Pan African Resources PLC Annual Report 2011

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FY2011 Annual Report · Pan African Resources PLC

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Annual Report
2011

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September 2011

The African Focused Precious Metals Producerr

A Sound Business Model

The Group has developed a sound business model during the year based on our
track record of delivery. Our business philosophy is based on four guiding pillars:

Profitability

Profit describes our commitment to grow the margin between our revenue and ‘all-
in’ cost base. This however, is on the condition that profits can never come at the
exploitation of our stakeholders. In short, our stakeholders also need to profit from
their association with us. This means no compromise on safety, credibility, honesty
and integrity.

Sustainability

We need to take decisions that will benefit our stakeholders on a continued basis
over the life of the business. We are not about short term gains at the expense of the
long term viability of the business. We need to optimise our returns and minimise
our risks, be flexible and adapt to a changing world. We are part of the environment
in which we do business, and cannot stand divorced from this environment, our
responsibilities or our commitments towards it.

Stakeholder Value

Stakeholders include our shareholders, employees and the communities directly
surrounding our operations. We also need to abide by and respect the laws of the
countries in which we operate. We need to be fair and reasonable when dealing
with contractors and suppliers and will not solicit or entertain any form of bribery
to enable preferential treatment. We will ensure that we have a communication
platform in place to facilitate effective communications between all stakeholders and
the Group in a constructive manner without prejudice.

Growth

This relates to our continued drive and passion to grow the other pillars of our
Company. Our growth however, cannot simply be for the sake of trying to be the
biggest. Growth must unlock value and must not compromise our business pillars.

We will always make decisions in the best interest of our stakeholders, by
being true to our strategy and the four business pillars that support our
vision.

Supporting our vision of:

Building a sustainable and profitable African focused precious
metals mining Group.

What is different about this report?

•

The Sustainablility Report has been integrated into the Annual Report as it
forms one of the pillars of our organisation and cannot be separated from our
vision and philosophy.
Throughout this report, interviews with and profiles of our people are
portrayed in their own words.

Pan African Resources PLC Annual Report 2011

The Group
Nature of our business

Pan African is a precious metals, African focused mining Group.

The Group remains unhedged and debt free, which means the Group has total leverage to the gold price and the ability to fund
all on-mine capital expenditure internally. In addition, the Group has access to a £13.7 million revolving credit facility.

The Group’s strategy of targeting low cost, high margin projects, which are either near or at production stage, enables it to
consistently improve not only its resource base but also its profit margins. This also enables the Group to pay a dividend and
ensures continued growth in shareholder value.

Successes of our pillar strategy allows us to propose a dividend of £7.4 million

Pillar

Highlight

Profitable

Sustainable

Stakeholder

•
•
•

•
•

•

•
•

• Gross revenue from gold sales increased by 15.62% to £79.2 million (2010: £68.5 million).
•

Earnings Before Interest, Taxation, Depreciation and Amortisation (‘EBITDA’) increased by 14.00% to
£28.5 million (2010: £25.0 million).
Attributable profit increased by 20.28% to £17.2 million (2010: £14.3 million).
Earnings Per Share (‘EPS’) increased by 15.38% to 1.20p (2010: 1.04p).

•
•
• Headline Earnings Per Share (‘HEPS’) increased by 12.15% to 1.20p (2010: 1.07p).
•
•

Profit margin increased by 30.36% to US$584/oz (2010: US$448/oz).
Final dividend of 0.5135 pence per share proposed (2010: 0.3723 pence per share paid).

The Group’s cash balance was £10.1 million (2010: £12.8 million) at year end.
Increased Group capital expenditure by 255.93% to £21.0 million (2010: £5.9 million).
Established the Barberton Transformation Trust whereby all suppliers to Barberton Mines will contribute
a percentage to our social development projects.
Investigating alternative energy supply through solar pilot plant.
Increase in total cost of production contained to 4.09% in Rand terms, which is below the South African
rate of inflation.
Increase of the Barberton Mines Life of Mine (‘LOM’) from 10 to 17 years.

Safety performance showed a significant improvement with Lost Time Injury Frequency Rate (‘LTIFR’)
improving by 47.62% to 2.2 (2010: 4.2) and Serious Injury Frequency Rate (‘SIFR’) by 40.00% to 0.66
(2010: 1.1).
Achieved one million fatality-free shifts over a 15 month period post financial year.
Salaries, wages, bonuses and training amounted to £21.6 million (2010: £18.7 million) representing
27.4% of the Group’s total revenue.
Invested in and fully funded the Umjindi Jewellery Project.

•
• Continue our support towards the Sinqobile community: The Sinqobile Primary School project, the

•

•
•
•

•

Vegetable Farm, the soup kitchen and other community projects.
Announced intention to list Manica as a stand-alone entity to unlock shareholder value and fast-track
development.

Resource inventory increased by 22.46% to 5.67Moz (2010: 4.63Moz).
Reserve inventory increased by 51.29% to 1Moz (2010: 661Koz).
Sustaining and increasing production profile at Barberton Mines through continued capital investment
of £6.8 million (2010: £5.9 million).
Built up a pipeline of organic growth projects at Barberton Mines, namely Bramber Tailings Facility and
the Amira exploration project.

Growth

• Defined a total indicated resource of 148koz (3.130Mt @ 1.47g/t in situ) at indicated recoveries of 52%

for the Bramber Tailings Project at Barberton Mines.

• Completing construction of Phoenix Platinum Chrome Tailings Retreatment Plant (‘CTRP’), which will
generate revenue from Platinum Group Metals (‘PGM’s’): Platinum (56.7%), Palladium, (27%) Rhodium
(16%) and Gold (0.5%). Production forecast to commence in December 2011.
Experienced Executive Committee (‘Exco’) established to ensure sustainable and profitable growth
continues.

•

Pan African Resources PLC Annual Report 2011

Table of Contents

Pan African remains

Salient Features ......................................................................................................4

focused on factors that we

can control and influence.

Share Statistics & Shareholdings .........................................................................5

Geographic Location ...........................................................................................6

Group Structure ...................................................................................................7

Cost control, increased

Chairman’s Statement ...................................................................................... 10

geological confidence in

our mineral resources

and a sustained drive to

Chief Executive Officer’s Review ................................................................... 14

The Pan African Exco ......................................................................................... 16

Mining Operations: Barberton Mines ............................................................. 30

Phoenix Platinum ................................................................................................ 40

increase productivity are

Near-Term Production: Bramber Tailings Retreatment Project ............... 46

still areas for continuous

Manica gold project, Manica Province, Mozambique .................................. 54

improvement.

C Ramaphosa, Chairman

We will always make

decisions in the

best interest of our

New Business ...................................................................................................... 58

Mineral Resources Management ..................................................................... 59

Sustainability ........................................................................................................ 76

Board of Directors ............................................................................................. 92

Executive Management Team - Pan African ................................................... 98

Management Team - Barberton Mines............................................................ 99

Corporate Governance and Compliance .................................................... 100

Compliance Summary and Gap Analysis ...................................................... 102

Directors’ Report ............................................................................................. 106

Key Performance Indicators (KPIs) ............................................................... 108

Statement of Directors’ Responsibilities .................................................... 109

Independent Auditor’s Report - South Africa ............................................. 110

Independent Auditor’s Report - United Kingdom ..................................... 111

Certificate of the Company Secretary ....................................................... 113

Consolidated Statement of Comprehensive Income ................................ 114

Consolidated Statement of Financial Position ........................................... 115

Consolidated and Company Statement Of Cash Flows ........................... 116

Consolidated and Company Statement of Changes in Equity ............... 117

Notes to the Financial Statements: ............................................................... 118

Accounting Policies & Financial Reporting Terms ...................................... 118

stakeholders by being

Notes to the Financial Statements (continued) ......................................... 130

true to our strategy and

the four business pillars

that support our vision.

Notice of Annual General Meeting ............................................................... 164

Explanatory Notes .......................................................................................... 166

Glossary of Terms and Abbreviations ........................................................... 168

Contact Details ................................................................................................. 171

J Nelson, Chief Executive Officer

Form Of Proxy - Pan African Resources ..................................................... 175

Pan African Resources PLC Annual Report 2011

Salient Features

Statement of Comprehensive Income

Profit After Taxation

Headline Earnings

Gold Sales

Mining Profit

Cost of Production

Impairment Costs

Statement of Financial Position

Non-Current Assets

Current Assets (including cash)

Total Equity

Non-Current Liabilities

Current Liabilities

Operating Performance

Tonnes Milled

Headgrade

Gold Sold

Spot Price Received

Total Cash Costs

Capital Expenditure

30 June
2011

30 June
2010

Percentage
Change
%

17,168,665

14,499,875

17,168,665

14,612,633

79,208,399

68,506,394

30,819,976

24,664,624

(45,345,417)

(40,553,886)

18.41

17.49

15.62

24.96

11.82

(335,401)

(100.00)

97,280,540

74,324,150

30.89

15,835,425

17,677,295

(10.42)

90,746,110

73,486,877

13,409,571

11,430,530

8,960,284

7,084,038

(£)

(kt)

(g/t)

(oz)

(US$/oz)

296.2

10.55

313.17

10.61

92,197

98,091

1,366

781

1,098

650

23.49

17.31

26.49

(5.42)

(0.55)

(6.01)

24.38

20.21

(£)

21,033,991

5,935,346

254.39

Attributable Profit / (Loss)

Headline Earnings Per Share (‘HEPS’)

£20,000,000

£15,000,000

£10,000,000

£5,000,000

(£922,450)

(£5,000,000)

£9,429,998

£5,460,074

£17,168,665

1,2 p/share

£14,612,633

1.20p

1.07p

0.85p

0.52p

1,0 p/share

0,8 p/share

0,6 p/share

0,4 p/share

0,2 p/share

0,0 p/share

15 months ended
30 June 2007

12 months ended
30 June 2008

12 months ended
30 June 2009

12 months ended
30 June 2010

12 months ended
30 June 2011

(0,2 p/share)

(0.14p)

Attributable Profit

Impairment

15 months ended
30 June 2007

12 months ended
30 June 2008

12 months ended
30 June 2009

12 months ended
30 June 2010

12 months ended
30 June 2011

Pan African Resources PLC Annual Report 2011

Share Statistics & Shareholdings

30 June
2011

30 June
2010

Percentage
Change

Number of shares in issue at end of year

1,444,040,711

1,409,540,711

Weighted average number of shares in issue

1,432,666,738

1,366,268,709

Weighted average diluted shares in issue

1,438,824,573

1,379,880,423

Major Shareholdings

Substantial Shareholdings
As at 24 June 2011 the substantial shareholdings, of which the Group is aware, are as follows:

Shares in issue:

Name

Shanduka Gold (Pty) Ltd

Coronation Fund Managers

Investec Asset Management (South Africa)

Allan Gray Investment Council

Number of Shares

Percentage held

366,168,585

217,335,477

149,619,143

111,214,383

2.45

4.86

4.27

25.36

15.05

10.36

7.70

Revenue

£ 80,000,000

£ 70,000,000

£ 60,000,000

£ 50,000,000

£ 40,000,000

£ 30,000,000

£ 20,000,000

£ 10,000,000

Nil

£53,000,352

£39,254,557

Gold Produced (oz)

£79,208,399

100,000

90,022oz

95,949oz

98,864oz

97,483oz

92,043oz

£68,506,394

d
e
c
u
d
o
r
p

d
o
g

z
o

80,000

60,000

40,000

20,000

15 months ended
30 June 2007

12 months ended
30 June 2008

12 months ended
30 June 2009

12 months ended
30 June 2010

12 months ended
30 June 2011

Underground

Surface

15 months ended
30 June 2007

12 months ended
30 June 2008

12 months ended
30 June 2009

12 months ended
30 June 2010

12 months ended
30 June 2011

Pan African Resources PLC Annual Report 2011

Geographic Location

Equator

Indian Ocean

Mozambique

Manica Project

Atlantic Ocean

Phoenix Platinum

Amira Exploration Project

Bramber Tailings

South
Africa

Barberton Mines
Fairview, Sheba & Consort

1,000km

LEGEND:
Mining Operations
Near-Term Production
Growth Projects

Harper Tailings Dam, Barberton Mines.

Pan African Resources PLC Annual Report 2011

Group Structure

Pan African Resources PLC

(Incorporated and Registered in England and Wales under the Companies Act 1985
with registration number 3937466 on 25 February 2000)

100%

Barberton Mines (Pty) Ltd
South Africa
(Incorporated in South Africa)

Phoenix Platinum Mining
(Pty) Ltd
South Africa
(Incorporated in South
Africa)

Mistral Resource
Development
Corporation
(British Virgin Isles)

Brampton Capital Overseas
Capital
(British Virgin Isles)

Dormant

Barberton Mining
Operations

Phoenix Platinum Chrome
Tailings Retreatment Project
South Africa

100%

Platinum Sands (Pty) Ltd
(Incorporated in
South Africa)

Dormant

98%

Explorator Limitada
Manica, Mozambique
(Incorporated in
Mozambique)

Manica Gold Project
Mozambique

Pan African Resources PLC Annual Report 2011

“At Barberton
Mines safety
is a priority.”

Pan African Resources PLC Annual Report 2011

Simanga Thomas Lubisi
Learner Miner

What Simanga had to say:

“Barberton Mines assisted me and a lot of other people by giving us employment

opportunities and providing training to employees for future development and to

non-mine employees to gain skills and knowledge in the mining environment.

At Barberton Mines, safety is a priority. We are given proper safety induction

training and the right protective clothing.”

Pan African Resources PLC Annual Report 2011

Chairman’s Statement

Pan African does not view itself

as separate from the communities

and environments in which we

operate. Harmonious, mutually

beneficial relationships and

interactions are crucial to the

sustainability of our business.

Dear Shareholder,

Our world remains an uncertain place, with recent volatility in markets surprising most of us. The debt situation
in the developed world is likely to continue to influence our lives in years to come, and the growth potential of
investments in developing countries is attracting a lot of interest. Gold, the traditional safe haven asset and value
protector, has performed exceptionally well. As a fellow Pan African shareholder, you must share our view that the
price outlook for the short and medium term is still very favourable.

The year under review has been a successful one for Pan African. The Group has increased profits, Phoenix Platinum
is nearing production and the Board has recommended a substantially increased dividend to shareholders. The
proposal for an increased dividend demonstrates our faith in the sustainability and quality of earnings of the Group.

In the current low-interest rate environment, investors continue to seek assets that provide a capital return and
yield. We believe Pan African offers a compelling value proposition in a world where the gold price is at an all-time
high, and our Group is poised to further differentiate itself by becoming both a growing primary gold and platinum
group metal producer.

Pan African Resources PLC Annual Report 2011

As we cannot control the gold price or the Rand/Dollar exchange rate, Pan African remains focused on factors
that we can control and influence. Cost control, increased geological confidence in our mineral resources and a
sustained drive to increase productivity are still areas for continuous improvement. Given inflationary pressures
in our operating environment, the Group has managed to contain cost escalations, but we believe we can do even
more in the coming years. A focus on mineral resource management has also yielded positive results, with an
increase in gold resources and reserves, and an increase in the estimated life-of-mine at Barberton to 17 years.

Production difficulties at Barberton, particularly during the last months of the financial year, resulted in the mine
not achieving productivity and production targets. Even though this is disappointing, the team has plans in place to
improve performance and deliver more ounces in the 2012 financial year. In addition, we will continue to commit
new capital to Barberton, to ensure that we not only protect the value of this flagship asset for the Pan African
Group and shareholders, but also increase mining flexibility and productivity.

Safety performance at Barberton has continued its positive trend, which is the result of the success of safety
initiatives implemented during the last two years and the commitment of all our people to creating a safe workplace.
We continue to work towards an environment where ‘zero harm’ to our people and contractors is no longer a
goal, but a reality.

The construction of the Phoenix Platinum CTRP is nearing completion, and we eagerly await the production of the
first PGM concentrate from the plant during the next months.

Pan African does not view itself as separate from the communities and environments in which we operate.
Harmonious, mutually beneficial relationships and interactions are crucial to the sustainability of our business. An
example of our integrated approach to problem solving is certainly our strategy around the prevention of criminal
mining, which involves the broader community and also other stakeholders, including national government. We are
also involved in a number of community projects, which provides for both current needs and also future growth
and development. This year’s annual report contains detailed information on sustainability, which we are proud to
present to shareholders and to other stakeholders.

