Pan African Resources PLC
Annual Report 2006

Plain-text annual report

THE EXPLORATION AND DEVELOPMENT COMPANY WITH ASSETS IN AFRICA Annual Report and Accounts 2006 EXPLORE AND DISCOVER . . . OUR VISION Continue the acquisition of a portfolio of mineral deposits with world-class potential in favourable areas of Africa and develop them to enhance shareholder value. WHY AFRICA? Africa produces more than 60 metal and mineral products and is a major producer of several of the world’s most important metals and minerals including Gold, PGM’s, Diamonds, Uranium, Manganese, Chromium, Nickel, Bauxite and Cobalt. Although under explored, Africa hosts about 30% of the planet’s mineral reserves, including 40% of the world’s gold, 60% of the world’s cobalt and 90% of the world’s PGM reserves — making it a truly strategic producer of these precious metals. It is one of the great ironies of the modern world that the richest continent in terms of resources is the poorest in terms of wealth. It is through harnessing the wealth of these resources that the continent hopes to escape from the poverty trap in which it is caught. Currently Pan African Resources provide employment and regeneration in some of the poorest regions of Africa. Post-colonial Africa, as a result of the legal, political, tenure, regulatory and taxation regimes for that period, discouraged international and junior mining companies from exploring the African continent. In 1986, Ghana was the first post-colonial government to reform its mining regulations to provide a viable tax and regulatory framework that allowed for foreign ownership. By 1995, 35 African countries had followed suit redefining rights and obligations for investors, as well as increasing incentives, deregulating and privatising. The reduction in political and economic risk has attracted junior and seniors alike to explore in these countries. The latter group has in turn been rewarded with some world-class discoveries in recent years, many of them initially found by juniors. Over the past 5–6 years, all of sub-Saharan Africa has seen dramatic changes in mineral exploration in both dollar terms and areas under exploration. To date, 60% of all mineral exploration in sub-Saharan Africa has gone to gold and diamond exploration. Historically Canada, Australia and the U.S.A. received close to 70% of all mineral exploration funding. From 1981 to 1991, Canada was number one in this category. In 1994, Australia took over the lead to be replaced by Latin America in 1997. During this period, almost unnoticed, Africa moved from 7th to 3rd place in terms of exploration funding. Africa is now equal to Australia and ahead of Canada and the U.S.A. in the dollar value of exploration funding. In 1990, Africa attracted less than 5% of world exploration funding. Since then, it has increased 9 times to represent 17% of the world total. Although the African continent has received huge interest in exploration activity to date, there is still opportunity to discover and explore areas which can deliver significant shareholder value. The Central African Republic as an example remains relatively unexplored as there are currently only two mining juniors actively exploring for gold. Pan African is one of them and with its exploration focus in this favorable area of the African continent the Company believes it will be able to unlock vast future potential. Mozambique is another pointing case where Pan African’s exploration activity could lead to the development of the country’s first major surface gold mine. On a continent that has limited economic success, suffers famine and deteriorating living and health standards, mining and exploration has been the sole exception in providing world-class economic success which proves that Africa can profit from its natural wealth. More African countries are now seizing the opportunity in creating an investment friendly environment. As a result Pan African Resources is not only able to capitalise on Africa’s natural wealth but also generate much needed wealth and expertise that will eventually allow the continent to thrive. Map of Africa showing countries where Pan African currently has exploration projects. Our Exploration strategy & project criteria: the key to unlocking Shareholder value — Minimum exploration target of 750,000oz — Eminent development potential — Potential to add significant additional ounces — Build portfolio of three to four exploration projects — retain focus OPERATIONAL HIGHLIGHTS & STRATEGIC FOCUS Manica Gold project in Mozambique (as at 29 June 2006): Independently verified in situ resource of 1,311Moz (14Mt @ 2.89g/t) (cid:2) Only 12% of the potentially mineralised strike-length explored to date Completing a pre-feasibility study on potential of a surface gold mine Possibility of near term (24 to 36 months) production Expanding exploration programme to access the potential of multi-million ounce surface resource Bogoin & Dekoa Gold projects in the Central African Republic (as at 29 June 2006): 4000km2 under exclusive exploration licences Delineated a gold-in-soil anomaly over a 12km strike-length at the Bogoin Gold project Large ground position targeting multi-million ounce gold deposits CONTENTS 2 Chairman’s Statement 4 Review of Operations 15 Board of Directors 16 Directors’ Report 18 Statement of Directors’ Responsibilities 19 Auditors’ Report 20 Consolidated Profit and Loss Account 21 Consolidated Balance Sheet 22 Company Balance Sheet 23 Consolidated Cash Flow Statement Notes to the Financial Statements 24 Notice of the 2006 Annual General Meeting 34 35 Form of Proxy 37 Officers and Advisers 1 PAN AFRICAN RESOURCES PLC Annual Report and Accounts 2006 (cid:2) (cid:2) (cid:2) (cid:2) (cid:2) (cid:2) (cid:2) CHAIRMAN’S STATEMENT The Board recognises that to remain prominent, we must invest available funds in projects with scope for significant returns. During the period under review the Company incurred an operating loss of £791,293 (2004: £164,231) representing a loss per share of 0.22p (2004: 0.09p). A focused exploration strategy and mission to advance our projects along the value curve has been responsible for the Company providing its Shareholders with a high value portfolio. At the Manica gold project in Mozambique, a resource of 1,311Moz has been independently verified with a pre-feasibility study currently under way to assess the viability of a surface gold mine. Major technical progress has been made at this project for the period and significant upside potential still exists with only some 12% of the potentially mineralised strike-length being explored. In January 2006 the Company exercised its option to purchase an 80% effective stake in the project and this will be completed in the second quarter of the financial year. In the Central African Republic the Company is well positioned, holding extensive ground with good gold potential covering some 4000km2. The exploration programmes at the Bogoin and Dekoa gold projects has been designed with the specific goal of testing for gold deposits larger than 2Moz in size. To date a gold-in- soil anomaly 12km in strike-length has been delineated. Some of the historical boreholes drilled within the identified anomaly returned high gold values, some as high as 20m @ 5.05g/t and 19m @ 17.38g/t. The projects in the Central African Republic are a joint venture with International Mining Investments and Goldiam SARL. Pan African commenced with an equal contributory interest of 45% to that of International Mining Investments, but has the option on a further 20% to take its effective stake to 65% upon project development. Pan African has operational control and manages the exploration programme on behalf of the joint venture. Participation in the Wa project in Ghana has been terminated after our initial exploration programme. Consequently expenditure incurred on this project has been written off. Our projects in general have the scope to deliver significant returns with the possibility of near term production combined with the considerable upside potential evident in the Central African Republic. The AIM market has been a major source of funding for global resource explorers despite competition for funding being high. The Company has recently raised £1.7 million which is adequate for the company to maintain its current exploration programmes. The outlook for gold appears promising against a weakening dollar, rising oil prices and global political tension. In recognition of this, advancing Manica to development and resource identification in the Central African Republic remains our immediate objective. 