Annual Report 2010
The diff erence
• Dividend paying gold company
• Unhedged and debt free
• Gold production: shallow, low cost & high grade
• Consistent year-on-year improvement in productivity
• Low cost & high grade platinum production from surface
due in 2011
• Management team with a proven track record of delivery
Platinum - tipped gold – with a yield
Pan African Resources PLC Annual Report 2010
1
Nature of our Business
Pan African Resources Plc (“Pan African”, “Pan African Resources”, “the Company” or “the Group”) is an African focused mining group
that produces approximately 100,000oz of gold per year, with production of platinum group metals forecast to begin by September of
2011. Its focus is on low cost, high margin production and acquiring near production projects. The Group is debt free, unhedged and
is able to fund its current on-mine capital expenditure from internal cash fl ows.
• Production and growth focus driven by:
• Low cost base;
• High margins;
• Signifi cant potential for long-term growth in reserve base; and
• Creating an enabling environment to allow optimum performance.
Resilient fi nancial performance
• Revenue from gold sales increased by 29.25% to £68.5 million (2009: £53.0 million)
• Headline earnings per share (“HEPS”) increased by 25.88% to 1.07p (2009: 0.85p)
• Earnings per share (“EPS”) increased by 160.00% to 1.04p (2009: 0.40p)
• Earnings before interest, tax, depreciation, amortisation and impairment (“EBITDA”)
increased by 9.17% to £25.0 million (2009: £22.9 million)
• Final dividend of 0.3723p per share (2009: dividend of 0.2555p per share) proposed
• Cash and cash equivalents increased by 435.56% to £12.80 million
(2009: £2.39 million)
Continued production improvement
from the Barberton Mines
(Proprietary) Limited
(“Barberton Mines”)
mining operations
• Underground gold production increased by 2.71% to 97,483oz (2009: 94,909oz)
• Headgrade improved by 2.81% to 10.61g/t (2009: 10.32g/t)
• Measured and indicated resource base increased by 30.22% to 1,814,000oz
(2009: 1,393,000oz)
• Barberton Mines old order mining rights converted to new order mining rights
Major progress made at
Phoenix Platinum Mining
(Proprietary) Limited
(“Phoenix Platinum”)
• Exclusive terms signed with International Ferro Metals (SA) (Proprietary) Limited
(“IFM”) in terms of the site location for a Chrome Tailings Retreatment Plant
(“CTRP”)
• Resource upgraded by 15.80% to 469,000oz (previously 405,000oz)
• Production expected to commence in the second half of 2011
• Forecast cash cost of less than US$400/oz
Established management team
with a proven track record
of unlocking potential
• Shanduka Gold (Proprietary) Limited (“Shanduka”) acquired a 26% shareholding in
Pan African
• Cyril Ramaphosa appointed as the Non-Executive Chairman
Pan African Resources PLC
(hereinaft er referred to as “Pan African”, “Pan African Resources”, “the Company” or “the Group”)
(Incorporated in England & Wales under the Companies Act 1985 with registration number
3937466 on 25 February 2000)
Share code on AIM: PAF
Share code on the JSE: PAN
ISIN: GB0005300496
2
Looking forward , management
is excited , passionate and
driven to not only meet but
exceed expectations
“Pan African’s
profi tability and
dividend payments
cert ainly distinguish the
Company from its peer
group”
2 Nature of our business
4 Salient features
5 Share statistics and shareholding
6 Geographic location
6 Company structure
7 Chairman’s report
9 Chief executive offi cer’s review
Over the past year we have
explored extensive business
opport unities that will help
Pan African Resources grow its
port folio
18 Mining operation: Barberton Mines
24 Near-term production: Phoenix Platinum Mining
26 Growth project: Manica gold project (“Manica”)
28 New business
Over the last
year Pan African
Resources has
streamlined various
aspects of its business,
in part icular Mineral
Resource Management,
and appointed the
best teams to meet
the challenges of the
sustainable business
that lie ahead
30 Group Mineral Resource Management Strategy
33 Mineral Resource Statement
39 Reporting code and standards
42 Board of directors
48 Executive management – Pan African Resources
48 Executive management – Barberton Mines
49 Corporate governance
56 Directors’ report
59 Statement of directors’ responsibilities
60 UK Independent auditors’ report
62 Independent auditors’ report
63 Certifi cate of the Company Secretary
64 Consolidated and Company statement of comprehensive
income
65 Consolidated and Company statement of fi nancial position
67 Consolidated and Company statement of changes in equity
68 Notes to the fi nancial statements
100 Notice of Annual General Meeting
104 Glossary of Terms and Abbreviations
Inserted Form of Proxy
Pan African Resources PLC Annual Report 2010
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Salient Features
Year ended Year ended
30 June
2009
30 June
2010
%
Change
Statement of Comprehensive
Income
Profi t after taxation
Headline earnings
(see Note 14 on page 81)
Gold sales
Mining profi t
Cost of production
Impairment costs
(£) 14,499,875
8,091,286
79.20
(£) 14,612,633
9,428,998
(£) 68,506,394
53,000,352
(£) 24,664,624
21,994,689
(£) (40,553,886) (28,504,686)
(5,025,463)
(£)
(335,401)
Statement of Financial
Position
Non-current assets
Current assets (including cash)
Total equity
Non-current liabilities
Current liabilities
Operating Performance
Tons milled
Headgrade
Gold sold
Spot price received
Total cash costs
Capital expenditure
(£) 74,324,150
(£) 17,677,295
(£) 73,486,877
(£) 11,430,530
7,084,038
(£)
67,197,831
4,948,877
56,360,402
9,685,537
6,100,769
(t)
(g/t)
(oz)
(US$/oz)
(US$/oz)
(£)
313,167
10.61
98,091
1,098
650
5,935,346
313,952
10.32
97,353
867
469
4,318,425
54.98
29.26
12.14
42.27
(93.33)
10.60
257.20
30.39
18.02
16.12
(0.25)
2.81
0.76
26.64
38.59
37.44
(cid:3)
(cid:73)
(cid:71)
(cid:82)
(cid:73)
(cid:52)
1.2
1
0.8
0.6
0.4
0.2
0.0
-0.2
-0.4
(cid:44)(cid:73)(cid:69)(cid:72)(cid:80)(cid:77)(cid:82)(cid:73)(cid:3)(cid:73)(cid:69)(cid:86)(cid:82)(cid:77)(cid:82)(cid:75)(cid:87)(cid:3)(cid:84)(cid:73)(cid:82)(cid:71)(cid:73)(cid:3)(cid:84)(cid:73)(cid:86)(cid:3)(cid:87)(cid:76)(cid:69)(cid:86)(cid:73)
(cid:37)(cid:71)(cid:85)(cid:89)(cid:77)(cid:87)(cid:77)(cid:88)(cid:77)(cid:83)(cid:82)(cid:3)(cid:83)(cid:74)(cid:3)
(cid:38)(cid:69)(cid:86)(cid:70)(cid:73)(cid:86)(cid:88)(cid:83)(cid:82)(cid:3)(cid:49)(cid:77)(cid:82)(cid:73)(cid:87)
(cid:21)(cid:28)(cid:3)(cid:81)(cid:83)(cid:82)(cid:88)(cid:76)(cid:87)(cid:3)
(cid:73)(cid:82)(cid:72)(cid:73)(cid:72)(cid:3)
(cid:23)(cid:21)(cid:3)(cid:49)(cid:69)(cid:86)(cid:71)(cid:76)(cid:3)
(cid:22)(cid:20)(cid:20)(cid:26)
(cid:21)(cid:25)(cid:3)(cid:81)(cid:83)(cid:82)(cid:88)(cid:76)(cid:87)(cid:3)
(cid:73)(cid:82)(cid:72)(cid:73)(cid:72)(cid:3)
(cid:23)(cid:20)(cid:3)(cid:46)(cid:89)(cid:82)(cid:73)(cid:3)
(cid:22)(cid:20)(cid:20)(cid:27)
(cid:61)(cid:73)(cid:69)(cid:86)(cid:3)
(cid:73)(cid:82)(cid:72)(cid:73)(cid:72)(cid:3)
(cid:23)(cid:20)(cid:3)(cid:46)(cid:89)(cid:82)(cid:73)(cid:3)
(cid:22)(cid:20)(cid:20)(cid:28)
(cid:61)(cid:73)(cid:69)(cid:86)(cid:3)
(cid:73)(cid:82)(cid:72)(cid:73)(cid:72)(cid:3)
(cid:23)(cid:20)(cid:3)(cid:46)(cid:89)(cid:82)(cid:73)(cid:3)
(cid:22)(cid:20)(cid:20)(cid:29)
(cid:61)(cid:73)(cid:69)(cid:86)
(cid:73)(cid:82)(cid:72)(cid:73)(cid:72)(cid:3)
(cid:23)(cid:20)(cid:3)(cid:46)(cid:89)(cid:82)(cid:73)(cid:3)
(cid:22)(cid:20)(cid:21)(cid:20)
16 000, 000
14 000, 000
12 000, 000
10, 000, 000
(cid:3)
(cid:134)
8, 000, 000
6, 000, 000
4, 000, 000
2, 000, 000
0.0
(2, 000, 000)
(cid:37)(cid:88)(cid:88)(cid:86)(cid:77)(cid:70)(cid:89)(cid:88)(cid:69)(cid:70)(cid:80)(cid:73)(cid:3)(cid:84)(cid:86)(cid:83)(cid:74)(cid:77)(cid:88)(cid:19)(cid:12)(cid:80)(cid:83)(cid:87)(cid:87)(cid:13)(cid:3)(cid:88)(cid:83)(cid:3)(cid:88)(cid:76)(cid:73)(cid:3)
(cid:83)(cid:91)(cid:82)(cid:73)(cid:86)(cid:87)(cid:3)(cid:83)(cid:74)(cid:3)(cid:88)(cid:76)(cid:73)(cid:3)(cid:84)(cid:69)(cid:86)(cid:73)(cid:82)(cid:88)
(cid:37)(cid:71)(cid:85)(cid:89)(cid:77)(cid:87)(cid:77)(cid:88)(cid:77)(cid:83)(cid:82)(cid:3)(cid:83)(cid:74)(cid:3)
(cid:38)(cid:69)(cid:86)(cid:70)(cid:73)(cid:86)(cid:88)(cid:83)(cid:82)(cid:3)(cid:49)(cid:77)(cid:82)(cid:73)(cid:87)
(cid:45)(cid:81)(cid:84)(cid:69)(cid:77)(cid:86)(cid:81)(cid:73)(cid:82)(cid:88)
(cid:37)(cid:88)(cid:88)(cid:86)(cid:77)(cid:70)(cid:89)(cid:88)(cid:69)(cid:70)(cid:80)(cid:73)(cid:3)
(cid:84)(cid:86)(cid:83)(cid:74)(cid:77)(cid:88)(cid:19)(cid:12)(cid:80)(cid:83)(cid:87)(cid:87)(cid:13)
(cid:21)(cid:25)(cid:3)(cid:81)(cid:83)(cid:82)(cid:88)(cid:76)(cid:87)(cid:3)
(cid:73)(cid:82)(cid:72)(cid:73)(cid:72)(cid:3)
(cid:23)(cid:20)(cid:3)(cid:46)(cid:89)(cid:82)(cid:73)(cid:3)
(cid:22)(cid:20)(cid:20)(cid:27)
(cid:61)(cid:73)(cid:69)(cid:86)(cid:3)
(cid:73)(cid:82)(cid:72)(cid:73)(cid:72)(cid:3)
(cid:23)(cid:20)(cid:3)(cid:46)(cid:89)(cid:82)(cid:73)(cid:3)
(cid:22)(cid:20)(cid:20)(cid:28)
(cid:61)(cid:73)(cid:69)(cid:86)(cid:3)
(cid:73)(cid:82)(cid:72)(cid:73)(cid:72)(cid:3)
(cid:23)(cid:20)(cid:3)(cid:46)(cid:89)(cid:82)(cid:73)(cid:3)
(cid:22)(cid:20)(cid:20)(cid:29)
(cid:61)(cid:73)(cid:69)(cid:86)(cid:3)
(cid:73)(cid:82)(cid:72)(cid:73)(cid:72)(cid:3)
(cid:23)(cid:20)(cid:3)(cid:46)(cid:89)(cid:82)(cid:73)(cid:3)
(cid:22)(cid:20)(cid:21)(cid:20)
4
Share Statistics and Shareholding
Year ended
30 June
2010
Year ended
30 June
2009
%
Change
Number of shares in issue
at end of year
Weighted average number of shares
in issue
Weighted average diluted number
of shares in issue
1,409,540,711 1,112,589,162
26.69
1,366,268,709 1,104,367,219
23.72
1,379,880,423 1,107,248,663
24.62
Major shareholdings
As at 25 June 2010, the substantial shareholdings of the Company were:
Shares in issue: 1,409,540,711
Name
Shanduka
Coronation Fund Managers
Investec Asset Management
Allan Gray Investment Council
JP Morgan Asset Management
Number of
shares
366,168,585
221,821,092
149,898,928
76,294,036
58,955,000
%
held
25.98
15,74
10,63
5.41
4.18
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n
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t
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(cid:54)(cid:73)(cid:90)(cid:73)(cid:82)(cid:89)(cid:73)
(cid:37)(cid:71)(cid:85)(cid:89)(cid:77)(cid:87)(cid:77)(cid:88)(cid:77)(cid:83)(cid:82)(cid:3)(cid:83)(cid:74)(cid:3)
(cid:38)(cid:69)(cid:86)(cid:70)(cid:73)(cid:86)(cid:88)(cid:83)(cid:82)(cid:3)(cid:49)(cid:77)(cid:82)(cid:73)(cid:87)
(cid:13)
(cid:20)
(cid:20)
(cid:20)
(cid:12)
(cid:3)
(cid:134)
80 000, 000
70 000, 000
60 000, 000
50, 000, 000
40, 000, 000
30, 000, 000
20, 000, 000
10, 000, 000
0.0
Gold produced
Acquisition of
Barberton Mines
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f
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160 000
140 000
120 000
100, 000
80, 000
60, 000,
40, 000
20, 000
0.0
(cid:21)(cid:25)(cid:3)(cid:81)(cid:83)(cid:82)(cid:88)(cid:76)(cid:87)(cid:3)
(cid:73)(cid:82)(cid:72)(cid:73)(cid:72)(cid:3)
(cid:23)(cid:20)(cid:3)(cid:46)(cid:89)(cid:82)(cid:73)(cid:3)
(cid:22)(cid:20)(cid:20)(cid:27)
(cid:61)(cid:73)(cid:69)(cid:86)
(cid:73)(cid:82)(cid:72)(cid:73)(cid:72)(cid:3)
(cid:23)(cid:20)(cid:3)(cid:46)(cid:89)(cid:82)(cid:73)(cid:3)
(cid:22)(cid:20)(cid:20)(cid:28)
(cid:61)(cid:73)(cid:69)(cid:86)
(cid:73)(cid:82)(cid:72)(cid:73)(cid:72)(cid:3)
(cid:23)(cid:20)(cid:3)(cid:46)(cid:89)(cid:82)(cid:73)(cid:3)
(cid:22)(cid:20)(cid:20)(cid:29)
(cid:61)(cid:73)(cid:69)(cid:86)
(cid:73)(cid:82)(cid:72)(cid:73)(cid:72)(cid:3)
(cid:23)(cid:20)(cid:3)(cid:46)(cid:89)(cid:82)(cid:73)(cid:3)
(cid:22)(cid:20)(cid:21)(cid:20)
Year ended
30 June
2006
Year ended
30 June
2007
Year ended
30 June
2008
Year ended
30 June
2009
Year ended
30 June
2010
Pan African Resources PLC Annual Report 2010
5
Geographic Location
Equator
Indian Ocean
Mozambique
Manica Project
Phoenix Platinum
Amira, Eagles Nest and
Thomas Victory-Hill Projects
Atlantic Ocean
South
Africa
0
1,000km
(cid:37)arbe(cid:1323)on Mines
- (cid:41)air(cid:89)ie(cid:90), Sheba and (cid:38)onso(cid:1323)
Legend:
Mining operations
Near-term production
Growth projects
Company Structure
Pan African Resources PLC
(Incorporated & Registered in England and Wales under the Companies Act 1985
with registration number 3937466 on 25 February 2000)
100%
100%
2%
100%
100%
Barberton Mines (Pty)
Limited South Africa
(Registered in South Africa)
Barberton Mining Operations
(“Barberton Mines”)
Phoenix Platinum Mining
(Pty) Limited South Africa
(Registered in South Africa)
Phoenix Platinum Chrome
Tailings Retreatment Project
South Africa
(“Phoenix Platinum”)
100%
Mistral Resource
Development Corporation
(British Virgin Isles)
98%
Explorator Limitada
Manica, Mozambique
(Registered in South Africa)
Platinum Sands (Pty) Ltd
(Registered in South Africa)
Manica Gold Project
Mozambique
Brampton Capital Overseas
Capital
(British Virgin Isles)
Dormant
6
Chairman’s Statement
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Cyril Ramaphosa (58)
Chairman
The origins of the quotation “May you live in interesting times” are unclear, but one could be
forgiven for suggesting that the phrase was coined to describe our world today. Markets and
commodity prices have generally recovered from the crash of 2008 and 2009, but market
volatility and a lack of direction are clear indicators of the uncertainty that faces the investor
in 2010.
Pan African has made the conscious decision to focus on those factors that we can control, to
ensure we deliver the performance that our shareholders and other stakeholders expect and
that management has the ability and experience to deliver. Cost control, increased geological
confi dence and a sustained drive to increase productivity are key areas for continuous
improvement. These and other areas of focus will ensure the long-term sustainability of
Barberton Mines, despite general and also mining specifi c infl ationary pressures.
The Group continues to produce pleasing operational and fi nancial results, and looking
forward, management is motivated to maintain and improve on this past success.
Our hearts and thoughts are with the family, friends and co-workers of Mr Mngobe Joseph
Ndlovu, who was fatally injured during a fall of ground accident at Barberton Mines’ Fairview
mine on 9 March 2010. The safety of our employees remains of paramount importance to
the management and board of Pan African, as evidenced by the various health and safety
initiatives and strategies implemented by the Group. A further loss to the Group and to the
board came with the passing of Mr John Hopwood, non-executive director of Pan African,
on 19 March 2010. John’s industry experience and wise counsel made him a great asset to
our board. He is sorely missed.
Pan African Resources PLC Annual Report 2010
7
Chairman’s Statement cont.
“Pan African’s
profi tability
and dividend
payments cert ainly
distinguishes the
Company from
its peer group”
Gold continues to perform well in US$ terms, with current investment demand underpinning
a US$ gold price of US$1,100/oz and above. Despite a strong Rand, Pan African’s margins
from our Barberton Mines operation remain attractive. Barberton Mines continues to be
key to Pan African’s future strategy, providing both ongoing cash fl ows and a further growth
opportunity to the Group.
The recent resource update for Phoenix re-affi rmed the potential of the project. Management
continues to progress Phoenix, and I am looking forward to regular market updates in the
next fi nancial year, as the project progresses towards production. In addition to diversifying
our asset base, a producing Phoenix will provide immediate cash fl ows, and therefore a
further platform for growth.
From a corporate perspective, Pan African welcomed both new shareholders and board
members early in the 2010 fi nancial year. The Company moved its JSE Limited (“JSE”) listing
from the Alternative Exchange to the JSE Main Board. It now has a dual primary listing on the
JSE Main Board and London’s AIM market. I would like to specifi cally thank my predecessor,
Keith Spencer, for his work and direction to the Group during his time as Chairman. Keith
continues his contributions to the board as deputy chairman.
The board has made a decision to propose Pan African’s second dividend. We believe that
the principle of a dividend, together with the size of the payment, demonstrates the Group’s
commitment to creating shareholder value. Pan African’s profi tability and dividend payments
certainly distinguishes the Company from many of the other companies in our sector.
The Group is not set on growth at all costs, we believe in sustainable and well-considered
expansion, whilst also providing a cash return to shareholders when the opportunity arises.
I wish to extend my sincere gratitude to the staff and management of Pan African and our
Group companies for their tireless efforts in ensuring the success of the Group over the past
year. I also wish to thank the shareholders of Pan African, for your loyal support and belief in
the Company and its management.
CM Ramaphosa
Chairman
30 August 2010
8
CEO’s Review
Jan Nelson (40)
Chief Executive Offi cer
“The Board
is once again
recommending
the payment of a
dividend”
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Highlights 2010
• Increase in gold production from underground operations
• Group continues to show that current in-situ gold grades
are sustainable
• Barbert on Mines’ life of mine (“LOM”) extended
• Phoenix is on schedule to supplement Group earnings
• Strong cash fl ows enables the recommendation of a dividend
Introduction
This year the Group continued to deliver a strong operational and fi nancial performance as a
result of increased gold sales and a stronger gold price. This performance clearly demonstrates
our ability not only to successfully operate Barberton Mines (since its acquisition in July 2007),
but also to improve its year-on-year performance.
We believe that our strategy of pursuing profi table growth opportunities which deliver
cash fl ow in the near term, is yielding results. It has strengthened our Statement of Financial
Position to the extent that the board will once again recommend the payment of a fi nal
dividend of 0.3723p per share (2009: dividend of 0.2555p per share paid).
We have now laid the foundations in terms of technical ability and fi nancial muscle and are
well-positioned to grow the Company via our strategic alliance with Shanduka Resources
(our largest shareholder through its subsidiary Shanduka Gold (Pty) Limited).
Pan African Resources PLC Annual Report 2010
9
CEO’s Review cont.
“Cost control
remains a key
focus for our
operational teams”
Despite pleasing results, the impact of signifi cant cost increases at Barberton Mines, mainly
in the area of security, electricity and corporate expenditure, reduced the Group’s EBITDA
in ZAR terms. The Group’s attributable profi t increased as a result of 100% of Barberton
Mines’ earnings fl owing through to a Group level from 21 August 2009 (as a result of the
Shanduka fl ip-up: refer to page 16). We will need to be more vigilant in terms of cost
control. Consequently key focus areas from executive management’s perspective will
be to: (a) increase productivity, (b) reduce security costs signifi cantly, (c) use power more
effi ciently at Barberton Mines and (d) reduce overhead costs. Cost reduction action plans
have been formulated and the effect of these will be reported to shareholders at future
results presentations.
The advancement of the Phoenix Platinum project is on schedule and the main focus will be
to realise cash fl ow from this project by the second half of 2011.
Health and safety
The safety performance of the Barberton mining operations (comprising the Fairview, Sheba
and New Consort sections) showed an improvement year-on-year with lost time injury
frequency rate (“LTIFR”) at 4.2 (2009: 6.4) and serious injury frequency rate (“SIFR”) at
1.1 (2009: 1.7). The number of shifts lost decreased, however the lost day severity rate
increased marginally, which indicates an increase in the severity of injuries experienced. It is
with great regret and sadness that the Company reports the tragic death of Mr Mngobe Joseph
Ndlovu, who lost his life after a fall of ground incident at the Fairview section in March
2010. The Fairview section, prior to this accident, achieved two million fatality free shifts in
February 2010.
Barberton Mines has designed and is in the process of implementing a safety, health,
environment and communities (“SHEC”) management system that will enable us to
improve health and safety and environmental management to industry leading levels. The
full implementation of the SHEC management system will be completed by the second
half of the 2011 fi nancial year. The training of our employees is done through the South
African Mining Qualifi cations Authority accredited training facility at the mine, which utilises
approved training programmes to maintain the competence levels of employees.
Accident rates (per million man hours)
9.6
7.9
6.8
8.0
Acquisition of Barberton Mines
6.4
4.8
2.6
3.7
3.3
2.8
3.1
4.2
2004
2005
2006
2007
2008
1.7
2009
1.1
2010
Lost time injury rate
Serious injury rate
Lost day severity rate
14.8
14.6
14.5
Acquisition of Barberton Mines
12.4
11.0
6.2
6.9
2004
2005
2006
2007
2008
2009
2010
10
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r
u
o
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n
o
i
l
l
i
m
r
e
p
e
t
a
R
8
6
4
2
0
15.0
12.0
e
t
a
r
y
t
i
r
e
v
e
S
9.0
6.0
3.0
0.0
10
The Mine Health and Safety Council targets set by the industry, in conjunction with the
South African Department of Mineral Resources (“DMR”), endeavour to align the health and
safety performance of the South African mining industry with international norms by 2013.
The targets are based on rate improvements for fatalities, noise induced hearing losses and
silicosis. The Group has committed itself to these targets.
Financial performance
Pan African is incorporated in England and Wales, and its reporting currency is pounds
sterling (£). Barberton Mines is a South African company, and its fi nancial statements are
prepared in South African Rand (“ZAR” or “Rand”). When Barberton Mines’ fi nancial
statements are translated into pounds sterling for the purposes of Group consolidation
and reporting, the annual average and year-end closing ZAR:£ exchange rates affect the
Group consolidated fi nancial results. In the current fi nancial year, the average prevailing
ZAR:£ exchange rate was 11.93:1 (2009: 14.39:1), and the closing ZAR:£ exchange rate was
11.53:1 (2009: 12.66:1). The year-on-year change in the average and closing exchange rates of
17.10% and 8.93%, respectively, should be taken into account for the purposes of comparing
year-on-year results.
Gross revenue from gold sales increased by 29.25% to £68.5 million (2009: £53.0 million).
The increase in revenue was mainly attributed to a 26.64% increase in the average gold
spot price received to US$1,098/oz (2009: US$867/oz), and the depreciation of the GBP
against the ZAR. The average US$:ZAR exchange rate was 15.95% stronger at ZAR7.59
(2009: ZAR9.03), which negatively impacted revenue received in ZAR. The effective ZAR
gold price was 6.41% higher at ZAR267,876/kg (2009: ZAR251,740/kg). Mining profi t at
Barberton Mines grew by 12.27% to £24.7 million (2009: £22.0 million).
Cost of production increased by 42.46% to £40.6 million (2009: £28.5 million). In Rand terms,
cost of production increased by 17.97% to ZAR483.8 million (2009: ZAR410.1 million). This
increase is mainly attributable to a 42.86% increase in electricity costs to ZAR42.0 million
(2009: ZAR29.4 million), security costs increasing by 176.92% to ZAR32.4 million
(2009: ZAR11.7 million) and salary, wages and other staff expenses increasing by 18.41% to
ZAR215.5 million (2009: ZAR182.0 million).
Barberton Mines commenced payment of the new South African mining royalty tax upon its
implementation in March 2010. This royalty charge for the year amounted to £0.84 million.
EBITDA for the year under review, excluding impairment charges, was £25.0 million
(2009: £22.9 million), an increase of 9.17%. Other expenses increased 31.29% to
£1.93 million (2009: £1.47 million), largely due to cancellation of the Metorex Limited
(“Metorex”) management agreement for Barberton Mines on 1 July 2009, for a consideration
of £0.34 million. The Company incurred an exploration expenditure impairment charge
of £0.35 million (2009: £5.0 million) during the year. This was the fi nal impairment charge
related to the Company’s investment in the Central African Republic.
Year ended
Year ended
30 June 2010 30 June 2009
Cash cost breakdown
(excluding Capex)
Year ended 30 June 2009
3 5%
%
7%
9%
16%
16%
44%
Salaries
Mining
Processing
Engineering
Electricity
Security
Other
R410,096,314
£28,504,686
US$/oz 469
ZAR/Kg 136,178
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Cash cost breakdown
(excluding Capex)
Year ended 30 June 2010
6%
7%
9%
7%
13%
14%
44%
Salaries
Mining
Processing
Engineering
Electricity
Security
Other
R483,807,857
£40,553,886
US$/oz 650
ZAR/Kg 158,711
Gold sales
EBITDA (excluding impairment)
Attributable profi t – Owners of the parent
EPS (see Note 14)
HEPS (see Note 14)
Weighted average number of shares in issue
(£)
(£)
(£)
(pence)
(pence)
68,506,394
25,022,552
14,277,232
1.04
1.07
53,000,352
22,889,784
4,403,535
0.40
0.85
1,366,268,709 1,104,367,219
Pan African Resources PLC Annual Report 2010
11
CEO’s Review cont.
Group income tax decreased by 6.10% to £7.7 million (2009: £8.2 million), due to a lower
tax rate percentage calculated in accordance with the South African gold mining tax formula.
This tax formula calculates an income tax rate, based on the ratio of revenues to mining costs
and capital expenditure.
The effective tax rate decreased from 50.39% to 34.55% in the current year. In the prior year
the profi t after taxation included an impairment charge of £5.0 million, which resulted in the
effective Group tax rate being signifi cantly higher than normal, as the impairment charge was
not deductible for tax purposes.