Pan African continues to explore growth opportunities, both organic and acquisitive, to generate value for
shareholders. In addition to profits re-invested to protect the value of our existing business, or paid as dividends to
shareholders, Pan African’s cash flow positive operations and healthy balance sheet, positions it favourably to take
advantage of the ‘right’ opportunity.

The Group continues to trade on both JSE Limited (‘JSE’) and London’s AIM market, with loyal shareholder support
in both jurisdictions.

I wish to again 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 continued loyal support and belief in the Group and its management.

Yours sincerely,

Cyril Ramaphosa

Pan African Resources PLC Annual Report 2011

“Barberton
have always
been very
conscious
about the
environment”

Pan African Resources PLC Annual Report 2011

Gugu Dlamini
Environmental Officer

What Gugu has to say:

“Pan African and the team at Barberton have always been very conscious about

the environment and have gone the extra mile to ensure that we operate in

an environmentally friendly manner. We are also working steadily to clean up

any historically poor environmental works or deposits.

A lot of tailings and waste footprints have been cleaned and rehabilitated. The

water management at the mine is receiving a lot of attention and overall, we

are happy with the progress. Pan African has been very supportive and we

think that this is good and bodes well for the future.”

Pan African Resources PLC Annual Report 2011

Chief Executive Officer ’s Review

12 - 18 months

6 months

Barberton
Mines

e
u
l
a
V

Bramber Tailings
Project

12 months

18 - 36 months

Through a separate listing fast track process

Manica Gold
Project

Amira Exploration
Project

Phoenix
Platinum

Drill targets

Definition Drilling Pre-Feasibility

Bankable Feasibility

Civils

Commisioning

Steady State

Life of Mine Expansion

Advanced Exploration

Advanced Valuation

Mine / Plant Construction

Mining

Acquisition Opportunities
Gold and Platinum Projects

Driving growth by advancing our organic pipeline of projects.

Planned Action

•

Strengthen our Statement of Comprehensive Income by:

–
–
–
–

Bringing surface stockpiles at Barberton to account (288kt @ 2.23g/t in situ).
Starting PGM production at Phoenix Platinum project (12,200oz 4E per annum).
Bringing Bramber Tailings project to account within 12-18 months.
Fast tracking development of Manica project through separate listing (with its own access to capital)
to unlock value.

• This will allow us to take full advantage of high commodity prices to:

– Grow the earnings and dividend and,
–

Exploit further opportunities in the precious metals sector.

Pan African Resources PLC Annual Report 2011

The Group’s focus

on Mineral Resource

Management is bearing

fruit in terms of

building a long term

sustainable business.

Introduction

The year under review represents the fourth year the Group has continued to grow earnings and as a result, we
can recommend the payment of a dividend for a third successive year. The growth in operating margin is mainly
the result of a strong gold price in spite of a lower than anticipated production performance from Barberton Mines.

Production was negatively influenced as a result of a strike in the first quarter of the financial year and stoppage
of certain production sections at Fairview in April 2011. The production stoppage was the result of additional
support that had to be installed to ensure safe extraction. Up to the stoppage, the mine was on track to produce
between 98,000oz and 100,000oz, as production lost in the first quarter had been made up. Unfortunately, due to
the stoppage of the mine and subsequent loss of production in April 2011, the deficit could not be made up and this
resulted in lower than planned production results.

Action plans have been put in place to ensure we reach our production targets in the next year and these are
discussed under the Operation Performance heading. Costs were well controlled and on a notional cash cost basis,
Barberton Mines remains one of the lowest cost gold mining operations in South Africa.

An Executive Committee (‘Exco’) has been formed and meets every six weeks to review the Group’s current
performance and to ensure we stay true to our business model and planned strategic targets. Exco is also responsible
for identifying key risk areas that could influence the business and put action plans in place to address these issues.

Pan African Resources PLC Annual Report 2011

The Pan African Exco

Jan Nelson

Thandeka Ncube

Andre vd Bergh

Ron Holding

Pieter Wiese

To build a sustainable
and profitable
African focused mining
Group.

Nicole Spruijt

Jenny Yates

Casper Strydom

Busi Sitole

Cobus Loots

Pan African Resources PLC Annual Report 2011

Key Themes and Areas of Accountability

Theme

Sub category

Champion

Key Role
Players

Quarterly
Report Back

Growth

Organic

P. Wiese

R. Holding
C. Loots

• Deputy Chairman
•

Board

Acquisitive

J. Nelson

Corporate and
Social Development

T. Ncube

Governance and
Compliance

N. Spruijt

Sustainability and
Development

Human Resources
Development

A. van den Bergh

Communication*

Internal

External

J. Nelson

Financial

B. Sitole

A. van den
Bergh
C. Strydom

J. Nelson
B. Sitole
J. Yates

T. Ncube
J. Nelson

Exco

N. Spruijt

C. Loots
J. Nelson

Group Profit
Optimisation

Productivity

Cost Control

C. Strydom

R. Holding

• Audit Committee

• Remuneration
Committee
• Nominations
Committee

• Chairman
• Deputy Chairman
•

Board

•
• Audit Committee

Strategy

J. Nelson

Commercial

C. Loots

•

Board

Executive
Directors

J. Nelson

Risk
Management**

Operational

R. Holding

C. Strydom

•

Board

Legal

J. Yates

J. Nelson

* The Group has a structured communication programme that allows various levels of the organisation to interact with relevant stakeholders on a continuous basis. This process is reviewed

formally on a quarterly basis and the appropriate feedback in given to the board.

** Risk Management: the Group has developed risk registers for all its projects, which is kept up to date and reviewed on a continuous basis.

Pan African Resources PLC Annual Report 2011

Group safety performance *

Barberton Mines is pleased to report no fatalities for the year under review.
Post the reporting period, during the month of July 2011, Barberton Mines
achieved one million fatality free shifts.

The Barberton Mines operating sections, comprising the Fairview, Sheba
and New Consort mines, showed further improvement year-on-year. The
Lost Time Injury Frequency Rate (‘LTIFR’) improved to 2.2 (2010: 4.2) and
the Serious Injury Frequency Rate (‘SIFR’) decreased to 0.66 (2010: 1.1).
The total Recordable Injury Frequency Rate (‘RIFR’) also decreased to 22.6
(2010: 33.3).

During the year a Safety, Health, Environment and Communities (‘SHEC’)
management system was fully implemented. This system provides for two
specific functional levels - strategic and operational. The strategic function
focuses on risk management of global and national concerns and issues,
inclusive of legal and regulatory requirements, whilst the operational
management drives the systems’ foundations, implementation, compliance
and monitoring functions. The continued success of the SHEC system is
highly dependent on the attention of the different role players, including:
corporate and operational management, employees, contractors and
employee representative bodies. The training of management and employees
as identified by the Risk Management Framework segment of the SHEC
programme is an ongoing process. The Group is of the opinion that this
management system is delivering the intended outputs.

Accident Rates (per million man hours)

4.8

2.8

3.1

6.4

4.2

15 months ended
30 June 2007

12 months ended
30 June 2008

12 months ended
30 June 2009

12 months ended
30 June 2010

12 months ended
30 June 2011

Lost Time Injury Rate

Serious Injury Rate

1.7

1.1

2.2

0.7

Total Recordable Injury Frequency Rate
60

55.7

50.8

37.8

33.3

22.6

15 months ended
30 June 2007

12 months ended
30 June 2008

12 months ended
30 June 2009

12 months ended
30 June 2010

12 months ended
30 June 2011

* The Lost Day Severity Rate (‘LDSR’) graph reported previously has been replaced with a more meaningful graph indicating the Total Recordable

Injury Frequency Rate (‘TRIFR’), which records the frequency rate of all injuries.

Pan African Resources PLC Annual Report 2011

Financial performance

Pan African is incorporated and registered in England and Wales, and its
reporting currency is pounds sterling (‘£’). In the current financial year, Pan
African changed its functional currency from £ to South African Rand (‘ZAR’
or ‘Rand’), due to the fact that the Group’s primary economic environment
is now South Africa. The reporting currency has remained unchanged in
£. Barberton Mines and Phoenix Platinum are South African incorporated
companies, and their functional and reporting currency is ZAR. Manica
is a Mozambican incorporated company and its functional and reporting
currency is Meticals (“MZN”).

When Barberton Mines, Phoenix Platinum and the Group financial
statements are translated into £ for the purposes of Group consolidation
and reporting, the annual average and year end closing ZAR:£ exchange rates
affect the Group consolidated financial results. In the current financial year,
the average prevailing ZAR:£ exchange rate was 11.11:1 (2010: 11.93:1), and
the closing ZAR:£ exchange rate was 10.94:1 (2010: 11.53:1). The year-on-
year change in the average and closing exchange rates of 6.87% and 5.12%
respectively should be taken into account for the purposes of comparing
year-on-year results.

When Manica financial statements are translated into £ for the purposes of
Group consolidation and reporting, the year end closing MZN:£ exchange
rate affects the Group consolidated financial results. In the current financial
year, the closing MZN:£ exchange rate was 45.33:1 (2010: 50.86:1). The
year-on-year change in the average and closing exchange rate of 10.87%,
should be taken into account for the purposes of comparing year-on-year
results.

Gross revenue from gold sales increased by 15.62% to £79.2 million (2010:
£68.5 million). The increase in revenue was mainly attributed to a 24.41%
increase in the average US$ gold spot price received to US$1,366/oz (2010:
US$1,098/oz), and the depreciation of the £ against the ZAR during the
reporting period. The average US$:ZAR exchange rate was 7.91% stronger
at ZAR6.99 compared to the previous year (2010: ZAR7.59), which
negatively impacted revenue received in ZAR. The effective ZAR gold price
was 14.51% higher at ZAR306,757/kg (2010: ZAR267,876/kg). Mining profit
at Barberton Mines grew by 24.70% to £30.8 million (2010: £24.7 million).

Cost of production increased by 11.58% to £45.3 million (2010: £40.6
million). In Rand terms, cost of production increased by 4.09% to ZAR503.6
million (2010: ZAR483.8 million). This increase is mainly attributable to a
17.34% increase in electricity costs to ZAR49.4 million (2010: ZAR42.1
million), security costs increasing by 4.01% to ZAR33.7 million (2010:
ZAR32.4 million) and salary, wages and other staff expenses increasing by
7.84% to ZAR232.4 million (2010: ZAR215.5 million).

Barberton Mines absorbed the first full year effect of the cost of the
new South African mining royalty tax implemented in March 2010, which
amounted to £2.4 million (2010: £0.8 million). EBITDA for the year under
review was £28.5 million (2010: £25.0 million), an increase of 14.00%. EPS
increased by 15.38% to 1.20p (2010: 1.04p) and HEPS were up 12.15% to
1.20p (2010: 1.07p), supported by increased revenue from gold sales. Net
asset value (‘NAV’) per share increased by 20.54% to 6.28p (2010: 5.21p)
and tangible NAV per share was up 37.50% to 3.85p (2010: 2.80p). The
upturn was primarily due to increase in property, plant and equipment
related to the Phoenix plant under construction.

Other expenses increased 47.37% to £2.8 million (2010: £1.9 million).
Group income tax increased by 19.48% to £9.2 million (2010: £7.7 million),
due to increased revenue and profits before tax.

Pan African Resources PLC Annual Report 2011

Cash cost breakdown
(excluding Capex)
year ended 30 June 2011
5%

10%

46%

14%

Totals:
£45,345,417
R503,592,598
US$ 781oz

Salaries

Mining

Processing

Engineering

Electricity

Security

Other

Cash cost breakdown
(excluding Capex)
year ended 30 June 2010

13%

44%

14%

Totals:
£40,553,886
R483,807,857
US$/oz 650

Salaries

Mining

Processing

Engineering

Electricity

Security

Other

Financial Summary

Gold Sales

EBITDA (excluding impairment)

Attributable Profit - Owners of the parent

EPS

HEPS

Year ended
30 June 2011
£

Year ended
30 June 2010
£

79,208,399

68,506,394

28,540,323

25,022,552

17,168,665

14,277,232

1.20

1.04

1.07

pence

Weighted average number
of shares in issue

1,432,666,738

1,366,268,709

Cash cost vs average gold price received (US$/oz)

1,500

1,200

900

600

300

z
o
/
$
S
U

15 months ended
30 June 2007

12 months ended
30 June 2008

12 months ended
30 June 2009

12 months ended
30 June 2010

12 months ended
30 June 2011

Cash Cost

Average Gold Price Received

Production Statistics

d
e

l
l
i

s
e
n
n
o
T

350,000

300,000

250,000

200,000

150,000

100,000

50,000

)
t
/
g
(

e
d
a
r
g
d
a
e
H

15 months ended
30 June 2007

12 months ended
30 June 2008

12 months ended
30 June 2009

12 months ended
30 June 2010

12 months ended
30 June 2011

Fairview

Sheba

Consort

Vamping tonnes

Grade

Capital Expenditure

8,000

7,000

6,000

5,000

4,000

3,000

2,000

1,000

£ 0

)
0
0
0
(

Pan African Resources PLC Annual Report 2011

15 months ended
30 June 2007

12 months ended
30 June 2008

12 months ended
30 June 2009

12 months ended
30 June 2010

12 months ended
30 June 2011

Development Capital

Maintenance Capital

Operational performance –

Barberton Mining Operations

Barberton Mines sold 92,197oz of gold during the year, a decrease of 6.01%
from the previous year (2010: 98,091oz). This decrease is the result of
the mining operations milling 296,200 tonnes, a decrease of 5.42% from
the prior year (2010: 313,167 tonnes). Head grade and overall recoveries
remained relatively constant at 10.55g/t (2010: 10.61g/t) and 90.80% (2010:
91.21%) respectively.

Production was affected by a strike at the Fairview section in the first
quarter of the reporting year, which impacted the operations by an estimated
3,000oz. Management made significant progress during the year in making
up the lost production and was on schedule to produce close to 100,000oz
by year end. Production however had to be stopped in one of the most
significant production contributing sections at the Fairview mine in April
2011, in order to address poor rockwall conditions. As a result additional
long anchors had to be inserted into the roof of the mining area to ensure
safe mining. Despite the impact on production, operations in the section
were halted, as the safety of our employees cannot be compromised. The
stoppage had a further negative impact of 3,000oz on planned production.

Despite the impact on

production, operations

in the section were

halted, as the safety of

our employees cannot

be compromised.

Production Summary

Financial Year

Tonnes Milled

Headgrade

Overall Recovery

Production: Underground

Production: Calcine Dump

Gold Sold

Average Price: Spot

Average Price: Hedge

Average Price: Spot

Average Price: Hedge

Total Cash Cost US$/oz sold

g/t

ZAR/kg

US$/oz

2011

2010

2009

2008

2007

296,200

313,167

313,952

315,305

330,367

10,55

10,61

92,043

97,483

92,197

98,091

10,32

94,909

3 955

97,353

8,90

82,436

13 513

99,078

9,20

90,022

89,572

306,757

267,876

251,740

193,159

148,151

1,366

1,098

781

650

867

469

105 850

96 067

823

451

476

640

415

465

Total Cash Cost ZAR/Kg sold

ZAR/Kg

175,520

158,711

136,178

111,272

107,656

Total Cost per Ton

Total Mining Cost per Ton

Capital Expenditure (Barberton)

Exchange rate - average

Exchange rate - closing

Exchange rate - average

Exchange rate - closing

ZAR/t

ZAR/£

ZAR/US$

1,706

1,647

1,537

1,486

1,313

1,256

1,088

1,045

908

858

6,773,708

5,918,271

4,052,665

2,901,792

1,637,359

11.11

10.94

6.98

6.83

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

Pan African Resources PLC Annual Report 2011

Management intends to undertake the following corrective actions to
address the risk of similar production problems:

•

Surface stockpiles have been identified and are being evaluated
(representing 288,675 tonnes at a grade of 2.23 g/t) and where viable
will be trucked to processing plants with capacity for additional tonnes,
to counter any negative underground deficit in volume during the
coming year.

• The development of two additional access platforms into the high-grade
ore-zone at Fairview mine to increase mining flexibility is ongoing.
• Re-evaluating certain calcine stockpiles on surface, which could be re-
treated through the Segalla plant (additional capital will be required to
ensure the plant is refurbished).

Total cash costs per ounce increased by 20.15% to US$781/oz (2010:
US$650/oz). In Rand per kilogram terms, total cash costs increased by
10.59% to ZAR175,520/kg (2010: ZAR158,711/kg).