2 PAN AFRICAN RESOURCES PLC Annual Report and Accounts 2006 Consulting Geologists Anton Esterhuizen (left) and Dave Griffiths (right) at the Bogoin Gold project in the Central African Republic The Company will maintain its acquisition policy aimed at securing gold deposits with exceptional upside value in areas of Africa not well explored but considered to be favourable both technically and politically. I would like to thank my fellow Directors and staff for their hard work during the period and particular thanks to Jan Nelson, our Chief Executive Officer, for his tireless efforts to raise the Company’s profile both in the markets and in the industry. COLIN BIRD Chairman 29 June 2006 3 PAN AFRICAN RESOURCES PLC Annual Report and Accounts 2006 REVIEW OF OPERATIONS Gold exploration and development company with exploration projects in Mozambique and the Central African Republic Mozambique — possibility of near term (24 to 36 months) production CAR — country play for multi-million ounce (>2Moz) gold deposits Strong Management Team with extensive understanding of African Geology and Mineral Deposits and substantial experience on AIM Technical/Management support from Pangea Exploration (Pty) Ltd (proven track record) INTRODUCTION The past year has been an extremely dynamic period for Pan African Resources. The Company has restructured its Board and reassessed its vision and strategic position considering the current resurgence in metal prices and resultant exploration activity. In order for Pan African to stay at the forefront of delivering shareholder value within this extremely competitive environment, the Company has developed a focused but pragmatic vision and strategy. Pan African will continue to build up an asset base of exploration projects within the African continent. Current projects or new acquisitions will have to meet three criteria: (a) an initial minimum target resource of not less than 750,000oz, (b) imminent development potential and (c) the potential to add significant more ounces. We feel that as we grow our current portfolio it will be done without losing focus on developing our current assets. EXPLORATION REVIEW The Manica project in Mozambique remains the Company’s most advanced project. The current resource of 1.311Moz (14Mt @ 2.89 g/t) has been independently verified. The current resource reflects just 12% of the total 22km strike-length of potential mineralisation. Of the total resource, 76%, or 1,001,555oz, fall within the Fair Bride prospect where the Company is in the process of conducting a pre-feasibility study to access the viability of an opencast gold mine. Recent boreholes drilled within the Fair Bride prospect, to provide samples for metallurgical testwork, returned gold intersections that not only confirmed previous datasets but far exceeded our geologist’s expectations. A recently completed geophysical study also delineated nine new drill targets adjacent to historically mined areas with known gold mineralisation. In total these drill targets represent a combined strike-length of 4.5km in the vicinity of the Dot’s Luck, Fair Bride North, Fair Bride West, Fair Bride East and Guy Fawkes prospects. The new drill targets at the Dot’s Luck and Fair Bride prospects represent strike extensions of the Fair Bride Central prospect, where work on the pre-feasibility of an opencast mine as mentioned is under way. If mineralised, these drill targets could significantly increase the current resource of 1.311Moz of gold. The Dot’s Luck and Fair Bride prospects occur along the Andrada shear zone where the mineralisation could also be conducive to possible opencast mining methods. Part of the recently completed geophysical survey also focused for the first time on prospective exploration targets adjacent to the Guy Fawkes underground mine. The Company has increased the size of its geological team in order to assess the potential of developing Manica into a multi-million ounce gold deposit. The pre-feasibility study is planned for completion at the end of the 2006 calendar year. Pan African has exercised its option to acquire Explorator Limitada (company incorporated in Mozambique) which holds title to the Manica project. Pan African has exercised this option through its wholly owned subsidiary, Mistral Resource Development Corporation, incorporated in the British Virgin Islands. Pangea Exploration (Pty) Ltd has a 20% carried interest in the project until feasibility stage upon which Pan African has the first right of refusal to acquire the 20% share from Pangea. This gives Pan African an effective 80% stake in the project. In the Central African Republic, Pan African has entered into a gold exploration joint venture with Goldiam SARL and International Mining Investments (IMI). Pan African and IMI each hold a 45% contributory stake and Goldiam SARL a 10% free carry. Pan African has purchased an additional 10% stake due upon project development from Goldiam SARL and its right to purchase a further conditional 10% bringing its effective stake in each gold project to a possible 65% stake. Pan African has management control on an executive level and manages the exploration programme on the joint venture’s behalf. The joint venture has been granted an exclusive exploration licence in the Bogoin area and more recently three additional exclusive exploration licences in the vicinity of the town of Dekoa. To date a 12km long gold- in-soil anomaly has been identified within the Bogoin project. Some of the best drill intercepts historically made within the identified gold-in-soil anomaly are 19m @ 17.38g/t, 20m @ 5.05g/t and 28m @ 3.9g/t. Pan African and its JV partners are optimistic about the underlying exploration potential in the CAR. The combined 4 PAN AFRICAN RESOURCES PLC Annual Report and Accounts 2006 Tectonic map of Mozambique (cid:3) (cid:3) (cid:3) (cid:3) (cid:3) “Since August 2005 Pan African has increased its market capitalisation four-fold to £20 million. This has been achieved on the back of a focused and aggressive exploration strategy. The quality of the company’s assets, cost-effective exploration expenditure and drive to deliver shareholder value have been key components to our growth, and will remain key to our future growth.” strike-length of the geological structures we are following up is in excess of 100km, and more ground has been applied for. Only Pan African and one other junior exploration company are currently working in the CAR. Pan African and its partners therefore have an ideal window of opportunity and regard the CAR as the “treasure chest” of Africa. In Ghana, the Company had three exploration licences for gold