1200
1000
z
o
/
$
S
U
800
600
400
200
0
350, 000
300, 000
250, 000
200, 000
150, 000
d
e
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i
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s
n
o
T
100, 000
50, 000
0.0
)
0
0
0
(
£
7, 000, 000
6, 000, 000
5, 000, 000
4, 000, 000
3, 000, 000
2, 000, 000
1, 000, 000
0.0
Company cash cost vs average gold price
Acquisition of
Barberton Mines
Nominal cash cost/oz
Adjusted PPI cash cost/oz
(Base 30 June 2006)
Average gold price received
$/oz
2006
2007
2008
2009
2010
Production statistics
Acquisition of Barberton Mines
2006
2007
2008
2009
2010
Capital expenditure
Acquisition of
Barberton Mines
2006
2007
2008
2009
2010
Vamping tons
Consort
Sheba
Fairview
Development capital
Maintenance capital
Operating performance
Barberton Mines sold 98,091oz of gold during the year, an increase of 0.76% from the
previous year (2009: 97,353oz). Although marginal, the increase is signifi cant in light of the
fact that mining was stopped for a period of two weeks in December 2009 due to illegal
mining activity.
Of further signifi cance is that all gold production was attributable from underground
mining operations, which increased by 2.71% to 97,483oz (2009: 94,909oz). As mentioned
12
“The Group continues
to achieve its targeted
milestones in
bringing the Phoenix
Platinum Project
into production”
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in the previous reporting period, production is expected to continue to increase as
a result of increased capital investment and implementation of an integrated Mineral
Resource Management (“MRM”) programme, which is expected to increase mining
fl exibility. The decrease of 0.25% in the volume of underground mining tons to 313,167t
(2009: 313,952t) was negligible and was offset by a 2.81% increase in headgrade to 10.61g/t
(2009: 10.32g/t).
Total cash costs increased by 38.59% to US$650/oz (2009: US$469/oz). In Rand terms, total
cash costs increased by 16.55% to ZAR158,711/kg (2009: ZAR136,178/kg).
Total capital expenditure at the mine increased by 47.50% to £5.9 million or 20.71% to
ZAR70.4 million (2009: £4 million or ZAR58.32 million). Maintenance capital expenditure
of £2.9 million (2009: £1.9 million) and development capital expenditure of £3.0 million
(2009: £2.1 million) was incurred.
Phoenix Platinum Mining (Pty) Limited
Since the previous reporting period signifi cant milestones have been achieved on the Phoenix
Platinum project. The fi rst of these was the signing of an exclusive terms of site agreement on
18 February 2010 with IFM. This agreement sets out the framework for concluding a formal
plant site agreement. Negotiations in this regard are currently being fi nalised.
In addition the following major technical milestones have been achieved:
• the completion of a metallurgical competent person’s report;
• the compilation of a SAMREC compliant resource estimate resulting in the PGM 4E’s
metal content increasing by 15.80% from 405,000oz to 469,000oz and the average grade
by 2.60% from 3.07g/t PGM 4Es to 3.15g/t PGM 4Es; and
• detailed process fl ow and engineering design was completed in June 2010. This will lead
to the fi nal capital cost estimate for the supply, construction and commissioning of the
Phoenix plant in accordance with the process design criteria being completed in the third
quarter of 2010.
Pan African Resources PLC Annual Report 2010
13
CEO’s Review cont.
“Our unique
approach to
Mineral Resource
Management
remains one of
our competitive
strengths”
Plant construction should commence during the second half of 2010 with commercial
production forecast to start in the second half of 2011.
Mining rights conversion
In terms of the South African Mineral and Petroleum Resources Development Act, 2002
(“MPRDA”), all mining licenses issued prior to the MPRDA that came into effect on
1 April 2004 are described as Old Order Mining Rights (“OOMR”). Holders of such rights
were required to have applied to the DMR for the conversion of these OOMR into New
Order Mining Rights (“NOMR”) within fi ve years of the MPRDA coming into effect.
Barberton Mines converted all its OOMR during the 2010 fi nancial year.
Barberton Mines NOMR relate to the mining licences in respect of Fairview Mine (old
order mining licence 28/2003), New Consort Mine (old order mining licence 30/2003) and
Sheba Mine (old order mining licence 29/2003). These licences combined comprise the
Barberton mining operations.
Mineral Resource Management
Gold inventory
The total resource inventory for the Group increased, when measured in terms of
gold content, by 1.16% to 4.635Moz (41.85Mt @ 3.45g/t), compared to 4.582Moz
(41.52Mt @ 3.44g/t) in 2009. The increase resulted from additional drilling and underground
development (at Barberton Mines), which led to a re-defi nition of geological envelopes and
geostatistical re-evaluation.
During the year under review, the Group’s reserve in gold content that is attributable to
Barberton Mines increased by 6.79% to 661,000oz (2.318Mt @ 8.87g/t), compared to
619,000oz (2.38Mt @ 8.01g/t) in 2009. Further, the increase in the Mineral Reserve grade of
10.74% to 8.87g/t (2009: 8.01g/t) is extremely encouraging.
A professional mining engineer with 15 years of relevant experience was appointed on a
full-time basis at Barberton Mines as MRM Manager, and the net result of the MRM initiative
at Barberton Mines is not only an extension in the LOM, but also an expectation that the
LOM will be further increased in the near future despite current depletion rates. By applying
an 85% conversion rate to the Combined Measured and Indicated Resource inventory,
Barberton Mines currently indicates an improved LOM from 10 years (2009) to 15 years.
Focus has also shifted to the identifi cation of shallow, low cost mineral resources, which
can be brought to account in the near term. This approach will not only see the production
profi le grow, but should also impact positively on the cost structure at Barberton Mines.
Our Group Consulting Geologist, Martin Bevelander, is turning his attention to accelerating
the exploration activities in the prospecting permit area at Barberton Mines. A regional
airborne geophysical survey was completed over the permit area and a series of potentially
near-surface targets have already been identifi ed. The Company will focus on drilling these
targets in the coming year, as some of the anomalies identifi ed are equal in size to the current
footprint of the Fairview mine.
Platinum inventory
The Company is also pleased to report a South African Code for Reporting of Exploration
Results, Mineral Resources and Mineral Reserves (“SAMREC”) compliant Platinum Group
14
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Elements (“PGE”) (4E: platinum, palladium, rhodium and gold) Mineral Resource for the
Phoenix Platinum project of 469,000 4E oz (4.64Mt @3.15g/t).
Previously the Group reported the Mineral Resource inventory as tailing feedstock volumes,
which at the time was estimated at 4.3Mt grading at between 1.1g/t and 4.18g/t, yielding a
total of 360Koz 4E. Subsequently, the Company geostatistically remodelled all resources at
Phoenix Platinum.
“We continue to
look at growth
opport unities that
will signifi cantly
strengthen our
Financial Position”
Of the total Mineral Resource 33.0% is located as surface sources (935Kt @ 2.45g/t) and
67.00% (1,277 Kt @ 3.66g/t) as current arisings.
Current feasibility work indicates a LOM of 17 years, producing an estimated 12,222oz 4E
per annum.
Group MRM strategy
The MRM initiative will continue to be a key strategic corporate focus for the Group enabling
management to ensure:
(a) that the economic value of mineral assets is optimally managed and extracted;
(b) integration of technical and associated functional disciplines along the business value
chain;
(c) increased levels of corporate governance through continued audit and quality control;
and
(d) the creation of shareholder value.
New business
For ty three projects were reviewed during the year. None fulfi lled our investment
criteria. Although we remain committed to growing our asset base, such growth will
come only from projects that fi t the Group’s investment criteria. This is a strategy that
has set us apar t from our peer group and will continue to do so in the future.
Pan African Resources PLC Annual Report 2010
15
CEO’s Review cont.
Corporate developments
On 19 June 2009, the Company announced that it had concluded an agreement with
Shanduka whereby Pan African would acquire Shanduka’s 26% shareholding in Barberton
Mines in exchange for the issue of 295,751,549 new Pan African ordinary shares to Shanduka.
This share exchange transaction with Shanduka became effective on 21 August 2009.
The board considered it prudent to simplify the Pan African Group structure by acquiring
the entire issued share capital of Barberton Mines, and in doing so:
• signifi cantly increasing the attributable gold ounces to Pan African to approximately
100,000 oz per year; and
• terminating the shareholders’ agreement that existed at Barberton Mines level.
On 26 June 2009, Metorex announced that it had engaged in a sale of shares exercise to
dispose of its 53.37% shareholding in Pan African. In addition to its 21% shareholding in
Pan African issued via the share exchange transaction detailed above, Shanduka purchased an
additional 5% of the enlarged share capital of Pan African through the sale of shares exercise.
As a result, Shanduka increased its shareholding in Pan African to 26%. The balance of the
shares sold by Metorex was taken up by institutional investors.
On 1 July 2009, the Company announced that Barberton Mines had cancelled the Metorex
management agreement for a consideration of £0.34 million. The outstanding consideration of
£954,759 to acquire 100% of Phoenix Platinum was paid to Metorex on 30 September 2009.
Illegal mining activity
We are pleased to report that the pro-active approach to the illegal mining problem at
Barberton Mines has signifi cantly reduced illegal mining activity in terms of both intensity
and severity.
By appointing a dedicated executive, reporting directly to the CEO on this issue, an enabling
environment has been created, which has resulted in a signifi cant increase in gold production
at the mine. Signifi cant progress has also been made in engaging all stakeholders in the
surrounding community (including Government) to combat this problem.
Despite our success, we need to remain vigilant. Our security effort has come at signifi cant
cost. Security costs for the fi nancial year have increased by 237.50% to £2.7 million (2009:
£0.8 million). Our focus in the coming fi nancial year will therefore be to not compromise
our current position, whilst at the same time reducing security expenditure by 25.93%
to £2.0 million. This will be achieved through: (a) making use of new advances in security
technology, (b) increasing perimeter controls, (c) a new approach to security management
with special reference to contractors and (d) seeking the co-operation of all stakeholders.
The future
We believe that the bedrock of a storm proof house is a strong foundation. We further
believe that the building of such a house is a process and not an event, and that the process
requires a systematic approach. Building a mining house is no different and, therefore, let us
refl ect on our foundation as it currently stands:
• Strong operational management team that continues to deliver strong operational
performance;
• Experienced project development team;
• Experienced board that ensures the requisite technical and fi nancial controls are in place;
• High quality assets with low-cost base and signifi cant upside potential;
• Strong Statement of Financial Position that allows a platform for further growth; and
• Strategic alignment to Shanduka in terms of sustainable growth.
16
“We have laid the
foundation to
build Pan African
into a signifi cant
mining house”
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How has our approach translated into shareholder value? Allow the numbers to speak for
themselves:
• Increase in profi t after tax over three years of 91.32%;
• Increase in HEPS over three years of 109.80%;
• Increase in underground gold production over three years of 18.25%;
• Decrease in serious accident rate over three years of 64.52%;
• Increase in capital expenditure over three years of 103.95%;
• Increase in measured and indicated resource over three years of 58.00%;
• Acquisition of Barberton Mines for less than US$200/oz at current prevailing gold price of
US$1,200/oz;
• Acquisition of near term CTRP business for less than US$140/oz at current prevailing
4 PGM basket price of US$1,350/oz; and
• Cash in bank growing by 435.56% and no debt.
Our turnaround, from loss-making explorer to a profi table gold producer (which soon
will also yield platinum production) has taken only three years, against the backdrop of a
challenging global environment. Getting the basics right, fi nding a better way, facing adversity
with guts and courage and our drive to shape the future of mining is our recipe for success.
Our focus on high margins, good returns and value accretive growth is what sets us apart
from our peers and will enable us to continue to pay dividends.
Our success is the result of a team effort and the continued support and patience from our
shareholders. The foundation is solid and we are now able to take advantage of major growth
opportunities to build Pan African into a signifi cant mining house.
As refl ected by our chairman, the interesting times in which we live have forced us to push
harder and perform better. I am proud to lead a team that has shown that it excels in such
circumstances.
Thank you again to our shareholders for your support, trust and patience.
JP Nelson
Chief Executive Offi cer
30 August 2010
Pan African Resources PLC Annual Report 2010
17
Mining Operations: Barbert on Mines
Nelspruit
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Legend:
Mining Licence
Prospecting Right
National Road
Regional Road
Railway
Barberton
Greenstone Belt
Name
Location
Status
Barbert on Mines
Mpumalanga province
(South Africa)
Gold producer
Holding company
Pan African (100% stake)
Controlling company Pan African
Geological sett ing
Sediments and metavolcanics
within the Barbert on
greenstone belt
Products mined
Gold
Actual production
• Tons per annum: 315Kt
• Grade (head grade): 10g/t
• Content per annum: 100Koz
Ongoing capex
£5.9 million per annum
Extraction method
BIOX®/CIL
LOM
15 years
Key management
Executive: Mining:
Mario Gericke
General Manager:
Casper Strydom
Sustainability and Diversity:
Thandeka Ncube
Safety, health and environment
The number of lost time injuries and serious injuries reduced during the year compared
to 2009 and resulted in improved accident rates of 4.20 and 1.10, respectively
(2009: 6.4 and 1.7). However, the lost day severity rate showed an increase for the year,
which is an indication of the increase of the severity of injuries experienced. In March 2010
one employee lost his life as a result of a fall of ground incident at the Fairview section.
The Company deeply regrets the fatality and remains committed to the zero accidents
philosophy that has been integral to safety management at the mine.
18
The Company remains committed to:
• the improvement of health and safety performance through the setting and achievement
of goals, taking into account stakeholder expectations and industry leading practices;
• the implementation of systems to provide a working environment that is conducive to
good health and safety; and
• the management of risks in the workplace and ensuring that employees have the relevant
skills to perform work-related tasks in a safe manner.
Production summary
2010*
2009*
2008*
2007**
2006**
Tons milled
Headgrade
Overall recovery
Production: underground
Production: calcine dump
Gold sold
(t)
313,167
313,952
315,305
330,367
313,779
(g/t)
(%)
(oz)
(oz)
(oz)
10.61
10.32
91
91
8.90
91
9.20
10.70
92
92
97,483
94,909
82,436
90,022
99,281
–
3,955
13,513
–
–
98,091
97,353
99,078
89,572
99,924
Average price: spot
(R/kg)
267,876
251,740
193,159
148,151
108,644
Average price: hedge
(R/kg)
–
–
105,850
96,067
90,125
Average price: spot
(US$/oz)
1,098
Average price: hedge
US$/oz)
Total cash cost US$/oz sold (US$/oz)
–
650
867
–
469
823
451
476
640
415
465
528
438
429
Total cash cost R/kg sold
(R/kg)
158,711
136,178
111,272
107,656
88,177
Total cost per ton
Total mining cost per ton
(R/t)
(R/t)
1,537
1,486
1,313
1,256
1,088
1,045
908
858
873
833
Capital expenditure
(£) 5,918,271 4,052,665 2,901,792 1,637,359 1,091,965
Exchange rate – average
(ZAR/£)
Exchange rate – closing
(ZAR/£)
Exchange rate – average (ZAR/US$)
Exchange rate – closing (ZAR/US$)
11.93
11.53
7.59
7.65
14.39
12.66
9.03
7.72
14.68
15.56
7.30
7.80
13.95
14.18
7.20
7.00
n/a
n/a
6.40
7.20
* Post-reverse acquisition of Barberton Mines
** Pre-reverse acquisition of Barberton Mines
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Pan African Resources PLC Annual Report 2010
19
Mining Operations: Barbert on Mines cont.
Capital expenditure
Organic growth projects
Key Project
I
II
Sheba – 35 ZK decline
Sheba – Edwin Bray, Thomas
and Joe’s Luck area
Fairview – 60/62 level development
III
IV Fairview – 3 shaft deepening
V Consort – 40 level exploration
drive
VI Consort – 50 level decline west
VII Consort – 37 Inter-level
exploration drive
slipping)
29
(station
break-away
out of shaft)
100
97
Year ended
Year ended
30 Jun 10 (m) 30 Jun 09 (m)
Potential
resource
target (oz)
140
69
5,000
1,056
642
36
740
817
Equipping
(equivalent
and cleaning
complete
–
15,000
203,000
350,000
10,000
224
–
30,000
–
I) Sheba – 35 ZK decline
Shaft sinking has been completed up to 36 level and horizontal development has commenced.
The hanging wall contact was intersected and development on this contact towards the
cross-fractures is underway.
II) Sheba – Edwin Bray, Thomas and Joe’s Luck area
Good development rates were achieved during the fi nancial year with the haulage
development reaching its destination. The return airway must still be completed.
Exploration drilling will re-commence to delineate the full extent of the Thomas fracture.
III) Fairview – 60/62 level development
This capital project has been completed with most employees being moved to the 3 shaft
capital project. Normal stoping operations have now started in this area.
IV) Fairview – 3 Shaft deepening
The cleaning of the shaft up to 64 level has been completed and widening of the shaft
between 62 and 64 level progressed well. At the end of the fi nancial year approximately 15m
of widening remained. Thereafter solid bottom sinking will commence.
V) Consort – 40 level exploration drive
40 Level station was developed off PC Shaft. Equipping of this level will commence in the
new fi nancial year followed by the development of an exploration drive.
VI) Consort – 50 level decline west
Sinking progressed to within a few metres from establishing the second station landing.
The focus for the new fi nancial year will be to complete the decline down to the third and
fi nal level, where after horizontal development will commence on all three levels.
20
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Pan African Resources PLC Annual Report 2010
21
Mining Operations: Barbert on Mines cont.
VII) Consort – 37 inter-level exploration drive
Excellent progress was made with the development on 37 inter-level and planned advances
were achieved. Exploration drilling has commenced.
Maintenance capital
The capital expenditure on maintenance of the processing plants at Barberton Mines
amounted to £190,813 for the year, as a result of the upgrade to the plant fl otation section
and installation of new Jameson cells at the Sheba section. Work commenced on the
extension of the tailings dam at the Fairview section of Barberton Mines and this work is
planned to be completed over a two-year period. This expenditure for the year under review
amounted to £440,550. The installation cost for a water treatment plant at Consort, for the
treatment of excess water from the process plant and tailing dams, amounted to £110,719
for the year.
The capital expenditure in the BIOX® plant situated at Fairview included the refurbishment
of a number of the secondary tank reactors, the procurement of critical spares for the plant
and the installation of a new BIOX® water treatment circuit. The expenditure on the BIOX®
plant amounted to £214,050 for the year under review.
The capital expenditure on the maintenance of the engineering equipment and infrastructure
totalled £985,478 for the year. The re-building of the load haul dump units (“LHDs”) was
a key focus area, to upgrade the mining equipment fl eet, and £261,504 was spent on this
activity during the year. The rehabilitation of shafts and headgears at the mine amounted to
£110,244. The replacement of skips, cages and bridles, together with the upgrading of shaft
safety devices and the installation of hydraulic shaft loading facilities, amounted to £217,795.
At Sheba the conversion of four battery locos and the procurement of an all-terrain forklift
and maintenance vehicle amounted to £79,066. Expenditure at all three sections of the mine
on power factor correction and solar heating amounted to £120,170. The replacement of
obsolete compressors with modern, more effi cient units and the upgrade of pumping and
reticulation systems amounted to £128,045 for the year.
The installation of a new 250kW booster fan and further upgrades to improve the ventilation
fl ows at Fairview and Sheba required £155,228 in capital expenditure. The procurement
of additional self-contained self-rescuers, required for Barberton Mines to comply with
current legal requirements, resulted in £104,225 expenditure. The combined expenditure on
maintenance totalled £2.9 million for Barberton Mines for the year.
Barbert on Mines Mineral Resource inventory as at 30 June 2010
Mineral Reserves
classifi cation(kt)
Mineral Resources
classifi cation
Grade Contained
(g/t) gold (kg)
Tons
(kt)
Grade Contained
(g/t) gold (kg)
(koz)
Tons
315 Measured
315
346
346
Total measured
Indicated
Total indicated
Inferred
Total inferred
Total mineral
resource
5,280
5,280
4,159
4,159
2,331
2,331
5.91
5.91
6.09
5.91
7.50
5.91
31,181
31,181
25,331
25,331
17,489
17,489
(koz)
1,003
1,003
814
814
562
562
11,770
6.29
74,001
2,379
Proven
Total proven
Probable
Total probable
1,418
1,418
900
900
6.91
6.91
11.97
11.97
9,795
9,795
10,777
10,777
Total proven and
probable
2,318
8.87
20,572
661
22
Barbert on Mines – Key focus areas
1. SHEC – Complete the implementation of the integrated safety, health and environment
management system, custom built for the operation to ensure continuous improvement
in the areas of safety, health and environment management and continue playing a leading
role in community and social development in the Barberton area.
2. Volume, value and quality – Focus on safe and steady state production that strives towards
the achievement of the planned ore tonnages, development advances, grades, recoveries
and cost control measures.
3. Productivity – Benchmark the operation to similar operations in the industry and identify
and implement means of improving productivity at the mine.
4. MRM – Continue the implementation of the integrated MRM system aimed at improving
fl exibility in terms of grade management and increasing the LOM of Barberton to 20 years.
5. Transformation – Implementing a plan to achieve the required empowerment targets
set out by Government, whilst enhancing our skills base and continuing improvements in
productivity.
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Pan African Resources PLC Annual Report 2010
23
Near Term Production: Phoenix Platinum
(cid:53)(cid:88)(cid:86)(cid:87)(cid:72)(cid:81)(cid:69)(cid:88)(cid:85)(cid:74)
terkstroom
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Samancor Millsell Mine
Xstrata Kroondal Mine
Middelkraal
Dam
Elandskraal dumps and pits
N4
Kroondal dump
(cid:44)(cid:41)(cid:48)(cid:3)(cid:80)(cid:76)(cid:81)(cid:76)(cid:81)(cid:74)(cid:3)(cid:68)(cid:85)(cid:72)(cid:68)
(cid:37)(cid:88)(cid:1361)(cid:72)(cid:79)(cid:86)(cid:73)(cid:82)(cid:81)(cid:87)(cid:72)(cid:76)(cid:81)(cid:3)(cid:39)(cid:68)(cid:80)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:38)(cid:88)(cid:85)(cid:85)(cid:72)(cid:81)(cid:87)(cid:3)(cid:36)(cid:85)(cid:76)(cid:86)(cid:76)(cid:81)(cid:74)(cid:86)
(cid:37)(cid:68)(cid:83)(cid:82)(cid:81)(cid:74)
N4
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IFM
N4
IFM surface area
Mooinooi
Planned Phoenix CTRP location
Hartebeespoort Dam
Olifantsnek
Dam
Buffelspoort
Dam
0
5km
2
1
5
R
Legend:
Rivers
Dams
Towns
Roads
Railway
Powerlines
Protected Natural Environment
Active Mines
Other Tailings Re-treatment Facilities
Project Boundaries
27°15’
27°30’
27°45’
Name
Location
Status
The Phoenix Platinum processing project
Nort h-West province (South Africa)
Final feasibility
Holding company
Phoenix Platinum
Controlling company Pan African (100% ownership)
Geological sett ing
Chrome tailings discards from chrome seam mining in
Products mined
Platinum (56.5%), Palladium (27%), Rhodium (16%)
the Bushveld Igneous Complex
Forecast production
• Tons per annum: 240,000t
and Gold (0.5%)
• Grade**: 3.52g/t
• Content per annum: 12,222oz
(PGM 4Es) @ 45% recovery
Project capex
£8.5 million
Extraction method
CTRP: Concentrator/fl ot ation plant
LOM
17 years
Key management
Operations Manager: Ron Holding
Metallurgical Consultant: Karishma Sewpersad
* Metal split indicated from metallurgical test work.
** Production Headgrade differs to the Average Resource grade due to the effect of selective mining and
screening-off of coarse low grade material during the processing of tailings.
Project summary
Production
per year
Tons
(kt)
Headgrade
(g/t)
Ounces Working costs
(US$/oz)
(koz)
Life of mine
(years)
PGMs (4Es)*
240
3.52*
12.2
400**
17
* Production Headgrade differs to the Average Resource grade due to the effect of selective mining and
screening-off of coarse low grade material during the processing of tailings.
** The ZAR:US$ exchange rate used to calculated the US$/oz working cost is 7.59.
Phoenix schedule milestones achievements
for the period under consideration
Key event
Achievement
Completion date
Engineering design
Resource statement
CTRP site negotiation
Metallurgical test work
Process fl ow design
Detail engineering design
Initial resource verifi cation
Upgrading to resource CPR
Exclusivity and agreed terms
Metallurgical CPR and process design criteria
May 2010
Jun 2010
Dec 2010
May 2010
Feb 2010
Jan 2010
24
Phoenix schedule milestones objectives for 2010/11
Target date
Key event
Objective
Comments
CTRP site negotiation
Final capital expenditure
Project review
Commence construction
Production start up
Conclude CTRP site negotiations
Detail engineering design
Capital estimate
Conclude execution agreement
Independent overall review
of the Phoenix Project
Site establishment
Commissioning of the CTRP
Sep 2010
July 2010
Aug 2010
Sep 2010
Sep 2010
2nd half 2010
2nd half 2011
Formal agreement with IFM
Site dependent
Site dependent
Final negotiations
Venmyn Rand (Pty) Limited
to complete
Earth works and civil engineering
* The above indicated project timeline is subject to management’s ability to conclude the preferred plant location agreement with IFM. An alternative site is
available but would however lead to a delay of 18 months in the production timeline.
Phoenix Platinum resource estimation
The Company is also pleased to report a South African Code for Reporting of Exploration
Results, Mineral Resources and Mineral Reserves (“SAMREC”) compliant Platinum Group
Elements (“PGE”) (4E: platinum, palladium, rhodium and gold) Mineral Resource for the
Phoenix Platinum project of 469,000 4Eoz (4.64Mt @3.15g/t).
Previously the Group reported the Mineral Resource inventory as tailing feedstock volumes,
which at the time was estimated at 4.3Mt grading at between 1.1g/t and 4.18g/t, yielding a
total of 360Koz 4E. Subsequently, the Company geostatistically remodelled all resources at
Phoenix Platinum.
Of the total Mineral Resource 33.00% is located as surface sources (935Kt @ 2.45g/t) and
67.00% (1,277 Kt @ 3.66g/t) as current arisings.
Current feasibility work indicates a LOM of 17 years, producing an estimate of 12,222oz 4E
per annum.
The total resource is summarised below:
Phoenix Platinum summary tot al resource
(100% att ributable to Pan African)
Area
Category
Volume (m³)
Tons
Grade
(4E) (g/t)
Kilos Ounces
(4E)
(4E)
All
All
All
Total
Measured
Indicated
Inferred
1,535,000 3,224,000
618,000
804,000
2,211,000 4,646,000
294,000
382,000
3.09
3.20
3.33
3.15
9,975
1,977
2,672
14,624
321,000
63,000
85,000
469,000
The resource statement has been compiled in accordance with SAMREC. The verifi cation
and validation of the data and the information contained in this announcement was managed
by Martin Bevelander, Group Consulting Geologist for Pan African, who is accredited with the
South African Council for Natural Scientifi c Professions (“SACNASP”).
The services of the following independent consultants and experts were secured to assist
and support this process:
• Sampling and Drilling: Plat-Tau Mining Services (Pty) Limited, Gold Mine Sand and Slime
Dams Drillers CC and Dump and Dune (Pty) Limited;
• Assaying, mineralogy and metallurgical test work: Mintek and SGS Lakefi eld Resources
Africa (Pty) Limited;
• Geological modelling and data conversion for the resources: Geologix MRC (Pty) Limited,
a South African resources and geological consultancy. Deon van den Heever is accredited
with SACNASP; and
• Metallicon Process Consulting (Pty) Limited: Michael Valenta is a Professional Engineer
registered with the Engineering Council of South Africa (ECSA) and on the International
Register of Professional Engineers as specifi ed under the Washington Accord.
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Pan African Resources PLC Annual Report 2010
25
Growth Project: Manica
Tanzania
Lake Malawi
Zambia
Malawi
Lake Cahora
Bassa
Tete
Zam
bezi
Manica Project
Quelimane
Harare
Mutare
we
Chimolo
Beira
Inhambane
a
Xai-Xai
Maputo
Legend:
Rivers
Lakes
Cities
Roads
Railway
Swaziland
0
600km
Name
Location
Status
The Manica gold project
Manica province (Mozambique)
Pre-feasibility
Holding company
Explorator Limitada
Pemba
Controlling company Pan African (100% ownership)
Geological sett ing
Sediments and metavolcanics
within the Odzi-Mutare-Manica
greenstone belt
Products mined
Gold
Forecast production
• Tons per annum 410,000t
(only oxide material) • Grade 2,36g/t
• Content per annum 30,000oz
Estimated capital cost £48.58 million per annum
Extraction method
BIOX®/CIL
LOM (includes
Pre-feasibility design indicates
sulphide material)
11 years at 80,000oz gold per annum
(heap-leach and underground
mining option)
Key management
Project Manager: Mario Gericke
Metallurgical Consultant:
Karishma Sewpersad
Project summary
Key events 2010
Date completed
Mineral Resource modelling
Metallurgical test work
Feb 2010
June 2010
Cost
£33,849
£27,875
Strategic review
The Company’s objective of defi ning a Mineral Resource greater than 2 million oz contained
gold was achieved during the fi nal geological modelling completed in February 2010 where a
total in situ Mineral Resource of 2.57 million oz contained gold was achieved.
The viability of the project is presently being investigated by applying a phased approach in
which the oxide mining potential will be the fi rst phase followed by a mining option focusing
on the sulphide bearing portion of the Fairbride project. This prefeasibility level study will
be complete in October 2010, after which its viability will be assessed prior to continuing
to full defi nitive feasibility level study. Metallurgical work to date indicated that a heap leach
philosophy was technically unviable and confi rmed that recoveries of gold in the oxide
part of the Fairbride orebody is satisfactory to warrant classical carbon in leach technology.
