loadshedding, a slower ramp up at Barberton and lower production at Evander underground operations. In an operational update for the year to 30th June 2023 the company reported, "Annual gold production of 175,209oz, achieving the revised guidance announced in May 2023. Group net senior debt declined to US$18.9million (December 2022: US$49.9million)". In a trading statement for the year to 30th June 2023 the company estimated that HEPS will fall be between 15% and 25% as a result of the fall in the rand against the US dollar. Technically, the share fell from a high of 623c in August 2020 to levels around 295c in September 2021. It then entered an upward trend which has taken it to a high 458c in March 2022. Since then it has been falling and is now trading for 325c. We see this as a marginal, volatile operation which involves considerable risk. We would advise investors to be cautious.