under an option agreement to earn-in in three trances from Kenor ASA. After reviewing the initial work programme it was decided not to continue with the project. FUTURE OUTLOOK Since August 2005 Pan African’s market capitalisation increased from £5.1 million to over £20 million. This reflects the solid progress made in the period under review. I would like to extend a special word of thanks to all our shareholders for investing in Pan African. I would also like to thank each and every member of Pan African’s team for their hard work and commitment. To my fellow Directors — Colin, Nathan, Rob and Hennie — thank you for your support and guidance. FUNDING STATUS The Company completed a £1.7 million fundraising in March 2006 by private placing. This will fund part of Pan African’s exploration and acquisition activity for the next year. Yours sincerely, JAN NELSON Chief Executive Officer 29 June 2006 THE TEAM Our Management team is well balanced with each member having a different skill set that complements project development. Photograph showing banded iron- formation with gold from the Central African Republic 5 PAN AFRICAN RESOURCES PLC Annual Report and Accounts 2006 Manica Gold Project Mozambique Regional Geological Setting and Mining History The Manica Gold concession is located on the eastern portion of the ~2.6 billion year old Odzi-Mutare-Manica greenstone belt, which is situated on the Zimbabwean Craton. The Odzi-Mutare-Manica greenstone belt straddles the Zimbabwean-Mozambican border and extends from the Save River in the west in Zimbabwe for approximately 140 kilometres eastwards into Mozambique where it is truncated by the Pan-African Mozambique mobile belt. The late Archaean linear east-northeast trending Odzi-Mutare-Manica greenstone belt is synformal, with ultramafic metavolcanic (Bulawayan Group) rocks along the margins and coarse clastic metasedimentary (Shamvaian Group) rocks in the core. Relatively older gneisses (early Archaean) surround the belt, which in turn is intruded by a younger group of tonalities, granodiorites and granites of the Sesombi and Chilimanzi Suites respectively. Gold mineralisation in the Odzi-Mutare- Manica greenstone belt is mainly hosted within secondary and tertiary structures linked to primary layer parallel regional shear zones. Gold mineralisation is confined to sub-vertical shear zones where conditions for gold precipitation are favourable. Gold concentration is dominated by factors such as deformation 6 PAN AFRICAN RESOURCES PLC Annual Report and Accounts 2006 and the generation of suitable structural regimes together with the emplacement of tonalitic magmas. This greenstone belt has historically produced in excess of 80 tonnes of gold in Zimbabwe and Mozambique, with the bulk of the production (in excess of 65 tonnes) from the Rezende Mine and surrounding area in Zimbabwe, 40 km to the west of the Manica concession. Gold has been mined in the area historically from the 12th century and was mined in prehistoric times by indigenous people. A Portuguese expedition first reached the mines in 1565. Gold mining records for the Odzi-Mutare district have been collected in the ‘Technical Files’ of the Zimbabwe Geological Survey, while records of activities for the Manica region are housed with the Ministerio Dos Recursos Minerais e Energia (Ministry of Mineral Occurrences and Energy) in Maputo, Mozambique. On the Mozambican side of the belt approximately 12 tonnes of gold production has been recorded on 23 mines and workings, although the bulk of these are placer deposits along the Revue River. Non-placer gold production occurred between 1900 and 1950 within the supergene zone. Workings at Braganca and Guy Fawkes went down to between 150m to 200m. Placer mining by artisanal miners is ongoing. Ownership & Title In 2004 the Manica Gold licence, which originally consisted of four separate licences (Andrada 93/L; Macequece 963/L/2002; Mutamborico 962/L/2002; Mazi 243/L) was consolidated into a single licence 93/L. The licence area is approximately 40 square kilometres and is centred on latitude 18° 53' S and 32° 54' E. Pan African Resources plc has exercised a right to acquire a 100% shareholding of Explorator Limitada, on 9 January 2006, which held title to the Manica project in the form of licence 93/L. The licence is in accordance with the Mozambique Government Mining Law and Regulations. The acquisition of 100% of Explorator Limitada will be completed in the second quarter of the current financial year. Pangea Exploration (Pty) Ltd retains a 20% carried interest as per the original agreement for which Pan African has the first right of refusal on any gold project discovered in Africa by Pangea Exploration (Pty) Ltd. This gives Pan African an effective 80% stake in the project. Map showing location of Manica Gold Project in Mozambique Exploration History & Current Status Several phases of exploratory work have been undertaken within the current 93/L licence area held by Explorator Limitada post mining operations during the 1950s. The 93/L licence covers two prospective target areas namely the Andrada Shear Zone (Fair Bride – Dot’s Luck Target Zone) and the Mutamborico Shear Zone (Guy Fawkes – Boa Esperanca Target Zone). The first of these phases was a 1979 exploration-drilling programme conducted at the Dot’s Luck prospect by a German group, this was later followed up by additional exploration drilling in 1987 and in 1989 by Minas Auriferas de Manica (Lonrho). An additional IP survey to the immediate east of Dot’s Luck was carried out by Lonrho, which was then followed by open pit sampling in the vicinity of Fair Bride. In 2001 Explorator Limitada completed a gold-in-soil geochemical survey and geological mapping of most of the southern portion of licence area 93/L. In 2002, this exploration work was followed by reverse circulation drilling (RC) programme. During the 2002 drilling programme, seven lines consisting 37 shallow (50 – 100m) RC holes giving a total of 2270 metres were drilled, targeting the Try Again and Fair Bride historical workings and possible extensions. During 2003 an induced dipole (IP) survey was conducted at the Fair Bride – Dot’s Luck Target zone, covering an area of 8 square kilometres, as well as at the Boa Esperanca prospect area, covering an area of 7 square kilometres. In October 2003, a more extensive RC drilling programme commenced, drill testing various targets and following up on positive results obtained during the 2002 drilling exercise. The 2003 drilling programme consisted of 35 RC holes giving a total of 3102 metres of drilling. In the first quarter of 2004 an additional 14 RC and 10 diamond drill holes gave a Mineral Resource Estimation total of 1358 metres and 1759 metres respectively, within the 93/L licence area. These drill holes were mainly concentrated in the Fair Bride – Dot’s Luck Target Zone. Two diamond drill holes were drilled in the Guy Fawkes area. An additional 16 RC drill holes were completed in January 2005 in the Fair Bride area totalling 1514 metres. This group of drill holes was specifically targeted at Arsenic (AS)-in-soil anomalies in and around the Fair Bride mineralised zone. Dipole – Dipole IP survey work commenced in the Fair Bride area in September 2005 on 50- metre line spacing, with stations 25m apart. This geophysical work was completed in December 2005; results are currently being interpreted to delineate further drilling targets. Pan African Resources is currently consolidating all previous exploration and mining data in the 93/L licence area. Map showing historical prospects and Manica Exploration Licence in spatial