Metallurgical test work continues while mine, engineering and plant design is investigated and
costed. The outcome of the pre-feasibility study for this oxide mining option will be available
in December 2010.
26
Project schedule
Key events
Completion date
Cost estimate
Metallurgical test work
Mine design
Plant design
Engineering design
Environmental impact assessment
Completion of pre-feasibility
October 2010
November 2010
November 2010
November 2010
June 2011
December 2010
£33,185
£33,185
£53,096
£53,096
£26,548
£46,459
Current risks identifi ed are as follows:
Risk
Capital cost of the oxide-focused initiative, associated fi nancial modelling results and size of
available oxide resource to support the initiative.
The prospecting licence expires on 20 October 2010 and Government has been
approached to convert the current prospecting licence into a mining licence. The response
from the Mozambique Government has been extremely positive and management would be
presenting their plans during September 2010 and would expect conversion by 20 October
2010.
Probability
Medium to high if more oxide material is identifi ed.
Effect of inability to manage this risk
Should fi nancial viability prove negative it would require an additional exploration programme
to defi ne more oxide resources at Manica or enter into a joint venture with other gold
players in the region to consolidate a suffi ciently large resource base to ensure economic
viability.
Management’s current approach to remediate
Optimally apply all technical expertise to designing a technical and capital cost-effective
design to the mining option.
In the backdrop of engineering, design and costing conduct investigations with respect to
other resources in the Manica valley, investigating possible synergies.
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Pan African Resources PLC Annual Report 2010
27
New Business
Strategy
As part of its growth strategy, Pan African’s focus is on identifying and evaluating gold and
platinum projects in Africa that are at an advanced exploration stage (JORC/SAMREC
Resource declared, ready for Pre-Feasibility Study) or further advanced (at Bankable
Feasibility Study, Mine Development and Construction, or Production stage). See Time-Value
Curve on page 29.
Main target areas are the known Wits/Archean/Birimian-type gold belts of west and southern
Africa, with further focus on projects with a robust resource/reserve base that can be
developed and mined at low cost, yielding high margins and with signifi cant opportunity for
long-term growth. Specifi c countries are indicated on the New Business Target Areas map
on the next page.
Process
Targets are identifi ed on the basis of grade, audited ounces in the ground, size and type of
orebody, and mineability. Other fi lters applied include economic and political risk as well as
level of services and infrastructure.
Once a project has passed through the strategic fi lters, a desktop study is carried out,
culminating in a fi nancial model indicating the project worth (NPV, IRR, Pay-back, etc).
A business case is then presented to the Pan African board, before a full due diligence is
undertaken.
Target
(Project,
Company,
mine)
Filter 1*
Desktop
study
(Initial
fi nancial
model)
Filter 2**
Detailed
review
(technical
and
fi nancial)
Recommendation
Filter 1*: Type/size/grade of orebody; economic/political risk; infrastructure/services.
Filter 2**: NPV; IRR; other fi nancial parameters.
Project summary
The focus during the 2010 fi nancial year was gold and platinum group metal projects in
Southern Africa and within South African borders.
The following table summarises the number of projects reviewed in 2010, listed per country:
Country
Projects reviewed
Desktop study completed
Further action
Burkina Faso
Cote d’Ivoire
Ghana
Senegal
Zambia
Mozambique
South Africa
Tanzania
Zimbabwe
Other
Total
2
1
2
1
1
1
21
1
12
1
43
–
–
–
–
–
–
9
1
–
–
10
–
–
–
–
–
–
8
–
–
–
8
28
Map showing countries that the Group is reviewing
for furt her growth opport unities
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W
Mauritania
Senegal
Mali
Niger
Gambia
Guinea Bissau
Guinea
Sierra Leone
Liberia
Burkina Faso
Benin
Togo
Ivory Coast Ghana
Equator
Atlantic Ocean
a
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f
A
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0
1,000km
Time value curve
Tanzania
Mozambique
Zambia
Namibia
B(cid:1318)swana
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South
Africa
Indian Ocean
Grassroot
exploration
Advanced
exploration
Scoping
study
Production
Target group
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M
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Pan African Resources PLC Annual Report 2010
29
Store of Gold and Platinum
Within Pan African there resides a committed philosophy that a detailed understanding of the
geology undoubtedly contributes to the optimal extraction of our mineral resource. From this
standpoint it is clear that “the economic graded mineral envelope dictates” how and what we
mine. During the 2010 fi nancial year Pan African embarked on an aggressive MRM (“Mineral
Resource Management”) initiative, which focused on an integrated MRM framework. The
initiative is designed to integrate and focus the Geological, Survey and Mine planning functions on
the operations toward maximising the value of the residing orebodies. This is done by ensuring
consistency and integrity in reporting, to continue to pursue value add through exploration, and
sustain delivery through organic growth from within the operations.
Strategy
The key operational focus is to integrate all intellectual capital and technical data in order to
enhance the Mineral Resource confi dence and volume, which results in an improved LOM to
the operations. The MRM framework developed and implemented hinges on integrated areas
of responsibility, necessitating a common approach and leading to a team-based interaction.
Previously independent technical departments made way for an integrated, commonly focused
MRM function, led by the newly appointed Mineral Resource Manager, a Mining Engineer with
15 years’ diverse experience in production, project development as well as MRM.
Further to the above framework having been implemented, the Group rolled out a Mineral
Resource Optimiser system. This system is a computer-based tool developed to analyse and
subsequently assist in optimising the mining of the resource in such a way that long-term
fi nancial returns are maximised. The optimiser utilises alternative methodology to the existing
pay limit methodology and offers a number of advantages:
• The unique statistical properties of the specifi c orebody are taken into account;
• It eliminates the need for adjustments and unpay mining;
• It allows for a scientifi c basis to determine the grade to operate at and maximise
operational returns;
• It provides a tool to manage the mining mix and prevents high grading or sterilisation of
resource blocks – optimising resource extractions and LOM; and
• It further allows for better planning with respect to development of mineral resource blocks.
Pan African will during the 2011 fi nancial year continue its drive towards MRM excellence
through improving geological understanding, data recording quality and to focus on ensuring
sustainability through appropriately focused exploration targets.
During the 2010 fi nancial year the MRM department completed the investigation of all
mineral resource blocks lying in historically mined out areas. From this study certain areas
of priority have been identifi ed, which will be targeted for opening up. Figures 1 and 2 on
pages 31 and 32 are vertical projections of the operations outlining these results.
All Mineral Resource blocks on the mine were classifi ed based on availability, assisting in
scheduling and prioritising blocks for mining and preparation for mining.
In summary, the changes made to the MRM approach at Barberton Mines resulted in the
following:
• Implementation of a new MRM framework;
• Integration of MRM technical team;
• Re-focused on-mine exploration towards upgrading Mineral Resources to Measured
Resource category;
• Appointment of a Mineral Resource Manager; and
• Completion of Airborne Geophysical survey over prospecting permit area – interpretation
initiated.
As a result of the above the Barberton Mines Mineral Resource inventory posted the
following improvements for 2010:
• Increased Barberton Mines Mineral Reserve by 42, 000oz contained gold;
• Increased Barberton Mines Measured Mineral Resource by 187, 000oz contained gold;
• Increased Barberton Mines Indicated Mineral Resource by 237, 000oz contained gold; and
• Increased Barberton Mines Inferred Mineral Resource by 59, 000oz contained gold.
30
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32
Barbert on Mines
Mineral Resources and Ore Reserves 2010 – general
As at 30 March 2010, Barberton Mines reported a Mineral Reserve of 661,000oz and Mineral
Resource of 2,379,000oz contained gold. The Measured and Indicated Mineral Resources are
inclusive of those Resources modifi ed to produce the Mineral Reserves. Reserves are reported
as mill delivered tonnes at the grade recovered having duly considered all modifying factors.
Commodity prices used
A gold price of US$1, 036.78/oz was used for the conversion of Mineral Resources to ore
reserves at an exchange rate of ZAR7.5/US$ resulting in a gold price of ZAR250, 000/kg.
Barbert on Mines mineral inventory – 30 June 2010
Grade Contained
Mineral reserves
(g/t) gold (kg)
classifi cation
Mineral resources
classifi cation
Tons
(kt)
(koz)
Proven
Total proven
Probable
Total probable
1,418
1,418
900
900
6.91
6.91
11.97
11.97
9,795
9,795
10,777
10,777
Total proven
and probable
2,318
8.87
20,572
661
315 Measured
315
346
346
Total measured
Indicated
Total indicated
Inferred
Total inferred
Total mineral
resource
Tons
(kt)
Grade Contained
(g/t) gold (kg)
5,280
5,280
4,159
4,159
2,331
2,331
5.91
5.91
6.09
5.91
7.50
5.91
31,181
31,181
25,331
25,331
17,489
17,489
(koz)
1,003
1,003
814
814
562
562
11,770
6.29
74,001
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Mineral Resources for Pan African are signed off by Martin Bevelander, the Group Consulting
Geologist. He is SACNASP accredited and is responsible for validating all Mineral Resource
estimation procedures within the Group. The reported Mineral Resource Statements are
SAMREC compliant and the Resource numbers in the Mineral Resource and Mineral
Reserve tables have been rounded to refl ect the appropriate level of confi dence. Gold and
platinum inventories are reported separately. Mineral Reserves are reported as subsets of
Mineral Resources.
Barbert on Mines Mineral Resource reconciliation:
2009 to 2010
Summary comment on Mineral Resource movement
Year-on-year, Barberton Mines Mineral Resources had a positive variance of 364,000oz
contained gold. This was mainly as a result of recent exploration drilling and development
intersections confi rming depth extensions on the Fairview lower levels. Further to the
increase in inventory, residue dumps previously not in inventory have been brought in. Lastly,
the Royal Sheba section was geologically remodelled, enhancing the 2009 inventory by a
further 148,000oz contained gold to 508,000oz contained gold.
Summary comment on Mineral Reserve movement
There was a year-on-year positive variance of 43,000oz with respect to the Mineral Reserves.
As indicated in the table below, Barberton Mines’ ore reserves as at 30 June 2010 refl ected
a year-on-year depletion of 96,000 oz.
Mineral Resource reconciliation: 2009 to 2010
Gold (kg)
Gold (koz)
Balance as at March 2009
Mined during 2010
Addition
62,672
2,259
13,589
74,002
Balance as at March 2010
11,330
Variance
* This fi gure does not include other sources of ore such as ramping and/or pillar mining.
2,015
73*
437
2,379
364
Pan African Resources PLC Annual Report 2010
33
Group Mineral Resource Statement cont.
Mineral Reserve reconciliation: 2009 to 2010
Balance as at March 2009
Mined during 2010
Addition
Balance as at March 2010
Variance
Gold (kg)
Gold (koz)
19,214
2,986
4,343
20,572
1,357
618
96
140
661
44
Mineral Reserve sensitivity
The graph below illustrates ore reserve sensitivities to a changing gold price below and
above ZAR275 000/kg:
(cid:51)(cid:86)(cid:73)(cid:3)(cid:86)(cid:73)(cid:87)(cid:73)(cid:86)(cid:90)(cid:73)(cid:3)(cid:87)(cid:73)(cid:82)(cid:87)(cid:77)(cid:88)(cid:77)(cid:90)(cid:77)(cid:88)(cid:77)(cid:73)(cid:87)
Tonnage grade curve (face values) - Fairview Mine
700
680
660
640
620
600
580
560
540
2, 500, 000
2, 000, 000
1, 500, 000
e
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10
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6
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(cid:83)(cid:94)(cid:3)(cid:12)(cid:20)(cid:20)(cid:20)(cid:13)
(cid:14)
(cid:62)(cid:37)(cid:54)(cid:22)(cid:20)(cid:20)(cid:16)(cid:20)(cid:20)(cid:20) (cid:62)(cid:37)(cid:54)(cid:22)(cid:22)(cid:25)(cid:16)(cid:20)(cid:20)(cid:20) (cid:62)(cid:37)(cid:54)(cid:22)(cid:25)(cid:20)(cid:16)(cid:20)(cid:20)(cid:20) (cid:62)(cid:37)(cid:54)(cid:22)(cid:27)(cid:25)(cid:16)(cid:20)(cid:20)(cid:20) (cid:62)(cid:37)(cid:54)(cid:23)(cid:20)(cid:20)(cid:16)(cid:20)(cid:20)(cid:20) (cid:62)(cid:37)(cid:54)(cid:23)(cid:22)(cid:25)(cid:16)(cid:20)(cid:20)(cid:20)
(cid:75)(cid:19)(cid:88)
(cid:75)(cid:83)(cid:80)(cid:72)(cid:3)(cid:83)(cid:94)(cid:3)(cid:12)(cid:20)(cid:20)(cid:20)(cid:13)
(cid:25)(cid:29)(cid:27)
(cid:75)(cid:19)(cid:88)
(cid:21)(cid:20)(cid:18)(cid:21)(cid:23)
(cid:26)(cid:23)(cid:22)
(cid:29)(cid:18)(cid:23)(cid:29)
(cid:26)(cid:26)(cid:21)
(cid:28)(cid:18)(cid:28)(cid:27)
(cid:26)(cid:27)(cid:23)
(cid:28)(cid:18)(cid:26)(cid:22)
(cid:26)(cid:29)(cid:21)
(cid:28)(cid:18)(cid:23)(cid:26)
(cid:26)(cid:29)(cid:22)
(cid:28)(cid:18)(cid:23)(cid:21)
(cid:14)(cid:3)(cid:54)(cid:73)(cid:74)(cid:80)(cid:73)(cid:71)(cid:88)(cid:3)(cid:88)(cid:76)(cid:73)(cid:3)(cid:75)(cid:83)(cid:80)(cid:72)(cid:3)(cid:84)(cid:86)(cid:77)(cid:71)(cid:73)(cid:3)(cid:77)(cid:82)(cid:3)(cid:62)(cid:37)(cid:54)(cid:19)(cid:79)(cid:75)
70.00
60.00
50.00
40.00
30.00
e
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10.00
10.00
20.00
30.00
40.00
50.00
60.00
70.00
Grade cut-off
Cum face tons
Cum face grades
Tonnage grade curve (face values) - Sheba Mine
Tonnage grade curve (face values) - Consort Mine
70.00
60.00
50.00
40.00
30.00
e
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G
e
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a
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400, 000
350, 000
300, 000
250, 000
200, 000
150, 000
100, 000
50, 000
0
40.00
35.00
30.00
25.00
20.00
15.00
10.00
5.00
e
d
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20.00
Cum face tons
Cum face grades
30.00
40.00
Grade cut-off
50.00
60.00
70.00
5.00
10.00
15.00
20.00
25.00
30.00
35.00
40.00
Grade cut-off
Cum face tons
Cum face grades
700, 000
600, 000
500, 000
400, 000
e
g
a
n
n
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T
300, 000
200, 000
100, 000
0
34
Reserves metal fi gures are fully inclusive of all mining dilutions and gold losses, and are
reported as mill delivered tonnes and head grades. Metallurgical recovery factors have not
been applied to the reserve fi gures.
Barbert on Mines cut-of f and average grades
2010 – 2011 business plan
The in-house developed Mineral Resource optimiser tool was developed and applied to
the mineral resource inventory. Functionally it is based on the concept of cut-off grade
calculation in order to guide the mine planning process. An optimal cut-off is determined,
which calculates the lowest grade at which the orebody can be mined, such that the total
profi ts, under a specifi ed set of mining parameters, are maximised. This calculation was
performed for each major mining area.
Cut-off grades are determined using the optimiser programme which requires the following
as inputs:
• The database inventory of all Mineral Resource blocks;
• An assumed gold price – ZAR275,000/kg;
• Planned production rates for each;
• Mine Call Factor (“MCF”);
• Plant Recovery Factor (“PRF”); and
• Planned cash operating costs and other effi ciency factors are calculated using historical
achievements as a baseline.
Optimiser cut-off and average grades currently used are tabled below:
Fairview
Sheba
Consort
Total
Barberton
Mines
Optimal cut-offs
Marginal cut-offs
AMG (face)*
AMG (head)*
Marginal tons
MCF
PRF
Au price
AMG (face)*
AMG (head)*
Paylimits @ ZAR275/g
Reserve grade
2010 – Planning outputs
AMG (face)*
AMG (head)*
Head grade
* AMG = Average Mining Grade
5.20
3.00
14.64
12.44
29.2%
85.0%
90.2%
ZAR275/g
11.31
9.61
6.52g/t
8.5g/t – 9g/t
5.17
3.68
12.87
11.59
33.7%
90.0%
92.0%
ZAR275/g
11.31
9.61
7.23g/t
5.98
3.22
13.36
11.74
30.3%
88.1%
90.7%
ZAR275/g
10.66
9.18
6,80g/t
7g/t – 8.5g/t 5.5g/t – 8.2g/t 7.5g/t – 8.5g/t
6.24
3.00
11.62
10.62
27.7%
91.4%
90.0%
ZAR275/g
8.50
7.76
6.73g/t
11.14
9.04
10.10
11.77
9.58
11.55
8.50
7.01
8.00
10.46
8.72
10.05
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Barbert on Mines pay-limit calculation
For the purpose of accurate and optimal pay-limit calculations the mine is broken up into
mining districts based on geographical location and common infrastructural considerations.
The reason for this is that mining costs in each district differ based on location and
infrastructure. A regional pay-limit calculation is in place at all operations at Barberton Mines.
Regional pay-limits for the different mining districts for the 2011 fi nancial business plan are
as follows:
Pan African Resources PLC Annual Report 2010
35
Group Mineral Resource Statement cont.
Consort section
3#
PC# MMR section
Consort
Total
Pay-limit
6.34g/t
7.93 g/t
6.11 g/t
7.31 g/t
Sheba section
Pay-limit
6.30 g/t
8.03 g/t
7.92 g/t
Above adit
level
MRC &
ZK Shafts
Sheba
Total
Fairview section
1#
3#
Fairview
Total
Pay-limit
6.08 g/t
7.27 g/t
7.17 g/t
Mineral Resource to Reserve modifying factors
Historical achievements with regard to modifying factors to convert Mineral Resources to
Mineral Reserves are recorded over time and the table below refl ects historical achievements
for Mineral Reserve Block Factor (“BF”), Overall Plant Recovery Factor and Mine Call Factor.
These historical achievements are then averaged and applied in converting Resources
to Reserves.
Resource to Reserve modifying factors applied
Consort
Effi ciencies
and factors
Current
10/11 Plan 00/01
01/02
02/03
03/04
04/05
05/06
06/07
07/08
08/09
09/10
BF
Overall Recovery
Mine Call Factor
100.0
90.0
91.4
90.2
92.6
96.3
85.2
91.7
86.2
100.2
89.3
91.7
66.3
90.3
85.9
84.5
93.0
86.2
97.3
93.5
107.8
69.9
92.4
99.8
97.5
91.9
86.1
122.2
91.6
83.4
125.0
89.7
89.3
Fairview
Effi ciencies
and factors
Current
10/11 Plan 00/01
01/02
02/03
03/04
04/05
05/06
06/07
07/08
08/09
09/10
BF
Overall Recovery
Mine Call Factor
100.0
90.2
85.0
80.0
89.1
82.3
91.9
90.4
98.7
88.7
89.2
90.6
95.0
88.3
79.4
110.8
90.3
85.7
114.3
90.3
82.5
90.4
90.9
82.1
117.5
90.5
84.0
101.6
90.8
80.1
120.5
90.9
90.0
Sheba
Effi ciencies
and factors
Current
10/11 Plan 00/01
01/02
02/03
03/04
04/05
05/06
06/07
07/08
08/09
09/10
BF
Overall Recovery
Mine Call Factor
100.0
92.0
90.0
89.6
91.8
97.9
123.2
91.3
98.0
104.0
92.3
99.7
100.5
92.8
111.8
94.8
93.7
99.9
109.9
93.0
92.3
110.9
92.6
86.1
112.4
92.7
90.1
107.6
92.8
109.8
86.9
91.7
126.3
36
Barbert on Mines – the way forward with MRM
MRM and initiatives introduced during 2009 and 2010 are adding signifi cant value to the
Group.
Focus for 2011 fi nancial year will be the following:
1. Improving methodologies on understanding historically mined out areas and remnant
resource block associated with these mining areas.
2. Focus exploration on continuing to defi ne short-term mining blocks and converting these
Indicated and Inferred Mineral Resources to the higher confi dence Measured category.
3. Continue a longer-term focus on extending and exploring the extensions of orebodies on
all mines.
4. Focus near mine exploration on target generation and testing targets defi ned by the
recently fl own airborne geophysical survey:
(a) Focus areas will be the southern prospecting area; and
(b) The eastern strike extension of the Zwartkopie Formation target situated between
Sheba mine and Royal Sheba.
The above initiatives will add to the Mineral Resource base and assist the mine in improving
mining fl exibility, assisting in grade management and ensuring production sustainability.
Manica Mineral Resource
During February 2009 the Fairbride prospect Mineral Resource was remodelled and an
updated resource inventory published. Exploration work is completed and the Mineral
Resource is detailed below:
Mineral Resources
classifi cation
Measured
Fairbride
Dots Luck
Guy Fawkes
Boa Esperanza
Total measured
Indicated
Fairbride
Dots Luck
Guy Fawkes
Boa Esperanza
Total indicated
Inferred
Fairbride
Dots Luck
Guy Fawkes
Boa Esperanza
Total inferred
Total mineral resource
Tons
kt
Grade
g/t
Contained
kg
Gold
koz
8,342
2.39
20,000
642
8,342
2.39
20,000
642
6,540
2,200
2.38
2.44
15,500
5,200
500
168
8,740
2.38
20,700
668
15,200
500
600
300
16,600
33,682
2.28
3.35
2.80
2.96
2.34
2.36
34,700
1,500
1,700
1,000
38,900
79,600
1,114
50
56
31
1,251
2,562
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Pan African Resources PLC Annual Report 2010
37
Group Mineral Resource Statement cont.
Phoenix Mineral Resource
During February 2010 the Mineral Resource for the Phoenix Tailing retreatment project was independently verifi ed by
Geologix (Pty) Limited. Tabled below is the current inventory held:
Mineral Reserves
classifi cation
Tons
(kt)
Grade Contained
(g/t) PGMs (kg)
Mineral Resources
classifi cation
(koz)
Tons
(kt)
Grade Contained
(g/t) PGMs (kg)
(koz)
Proved
Total Proved
Probable
Total Probable
Total Proven
and Probable
Measured
Total Measured
Indicated
Total Indicated
Inferred
Total Inferred
Total Mineral
Resource
–
–
–
–
3,224
3,224
618
618
804
804
3.09
3.09
3.20
3.20
3.33
3.33
9,975
9,975
1,977
1,977
2,672
2,672
4,646
3.15
14,624
321
321
63
63
85
85
469
Mineral Resource content is report ed as 4E
(Platinum, Palladium, Rhodium and Gold)
A full project progress report is published under the operational section of the report.
Pan African combined Mineral Resource inventory
(Gold operations and Manica projects – Mozambique)
Mineral Reserves
classifi cation
Tons
(kt)
Grade Contained
(g/t) gold (kg)
Mineral Resources
classifi cation
(koz)
Tons
(kt)
Grade Contained
(g/t) gold (kg)
Proved
Total Proved
Probable
Total Probable
1,418
1,418
900
900
6.91
6.91
11.97
11.97
9,795
9,795
10,777
10,777
–
–
–
315 Measured
315 Total Measured
Indicated
346
346 Total Indicated
Inferred
Total inferred
Total Mineral
–
13,622
13,622
10,699
10,699
17,531
17,531
3.76
3.76
3.82
3.82
2.98
2.98
51,181
51,181
40,831
40,831
52,189
52,189
(koz)
1,645
1,645
1,314
1,314
1,676
1,676
2,318
8.87
20,572
661 Resource
41,852
3.45 144,201
4,635
Total Proven
and Probable
38
Mineral Report ing Code
Pan African defi nes its Mineral Resources/Reserves in line with the SAMREC Code and its defi nitions.
Mineral Resource classifi cation structure applied by the Group is outlined below:
Exploration results
Mineral resources
Reported as in situ mineralisation estimates
Modifying
factors
Ore reserves
Reported as mineable production estimates
Increasing level
of geoscientifi c
knowledge and
confi dence
Inferred
Indicated
Measured
Probable
Proved
Consideration of mining, metallurgical, economic, marketing, legal, environmental. social and governmental
factors (the “modifying factors”)
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Pan African Resources PLC Annual Report 2010
39
Group Mineral Resource Statement cont.
“Pan African
ensures that
international
acceptable standards
are adhered to in its
Mineral Resource
report ing process”
Mineral Resources defi nitions (according
to SAMREC code)
An “Inferred Mineral Resource” is part of a Mineral Resource for which tonnage, grade and
mineral content can be estimated with a low level of confi dence. It is inferred from geological
evidence and sampling, and assumed but not verifi ed geologically and/or through analysis of
grade continuity. It is based on information gathered through appropriate techniques from
locations such as outcrops, trenches, pits, workings and drill holes that may be limited or even
of uncertain quality and reliability.
An “Indicated Mineral Resource” is that part of a Mineral Resource for which tonnage,
densities, shape, physical characteristics, grade and mineral content can be estimated
with reasonable level of confi dence. It is based on exploration, sampling and the testing
of information gathered through appropriate techniques from locations such as outcrops,
trenches, pits, workings and drill holes. The locations are too widely or inappropriately spaced
to confi rm geological and/or grade continuity but are spaced closely enough for continuity
to be assumed.
A “Measured Mineral Resource” is that part of a Mineral Resource for which tonnage,
densities, shape, physical characteristics, grade and mineral content can be estimated with a
high level of confi dence. It is based on detailed and reliable exploration, sampling and testing
information gathered through appropriate techniques from locations such as outcrops,
trenches, pits, workings and drill holes. The locations are spaced closely enough to confi rm
geological and grade continuity.
Mineral Reserve defi nitions (according to
SAMREC code)
An ore reserve is the economically mineable material derived from a Measured and/or
Indicated Resource. It includes diluting and contaminating materials and allows for losses that
are expected to occur when the material is mined. Appropriate assessments to a minimum
of a pre-feasibility study for a project, or a life of mine plan for an operation, must have
been carried out, including consideration of and modifi cation by, realistically assumed mining,
metallurgical, economic, marketing, legal, environmental, social and governmental factors (the
modifying factors). Such modifying factors must be disclosed.
A “Probable ore reserve” is the economically mineable material derived from a Measured
and/or Indicated Mineral Resource. It is estimated with a lower level of confi dence than a
proved ore reserve. It includes diluting and contaminating materials and allows for losses that
are expected to occur when the material is mined. Appropriate assessments to a minimum
of a pre-feasibility study for a project, or a life of mine plan for an operation, must have
been carried out, including consideration of, and modifi cation by, realistically assumed mining,
metallurgical, economic, marketing, legal, environmental, social and governmental factors. Such
modifying factors must be disclosed.
A “Proven ore reserve” is the economically mineable material derived from a Measured
Resource. It is estimated with a high level of confi dence. It includes diluting and contaminating
materials and allows for losses that are expected to occur when the material is mined.
Appropriate assessments to a minimum of a pre-feasibility study for a project, or a life of mine
plan for an operation, must have been carried out, including consideration of, and modifi cation
by, realistically assumed mining, metallurgical, economic, marketing, legal, environmental, social
and governmental factors. Such modifying factors must be disclosed.
40
The specifi c gravity used during Mineral Resource modelling is as follows:
Barberton Mines
• Fairview mines – 2.83t/m3
• Sheba Mine – 2.73 t/m (ZK orebody) and 2.93 t/m (MRC orebody)
• New Consort mine – 2.88 t/m3
Manica – 2.7 t/m3
Pan African utilises various external consultants in modelling, auditing and thereby ensures that
internationally acceptable standards are maintained in its Mineral Resource reporting. Mineral
Resource modelling for the Manica Project uses 3D geological and geostatistical modelling
done within the Datamine environment. Models generated are signed off by both in-house
and external competent persons all affi liated with the South African Council of Natural
Scientists (“SACNAS”). Martin Bevelander is SACNAS accredited. See his qualifi cations on
page 48.
Barberton Mines utilises classical evaluation techniques in its Mineral Resource modelling.
The mine has identifi ed certain areas where geological continuity and physical geological
character of the orebody allows for geostatistical modelling and these methods are applied
in these instances.
Martin Bevelander
Group Consulting Geologist
30 August 2010
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Pan African Resources PLC Annual Report 2010
41
Board of Directors
Executive directors
Jan Nelson (40)
Chief Executive Offi cer
Appointment date: 1 September 2005
Qualifi cations: BSc (Hons)
Committees: SHEC
After obtaining his honours degree in Geology, Jan embarked on a career in gold exploration and
mining in South Africa, Zimbabwe and Tanzania. He has over 15 years’ experience and, within this
period, held positions in mine management and operations with Harmony Gold Mining Company
Limited, Hunter Dickenson and Gold Fields Limited. Jan was CEO when the Company transformed
from an exploration company to a gold mining company. He was involved in the acquisition of
Barberton Mines and was also instrumental in acquiring Phoenix Platinum, which will add further
revenue to the Company. He has built up a competent mining team that is well-positioned to build
the Company to a mid-tier gold producer.