Total capital expenditure at the mine increased by 15.25% to £6.8 million
or 6.82% to ZAR75.2 million (2010: £5.9 million or ZAR70.4 million).
Maintenance capital expenditure of £3.6 million (2010: £2.9 million) and
development capital expenditure of £3.2 million (2010: £3.0 million) was
incurred.

Review of Phoenix Platinum

Plant construction

(at Phoenix) is underway

The Group is pleased to report that the following significant milestones
have been achieved:

and the first concentrate is

Ferro Metals (Pty) Limited (‘IFM’) Lesedi property,

• Conclusion of the agreement to construct the CTRP on the International

• Award of the Lump Sum Turn Key contract to Matomo Projects (Pty)

expected to be produced

ahead of schedule, by the

end of December 2011.

Ltd (`Matomo’) to construct the plant,
• Completion of the final engineering design,
• Commencement of bulk earthworks, and
•

Start of plant construction.

Plant construction is underway and production of the first concentrate is
expected ahead of schedule, by the end of December 2011. This is a significant
milestone for the Group, as it distinguishes Pan African as both a primary
gold and PGM producer, and further demonstrates the Group’s project
development ability. The commencement of production by December 2011
will result in an additional revenue contribution for the 2012 financial year,
and will further strengthen the Statement of Comprehensive Income and
increase our margins.

Pan African Resources PLC Annual Report 2011

... if viable could extend

the Life of Project from

approximately three to ten

years and increase the annual

production profile at the mine

by approximately 20,000oz.

Bramber Tailings project

A total of 308 auger drill holes were drilled on a grid of 20 metres by
20 metres, representing a total of approximately 6,074 metres. Samples of
each hole were taken at 1.5 metres intervals and composited at 3 metre
intervals, representing a total of 2,344 samples taken for assaying. Modelling
and geological profiling of the boreholes confirmed two distinct positional
populations across the tailings dam which is the result of historical deposition
that took place in two separate compartments, a higher grade BIOX® tail
section and a lower grade concentrator/flotation tail section.

Geostatistical modelling indicates 74,600oz (758kt @ 3.06g/t in situ)
for the BIOX® section and 72,900oz (2.369Mt @ 0.96g/t in situ) for the
concentrator/flotation section. This represents a total resource of 147,500oz
(3.130Mt @ 1.47g/t in situ).

A total of 10 composite samples representative of the tailings dam were
submitted for metallurgical recovery test work. Initial excess cyanide test
work indicated recoveries varying from 45% to 55%. Kinetic test work
was also done to determine residence time, which guides the process flow
design for optimum plant configuration. Indicative recoveries of 52% have
been determined.

The feasibility study covering plant design, final process flow design, volume
throughput, chemical and reagent consumption, recoveries and capital and
operating expenditure will be completed by Q2 of the 2012 financial year.
If feasible, a new plant will be constructed to treat approximately 1.2Mt
per annum of tailings for three years. An Order of Magnitude estimate
study completed by Matomo estimates the capital cost of the project
at approximately ZAR250 million (approximately £22.9 million). Plant
construction is estimated to take 12 months.

The Group has also completed initial auger drilling on another 9Mt of
tailings, which if viable could extend the Life of Project from approximately
three to ten years and increase the annual production profile at the mine by
approximately 20,000oz. The initial drilling programme has been completed
and the associated metallurgical test work applicable to the completed
expansion is expected within the next quarter. The 100 auger holes drilled
equates to 1,804 metres. The 1,368 samples taken at 1.5 metre increments
were composited at 3 metre intervals, for a total of 872 combined samples
submitted for gold content determination. A total of 10 composites,
representing the various dumps, were submitted for metallurgical test work.
Final results of assays and metallurgical test work are still pending.

Of the total Mineral Resource, 24%, by volume (51% by gold content),
originated from the BIOX® process. The flotation process produced the
balance.

Pan African Resources PLC Annual Report 2011

Costs were well controlled and on a notional cash

cost basis, Barberton Mines remains one of the lowest

cost gold mining operations in South Africa.

Phoenix Platinum, plant construction progress as at August 2011.

Pan African Resources PLC Annual Report 2011

The advancement of our organic growth projects, at a time

when commodity prices are high, could not be more opportune.

Pan African Resources PLC Annual Report 2011

Mineral Resource Management (‘MRM’)

MRM strategy

The MRM initiative will remain a key strategic corporate focus for the
Group and forms an integral part of our sustainable business pillar, enabling
management to ensure:

• That the economic value of mineral assets is optimally managed and

•

extracted,
Integration of technical and associated functional disciplines along the
business value chain,
Increased levels of corporate governance through continued audit and
quality control, and

• The creation of shareholder value.

During the year, the Group’s

Gold inventory

reserve in gold content

increased by 51% to 1Moz.

The Fairview section has mined

over 4Moz of gold over its life.

The total South African Code for Reporting of Exploration Results,
Mineral Resources and Mineral Reserves (“SAMREC”) compliant resource
inventory for the Group increased, when measured in terms of gold content,
by 22.46% to 5.67Moz (63.15Mt @ 2.79g/t in situ), compared to 4.63Moz
(41.85Mt @ 3.45g/t in situ) in 2010. The increase at Barberton resulted
from additional drilling and underground development, which led to a
re-definition of geological envelopes and geostatistical re-evaluation. At
Manica a geostatistical re-evaluation provided greater geological confidence
to project indicated and inferred mineralised envelopes further along dip.

During the year under review, the Group’s reserve in gold content
attributable to Barberton Mines increased significantly by 51.29% to 1Moz
(3.83Mt @ 8.12g/t) (2010: 661,000oz, 2.318Mt @ 8.87g/t). Based on a
historical conversion factor of 85% of the Measured and Indicated blocks
to Proved and Probable, LOM has been increased from 10 to 17 years. This
clearly shows that the Group’s focus on Mineral Resource Management is
bearing fruit in terms of building a long-term sustainable business.

The focus on the identification of shallow, low cost mineral resources, which
can be brought to account in the near term, has resulted in the delineation
of the Bramber surface tailings resource. The Bramber tailings project
represents a Measured and Indicated Resource of 147,500oz (3.128Mt @
1.47g/t in situ) and a Proved and Probable reserve of 76,000oz (3.128Mt
@ 0.76g/t based on tested recoveries of 52%). This approach may see
the production profile grow, and could also impact positively on the cost
structure at Barberton Mines. The focus will remain on growing shallow
low cost mineral resources.

As part of this focus, the Group will be drilling several surface boreholes
towards the south of the Fairview mine, where near-surface geophysical
targets have been identified, that could represent a surface area footprint
equal to all the mining that has taken place at the Fairview section. The
Fairview section has mined over 4Moz of gold over its life.

Pan African Resources PLC Annual Report 2011

The Company is currently

reviewing South African gold

and platinum opportunities

that are either in production

or close to production.

Platinum inventory

The Phoenix Platinum project represents SAMREC compliant PGM Mineral
Resource of 470,300oz (4.64Mt @3.15g/t).

Of the total Mineral Resource, 154,700oz is classified as surface sources
(1,964kt @ 2.45g/t) and 315,600oz (2,682kt @ 3.66g/t) as current arisings.

Current feasibility work indicates a LOM of 17 years at a depletion rate of
approximately 12,000oz PGM’s per annum.

New Business

The Group re-focused its New Business team to concentrate on the
development of the Bramber tailings project as a “stand alone” business.
This strategy has paid off with the team evaluating a further 9Mt of tailings
material to the current resource of 3.1Mt. The team remains focused on
completing a definitive feasibility study by Q2 of the 2012 financial year, in
order to bring the project to account and capitalise on current high gold
prices.

The Group is currently reviewing South African gold and platinum
opportunities that are either in production or close to production.

Corporate Developments

Manica

The Group announced on 19 August 2011 that it was considering listing the
Manica project as a stand-alone entity on an international exchange, for the
following reasons:

• The Group’s capital is currently committed to bringing its organic
growth projects (Phoenix Platinum, Bramber Tailings and Amira) to
account at an estimated capital cost of £35.0 million,
Shareholders have indicated that they do not favour a mixture of mining
assets and exploration/early development projects, and

•

• Key strategic partners identified as partners in developing Manica

require access to a separate and independent entity.

In order to fast track the project, it is envisaged that a separate listing will
benefit all stakeholders because:
• The new entity will have its own dedicated management team,
•

Separate access to capital to fund an aggressive project development
plan,

• Operational flexibility, and
• Attract strategic development partners.

Should this strategy for Manica prove viable, the Group will initially retain
a shareholding and board position on the newly listed entity. Shareholders
will be kept informed on the progress made in due course.

Pan African Resources PLC Annual Report 2011

Our focus on developing our

organic pipeline of projects will

continue to allow us to grow

our earnings and dividends.

The Future

The Group will continue to drive the pillars: profitable, sustainable,
stakeholder, growth. As a result of having laid a solid foundation in terms
of our mining and project development skill set, we have grown our balance
sheet. This has allowed us to allocate significant resources in building an
organic pipeline of projects at Barberton Mines, that could:

• Have cost structures of less than US$450/oz,
• Have profit margins in excess of 35%, and
Be producing within 12 to 24 months.
•

These organic projects will significantly grow our Group’s statement of
comprehensive income during a high commodity pricing period. The timing
of this growth could not be more opportune.

We have started building our precious metals mining house – still small, but
highly profitable and focused. We have developed a sound business model
and philosophy that have now been tried and tested. Together with our
strategic partners and stakeholders, we will leverage this to our advantage.

Once again our achievements have been a team effort and I would like to
thank everyone in the organisation for their passion, dedication and drive
in achieving the results presented in this report and for their commitment
moving forward.

To my fellow board members, thanks for your guidance and wise counselling.

We look forward to a year that will see us producing both platinum and
gold!

Jan Nelson
Chief Executive Officer
12 September 2011

Pan African Resources PLC Annual Report 2011

Phoenix Plant Construction.

Pan African Resources PLC Annual Report 2011

Mining Operations: Barberton Mines
Geographic Location

Nelspruit

Malelane

Kaapmuiden

Noordekaap

New Consort Mine

Sheba Mine

Barberton

Fairview Mine

Intern

atio
n
al B

ord

Bulembu

Piggs Peak

Forbes Reef

LEGEND:
Mining Licence
Prospecting Right
National Road
Regional Road
Railway
Barberton Greenstone Belt

Barberton Mines

Mpumalanga province (South Africa)

Gold producer

20km

Profile

Name

Location

Status

Holding Company

Pan African (100% stake)

Controlling Company

Pan African

Geological Setting

Sediments and metavolcanics within the Barberton greenstone belt

Products Mined

Gold

Actual Production

Tonnes Per Annum:

Grade (recovered)

Content Per Annum

Ongoing Capex

£6.8 million per annum

Extraction Method:

BIOX® / Carbon-in-leach (‘CIL’)

LOM

17 years

Key Management

Executive: Mining

General Manager

296,200

10.55g/t

92,043 oz

Ron Holding

Casper Strydom

Pan African Resources PLC Annual Report 2011

Safety, Health and Environment

Safety

Barberton Mines is pleased to report no fatalities for the year under review. Post the reporting period, during the
month of July 2011 Barberton Mines achieved one million fatality free shifts, over a 15 month period.

The Lost Time Injury Frequency Rate improved by 25% and the Reportable Injury Frequency Rate improved by 40%
during the year compared to 2010, indicating the increased efforts and focus placed on safety at Barberton Mines.

The success achieved through the Barberton Mines Safety, Health, Environment and Community (‘SHEC ‘) system is
evident from the statistics shown below:

Lost time injury frequency rate (‘LTIFR’)

Total recordable injury frequency rate (‘TRIFR)

Serious injury frequency rate (‘SIFR’)

Fatal injury frequency rate (‘FFR’)

2011

2010

2.21

22.7

0.66

4.20

33.3

1.10

0.18

In addition to a robust SHEC system in place at the mine, Barberton Mines 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.

Environment

Mining and exploration activities are always conducted in a way where best practice is considered to minimise the
impact on the environment to acceptable levels. The updated Environmental Monitoring Programme has been
submitted to the South African Department of Minerals and Resources (‘DMR’), awaiting approval. Monitoring
programmes are compliant with regulations of the Department of Water Affairs as well as the Department of
Environmental Affairs.

The water licences for the New Consort and Fairview mines were approved during the 2011 financial year,
approval for the Sheba mine is expected in Q1 2012. Water quality is considered a major focus point and water
management issues are constantly reviewed to improve water use at the mine. A major achievement to improve
water management, was the completion of the new tailings storage facility at the Fairview mine and the ASTER®
water treatment plant at the New Consort mine so that water returning from the tailings return water dams can
be reused. As part of our continuous improvement, aquatic bio-monitoring commenced in the 2011 financial year
as an additional monitoring tool in the in-flow watercourses.

Pan African Resources PLC Annual Report 2011

Longitudinal Section through the New Consort Mine depicting Organic Growth Projects

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Pan African Resources PLC Annual Report 2011

Longitudinal Section through the Fairview and Sheba Mines depicting Organic Growth Projects

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Pan African Resources PLC Annual Report 2011

Capital Expenditure

Organic Growth Projects

During the year under review, a total of £6.8 million was spent on capital expenditure, of which £3,2 million was for
capital development projects.

The progress of the projects are summarised below (please refer to plans on pages 32 and 33):

Key

Project

2011

2010

Potential
resource
target

Comment

(metres)

(oz)

Sheba – 36ZK

294

140

6,000

completed during the year. The horizontal development along

Good progress has been made with the development on the

hanging wall contact on 36 Level. The establishment of a second

escape access way to improve ventilation to 35 Level was also

Sheba –

Edwin Bray

the hanging wall contact will continue during the financial

year, reaching the ZK target area towards the end of the 2012

financial year.

Incline development towards the high grade surface borehole

intersections was carried out during the financial year. It is

expected that the elevation of these free gold intersections

to Thomas

491

1,056

17,000

will be reached by the end of the 2012 financial year. This

and Joe’s

Luck area

development will be done in conjunction with exploration

drilling to determine the potential down dip extension of the

Thomas fracture. Development towards the Joe’s Luck area is

planned for the 2013 financial year.

54 Level

III

Rossiter

orebody

(Level

equipping

completed)

11,000

development of 120 metres is planned for the 2012 financial year

Equipping of 54 Level was completed during the year. Horizontal

to reach the mineralised zone.

Fairview

A winder cross cut and 95% of the shaft slipping was completed

during the financial year. The establishment of return airways

– 3 Shaft

149

278,000

and shaft equipping below 62 Level has commenced and will be

Deepening

New Consort

– 40 level

completed in the 2012 financial year. A total of 186 metres of

development, inclusive of shaft sinking is planned for the 2013

financial year.

Equipping of the level was completed during the financial year

and development into the pegmatite commenced. Developing

station

10,000

through the pegmatite will target the possible upward extension

establishment

of the high grade Bullion mineralised zone.

New Consort

The second station landing was established during the year and

was followed up with horizontal development exposing a known

– 50 Level

123

100

26,000

zone of mineralisation. Decline shaft sinking towards the final

Decline West

station has commenced and will be completed during the 2012

financial year.

New Consort

The 37 Level East haulage was re-equipped during the financial

year and horizontal development extended towards the Bullion

VII

– 37 Level

(New target area)

mineralised zone. This capital project has subsequently been put

Development

on hold until the 40 Level Development intersects the upward

projected extension of the Bullion mineralised zone.

Pan African Resources PLC Annual Report 2011

On Mine Development

On mine development is summarised below:

On-Mine Development
for 2011

New
Consort

Fairview

Sheba

Reef Development

Stope Development

Waste Development

Total Development

Capital

metres

483

455

1,080

2,018

377

g/t

3.83

7.09

metres

g/t

metres

626

229

1,044

1,899

331

3.14

6.41

874

2,276

3,242

789

g/t

4.51

13.67

Maintenance Capital

The maintenance capital at Barberton Mines amounted to £3.6 million. Expenditure on processing plant
maintenance was £0.6 million for the year, as a result of purchasing of a new Knelson concentrator at the Sheba
plant and installation of new blowers and compressors in the BIOX® plant at Fairview. A new BIOX® Elution Column
replacement was purchased for £0.1 million. The extension of the tailings dam at the Fairview section of Barberton
Mines was completed at a cost of £0.7 million. The total metallurgical maintenance and replacement expenditure for
the year under review amounted to £1.3 million.