relation to the Odzi- Mutare-Manica greenstone belt (shown above) 7 PAN AFRICAN RESOURCES PLC Annual Report and Accounts 2006 Manica Gold Project continued Work completed and planned Plan view (above; figures after red bar refers to thickness and grade in g/t) and three-dimensional view (below; colour scheme relates to grade intervals in g/t as shown in legend) of Mineralised zones at Fair Bride prospect Manica Geophysical Surveys Work Completed Work Planned — 2006 Soil Geochemistry Surface Mapping IP Survey 8224m RC Drilling 1759m Diamond Drilling CPR by Geologix MRC & Explormine DP-DP Geophysical survey 1000m of infill drilling & bulk metallurgical sample 8 PAN AFRICAN RESOURCES PLC Annual Report and Accounts 2006 Metallurgical test work by SGS Lakefield Metallurgical test work by Gold Fields Technical Division Open pit design & cost estimation by Turgis Mining Engineering consultants 8000m drilling programme — follow-up on DP-DP targets Completing an EIA Completing a pre-feasibility study at the end of the 2006 calendar year A Dipole Pseudo-section from Fair Bride prospect (cid:3) (cid:3) (cid:3) (cid:3) (cid:3) (cid:3) (cid:3) (cid:3) (cid:3) (cid:3) (cid:3) (cid:3) (cid:3) (cid:3) Ikonos satellite image (‘bird’s eye view’) of Manica concession showing major geological structures, holes drilled and some of prominent prospects 9 PAN AFRICAN RESOURCES PLC Annual Report and Accounts 2006 Manica Gold Project continued Summary & Strategic Focus Combined 1,311Moz resource independently verified Two mineralised shear zones — 12% explored Focus on four prospects previously mined Fair Bride: 1Moz @ 2.58g/t resource on surface with near term (24 to 36 months) production potential and considerable upside potential (cid:3) Guy Fawkes: 228Koz @ 9,34g/t — established underground mine: down dip and strike extent untested Dot’s Luck & Andrada: 50Koz @ 1.66g/t — build on surface resource potential Boa Esperanza: 31Koz @ 2.96g/t — Open-pit and underground mine, potential untested Build on proving up multi-million ounce surface resource at Manica project in Mozambique Defined drill targets to be tested during 2006 Complete a pre-feasibility study on surface resource 10 PAN AFRICAN RESOURCES PLC Annual Report and Accounts 2006 (cid:3) (cid:3) (cid:3) (cid:3) (cid:3) (cid:3) (cid:3) (cid:3) (cid:3) Bogoin & Dekoa Gold Projects Central African Republic Regional Geological Setting and Mining History The area is characterised by metabasalts, sericite schists and banded iron- formation sequences. Mineralisation appears to be shear-zone hosted within these lithologies. Two project areas have been defined: the Bogoin Gold Project covering 1000km2, and the Dekoa Gold Project covering 3000km2. Ownership & Title The project areas cover two of the four major known greenstone belts in the Central African Republic. The project areas are covered by four exclusive exploration licences. Pan African has purchased an additional 10% stake due upon project development from Goldiam SARL and its right to purchase another 10% bringing its effective stake in each gold project meeting certain development criteria to a possible 65% stake. Pan African has management control on an executive level and manages the exploration programme on the joint venture’s behalf. Gold has previously been mined in the area from a now abandoned open-pit. Three of the best drill intercepts from exploration work carried out in the 1960s by GTZ (Deutsche Gesellschaft fur Technische Zusammenarbeit) were 17.38g/t over 19m, 3.90 g/t over 28m, and 5.05g/t over 20m. Map showing location of Bogoin and Dekoa gold projects in the Central African Republic 11 PAN AFRICAN RESOURCES PLC Annual Report and Accounts 2006 Bogoin and Dekoa Gold Project continued Exploration History & Current Status Work Completed Covered 60km of mineralised strike-length with soil sampling programme at Bogoin Identified a 12km gold-in-soil anomaly at Bogoin Infill soil geochem sampling Ground magnetic survey at Bogoin Work Planned — 2006 Identify drill targets at Bogoin Drill one of the targets at Bogoin Start soil sampling programme at Dekoa Mineral Resource Estimation Resource Status/Geological Potential Completion of a soil sampling programme — results identified a significant gold-in- soil, exceeding 12km in strike-length. This could indicate the potential of a large gold deposit. Map showing plan view of 12km gold-in-soil anomaly identified and position of historical boreholes drilled in the area 12 PAN AFRICAN RESOURCES PLC Annual Report and Accounts 2006 (cid:3) (cid:3) (cid:3) (cid:3) (cid:3) (cid:3) (cid:3) Summary & Strategic Focus The target: Multi-million ounce gold deposits (+2Moz) Fast track exploration activity to delineate large gold anomalies Expand land holding in CAR: one of only two known gold exploration companies active in the country Bogoin gold project: exclusive exploration licence covering ~1000km2 — 12km gold-in-soil anomaly: identify and drill targets during 2006 Dekoa greenstone belt: recently granted 3 exclusive exploration licences ~3000km2 — Commence soil sampling Q2 Geological team drying soil samples for dispatch to the laboratory for gold analysis at the Bogoin project 13 PAN AFRICAN RESOURCES PLC Annual Report and Accounts 2006 (cid:3) (cid:3) (cid:3) (cid:3) (cid:3) Bogoin and Dekoa Gold Project continued Map showing Pan African and its JV partners Gold Projects at Bogoin and Dekoa in relationship to major gold discoveries within the same tectonic region 14 PAN AFRICAN RESOURCES PLC Annual Report and Accounts 2006 BOARD OF DIRECTORS COLIN BIRD C.ENG, FIMMM CHAIRMAN — NON-EXECUTIVE CEO of Jubilee Platinum plc, Managing Director of Lion Mining Finance Ltd. Served as director on several junior exploration and mining companies. JAN NELSON B.SC. (HONS) CHIEF EXECUTIVE OFFICER Geologist with extensive management experience in the mining & exploration industry with Gold Fields, Harmony & Hunter Dickenson NATHAN STEINBERG FCA, FCCA, TEP FINANCE DIRECTOR Partner at Munslows Chartered Accountants, Finance Director at Golden Prospect plc ROB STILL B.COM (HONS), CTA, CA(SA) NON-EXECUTIVE CEO of Pangea Exploration. Served as CEO and Director of various junior and major exploration and mining companies. HENNIE BLIGNAULT PH.D. NON-EXECUTIVE Independent Exploration Consultant Group Geologist at Gold Fields. 15 PAN AFRICAN RESOURCES PLC Annual Report and Accounts 2006 Directors’ Report The Directors present their annual report and the audited financial statements for the 18 month period ended 31 March 2006. PRINCIPAL ACTIVITIES AND REVIEW OF BUSINESS The Group’s principal activity during the period was that of mineral exploitation and exploration. A full review of the activity of the business and of future prospects is contained in the Executive Review which accompanies these financial statements. GOING CONCERN The Board confirms that the business is a going concern and has reviewed its working capital requirements in conjunction with its future funding capabilities for the next 12 months and has found them to be adequate. DIRECTORS AND THEIR INTERESTS The present membership of the Board is set out on page 15. RESULTS AND DIVIDENDS The results for the period are disclosed in the profit and loss account on page 20. The Directors who held office during the period and their interests in the Company’s issued share capital are given below: The Directors do not recommend a dividend. POLICY FOR PAYMENT OF CREDITORS It is the Company’s policy to settle all agreed transactions within the terms established with suppliers. There were no trade creditors at the balance sheet date. Name of Director Mr C Bird Mr H J Blignault (appointed 09/01/2006) Mr J Nelson (appointed 01/09/2005) Mr R G Still Mr N A Steinberg FCA FCCA TEP Mr R M Craddock (resigned 22/07/2005) Mr T Kroepelien (resigned 29/03/2005) Ordinary shares At At Share options At At 31/03/06 01/10/04 31/03/06 01/10/04 25,000,000 — — — 800,000 25,000,000 — — — 800,000 4,000,000 5,000,000 18,000,000 4,000,000 5,200,000 4,000,000 — — 4,000,000 5,200,000 In addition, Mr Rob Still is a director of Pangea Exploration (Pty) Limited which holds 6,000,000 ordinary shares and has an option over 7,500,000 ordinary shares. A trust connected to Mr Still’s family and Brait S.A., a substantial shareholder (see below) for which Mr Still acts as an adviser, both have substantial interests in Pangea Exploration (Pty) Limited. 