Cobus Loots (32)
Financial Director
Appointment date: 26 August 2009
Qualifi cations: CA(SA), CFA® Charterholder
Cobus Loots is a principal with Shanduka Resources (Pty) Limited. He is a qualifi ed Chartered
Accountant (SA) and a CFA® Charterholder. He served articles with Deloitte & Touche, and
was an audit manager with the fi rm prior to leaving in order to pursue a career in fi nance. Cobus’
experience includes mining specifi c acquisitions and fi nance, as well as management of both
exploration and producing mineral assets.
Non-executive directors
Cyril Ramaphosa (58)
Non-executive Chairman
Appointment date: 17 September 2009
Qualifi cations: BProc
Committees: Nominations (Chairman)
Cyril Ramaphosa joined the board of South African Breweries Limited in 1997 and was appointed
to the board of SABMiller PLC upon its listing on the London Stock Exchange in 1999. He is
Executive Chairman of the Shanduka Group, non-executive Chairman of the MTN Group Limited,
Joint non-executive Chairman of Mondi plc and Mondi Limited and holds directorships in Macsteel
Global B.V., The Bidvest Group, Standard Bank and Alexander Forbes. He also serves on the board
of the Commonwealth Business Council.
42
Keith Spencer (60)
Lead independent, Non-executive Deputy Chairman
Appointment date: 8 October 2007
Qualifi cations: BSc Eng (Mining)
Committees: SHEC (Chairman), Audit, Nominations
Keith is a qualifi ed mining engineer with 35 years of practical mining experience. In 1984, Keith
was appointed as General Manager of Greenside Colliery and in 1986 moved to Kloof Gold
Mine as General Manager. In 1989, he was appointed as Consulting Engineer for Gold Fields of
South Africa to the following mines: Doornfontein Gold Mine, Driefontein Consolidated Gold
Mine, Greenside Colliery and Tsumeb Base Metals mine. He also served as Managing Director
of Driefontein Consolidated, Chairman and Managing Director of Deelkraal Gold Mine, and as a
board member of all gold mines belonging to Gold Fields of South Africa. In 1999, Keith joined
Metorex Limited, fi rst as a private consultant and after two years as a permanent member of the
executive managing the Wakefi eld Coal operations, O’okiep Copper Company, Barberton Gold
Mines, and Metmin Manganese Mine. In 2001, Keith became the Operations Director for Metorex
Limited. Keith has managed some of the largest gold mines in the world.
Rob Still (55)
Non-executive Director
Appointment date: 9 September 2004
Qualifi cations: BCom (Hons), CTA
Committees: Audit (Acting Chairman), Remuneration, Nominations
Rob has vast experience in mining, specialising in mining fi nance. He started his career as a
Char tered Accountant, becoming a par tner at Ernst & Whinney before leaving in 1986 to
co-found Rhombus Exploration Limited. Since then he has been involved in the mining industry
world-wide and has held executive and non-executive directorships in companies listed in South
Africa, Australia, Canada and the UK. He has participated in the evaluation and development
of several new mining projects including: Rhovan, Ticor Titanium, Pangea Gold Fields Limited,
Southern Mining Corporation Limited (Corridor Sands), Great Basin Gold Limited (Burnstone)
and Zimbabwe Platinum Mines Limited.
Rowan Smith (45)
Non-executive Director
Appointment date: 17 September 2009
Qualifi cations: BSc (Hons), BCom (Hons)
Committees: Remuneration (Chairman)
Rowan is currently the Managing Director of Shanduka Resources and has almost two decades
of collective experience in the minerals and merchant banking industries. His experience includes
geological valuation work for Rand Mines, seven years with Societe Generale de Surveillance in
both Geneva and South Africa as a manager, and four years as a director of Investec’s Resource
Finance Division. Rowan’s passion for business development, coupled with his technical and
merchant banking expertise, have provided him with the skills to originate, structure and implement
a host of investments across the various resource based sectors.
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John Hopwood
Independent Non-Executive
Appointment date: 2 June 2008
Deceased: 19 March 2010
Qualifi cations: BCom, CA(SA)
Committees: Audit, Remuneration, Nominations
Pan African Resources PLC Annual Report 2010
43
Board of Directors cont.
Board purpose and function
The board’s purpose is to ensure corporate governance, risk, strategy and shareholder
interests are priorities at all times. According to the Articles of Association the board may
consist of not less than four and not more than eight members. At the end of the fi nancial
year under review, the board consisted of six members, following the untimely death of
Mr John Hopwood.
Except for as disclosed, Pan African is not aware of any director, or of the families of any
directors, having any interest, direct or indirect, in any transaction during the last fi nancial
year or in any proposed transaction with any company in the Pan African Group which has
affected or will materially affect Pan African or its investment interest or subsidiaries.
Board changes
It is with deep regret that the board of Pan African reports the untimely death of
Mr John Hopwood on 19 March 2010. John brought a great deal of wisdom and experience
to the board of Pan African and will be sorely missed.
Resignation
Maritz Smith
Financial Director
26 August 2009
Appointments
Cyril Ramaphosa Non-executive Chairman
Rowan Smith
Cobus Loots
Non-executive
Financial Director
17 September 2009
17 September 2009
26 August 2009
Succession plan
The Nominations Committee, which functions as a sub-committee of the board, is tasked
with ensuring succession planning for both executive and non-executive board positions.
Board meetings
During the year under review, the board of Pan African held a board meeting per quarter
as required by the Articles of Association. Meeting dates and attendance are set out below:
Name
Cyril Ramaphosa
Keith Spencer
Jan Nelson
Cobus Loots
Rowan Smith
Rob Still
John Hopwood
17 September 20 November
2009
2009
19 March
2010
18 June
2010
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
•
√
√
√
√
√
√
•
√ Attended
• Mr John Hopwood passed away on 19 March 2010.
Chairman and CEO roles
The roles of Chairman and Chief Executive Offi cer are held by two different people and
are separate and distinct. Although the Chairman, Cyril Ramaphosa, is not independent, the
benefi t of his experience and expertise is deemed by the board to outweigh any potential
confl ict related to his position. In addition, the board has nominated Mr Keith Spencer as lead
independent director, as required by the JSE.
44
Board induction and training
All board members have vast experience and therefore no additional formal training or
induction is considered necessary. The existing board members are available at all times to
ensure the smooth induction of any new board member. Where board members require
additional training, the Company makes resources available.
Access to management and independent
advice
The board members have access to the executive management of the Company at all
times. All board members are entitled to seek independent third party expert advice, when
considered necessary. From time to time members of executive management are requested
to attend board meetings in order to present projects or updates.
Delegation of authority
The board has formed various committees in order to allow directors to excel in areas
where their experience lies and, in doing so, the board as a whole has delegated authority in
certain areas to the relevant sub-committees and directors, who report back to the board
on a regular basis. Despite this delegation of authority, the entire board remains responsible
for the performance of its duties.
Board self-ass essment
The board performs a self-assessment on an annual basis, to ensure it has the requisite
skills and experience to fulfi l its duties. Any weaknesses or inadequacies are addressed in a
timely manner.
Executive directors
The executive directors all have employee contracts with the Company and are remunerated
by the Company for services performed.
Non-executive directors
In accordance with the Company’s Articles of Association, non-executive directors are
entitled to directors’ fees (please refer to note 32). These fees are paid quarterly.
Rot ation of directors
In accordance with the Company’s Articles of Association, one-third of the board retire by
rotation annually, and any directors appointed between AGMs need to be re-elected. This year,
Rob Still and Jan Nelson retire by rotation and will seek re-election at the forthcoming AGM.
Board committ ees
The board has instituted the committees listed below to allow the directors best suited in
terms of skills and experience to manage various divisions of responsibility. The formation of
these committees does not in any way absolve the board of its overall responsibility to the
shareholders and the Company and, as such, each committee is required to report back to
the board at each board meeting.
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Pan African Resources PLC Annual Report 2010
45
Board of Directors cont.
46
Committee
Directors
Appointed
Resigned Meetings attended
Responsibilities
Audit
John Hopwood
18 August 2008 Deceased
Rob Still
(Acting Chairman)
18 August 2008
25 August 2009
17 September 2009
1 February 2010
25 August 2009
17 September 2009 position and prospects of the
1 February 2010
Ensuring the fi nancial performance,
Group are properly monitored,
controlled and reported.
Meeting the auditors and reviewing
their reports relating to accounts
and internal controls.
Reviewing the expertise and
Keith Spencer
17 September 2009
Remuneration John Hopwood
2 June 2008
Deceased
Rob Still
9 September 2004
Rowan Smith
(Chairman)
20 October 2009
17 September 2009 experience of the Financial Director
1 February 2010
on an annual basis.
Reviewing the use of external
auditors for non-audit purposes.
6 August 2009
2 December 2009
6 August 2009
2 December 2009
19 March 2010
6 August 2009
2 December 2009
19 March 2010
Reviewing the performance of the
executive directors, employees and
executive management.
Determining remuneration and the
basis of the service agreements
with due regard to the interests of
shareholders.
Determining the payment of any
bonuses to executive directors and
the granting of options to
employees, including executive
directors, under the Company’s
share option scheme.
Nominations Cyril Ramaphosa
20 October 2009
(Chairman)
20 November 2009 Determining the slate of director
18 June 2010
John Hopwood
20 October 2009 Deceased
20 November 2009
Keith Spencer
20 October 2009
20 November 2009 Reviewing, evaluating and
18 June 2010
Rob Still
19 March 2010
18 June 2010
nominees for election to the board.
Identifying and recommending
candidates to fi ll vacancies occurring
between shareholder meetings.
recommending changes to the
Company’s corporate governance
guidelines.
Reviewing the Company’s policies
and programme that relate to
matters of corporate citizenship,
including public issues of signifi cance
to the Company and its
stakeholders.
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SHEC
Keith Spencer
(Chairman)
12 October 2009
Jan Nelson†
12 October 2009
Mario Gericke†
12 October 2009
12 October 2009
17 June 2010
12 October 2009
17 June 2010
12 October 2009
17 June 2010
Establishing a Safety, Health,
Environment and Community policy
framework for the Company.
Strategically reviewing the safety
performance of all operations
compared to the policy framework.
Implementing corrective measures
when necessary to achieve the
objectives of the policy framework.
Ron Holding†
12 October 2009
12 October 2009
Karishma Sewpersad‡ 12 October 2009
12 October 2009
17 June 2010
† Executive management of Pan African
‡ Shanduka external consultant
Pan African Resources PLC Annual Report 2010
47
Board of Directors cont.
The executive directors and senior management review both the mining operations and
the exploration projects on a formal basis each month. This includes a detailed review of
the technical and fi nancial parameters, as well as capital requirements and expenditure. All
parameters are measured against the strategic plans and any variations are discussed and
action plans are put in place to rectify such deviations. The investment and technical decisions
form part of the board’s responsibilities.
Executive management – Pan African
The Executive Committee (“Exco”) of Pan African consists of the following members:
Name
Age
Qualifi cation
Jan Nelson
Cobus Loots
Mario Gericke
40
32
43
Festus van Rooyen 46
Pieter Wiese
Ron Holding
47
58
Martin Bevelander 48
BSc (Hons)
CA(SA), CFA® Charterholder
BEng (Mining), PrEng (Mining
Engineering), Mine Managers
Certifi cate of Competency
(Metalliferous), Certifi cate in
Strata Control
National Diploma Police
Administration
BSc (Hons)
NDT Mining
Metalliferous (Wits)
AMM (SA)
MDP (UCT)
BSc (Hons) Geology
Areas of
responsibility
Chief Executive Offi cer
Chief Financial Offi cer
Executive: Mining
Operations
Executive: Security
Executive: New Business
Operations Manager:
Phoenix Platinum
Group Consulting
Geologist
Executive management – Barbert on Mines
Name
Age
Qualifi cation
Areas of
responsibility
Manager Mining
General Manager
National Higher Diploma
Metalliferous Mining
Mine Managers Certifi cate
Mine Managers Certifi cate of
Competency
National Technical Diploma (Mech) Manager Engineering
Manager Finance and
BCom (Hons), CA(SA)
Administration
Manager Human
Resources
Metallurgical Manager
Diploma in HR Management
Diploma in LR Management
National Higher Diploma
Extractive Metallurgy
BSc Engineering (Hons) Mining
Manager Mineral
Resources
Casper Strydom
52
Pierre Human
49
Dario Negri
Neal Reynolds
André van
den Bergh
Jonathan Irons
49
27
54
44
Brian Chirove
42
48
Corporate Governance
Nominated Adviser and Broker
RBC Capital Markets is the Company’s Nominated Adviser (“NOMAD”) and Broker.
The duty of the NOMAD and Broker is to advise the Group on compliance concerning the
AIM Rules and continuing obligations as an AIM quoted company.
Sponsor
Macquarie First South Advisers (Pty) Limited is, in accordance with the Listings
Requirements of the JSE, the Company’s appointed Sponsor. Macquarie is therefore
responsible to ensure that the Company is at all times guided and advised as to the application
of the Listings Requirements of the JSE.
Sustainability includes:
Data measurement techniques and the basis of calculations including assumptions and
techniques for underlying estimations applied to the compilation of the indicators and other
information in the report as well as explaining any decisions not to apply or to substantially
diverge from, the governance protocols.
Pan African is committed to creating long-term shareholder value by embracing opportunities,
optimising its operations and minimising risk. We recognise that the sustainability of our
operations is dependent on the ability to earn and maintain the goodwill of the communities
around our mining operations. Pan African engages with its immediate communities in order
to identify social needs and institute hands-on projects to address these needs.
The Group recognises its responsibility for the broader impact of our activities on
stakeholders, the environment and the health and safety of our employees. Pan African
embraces sustainable development as one of its duties as a responsible corporate citizen and
a responsible operating company.
A detailed sustainability report is available on the Group’s website.
Stakeholder communication
Pan African has an ‘open door’ policy regarding communication between the Company
and the various stakeholders. The executive directors are available for correspondence and
respond to email, letters or faxes received in a timely manner.
Defi nition of stakeholders
• Shareholders: institutions, natural persons and employees holding shares in the Company.
• Stakeholders: person, group, organisation, or system which affects or can be affected by an
organisation’s actions;
• Employees: any person employed on a full-time basis by the Company;
• Unions: National Union of Mineworkers (“NUM”) and the United Association of South
Africa (“UASA”); and
• Suppliers: providers of goods and services.
Broad-Based Black Economic
Empowerment (“BBBEE”)
Pan African is committed to the principles and objectives of BBBEE and reports on its
achievements based on the BBBEE pillars below:
Ownership
In August 2009 Shanduka exchanged its shareholding of 26% in Barberton Mines for a 21%
shareholding in Pan African and in addition bought 5% from Metorex, resulting in 26% of
Pan African being owned by the Black-owned and controlled Shanduka. The board of the
Company has been restructured to include representation from Shanduka.
“The Group
recognises its
responsibility for
the broader impact
of our activities on
stakeholders”
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Corporate Governance cont.
Human resources development and employment
equity
The Company complies with the Employment Equity Act and the Skills Development Act
and is on track to meet the Mining Charter scorecard of 40% Historically Disadvantaged
South African representation at senior and top management at Barberton Mines.
Procurement and enterprise development
Pan African supports the development of small and medium enterprises that are Black
owned. At Barberton Mines level during the past year 34% of the procurement budget was
spent with Black enterprises.
Community development and corporate social investment
In the year under review a number of initiatives were embarked on at Barberton Mines:
Name
Description
Total monetary contribution
Verulam Life Skills Centre
Sinqobile Vegetable Project
Verulam Soup Kitchen
St John’s Care Centre
Umjindi Jewellery Project
A centre that will focus on the development of life skills in
the community such as brickmaking, welding, cooking, etc.
The centre will be run in collaboration with the local
community and Government.
,
A community-run vegetable initiative. The project will be
advanced in a phased manner to full co-operative status.
Supplies Thandanani Drop-Inn Centre in Emjindini with food
supplies on a weekly basis.
The facility focuses mainly on the care of Aids patients and
orphans that are terminally ill.
Monthly payments of R5,000
(£347).
A jewellery training facility in Barberton, which runs learnership Monthly payments of R20,000
programmes with the support of the Mining Qualifi cations
Authority.
(£1,390).
Other Welfare
Assistance given on an ad hoc basis.
50
Safety, Health , Environment and
Community (“SHEC”)
Safety, health , environment and community
development policy
Pan African is unashamedly committed to protect the environment and prevent pollution
while taking care of the health and safety of those who work at or visit our sites in a
manner that is respectful of international standards and local laws, as well as the well-being
of the communities in which we operate. The most important legacy we want to leave is a
contented community, well-equipped and positioned for the future.
Our guiding principles are:
• Identify the hazards and risks that may have a negative impact on the health and safety of
our people and those visiting our sites, the environment in which we operate, and anything
that may be to the detriment of the communities in which we operate;
• Develop SHEC management systems ensuring the implementation and maintenance of
processes and other controls required to achieve our goal of zero incidents, injuries and
illnesses; and
• Encourage employees to adopt and embrace a lifestyle that is healthy, safe and conscious
of the importance of the environment.
In support of this, we will:
• Provide our leaders with the means to improve our SHEC performance continuously
while holding them accountable for the outcomes;
• Facilitate leadership to understand the SHEC responsibilities and accountabilities and
demonstrate their commitment visibly through their actions in the quest for zero incidents,
injuries and illnesses;
• Treat legal requirements as minimum standards and, in the absence thereof, apply leading
practice;
• Ensure compliance with adopted SHEC standards and management systems by means of
regular audits and performance review;
• Encourage employee and stakeholder involvement and buy-in through training,
communication and regular meetings;
• Reduce our environmental footprint by:
• Improving energy effi ciency and natural resource consumption;
• Improving the use, re-use and recycling of materials; and
• Protecting and restoring natural biodiversity while reducing greenhouse gas emissions;
• Understand the needs of our communities while developing support programmes to
ensure their upliftment and well-being;
• Assist communities in which we operate with health safeguarding programmes and
sustainable wealth creating initiatives; and
• Insist that suppliers and contractors provide us with products and services in support of
our goals and objectives.
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Pan African Resources PLC Annual Report 2010
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Corporate Governance cont.
Safety and health
Safety performance frequency rates
Frequency rates
Non lost time injury frequency rate (“NLTFR”)
Lost time injury frequency rate (“LTIFR”)
Total recordable injury frequency rate (“TRIFR”)
Reportable injury frequency rate (“RIFR”)
Serious injury frequency rate (“SIFR”)
Lost day severity rate (“LDSR”)
Fatal injury frequency rate (“FFR”)
2010
2009
28
4.2
33.3
1.1
1.1
6.9
0.18
29.8
6.4
36.2
1.7
1.7
6.2
0
Barberton Mines completed the 2010 fi nancial year with an overall improvement in accident
statistics of 188 total accidents (2009: 202 accidents). There was no signifi cant decrease in the
number of dressing station cases. However the more serious lost time accidents improved by
32% and the reportable accidents improved by 33%.
An updated Safety and Health management system is being designed and implemented on
the mine. This should be completed during 2011.
The Company’s medical surveillance code of practice regulates measures to eliminate,
control and minimise health risks to which employees are or may be exposed.
Environment
All mining and exploration activities are conducted with the highest level of environmental
awareness achievable for a company of this nature. The Environmental Monitoring
Programmes (“EMP”) for all three mines were updated during the year and submitted to the
DMR at the end of August 2010. The water and air monitoring programmes are compliant
with the regulations and requirements of the Department of Water Affairs and Forestry as
well as the Department of Environmental Affairs and Tourism.
During the year under review, a water retreatment programme was initiated.
Environmental performance
Number of incidents
Level 1
Level 2
Level 3
Level 4
Level 5
2010
2009
1
8
5
–
–
6
9
1
–
–
Defi nitions:
Level 1:
Level 2:
Level 3:
Level 4:
Level 5:
Incident that involves minor non-conformances that result in no or negligible
adverse environmental impact.
Incident that involves miner non-conformances that result in short-term, limited
and non-ongoing adverse environmental impacts.
Incident that contains limited non-conformances or non-compliances. These non-
compliances are those that result in ongoing, but limited environmental impact.
Incident that contains signifi cant non-conformances or non-compliances. These
non-compliances are those that result in medium-term environmental impact.
Incident that contains major non-conformances or non-compliances. These non-
compliances are those that result in long-term environmental impact.
The water use licence application has been submitted to the Department of Water Affairs.
The Environmental Impact Assessment (“EIA”) for the Fairview tailings dam extension was
completed and submitted.
52
Progress made during the year on the environmental programme:
• 247 tons of AsO3 has been removed to ZINCOR;
• The waste rock dump at Fairview has been removed and re-vegetation of the footprint
will commence; and
• The sulphur stockpile remains but it is not a signifi cant environmental threat.
Company secretary
St James’s Corporate Services Limited was appointed company secretary on 8 July 2008.
All directors have access to the advice and services of the Company secretary who is
responsible to the board for ensuring compliance procedures and regulations of a statutory
nature are met. Furthermore, all directors are entitled to seek independent professional
advice concerning the affairs of the Group at the Company’s expense, should they believe
that course of action would be in the best interest of the Group.
The Company secretary, in conjunction with the Company’s legal advisors, is responsible
for drawing the attention of the directors to their legal duties and in collaboration with the
Company’s NOMAD, is responsible for ensuring that new directors are effectively informed
in terms of their duties and responsibilities.
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Corporate Governance cont.
Further, the Company secretary, together with the Company’s investor relations
representatives, provides a direct communication link with investors and liaises with the
Company’s share registrars on all issues affecting shareholders. The Company secretary
maintains the statutory books of the Company and also provides mandatory information
required by various regulatory bodies and stock exchanges on which the Company is listed.
Code of ethics
On 1 November 2009, Pan African committed to the following code of ethics:
“As leaders and employees of Pan African, we hereby commit ourselves to the highest ethical
conduct and agree to:
• Respect the laws of the Republic of South Africa and of any other country in which we
may operate or visit;
• Live the principle of integrity in all our activities and refrain from any behaviour, overt and
otherwise, that may damage the organisation’s image and/or performance of whatever nature;
• Treat our employees and any other person with dignity, respect and in a just manner
irrespective of race, religion, gender, disability, age, or nationality or any other characteristic;
• Be honest in all our dealings and undertake to distance ourselves from any activity that
has the potential of being regarded as incoherent with what is expected of a responsible
company and individual;
• Avoid any potential confl ict of interest and when it may exist, disclose it to affected parties
without any delay;
• Reject any form of bribery and act upon any non-compliance as strongly as possible;
• Accept the full responsibility and ultimate accountability when we make decisions that
may impact on the health and safety of our employees and the communities in which
we operate, and take full responsibility for the environment and the well-being of the
communities; and
• Assist in developing our colleagues and teams to become worthy team players and
responsible South African citizens.”
Restrictions on share dealings
All directors and employees are prohibited from dealing in shares during any period in
which price sensitive information is available. The CEO distributes memoranda, informing
the affected parties of these periods. Should a senior employee or director wish to trade
Pan African shares, written permission must be granted from either the CEO or CFO.
Risk management
During the year under review, a formal Risk Assessment Process was initiated for the
Group. The aim of this process is to minimise harm to people, production and environment.
A separate Risk Committee is not considered necessary as the board reviews the risk
process on a quarterly basis as part of the board meetings.
54
Sector
Risk
Description
Management of risk
Criminal mining
Safety of employees
The direct impact of criminal mining on
the safety and health of employees.
Gold theft
The theft of visible gold by criminal miners.
Costs/profi ts
Volatility of gold price
Price fl uctuation caused by market
conditions.
Electricity
Volatility of ZAR/US$ The Company’s costs are mainly
exchange rate
Increasing electricity
costs
ZAR based.
Increases implemented and proposed
by Eskom – South African power supplier.
Legal
Mining Charter
Laws governing mineral rights.
Mining Licences –
old order/new
order rights
Process to convert the older order
mining rights to new order mining rights.
The Company has embarked on a
comprehensive programme to address
criminal mining.
Productivity and cost controls and a
rigorous approach to investment
evaluation.
Productivity and cost controls.
Power optimisation initiatives and
programmes.
Monitoring and management using the
Mining Charter Score Card.
Complied with the application
requirements and application submitted.
Human resources Dependence on
key personnel
Skills exodus
Increasing cost
of labour
HIV/Aids
Labour/skills
Specialised skills required for types
of operations.
Increased focus on skills development
and training.
South African labour/skills drain.
Cost of living-related cost and effect
of organised labour on labour cost.
Incentive and retention programmes.
Drive on cost control and increased
effi ciencies.
Responsibility towards employees/
negative effect on labour/ skills
turnover and reduced effi ciencies.
The Company runs recognised
HIV/Aids programmes.
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Pan African Resources PLC Annual Report 2010
55
Directors’ Report
The directors present their annual report and the audited fi nancial statements for the year ended 30 June 2010.
Principal activities
The Group’s principal activity during the year was gold mining and exploration activities. A full review of the activities of the business
and of future prospects is contained in the Chief Executive Offi cer’s Report which accompanies these fi nancial statements, with
fi nancial and non-fi nancial key performance indicators (“KPIs”) shown below.
Key performance indicators
The Group produces management reports on a monthly basis that highlight several KPIs from a corporate, operational and management
perspective to assess the fi nancial position and performance of the Group. These are highlighted on page 58.
Results and dividends
The results for the year are disclosed in the Consolidated Statement of Comprehensive Income on page 64. The salient features of
these results can be found on page 4.
The board of directors recommends a fi nal dividend for the year ended 30 June 2010 of 0.3723p per share (2009: dividend paid of
0.2555p per share), to be approved by shareholders at the forthcoming annual general meeting of the Company.
Policy for payment of creditors
It is the Company’s policy to settle all agreed transactions within the terms established with suppliers. The Company’s credit days are
a maximum of 60 days.
Risk management
The key business risks to which the Company is exposed have been considered and addressed on pages 54 to 55.
Internal control
The board is responsible for maintaining a sound system of internal controls to safeguard shareholders’ investment and Group assets.
The directors monitor the operation of internal controls. The objective of the system is to safeguard Group assets, ensure proper
accounting records are maintained and that the fi nancial information used within the business and for publication is reliable. Any such
system of internal control can only provide reasonable but not absolute assurance against material misstatement or loss.
Internal fi nancial control procedures undertaken by the board include:
• Review of monthly fi nancial reports and monitoring performance;
• Review of internal audit reports and follow-up action of weaknesses identifi ed by these reports;
• Review of competency and experience of senior management staff;
• Prior approval of all signifi cant expenditure including all major investment decisions; and
• Review and debate of treasury and other policies.
The board has reviewed the operation and effectiveness of the Company’s system of internal control for the fi nancial year and the
period up to the date of approval of the fi nancial statements.
Going concern
The board confi rms that the business is a going concern and has reviewed its working capital requirements in conjunction with its
future funding capabilities for at least the next 12 months and has found them to be adequate.
The Group is debt free and has a profi t margin of approximately 27% after capital expenditure and depreciation at Barberton Mines.
Should the need arise the Group can cease most exploration and capital activities and in doing so conserve cash.
56
Events aft er the report ing period
Subsequent to the year end, an additional 4,000,000 ordinary shares were issued for cash at 4.0p per share on 23 August 2010, in
relation to share options exercised.
Directors
The following were directors during the year under review:
Mr K C Spencer*
Mr J P Nelson
Mr R G Still*
Mr C M Ramaphosa
(appointed 17 September 2009)
Mr R M Smith
Mr J A J Loots
Mr M Smith
(appointed 17 September 2009)
(appointed 26 August 2009)
(resigned 26 August 2009)
Mr J G Hopwood*
(deceased 19 March 2010)
* Independent
Auditors
Deloitte LLP have been appointed as Group auditors until the conclusion of the next Annual General Meeting.
Each of the persons who is a director at the date of approval of this annual report confi rms that:
• So far as the director is aware, there is no relevant information of which the Company’s auditors are unaware; and
• The director has taken all the steps that he ought to have taken as a director in order to make himself aware of any relevant audit
information and to establish that the Company’s auditors are aware of that information.
This confi rmation is given and should be interpreted in accordance with S418 of the UK Companies Act 2006.
Deloitte LLP have expressed their willingness to continue in offi ce as auditors and a resolution to reappoint them will be proposed at
the forthcoming Annual General Meeting.
By order of the board,
Jan Nelson
Chief Executive Offi cer
30 August 2010
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Directors’ Report cont.
Key Performance Indicators (KPIs)
Level
KPI
Measurable
US$/oz
Costs
2010
650
2009 % change Achievement Comment
469
38.59% Moderate
Gold sold
Revenue
98,091oz
97,353oz
0.76% Moderate
Corporate
Capital
expenditure
Tax
Growth
£5.9 million
£4.3 million
37.21% Good
Effective tax
rate
34.55%
50.39%
31.43% Moderate
Tons
Volume
313Kt
313Kt
0% Good
g/t
Quality
10.61g/t
10.32g/t
2.81% Good
Mining
% total
recovery
BEE
Fatal
accidents
Gold sales
Mining title
Safety
91%
26%
1
91%
26%
0% Good
0
(100%) Poor
0% Moderate
No signifi cant change.