The capital expenditure on the maintenance of engineering equipment and infrastructure totalled £1.1 million for
the year. Upgrading the mining equipment fleet was a key focus area during the year, with expenditure of £0.2 million
to re-build load haul dumpers. The purchase of new hoppers cost £0.1 million.

Expenditure on the refurbishment of shafts and headgears at the mine amounted to £0.1 million. The replacement
of obsolete compressors with modern, more efficient units and the upgrading of pumping and reticulation systems
amounted to £0.1 million for the year. The old mobile crane was replaced by the purchase of a new mobile crane
for £0.2 million.

The balance of the maintenance capital was principally spent on the final implementation of the SHEC system for
£0.16 million, replacement of light vehicles for £0.04 million, a new X-Ray unit for £0.04 million, a new Symons
crusher to the value of £0.05 million and new pump replacements costing £0.06 million.

Pan African Resources PLC Annual Report 2011

Key Focus Areas

Key Focus Area for 2010

Achieved

Key Focus Areas for 2011

Yes

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.

Volume, Value & 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.

Safety - Achieved
Cost control was
good but production
volumes were not
achieved as per plan.

SHEC – Continue with doing the
required work in all the various
areas.
Safety – Targets set and systems
in place to manage it.
Health
and Environment –
Structures and Systems in place
to comply with legislation and to
manage on mine issues.
Communities – Systems and
structures in place to also comply
with the Social and Labour plan
and LED initiatives.

To achieve the business plan
which deals with volumes, costs,
values and quality. After safety
this is the main focus area.

–

Benchmark

the
Productivity
operation to similar operations in the
industry and identify and implement
means of improving productivity at the
mine.

No similar operations
identified.

Productivity levels
to be improved
through targeting
surface resources.

To fast track the Bramber Tailings
retreatment project. Also to
investigate
implement
and
treatment of any other surface
sources on mine.

MRM – Continue the implementation
of the integrated MRM system aimed at
improving flexibility in terms of grade
management and increasing the LOM
of Barberton to 20 years.

Yes

Transformation – Implementing a plan
to achieve the required empowerment
targets set out by Government, whilst
enhancing our skills base.

Yes

for new or
MRM – Search
additional reserves in the current
workings and off mine in new
areas. This is critical not only to
extend the LOM but also to give
improved flexibility.

Focus on our Employment Equity
strategy to ensure that 2014
targets are met. Emphasis will be
placed on training and education
as well as the retention of skills.

Pan African Resources PLC Annual Report 2011

Headgear, Sheba Mine

Pan African Resources PLC Annual Report 2011

“Today I am well
skilled in the mining
environment,
particularly in health,
safety and observation.”

Underground, Fairview Mine.

Pan African Resources PLC Annual Report 2011

Thandeka Ndlovu
Underground Environmental Assistant

“I do not have enough words to thank Barberton Mines and Pan African

Resources for believing in me by offering an inexperienced woman in mining

the opportunity to work as an Underground Environmental Assistant.

When I started here in 2008, I had no experience at all and was really scared,

however, excited to work underground. Today I am well skilled in the mining

environment, particularly in health, safety and observation.

I also want to express gratitude to our Management Team for being more

considerate in safety. People may not know this but the underground conditions

at Barberton Mines are safer and healthier than most others in the country.

I am one of many employees who say thumbs up to Barberton Mines with

their safety record!”

Pan African Resources PLC Annual Report 2011

Phoenix Platinum
South Africa
Geographic Location

terkstroom

t
l

Brits

R 5 6 6

511

AQPSA
Samancor Millsell Mine

Xstrata Kroondal Mine

Middelkraal
Dam
Elandskraal Dumps and Pits

Kroondal Dump

IFM Mining Area

Buf felsfontein Dams and Current Arisings

Bapong

2
1
5
R

IFM

IFM Surface Area

Mooinooi

Planned Phoenix CTRP Location

Hartebeespoort Dam

LEGEND:
Rivers
Dams
Towns
Roads
Railway
Powerlines
Protected Natural Environment
Active Mines
Other Tailings Re-treatment Facilities
Project Boundaries

Buffelspoort
Dam

Rustenburg

R
24

’

5
4
°
5
2

R
30

Olifantsnek
Dam

27°15’

27°30’

27°45’

5km

2
1
5
R

Project Summary

Name of project

The Phoenix Platinum processing project

Location

Status

North-West Province (South Africa)

Under Construction

Holding company

Phoenix Platinum

Controlling company

Pan African (100% ownership)

Geological setting

Chrome tailings from chrome seam mining in the Bushveld Igneous Complex
situated on International Ferro Metals’ (‘IFM’) Lesedi operations.

Products mined*

Platinum (56.5%), Palladium (27%), Rhodium (16%) and Gold (0.5%)

Production forecast

Tonnes per annum

Grade**

240,000t

3.52g/t

Content per annum

12,000oz (PGMs) @ 45% recovery

Working Costs

US$466/oz †

Extraction method

Chrome Tailings Retreatment Plant (‘CTRP’): Concentrator/flotation plant

LOM

17 years

Key management

Executive: Mining

Ron Holding

Project Engineer

Richard KÜnnemann

* 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.

†The ZAR:US$ exchange rate used to calculate the US$/oz working cost is 7.2. This working cost is forecast for second half of 2012.

Pan African Resources PLC Annual Report 2011

Safety Performance

Earthworks at the Phoenix Platinum CTRP construction site on IFM’s property commenced on 23 March 2011.
A total of 46,345 construction man-hours have been worked during the year under review with no significant
incidents or accidents.

Phoenix Platinum Mining (Pty) Ltd
SHEC Integrated System

Number

46,345

Safety (Frequency Rate)

Man hours worked

Fatality

Reportable Accidents

Permanent Disability / Impairment

Lost Work Days

Restricted Work Days

Medical Treatment

First Aid Treatment

Environment (Number of Incidents)

Number

Major Environmental Incidents

Medium Environmental Incidents

Minor Environmental Incidents

Other Incidents

Pan African Resources PLC Annual Report 2011

Milestones Achieved in 2011

Key event

Achievement

Completion
date

CTRP site negotiation

Concluded agreement to construct the CTRP on IFM property November 2010

Concluded Lump Sum Turn Key Contract (‘LSTK’)

November 2010

CTRP Design

Final Engineering Design

February 2011

CTRP Site establishment Commence bulk earthworks

CTRP Construction

Order long lead items

March 2011

Commenced Mechanical Construction of feed thickener

June 2011

Tailings storage facility
(‘TSF’) extension

Completed design and allocated construction contract

May 2011

Re-mined Section

Flotation Section

Electrical Substation

Water Storage Dam

Thickener

Reagent Section

Mixing Tanks

Bead Mill

Plant Construction as at August 2011.

Pan African Resources PLC Annual Report 2011

Milestones Objectives for 2012

Key Event

Objective

Target Date

Comments

Commission CTRP

October 2011

On target despite the
NUMSA strike

CTRP construction

Produce first concentrate

December 2011

Six weeks before LSTK target

Capital expenditure of £8.5 million

Within budget

TSF Management

Construct TSF Extension

October 2011

Take control of IFM TSF

Re-mine Tailings Dam No. 2

September 2011

Stockpiling tailings
for CTRP feed

PGM concentrate
supply

Conclude concentrate offtake
agreement with major producer

October 2011

Maximise potential revenue

Increase CTRP
capacity

Secure additional feedstock

June 2012

Potential sources in the
area being investigated

Re-mined area

Thickener

Water Storage Dam

Reagent Section

Electrical Substation

Bead Mill

Flotation Section

Concentrate Tank

Offices and Workshops

3D impression of completed CTRP Plant.

Pan African Resources PLC Annual Report 2011

“Before this course, I was
hopeless, I had no job and no
future. Now I have learnt how
to weld so I can get a job.”

Pan African Resources PLC Annual Report 2011

Welding Course

This 2-month course provides community members the opportunity to

master the trade of welding.

As highlighted through an interview with the Chairman of the Co-op, Bongani,

this course is much more than just a place to learn, it has given these men and

women hope for the future.

Bongani is married with two children, he was previously unemployed and in

his own words his future was ‘hopeless’, now he is able to make money by

selling the window frames they have made to the school under construction.

Pan African Resources PLC Annual Report 2011

Near-Term Production: Bramber Tailings
Retreatment Project

Harper Dump - North

Harper Dump - South

Bramber Dump

Consort / Segalla Dump

Pan African Resources PLC Annual Report 2011

Project Summary

Name of project

The Bramber Tailings Retreatment Project

Location

Status

Mpumalanga Province (South Africa)

Feasibility underway

Holding company

Barberton Mines (Pty) Ltd

Controlling company

Pan African (100% ownership)

Geological setting

Gold tailings originating from the Fairview Mine

Products mined

Gold

Tonnes per annum

1,000,000 to 1,200,000t

Production forecast

Recovered Grade *

0.76g/t

Content per annum

24,000 oz - 29,000 oz

Estimated capital cost

£22.5 million

Extraction method

CIL plant

LOM

3 years (Bramber only, excluding other surface dumps under investigation) **

Key management

Project Manager

Pieter Wiese

Metallurgical Consultant

Eugene Nel

* Assuming an average recovery of 52%.

** Should other tailings sources prove viable, the LOM could be extended to 10 years at a processing rate of 1.2Mt per annum.

Pan African Resources PLC Annual Report 2011

Milestone Achievements for 2011

Key event

Achievement

Completion date

Tailings Storage Facility
(‘TSF’) Auger Drilling

Resource Statement

Completed

March 2011

Initial resource verification

June 2011

Reserve conversion

July 2011

Metallurgical test work

Initial metallurgical tests completed

June 2011

Engineering Design

Awarded to Matomo

June 2011

Project Milestones Objectives for 2012

Key Event

Objective

Feasibility Study Design

Process Flow Design (PFD)

Target Date

October 2011

Construction tender

Appoint construction contract

December 2011

Detailed design and Execution

Commence Plant Construction

January 2012

Engineering Completion

Plant construction completed

October 2012

Commissioning

Plant hot and cold commissioning

November 2012

EIA

TSF

EIA extension, application and permitting

October 2012

Tailing Storage Facility design and
construction (as per plant schedule)

October 2012

Production Start Up

Estimated first production

January 2013

Pan African Resources PLC Annual Report 2011

Bramber Tailings Project Resource Estimation

The Group is pleased to report a South African Code for Reporting of Exploration Results, Mineral Resources
and Mineral Reserves (‘SAMREC’) compliant gold Mineral Resource for the Bramber Tailings project of 148,000oz
(3.13Mt @1.47g/t).

Subsequent to the completion of metallurgical test work on the dump material, recoveries were determined to
be 52%. The Group is also pleased to report a SAMREC compliant gold Mineral Reserve for the Bramber Tailings
project of 76,000oz. (3.13Mt @0.76g/t).

A total of 308 auger drill holes were drilled on a grid of 20 metres by 20 metres, representing a total of approximately
6,074 metres. Samples of each hole were taken at 1.5 metres intervals and composited at 3 metre intervals,
representing a total of 2,344 samples taken for assaying. Modelling and geological profiling of the boreholes
confirmed two distinct positional populations across the tailings dam which is the result of historical deposition
that took place in two separate compartments, a higher grade BIOX® tail section and a lower grade concentrator/
flotation tail section.

Geostatistical modelling indicates 74,600oz (758kt @ 3.06g/t in situ) for the BIOX® section and 72,900oz (2.369Mt
@ 0.96g/t in situ) for the concentrator/flotation section. This represents a total resource of 147,500oz (3.130Mt
@ 1.47g/t in situ).

A total of 10 composite samples representative of the tailings dam were submitted for metallurgical recovery test
work. Initial excess cyanide test work indicated recoveries varying from 45% to 55%. Kinetic test work was also
done to determine residence time, which guides the process flow design for optimum plant configuration. Indicative
recoveries of 52% have been determined.

The feasibility study covering plant design, final process flow design, volume throughput, chemical and reagent
consumption, recoveries and capital and operating expenditure will be completed by Q2 of the 2012 financial year.
If feasible, a new plant will be constructed to treat approximately 1.2Mt per annum of tailings for three years. An
Order of Magnitude estimate study completed by Matomo estimates the capital cost of the project at approximately
ZAR250 million (approximately £22.9 million). Plant construction is estimated to take 12 months.

The Group has also completed initial auger drilling on another 9Mt of tailings, which if viable could extend the
Life of Project from approximately three to ten years and increase the annual production profile at the mine by
approximately 20,000oz. The initial drilling programme has been completed and the associated metallurgical test
work applicable to the completed expansion is expected within the next quarter. The 100 auger holes drilled equates
to 1,804 metres. The 1,368 samples taken at 1.5 metre increments were composited at 3 metre intervals, for a
total of 872 combined samples submitted for gold content determination. A total of 10 composites, representing
the various dumps, were submitted for metallurgical test work. Final results of assays and metallurgical test work
are still pending.

Of the total Mineral Resource, 24%, by volume (51% by gold content), originated from the BIOX® process. The
flotation process produced the balance.

Pan African Resources PLC Annual Report 2011

Sinqobile Vegetable Project

The Sinqobile Vegetable Project has allowed members of the community the

benefit of access to seeds, fertilizer as well as the expertise of Gail Makhanya.

Gail is a recent Agriculturist graduate from the Tswane University of

Technology. She has been hired on a 12-month contractual basis, beginning in

May 2011, to advise and teach project participants. She focuses on finance,

the science of growing vegetables as well as time management.

The chairperson of the Co-operation, Lindiwe, was running her own vegetable

garden before the formalisation of the Sinqobile project. She has gained skills

in both agriculture and business which will help her develop for the future.

Pan African Resources PLC Annual Report 2011

Amira Exploration Project,
Barberton Mines

Thomas and Joe’

s Luck

Margaret, Mamba and Eureka

Victory Hill

Sheba Mine

Royal Sheba Mine

Royal Sheba Slimes Dams

E a g les Nes t Min e

0
0
0

5
4
+
X

Fairview Slimes Dam

Barberton Mines

Fairview Mine

Barberton Mines

BIOX Metallurgical Plant

0
0
0

To Nelspruit

0
5
+
X

R
40

a
e
r
A
t
e
g
r
a
T

Target Area

Florence and
Devonian

Barberton

Ulundi Syncline Axis

LEGEND:

Main Roads
Towns
Shafts
Mined Out Areas
Mine Authorisation Boundary
New Order Prospecting Area

Amira Target Area

0
0
0

5
5
+
X

SCALE:

2,5km

Project Summary

Name of project

Amira project

Location

Status

Mpumalanga Province (South Africa)

Exploration

Holding Company

Barberton Mines (Pty) Ltd

Controlling Company

Pan African (100% ownership)

Geological setting

Prospecting area to the south of the Fairview Mine

Products mined

Gold

Estimated capital cost

£0.20 million

Exploration method

Diamond and Reverse Circulation (‘RC’) drilling

LOM

Potential extension to Barberton Mines

Key management

General Manager

Casper Strydom

Exploration Manager

Roelf le Roux

Pan African Resources PLC Annual Report 2011

During 2006, Barberton Mines obtained a new order prospecting right, covering 1,900 hectares over ground
previously held under claims, directly to the south of the Fairview mining licence.

The bulk of the gold production at Barberton Mines, and thus more than half of the total Barberton Greenstone
Belt, is associated with sheared competency contrasting litho boundaries. The litho boundary most commonly
found to host mineralised shears, is the boundary between the silicified, fuchsitic altered Zwartkoppie (‘ZK’) unit
and the greywacke and shale of the Sheba Formation. This ZK unit occurs in the Barberton Mines mining and
prospecting area as folds, thrust into the over lying greywacke and shale. This whole sequence was subsequently
refolded around the Ulundi Syncline (‘Amira Project’).

During the late 1990’s Amira International Ltd, through researchers based at the University of Western Australia,
carried out a research project at Barberton Mines. The aim of the project was to reconstruct the deformational
process that coincided with the mineralising event. The fold closure of the Ulundi Syncline was shown to be
a favourable feature to concentrate mineralising fluid flow (gold deposition). After extensive desktop studies,
compiling more than a hundred years of exploration data and a recent airborne geophysical survey, drill targets
were selected based on known mineralisation models and the best interpretation of the structural regime of the
Barberton Mines ore bodies at Fairview and Sheba mines. Numerous anomalies, similar in footprint size to the
Fairview anomaly, were identified over the Amira project.