16 PAN AFRICAN RESOURCES PLC Annual Report and Accounts 2006 SUBSTANTIAL SHAREHOLDERS The Directors understand that the following are institutional shareholders as at 26 June 2006: Ordinary shares of 1p each Brait S.A. Craton Capital Number Percentage 68,400,000 27,000,000 16.7% 6.6% AUDITORS Grant Thornton UK LLP have expressed their willingness to continue in office as auditors. A resolution to reappoint them will be proposed at the forthcoming Annual General Meeting. Approved by the Board of Directors and signed on behalf of the Board on 29 June 2006. C BIRD Chairman 29 June 2006 17 PAN AFRICAN RESOURCES PLC Annual Report and Accounts 2006 Statement of Directors’ Responsibilities Company law in the United Kingdom requires the Directors to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the Company and the Group and of the profit or loss of the Group for that period. In preparing those financial statements the Directors are required to: Select suitable accounting policies and then apply them consistently; Make judgements and estimates that are reasonable and prudent; State whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; Prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group will continue in business. The Directors are responsible for keeping proper accounting records which disclose, with reasonable accuracy at any time, the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 1985. They are also responsible for safeguarding the assets of the Group and for taking reasonable steps for the prevention and detection of fraud and other irregularities. 18 PAN AFRICAN RESOURCES PLC Annual Report and Accounts 2006 (cid:3) (cid:3) (cid:3) (cid:3) Report of the Independent Auditors to the Members of Pan African Resources plc We have audited the financial statements of Pan African Resources plc for the eighteen month period ended 31 March 2006 which comprise the consolidated profit and loss account, the balance sheets, the consolidated cash flow statement and notes 1 to 20. These financial statements have been prepared under the accounting policies set out therein. This report is made solely to the Company’s members, as a body, in accordance with Section 235 of the Companies Act 1985. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditors’ report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members, as a body, for our audit work, for this report, or for the opinions we have formed. RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS The Directors’ responsibilities for preparing the annual report and the financial statements in accordance with United Kingdom law and accounting standards are set out in the statement of directors’ responsibilities. Our responsibility is to audit the financial statements in accordance with relevant legal and regulatory requirements and United Kingdom auditing standards. We report to you our opinion as to whether the financial statements give a true and fair view and are properly prepared in accordance with the Companies Act 1985. We also report to you if, in our opinion, the directors’ report is not consistent with the financial statements, if the Company has not kept proper accounting records, if we have not received all the information and explanations we require for our audit, or if information specified by law regarding Directors’ remuneration and transactions with the Group is not disclosed. We read other information contained in the annual report and consider whether it is consistent with the audited financial statements. This other information comprises only the chairman’s statement, review of operations and directors’ report. We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the financial statements. Our responsibilities do not extend to any other information. BASIS OF OPINION We conducted our audit in accordance with United Kingdom auditing standards issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgements made by the Directors in the preparation of the financial statements, and of whether the accounting policies are appropriate to the Group’s circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion, we also evaluated the overall adequacy of the presentation of information in the financial statements. OPINION In our opinion the financial statements give a true and fair view of the state of affairs of the Company and the Group at 31 March 2006 and of the loss of the Group for the eighteen month period then ended and have been properly prepared in accordance with the Companies Act 1985. GRANT THORNTON UK LLP Registered Auditors Chartered Accountants Southampton 29 June 2006 19 PAN AFRICAN RESOURCES PLC Annual Report and Accounts 2006 Consolidated Profit and Loss Account period ended 31 March 2006 Exploration costs Administrative expenses Total administrative expenses and operating loss Interest receivable Amounts written off investments Loss on ordinary activities before taxation Tax on loss on ordinary activities Loss for the financial period Loss per ordinary share — basic There were no recognised gains or losses other than the loss for the period. The accompanying accounting policies and notes form an integral part of these financial statements 18 months to 31/03/06 £ 18 months to 30/09/04 £ Notes 7 2 4 5 6 (464,575) (346,827) (811,402) 30,759 (10,650) (791,293) — — (178,374) (178,374) 14,143 — (164,231) — (791,293) (164,231) (0.22p) (0.09p) 20 PAN AFRICAN RESOURCES PLC Annual Report and Accounts 2006 Consolidated Balance Sheet as at 31 March 2006 Fixed assets Intangible assets Investments Current assets Debtors Cash at bank Creditors: amounts falling due within one year Net current assets Total assets less current liabilities Capital and reserves Share capital Share premium account Merger reserve Profit and loss account Shareholders’ funds These financial statements were approved by the Board on 29 June 2006 and signed on its behalf by: N A STEINBERG FCA FCCA TEP Finance Director C BIRD Chairman The accompanying accounting policies and notes form an integral part of these financial statements Notes £ £ £ £ 31/03/06 30/09/04 7 8 9 10 11 12 12 4,847,630 4,800 4,852,430 3,831,710 24,200 3,855,910 3,225 1,874,702 1,877,927 (399,455) 18,434 1,224,133 1,242,567 (107,163) 1,478,472 6,330,902 4,077,532 3,978,178 1,485,000 (3,209,808) 6,330,902 1,135,404 4,991,314 3,520,000 2,404,829 1,485,000 (2,418,515) 4,991,314 21 PAN AFRICAN RESOURCES PLC Annual Report and Accounts 2006 Company Balance Sheet as at 31 March 2006 Notes £ £ 31/03/06 30/09/04 £ £ Fixed assets Investments Current assets Debtors Cash at bank 8 9 2,273,630 1,874,652 4,148,282 Creditors: amounts falling due within one year 10 (380,487) Net current assets Total assets less current liabilities Capital and reserves Share capital Share premium account Merger reserve Profit and loss account Shareholders’ funds 11 12 12 These financial