Increased largely due to
strong ZAR and increases in
the cost of electricity, labour
and security.
Increase in underground
mining productivity, prior
year there was surface
tailings sales.
Strong focus on investment
in development and
maintenance of the mine.
Prior effective rate was
high due to the impairment
charge, which was not tax
deductible.
Sustainable production
achieved.
Focus on increasing
resources and sustainable
head grades.
The Group complies with
relevant legislation.
Safety still remains the
Group’s top priority and
focus area.
Group resource base
increased due to the MRM
initiatives.
Growth
Resource
base
Sustainability
4,635Moz
4,582Moz
1.16% Good
58
Statement of Directors’ Responsibilities
The directors are responsible for preparing the Annual Report and the fi nancial statements in accordance with applicable laws and
regulations.
Company law requires the directors to prepare fi nancial statements for each fi nancial year. The directors are required by the International
Accounting Standard (“IAS”) Regulation to prepare the Group fi nancial statements under International Financial Reporting Standards
(“IFRSs”) as adopted by the European Union and have also elected to prepare the parent company fi nancial statements in accordance
with IFRSs as adopted by the European Union. The fi nancial statements are also required by law to be properly prepared in accordance
with the Companies Act 2006.
International Accounting Standard 1 requires that fi nancial statements present fairly for each fi nancial year the Company’s fi nancial
position, fi nancial performance and cash fl ows. This requires the faithful representation of the effects of transactions, other events
and conditions in accordance with the defi nitions and recognition criteria for assets, liabilities, income and expenses set out in the
International Accounting Standards Board’s ‘Framework for the preparation and presentation of fi nancial statements’. In virtually all
circumstances, a fair presentation will be achieved by compliance with all applicable IFRSs. However, directors are also required to:
• Properly select and apply accounting policies;
• Present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable
information; and
• Provide additional disclosures when compliance with the specifi c requirements in IFRSs are insuffi cient to enable users to understand
the impact of particular transactions, other events and conditions on the entity’s fi nancial position and fi nancial performance.
The directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the fi nancial
position of the Company and enable them to ensure that the fi nancial statements comply with the Companies Act 2006. They are
also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection
of fraud and other irregularities.
By order of the board.
Jan Nelson
Chief Executive Offi cer
Jacobus Loots
Financial Director
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Pan African Resources PLC Annual Report 2010
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UK Independent Auditors’ Report
To the members of Pan African
We have audited the fi nancial statements of Pan African for the year ended 30 June 2010 which comprise the Group and Parent
Company Statement of Comprehensive Income, the Group and Parent Company Statement of Financial Position, the Group and
Parent Company Cash Flow Statement, the Group and Parent Company Statement of Changes in Equity and the related notes 1
to 36. The fi nancial reporting framework that has been applied in their preparation is applicable law and International Financial
Reporting Standards (“IFRSs”) as adopted by the European Union. The fi nancial reporting framework that has been applied in the
preparation of the parent company fi nancial statements is applicable law and United Kingdom Accounting Standards (United Kingdom
Generally Accepted Accounting Practice).
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the UK Companies
Act 2006. 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
As explained more fully in the Statement of Directors’ Responsibilities, the directors are responsible for the preparation of the fi nancial
statements and for being satisfi ed that they give a true and fair view. Our responsibility is to audit the fi nancial statements in accordance
with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing
Practices Board’s (“APB’s”) Ethical Standards for Auditors.
Scope of the audit of the fi nancial statements
An audit involves obtaining evidence about the amounts and disclosures in the fi nancial statements suffi cient to give reasonable
assurance that the fi nancial statements are free from material misstatement, whether caused by fraud or error. This includes an
assessment of: whether the accounting policies are appropriate to the Group’s and the parent company’s circumstances and have been
consistently applied and adequately disclosed; the reasonableness of signifi cant accounting estimates made by the directors; and the
overall presentation of the fi nancial statements.
Opinion on fi nancial statements
In our opinion:
• The fi nancial statements give a true and fair view of the state of the Group’s and of the parent company’s affairs as at 30 June 2010
and of the Group’s and the parent company’s profi t for the year then ended;
• The fi nancial statements have been properly prepared in accordance with IFRSs as adopted by the European Union; and
• The fi nancial statements have been prepared in accordance with the requirements of the UK Companies Act 2006.
Separate opinion in relation to IFRSs as issued by the IASB
As explained in note 1 to the fi nancial statements, the Group in addition to complying with its legal obligation to apply IFRSs as adopted
by the European Union, has also applied IFRSs as issued by the International Accounting Standards Board (“IASB”).
In our opinion the Group fi nancial statements comply with IFRSs as issued by the IASB.
Opinion on ot her matt ers prescribed by the UK Companies Act 2006
In our opinion:
• The information given in the Directors’ Report for the fi nancial year for which the fi nancial statements are prepared is consistent
with the fi nancial statements.
60
Matt ers on which we are required to report by exception
We have nothing to report in respect of the following:
Under the UK Companies Act 2006 we are required to report to you if, in our opinion:
• Adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received
from branches not visited by us; or
• The parent company fi nancial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement
with the accounting records and returns; or
• Certain disclosures of directors’ remuneration specifi ed by law are not made; or
• We have not received all the information and explanations we require for our audit.
Deborah Thomas
(Senior Statutory Auditor)
for and on behalf of Deloitte LLP
Chartered Accountants and Statutory Auditors
London, UK
30 August 2010
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Pan African Resources PLC Annual Report 2010
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Independent Auditors’ Report
To the members of Pan African Resources PLC
We have audited the Group annual fi nancial statements and annual fi nancial statements of Pan African Resources Plc, which comprise
the consolidated and separate statements of fi nancial position as at 30 June 2010, and the consolidated and separate statements of
comprehensive income, changes in equity and cash fl ows for the fi nancial year then ended, a summary of signifi cant accounting policies
and other explanatory notes, as set out on pages 68 to 77.
Directors’ responsibility for the fi nancial statements
The Company’s directors are responsible for the preparation and fair presentation of these fi nancial statements in accordance with
International Financial Reporting Standards. This responsibility includes designing, implementing and maintaining internal control relevant
to the preparation and fair presentation of fi nancial statements that are free from material misstatement, whether due to fraud or
error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.
Auditor ’s responsibility
Our responsibility is to express an opinion on these fi nancial statements based on our audit. We conducted our audit in accordance
with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the
audit to obtain reasonable assurance whether the fi nancial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fi nancial statements.
The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the
fi nancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant
to the entity’s preparation and fair presentation of the fi nancial statements in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also
includes evaluating the appropriateness of accounting principles used and the reasonableness of accounting estimates made by the
directors, as well as evaluating the overall fi nancial statement presentation.
We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the fi nancial statements present fairly, in all material respects, the consolidated and separate fi nancial position of Pan
African Resources Plc as at 30 June 2010, and its consolidated and separate fi nancial performance and its consolidated and separate
cash fl ows for the year then ended in accordance with International Financial Reporting Standards.
Deloitte & Touche
Per IT Marshall
Partner
30 August 2010
Deloitte & Touche – Registered Auditors
Buildings 1 and 2, Deloitte Place
The Woodlands, 20 Woodlands Drive, Woodmead, Sandton, 2196
Johannesburg, South Africa
National executive: GG Gelink Chief Executive AE Swiegers Chief Operating Offi cer GM Pinnock Audit DL Kennedy Tax & Legal
and Risk Advisory L Geeringh Consulting L Bam Corporate Finance CR Beukman Finance TJ Brown Clients & Markets NT Mtoba
Chairman of the Board MJ Comber Deputy Chairman of the Board
A full list of partners and directors is available on request.
62
Cert ifi cate of the Company Secretary
I hereby certify that Pan African has lodged with the Registrar of Companies all such returns as are required of a public company in
terms of the Companies Act 2006. All such returns are true, correct and up to date.
St James’s Corporate Services Limited
30 August 2010
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Pan African Resources PLC Annual Report 2010
63
Consolidated and Company Statement of
Comprehensive Income
for the year ended 30 June 2010
Notes
4
5
16
Revenue
Gold sales
Realisation costs
On-mine revenue
Cost of production
Depreciation
Mining profi t
Other (expenses)/income
Impairment costs
Royalty costs
Net income before fi nance income and fi nance costs
Finance income
Finance costs
Profi t before taxation
Taxation
Profi t after taxation
Other comprehensive income:
Foreign currency translation differences
4, 9
9
10
13
Group
Company
30 June
2010
£
30 June
2009
£
30 June
2010
£
30 June
2009
£
–
–
–
–
–
–
–
–
–
–
–
8,165,247
(335,401)
–
7,829,846
468,490
(79)
8,298,257
–
–
9,764,359
(5,056,290)
–
4,708,069
113,205
(689)
4,820,585
–
68,506,394
(162,791)
53,000,352
(140,546)
68,343,603
(40,553,886)
(3,125,093)
24,664,624
(1,929,787)
(335,401)
(837,378)
21,562,058
661,645
(67,915)
52,859,806
(28,504,686)
(2,360,431)
21,994,689
(1,465,336)
(5,025,463)
–
15,503,890
816,754
(9,933)
22,155,788
(7,655,913)
16,310,711
(8,219,425)
14,499,875
8,091,286
8,298,257
4,820,585
2,379,762
3,649,901
–
–
Total comprehensive income for the year
16,879,637
11,741,187
8,298,257
4,820,585
Profi t attributable to:
Owners of the parent
Non-controlling interest
Total comprehensive income attributable to:
Owners of the parent
Non-controlling interest
From continuing operations:
Basic earnings per share (pence)
Diluted earnings per share (pence)
14,277,232
222,643
4,403,535
3,687,751
8,298,257
–
4,820,585
–
14,499,875
8,091,286
8,298,257
4,820,585
14
14
16,809,093
70,544
7,485,801
4,255,386
8,298,257
–
4,820,585
–
16,879,637
11,741,187
8,298,257
4,820,585
1.04
1.03
0.40
0.40
–
–
–
–
64
Consolidated and Company Statement of
Financial Position
at 30 June 2010
Group
Company
30 June
2010
£
30 June
2009
£
30 June
2010
£
30 June
2009
£
Notes
Ass ets
Non-current assets
Property, plant and equipment and mineral rights
Other intangible assets
Goodwill
Investments
Rehabilitation trust fund
Current assets
Inventories
Receivables from subsidiaries
Trade and other receivables
Cash and cash equivalents
TOTAL ASSETS
Equity and liabilities
Capital and reserves
Share capital
Share premium
Translation reserve
Share option reserve
Retained income
Realisation of equity reserve
Merger reserve
Equity attributable to owners of the parent
Non-controlling interest
Total equity
Non-current liabilities
Long term provisions
Deferred taxation
Current liabilities
Trade and other payables
Short term liabilities – Interest bearing
Short term provisions
Payable to other group companies
Current tax liability
16
17
18
19
20
21
34
22
23
25
27
28
26
26
27
34
37,495,010
13,087,880
21,000,714
–
2,740,546
31,801,235
12,038,616
21,000,714
–
2,357,266
27,642
–
–
53,259,921
–
20,547
–
–
38,499,708
–
74,324,150
67,197,831
53,287,563
38,520,255
1,126,374
–
3,794,659
12,756,262
358,363
–
2,201,213
2,389,301
–
10,984,384
162,337
14,240,891
–
10,341,443
23,286
1,507,134
17,677,295
4,948,877
25,387,612
11,871,863
92,001,445
72,146,708
78,675,175
50,392,118
14,095,406
49,732,830
4,495,865
754,394
25,814,783
(10,701,093)
(10,705,308)
11,125,891
37,899,997
1,964,004
549,690
11,537,551
–
(10,705,308)
73,486,877
–
52,371,825
3,988,577
14,095,406
49,732,830
–
739,519
6,233,564
–
1,560,000
72,361,319
11,125,891
37,899,997
–
626,003
(2,064,693)
–
1,560,000
49,147,198
–
73,486,877
56,360,402
72,361,319
49,147,198
3,338,198
8,092,332
2,933,105
6,752,432
11,430,530
9,685,537
–
–
–
–
–
–
5,041,754
–
1,465,299
–
576,985
3,719,787
20,669
1,151,895
954,759
253,659
534,427
–
41,411
5,738,018
–
253,101
–
37,060
954,759
–
7,084,038
6,100,769
6,313,856
1,244,920
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TOTAL EQUITY AND LIABILITIES
92,001,445
72,146,708
78,675,175
50,392,118
Pan African Resources PLC Annual Report 2010
65
Consolidated and Company Cash Flow Statements
for the year ended 30 June 2010
NET CASH FROM/(USED IN) OPERATING
ACTIVITIES
INVESTING ACTIVITIES
Dividends received
Additions to property, plant and equipment,
mineral rights
Additions to intangibles
Loans to subsidiaries
Funding of rehabilitation trust fund
Cash outfl ow on acquisition of subsidiary
Group
Company
30 June
2010
£
30 June
2009
£
30 June
2010
£
30 June
2009
£
Notes
36
18,325,307
8,567,361
(128,716)
(3,527,515)
–
–
9,032,496
11,275,545
(5,935,346)
(976,373)
–
147,458
–
(4,318,425)
(1,580,349)
–
193,347
(4,205,144)
(17,075)
–
(642,941)
–
–
(7,396)
–
(4,316,065)
–
(4,205,144)
NET (CASH USED IN)/FROM INVESTING ACTIVITIES
(6,764,261)
(9,910,571)
8,372,480
2,746,940
FINANCING ACTIVITIES
Borrowings raised
Borrowings repaid
Loans from subsidiaries
Shares issued
Share issue costs
–
(954,759)
–
48,000
(5,866)
1,145,710
(190,952)
–
–
–
–
(954,759)
5,738,018
–
(5,866)
1,145,710
(190,952)
–
–
–
25
NET CASH FROM FINANCING ACTIVITIES
(912,625)
954,758
4,777,393
954,758
NET INCREASE/(DECREASE) IN CASH
AND CASH EQUIVALENTS
Cash and cash equivalents at the beginning of the year
Effect of foreign exchange rate changes
CASH AND CASH EQUIVALENTS AT THE
END OF THE YEAR
10,648,421
2,389,301
(281,460)
(388,452)
5,419,489
(2,641,736)
13,021,157
1,507,134
(287,400)
174,183
1,455,587
(122,636)
23
12,756,262
2,389,301
14,240,891
1,507,134
66
Consolidated and Company
Statement of Changes in Equity
for the year ended 30 June 2010
Share
capital
£
Share
premium
Translation
Share
option
Realisation
Non-
Retained
of equity
Merger
controlling
account
reserve
reserve
earnings
reserve
reserve
interest
£
£
£
£
£
£
£
Total
£
GROUP
Balance at 30 June
2008
Issue of shares
Current year
movement
Profi t for the year
Dividend issue
Share based
payment – Charge
for the year
Balance at
30 June 2009
Issue of shares
Share issue costs
Current year
movement
Profi t for the year
Share Based
payment – Charge
for the year
Balance at 30 June
2010
COMPANY
Balance at 30 June
2008
Issue of shares
Profi t for the year
Dividend issue
Charge for the year
Balance at 30 June
2009
Issue of shares
Share issue costs
Current year
movement
Profi t for the year
Dividend issue
Charge for the year
Balance at 30 June
2010
10,998,664 37,267,475 (1,118,262)
–
127,227
632,522
285,312
–
9,946,021
–
– (10,705,308)
–
–
3,694,869 50,368,771
759,749
–
–
–
–
–
–
–
–
–
3,082,266
–
–
–
–
–
–
4,403,535
(2,812,005)
–
264,378
–
–
–
–
–
–
–
–
–
3,649,901
567,635
3,687,751
8,091,286
(3,961,678) (6,773,683)
–
264,378
11,125,891 37,899,997
1,964,004
549,690 11,537,551
– (10,705,308)
3,988,577 56,360,402
2,969,515 11,838,699
(5,866)
–
–
–
–
–
– (10,701,093)
–
–
–
–
–
–
–
–
2,531,861
–
–
– 14,277,232
–
204,704
–
–
–
–
–
–
–
–
–
(4,059,121)
–
48,000
(5,866)
(152,099) 2,379,762
222,643 14,499,875
–
204,704
14,095,406 49,732,830
4,495,865
754,394 25,814,783 (10,701,093) (10,705,308)
– 73,486,877
10,998,664 37,267,475
632,522
–
–
–
127,227
–
–
–
11,125,891 37,899,997
2,969,515 11,838,699
(5,866)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
491,320 (4,073,273)
–
4,820,585
(2,812,005)
–
–
–
–
134,683
626,003 (2,064,693)
–
–
–
–
–
–
–
113,516
–
8,298,257
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,560,000
–
–
–
–
– 46,244,186
759,749
–
4,820,585
–
(2,812,005)
–
134,683
–
1,560,000
– 49,147,198
–
–
–
–
–
–
– 14,808,214
(5,866)
–
–
–
–
–
–
8,298,257
–
113,516
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14,095,406 49,732,830
–
739,519
6,233,564
–
1,560,000
– 72,361,319
Pan African Resources PLC Annual Report 2010
67
Not es to the Financial Statements
for the year ended 30 June 2010
1. General information
Pan African is a company incorporated in England and Wales under the Companies Act 1985. The Company has a dual primary
listing on the AIM Market (“AIM”) of the London Stock Exchange and the JSE Limited (“JSE”). The move to the JSE main board
occurred on 1 December 2009, resulting in the Company’s dual primary listing. The Company previously had a secondary
listing on AltX, a division of the JSE. The nature of the Group’s operations and its principal activities was of gold mining and
exploration activities. The fi nancial statements are presented in Pounds Sterling. Foreign operations are included in accordance
with the policies set out below. The individual fi nancial statements of each Group Company are maintained in their functional
currencies, which is determined by reference to the primary economic environment in which it operates. For the purpose of
the consolidated fi nancial statements, the results and fi nancial position of each Group Company is expressed in Pounds Sterling.
The fi nancial statements have been prepared on the going concern basis.
The fi nancial statements have also been prepared in accordance with the International Financial Reporting Standards (“IFRS”)
adopted by the European Union and the Republic of South Africa.
2. Accounting policies
Basis of preparation and general information
The annual fi nancial statements have been prepared under the historical cost basis, except for certain fi nancial instruments
which are stated at fair value. The principal accounting policies are set out below and are consistent in all material respects with
those applied in the previous year, except where otherwise indicated.
Historic reverse acquisition
On 31 July 2007 the Company acquired 74% of Barberton Mines (Pty) Limited (“Barberton”) in a share-for-share transaction.
IFRS3 Business Combinations defi nes the acquirer in a business combination as the entity that obtains control. Accordingly, the
combination was accounted for as a reverse acquisition.
Going concern
The fi nancial position of the Group, its cash fl ows and liquidity position are described in note 29. In addition, note 29 to the
fi nancial statements includes the Group’s objectives, policies and processes for managing its capital; its fi nancial risk management
objectives; details of its fi nancial instruments and its exposure to credit risk.
The Group has, during the current and previous fi nancial years, benefi ted from high gold prices and increased underground
mining production. The Group is largely debt free and currently generates suffi cient cash through its operations to fund future
capital on its operations. Future growth projects will be funded by internally generated cashfl ows, third party funding, or by a
combination of both. The directors ensure that funding requirements for future growth projects do not compromise the ability
of the Group to continue as a going concern. The Group is currently forecasting positive cash fl ows for the foreseeable future.
Management is not aware of any material uncertainties which may cast signifi cant doubt on the Group’s ability to continue as
a going concern. Based on the current status of the Group’s fi nances, the directors have formed a judgement, at the time of
approving the Financial Statements, that there is a reasonable expectation that the Group has, or will have, adequate resources
to enable the Group to continue to meet its fi nancial commitments for the foreseeable future. Accordingly, the directors
continue to adopt the going concern basis in preparing the fi nancial statements.
68
New and revised International Financial Report ing Standards
not yet adopted
The Group applies all applicable IFRS in preparation of the fi nancial statements. Consequently, all IFRS statements that were
effective at 30 June 2010 and are relevant to its operations have been applied.
At the date of authorisation of these fi nancial statements, the following standards and interpretations, which have not been
applied in these fi nancial statements, were in issue but not yet effective:
Standard/
Interpretation
New standards:
Description
Effective for annual periods
beginning on or after
IFRS 9
Financial Instruments: Classifi cation and Measurement of Financial Assets
1 January 2013
Amendments to existing standards:
IFRS 2
Share-based Payments:
IFRS 3
IAS 24
IAS 32
IAS 39
Group Cash-settled Share-based Payment Transactions
Business Combinations: Revisions to certain key areas of the standard
Related Party Disclosures
Financial Instruments: Presentation – Classifi cation of Rights Issue
Financial Instruments: Recognition and Measurement: Amendments to
IAS 39 for eligible hedged items:
Infl ation in a fi nancial hedged item
A one-side risk in hedge item
Improvements to IFRS – May 2008:
IFRS 5
Non-current Assets Held for Sale and Discontinued Operations:
Classifi cation of non-current assets (or disposal groups) classifi ed as held
for sale or discontinued operations
Improvements to IFRS – April 2009:
IFRS 2
IFRS 5
IFRS 8
IAS 1
IAS 7
IAS 17
IAS 18
IAS 36
IAS 38
IAS 39
Share-based Payments: Consequential Amendment Relating to Business
Combinations
Non-current Assets held for Sale and Discontinued Operations: Disclosures
Required in Respect of Non-current Assets (or Disposal Groups) Classifi ed
as Held for Sale or Discontinued Operations
Operating Segments: Disclosure Information about Segment Assets
Presentation of Financial Statements: Current/Non-current Classifi cation of
Convertible Instruments
Statement of Cash Flows: Classifi cation of Expenditures on Unrecognised
Assets
Leases: Classifi cation of leases on land and buildings
Revenue: Determining whether an Entity is Acting as a Principal or as an
Agent
Impairment of Assets: Allocation of Goodwill to Cash Generating Units
Intangible Assets: Acquisition of Intangible Assets in a Business Combination
Financial Instruments: Recognition and Measurement:
Scope Exemption of Business Combination Contracts
Cash Flow Hedge Accounting
IFRIC 9
Reassessment of Embedded Derivatives: Scope of IFRIC 9
1 January 2010
1 July 2009
1 January 2011
1 February 2010
1 July 2009
1 July 2009
1 July 2009
1 July 2009
1 January 2010
1 January 2010
1 January 2010
1 January 2010
1 January 2010
1 January 2010
1 January 2010
1 July 2009
1 January 2010
1 January 2010
1 July 2009
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Pan African Resources PLC Annual Report 2010
69
Not es to the Financial Statements cont.
for the year ended 30 June 2010
New and revised International Financial Report ing Standards not yet
adopted (continued)
Standard/
Interpretation
Effective for annual periods
beginning on or after
Description
Improvements to IFRS – May 2010:
IFRS 1
First Time Adoption of IFRS:
Accounting Policy Changes in the year of adoption
Use of Deemed Cost for Rate Regulated Activities
IFRS 3
Business Combinations:
Measurement of Non-controlling Interest
Un-replaced and Voluntarily Replaced Share-based Payment Awards
Transitional Provisions for Contingent Consideration from a Business
Combination that occurred before the Effective Date of the Revised IFRS
Improvements to IFRS – May 2010:
IFRS 7
Financial Instruments: Disclosures
Clarifi cation of Disclosures
IAS 1
IAS 27
IAS 34
IFRIC 13
Presentation of Financial Statements: Clarifi cation of Presentation of
Statement of Changes in Equity
Consolidated and Separate Financial Statements: Transitional Provisions
Interim Financial Reporting: Signifi cant Events and Transactions
Customer Loyalty Programmes: Fair Value of Award Credits
New Interpretations:
IFRIC 17
IFRIC 18
IFRIC 19
Distributions of Non-cash Assets to Owners
Transfer of Assets from Customers
Extinguishing Financial Liabilities with Equity Instruments
Amendments to existing interpretations:
1 January 2011
1 January 2011
1 July 2010
1 July 2010
1 July 2010
1 January 2011
1 January 2011
1 July 2010
1 January 2011
1 January 2011
1 July 2009
1 July 2009
1 July 2010
IFRIC 14
Prepayments of a Minimum Funding Requirement
1 January 2011
The impact of the adoption of the above standards and interpretations still needs to be considered, but is not expected to have
a material impact on the fi nancial results.
Basis of consolidation
The consolidated fi nancial statements incorporate the fi nancial statements of the Company and entities controlled by the
Company (its subsidiaries) to 30 June each year. Control is achieved where the Company has the power to govern the fi nancial
and operating policies of an investee enterprise so as to obtain benefi ts from its activities. The results of the subsidiaries
acquired or disposed of during the year are included in the consolidated Statement of Comprehensive Income from the
effective date of acquisition or up to the effective date of disposal, as appropriate. Inter-company transactions and balances
between Group entities are eliminated on consolidation.
Business combinations
Acquisitions of subsidiaries and businesses are accounted for using the purchase method. The cost of a business combination is
measured as the aggregate of the fair values (at the date of exchange) of assets given, liabilities incurred or assumed, and equity
instruments issued by the Group in exchange for control of the acquiree, plus any costs directly attributable to the business
combination. The acquiree’s identifi able assets, liabilities and contingent liabilities that meet the conditions for recognition
under IFRS 3 Business Combinations are recognised at their fair values at the acquisition date, except for non-current assets
(or disposal groups) that are classifi ed as held-for-sale in accordance with IFRS 5 Non-current Assets Held for Sale and
Discontinued Operations, which are recognised and measured at fair value less costs-to-sell.
Goodwill arising on acquisitions is recognised as an asset, and initially measured at cost, being the excess of the cost of the
business combination over the Group’s interest in the net fair value of the identifi able assets, liabilities and contingent liabilities
70
recognised. If, after reassessment, the Group’s interest in the net fair value of the acquiree’s identifi able assets, liabilities and
contingent liabilities exceeds the cost of the business combination, the excess is recognised immediately in profi t or loss.
The interest of minority shareholders in the acquiree is initially measured at the minority’s proportion of net fair value of the
assets, liabilities and contingent liabilities recognised.
Change in ownership interest
In terms of IAS 27, changes in a parent’s ownership interest in a subsidiary that do not result in a change of control are
accounted for as equity transactions.
Propert y, plant and equipment
Mining assets
Mining assets, including mine development costs and mine plant facilities, are recorded at cost less provision for impairment and
accumulated depreciation.
Expenditure incurred to develop new ore bodies, to defi ne mineralisation in existing ore bodies, to establish or expand
productive capacity and expenditure designed to maintain productive capacities, is capitalised until commercial levels of
production are achieved.
Mineral and surface rights
Mineral and surface rights are recorded at cost less provision for impairment and accumulated depreciation.
Land
Land is shown at cost and is not depreciated.
Gain or loss on disposal or retirement of assets
The gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the
difference between the sales proceeds and the carrying amount of the asset and is recognised in profi t or loss.
Depreciation
Mining assets, mineral and surface rights mining assets, mine development costs, mineral and surface rights and plant mine
facilities are depreciated over the estimated LOM to their residual values using the units-of-production method based on
estimated proven and probable ore reserves.
Other mining plant and equipment is depreciated on the straight-line basis over the shorter of the LOM or their estimated
useful lives.
Depreciation of non-mining ass ets
Buildings and other non-mining assets are recorded at cost and depreciated on the straight-line basis over their expected useful
lives, which vary between three to ten years.
Mining exploration – Change in accounting policy on Greenfi eld
prospects
Previously expenditure on exploration activities on Greenfi eld prospects was capitalised until the viability of the mining venture
was proven. If the mining venture was subsequently considered non-viable, the expenditure was charged against income when
that fact became known.
Exploration expenditure on Greenfi eld prospects is now expensed in the year in which it is incurred. When a decision is taken
by the directors that a mining property/project is potentially commercially viable (normally when the project has reached the
pre-feasibility stage, once it is considered probable that future economic benefi ts will be realised and that development may be
commissioned) all further directly attributable pre-production expenditure is capitalised. Capitalisation of the pre-production
expenditure ceases when commercial levels of production are achieved, at which stage the respective assets are depreciated.
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The change in accounting policy will not impact current-year or prior-year fi nancial results.
Pan African Resources PLC Annual Report 2010
71
Not es to the Financial Statements cont.
for the year ended 30 June 2010
Impairment (except for goodwill)
At each Statement of Financial Position date, the Group reviews the carrying amounts of its tangible and intangible assets to
determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists both
the value in use and the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss
(if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable
amount of the cash-generating unit to which the asset belongs. Impairment losses are immediately recognised as an expense.
A reversal of an impairment loss is recognised immediately in the Statement of Comprehensive Income.
Goodwill
Goodwill arising on consolidation represents the excess of the cost of acquisition over the Group’s interest in the fair value of
the identifi able assets and liabilities of a subsidiary, associate or jointly-controlled entity at the date of acquisition. Goodwill is
initially recognised as an asset at cost and is subsequently measured at cost less accumulated impairment losses.