The fold closure of the Ulundi syncline is the first drill target to be tested by surface diamond drilling with a budget
of £0.20 million during the 2012 financial year. Two diamond drill holes, each to a depth of 1,000 metres, are planned
for the next year. If these holes confirm the geological model and present evidence for gold mineralising fluid flow,
then follow-up diamond drilling and RC drilling will be carried out.

Harper Tailings Dam, Barberton

Pan African Resources PLC Annual Report 2011

Manica gold project,
Mozambique
Geographic Location

TANZANIA

Lake Malawi

ZAIRE

ZAMBIA

MALAWI

Pemba

Lake Cahora
Bassa

Tete

Zambezi

Harare

Manica Project

Quelimane

ZIMBABWE

Mutare

Chimoio

Beira

BOTSWANA

SOUTH AFRICA

Inhambane

Xai-Xai

Maputo

LEGEND:
Rivers
Lakes
Cities
Roads
Railway

SWAZILAND

600km

Project Summary

Name of project

The Manica gold project

Location

Status

Manica Province (Mozambique)

Scoping study (metallurgical test at pre-feasibility level)

Holding Company

Explorator Limitada

Controlling Company

Pan African (100% ownership)

Geological setting

Sediments and metavolcanics within the Odzi-Mutare-Manica greenstone belt

Product

Production estimate*

Gold

Open Pit

Approximately 50,000oz

Underground

Approximately 100,000oz

Estimated capital cost

USD 150 to USD180 million

Extraction method

LOM

Key management

Based on an optimised open pit mine design followed by underground mining,
applying a sublevel open stoping methodology. The project team is currently
investigating the viability of an alternative processing route including BIOX®
and ultrafine grind.

Scoping design indicates 16 years at 100koz gold per annum (open pit and
underground mining option). The open pit operation is expected to have an
8 year LOM.

Project Manager

Craig Hutton

Metallurgical Consultant Graeme Farr

* Still at Scoping level of design.

Pan African Resources PLC Annual Report 2011

Project summary

Exploration Licence converted to Mining Licence on 30 March 2011, this licence is valid for 25 years and is
renewable for a further 25 years.

In May 2011 Pan African declared a revised resource of 2.97Moz at 1.83 g/t.

Key Events 2011

Date completed

Cost

Mine design Oxide Study

December 2010

£0.05 million

Metallurgical Design

December 2010

£0.11 million

Open Pit plus underground

December 2010

£0.05 million

Metallurgical Review

December 2010

£0.01 million

Mineral Resource Modelling

May 2011

£0.02 million

Strategic review

It is the intent of the board to list the Manica project as a separate exploration entity on an international exchange
in Q3 / Q4 of the 2012 financial year, subject to market conditions and investor sentiment. The Company believes
this approach will not only fast track development, but will result in optimum returns for shareholders.

Pan African Resources PLC Annual Report 2011

“Pan African Resources’
CSI has opened
doors for many
hopeless young people
around Barberton
“I Love the way (Pan African’s)
and its surrounding
growing every day.
communities.”
I can see the growth, the big
improvement and the way
it has brought me up from a
cleaner to an office secretary
. I also appreciate the people
who work here for this
company they teach me things
every day. And I know one day
I will be in a high position. “

Pan African Resources PLC Annual Report 2011

Fortunate Ngomane
Corporate and Social Investment

What Fortunate has to say:

“Pan African Resources’ CSI has opened doors for many hopeless young

people around Barberton and its surrounding communities.

A community skills development centre was established in Barberton’s

Sinqobile Township with the aim of developing skills in welding, sewing,

bread baking and brick making. All skills developed at the centre are free to

community members.

Furthermore, Pan African Resources is busy with the construction of a primary

school at the Sinqobile Township, which will accommodate 950 children, with

the hope of providing better educational facilities to previously disadvantaged

children.

Pan African further assists local community organisations, such as the Sinqobile

Vegetable Project. This project is currently operating on land donated by

Barberton Mines, and receives technical and business mentoring regularly, also

marketing and financial assistance when required.”

Pan African Resources PLC Annual Report 2011

New Business

Strategy

As part of its growth strategy, Pan African adopted a two tier approach for the 2011 financial year. Firstly, it focused
on the organic growth of its own assets. Secondly, it focused on external growth by identifying and evaluating mainly
gold and platinum projects in South 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).

Main target areas are the known Wits and Greenstone-type gold deposits in South Africa, with further focus on
projects holding a robust resource/reserve base that can be developed and mined at low-cost, yielding high margins
and with significant opportunity for long-term growth.

Process

Targets are identified on the basis of grade, audited ounces in the ground, size and type of orebody, and mineability.
Other filters applied include economic and political risk as well as level of services and infrastructure.

Once a project has passed through the strategic filters, a desktop study is carried out, culminating in a financial
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 Financial
Model)

Filter 2 ‡

Detailed
Review

(Technical &
Financial)

R e c o m m e n d a t i on

† Filter 1: Type/size/grade of orebody; economic/political risk; infrastructure/services

‡ Filter 2: NPV; IRR; other financial parameters

New Business Focus

The focus during the 2011 financial year was organic growth projects as well as gold and platinum group metal
projects in South Africa.

Three acquisition opportunities were reviewed during the year. However, the major focus was on progressing the
Bramber Tailings Retreatment Project, the identification and evaluation of other potential surface sources at the
Group’s Barberton Mines and completing the Manica feasibility, all of which are described in the CEO’s Review.

Pan African Resources PLC Annual Report 2011

Mineral Resources Management

Pan African’s MRM philosophy is that a detailed understanding of the orebody undoubtedly contributes to the
optimal extraction of the core asset for our mining operations, viz: The Orebody. From this standpoint it is clear
that the ‘Orebody dictates’ through its various characteristics. Within the accepted MRM framework, Geological,
Survey and Mine planning functions on the operations are focused toward maximising the value of the residing
orebodies.

Strategy

The key operational focus is to integrate all intellectual capital and technical data, in order to enhance the Mineral
Resource confidence and volume which should ultimately result in an improved LOM. The MRM framework
developed and implemented, hinges on integrated areas of responsibility, necessitating a common approach and
leading to a team based interaction.

In addition to this framework, the Group uses 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 financial returns are maximised. The optimiser utilises alternative methodology to existing pay-limit
methodology and offers a number of advantages, namely:

• The unique statistical properties of the specific ore body is taken into account,
•
•
•

It eliminates the need for adjustments and unpay mining,
It allows for a scientific 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.

•

During the 2012 financial year, Pan African will continue its drive towards MRM excellence through improving
geological understanding, data recording quality and concentrate on ensuring sustainability through appropriately
focused exploration targets.

For the purpose of this report, financial units used on the operations are not converted to £. For certain calculations
$/oz was converted to ZAR/kg for the use on the operations.

Pan African Resources PLC Annual Report 2011

Barberton Mines (Pty) Ltd

Barberton Mines Resource and Reserve Summary: Total Mine

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Pan African Resources PLC Annual Report 2011

During the 2011 financial year the following significant changes to resources occurred:

• A SAMREC compliant evaluation of the Bramber slimes dam was completed. The dam was drilled on a 20

metre by 20 metre grid, sampled and evaluated by an independent evaluator.

• The dam contains 3,128,000 tonnes at 1.47g/t, adding 147,000oz to the overall resource.
• The Royal Sheba resource was reviewed and reduced along geological constraints. This reduced the volume

•

and increased the grade.
Based on a Concept Study of the dormant Royal Sheba mine by Turgis Mining Consultants, Royal Sheba was
moved forward in the LOM plan and the resource was converted to reserve.

• The Clutha section of New Consort mine that last worked in 1997 was moved forward in the LOM plan and

converted to resource.

• Deep drilling at Fairview mine resulted in significant extension to the high grade MRC indicated resource.

As a result of the above the Barberton Mines Mineral Resource inventory posted the following changes for 2011:

Increased Barberton Mines Mineral Reserve by 336,000oz contained gold,

•
• Decreased Barberton Mines Measured Mineral Resource by 30,000oz contained gold,
•
•

Increased Barberton Mines Indicated Mineral Resource by 482,000oz contained gold, and
Increased Barberton Mines Inferred Mineral Resource by 85,000oz contained gold.

Mineral Resources and Ore Reserves 2011 - General

As at 30 June 2011, Barberton Mines reported a Mineral Reserve of 998,000oz and Mineral Resource of 2,692,000oz
contained gold. The Measured and Indicated Mineral Resources are inclusive of those Resources modified 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$1,333.00/oz was used for the conversion of Mineral Resources to ore reserves at an exchange
rate of R7.00/US$ resulting in a gold price of R300,000/kg.

Summary comment on Mineral Resource movement

Year-on-year, Barberton Mines Mineral Resources had a positive variance of 312,000oz contained gold. This was
mainly as a result of confirmed depth extensions on the Fairview lower levels and the evaluation of the Bramber
slimes dam.

Summary comment on Mineral Reserve movement

There was a year-on-year positive variance of 336,000oz with respect to the Mineral Reserves. The increase can be
ascribed to the conversion of Royal Sheba mine resource to reserve. As indicated in the table below, Barberton
Mines’ ore reserves as at 30 June 2011 reflected a year-on-year depletion of 71,000oz.

Pan African Resources PLC Annual Report 2011

Mineral Resource reconciliation: 2010 to 2011

Gold (Kg)

Gold (Koz)

Balance as at March 2010

74,026

2,379

Mined during 2011

Addition

2,223

11,939

383

Balance as at March 2011

83,742

2,692

Variance

9,717

3,124

Mineral Reserve reconciliation: 2010 to 2011

Gold (Kg)

Gold (Koz)

Balance as at March 2010

Mined during 2010

Addition

Balance as at March 2011

Variance

Mineral Reserve Sensitivity

20,572

2,647

13,118

31,043

10,471

661

421

998

336

The graph below illustrates ore reserve sensitivities to a changing gold price below and above ZAR275,000/kg.

1,200

1,000

)
0
0
0
(

d
o
g

z
O

800

600

400

200

R 250 000

R 275 000

R 300 000

R 325 000

R 350 000

R 375 000

R400 000

gold oz (000)

g/t

)
t
/
g
(

e
d
a
r
G

Pan African Resources PLC Annual Report 2011

Grade Tonnage Curves

Reserves metal figures are fully inclusive of all mining dilutions and gold losses, and are reported as mill delivered
tonnes and recovered grades.

Sheba

120,000

100,000

80,000

60,000

40,000

20,000

s
e
n
n
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50
40
Paylimit Grade (g/t)

Fairview
2,500,000

2,000,000

1,500,000

1,000,000

s
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n
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500,000

t
/
g

New Consort

600,000

500,000

400,000

300,000

200,000

s
e
n
n
o
T

100,000

t
/
g

20
Paylimit Grade (g/t)

Cumulative Face Tonnes

Cumulative Face Grade

Pan African Resources PLC Annual Report 2011

Barberton Mines Cut-off and Average Grades 2012 Business Plan

The Mineral Resource Optimiser tool was 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 ore body can be mined such that the total profits, under a specified
set of mining parameters, are maximised. This calculation was performed for each major area.

Cut-off grades are determined using the optimiser program that requires the following as inputs:

• The database inventory of all Mineral Resource blocks,
• An assumed gold price – ZAR320,000/kg,
•
Planned production rates for each mine,
• Mine Call Factor (‘MCF’),
•
•

Plant Recovery Factor (‘PRF’), and
Planned cash operating costs and other efficiency factors are calculated using historical achievements as a
baseline.

Optimiser cut-off and average grades currently used are tabled below:

Fairview

Sheba

New
Consort

Total Barberton
Mines

Optimal Cut-offs

Marginal Cut-offs

Average Mining Grade (face) (Optimal)

Average Mining Grade (head) (Optimal)

Marginal Tonnes (25% profit margin)

MCF

PRF

g/t

Gold Price

ZAR/g

Barberton: cut off

Average Mining Grade (face)

Average Mining Grade (head)

Paylimits @ ZAR320/g

Reserve Grade

g/t

6.89

1.70

16.65

13.57

38.70

81.50

90.90

320

2.0

5.90

1.60

13.76

12.52

56.60

100.00

92.70

320

2.0

11.86

8.09

9.67

6.91

13.35

7.36

5.36

4.98

8.30

2.27

13.11

11.80

54.80

90.00

90.50

320

2.0

8.82

7.93

8.0

6.64

7.04

1.60

16.09

13.31

48.70

90.90

91.00

320

2.0

10.36

9.42

6.55

8.10

Pan African Resources PLC Annual Report 2011

Barberton 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 2012 financial business plan are as
follows:

New Consort Section

Pay-limit

g/t

Sheba Section

6.89

PC#

MMR Section

New Consort Total

8.70

14.36

8.79

Above Adit Level

MRC & ZK Shafts

Sheba Total

Pay-limit

g/t

6.83

5.71

5.77

Fairview Section

Pay-limit

g/t

6.00

7.92

Fairview Total

7.71

Mineral Resource to Reserve Modifying factors

The table below reflects historical achievements for Mineral Reserve Block Factor, Overall Plant Recovery Factor
and MCF. Modifying factors used for converting Resources to Reserves and for the mine plan are deduced from
these historical achievements.

Resource to Reserve modifying factors applied

New Consort

Efficiencies & Factors

Current

Historical

11/12 Plan

10/11

09/10

08/09

07/08

06/07

05/06

04/05

03/04

02/03

01/02

Block Factor

Overall Recovery

Mine Call Factor

100.0

114.4

125.0

122.2

97.5

69.9

97.3

84.5

66.3

100.2

85.2

89.8

89.1

89.7

91.6

91.9

92.4

93.5

93.0

90.3

89.3

91.7

90.0

99.5

89.3

83.4

86.1

99.8

107.8

86.2

85.9

91.7

86.2

Pan African Resources PLC Annual Report 2011

Fairview

Efficiencies & Factors

Block Factor

Overall Recovery

Mine Call Factor

Sheba

Efficiencies & Factors

Block Factor

Overall Recovery

Mine Call Factor

Current

Historical

11/12 Plan

10/11

09/10

08/09

07/08

06/07

05/06

04/05

03/04

02/03

01/02

100.0

94.3

120.5

101.6

117.5

90.4

114.3

110.8

95.0

88.7

91.9

90.9

90.2

90.9

90.8

90.5

90.9

90.3

88.3

89.2

90.4

81.5

84.8

90.0

80.1

84.0

82.1

82.5

85.7

79.4

90.6

98.7

Current

Historical

11/12 Plan

10/11

09/10

08/09

07/08

06/07

05/06

04/05

03/04

02/03

01/02

91.0

86.9

107.6

112.4

110.9

109.9

94.8

100.5

104.0

123.2

92.6

92.0

91.7

92.8

92.7

92.6

93.0

93.7

92.8

92.3

91.3

100.0

125.9

126.3

109.8

90.1

86.1

92.3

99.9

111.8

99.7

98.0

During the past year 1,946.7 metres of reef development at an average grade of 3.90g/t and 4,399.8 metres of waste
development were completed, of this development 3,547 metres was geologically mapped.

Barberton Mines collared 228 underground boreholes during the year and drilled 15,681 metres of core. A total of
84 significant intersections were returned, of which, 45 were above the pay-limit and a further 39 showed marginal
grade intersections. The average value of all 45 economic intersections amounts to 42.56g/t over a width of 176
centimetres.

The specific gravity used during Mineral Resource modelling is as follows:
•

Barberton Mines

Fairview mine – 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

Gold Pour, Fairview Mine

Pan African Resources PLC Annual Report 2011

The following are the most significant results obtained during the year:

Mine

Section

Borehole name

Width
(centimetre)

Grade
(g/t)

Exploration
Bullion – 45 level

Exploration 37
Inter-level

Depth Extension
exploration – No.
3 Shaft orebody

MMR deep footwall
exploration

Resource definition
of stock work
orebody

45H50

45H36

37XC-9

37XC-8

3#CT-2

3#DEC-23

3#DEC-6

20XC-5

20XC-3

24-20ST07

24-20ST04

New Consort

Sheba

Fairview

Depth extension
exploration of the
MRC orebody

Bh 5816

Bh 5803

100

320

100

400

100

282

297

296

691

693

62.90

27.08

220.42

24.38

55.76

27.08

70.28

55.55

224.66

60.63

58.69

56.38

120.03

65.83

Pan African Resources PLC Annual Report 2011

Barberton Mines – the way forward with MRM

MRM initiatives introduced during 2011 are adding significant value to the Group.