statements were approved by the Board on 29 June 2006 and signed on its behalf by: 3,074,505 3,093,905 786,110 1,208,255 1,994,365 (81,352) 3,767,795 6,842,300 4,077,532 3,978,178 1,485,000 (2,698,410) 6,842,300 1,913,013 5,006,918 3,520,000 2,404,829 1,485,000 (2,402,911) 5,006,918 N A STEINBERG FCA FCCA TEP Finance Director C BIRD Chairman The accompanying accounting policies and notes form an integral part of these financial statements 22 PAN AFRICAN RESOURCES PLC Annual Report and Accounts 2006 Consolidated Cash Flow Statement period ended 31 March 2006 Net cash outflow from operating activities Returns on investments and servicing of finance Capital expenditure and financial investment Acquisitions Financing Increase in cash The accompanying accounting policies and notes form an integral part of these financial statements 18 months to 31/03/06 £ 18 months to 30/09/04 £ (503,901) (118,199) 30,759 14,143 (697,170) (777,405) — (43,724) 1,820,881 1,578,674 650,569 653,489 Notes 14 15 15 15 15 16 23 PAN AFRICAN RESOURCES PLC Annual Report and Accounts 2006 Notes to the Financial Statements period ended 31 March 2006 1 Accounting policies Basis of accounting The financial statements are prepared under the historical convention and in accordance with applicable United Kingdom accounting standards. The principal accounting policies, which have been reviewed by the Directors in the light of FRS 18, are set out below. Consolidation The Group financial statements consolidate those of the Company and its subsidiary undertakings (see note 8) drawn up to 31 March 2006 under the acquisition method. The results of the subsidiary undertakings acquired are included from the date of acquisition. Profits or losses on inter-group transactions are eliminated in full. On acquisition of a subsidiary, all of the subsidiary’s assets and liabilities which exist at the date of acquisition are recorded at their fair value reflecting their condition at that date. Segmental analysis The Group’s exploration activities and intangible assets are in Africa although the working capital to fund these activities is held in the United Kingdom. Other segmental analysis is not material to the financial statements. Fixed asset investments Fixed Asset Investments are included at cost less amounts written off. Deferred exploration costs The Group uses the full cost method of accounting for mining operations. The cost of expenditure on licences, concessions and explorations incurred by subsidiary undertakings are carried as intangible assets until such time as it is determined that there are commercially exploitable reserves at which time such costs are transferred to tangible assets to be depreciated over the expected productive life of the asset. The Group’s intangible assets are reviewed periodically by the Directors. Exploration appraisal and development costs determined as unsuccessful are written off to the profit and loss account. Deferred tax Deferred tax is recognised on all timing differences where the transactions or events that give the Group an obligation to pay more tax in the future, or a right to pay less tax in the future, have occurred by the balance sheet date. Deferred tax assets are recognised when it is more likely than not that they will be recovered. Deferred tax is measured using rates of tax that have been enacted or substantively enacted by the balance sheet date. Corresponding figures Corresponding figures are shown for the 18 month period ended 30 September 2004. 24 PAN AFRICAN RESOURCES PLC Annual Report and Accounts 2006 2 Operating loss Operating loss is stated after charging: Auditors’ remuneration — audit services — non-audit services as nominated adviser The operating costs largely comprise central overheads related to the management of the Group’s activities. 3 Directors and employees Staff costs, including Directors’ remuneration were as follows: Wages and salaries Social security costs Directors’ fees 2006 £ 10,500 — 2004 £ 5,000 12,000 2006 £ 67,500 4,957 12,250 84,707 2004 £ 9,750 828 — 10,578 The only employees of the Company were the Directors as detailed in the directors’ report. Nathan Steinberg is a partner in Munslows, a firm of Chartered Certified Accountants. That firm charged fees of £20,000 (2004: £32,500) excluding VAT in respect of professional services. The Company incurred fees of £11,250 from Lion Mining Finance Limited, a company of which Colin Bird is a director. No payments in respect of pension contributions have been made. 4 Taxation reconciliation Loss on ordinary activities before taxation Loss on ordinary activities multiplied by the standard rate of UK corporation tax Expenses not deductible for tax purposes Unrelieved tax losses to be carried forward UK corporation tax payable Accumulated tax losses available to set against future taxable revenue Capital Revenue 2006 £ 2004 £ (791,293) (164,231) (237,388) 1,082 236,306 — (49,269) 321 48,948 — 1,255,798 944,637 1,264,548 668,098 25 PAN AFRICAN RESOURCES PLC Annual Report and Accounts 2006 Notes to the Financial Statements period ended 31 March 2006 5 Loss for the financial period The Company has taken advantage of Section 230 of the Companies Act 1985 and has not included its own profit and loss account in these financial statements. The company loss for the period was £295,499 (2004: £148,627). 6 Loss per ordinary share The calculation of loss per ordinary share is based on losses of £791,293 (2004: £164,231) and on 354,281,542 ordinary shares (2004: 170,803,279), being the weighted average number of ordinary shares in issue during the period. There is no dilutive effect of share options. 7 Intangible fixed assets — Group Cost At October 2004 Additions — exploration costs Less: costs of aborted projects in Ghana written off At 31 March 2006 Exploration Expenditure £ 3,831,710 1,480,495 (464,575) 4,847,630 Included in the above are fees of £12,500 (2004: £35,000) paid to Munslows, a firm in which N A Steinberg is a partner and fees of £9,000 (2004: £10,000) to Lion Mining Finance Limited, a company of which C Bird is a director. 26 PAN AFRICAN RESOURCES PLC Annual Report and Accounts 2006 8 Fixed asset investments Group Cost At 1 October 2004 Provisions for diminution in value At 31 March 2006 Company Cost At 1 October 2004 Provision for diminution in value At 31 March 2006 £ 24,200 (19,400) 4,800 Total £ Subsidiaries £ Other £ 3,069,705 — 3,069,705 24,200 (19,400) 3,093,905 (19,400) 4,800 3,074,505 At 31 March 2006 the Company held the following shares in subsidiary undertakings. Name of undertaking Mistral Resource Development Corporation Limited Brampton Capital Overseas Limited Globalstrand Limited Country of incorporation Principal activity British Virgin Islands British Virgin Islands England and Wales Mining exploration Mining exploration Dormant Proportion of capital held by country 100% 100% 100% Other investments include Orevest plc, an investment which is traded on OFEX, at market value of £4,800 (2004: cost £24,200). The market value at 30 September 2004 was £18,932. 9 Debtors Prepayments and other debtors Amounts owed by subsidiaries 2006 £ 3,225 — 3,225 Group Company 2004 £ 18,434 — 2006 £ 3,225 2,270,405 18,434 2,273,630 2004 £ 18,434 767,676 786,110 Amounts owed by the subsidiaries are repayable on demand but are not expected to be repaid in the foreseeable future. 