For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash-generating units (“CGU”) expected
to benefi t from the synergies of the combination. Cash-generating units to which goodwill has been allocated are tested for
impairment annually, or more frequently when there is an indication that the CGU may be impaired. If the recoverable amount
of the cash-generating unit is less than the carrying amount of the CGU, the impairment loss is allocated fi rst to reduce the
carrying amount of any goodwill allocated to the unit and then to the other assets of the CGU pro rata on the basis of
the carrying amount of each asset in the CGU. An impairment loss recognised for goodwill is not reversed in a subsequent
period. On disposal of a subsidiary, associate or jointly-controlled entity, the attributable amount of goodwill is included in the
determination of the profi t or loss on disposal.
Taxation
The charge for current tax is based on the results for the year as adjusted for items which are non-deductible or disallowed.
It is calculated using tax rates that have been enacted or substantively enacted by the Statement of Financial Position date.
Deferred tax is accounted for using the liability method in respect of temporary differences arising from differences between
the carrying amount of assets and liabilities in the fi nancial statements and the corresponding tax basis used in the computation
of taxable profi t. In principle, deferred tax liabilities are recognised for all taxable temporary differences, and deferred tax
assets are recognised to the extent that it is probable that taxable profi t will be available against which deductible temporary
differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from
the initial recognition (other than a business combination) of other assets and liabilities in a transaction, which affects neither
tax nor accounting profi t.
Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is
settled, based on tax rates (and laws) that have been enacted or substantively enacted by the Statement of Financial Position
date. The measurement of deferred tax liabilities and asset refl ects the tax consequences that would follow from the manner in
which the Group expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities. Deferred tax
is charged or credited to the statement of comprehensive income, except when it relates to items credited or charged directly
to equity, in which case the deferred tax is also recorded within equity, or where they arise from the initial accounting for a
business combination. In a business combination, the tax effect is taken into account in calculating goodwill or in determining
the excess of the acquirer’s interest in the net fair value of the acquiree’s identifi able assets, liabilities and contingent liabilities
over the cost of the business combination.
The carrying amount of deferred tax assets are reviewed at each Statement of Financial Position date and reduced to the
extent that it is no longer probable that suffi cient taxable profi ts will be available to allow all or parts of the assets to be
recovered.
72
Provisions
Provisions are recognised when the Group has a legal or constructive obligation resulting from past events, it is probable that
an outfl ow of resources embodying economic benefi ts will be required to settle the obligation and a reliable estimate can be
made of the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the
Statement of Financial Position date, taking into account the risks and uncertainties surrounding the obligation.
When some or all of the economic benefi ts required to settle a provision are expected to be received from a third party, the
receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable
can be measured reliably.
Lease ass ets
The Group leases certain property plant and equipment. A lease is classifi ed as a fi nance lease if it transfers substantially all the
risks and rewards incidental to ownership to the Group. Other leases are classifi ed as operating leases.
Finance lease assets are capitalised at the lease’s commencement at the lower of the fair value of the leased property and the
present value of the minimum lease payments.
Operating leases
Operating lease payments are recognised as an expense on a straight-line basis over the lease term. The difference between
the amounts recognised as an expense and the contractual payments are recognised as an operating lease liability.
Foreign currencies
Transactions in currencies other than the functional currency of the relevant subsidiary are initially recorded at the rates of
exchange ruling on the dates of the transactions. Monetary assets and liabilities denominated in such other currencies are
retranslated at the rates ruling at the Statement of Financial Position date. Profi ts and losses arising on exchange are dealt with
in the Statement of Comprehensive Income. In order to hedge its exposure to foreign exchange risks, the Group may enter
into forward contracts. On consolidation, the assets and liabilities of the Group’s foreign operations are translated into Pounds
Sterling at exchange rates ruling at the Statement of Financial Position date. Income and expense items are translated at the
average exchange rates for the period. Exchange differences arising from the translation of foreign operations are classifi ed as
equity and are recognised as income or expenses in the period in which the operation is disposed of. Translation differences
on foreign loans to subsidiaries which are classifi ed as equity loans are also accounted for as equity.
Consumable stores and product inventories
Consumable stores are valued at the lower of cost, determined on a weighted average basis, and estimated net realisable value.
Net realisable value represents the estimated selling price less all estimated costs of completion and costs to be incurred in
marketing, selling and distribution. Obsolete and slow-moving consumable stores are identifi ed and are written down to their
economic or realisable values. Product inventories are valued at the lower of cost, determined on a weighted-average basis, and
net realisable value. Costs include direct mining costs and mine overheads.
Retirement and pension benefi ts
Payments to defi ned contribution retirement benefi t plans are charged as an expense as they fall due. Payments made to state-
managed schemes are dealt with as defi ned contribution plans where the Group’s obligations under the schemes are equivalent
to those arising in a defi ned contribution retirement benefi t plan.
Post-retirement benefi ts ot her than pension
Historically Barberton Mines provided retirement benefi ts by way of medical-aid scheme contributions for certain employees.
The practice has been discontinued for some years. The net present value of estimated future costs of company contributions
towards medical aid schemes for these retirees is recorded as a provision on the Group Statement of Financial Position. The
provision is reviewed annually with movements in the provision recorded in the Statement of Comprehensive Income.
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Pan African Resources PLC Annual Report 2010
73
Not es to the Financial Statements cont.
for the year ended 30 June 2010
Equity part icipation plan
Equity-settled share-based payments to employees are measured at the fair value of the equity instruments at the grant date.
Details regarding the determination of the fair value of equity-settled share-based transactions are set out in note 33. The fair
value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the
vesting period, based on the Group’s estimate of equity instruments that will eventually vest. At each Statement of Financial
Position date, the Group revises its estimate of the number of equity instruments expected to vest. The impact of the revision
of the original estimates, if any, is recognised in the Statement of Comprehensive Income such that the cumulative expense
refl ects the revised estimate, with corresponding adjustments to the equity-settled employee benefi ts reserve.
Provision for environmental rehabilitation costs
Long-term environmental obligations are based on Barberton Mines environmental plans, in compliance with current
environmental and regulatory requirements. Full provision is made based on the net present value of the estimated cost of
restoring the environmental disturbance that has occurred up to the Statement of Financial Position date. Increases due to
additional environmental disturbances are capitalised and amortised over the remaining lives of the mines. The estimated cost
of rehabilitation is reviewed annually and adjusted as appropriate for changes in legislation or technology. Cost estimates are
not reduced by the potential proceeds from the sale of assets or from plant clean-up at closure.
Provision for closure costs
The Group provides for closure costs other than rehabilitation costs, if any, when the directors have prepared a detailed plan
for closure of the particular operation, the remaining life of which is such that signifi cant changes to the plan are unlikely, and
the directors have raised a valid expectation in those affected that it will carry out the closure by starting to implement that
plan or announcing its main features to those affected by it.
Revenue recognition
Sales represents the value of minerals sold, excluding value-added tax, and is recognised when goods are delivered and risk and
reward has passed, and is measured at the fair value of the consideration received or receivable. Interest income is accrued on
a time basis, by reference to the principal outstanding and at the interest rates applicable, which is the rate that exactly discounts
estimated future cash receipts through the expected life of the fi nancial asset to that asset’s net carrying amount. Dividend
income from investments is recognised when the shareholders’ rights to receive payment have been established. Revenue is
recognised when the buyer takes title, provided that:
(a) It is probable that delivery will be made;
(b) The item is on hand, identifi ed and ready for delivery to the buyer at the time the sale is recognised;
(c) The buyer specifi cally acknowledges the deferred delivery instructions; and
(d) The usual payment terms apply.
Loans and receivables
Trade receivables, loans and other receivables that have fi xed or determinable payments and that are not quoted in an active
market are classed as loans and receivables. Loans and receivables are measured at amortised cost using the effective interest
method, less impairment if necessary. Interest income is recognised by applying the effective interest rate, except for short-term
receivables, when the recognition of interest would be immaterial.
Impairment of fi nancial ass ets
Financial assets, other than those at Fair Value Through Profi t and Loss (“FVTPL”), are assessed for indicators of impairment at
each Statement of Financial Position date. Financial assets are impaired where there is objective evidence that, as a result of one
or more events that occurred after the initial recognition of the fi nancial asset, the estimated future cash fl ows of the fi nancial
asset have been negatively impacted.
74
Derecognition of fi nancial ass ets
The Group derecognises a fi nancial asset only when the contractual rights to the cash fl ows from the asset expire, or when it
transfers the fi nancial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group
neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset,
the Group recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Group
retains substantially all the risks and rewards of ownership of a transferred fi nancial asset, the Group continues to recognise the
fi nancial asset and also recognises a collateralised borrowing for the proceeds received.
Financial liabilities and equity instruments issued by the Group
Classifi cation as debt or equity
Debt and equity instruments are classifi ed as either fi nancial liabilities or as equity in accordance with the substance of the
contractual arrangement.
Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities.
Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs.
Financial liabilities
Financial liabilities are classifi ed as either fi nancial liabilities FVTPL or “other fi nancial liabilities”.
Financial liabilities at FVTPL
Financial liabilities are classifi ed as at FVTPL where the fi nancial liability is either held for trading or it is designated as at FVTPL.
A fi nancial liability is classifi ed as held for trading if:
• It has been incurred principally for the purpose of repurchasing in the near future; or
• It is part of an identifi ed portfolio of fi nancial instruments that the Group manages together and has a recent actual pattern
of short-term profi t-taking; or
• It is a derivative that is not designated and effective as a hedging instrument.
A fi nancial liability other than a fi nancial liability held for trading may be designated as at FVTPL upon initial recognition if:
• Such designation eliminates or signifi cantly reduces a measurement or recognition inconsistency that would otherwise arise;
or
• The fi nancial liability forms part of a group of fi nancial assets or fi nancial liabilities or both, which is managed and its
performance is evaluated on a fair value basis, in accordance with the Group’s documented risk management or investment
strategy, and information about the grouping is provided internally on that basis; or
• It forms part of a contract containing one or more embedded derivatives, and IAS 39 Financial Instruments: Recognition and
Measurement permits the entire combined contract (asset or liability) to be designated as at FVTPL.
Financial liabilities at FVTPL are stated at fair value, with any resultant gain or loss recognised in profi t or loss. The net gain or loss
recognised in profi t or loss incorporates any interest paid on the fi nancial liability. The Group has no fi nancial liabilities classifi ed
as FVTPL.
Other fi nancial liabilities
Other fi nancial liabilities are subsequently measured at amortised cost using the effective interest method, with interest
recognised on an effective yield basis.
The effective interest method is a method of calculating the amortised cost of a fi nancial liability and of allocating interest
expense over the relevant period. The effective interest rate is the rate that discounts the estimated future cash payments
through the expected life of the fi nancial liability or, where appropriate, a shorter period.
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Pan African Resources PLC Annual Report 2010
75
Not es to the Financial Statements cont.
for the year ended 30 June 2010
Financial liabilities and equity instruments issued by the Group
(continued)
Derecognition of fi nancial liabilities
The Group derecognises fi nancial liabilities only when the Group’s obligations are discharged, cancelled or they expire.
Derivative fi nancial instruments
In the ordinary course of its operations, the Group may enter into a variety of derivative fi nancial instruments to manage its
exposure to commodity prices, volatility of interest rates and foreign exchange rate risk.
Derivatives are initially recognised at cost at the date a derivative contract is entered into and are subsequently re-measured to
their fair value at each Statement of Financial Position date. The resulting gain or loss is recognised in profi t or loss immediately
unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in profi t or
loss depends on the nature of the hedge relationship. A derivative is presented as a non-current asset or a non-current liability
if the remaining maturity of the instrument is more than 12 months and it is not expected to be realised or settled within
12 months. Other derivatives are presented as current assets or current liabilities.
Hedge accounting
The Group may designate certain hedging instruments, which include derivatives, embedded derivatives and non-derivatives in
respect of foreign currency risk, as either fair value hedges, cash fl ow hedges, or hedges of net investments in foreign operations.
Hedges of foreign exchange risk or fi rm commitments are accounted for as cash fl ow hedges. At the inception of the hedge
relationship, the entity documents the relationship between the hedging instrument and the hedged item, along with its risk
management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the inception of the
hedge and on an ongoing basis, the Group documents whether the hedging instrument that is used in a hedging relationship is
effective in offsetting changes in fair values or cash fl ows of the hedged item.
Fair value hedge
Changes in the fair value of any derivatives that are designated and qualify as fair value hedges are recorded in profi t or loss
immediately, together with any changes in the fair value of the hedged item that are attributable to the hedged risk. The change
in the fair value of the hedging instrument and the change in the hedged item attributable to the hedged risk are recognised
in the line of the Statement of Comprehensive Income relating to the hedged item. Hedge accounting is discontinued when
the Group revokes the hedging relationship, the hedging instrument expires or is sold, terminated, or exercised, or no longer
qualifi es for hedge accounting. The adjustment to the carrying amount of the hedged item arising from the hedged risk is
amortised to profi t or loss from that date.
Cash fl ow hedge
The effective portion of changes in the fair value of any derivatives that are designated and qualify as cash fl ow hedges are
deferred in equity. The gain or loss relating to the ineffective portion is recognised immediately in profi t or loss, and is included in
the “other gains and losses” line of the Statement of Comprehensive Income. Amounts deferred in equity are recycled in profi t
or loss in the periods when the hedged item is recognised in profi t or loss, in the same line of the Statement of Comprehensive
Income as the recognised hedged item. However, when the forecast transaction that is hedged results in the recognition of
a non-fi nancial asset or a non-fi nancial liability, the gains and losses previously deferred in equity are transferred from equity
and included in the initial measurement of the cost of the asset or liability. Hedge accounting is discontinued when the Group
revokes the hedging relationships, the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifi es
for hedge accounting. Any cumulative gain or loss deferred in equity at that time remains in equity and is recognised when the
forecast transaction is ultimately recognised in profi t or loss. When a forecast transaction is no longer expected to occur, the
cumulative gain or loss that was deferred in equity is recognised immediately in profi t or loss.
Cash and cash equivalents
Cash and cash equivalents comprise cash-on-hand and demand deposits, and other short-term highly liquid investments that
are readily convertible to a known amount of cash and are subject to an insignifi cant risk of changes in value.
76
3. Critical accounting estimates and judgements
In preparing the annual fi nancial statements in terms of IFRS, the Group’s management is required to make certain judgements,
estimates and assumptions that may materially affect reported amounts of assets and liabilities at the date of the fi nancial
statements and the reported amounts of revenue and expense during the reported year and the related disclosures. The
estimates and judgements are based on historical experience, current and expected future economic conditions and other
factors. Actual results may differ from these estimates.
Critical accounting estimates and judgements made by management
The following judgements, that have the most signifi cant effect on the amounts recognised in the fi nancial statements, have been
made by management in the process of applying the Group’s accounting policies:
• Estimates made in determining the present obligation of environmental provisions including decommissioning and
rehabilitation;
• Estimates made in determining the recoverable amount of assets where there is an indication that an asset may be impaired,
this includes the estimation of cash fl ows and the discount rates used;
• Estimates made in determining the life of the mines. The Life of Mine is determined from development plans based on mine
management’s estimates and includes total mineral reserve and a portion of the mineral resource. These plans are updated
from time to time and take into consideration the actual current cost of extraction, as well as certain forward projections.
These projections are reviewed by the board.
• Estimates made of legal or constructive obligations resulting in the raising of provisions, and the expected date of probable
outfl ow of economic benefi ts to assess whether the provision should be discounted;
• Estimates of mineral resources and ore reserves in accordance with the SAMREC code (2000) for South African properties.
Such estimates relate to the category for the resource (measured, indicated or inferred), the quantum and the grade;
• Estimates of the carrying value of goodwill and intangible assets;
• Estimates of the fair value of assets at acquisition are made in accordance with IFRS and take into account the replacement
value of assets; and
• Estimates of feasibility studies related to exploration and growth projects.
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Pan African Resources PLC Annual Report 2010
77
Not es to the Financial Statements cont.
for the year ended 30 June 2010
4. Revenue
Gold sales
Finance income
5. Cost of production
Salaries and wages
Mining
Processing
Engineering and technical services
Electricity
Security
Administration and other
Group
Company
30 June
2010
£
30 June
2009
£
30 June
2010
£
30 June
2009
£
68,506,394
661,645
53,000,352
816,754
–
468,490
–
113,205
69,168,039
53,817,106
468,490
113,205
(18,064,485)
(5,494,006)
(5,424,230)
(2,919,966)
(3,528,059)
(2,714,009)
(2,409,131)
(12,652,511)
(4,444,537)
(4,581,547)
(2,562,747)
(2,044,367)
(813,041)
(1,405,936)
(40,553,886)
(28,504,686)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
6. Segmental analysis
A segment is a distinguishable component of the Group that is engaged in providing products or services in a particular
business sector (business segment), which is subject to risk and rewards that are different to those of other segments. The
Group’s business activities were conducted through three business segments, fi rstly in Barberton Mines located in Barberton
South Africa, the Group’s corporate and exploration activities and Phoenix Platinum Mining. The Chief Executive Offi cer
reviews the operations in accordance with the disclosures presented below.
Revenue
Gold sales
Realisation costs
On-mine revenue
Cost of production
Depreciation
Mining profi t
Other (expenses)/income
Impairment costs
Royalty costs
Net income before fi nance income
and fi nance costs
Finance income
Finance costs
Profi t before taxation
Taxation
Barberton
Mines
£
68,506,394
(162,791)
68,343,603
(40,553,886)
(3,125,093)
24,664,624
(173,988)
–
(837,378)
23,653,258
193,155
(67,836)
23,778,577
(7,655,913)
30 June 2010
Corporate
*Phoenix and Growth
Projects
Platinum
£
£
Barberton
Mines
£
Group
£
30 June 2009
Corporate
*Phoenix and Growth
Platinum
£
Projects
£
Group
£
–
–
–
–
–
–
–
–
–
–
–
–
–
–
– 68,506,394 53,000,352
–
(140,546)
(162,791)
– 68,343,603 52,859,806
– (40,553,886) (28,504,686)
(3,125,093) (2,360,431)
–
– 24,664,624 21,994,689
(100,324)
–
–
(1,755,799) (1,929,787)
(335,401)
(837,378)
(335,401)
–
(2,091,200) 21,562,058 21,894,365
661,645
703,549
(67,915)
(9,244)
468,490
(79)
(1,622,789) 22,155,788 22,588,670
(7,655,913) (8,219,425)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
– 53,000,352
(140,546)
–
– 52,859,806
– (28,504,686)
(2,360,431)
–
– 21,994,689
(1,365,012) (1,465,336)
(5,025,463) (5,025,463)
–
–
(6,390,475) 15,503,890
816,754
(9,933)
113,205
(689)
(6,277,959) 16,310,711
(8,219,425)
–
Profi t after taxation
16,122,664
–
(1,622,789) 14,499,875 14,369,245
–
(6,277,959) 8,091,286
Other comprehensive income:
Foreign currency translation differences
Total comprehensive income
for the year
1,936,738
443,024
–
2,379,762
3,301,475
348,426
–
3,649,901
18,059,402
443,024 (1,622,789) 16,879,637 17,670,720
348,426 (6,277,959) 11,741,187
* Costs directly attributable to Phoenix Platinum, along with attributable overheads, are capitalised to intangible assets.
78
6. Segmental analysis (continued)
30 June 2010
Corporate
*Phoenix and Growth
Projects
Platinum
£
£
Barberton
Mines
£
Barberton
Mines
£
Group
£
30 June 2009
Corporate
*Phoenix and Growth
Platinum
£
Projects
£
Group
£
Segmental assets
Segmental liabilities
Goodwill
Net assets (excluding goodwill)
Capital expenditure
43,420,283 4,858,063 22,722,385 71,000,731 31,965,438
379,919 18,514,568 14,619,687
18,049,443
–
–
25,370,840 4,772,857 22,342,466 52,486,163 17,345,751
5,918,271
4,052,655
17,075 5,935,346
85,206
–
– 21,000,714
–
31,585
–
4,447,159 14,733,397 51,145,994
1,135,034 15,786,306
– 21,000,714
4,415,574 13,598,363 35,359,688
9,150,031
265,770
4,831,606
* Costs directly attributable to Phoenix Platinum, along with overheads, are capitalised to intangibles.
7. Operating leases
At the fi nancial year end, the Group and Company had outstanding commitments under non-cancellable operating leases mainly
in respect of offi ce equipment, security cameras, building rentals and compressors, which fall due as follows:
Within one year
Years 2 to 5
Minimum lease payments under operating leases
recognised as an expense in the year:
Leases are negotiated for an average term of
three to fi ve years.
8. Other (expenses)/income
Dividends received – subsidiaries
Foreign exchange gain
Operating leases
Company depreciation
Sundry other
9. Finance income/(costs)
Interest received – Bank
Interest paid – Bank
10. Profi t before taxation
Profi t for the year has been arrived at after charging:
Management fee expense/(income)
– Metorex
– Shanduka
Share option expense
Depreciation
Impairment costs
Staff costs
Operating leases
Group
Company
30 June
2010
£
30 June
2009
£
204,240
121,350
176,651
298,331
325,590
474,982
30 June
2010
£
41,407
19,865
61,272
30 June
2009
£
33,890
57,581
91,471
182,762
164,760
23,237
29,348
–
101,369
(182,762)
–
(1,848,394)
–
86,484
(164,760)
–
(1,387,060)
9,032,496
101,369
(23,237)
(9,980)
(935,401)
11,275,545
86,484
(29,348)
(8,519)
(1,559,803)
(1,929,787)
(1,465,336)
8,165,247
9,764,359
661,645
(67,915)
816,754
(9,933)
468,490
(79)
113,205
(689)
593,730
806,821
468,411
112,516
335,289
76,688
204,704
3,125,093
335,401
18,772,545
182,762
388,685
51,854
264,378
2,360,431
5,025,463
12,993,897
164,760
–
–
113,516
9,980
335,401
708,060
23,237
–
–
134,683
8,519
5,056,290
147,280
29,348
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The Company impairment relates to the fi nal impairment of the inter-company loan to Central African Republic exploration
project.
Pan African Resources PLC Annual Report 2010
79
Not es to the Financial Statements cont.
for the year ended 30 June 2010
11. Auditor ’s remuneration
Fees payable to the Company’s auditors for the audit
of the Company’s annual accounts
Audit of the consolidated fi nancial statements
Audit of the Company’s subsidiaries pursuant
to legislation
Under provision of audit fee in the prior year
Group
Company
30 June
2010
£
30 June
2009
£
30 June
2010
£
10,000
48,180
40,880
19,280
10,000
32,000
22,577
88,447
10,000
48,180
–
19,280
30 June
2009
£
10,000
32,000
–
88,447
Total audit fees
118,340
153,024
77,460
130,447
Other services rendered by the Auditors
Total non-audit fees
2,012
2,012
–
–
2,012
2,012
–
–
12. Staff costs
The average number of employees were:
Corporate and Growth Projects
Mining
Their aggregate remuneration comprised:
Salary and wages
Other pension costs
13. Taxation
Income tax expense
South African normal taxation
– current year
– prior year
Deferred taxation
– current year
Total taxation charge
Profi t before taxation
Taxation at the domestic taxation rate of 28%
Non-deductible expenses/(exempt income)
Taxation rate differential
Tax effect of utilisation of tax losses
Number
Number
Number
Number
12
1,783
1,795
7
1,708
1,715
10
–
10
7
–
7
£
17,503,662
1,268,883
£
12,108,815
885,082
£
682,278
25,782
Number
146,523
757
18,772,545
12,993,897
708,060
147,280
7,283,602
(356,490)
7,804,762
–
728,801
414,663
7,655,913
22,155,788
6,203,621
151,229
1,301,063
–
8,219,425
16,310,711
4,566,999
1,466,315
2,186,111
–
–
–
–
–
–
–
–
8,298,257
2,323,512
(2,503,143)
–
179,631
–
4,820,586
1,349,764
(1,690,838)
–
341,074
Taxation expense for the year
7,655,913
8,219,425
Effective taxation rates
Statutory rate
Taxation rate differential
Non-deductible expenses/(exempt income)
Tax effect of utilisation of tax losses
Effective taxation rate
%
28.00
5.87
0.68
–
34.55
%
28.00
13.40
8.99
–
50.39
–
%
28.00
–
(30.16)
2.16
0.00
–
%
28.00
–
(35.08)
7.08
0.00
There are no signifi cant unrecognised temporary differences associated with undistributed profi ts of overseas subsidiaries. South
African mining tax on mining income is determined according to a formula which takes into account the profi t and revenue
from mining operations. South African mining taxable income is determined after the deduction of all mining capital expenditure,
with the proviso that this cannot result in an assessed loss. Capital expenditure amounts not deducted are carried forward as
unredeemed capital expenditure to be deducted from future mining income. The Group has no unredeemed capital carried
forward deductible against future profi ts.
80
14. Earnings per share
Basic and diluted earnings per share
Basic and diluted earnings per share are based on the Group’s profi t for the year attributable to owners of the parent, divided
by the weighted average number of shares in issue during the year.
30 June 2010
Weighted
average
number
of shares
Net
profi t
£
Earnings
per share
Pence
30 June 2009
Weighted
average
number
of shares
Net
profi t
£
From continuing operations
Basic EPS
Share options
14,277,232 1,366,268,709
13,611,714
1.04
4,403,535 1,104,367,219
2,881,444
Diluted EPS
14,277,232 1,379,880,423
1.03
4,403,535 1,107,248,663
Earnings
per share
Pence
0.40
–
0.40
Headline earnings per share
Headline earnings per share is based on the Group’s headline earnings divided by the weighted average number of shares in
issue during the year.
Reconciliation between earnings and headline earnings from continuing operations:
30 June 2010
Weighted
average
number
of shares
Net
profi t
£
Earnings
per share
Pence
30 June 2009
Weighted
average
number
of shares
Net
profi t
£
Earnings as reported
Adjustments:
Impairment costs
14,277,232 1,366,268,709
1.04
4,403,535 1,104,367,219
335,401 1,366,268,709
0.03
5,025,463 1,104,367,219
Headline earnings per share*
Share options
14,612,633 1,366,268,709
13,611,714
1.07
–
9,428,998 1,104,367,219
2,881,444
Diluted headline earnings
per share
14,612,633 1,379,880,423
1.06
9,428,998 1,107,248,663
* Headline earnings per share is required to be disclosed in terms of the Listing Requirements of JSE Limited.
Earnings
per share
Pence
0.40
0.45
0.85
–
0.85
15. Dividends
The board of directors recommend a fi nal dividend for the year ended 30 June 2010 of 0.3723p per share (2009: dividend paid
of 0.2555p per share), to be approved by shareholders at the forthcoming annual general meeting of the Company.
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Pan African Resources PLC Annual Report 2010
81
Not es to the Financial Statements cont.
for the year ended 30 June 2010
16. Propert y, plant and equipment and mineral rights
Mineral
rights
and
mining
property
£
Land*
£
Building
and
infra-
structure
£
Plant
and
machinery
£
Shafts
£
Exploration
£
Other
£
Total
£
Group
COST
Balance at
30 June 2008
Additions
Acquisition of
subsidiary
Impairment
Disposal
Foreign currency
translation reserve
Balance at
30 June 2009
Additions
**Impairment
Foreign currency
translation reserve
Balance at
30 June 2010
Group
ACCUMULATED
DEPRECIATION
Balance at
30 June 2008
Charge for the year
Foreign currency
translation reserve
Balance at
30 June 2009
Charge for the year
Foreign currency
translation reserve
Balance at
30 June 2010
CARRYING
AMOUNT
6,775
4,591,927
1,293,458
7,890,030 13,860,305
269,488
279,924 28,191,907
–
–
–
1,558,610
2,032,679
461,366
265,770
4,318,425
17,830
–
–
4,813,776
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(242,730)
(5,082)
4,831,606
(242,730)
(5,082)
3,031
1,450,511
295,990
2,017,793
3,448,567
124,505
28,180
7,368,577
27,636 10,856,214
1,589,448 11,466,433 19,341,551
855,359
326,062 44,462,703
–
–
–
–
24,760
–
1,811,948
–
3,774,572
–
306,991
–
17,075
(294,916)
5,935,346
(294,916)
2,706
1,062,711
156,442
1,184,752
2,023,133
94,286
120
4,524,150
30,342 11,918,925
1,770,650 14,463,133 25,139,256
1,256,636
48,341 54,627,283
Mineral
rights
and
mining
property
£
Building
and
infra-
structure
£
Plant
and
machinery
£
Land*
£
Shafts
£
Exploration
£
Other
£
Total
£
–
(1,539,122)
(432,282) (2,268,323) (3,882,366)
(330,172)
(93,139)
(719,080) (1,209,521)
–
(397,175)
(111,607)
(617,008) (1,053,154)
(2,266,469)
(637,028) (3,604,411) (6,145,041)
–
–
–
–
–
(8,122,093)
(8,519) (2,360,431)
–
(2,178,944)
(8,519) (12,661,468)
(358,353)
(112,550)
(961,664) (1,574,982)
(107,564)
(9,980) (3,125,093)
(234,186)
(66,229)
(385,903)
(655,695)
(3,699)
–
(1,345,712)
–
–
–
–
(2,859,008)
(815,807) (4,951,978) (8,375,718)
(111,263)
(18,499) (17,132,273)
At 30 June 2009
At 30 June 2010
27,636
30,342
8,589,745
9,059,917
952,420
954,843
7,862,022 13,196,510
9,511,155 16,763,538
855,359
1,145,373
317,543 31,801,235
29,842 37,495,010
*
Details of land are maintained in a register held at the offi ces of Barberton Mines, which may be inspected by a member or their duly authorised
agents. The Group reviews the residual values used for purposes of depreciation calculations annually.