Focus for 2012 financial year will be the following:

• Access historically mined out areas and remnant resource blocks to produce and explore in these areas,
•

Focus exploration on continuing to define short term mining blocks and converting these Indicated and Inferred
Mineral Resources to the higher confidence Measured category,

• Continue a longer term focus on extending and exploring the extensions of ore-bodies on all mines, and
•

Focus near mine exploration on target generation and testing targets defined by the recently flown airborne
geophysical survey on the prospecting area to the south of Fairview mine (the Amira project):

– Diamond drilling is planned on the geologically modelled Ulundi Syncline fold closure on the prospect

–

licence area.
The eastern strike extension of the Zwartkoppie Formation along the southern limb of the Ulundi
Syncline is targeted for RC drilling during this year.

The above initiatives will not only add to the Mineral Resource base and assist the mine in improving mining
flexibility, but if the surface drilling is successful it could result in a production increase for Barberton in the medium
term.

Gold Pour, Fairvew Mine

Pan African Resources PLC Annual Report 2011

Mineral Reporting Code

Pan African defines its Mineral Resources/Reserves in line with the SAMREC Code and its definitions.

Mineral Resource classification structure applied by the Group is outlined below:

RESOURCE

(reported as in situ mineral estimates)

Modifying

factors *

RESERVE

(reported as mineable production estimates)

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Probable

Inferred

* Consideration of mining, metallurgical, economic, marketing, legal, environmental, social and governmental factors

Mineral Resources definitions (according to SAMREC code)

Inferred Mineral Resource:

Is part of a Mineral Resource for which tonnage, grade and mineral content can be estimated with a low level of
confidence. It is inferred from geological evidence and sampling, and assumed but not verified 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.

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 confidence. 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 confirm geological and/or grade continuity but
are spaced closely enough for continuity to be assumed.

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 confidence. 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 confirm geological and grade continuity.

Pan African Resources PLC Annual Report 2011

Mineral Reserve definitions (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 modification by, realistically assumed mining,
metallurgical, economic, marketing, legal, environmental, social and governmental factors (the modifying factors).
Such modifying factors must be disclosed.

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 confidence 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 modification by, realistically assumed mining, metallurgical, economic, marketing, legal,
environmental, social and governmental factors. Such modifying factors must be disclosed.

Proved ore reserve:

Is the economically mineable material derived from a Measured Resource. It is estimated with a high level of
confidence. 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 modification by, realistically
assumed mining, metallurgical, economic, marketing, legal, environmental, social and governmental factors. Such
modifying factors must be disclosed.

Pan African utilises various external consultants in modelling, and auditing, thereby ensuring 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 affiliated with the South African Council of Natural Scientists
(‘SACNAS’).

Barberton Mines utilises classical evaluation techniques in its Mineral Resource modelling. The mine has identified
certain areas where geological continuity and physical geological character of the orebody allows for geostatistical
modelling and these methods are applied in these instances.

Frans Chadwick
12 September 2011

Pan African Resources PLC Annual Report 2011

The following tables represent a summary of the Group’s Resources and Reserve Statements:

Manica Resource Summary

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Pan African Resources PLC Annual Report 2011

Phoenix Platinum Resource and Reserve Estimate

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Pan African Resources PLC Annual Report 2011

Pan African Combined Resource and Reserve Conversion Table

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Pan African Resources PLC Annual Report 2011

“Before this course, the ladies
were jobless and hopeless.”

Pan African Resources PLC Annual Report 2011

Bread Making Course
Sinqobile Life Skills Centre

The Story:

This 15 day course is facilitated by Melody Madlala. The participants in this

course are accepted on “Commitment” which means that they pay no money

but have to give their commitment as if they were fully paying students.

Melody says that before this course, the ladies were jobless with no marketable

skills. Once they completed this course, they were able to provide food for

their families as well as possibly get a job in a bakery or the like.

Any surplus goods baked are donated to the nursery school in Sinqobile

township.

Pan African Resources PLC Annual Report 2011

Sustainability

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Pan African Resources PLC Annual Report 2011

The Pan African Sustainability Philosophy

There are so many expert opinions in the marketplace about the meaning of sustainability, Pan African takes
cognisance of them, but ultimately we follow our own view, which is one of self-regulation. Government has
set targets for the mining industry in terms of social development, Broad Based Black Economic Empowerment
(‘BBBEE’) and community upliftment. At Pan African we strive to not only meet these criteria but to exceed them.

We do not believe in merely ticking the correct boxes, we believe in creating a community where opportunity and
development is available to all in the surrounding areas of our projects, especially in the Barberton area where
unemployment is at a level of more than 60%. Pan African believes in uplifting the community in a sustainable
manner, which means that we provide funding and support to our community projects with the goal that they will
one day become fully sustainable, profit organisations in their own right. An example of this belief is the Umjindi
Jewellery Project.

Sustainability Contacts

The sustainability panel was made up of the following people, who would gladly answer any further questions that
you may have:

Thandeka Ncube (Chairperson) +27 (0) 11 305 8900
Andre van den Bergh
Nicole Spruijt

+27 (0) 011 243 2900
+27 (0) 11 243 2900

tncube@shanduka.co.za
andre@paf.co.za
nicole@paf.co.za

Sub-Committees

Sustainability Report Committee

Thandeka Ncube – Chairperson
Andre van den Bergh
Nicole Spruijt

Transformation Committee

Casper Strydom
Ron Holding
Jan Nelson
Andre van den Bergh
Thandeka Ncube
Busi Sitole

With special thanks to:

Fortunate Ngomane
Gugu Dlamini

Pan African Resources PLC Annual Report 2011

At Pan African, we believe

that our employees and the

communities surrounding

our operations are the

heart of the business.

Dear Stakeholders,

In line with building a profitable and sustainable mining Group, two of our key focus areas are our people and our
community. At Pan African, we believe that our employees and the communities surrounding our operations are the
heart of the business. We therefore strive to conduct our business in a manner that promotes a culture of learning
and development for our people and the community. The community of Barberton has an unemployment rate of
more than 60%, whilst the mine produces high grade gold and is the single largest employer for the area. With such
a high unemployment rate the surrounding community is a victim of socio-economic challenges that breed in such
unfavourable conditions. It is with this background that we develop programmes seeking to address and combat the
socio-economic challenges rampant in the community.

The programmes we discuss in detail are in response to, and in line with, the needs highlighted by our stakeholders.
We are especially proud of the skills centre, where the youth can find a place to improve and develop their skills
making them employable at the mine and beyond. We are also very proud of the Sinqobile Vegetable Project where
unemployed women are producing vegetables that they market to nearby food retailers. Through this project these
women are able to feed their families, where in most cases they are heads of households.

We recognise that our programmes in sustainability need to reach out to more segments of the community and in
the coming financial year, the strategy is to develop the projects in partnership with other rural development projects
currently being implemented by Government. This will ensure the impact we seek to make in our community and
with our people is sustainable.

Thandeka Ncube
Executive: Transformation

Pan African Resources PLC Annual Report 2011

Sustainability Objectives Achieved

No.

Item

Achieved

Comment

Complete the
implementation
of a SHEC risk-
based management
system by the second
quarter of 2011.

Focus on the
improvement and
alignment of SHEC
training material.

Yes

SHEC system has been implemented and is operational.

On target.

Training material
loaded onto the
SHEC system.
Ongoing
development
and maintenance
of training
development.

ASTER® has been constructed and is operating at New
Consort Mine. ASTER® stands for Activated Sludge Tailings
Effluent Remediation. The slimes dam water contains
thiocyanate which is formed by the interaction of free
cyanide with sulphur. The presence of both cyanide and
thiocyanate in the tailings water prevents the recycling of
this water back to the process plant.
This means that ‘clean water’ has to be taken in to the plant
to be used in the metallurgical process. This clean water is
then contaminated by the metallurgical process and cannot
be discharged downstream into the river. What is achieved
by the ASTER® process is that the contaminated water
from the tailings facility is ‘cleaned’ through a biological
degradation process of the contaminants: thiocyanate and
cyanide. The water is then suitable to be reused in the
metallurgical process.

Limited clean water is then diverted to the metallurgical
process which means that the contamination of clean water
resources has been eliminated.

The Sheba water licence is expected to be issued by Q2 of
the 2012 financial year.
The Fairview and New Consort licence conditions are
onerous and the mine is currently in discussions with the
Department of Water Affairs and Forestry (‘DWAF’) to
address compliance matters.

Installed and feeding into the 308KW Substation
in the village. It supplies 960KW.
Achieving the energy supplies expected.

Complete the first water
purification plant.

Yes

Secure water licences
were submitted to the
authorities in 2009.

Received Fairview
and New Consort
Mines water
licences

Yes

Yes.

Evaluate the feasibility
of a solar power
plant at Barberton.

Consolidate our SHEC
initiatives into a 5
year plan with clear
outcomes, objectives
and accountability.

Pan African Resources PLC Annual Report 2011

Governance and Risk Management

No. Risk Source

Risk Impact

Action required to counter risk

Mining flexibility at
Fairview (50% of
gold produced from
one stope - limited
access platforms).

Reduced gold output and
reduction in grade of Barberton
Mines mining mix (4g/t impact
on average mining grade).

•

Increase mining platforms from one to
three in Q2 the 2012 financial year.
Increase diamond drilling ahead of
development to counter stop-start of
stopes.

AMCU impact at
Fairview on top of a
‘tough’ mine plan.

50% of Fairview employees
strike for two to three weeks
(loss of production shifts).

Continued low-grade
impact from New
Consort (non-profit
centre-costs).

Non-delivery of gold that
puts pressure on ‘make-up’
from Sheba and Fairview.

VTN - contract
sweepings (account for
20% of BARBERTON
MINES production).

Underperformance of
high yield delivery;
Management focus,
Inventory build-up,
Payment margins squeezed.

• Capital expenditure to focus on 2 Shaft

and 3 Shaft at Fairview.

• Grow surface stockpiles from Fairview and
New Consort old low-grade stockpiles, as
well as Eagles Nest.
Barberton to interdict AMCU should a
certificate be issued by the Council for
Conciliation, Mediation and Arbitration
(CCMA).

•

• Continue with the aggressive development

•

and exploration programme during 2012.
Investigate targets in the 3 and 7 Shaft
areas and bring them to account.

Focus management’s attention on VTN
performance.

• Re-evaluate the sweeping and vamping
inventories that are available for VTN and
the cost thereof.

• Apply

the MRM strategy

to VTN’s

operations.

BIOX® recoveries.

Crusher requires replacement -
down-time & oil flotation plant.

• Have complete crusher on stand-by.

New tailings facility
at Barberton
Mines awaiting
DMR approval.

Mine can be stopped.

• Continuous

follow-up with DMR to
approve Environmental Impact Assessment
(‘EIA’).

Group growth profile.

Sustaining revenue
build-up post 2018.

• Require strategic asset acquisition.

Group cash costs.

Strengthening of ZAR to US$.

• Develop corporate strategy.

Unemployment
at >60% in the
area around
Barberton Mines.

Increase of criminal activity and
social demand on asset seizure.

• More focused on corporate social and
development programme - create more
employment opportunities.

Concept of
nationalisation.

New government approach
in tax, dust levy and
royalty structures.

•

Exco & board strategic workshop with
respect to stakeholder risk required.

Pan African Resources PLC Annual Report 2011

Stakeholders

Broad Based Black Economic Empowerment (‘BBBEE’) or Black Economic Empowerment (‘BEE’)

The term ‘BEE’ or ‘BBBEE’ is used a great deal in South Africa, but what does it really mean? Pan African believes it
means uplifting groups of the population previously excluded from full economic participation in the Country and
empowering these groups to actively contribute to the growth of the South African economy.

Pan African is committed to the principles and objectives of BBBEE and reports on its achievements based on the
BBBEE pillars below:

Ownership

Pan African has a valuable relationship with its BEE partner, Shanduka Resources via its wholly owned subsidiary,
Shanduka Gold. Shanduka owns 26% of the Group, but has a more active role than fulfilling government requirements
regarding BEE. Shanduka plays a vital role in bringing skills to the table of Pan African, for example our new
Executive: Finance, Busi Sitole is from the Shanduka arena, as is our Transformation expert, Thandeka Ncube. These
ladies bring a wealth of skills previously unattainable to Pan African. In addition to Thandeka and Busi, our board
has been restructured to accommodate increased Shanduka representation.

Human Resources Development and Employment Equity

The Group complies with both the Employment Equity Act and the Skills Development Act and is on track to meet
the Mining Charter scorecard of 40% Historically Disadvantaged South Africans representation at senior and top
management at Barberton Mines.

Procurement and Enterprise Development

Pan African supports the development of Small and Medium Black owned Enterprises. At Barberton Mines, 34% of
the procurement budget was spent with Black enterprises.

Community Development and Corporate Social Investment

Detail of the community projects underway is in the table on page 84.

Communication

Pan African has identified two groups of stakeholders: internal stakeholders (employees, contractors and others)
and external (investors, media, suppliers and others).

In line with the different needs of each group, Pan African has developed two distinct communication strategies.

Internal Communications:

A formalised Exco was created during the year under review, with the ultimate goal of aligning the Pan African
strategy with the team’s passions. A number of conversations were held and the outcomes were illuminating.

Straight Talk – newsletter
A quarterly newsletter is distributed to the management at Barberton Mines and is then disseminated to each
branch of the Group.

Quarterly Roadshow
In conjunction with the dissemination of the quarterly newsletter, Straight Talk, Jan Nelson presents this newsletter
to employees from a shift boss level upwards. Any messages are then relayed from the shift bosses downwards.

Pan African Resources PLC Annual Report 2011

External Communications:

Press Releases
Regulatory press releases are disseminated through SENS (JSE) and PRN (AIM).

Roadshows
Jan Nelson is often on the road talking to investors in the USA, UK and Europe.

Investor Presentations
Bi-annual investor presentations are held to announce Pan African’s financial results.

Website
The Pan African website is updated according to AIM Rule 26 on a regular basis. The website is reworked annually.

Ad hoc
Other communication when required via email, telephone and post.

Safety, Health, Environment and Community (‘SHEC’)

Pan African strives to guard the health and safety of those who work at or visit our operations. We remain
committed to protecting the environment and preventing pollution whilst ensuring the wellbeing of the communities
in which we operate. Our approach is to be reverent of local laws in this regard.

Safety and Health

During the year a Risk Management framework was implemented providing two specific functional levels, i.e. a
strategic and operational function. The strategic function focuses on risk management of international and national
concerns, inclusive of legal and regulatory requirements. We are of the opinion that this management system is
delivering the intended outputs.

The continued success of the SHEC system’s integrity is highly dependent on the undivided attention of the different
role players - operational management to ensure that information is updated continuously and as correct as possible,
while corporate management accept the responsibility to ensure punctual compliance on all respects.

In the execution of our integrated Safety and Health Management System we will continue to:

•

Identify the hazards that may negatively affect the safety and health of our people, the environment and the
community,
Enforce a high standard for physical conditions in the workplace and at our sites through the active participation
of all role players, internal audits, planned inspections and enthusiastic co-operation auditing to be conducted
in detail to ensure all aspects of the working place is inspected,

• Maintain the mindset of zero tolerance towards sub standard work, unsafe conditions and acts by focusing on

the reporting of hazards to ensure an effective safety management system for all,
Prompt our people to accept and maintain healthy and safe lifestyles,

•
• Maintain a positive attitude towards our commitment to eliminate sub standard acts or conditions by being

positive mentors and role players, and

• At all times maintain and provide world-class medical care, social and health guidance to support our people

should the need arise.

Pan African Resources PLC Annual Report 2011

Environment

Environmental incidents.

2011

2010

Level 1 - Non conformance, but with no impact to the environment.

Level 2 - Limited impact and non ongoing incident or when the
intervention was effective.

Level 3 - Ongoing or incident that could not be contained, but not
seriously affecting the environment.

Level 4 - Non compliance that result in medium-term impact, but not
have an operational-threatening event (usually that is where reporting
to Government departments will start).

Level 5 - Serious events with long term impacts and /or with live
threatening impacts for communities and the environment.

The level 4 incident was reported to the Department of Water Affairs. This incident was at Fairview, when
the return water dam overflowed in December 2010 during heavy rains caused by a cloud burst. The incident
occurred before the commissioning of the new return water dams of the tailings dam extension. The new clear
water dam capacity is such that it should prevent a recurrence.