27 PAN AFRICAN RESOURCES PLC Annual Report and Accounts 2006 Notes to the Financial Statements period ended 31 March 2006 10 Creditors: amounts falling due within one year Taxes and social security Accruals and deferred income Amounts owed to subsidiaries 11 Share capital Authorised equity shares 1,000,000,000 ordinary shares of £0.01 each Allotted equity shares 407,753,235 Allotted, called up and fully paid ordinary shares of £0.01 each The following issues of shares were made during the period. Group Company 2006 £ — 399,455 — 399,455 2004 £ 1,424 105,739 — 107,163 2006 £ — 380,487 — 380,487 2004 £ 1,424 79,927 1 81,352 2006 £ 2004 £ 10,000,000 10,000,000 4,077,532 3,520,000 a) On 3 October 2005, 2,750,000 ordinary shares were issued at 2p per share as consideration for exploration costs in the Central African Republic of which 1p per share has been credited to share premium account. b) On 21 December 2005, 7,000,000 ordinary shares were issued for cash at 3p per share, of which 2p per share has been credited to share premium account. c) On 26 March 2006, 6,000,000 ordinary shares were issued at 4.25p per share as consideration for the acquisition of exploration rights as set out in note 20 below, of which 3.25p per share has been credited to share premium account, and a further 40,003,235 ordinary shares were issued for cash at 4.25p per share, of which 3.25p per share has been credited to share premium account. 28 PAN AFRICAN RESOURCES PLC Annual Report and Accounts 2006 12 Reserves Group At 1 October 2004 Issue of shares Expenses of share issue Loss for the period At 31 March 2006 Company At 1 October 2004 Issue of shares Expenses of share issue Loss for the period At 31 March 2006 Share issue costs include fees of £25,000 to Munslows, a firm in which N A Steinberg, a Director, is a partner. 13 Reconciliation of movement in shareholders’ funds Loss for the period Proceeds of share issue Issue costs Opening shareholders’ funds Closing shareholders’ funds Share premium account £ 2,404,829 1,662,606 (89,257) — Merger reserve £ 1,485,000 — — — Profit and loss account £ (2,418,515) — — (791,283) 3,978,178 1,485,000 (3,209,808) 2,404,829 1,662,606 (89,257) — 1,485,000 — — — (2,402,911) — — (295,499) 3,978,178 1,485,000 2,698,410 2006 £ (791,293) 2,220,138 (89,257) 1,339,588 4,991,314 Group 2004 £ (164,231) 4,905,000 (321,326) 4,419,443 571,871 6,330,902 4,991,314 29 PAN AFRICAN RESOURCES PLC Annual Report and Accounts 2006 Notes to the Financial Statements period ended 31 March 2006 14 Reconciliation of operating loss to net cash outflow from operating activities Operating loss Increase in creditors Decrease in debtors 15 Gross cash flows Returns on investments and servicing of finance Interest received Capital expenditure and financial investment Sale of investment Proceeds from liquidation of investment Purchase of intangible fixed assets Acquisitions Payments to acquire subsidiaries Bank balances acquired with subsidiary Financing Proceeds of issue of shares Issue costs 30 PAN AFRICAN RESOURCES PLC Annual Report and Accounts 2006 2006 £ (811,402) 292,292 15,209 Group 2004 £ (178,374) 50,226 9,949 (503,901) (118,199) 2006 £ 2004 £ 30,759 14,143 — 8,750 (705,920) 5,000 — (782,045) (697,170) (777,405) — — — (64,705) 20,981 (43,724) 1,910,138 (89,257) 1,900,000 (321,326) 1,820,881 1,578,674 16 Reconciliation of net cash flow to movement in net funds Net funds at 1 October 2004 Increase in cash in the period Net funds at 31 March 2006 17 Share options 2006 £ 1,224,133 650,569 2004 £ 570,644 653,489 1,874,702 1,224,133 The Company has share option schemes under which options have been granted to the Directors and other persons. The share options currently in existence are as follows: Date granted Parties 10/5/2000 03/4/2000 13/8/2004 13/8/2004 01/09/2005 Former Director Directors Directors Others Directors Exercise price Number of shares Vesting date 4p 4p 4p 4p 2p 1,500,000 1,200,000 12,000,000 16,300,000 23,000,000 18/5/2003 18/5/2003 08/9/2004 08/9/2004 02/09/2006 Final exercise date 18/5/2007 18/5/2007 08/09/2007 08/09/2007 02/09/2016 At the period end the market value of the Company’s shares was 5.2p per share. The highest price during the period was 5.72p and the lowest price was 1p. 31 PAN AFRICAN RESOURCES PLC Annual Report and Accounts 2006 Notes to the Financial Statements period ended 31 March 2006 18 Financial instruments The Company uses financial instruments, other than derivatives, comprising cash liquid resources and various items such as debtors, creditors and other items that arise directly from its operations. The main purpose of these financial instruments is to utilise finance in the Group’s operations. The main risks arising from the Company’s financial instruments are interest risk, liquidity risk and currency risk. The Directors review and agree policies for managing these risks and these are summarised below. Short-term debtors and creditors have been excluded from all the following disclosures. Interest rate risk The Company finances its operations through equity financing to alleviate the interest rate risk. Liquidity risk The Company seeks to manage financial risk to ensure sufficient liquidity is available to meet foreseeable needs and to invest cash assets safely and profitably. Currency risk The Company manages its currency risk by holding financial investments in sterling and financing the investment in overseas securities on an arising basis. Fair values The fair values of the Company’s instruments are considered equal to the book value. The interest rate exposure of the financial assets of the Company as at 31 March 2006 related wholly to floating interest rates in respect of cash at bank and is held in the following currencies: Sterling — Cash at bank US Dollars 32 PAN AFRICAN RESOURCES PLC Annual Report and Accounts 2006 2006 £ 2004 £ 1,874,652 50 1,208,255 15,878 1,874,702 1,224,133 19 Related party transactions Mr R G Still is a director of Pangea Exploration (Pty) Limited which is owned as to 33% by a trust connected with his family. Exploration expenditure of £255,476 was incurred by Pangea Exploration (Pty) Limited on behalf of the Company in respect of the Manica gold project in accordance with an agreement dated 19 November 2003, £44,735 in respect of the Bogoin project in accordance with an agreement dated 30 September 2005 and £92,755 in respect of project management. In addition, the Group has acquired rights from Pangea in the Bogoin project in Central African Republic as set out in note 20 below. Administration expenditure includes £15,000 (excluding VAT) (2004: £10,000) incurred by Munslows on behalf of the Company in respect of its office accommodation costs. 20 Capital Commitments The Company agreed in January 2006 to acquire 100% of Explorator Limitada for a consideration of £150,000 to be satisfied by the issue of 7,500,000 ordinary shares in the Company. The completion of this transaction will take place when the relevant regulatory approval is received from the Mozambique authorities. The Board has contracted to acquire rights in the joint venture in Central African Republic from Pangea Exploration (Pty) Limited. The consideration is payable over 3 years and subject to continuing of operation in Central African Republic over the period. The Company has satisfied its obligation in the balance sheet date of £255,000 satisfied by the issue of 6,000,000 shares at 4.25p. The future commitments under this agreement are estimated at £510,000 which the Company can satisfy by the issue of a further 12,000,000 ordinary shares in the Company. The Board has contracted to acquire an additional 10% interest in the joint venture from Goldium for £112,000 of which £53,000 has been paid and £59,000 will be satisfied by the issue of 1,072,727 ordinary shares in the Company. The completion of this transaction will take place when the relevant regulatory approvals have been received from the Central African Republic authorities. 