** The fi nal impairment of the exploration machinery in the Central African Republic which was fi nally written off during the closure and deregistration
of the company.
82
16. Propert y, plant and equipment and mineral rights (continued)
Mineral
rights
and
mining
Building
and
infra-
Plant
and
Land*
property
structure
machinery
Shafts
Exploration
£
–
–
–
–
–
£
–
–
–
–
–
£
–
–
–
–
–
£
–
–
–
–
–
£
–
–
–
–
–
£
–
–
–
–
–
Other
£
Total
£
21,670
7,396
21,670
7,396
29,066
29,066
17,075
17,075
46,141
46,141
Company
COST
Balance at
30 June 2008
Additions
Balance at
30 June 2009
Additions
Balance at
30 June 2010
Mineral
rights
and
mining
Building
and
infra-
Plant
and
Company
£
£
£
£
£
£
Land*
property
structure
machinery
Shafts
Exploration
Other
£
Total
£
ACCUMULATED
DEPRECIATION
Balance at
30 June 2008
Charge for the year
Balance at
30 June 2009
Charge for the year
Balance at
30 June 2010
CARRYING
AMOUNT
At 30 June 2009
At 30 June 2010
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(8,519)
–
(8,519)
(8,519)
(8,519)
(9,980)
(9,980)
(18,499)
(18,499)
20,547
27,642
20,547
27,642
*
Details of land are maintained in a register held at the offi ces of Barberton Mines, which may be inspected by a member or their duly authorised
agents. The Group reviews the residual values used for purposes of depreciation calculations annually.
** The fi nal impairment of the exploration machinery in the Central African Republic which was fi nally written off during the closure and deregistration
of the company.
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Pan African Resources PLC Annual Report 2010
83
Not es to the Financial Statements cont.
for the year ended 30 June 2010
17. Other intangible ass ets
EXPLORATION AND EVALUATION ASSETS
Balance at 30 June 2008
Purchase of Ghana Exploration Licence
Purchase of Central African Republic Mining Licence
Purchase of subsidiary
Exploration expenditure
Impairment
Foreign currency translation reserve
Balance at 30 June 2009
Exploration expenditure
Foreign currency translation reserve
Balance at 30 June 2010
Group
£
12,837,045
720,000
39,749
239,997
1,580,349
(4,651,335)
1,272,811
12,038,616
976,373
72,891
13,087,880
The impairment of the intangible assets in the prior year was based on the cash-generating units in relation to the exploration
and evaluation of assets based in Ghana and the Central African Republic. The intangible assets that were considered non-
recoverable were impaired in full due to the mining venture being considered by the directors as non-viable.
18. Goodwill
Goodwill acquired in a business combination is allocated at acquisition to the CGUs that are expected to benefi t from that
business combination.
Group
Company
30 June
2010
£
30 June
2009
£
30 June
2010
£
30 June
2009
£
Opening and closing balance
21,000,714
21,000,714
–
–
The Group tests the goodwill carrying amount annually for impairment, or more frequently if there are indications that goodwill
might be impaired. The goodwill carrying amount is not considered impaired and the review was performed in accordance with
the Group’s accounting policies.
The recoverable amounts of the CGUs are determined from value-in-use calculations. The key assumptions for the value-in-use
calculations are those regarding the discount rates, growth rates and expected changes to selling prices and direct costs during
the period. Management estimates discount rates using pre-tax rates of 12%, which refl ect current market assessments of the
time value of money and the risks specifi c to the CGUs to the extent not already refl ected in the cash fl ows being discounted,
an average gold price between US$900 – US$1,150 and exchange rate of ZAR7.80 – ZAR10.0 to the dollar over the life of
projects. The life of projects were estimated at 10 years for Barberton Mines, and 10 years for the Manica gold project. Changes
in selling prices and direct costs are based on past practices and expectations of future changes in the market.
The Group prepares cash-fl ow forecasts derived from the most recent fi nancial budgets approved by management.
84
19. Investments
Investments
Company
30 June
2010
£
30 June
2009
£
53,259,921
38,499,708
At 30 June 2010 the Company held the following shares in subsidiary undertakings:
Name of undertaking
Barberton Mines
Explorator Limitada
Mistral Resource
Development Corporation
Brampton Capital
Overseas Limited
Phoenix Platinum
Country of
incorporation
Principal activity
Proportion
of capital
effectively held
by Company
Carrying
amount
2010
£
Carrying
amount
2009
£
South Africa
Mozambique
Mining
Exploration
100%
100%
45,770,663
88,972
31,010,450
88,972
British Virgin Isles
Exploration
100%
584,705
584,705
British Virgin Isles
South Africa
Exploration
Mining
100%
100%
2,485,000
4,330,581
2,485,000
4,330,581
53,259,921
38,499,708
20. Rehabilitation trust fund
Group
Company
30 June
2010
£
30 June
2009
£
30 June
2010
£
Funds held in trust fund (refer to note 27)
2,740,546
2,357,266
–
21. Inventories
Consumable stores
Provision for obsolete stock
22. Trade and ot her receivables
Trade receivables
Other receivable and prepayments
VAT receivables
Group
Company
30 June
2010
£
30 June
2009
£
1,222,381
(96,007)
410,995
(52,632)
1,126,374
358,363
30 June
2010
£
–
–
–
Group
Company
30 June
2010
£
30 June
2009
£
2,905,338
347,054
542,267
1,476,643
218,573
505,997
30 June
2010
£
48,589
86,483
27,265
3,794,659
2,201,213
162,337
There are no material amounts owing that are past due and/or requiring impairment.
30 June
2009
£
–
30 June
2009
£
–
–
–
30 June
2009
£
23,286
–
–
23,286
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Pan African Resources PLC Annual Report 2010
85
Not es to the Financial Statements cont.
for the year ended 30 June 2010
22. Trade and ot her receivables (continued)
The average credit period is:
Number of days
No interest is charged on trade receivables.
Group
30 June
2010
15
30 June
2009
10
Before accepting any new customers, the Group uses a credit bureau or performs a credit assessment to assess the potential
customer’s credit limit and credit quality. The Group only transacts with credit worthy customers and large institutions within
South Africa.
The fair value of trade receivables is not materially different from the carrying value presented. No receivables have been
pledged as security.
23. Cash and cash equivalents
Cash and cash equivalents comprise cash held by the Group and short-term bank deposits with an original maturity of three
months or less. The carrying amount of these assets approximates their fair value.
Group
Company
30 June
2010
£
30 June
2009
£
30 June
2010
£
30 June
2009
£
Cash and cash equivalents
12,756,262
2,389,301
14,240,891
1,507,134
CREDIT FACILITIES
The Group has the following credit facilities at
30 June 2010:
Overdraft facility
Asset fi nance facility
Guarantee
Credit card
1,647,389
–
587,222
8,670
1,579,479
45,015
236,922
10,661
2,243,281
1,872,077
–
–
–
–
–
–
–
–
–
–
The overdraft facility and asset fi nance facilities are unsecured. The overdraft facility attracts interest at prime in South Africa.
24. Acquisition of additional shares in subsidiary
Acquiring additional shares in the subsidiary after control was obtained is accounted for as an equity transaction with owners.
On 19 June 2009 the Company announced that it had concluded an agreement with Shanduka and Shanduka’s holding company,
Shanduka Resources (Proprietary) Limited, whereby Pan African would acquire Shanduka’s 26% shareholding in Barberton
Mines, in exchange for the issue of new ordinary shares in Pan African to Shanduka. On 21 August 2009 Pan African announced
that the transaction had become unconditional and that the shares had been issued and allotted to Shanduka. Barberton Mines
became a wholly-owned subsidiary of Pan African from this date. The new shares issued to Shanduka (295,751,549 ordinary
shares) represent 21% of the enlarged issued share capital of Pan African following implementation of this transaction. Shanduka
acquired a further 5% of the issued ordinary share capital of Pan African via the Metorex book build, thereby increasing its
shareholding to 26%.
86
24. Acquisition of additional shares in subsidiary (continued)
For accounting purposes the Group consolidated 100% of profi ts from Barberton Mines from 21 August 2009.
The accounting treatment for the Shanduka and Pan African transaction was in accordance with IAS 27 (revised). Changes in
a parent’s ownership interest in a subsidiary that do not result in a change of control are accounted for as equity transactions
(i.e. transactions with owners in their capacity as owners). Therefore the additional investment of £14,760,214 through the
Pan African share issue to Shanduka and non-controlling interest of £4,059,121 as at 21 August 2009 were eliminated on
consolidation, and the Group’s realisation of equity reserve increased by £10,701,093.
25. Share capital
Group
Company
30 June
2010
£
30 June
2009
£
30 June
2010
£
30 June
2009
£
Authorised
2,000,000,000 (2009: 2,000,000,000) ordinary
shares of £0.01 each
Issued and fully paid up
1,409,540,711 (2009: 1,112,589,162) ordinary shares
of £0.01 each
20,000,000
20,000,000
20,000,000
20,000,000
14,095,406
11,125,891
14,095,406
11,125,891
The following non-cash issue of shares was made during the year:
On 21 August 2009, 295,751,549 ordinary shares were issued in terms of the Share Exchange Agreement between Pan African
Resources and Shanduka at 65 cents per share.
The following cash issue of shares was made during the year:
On 10 June 2010; 1,200,000 ordinary shares were issued to Mr N Steinberg at 4.0p per share for cash in relation to share
options exercised.
Subsequent to the year-end the following cash issues of shares has been made:
On 23 August 2010; 4,000,000 ordinary shares were issued to Mr N Steinberg at 4.0p per share for cash in relation to share
options exercised.
Current number of share options outstanding at 30 June 2010 is 52,145,000 (2009: 49,945,000).
26. Borrowings
Group
Company
30 June
2010
£
30 June
2009
£
30 June
2010
£
30 June
2009
£
Trade and other payables
Accruals
4,064,830
976,924
3,719,877
–
200,338
334,089
253,101
–
Total trade and other payables
5,041,754
3,719,877
534,427
253,101
Short-term liabilities – interest bearing
Amount due within 12 months
Amount due for settlement after 12 months
Total borrowings
–
–
–
20,669
–
20,669
–
–
–
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–
–
Borrowings in the prior year represented instalment fi nance loans and were secured by plant and equipment with a net book
value of £249,786. These borrowings bore interest at South African prime less 1.5% and were paid in full in the current year.
The Group has no fi nance leases at 30 June 2010.
Pan African Resources PLC Annual Report 2010
87
Not es to the Financial Statements cont.
for the year ended 30 June 2010
27. Provisions
GROUP
Balance at 30 June 2008
Provided during the year
Utilised during the year
Foreign currency translation
Balance at 30 June 2009
Provided/(utilised) during the year
Utilised during the year
Foreign currency translation
Balance at 30 June 2010
Balance at 30 June 2009
Long-term provisions
Current provisions
Balance at 30 June 2010
Long-term provisions
Current provisions
COMPANY
Balance at 30 June 2008
Provided during the year
Utilised during the year
Balance at 30 June 2009
Provided during the year
Utilised during the year
Balance at 30 June 2010
Balance at 30 June 2009
Long-term provisions
Current provisions
Balance at 30 June 2010
Long-term provisions
Current provisions
Post
retirement
benefi ts
£
122,990
–
(12,790)
26,402
Rehabilitation
£
2,096,964
193,347
–
506,192
Leave pay
and bonuses
£
711,085
1,104,397
(842,253)
178,666
Total
£
2,931,039
1,297,744
(855,043)
711,260
136,602
2,796,503
1,151,895
4,085,000
(18,470)
(14,937)
12,223
147,458
–
278,819
1,488,831
(1,291,205)
115,778
1,617,819
(1,306,142)
406,820
115,418
3,222,780
1,465,299
4,803,497
136,602
–
2,796,503
–
–
1,151,895
2,933,105
1,151,895
136,602
2,796,503
1,151,895
4,085,000
115,418
–
3,222,780
–
–
1,465,299
3,338,198
1,465,299
115,418
3,222,780
1,465,299
4,803,497
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
37,060
–
37,060
76,410
(72,059)
41,411
–
37,060
37,060
–
41,411
41,411
–
37,060
–
37,060
76,410
(72,059)
41,411
–
37,060
37,060
–
41,411
41,411
Rehabilitation trust fund
The Group is exposed to environmental liabilities relating to its mining operations. Estimates of the cost of environmental and
other remedial work such as reclamation costs, close down and restoration and pollution control are made on an annual basis,
based on the estimated life of the mine, following which payments are made to a rehabilitation trust set up as required by South
African Laws and Regulations. The provision represents the net present value of the best estimate of the expenditure required
to settle the obligation to rehabilitate environmental disturbances caused by mining operations. These costs are expected to be
incurred over the life of mine and after fi nal closure of the operations.
Leave pay
The provision for leave pay is provided for, based on the total cost of employment of employees and the amount of leave days
owing to them.
88
28. Deferred taxation
Group
Company
Deferred tax liabilities
Property, plant and equipment
Provisions
Net deferred tax liabilities
Reconciliation of deferred tax liabilities:
Net deferred liabilities at the beginning
of the year
Deferred tax asset acquired
Deferred tax charge for the year
Translation difference
30 June
2010
£
30 June
2009
£
Note
8,881,636
(789,304)
7,240,069
(487,637)
8,092,332
6,752,432
6,752,432
–
728,801
611,099
5,201,245
(110,179)
414,663
1,246,703
13
Net deferred liabilities at the end of the year
8,092,332
6,752,432
30 June
2010
30 June
2009
£
–
–
–
–
–
–
–
–
£
–
–
–
–
–
–
–
–
29. Financial instruments
The Group manages its capital to ensure that it will be able to continue as a going concern while maximising the return to
shareholders through the optimisation of the debt and equity balances. The Group’s overall strategy remains unchanged from
the prior year.
Components of capital:
Interest-bearing debt
Cash and cash equivalents
Net interest-bearing assets
Equity
Group
Company
30 June
2010
£
30 June
2009
£
30 June
2010
£
30 June
2009
£
–
(12,756,262)
20,669
(2,389,301)
–
(14,240,891)
–
(1,507,134)
(12,756,262)
73,486,877
(2,368,632)
56,360,402
(14,240,891)
72,361,319
(1,507,134)
49,147,198
Net debt to equity ratio (%)
(0.17)
(0.04)
(0.20)
(0.03)
Categories of fi nancial instruments:
Financial assets:
Cash and cash equivalents
Receivables
Financial liabilities:
Amortised cost
12,756,262
3,794,659
2,389,301
2,201,213
14,240,891
162,337
1,507,134
23,286
5,041,754
4,695,215
575,838
1,207,860
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Pan African Resources PLC Annual Report 2010
89
Not es to the Financial Statements cont.
for the year ended 30 June 2010
29. Financial instruments (continued)
Financial risk management objectives
The Group seeks to minimise the effects of fi nancial risks by using derivative fi nancial instruments to hedge risk exposures
where appropriate. The use of fi nancial derivatives is governed by the Group’s policies approved by the board of directors,
which provide written principles on foreign exchange risk, interest rate risk, credit risk, the use of fi nancial derivatives and
non-derivative fi nancial instruments, and the investment of excess liquidity. Compliance with the policies and exposure limits
is reviewed on a continuous basis. The Group does not enter into or trade fi nancial instruments, including derivative fi nancial
instruments, for speculative use.
Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in fi nancial loss to the Group.
The Group has adopted a policy of only dealing with creditworthy counterparties and obtaining suffi cient collateral, where
appropriate, as a means of mitigating the risk.
The Group’s credit risk is primarily attributable to its trade receivables. The amounts presented in the Statement of Financial
Position are net of allowances for doubtful receivables of £11,916 (2009: £16,771), estimated by the Group’s management
based on the current economic environment. The credit risk on liquid funds is limited because the counterparties are dealt with
in accordance with the Group’s credit policy. The Group has one major customer that represents more than 5% of the trade
receivables balance for the individual companies.
Customers above 5%
Group
30 June
2010
£
30 June
2009
£
2,856,749
1,480,138
Market risk
The Group’s activities expose it primarily to the fi nancial risks of changes in foreign currency exchange rates and the gold
price. Where appropriate, the Group enters into a variety of derivative fi nancial instruments to manage its exposure to foreign
currency risk and the commodity price risk. Market risk exposures are measured using sensitivity analysis.
Foreign currency risk
The Group undertakes certain transactions in foreign currencies. Hence, exposures to exchange rate fl uctuation arise. Exchange
rate exposures are managed within approved policy parameters.
Commodity price risk
The Group may enter into forward contracts to hedge their exposure to fl uctuations in gold prices and exchange rates on
specifi c transactions. The contracts are matched with anticipated future cash fl ows from gold sales.
Interest rate and liquidity risk
Fluctuations in the interest rates impact on short-term investment and fi nancing activities, giving rise to interest rate risk. In
the ordinary course of business, the Group receives cash proceeds from its operations and is required to fund working capital
and capital expenditure requirements. Cash is managed to ensure that surplus funds are invested to maximise returns whilst
ensuring that capital is safeguarded to the maximum extent by only investing with reputable fi nancial institutions. Contractual
arrangements for committed borrowing facilities are maintained to meet the Group’s normal and contingent funding needs.
Currency and commodity price risk
Currency and gold price
Pound Sterling/Rand
Gold price
90
Average rate
for the year
ended
30 June
2010
11.93
$1,098
Closing rate at
30 June
2010
11.53
$1,241
29. Financial instruments (continued)
Currency and commodity price risk (continued)
Foreign currency/gold price sensitivity
2010
2009
Impact of 10%
currency or gold
price movement
on profi t/(loss)
£
4,485,530
3,355,982
The Pound Sterling carrying amount of the Group’s foreign currency denominated monetary assets and liabilities at Statement
of Financial Position date is as follows:
2010
Assets
Liabilities
2009
Assets
Liabilities
South African
Rands
GBP
Total
3,273,465
4,507,327
14,403,830
534,427
17,677,295
5,041,754
3,378,274
3,466,390
1,212,240
253,397
4,590,514
3,719,787
Commodity hedges
The Group did not undertake any hedging in the current or prior year.
Interest rate risk
The Group is exposed to interest rate risk as entities within the Group borrow and invest funds at both fi xed and fl oating
interest rates.
Interest rate sensitivity
Based on the low level of interest-bearing balances on the Statement of Financial Position, an interest rate sensitivity is not
performed as the interest rate exposure to the Group is minimal.
Liquidity risk
Ultimate responsibility for liquidity risk management rests with the board of directors, which has built an appropriate liquidity
risk management framework for the management of the Group’s short-term funding and liquidity management requirements.
The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowings facilities, by
continually monitoring forecasts and actual cash fl ows and matching maturity profi les of fi nancial assets and liabilities.
The Group has access to fi nancing facilities at its mining operations, of which the total unutilised portion is currently
£133,720 (2009: £1,900,000). The Group expects to meets its other obligations from operating cash fl ows and proceeds of
maturing fi nancial assets.
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Pan African Resources PLC Annual Report 2010
91
Not es to the Financial Statements cont.
for the year ended 30 June 2010
29. Financial instruments (continued)
Liquidity risk analysis
The following table indicates the Group’s remaining contractual maturity from its fi nancial liabilities:
Group
2010
Trade payables
Long-term liabilities
Other-short term liabilities
Group
2009
Trade payables
Long-term liabilities
Other-short term liabilities
Company
2010
Trade payables
2009
Trade payables
Weighted
average
interest
rate
Less than
12 months
£
1-5 years
Total
0%
0%
0%
0%
0%
0%
0%
0%
4,064,830
–
–
3,719,787
–
975,428
200,338
1,207,860
–
–
–
–
–
–
–
–
4,064,830
–
–
3,719,787
–
975,428
200,338
1,207,860
Fair value of fi nancial instruments
The directors consider that the carrying amounts of fi nancial assets and liabilities recorded approximate their fair values.
30. Post retirement benefi t information
All employees are required to be members of either the Barberton Retirement Fund, Sentinel Retirement Fund or Mine
Workers Provident Fund or the Shanduka Group Provident Fund. These are defi ned contribution funds and are registered
under and governed by the South African Pension Act, 1956 as amended. The assets of the scheme are held separately
from those of the Group in funds and they are in the control of the trustees. The total costs charged to the Statement of
Comprehensive Income of £1,268,883 (2009: £885,082) represent employer contributions payable to the schemes by the
Group at rates specifi ed in the rules of the scheme. The calculation of the provision for post retirement medical benefi ts is
performed internally by management using the South African Revenue Services life expectancy tables as the benefi ts payable
are a fi xed amount per pensioner.
31. Commitments , contingent liabilities and guarantees
Group
Commitments
The Group had outstanding open orders contracted for at year end of £111,905 (2009: £62,231).
Contingent liabilities
The Group had no contingent liability in the current fi nancial year, in the prior year £48,976 was in relation to a pending legal
case in which a settlement was reached in the current fi nancial year.
Guarantees
The Group had guarantees of £334,044 (2009: £225,285) in favour of Eskom, and £253,178 (2009: £1,579) in favour of the
DMR at year end.
Company
There were no commitments, contingent liabilities and guarantees for the Company for the year ended 30 June 2010
(2009: £nil).
92
32. Directors’ emoluments
The key management personnel for which remuneration has been disclosed are the directors:
Executive directors
Emoluments
Share options
Total
Non-executive directors
Emoluments
Over-provision in the prior year
Total
Total remuneration
Individual
Executive
Mr J Nelson
Mr J A J Loots
Total
Individual
Non-executive
Mr R G Still
Mr J Hopwood
Mr K C Spencer
Mr R M Smith
Mr C M Ramaphosa
Total
30 June
2010
£
260,278
–
260,278
153,918
–
153,918
30 June
2009
£
92,168
–
92,168
42,500
(30,000)
12,500
414,196
104,668
Share options
exercised
and sold
£
Cost to
Company
£
Bonuses
£
Total 2010
£
Total 2009
£
–
–
–
138,647
62,867
58,764
–
197,411
62,867
201,514
58,764
260,278
Share options
exercised
and sold
£
Directors’ fees
£
Bonuses
£
–
–
–
–
–
–
26,823
24,832
37,720
22,632
41,911
153,918
–
–
–
–
–
–
Total
30 June
2010
£
26,823
24,832
37,720
22,632
41,911
153,918
92,168
–
92,168
Total
30 June
2009
£
15,000
17,500
10,000
–
–
42,500
Non-executive directors
During the year under review, the non-executive directors were Mr R G Still, Mr J Hopwood, Mr K Spencer, Mr C M Ramaphosa
and Mr R M Smith.
Non-executive directors are entitled to the following fees as approved annually by the Remuneration Committee for services
rendered, based on their appointment to the respective board sub-committees:
Board of directors Chairman
Board of directors Deputy Chairman
Board of directors
Remuneration Committee
Audit Committee
SHEC Committee
Nominations Committee
In the prior year the non-executive directors were entitled to an annual fee of £15 000.
Chairperson
£
35,624
20,956
–
6,287
8,382
–
6,287
Member
£
–
–
16,345
4,191
6,287
6,287
4,191
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Pan African Resources PLC Annual Report 2010
93
Not es to the Financial Statements cont.
for the year ended 30 June 2010
32. Directors’ emoluments (continued)
2010 share options
Mr K C Spencer
Mr J Nelson
Mr R G Still
Mr J Hopwood
Total
2009 share options
Mr K C Spencer
Mr J Nelson
Mr R G Still
Mr J Hopwood
Total
Average
Total options
option price
Total options
1 July 2009
(Pence)
30 June 2010
3,000,000
6,000,000
4,000,000
1,000,000
6.2
2.0
2.5
6.2
3,000,000
6,000,000
4,000,000
1,000,000
14,000,000
–
14,000,000
Average
Total options
option price
Total options
1 July 2008
(Pence)
30 June 2009
3,000,000
6,000,000
4,000,000
1,000,000
6.2
2.0
2.5
6.2
3,000,000
6,000,000
4,000,000
1,000,000
14,000,000
–
14,000,000
Directors’ interest in shares
As at 30 June 2010 the CEO, Mr J P Nelson, held 122,442 shares in Pan African Resources, including a purchase of 75,134 shares
at 95 cents per share on 16 October 2009.
As at 30 June 2010 the Financial Director, Mr J A J Loots, held 130,000 shares, purchased at 76 cents per share on 24 February 2010.
Mr R G Still is a director of Pangea Exploration (Proprietary) Limited (Pangea) and a trustee of a family trust which owns
33.33% of Pangea. Mr R G Still, a non-executive director of Pan African, is therefore deemed to have an indirect, non-benefi cial
interest in Pangea’s holding in the Company. Pangea holds 2.67% of the current issued share capital of Pan African.
Substantial shareholdings
As at 25 June 2010 the substantial shareholdings of which the Company is aware are as follows:
Shares in issue: 1,409,540,711
Name
Shanduka Gold
Coronation Fund Managers
Investec Asset Management
Allan Gray Investment Council
J P Morgan Asset Management
Number
of shares
Percentage
held
366,168,585
221,821,092
149,898,928
76,294,036
58,955,000
25.98%
15.74%
10.63%
5.41%
4.18%
33. Share options
On 1 September 2005, the Company established a share option programme relating to equity-settled share options entitling
specifi c employees, offi cers, directors and qualifying consultants as approved by the board of directors of the Company and its
subsidiaries to purchase shares in the Company. The share option exercise price is determined using the closing price at which
shares are traded on the JSE or AIM (as determined by the board of directors), on the trading date immediately preceding the
date upon which the board authorised the grant of the opportunity to acquire the relevant share options, as the case may be
to a participant. Pursuant to resolutions of the board passed in accordance with the rules of the share option programme, share
options may be released from the share option programme to participants, share options may be exercised by participants and
allocation shares may be delivered to participants as follows for allocations prior to 21 July 2008:
94
33. Share options (continued)
(i) 33.33% of the total number of shares allocated after one year has elapsed from the grant date by the participant of
the grant;
(ii) up to 66.67% of the total number of shares allocated after two years have elapsed from the grant date by the participant
of the grant;
(iii) the balance of the shares allocated after three years have elapsed from the grant date by the participant of the grant;
and for allocations subsequent to 21 July 2008 as follows:
(i) 25% of the total number of shares allocated after one year has elapsed from the grant date by the participant of the grant;
(ii) up to 50% of the total number of shares allocated after two years have elapsed from the grant date by the participant of
the grant;
(iii) up to 75% of the total number of shares allocated after three years have elapsed from the grant date by the participant of
the grant; and
(iv) the balance of the shares after four years have elapsed from the grant date by the participant of the grant; provided that
the board may, at its discretion, anticipate or postpone such dates.
An option holder may not exercise a share option under the share option programme by later than the end of the year
preceding the tenth anniversary of the grant date. Upon death of an option holder the estate would be entitled to exercise
the options vested to date within twelve months of the date of death, if the options are not exercised the total available share
options would lapse. The directors have the discretion to approve the vesting of the deceased total number of unvested
share options.
The number of vested share options to which an option holder is entitled expires after a period of six months due to
retirement, redundancy or disability of the option holder.
The number and weighted average exercise price of share options is as follows:
Outstanding at 1 July
Granted during the year
Exercised during the year
Lapsed in the year
30 June 2010
30 June 2009
Weighted
average
exercise
price
Number
of options
4.7p
6.1p
4.0p
–
49,945,000
3,400,000
(1,200,000)
–
Weighted
average
exercise
price
Number
of options
4.7p
–
–
–
49,945,000
–
–
–
Outstanding and exercisable at 30 June
4.8p
52,145,000
4.7p
49,945,000
30 June 2010
30 June 2009
Vested
Unvested
Vested
Unvested
Total number share options at year end
37,019,583
15,125,417
29,533,333
20,411,667
The fair value of services received for share options granted is based on the fair value of share options granted, measured using
for all issues prior to 20 March 2010 a Black Scholes model and a variant of the Binomial model for issues on 20 March 2010,
with the following inputs:
Share price
Exercise price
Expected volatility
Expected life
Risk-free interest rate
30 June 2010
30 June 2009
68c
68c
58.61%
6.2p
7.0p
72.39%
3 – 6 years
1 – 3 years
8.145%
5.31%
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Pan African Resources PLC Annual Report 2010
95
Not es to the Financial Statements cont.
for the year ended 30 June 2010
33. Share options (continued)
A Company dividend rate has not yet been determined and therefore is not taken into account in option fair value calculations.
The volatility of the Company’s share price on each date of grant was calculated as the average of volatilities of share prices
of the Company on the corresponding dates. The volatility of share price of the Company was calculated as the average of
annualised standard deviations of daily continuously compounded returns on the Company’s stock, calculated over one to
four years back from the date of grant. Therefore, volatility of the Company’s share prices was calculated over the period
commensurate with the expected life of the options under consideration, giving more weight to more recent historical data to
account for volatility persistence.