Pan African Resources PLC Annual Report 2011

Community

Community Development and Corporate Social Investment for the 2011 financial year

Description

Milestones achieved

Milestones
not achieved

Planned milestones
2012 financial year

Amount
spent

Sinqobile Life Skills Centre

•

Business
development
in bread
baking and
sewing
courses.
• Training in

brick making.

Sinqobile Life Skills
Centre is situated in
the Sinqobile township,
four kilometres from
Fairview Mine.

The
training centre
in
provides
training
welding, bread baking,
and
brick making
sewing. The
centre
also accommodates a
local home based care
facility / soup kitchen
that provides meals
on a daily basis to the
local HIV/AIDS and TB
patients and orphans.

• The Executive Mayor
officially launched
the centre on 15
October 2010.

• The centre
has trained:
– 22 local youths
of both genders
in arc welding,
– 15 women in

bread baking and

– 16 women
in sewing.

•

Provision of meals on
a daily basis to the
orphans and TB and
HIV/ AIDS patients.
Establishment and
registration of a
formal business
(welding cooperative)
that supplies quality
steel window
frames to the newly
established Sinqobile
Primary School.

• Quality

£0.03 million

dressmaking
course in boiler
maker suits
(overalls) as
per the South
African Bureau
of Standards
(‘SABS’) standards,
entrepreneurship
assessment
and business
development,
and supply (job
creation) of
quality boiler
maker suits
to Barberton
Mines and other
surrounding
companies.
Brick making
training and
production as
per the SABS
standards,
business
development
and marketing.

•

Pan African Resources PLC Annual Report 2011

Description

Milestones achieved

Milestones
not achieved

Planned milestones
2012 financial year

Amount
spent

Sinqobile Vegetable Project

£0.02 million

•

Business
management
and mentoring.
Establishment of
a new agricultural
project at
Mlambongwane.

• Commitment
from seven
other
beneficiaries.
• Opening of

bank account.
• Transferring
of business
management
skills to
beneficiaries.

This project is also
situated at Sinqobile
township. It produces
fresh vegetables
and provides the
produce to local
supermarkets, schools,
and households.
The project has
14 beneficiaries.

• Registration of a

•

primary agricultural
cooperative.
Provision of two
hectare piece of land.
Provision of seedlings
and seeds.
Provision of water
and electricity.
Provision of
mentoring and
monitoring daily.

• Marketing

and business
management skills.
• Adult Basic Education
and Training (‘ABET’)
classes to three
beneficiaries.

Pan African Resources PLC Annual Report 2011

Description

Milestones achieved

Milestones
not achieved

Planned milestones
2012 financial year

Amount
spent

Umjindi Jewellery Project

Increased number
of learners.

Jewellery export to
various countries
across Europe.

£0.11 million

The project is situated
in Barberton and
trains young people in
jewellery manufacture.

The following
targets were met:
• Renovations and
construction as
per the required
standards.
• Marketing and

sales through local
exhibitions.

• Acquisition of funds
from Department
of Economic
Development,
mainly for expansion
of security and
display cabinets.
Implementation
of the Jacaranda
Tree project.

•

Pan African Resources PLC Annual Report 2011

Description

Milestones achieved

Milestones
not achieved

Planned milestones
2012 financial year

Amount
spent

Sinqobile Primary School

A new primary school
to be constructed
at Sinqobile
township which will
accommodate children
that are currently
studying at Fairview
Primary, New Consort
Primary, Dixie Farm
Primary, Kaap Vallei
Primary and Khanyisa
Primary school.

Social Development

These are projects
originating as a
result of an intensive
consultation process
to identify specific
needs within our
adjacent communities.

•
•
•
•

Site clearance.
Fencing.
Land surveying.
Finalisation of
building plans.

Construction
of first phase.

Construction of first
phase which includes
eight classrooms,
one ablution block,
a Grade R block
and a sports field.

£0.07 million

Implementation of
socio-economic
programmes in
our community.

Successful
implementation
of the Barberton
Transformation Trust.

£0.08 million

•

Provision of meals
to five home based
care facilities.
Establishment of a
new home based
care facility at
Mlambongwane.
• Donation to St John
Mission for the
housing of HIV/AIDS
patients and orphans.

• Donation to Kohin

group (life orientation
coaches in local
primary schools).
• Donation of building
material to two
local schools – for
the establishment
of soup kitchens.

• Donation of

•

building material
to local churches
infrastructure
development.
Establishment of
the Barberton
Transformation Trust.
Supply of school
uniforms and food
parcels to 100 local
Aids orphans.
Financial contribution
to the local school
athletics programme.
• Donation of meals to
local winter classes
for the Grade 12’s.

•

Pan African Resources PLC Annual Report 2011

Barberton Transformation Trust

The charter defines a ‘Social Fund’ as:

A trust fund that provides financing for investments targeted at meeting the needs of poor and vulnerable

communities as informed by commitments made by companies in terms of their social and labour plans.

It is therefore evident that the charter requires mining companies, either individually or collectively, to establish a
trust fund into which multinational suppliers of capital goods can deposit their contributions.

Barberton Mines recently established the Barberton Transformation Trust (the ‘Trust’) with the explicit aim of
improving the quality of life of local communities around the mine through local economic development, job
creation and socio-economic development. In addition to its SLP obligations, Barberton Mines will provide some
ZAR4.0 million seed funding into the Trust for a range of developmental projects. At the same time the Trust is being
offered as a vehicle to suppliers of Barberton Mines for socio-economic and enterprise development projects. In
this manner the Trust aims to raise a further ZAR8.0 million for developmental projects in the area. The Trust has
been structured so that the contributions of suppliers will count towards their BBBEE Scorecards.

By increasing the pool of funding available for development, the Trust aims to undertake more projects than what
its own resources allow and in this way undertake larger, more sustainable projects. Presently the Trust is reviewing
its project portfolio and is interacting with suppliers.

Rehabilitation Provision

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 as well as pollution
control are made on an annual basis, based on the estimated LOM, 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 LOM.

The rehabilitation trust fund and rehabilitation provision balances as at 30 June 2011 were £3.0 million and £3.4
million respectively. In addition to this, the Group has issued a bank guarantee of £0.2 million in favour of the DMR
in the event available funds are not sufficient to cover the rehabilitation liability when it becomes due.

Biodiversity and land management.

The rehabilitation plan is focused on restoring disturbed areas by making use of the most natural methods possible,
such as:

• Kraal manure from a local farmer is used as organic matter to improve the quality of the soil,
•

Portulacaria Afra - common names: Porkbush, Spekboom - 328 trees of Portulacaria afra have been planted on
the footprints, 100 at the T-dump and 238 on the side slopes of Segalla Tailings dam. Recent research has shown
that this tree has an excellent ‘carbon sponge’ as it has the ability to absorb free carbon from the atmosphere
which is used to make plant tissue, and

• Coir Geotextile – is used for the TSF side slopes to minimise and prevent soil erosion.

Pan African Resources PLC Annual Report 2011

Solar Panels, Barberton Mines.

Pan African Resources PLC Annual Report 2011

Pan African’s Policies Regarding our Stakeholders

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 conflict 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.

• Assist in developing our colleagues and teams to become worthy team players and responsible South African

citizens.’

Monitoring of Ethical Performance

Visual campaigns have been launched to emphasise the importance of ethical behaviour in the Group. Ethical
performance is monitored on a quarterly basis through the CEO’s road shows and feedback sessions as well as the
Exco management reviews. Senior management is further rated on ethical behaviour on a regular basis. Policies
regarding procurement and other services further ensure that ethical behaviour is well understood and enforced.
The Group is not aware of any material non-compliance related to its internal code of ethics by directors and/or
senior employees.

Pan African Resources PLC Annual Report 2011

SHEC Policy

Pan African Resources PLC 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.
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 efficiency and natural resource consumption
Improving the use, re-use and recycling of materials
Protecting and restore natural biodiversity while reducing greenhouse gas emissions

• Understand the needs of our communities while developing support programmes to ensure its upliftment and

well-being.

• Assist communities in which we operate with health safeguarding programmes and sustainable wealth creating

initiatives.
Insist that suppliers and contractors provide us with products and services in support of our goals and objectives.

•

Pan African Resources PLC Annual Report 2011

Board of Directors

Non Executive Directors

Cyril Ramaphosa (59)
Non-Executive Chairman
Appointment date: 17 September 2009
Qualifications: BProc
Committees:
Nominations (Chairman)

Cyril Ramaphosa joined the board of South African Breweries Ltd 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.

Keith Spencer (61)
Lead independent, Non-Executive Deputy Chairman
Appointment date: 8 October 2007
Qualifications: BSc Eng (Mining)
Committees:
SHEC (Chairman)
Audit
Nominations

Keith is a qualified 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, first as a private consultant and after 2
years as a permanent member of the executive managing the Wakefield
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 (56)
Independent, Non-Executive Director
Appointment date: 9 September 2004
Qualifications: BCom (Hons), CTA
Committees:
Audit (Acting Chairman)
Remuneration
Rob has vast experience in mining, specialising in mining finance. He started
his career as a Chartered Accountant, becoming a partner of 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.

Pan African Resources PLC Annual Report 2011

Executive Directors

Jan Nelson (41)
Chief Executive Officer
Appointment date: 1 September 2005
Qualifications: 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 instrumental
in transforming the Group from an exploration Company to a gold mining
Group. He was the driver behind the acquisition of Barberton Mines and
was also instrumental in acquiring Phoenix Platinum, which will add further
revenue to the Group. He has built up a competent mining team that is
well positioned to grow the Group to a mid-tier precious metals producer.

Cobus Loots (33)
Financial Director
Appointment date: 26 August 2009
Qualifications: CA(SA), CFA® Charterholder

Cobus Loots is a principal with Shanduka Resources (Pty) Ltd. He is a
qualified Chartered Accountant (SA) and a CFA® Charterholder. He served
articles with Deloitte & Touche, and was an audit manager with the firm
before leaving in order to pursue a career in finance. Cobus’ experience
includes mining specific acquisitions and finance, as well as management of
both exploration and producing mineral assets.

Post Financial Year End

Phuti Malabie (40)
Non-Executive Director
Appointment date: 20 July 2011
Qualifications: BA Economics, MBA

Phuti is the CEO of Shanduka Group (Pty) Ltd. She joined Shanduka in 2004
as the Managing Director of Shanduka Energy (Pty) Ltd. She was previously
the head of the Project Finance South Africa unit at the Development Bank
of Southern Africa. Prior to that she was Vice President at Fieldstone, an
international firm specialising in the financing of infrastructure assets. Her
academic qualifications are a BA Economics from Rutgers University (State
University of New Jersey, USA) (1993) and an MBA from De Montfort
University in Leicester, UK (1996). She completed the Kennedy School of
Government Executive Education Programs’ Global Leadership and Public
Policy for the 21st Century’, at Harvard University in 2008. She is a board
member of a number of Shanduka Group investee companies.

Rowan Smith (46), Non-Executive Director
Appointment date: 17 September 2009
Date of Resignation: 20 July 2011

Pan African Resources PLC Annual Report 2011

Board of Directors (continued)

Board Purpose & Function
The Board’s purpose is to ensure corporate governance, risk, strategy and shareholder interests are priorities at all
times in order to fulfil their main role, which is overseeing the positive performance of the Group.

Except or 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 financial 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 and composition
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 financial year under review, the Board consisted of 6 members. Changes reflected
below are post year under review:

Resignations:
Mr Rowan Smith resigned on 20 July 2011.

Appointments:
Ms. Phuti Malabie was appointed to the board on 20 July 2011.

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

19 October
2010

17 February
2011

20 April 2011 Special Board

Meeting

11 August
2011*

Cyril Ramaphosa

Keith Spencer

Jan Nelson

Cobus Loots

Rowan Smith

Rob Still

Phuti Malabie

√

√ Attended

X did not attend

~ Appointment post financial year end

* Post financial year end

Chairman and CEO Roles
The roles of Chairman and Chief Executive Officer are held by two different people and are separate and distinct.
Although the Chairman, Cyril Ramaphosa, is not independent, the benefit of his experience and expertise is deemed
by the board to outweigh any potential conflict related to his position. In addition, the board has nominated Mr.
Keith Spencer as lead independent director, as required by the JSE.

Pan African Resources PLC Annual Report 2011

Board Induction & 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 Group makes resources available.

Access to Management & Independent Advice
The board members have access to the Executive Management of the Group 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-Assessment
The board performs a self-assessment on an annual basis, to ensure it has the requisite skills and experience to fulfil
its duties. Any weaknesses or inadequacies are addressed in a timely manner. In addition to this, each committee is
reviewed quarterly and should corrective measures be needed from time to time, this is effected immediately.

The board evaluates the composition and performance of sub-committees at each board meeting. Currently, the
Group Audit Committee comprises only two independent directors. A third independent director will be appointed
to the Audit Committee in the next year.

External Advisors
There are no external advisors that regularly attend board or other committee meetings.

Executive Directors
The executive directors all have employee contracts with the Group and are remunerated by the Company for
services performed (please refer to Note 32).

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.

Rotation of Directors
In accordance with the Group’s Articles of Association, one third of the board retire by rotation annually, and any
directors appointed between AGM’s need to be re-elected. This year, Keith Spencer, Cyril Ramaphosa and Phuti
Malabie will seek re-election at the forthcoming AGM.

Board Composition
The Group board composition has been considered to ensure that there is a clear balance of power and authority
at board level, such that no individual has unfettered powers of decision-making.

Pan African Resources PLC Annual Report 2011

Board of Directors (continued)

Board Committees
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 Group, and as such each committee is
required to report back to the board at each board meeting.

Directors

Appointed

Resigned

Meetings
Attended

Responsibilities

Audit Committee

Rob Still (Acting

18 August 2008

25 August 2010

•

Ensuring the financial performance, position

Chairman)

Keith Spencer

17 September 2009

17 February 2011

and prospects of the Group are properly

14 June 2011

monitored, controlled and reported.

5 September 2011

•

Meeting the auditors and reviewing their

reports relating to accounts and internal

controls.

25 August 2010

17 February 2011

14 June 2011

•

Reviewing the expertise and experience of

the Financial Director on an annual basis.

Reviewing the use of external auditors for

5 September 2011

non-audit purposes.

•

The Audit Committee has reviewed the expertise and experience of the Financial Director, and his expertise and experience are

considered appropriate for his position.

All non-audit services rendered by the Group’s external auditors during the year was approved by the Audit Committee.

As part of its functions, the Audit Committee regularly reviews work performed by the internal auditors on the Group’s systems

on internal control, and also requires reports from management on the effectiveness of controls. Where appropriate, executive

management’s performance evaluations and measures include requirements relating to the improvement of internal controls. No

weaknesses in financial control that are considered material and that resulted in actual material financial loss, fraud or material errors

during the year have been identified by the Audit Committee.

The audit committee believes the current financial control environment is adequate.

The audit committee has satisfied itself of the fact that the auditor was independent of the Group, the appropriateness of the financial

statements and the strength of the internal financial controls of the Group. The Audit Committee considers factors such as fees for

non-audit services performed, the relative size of the Pan African audit fee in relation to total fees received, as well as personal and other

relationships, when assessing the independence of the external auditors.

•

The audit committee believes that it has complied with its legal, regulatory or other responsibilities.

Remuneration Committee

Rob Still

(Chairman)

9 September 2004

20 October 2010

•

Reviewing

the performance of

the

20 April 2011

29 July 2011

executive

directors,

employees

and

executive management.

•

Determining remuneration and the basis of

the service agreements with due regard to

Rowan Smith

20 October 2009

20 July 2011

20 April 2011

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 Group’s share option

scheme.

Pan African Resources PLC Annual Report 2011

Directors

Appointed

Resigned

Meetings
Attended

Responsibilities

Nominations Committee

20 October 2009

Cyril

Ramaphosa

(Chairman)

19 October 2010

20 April 2011

•

Determining the slate of director nominees

for election to the board.

Identifying and recommending candidates

to fill vacancies occurring between

shareholder meetings.

•

Reviewing, evaluating and recommending

changes

the Group’s

corporate

governance guidelines.

•

Reviewing

the Group’s policies and

programme that relate to matters of

Keith Spencer

20 October 2009

19 October 2010

corporate citizenship,

including public

20 April 2011

issues of significance to the Group and its

stakeholders.

Rob Still

19 March 2010

19 October 2010

20 April 2011

SHEC Committee

Keith Spencer

12 October 2009

13 October 2010

•

Establishing a Safety, Health, Environment

(Chairman)

25 November 2010

and Community policy framework for the

16 February 2011

Group.