33 PAN AFRICAN RESOURCES PLC Annual Report and Accounts 2006 Notice of the 2006 Annual General Meeting Notice is hereby given that the 2006 Annual General Meeting of the Company will be held at the offices of Grant Thornton, Grant Thornton House, Euston Square, Melton Street, London NW1 2EP on 27 July 2006 at 10.30 a.m. to transact the following business of the Company. To receive and adopt the Directors’ Report and the financial statements for the period ended 31 March 2006. To re-elect Hendrik Johann Blignault as a Director, who was appointed during the period. To re-elect Jan Petrus Nelson as a Director, who was appointed during the period. To re-elect Robert George Still as a Director, who is retiring by rotation. 7. As special business to consider and, if thought fit, to pass the following resolution which will be proposed as a Special Resolution. THAT the Directors be and they are hereby empowered pursuant to Section 95 of the Companies Act 1985 (“the Act”), in substitution for all previous powers granted thereunder, to allot equity securities of up to an aggregate nominal amount of £2,922,000.00 (within the meaning of Section 94 of the Act) for cash pursuant to the authority granted by resolution 6 above as if Section 89(1) of the Act did not apply to any such allotment provided that this power shall expire at the conclusion of the Annual General Meeting of the Company to be held in 2007, save that the Company may, before such expiry make an offer or agreement which would or might require equity securities to be allotted after such expiry and the Directors may allot equity securities in pursuance of any such offer or agreement as if the authority conferred hereby had not expired. 1. 2. 3. 4. 5. 6. To reappoint Grant Thornton UK LLP as auditors and to authorise the Directors to fix their remuneration. By Order of the Board dated 29 June 2006 As special business, to consider and, if thought fit, to pass the following resolution which will be proposed as an Ordinary Resolution. THAT the Directors be and are hereby generally and unconditionally authorised pursuant to Section 80 of the Companies Act 1985 ("the Act"), in substitution for all previous powers granted to them, to exercise all the powers of the Company to allot and make offers to allot relevant securities (within the meaning of Section 80(2) of the Act) up to an aggregate nominal amount £2,922,000.00; such authority shall, unless previously revoked or varied by the Company in general meeting, expire on the conclusion of the Annual General Meeting of the Company to be held in 2007 provided that the Company may, at any time before such expiry, make an offer or enter into an agreement which would or might require relevant securities to be allotted after such expiry and the Directors may allot relevant securities pursuant to any such offer or agreement as if the authority conferred hereby had not expired. JOHN BOTTOMLEY Secretary Manfield House 2nd Floor 1 Southampton Street London WC2R 0LR 34 PAN AFRICAN RESOURCES PLC Annual Report and Accounts 2006 Form of Proxy I/We, the undersigned, being a member of the above-named company, hereby appoint . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . or failing him the Chairman of the meeting as my/our proxy to vote for me/us on my/our behalf at the Annual General Meeting of the Company to be held on 27 July 2006 at 10.30 a.m. and at any adjournment thereof. The proxy will vote on the undermentioned resolutions, as indicated. ORDINARY RESOLUTIONS 1. To adopt the Report and Accounts. 2. To re-elect Hendrik Johan Blignault, a Director who was appointed during the period. 3. To re-elect Jan Petrus Nelson, a Director who was appointed during the period. 4. To re-elect Robert George Still, a Director who is retiring by rotation. 5. To reappoint Grant Thornton UK LLP as auditors. 6. To empower the Directors to allot relevant securities pursuant to Section 80 of the Companies Act 1985. SPECIAL RESOLUTIONS 7. To disapply the pre-emption rights contained in Section 89(1) of the Companies Act 1985. FOR AGAINST WITHHELD* VOTE DISCRE- TIONARY† If this form is signed and returned without any indication as to how the proxy shall vote, he will exercise his discretion both as to how he votes (and whether or not he abstains from voting). * The “Vote Withheld” option is to enable you to abstain on the specified resolution. Please note a “Vote Withheld” has no legal effect and will not be counted in The votes “For” and “Against” a resolution. † If you select “Discretionary” or fail to select any of the given options, the proxy is authorised to vote (or abstain from voting) at his or her discretion on the specified resolution. The proxy is also authorised to vote (or abstain from voting) on any other business, which may properly come before the meeting. Print name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Date . . . . . . . . . . . . . . . . . . . . . . . Signature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Notes: (i) (ii) (iii) (iv) (v) This form is for use of shareholders only and will be used only in the event of a poll being directed or demanded. You may if you wish delete the words “the Chairman of the Meeting” and substitute the name(s) of your choice. Please initial such alteration. To be effective this form of proxy must be lodged at the Company’s registrars, Capita Registrars Limited, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU not later than 48 hours before the start of the meeting. In the case of a corporation the form must be executed under its common seal or under the hand of an officer or attorney duly authorised in writing. In the case of joint holders the signature of any of them will suffice but the names of all joint holders should be shown. The vote of the senior joint holder who tenders a vote whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders, and for this purpose seniority shall be determined by the order in which the names stand in the Register of Members in respect of the joint holding. 35 PAN AFRICAN RESOURCES PLC Annual Report and Accounts 2006 ✄ First fold l d o f d r i h T e t i s o p p o p a l f n i k c u t d n a d a o R m a h n e k c e B 4 3 M A H N E K C E B R B 4 3 R B t n e K d e t i m L i s r a r t s i g e R a t i p a C y r t s i g e R e h T 22 l d o f d n o c e S I E C V R E S Y L P E R S S E N S U B I 2 2 1 B M . o N e c n e c L i Officers and Advisers DIRECTORS Colin Bird (Non-Executive Chairman) Hendrik Johan Blignault (Non-Executive Director) Jan Petrus Nelson (Chief Executive Officer) Robert George Still (Non-Executive Director) Nathan Anthony Steinberg FCA FCCA TEP (Finance Director) COMPANY SECRETARY AND REGISTERED OFFICE John Michael Bottomley FICS Manfield House 2nd Floor 1 Southampton Street London WC2R 0LR Company Number: 3937466 AUDITORS Grant Thornton UK LLP 31 Carlton Crescent Southampton SO15 2EW BROKERS AND NOMINATED ADVISERS Ambrian Partners Limited 8 Angel Court London EC2R 7HP REGISTRARS Capita Registrars Northern House Woodsome Park Fenay Bridge Huddersfield HD8 0LA SOLICITORS Stringer Saul 17 Hanover Square London W1S 1HU WEBSITE www.panafricanresources.com www.panafricanresources.com Pan African Resources PLC Registered Office: Manfield House 2nd Floor 1 Southampton Street London WC2R 0LR United Kingdom Tel: +44 (0)20 7845 7500 Fax: +44 (0)20 7845 7501 Administration Pangea Block Central Park Suites Central Main and Orchard Avenue Bordeaux Randburg 2125 South Africa Tel: +44 (0)27 11 886 1211 Fax: +44 (0)27 11 886 1044 

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