There are no market conditions attached to the exercise of the share options.
The Group recognised total expenses of £204,704 (2009: £264,378) related to equity-settled share-based payment transactions
during the reporting period.
34. Related part y transactions
The Group entered into the following transactions and held year end balances with related parties:
Statement of
comprehensive
income
30 June
2010
£
Statement of
comprehensive
income
30 June
2009
£
Statement of
fi nancial
position
30 June
2010
£
Statement of
fi nancial
position
30 June
2009
£
(9,032,496)
885,163
–
–
–
181,707
335,289
76,688
(11,275,545)
194,107
4,600
5,050
3,291
27,246
388,685
51,854
(7,553,649)
(10,600,712)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
8,982,300
–
2,002,084
207,842
8,802,157
3,150,247
1,067,883
10,984,384
13,228,129
–
(5,738,018)
(954,759)
–
(5,738,018)
(954,759)
–
4,209,606
* Dividends received
* Fee received from Barberton Mines
* Admin fee received from Ghana
* Admin fee received from Central African Republic
* Admin fee received from Metorex
* Admin fee received from Phoenix Platinum
Fee paid to Metorex
Fee paid to Shanduka
Loans to/(from) subsidiaries
*Barberton Mines
*Mistral Resources
*Or Oubangui
*Phoenix Platinum
Payable to another Group Company
**Metorex
*Barberton Mines
Purchase of subsidiary
Purchase of Phoenix Platinum from Metorex
* These related party transactions related to Pan African and eliminate on consolidation.
** Metorex was the holding company of Pan African up to 1 July 2010, therefore was a related party to the Group in the prior year.
The loan from Metorex was the balance owing in relation to the outstanding purchase consideration for Phoenix Platinum.
The loan incurred no interest and was paid on 30 September 2009 in full.
35. Events aft er the report ing period
Subsequent to the year end, an additional 4,000,000 ordinary shares were issued for cash at 4.0p per share on 23 August 2010
for cash at 2.0p per share in relation to share options exercised.
96
36. Reconciliation of profi t before taxation to cash generated by/
(utilised in) operations
Profi t before taxation
Adjusted for:
Dividends received
Impairment
Share option costs
Net fi nance income
Royalty costs
Depreciation
Group
Company
30 June
2010
£
30 June
2009
£
22,155,788
3,908,846
16,310,711
6,843,451
–
335,401
204,704
(593,730)
837,378
3,125,093
–
5,025,463
264,378
(806,821)
–
2,360,431
30 June
2010
£
8,298,257
(9,042,010)
(9,032,496)
335,401
113,516
(468,411)
–
9,980
30 June
2009
£
4,820,585
(6,188,569)
(11,275,545)
5,056,290
134,683
(112,516)
–
8,519
Operating cashfl ows before working capital changes
26,064,634
23,154,162
(743,753)
(1,367,984)
Working capital changes
(857,137)
2,266,079
146,626
539,958
(Increase)/decrease in inventories
(increase)/decrease in trade and other receivables
Increase in trade and other payables and provisions
(768,011)
(1,593,446)
2,019,795
19,611
771,563
2,033,531
–
(139,051)
285,677
–
286,907
253,051
Non-cash items
(515,475)
(558,626)
–
–
Cash generated by/(utilised in) operations
25,207,497
25,420,241
(597,127)
(828,026)
Income taxes paid
Royalties paid
Net fi nance income
Dividends paid
Dividends paid to minorities
(6,685,351)
(790,569)
593,730
–
–
(10,886,018)
–
806,821
(2,812,005)
(3,961,678)
–
–
468,411
–
–
–
–
112,516
(2,812,005)
–
Net cash from/(used in) operating activities
18,325,307
8,567,361
(128,716)
(3,527,515)
Taxation paid during the year:
Taxation charge per the statement of comprehensive
income
Less: Deferred taxation
Taxation unpaid at beginning of year
Taxation unpaid at end of year
Foreign currency translation
7,655,913
(728,801)
6,927,112
253,659
(528,566)
33,146
8,219,425
(414,663)
7,804,762
3,055,393
(253,659)
279,522
Taxation paid during year
6,685,351
10,886,018
Royalty paid during the year:
Royalty costs unpaid at beginning of year
Royalty costs unpaid at end of year
Royalty costs
Foreign currency translation
Royalty paid
–
(48,419)
837,378
1,610
790,569
–
–
–
–
–
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Pan African Resources PLC Annual Report 2010
97
Not es to the Financial Statements cont.
for the year ended 30 June 2010
37. Special resolutions
Special resolutions of members passed in accordance with the company’s articles of association at the Annual General Meeting
held on 14 December 2009.
It was resolved
That the Company be generally and unconditionally authorised for the purposes of section 701 of the Companies Act 2006 to
make market purchases (as defi ned in section 693 of that Act) of ordinary shares of the Company on such terms and in such
manner as the Directors of the Company shall determine provided that:
(a)
the maximum aggregate number of ordinary shares which may be purchased is 140,834,071 (representing approximately
10 per cent of the issued share capital of the Company at 10 November 2009);
(b)
the minimum price (excluding expenses) which may be paid for each ordinary share is 1p;
(c)
(d)
the maximum price (excluding expenses) which may be paid for any ordinary share does not exceed 5 percent. above
the average closing price of such shares for the fi ve business days on the London Stock Exchange prior to the date of
purchase;
this authority shall expire at the conclusion of the next annual general meeting of the Company or on 31 December 2010,
whichever is the earlier, unless such authority is renewed prior to that time (except in relation to the purchase of ordinary
shares the contract for which was concluded before the expiry of such authority and which might be executed wholly or
partly after such expiry); and
(e)
Any market purchases by the Company of ordinary shares in the Company as contemplated in this resolution shall
comply, to the extent required, with the provisions of the Listings Requirements of JSE Limited pertaining to the general
authority to repurchase securities for cash.
That, the draft regulations in the form produced to the meeting be adopted as the articles of association of the Company in
substitution for and to the exclusion of the existing articles of association.
98
38. Shareholder analysis
Register date: 25 June 2010
Issued share capital: 1,409,540,711 shares
Shareholder spread
shareholders
Percentage
shares
Percentage
Number of
Number of
1 –
1,001 –
1,000 shares
10,000 shares
10,001 – 100,000 shares
100,001 – 1,000,000 shares
1,000,001 shares and over
Total
198
1,259
1,468
327
130
3,382
5.85
37.23
43.41
9.67
3.84
131,466
7,008,787
52,334,255
104,563,720
1,245,502,483
0.01
0.50
3.71
7.42
88.36
100.00
1,409,540,711
100.00
Number of
Number of
Distribution of shareholders
shareholders
Percentage
Shares
Percentage
Banks
Brokers
Close corporations
Endowment funds
Individuals
Insurance companies
Investment companies
Mutual funds
Nominees and trusts
Other corporations
Pension funds
Private companies
Public companies
Total
20
8
37
6
2,725
4
12
34
392
24
61
42
17
3,382
0.59
0.24
1.09
0.19
80.57
0.12
0.35
1.01
11.59
0.71
1.80
1.24
0.50
227,835,843
3,815,457
1,780,484
2,329,196
92,707,763
11,834,200
49,363,413
242,725,414
243,094,143
552,698
102,346,422
419,114,537
12,041,141
16.16
0.27
0.13
0.17
6.58
0.84
3.50
17.22
17.25
0.04
7.26
29.73
0.85
100.00
1,409,540,711
100.00
Public/Non-public shareholder
shareholders
Percentage
shares
Percentage
Number of
Number of
Director non-public shareholders
Strategic Holdings (more than 10%) non-public
Public shareholders
Total
2
3
3,377
3,382
0.06
0.03
99.91
252,442
737,888,605
671,399,664
0.02
52.35
47.63
100.00
1,409,540,711
100.00
Benefi cial holding of 3% or more
Shanduka Gold
Coronation Fund Managers
Investec Asset Management
Allan Gray Investment Council
JP Morgan Asset Management
Number of
shareholders
Percentage
366,168,585
221,821,092
149,898,928
76,294,036
58,955,000
25.98
15.74
10.63
5.41
4.18
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Pan African Resources PLC Annual Report 2010
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Not ice of Annual General Meeting
NOTICE IS HEREBY GIVEN that the 2010 Annual General Meeting of Pan African Resources Plc will be held at the offi ces of Fasken
Martineau LLP, Fourth Floor, 17 Hanover Square, London W1S 1HU on Monday, 15 November 2010 at 10h00 (all times stated are
United Kingdom times unless otherwise stated) to consider and, if thought fi t, transact the following business:
Ordinary business
1.
To receive and adopt the Directors’ report, the Audited Statement of Accounts and Auditors’ report for the year ended 30 June
2010.
To re-elect Mr R G Still as a Director of the Company, who retires by rotation pursuant to the Articles of Association of the
Company.
To re-elect Mr J P Nelson as a Director of the Company, who retires by rotation pursuant to the Articles of Association of the
Company.
To approve the fi nal dividend of 0.3723p per share for the year ended 30 June 2010.
To re-appoint Deloitte LLP as auditors of the Company and to authorise the Directors to determine their remuneration.
2.
3.
4.
5.
Special business
As special business, to consider and if thought fi t, to pass the following resolutions of which Resolution 6 will be proposed as an
Ordinary Resolution and Resolutions 7 and 8 will be proposed as Special Resolutions:
6.
7.
THAT the Directors be and are hereby generally and unconditionally authorised pursuant to Section 551 of the Companies Act
2006 (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 equity securities (within the meaning of Section 560 of the Act up to an aggregate nominal amount
of £6,553,793.42; 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 2011 or on 31 December 2011, whichever is the earlier,
provided that the Company may, at any time before such expiry, make an offer or enter into an agreement which would or might
require equity securities to be allotted after such expiry and the Directors may allot equity securities pursuant to any such offer
or agreement as if the authority conferred hereby had not expired.
THAT the Directors be and they are hereby empowered pursuant to Section 571 of the Companies Act 2006 (the “Act”),
in substitution for all previous powers granted thereunder, to allot equity securities (within the meaning of Section 560 of the
Act) for cash pursuant to the authority granted by resolution 6 above as if Section 561 (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
2011 or on 31 December 2011, whichever is the earlier, and such power is limited to the allotment of equity securities:
(a) in connection with rights issues and other pre-emptive issues to holders of ordinary shares where the equity securities
respectively attributable to the interests of such holders are proportionate (as nearly as may be practicable) to the respective
numbers of ordinary shares held by them, but subject to such exclusions or other arrangements as the directors may deem
necessary or expedient to deal with any fractional entitlements or any legal or practical problems under law of, or the
requirements of any regulatory body or any recognised stock exchange in, any territory;
(b) up to a maximum aggregate nominal value of £287,450 in connection with the exercise of options granted to various parties
(including Directors);
(c) up to a maximum aggregate nominal value of £709,770.36 (being approximately 5 per cent. of the issued share capital of the
Company as at the date of this notice) in connection with the granting of options by the Company granted in accordance
with the Pan African Resources PLC Share Option Plan; and
(d) up to a maximum aggregate value of £709,770.36 (being approximately 5 per cent. of the issued share capital of the
Company as at the date of this notice) otherwise than pursuant to paragraphs (a) to (c) above);
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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. The allotment of shares for cash in accordance with this resolution shall comply,
to the extent required, with the provisions of the Listings Requirements of JSE Limited pertaining to general issues of shares
for cash.
8.
That the Company be generally and unconditionally authorised for the purposes of Section 701 of the Companies Act 2006 to
make market purchases (as defi ned in Section 693 of that Act) of ordinary shares of the Company on such terms and in such
manner as the Directors of the Company shall determine provided that:
(a) the maximum aggregate number of ordinary shares which may be purchased is 70,977,035 (representing approximately
5 per cent of the issued share capital of the Company at 15 October 2010;
(b) the minimum price (excluding expenses) which may be paid for each ordinary share is 1p;
(c) the maximum price (excluding expenses) which may be paid for any ordinary share does not exceed 5 per cent. above the
average closing price of such shares for the fi ve business days on the London Stock Exchange prior to the date of purchase;
(d) this authority shall expire at the conclusion of the Annual General Meeting of the Company to be held in 2011 or on
31 December 2011, whichever is the earlier, unless such authority is renewed prior to that time (except in relation to the
purchase of ordinary shares the contract for which was concluded before the expiry of such authority and which might be
executed wholly or partly after such expiry); and
(e) Any market purchases by the Company of ordinary shares in the Company as contemplated in this resolution shall comply,
to the extent required, with the provisions of the Listings Requirements of JSE Limited pertaining to the general authority to
repurchase securities for cash.
By Order of the Board
St James’s Corporate Services Limited
Company Secretary
15 October 2010
6 St James’s Place
London
England
SW1A 1NP
Pan African Resources PLC Annual Report 2010
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Not ice of Annual General Meeting cont.
EXPLANATORY NOTES
Entitlement to att end and vot e
1.
Pursuant to Regulation 41 of the Uncertifi cated Securities Regulations 2001, the Company specifi es that only those members
registered on the Company’s register of members at:
• 16h00 on Friday, 12 November 2010; or,
• if the AGM is adjourned, at 18h00 on the day two days prior to the adjourned meeting, shall be entitled to attend and vote at
the AGM.
Appointment of proxies
2.
If you are a member of the Company at the time set out in note 1 above, you are entitled to appoint a proxy to exercise all or
any of your rights to attend, speak and vote at the AGM and you should have received a proxy form with this notice of meeting.
You can only appoint a proxy using the procedures set out in these notes and the notes to the proxy form.
3.
A proxy does not need to be a member of the Company but must attend the AGM to represent you. Details of how to appoint
the Chairman of the AGM or another person as your proxy using the proxy form are set out in the notes to the proxy form.
If you wish your proxy to speak on your behalf at the AGM you will need to appoint your own choice of proxy (not the Chairman)
and give your instructions directly to them.
4.
5.
You may appoint more than one proxy provided each proxy is appointed to exercise rights attached to different shares. You
may not appoint more than one proxy to exercise rights attached to any one share. To appoint more than one proxy, you may
photocopy this form.
A vote withheld is not a vote in law, which means that the vote will not be counted in the calculation of votes for or against the
resolution. If you either select the “Discretionary” option or if no voting indication is given, your proxy will vote or abstain from
voting at his or her discretion. Your proxy will vote (or abstain from voting) as he or she thinks fi t in relation to any other matter
which is put before the AGM.
Appointment of proxy using hard copy proxy form
6.
The notes to the proxy form explain how to direct your proxy how to vote on each resolution or withhold their vote.
To appoint a proxy using the proxy form, the form must be:
• completed and signed; and
• sent or delivered to Capita Registrars at Proxies Department, The Registry, 34 Beckenham Road, Beckenham, Kent, BR3
4TU or Computershare Investor Services (Pty) Limited, Ground Floor, 70 Marshall Street, Johannesburg 2001, South Africa
(PO Box 61051, Marshalltown 2107, Johannesburg, South Africa); no later than 10h00 on Friday, 12 November 2010.
In the case of a member which is a company, the proxy form must be executed under its common seal or signed on its behalf by
an offi cer of the company or an attorney for the company.
Any power of attorney or any other authority under which the proxy form is signed (or a duly certifi ed copy of such power or
authority) must be included with the proxy form.
Appointment of proxy by joint members
7.
In the case of joint holders, where more than one of the joint holders purports to appoint a proxy, only the appointment
submitted by the most senior holder will be accepted. Seniority is determined by the order in which the names of the joint
holders appear in the Company’s register of members in respect of the joint holding (the fi rst-named being the most senior).
Changing proxy instructions
8.
To change your proxy instructions simply submit a new proxy appointment using the methods set out above. Note that the
cut-off time for receipt of proxy appointments (see above) also applies in relation to amended instructions; any amended proxy
appointment received after the relevant cut-off time will be disregarded.
Where you have appointed a proxy using the hard-copy proxy form and would like to change the instructions using another
hard-copy proxy form, please contact Capita Registrars, Proxies Department, The Registry, 34 Beckenham Road, Beckenham, Kent
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BR3 4TU or Computershare Investor Services (Pty) Limited, Ground Floor, 70 Marshall Street, Johannesburg 2001, South Africa
(PO Box 61051, Marshalltown 2107, Johannesburg, South Africa).
If you submit more than one valid proxy appointment, the appointment received last before the latest time for the receipt of
proxies will take precedence.
Termination of proxy appointments
9.
In order to revoke a proxy instruction you will need to inform the Registrar by sending a signed hard copy notice clearly stating
your intention to revoke your proxy appointment as above. In the case of a member which is a company, the revocation notice
must be executed under its common seal or signed on its behalf by an offi cer of the company or an attorney for the company.
Any power of attorney or any other authority under which the revocation notice is signed (or a duly certifi ed copy of such power
or authority) must be included with the revocation notice.
The revocation notice must be received by Capita Registrars or Computershare Investor Services (Pty) Limited no later than
10h00 on Friday, 12 November 2010. If you attempt to revoke your proxy appointment but the revocation is received after the
time specifi ed then, subject to the paragraph directly below, your proxy appointment will remain valid.
Appointment of a proxy does not preclude you from attending the AGM and voting in person. If you have appointed a proxy and
attend the AGM in person, your proxy appointment will automatically be terminated.
Issued shares and tot al vot ing rights
10. As at 18h00 on 15 October 2010, the Company’s issued share capital comprised 1,413,540,711 ordinary shares of 1p each. Each
ordinary share carries the right to one vote at a general meeting of the Company and, therefore, the total number of voting rights
in the Company as at 18h00 on 15 October 2010 was 1,413,540,711.
Directors’ interests and documents on display
11. A statement or summary of transactions of directors (and their family interests) in the share capital of the Company and copies of
their service contracts will be available for inspection at the Company’s registered offi ce during normal business hours (Saturdays
and public holidays excepted) from the date of this notice until the conclusion of the AGM and will also be available for inspection
at the place of the AGM for at least 15 minutes prior to and during the meeting.
CREST
12. CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment service may do
so for the meeting and any adjournment(s) thereof by using the procedures described in the CREST manual. CREST personal
members or other CREST sponsored members, and those CREST members who have appointed a voting service provider(s),
should refer to their CREST sponsor or voting service provider(s), who will be able to take the appropriate action on their behalf.
13. In order for a proxy appointment or instruction made using the CREST service to be valid, the appropriate CREST message
(a “CREST Proxy Instruction”) must be properly authenticated in accordance with Euroclear’s specifi cations and must contain the
information required for such instructions, as described in the CREST Manual. The message, regardless of whether it constitutes
the appointment of a proxy or to an amendment to the instruction given to a previously appointed proxy must, in order to
be valid, be transmitted so as to be received by the issuer’s agent (ID: RA10) by 10h00 on Friday, 12 November 2010 (or 48
hours preceding the date and time for any adjourned meeting). For this purpose, the time of receipt will be taken to be the time
(as determined by the timestamp applied to the message by the CREST Applications Host) from which the issuer’s agent is able to
retrieve the message enquiry to CREST in the manner prescribed by CREST. After this time any change of instructions to proxies
appointed through CREST should be communicated to the appointee through other means.
14. CREST members, and, where applicable, their CREST sponsors or voting service providers should note that Euroclear does not
make available special procedures in CREST for any particular messages. Normal system timings and limitations will therefore
apply in relation to the input of CREST Proxy Instructions. It is the responsibility of the CREST member concerned to take (or,
if the CREST member is a CREST personal member or sponsored member or has appointed a voting service provider(s) to
procure that his CREST sponsor or voting service provider(s) take(s) such action as shall be necessary to ensure that a message
is transmitted by means of the CREST system by any particular time). In this connection, CREST members and, where applicable,
their CREST sponsors or voting service providers are referred, in particular, to those sections of the CREST manual concerning
practical limitations of the CREST system and timings.
Pan African Resources PLC Annual Report 2010
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Glossary of Terms and Abbreviations
Term
Adit
Defi nition
A mining tunnel that is mined from the side of a mountain or mining pit
Attributable Profi t to the Parent
Profi t on ordinary activities, after tax, minority interests and preference dividends, attributable
to ordinary equity shareholders
Cash Cost
Cash costs include direct operating costs for all mining and processing sites, but are exclusive of
royalties, production taxes, depreciation and rehabilitation, as well as corporate administration,
capital and exploration costs
Chrome Tailings
Discards from a chrome washing plant be it historical (tailings dams) or new (current arisings)
Chrome Tailings Retreatment
Programme
This is a fl otation plant constructed to recover PGMs from chrome tailings
Current Arisings
Criminal Miners
Decline
Development Capital
Earnings Per Share
Effective Tax Rate
Fatal Injury
Greenstone Belt
The live tailings discarded by the chrome operators’ washing plant and fed directly to a CTRP
Trespassers who enter mining operations and illegally remove visible gold
Underground evacuation at an inclined angle – normally a shaft
Capital expenditure incurred in development of the workings areas and creation of additional
Mineral Resources to support the mining operations
Attributable profi t to the parent company divided by the weighted average number of shares
Current and deferred taxation as a percentage of net profi t before taxation
An injury that caused the death of a person
Geological zone of variably metamorphosed matic to ultramatic volcanic sequences with
associated sedimentary rocks that occur within Archaean and Proterozoic cratons between
granite and gneiss
Headline Earnings Per Share
Headline earnings attributable to the parent company divided by the weighted average number
of shares
In situ
Indicated Resource
Inferred Resource
Lost Day Severity Rate
Lost Time Injury Rate
Measured Resource
Probable Reserve
Proved Reserve
Reserve Base
Serious Injury
Original or unbroken condition of the reef before mining
A mineral resource reported as an in situ mineralisation estimate – intermediate level of
geoscientifi c knowledge and confi dence
A mineral resource reported as an in situ mineralisation estimate – low level of geoscientifi c
knowledge and confi dence
The lost day severity rate is calculated as the total lost days resulting from accidents during a
period divided by the total lost day cases and this number represents the average days away
The rate of lost time injuries occurring per 1,000,000 hours worked
A mineral resource reported as an in situ mineralisation estimate – high level of geoscientifi c
knowledge and confi dence
A mineral reserve reported as a mineable production estimate – lower level of geoscientifi c
knowledge and confi dence
A mineral reserve reported as a mineable production estimate – higher level of geoscientifi c
knowledge and confi dence
A mineral reserve reported as a mineable production estimate – the probable and proved
reserve
An injury that incapacitates the employee from performing that employee’s similar occupation
for a period of 14 days or more
Underground mining
Mining activities occurring below the earth’s surface
Vamping tons
Reef tons emanating from cleaning out of old underground working places
104
Abbreviation
Defi nition
Barberton Mines
Barberton Mines (Pty) Limited
BBBEE
BFS
BIOX®
CIL
CTRP
DMR
IRR
Broad Based Black Economic Empowerment
Bankable Feasibility Study
Biological Oxidation
Carbon-in-leach
Chromite Tailings Retreatment Plant
Department of Mineral Resources: South African Governmental department (Previously DME)
Internal Rate of Return
Maintenance Capital
Capital expenditure incurred to support or improve the current mining operations
Metorex
Mining Profi t
MPRDA
NPV
Metorex Limited – held 53.4% in Pan African until 1 July 2009
Mining profi t represents the profi ts earned from the Group’s mines and is stated before
royalties, impairment of exploration assets and other (expenses)/income not directly related to
the Group’s mining operations
The South African Mineral and Petroleum Resources Development Act 28 of 2002
Net Present Value
Pan African or the Company
Pan African Resources PLC
PFS
PGE
PGM
PGM 4E
Phoenix Platinum
RC
SAMREC
The SAMREC Code
Pre-Feasibility Study
Platinum Group Elements generally referring to all elements associated with platinum i.e.
platinum, palladium, rhodium, gold, ruthenium, iridium etc.
Platinum Group Minerals/Metals
Platinum Group Minerals/Metals only including the 4 Elements- Platinum, Palladium, Rhodium
and Gold
Phoenix Platinum Mining (Pty) Limited – The Chromite Tailings Retreatment Plant in the
North-West province, South Africa
Reverse Circulation: drilling method
The South African Resource Committee
The South African code for the reporting of exploration results, mineral resources and mineral
reserves
Shanduka
Shanduka Gold (Pty) Limited, a 100% subsidiary of Shanduka Resources (Pty) Limited
Pan African Resources PLC Annual Report 2010
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Not es
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Form of Proxy - Pan African Resources PLC
(Incorporated and registered in England and Wales under Companies Act 1985
with registration number 3937466 on 25 February 2000)
Share code on AIM: PAF ISIN: GB0004300496 Share code JSE: PAN
This Form of Proxy is for use by all non-South African shareholders and for South African certifi cated shareholders and South African own name
dematerialised shareholders only.
I/We, the undersigned, being a member of the above-named company, hereby appoint the Chairman of the Meeting or (see note 1)
Name of proxy
Number of shares proxies appointed over
as my/our proxy to attend, speak and vote on my/our behalf at the Annual General Meeting of Pan African Resources Plc to be held at the offi ce of
Fasken Martineau LLP, Fourth Floor, 17 Hanover Square, London W1S 1HU at 10h00 on Monday, 15 November 2010 at any adjournment thereof.
If you wish to appoint multiple proxies please see note 1 below.
Please also tick here if you are appointing more than one proxy.
The proxy will vote on the undermentioned resolutions, as indicated.
ORDINARY BUSINESS:
For
Against
Voting Withheld*
Discretionary**
1.
To receive the Accounts and the reports of the
directors and auditors thereon
2. To re-elect Mr R G Still as a Director of the Company
3. To re-elect Mr J P Nelson as a Director of the Company
4.
5.
To approve the fi nal dividend of 0.3723p per share for
the year ended 30 June 2010.
To re-appoint Deloitte LLP as auditors of the
Company and to authorise the Directors to
determine their remuneration
SPECIAL BUSINESS:
For
Against
Voting Withheld*
Discretionary**
6. To authorise the Directors to allot equity securities
7. To disapply the statutory pre-emption rights
8. To approve off market purchases of Ordinary Shares
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 specifi ed
resolution. Please note a ‘Vote Withheld’ has no legal effect and will not
be counted in the votes ‘For’ and ‘Against’.
** 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 specifi ed resolution. The proxy is also authorised to
vote (or abstain from voting) on any other business, which may properly
come before the meeting.
(BLOCK CAPITALS)
Print Name:
Signature:
Address:
Dated this
day of
2010
Notes
1. To appoint as a proxy a person other than the Chairman of the meeting insert the full
name in the space provided. To appoint more than one proxy you may photocopy this
form. Please indicate the proxy holder’s name and the number of shares in relation to
which they are authorised to act as your proxy (which, in aggregate, should not exceed
the number of shares held by you). Please also indicate if the proxy instruction is one
of multiple instructions being given. All forms must be signed and should be returned
together in the same envelope. A proxy need not be a member of the Company.
2. This form is for use of shareholders only and will be used only in the event of a poll
being directed or demanded.
3. You may, if you wish, delete the words “the Chairman of the Meeting” and substitute
the names(s) of your choice. Please initial such alteration.
4. To be effective, this form of proxy must be lodged at the Company’s registrars,
Capita Registrars, PXS, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU
or Computershare Investor Services 2004 (Pty) Limited, Ground Floor, 70 Marshall
Street, Johannesburg 2001, South Africa not later than 48 hours before the start of
the meeting.
5. In the case of a corporation, the form must be executed under its common seal or
under the hand of an offi cer or attorney duly authorised in writing.
6. In the case of joint holders, the signature of any of them will suffi ce 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.
7. Dematerialised shareholders in South Africa who are not own name dematerialised
shareholders and who wish to attend the AGM should instruct their CSDP or broker
to issue them with the necessary authority to attend the meeting in person, in the
manner stipulated in the custody agreement governing the relationship between such
shareholders and their CSDP or broker. These instructions must be provided to the
CSDP or broker by the cut-off time and date advised by the CSDP or broker for
instructions of this nature. Dematerialised shareholders in South Africa who are not
own name dematerialised shareholders and who cannot attend but who wish to vote
at the AGM should provide their CSDP or broker with their voting instructions, in
the manner stipulated in the custody agreement governing the relationship between
such shareholders and their CSDP or broker. These instructions must be provided to
the CSDP or broker by the cut-off time and date advised by the CSDP or broker for
instructions of this nature.
8. Shares held in uncertifi cated form (i.e. in CREST) may be voted through the CREST
Proxy Voting Service in accordance with the procedures set out in the CREST manual.
POSTAGE WILL
BE PAID BY THE
ADDRESSEE
Second Fold
NO POSTAGE
NECESSARY IF
POSTED IN
SOUTH AFRICA
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BUSINESS REPLY SERVICE
LICENCE NO. J 5563
2107 MARSHALLTOWN
Third Fold
and tuck in fl ap opposite
The diff erence
• Dividend paying gold company
• Unhedged and debt free
• Gold production: shallow, low cost & high grade
• Consistent year-on-year improvement in productivity
• Low cost & high grade platinum production from surface
due in 2011
• Management team with a proven track record of delivery
Platinum - tipped gold – with a yield
www.panafricanresources.com