20 April 2011

•

Strategically

reviewing

the

safety

performance of all operations compared to

the policy framework.

Jan Nelson

12 October 2009

13 October 2010

•

Implement corrective measures when

25 November 2010

necessary to achieve the objectives of the

16 February 2011

policy framework.

Mario Gericke †

12 October 2009

11 November

13 October 2010

2010

Ron Holding †

12 October 2009

11 November

13 October 2010

2010

25 November 2010

16 February 2011

20 April 2011

Karishma

Sewpersad ‡

12 October 2009

31 July 2011

13 October 2010

† - Exco member, not board member

‡ - Consultant from Shanduka

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 financial 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.

Pan African Resources PLC Annual Report 2011

Executive Management Team - Pan African

Name

Age Qualification

Designation

Jan Nelson

Cobus Loots

Ron Holding

Pieter Wiese

Busi Sitole

Casper Strydom

BSc (Hons) Geology

Chief Executive Officer

BCom (Hons)
CA(SA)
CFA® Charterholder

Chief Financial Officer

NDT Mining Metalliferous (Wits)
AMM (SA)
MDP (UCT)

Executive: Mining

BSc (Hons) Geology

Executive: New Business

BCom (Hons)
CA (SA)

National Higher Diploma
Metalliferous Mining
Mine Managers Certificate

Executive: Finance

General Manager: Barberton Mines

Thandeka Ncube

BA Social Sciences
MBA

Executive: Transformation

Andre van den Bergh

Diploma in HR Management
Diploma in LR Management

Executive: Human Resources

Jenny Yates

Nicole Spruijt

BA Hons LLB

Executive: Legal

BA Communications
BA (Hons) Corporate Communications

Executive: Public Relations

Pan African Resources PLC Annual Report 2011

Management Team - Barberton Mines

Name

Age Qualification

Designation

Casper Strydom

Pierre Human

Hans Grobler

Neal Reynolds

Essie Esterhuizen

Jonathan Irons

National Higher Diploma
Metalliferous Mining
Mine Managers Certificate

General Manager

Mine Managers Certificate of
Competency

Manager: Mining

Government Certificate of
Competency (Mines and Works),
ECSA registration and obtained
a National Higher Diploma in
Mechanical Engineering (Cum Laude)

Manager: Engineering

BCom (Hons) CA(SA)

Manager: Finance and Administration

National Certificate:
Personnel Management
Skills Development Facilitator

National Higher Diploma
Extractive Metallurgy

Manager: Human Resources

Manager: Metallurgy

Brian Chirove

BSc Engineering (Hons) Mining

Manager: Mineral Resources

Pan African Resources PLC Annual Report 2011

Corporate Governance and Compliance

Pan African strives to comply with the UK Companies Act, King Code III and the JSE Listing Requirements as far as
is possible for an organisation of this size.

Nominated Adviser and Broker – United Kingdom
RBC Capital Markets is the Group’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 of an AIM quoted
company.

Sponsor
Macquarie First South Capital (Pty) Ltd (‘Macquarie) is the Group’s appointed sponsor, in accordance with the
Listings Requirements of the JSE. Macquarie is responsible for advising the Group on compliance concerning the
JSE Listings Requirements and continuing obligations of a JSE listed company.

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. Furthermore, all directors are entitled to seek independent
professional advice concerning the affairs of the Group at the Group’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 Group’s legal advisors, is responsible for drawing the attention of
the directors to their legal duties and in collaboration with the Group’s NOMAD and Sponsor, is responsible for
ensuring that new directors are effectively informed in terms of their duties and responsibilities.

Further, the company secretary, together with the Group’s investor relations’ representatives, provides a direct
communication link with investors and liaises with the Group’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.

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 Chief Executive Officer 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 Chief Executive Officer or Financial Director.

Awards Received
No awards were received during the period under review.

100

Pan African Resources PLC Annual Report 2011

Interim Results
Currently external auditors do not review interim results.

Significant changes regarding size, structure, or ownership
No significant changes occurred during the period under review.

Internal audit
The Audit Committee is responsible for overseeing internal audit in the Pan African Group. Currently the internal
audit function within Pan African is outsourced to BDO South Africa. The primary goals of internal audit are to
evaluate the group’s risk management, internal control and corporate governance processes and ensure that they
are adequate and are functioning correctly. The Audit Committee ensures that the internal auditing function is an
independent and objective assurance and consulting activity that is guided by a philosophy of adding value, as well as
safeguarding and improving the operations of the Group. The internal auditors report directly to the Chairman of
the Audit Committee, and at all times have access to Pan African directors.

An internal audit programme is approved annually by the Audit Committee and defines the reviews to be undertaken
during each financial year and focuses on the adequacy and effectiveness of systems of internal control and on risk
management.

The internal audit coverage plan is considered to be “risk based’ as it focuses on those areas of the business that
are deemed to present the greatest risk to the business in term of financial loss, loss of other assets, misstatement
or lack/circumvention of internal controls. The internal audit plan is reviewed and updated by the Audit Committee,
with input from Executive Management and External auditors, on a regular basis.

During the year, the internal auditors reviewed, inter alia, the following:

•
•

Procurement – May 2010, and
Payroll – November 2010

The internal auditors further assist in areas where their specific expertise is required, such as when a new
management information system is implemented.

Information Technology (‘IT’)
The majority of IT services and support in the Pan African Group is outsourced, with service level agreements in
place with regular service providers. Barberton Mines is currently in the process of selecting and implementing
a new IT system, critical to the organisation’s operations. Whilst there are many potential benefits to be gained
from successful implementation of new technology, there are also a number of risks that arise and these must be
managed. Management needs to have a high level of confidence that the system has been successfully implemented,
operates effectively, and provides the expected levels of business and management support. In addition, because the
system will have a direct impact on the way data and financial information is transacted, the accuracy of data and
the existence and effectiveness of controls is critical. The Group’s internal auditors are assisting with the selection,
implementation and post-implementation review of the new Barberton IT system.

Pan African Resources PLC Annual Report 2011

101

Compliance Summary and Gap Analysis

The following matters have been identified as disclosure and corporate governance deficiencies within the
Group, when the principles of King III are applied. The Group will work with external consultants in further
implementing King III requirements in the next year. The list below is not exhaustive, but rather indicates the
matters currently considered as mandatory by King III.

Corrective Action
Proposed

To be included in the next
Annual Report.

King III Principle

Current Deficiency

Principle 1.3 of King
III

• The report states that the board is focused on
corporate governance by focusing on King III
compliance. However the report does not provide
information on assessment or monitoring of internal
ethics performance. An internal code of ethics
is disclosed, however, there are no statistics on
performance against the company’s internal code of
ethics.

Principle 2.18 of King
III

• The board should comprise a balance of power, with
a majority of non-executive directors. The majority
of non-executive directors should be independent.

Principle 2.22 of King
III

• A recent evaluation of the board & its committees
has not been reported upon and there is no overview
of this evaluation.

To be included in the next
Annual Report.

Principle 2.26 of King
III

• There is limited disclosure on the Remuneration

Policy.

• There is no disclosure of the three most highly-paid
employees who are not directors of the company.

• There is no explanation of the policy on base pay and
no mention of any policy to pay salaries on average
at above median.

A separate remuneration
report will be included in
the next Annual Report.
further
The Group has
dedicated
appointed
executive
address
current shortcomings.

a
to

• There

is
severance policies.

limited disclosure on contracts and

•

Base pay and bonuses: there is no disclosure on
policies, any overriding conditions for the award of
bonuses and targets relating to performance

• To align shareholders’ and executives’ interests,
vesting of share
incentive awards should be
conditional on achieving performance conditions.
Such performance measures and the reasons for
selecting them is not disclosed.

• There is no explanation and justification of any
material payments that may be viewed as being ex
gratia in nature.

102

Pan African Resources PLC Annual Report 2011

King III Principle

Current Deficiency

Corrective Action
Proposed

Principle 3.10 of King
III

• No final charter has been adopted for the Audit
Committee, and terms of reference for the Internal
Audit function remains outstanding.

• There is no statement on information about any other
responsibilities assigned to the audit committee by
the board.

• The audit committee should comprise at least 3
members who are non-executive with the chairman
being independent non-executive.

• There is no statement on information about any other
responsibilities assigned to the audit committee by
the board.

for

reference

Charters for internal audit
and the Audit Committee,
as well as a formal terms
of
the
Audit Committee, will be
finalised and presented to
the board for approval in
the next year and is to be
included in the next Annual
Report.

Principle 7.3 of King
III

•

Internal Audit should provide a comment on the
Group’s Internal Control environment.

To be included in the next
Annual Report.

Principle 4.10 of King
III

• The annual report does not contain a review of a
potentially risky venture. The risk should be analysed
and the probability of occurrence of the risk event be
determined and disclosed.

To be included in the next
Annual Report.

Principle 8.2 of King
III

• There is no disclosure on the nature of the dealing
with stakeholders and the outcome of these dealings.

To be included in the next
Annual Report.

Principle 9.3 of King
III

• No independent assurance has been performed on

sustainability information.

Overall

• There is no formal policy detailing the procedures

for appointments to the Board.

• There is no formal policy detailing the procedures
for how the board composition has been considered
to ensure that there is a clear balance of power and
authority at board level, such that no individual has
unfettered powers of decision-making.

The Group is working with
independent
consultants
to ensure readiness for
independent assurance in
the next year. An assurance
readiness plan will be
developed, whereby
the
Group will start off by
obtaining assurance on key
sustainability
indicators,
and then extend the scope
of assurance over time.

The Board applies rigorous
criteria for the selection of
new members. A formal
policy will however be
adopted in the next year.

Pan African Resources PLC Annual Report 2011

103

“I Love the way
(Pan African’s)
growing every day.

I can see the
growth, the big
improvement and
the way it has
brought me up
from a cleaner to
an office secretary.
I also appreciate
the people who
work here for this
company they
teach me things
every day. And
I know one day I
will be in a high
position. “

104

Pan African Resources PLC Annual Report 2011

Marshila Matlalapoo
Receptionist, Corporate Office

Her Story:

Marshila Matlalapoo, was the office cleaner on contract through an external

company. Pan African hired her on a full-time basis to train her into the

position of receptionist. Ongoing in-house and external training has been

provided to fully develop her skills.

Marshila is a single mother to a three year old little boy, who before Pan

African took her on full-time, was living on a salary which was barely covering

her transport. She now has the flexibility and opportunity to educate her son,

upgrade her living standards and grow into the role reflected by her passion.

Pan African Resources PLC Annual Report 2011

105

Directors’ Report

The directors present their annual report and the audited financial statements for the year ended 30 June 2011.

Principal Activities
The Group’s principal activity during the year was of gold mining and exploration activities. A full review of the
activities of the business and of future prospects are contained in the Chief Executive Officer’s Report which
accompanies these financial statements, with financial and non-financial key performance indicators shown below.

Key performance indicators
The Group produces management reports on a monthly basis that highlight several Key Performance Indicators
(‘KPIs’) from a corporate, operational and management perspective to assess the financial position of the Group.
These are highlighted on page 108.

Results and Dividends
The results for the year are disclosed in the Consolidated Statement of Comprehensive Income on page 114. The
salient features of these results can be found on page 2.

The Board of Directors proposes a final dividend for the year ended 30 June 2011 of £7.4 million (2010: 5.4 million)
which, calculated on 1,444,040,711 issued shares currently outstanding, equates to 0.5135p per share (2010: Final
dividend of 0.3723p declared), and is to be approved by shareholders at the forthcoming annual general meeting of
the Company.

Policy for payment of creditors
It is the Group’s policy to settle all agreed transactions within the terms established with suppliers. The Group’s
credit days are a maximum of 60 days.

Risk Management
The key business risks to which the Group is exposed have been considered and addressed on page 80.

A separate risk committee is not considered necessary as this role is fulfilled by the board, its sub-committees as
well as that of executive management. The identification and management of critical risks is a strategic focus area
for executive management, reviewed on a monthly basis, and together with action plans, reported regularly to the
Board. Executive management has the ability to call for emergency board meetings, should the need arise. Risk
registers for each business segment is in place. The Board has reviewed the current risks to the business, and at the
time of reporting, believes that the current business risks do not exceed the risk appetite of the Group.

Residual risks include the Rand gold price, government and regulatory frameworks, as well as unforeseen natural
disasters.

The Board believes that the current processes of identifying and dealing with risks is effective.

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 financial 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.

106

Pan African Resources PLC Annual Report 2011

Internal financial control procedures undertaken by the board include:
• Review of monthly financial reports and monitoring performance.
• Review of internal audit reports and follow-up action of weaknesses identified by these reports.
• Review of competency and experience of senior management staff.
•
• Review and debate of treasury and other policies.

Prior approval of all significant expenditure including all major investment decisions.

The board has reviewed the operation and effectiveness of the Group’s system of internal control for the financial
year and the period up to the date of approval of the financial statements.

Going Concern
The board confirms that the business is a going concern and that it has reviewed the business’ 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 secured a three-year revolving credit facility with Nedbank Limited.
The Group has not yet utilised the facility as it currently has sufficient cash on hand. Management is not aware of
any material uncertainties that may cast significant doubt on the Group’s ability to continue as a going concern.
Should the need arise the Group can cease most exploration and capital activities, and by doing so conserve cash.

Events after the reporting period
Mr Rowan Smith resigned as Non-Executive Director on 20 July 2011, and Ms Phuti Malabie was appointed on the
same date. The Group announced on 19 August 2011 that it was considering listing the Manica project as a stand-
alone entity on an international exchange

Directors
The following were directors during the year under review:
Mr C M Ramaphosa (Chairman)
Mr K C Spencer*
Mr J P Nelson
Mr J A J Loots
Mr R G Still *
Mr R M Smith

* Independent

Auditors
Deloitte LLP have been appointed as 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 confirms that:
•
So far as the director is aware, there is no relevant information of which the Group’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 Group’s auditors are aware of that information.

This confirmation 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 office 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 Officer

Pan African Resources PLC Annual Report 2011

107

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108

Pan African Resources PLC Annual Report 2011

Statement of Directors’ Responsibilities

The directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable
laws and regulations.

Company law requires the directors to prepare financial statements for each financial year. The directors are required by
the International Accounting Standard (“IAS”) Regulation to prepare the Group financial statements under International
Financial Reporting Standards (“IFRSs”) as adopted by the European Union and have also elected to prepare the parent
company financial statements in accordance with IFRSs as adopted by the European Union. The financial statements are
also required by law to be properly prepared in accordance with the Companies Act 2006.

International Accounting Standard 1 requires that financial statements present fairly for each financial year the Group’s
financial position, financial performance and cash flows. This requires the faithful representation of the effects of
transactions, other events and conditions in accordance with the definitions 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 financial 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 specific requirements in IFRSs are insufficient to enable
users to understand the impact of particular transactions, other events and conditions on the entity’s financial
position and financial performance.

The directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time
the financial position of the Group and enable them to ensure that the financial statements comply with the Companies
Act 2006. They are also responsible for safeguarding the assets of the Group 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 Officer

Jacobus Loots
Financial Director

Pan African Resources PLC Annual Report 2011

109

Independent Auditor ’s Report - South Africa
To The Members Of Pan African Resources Plc

We have audited the Group annual financial statements and annual financial statements of Pan African Resources Plc,
which comprise the consolidated and separate statements of financial position as at 30 June 2011, the consolidated
and separate statements of comprehensive income, changes in equity and consolidated and separate statements
of cash flows for the financial year then ended, a summary of significant accounting policies and other explanatory
notes 1 to 36.

Directors’ Responsibility For The Financial Statements
The Group’s directors are responsible for the preparation and fair presentation of the consolidated and separate
financial statements in accordance with International Financial Reporting Standards and for such internal control as
the directors determine is necessary to enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.

Auditor’s Responsibility
Our responsibility is to express an opinion on the consolidated and separate financial 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 consolidated and separate financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated and separate financial statements. The procedures selected depend on the auditor’s judgement,
including the assessment of the risks of material misstatement of the consolidated and separate financial statements,
whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant
to the Group’s preparation and fair presentation of the consolidated and separate financial 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 Group’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 consolidated and separate financial statement presentation.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinion.

Opinion
In our opinion, the Group annual financial statements and annual financial statements present, in all
material respects, the consolidated and separate financial position of Pan African Resources Plc as at
30 June 2011, and its consolidated and separate financial performance and its consolidated and separate cash flows
for the year then ended in accordance with International Financial Reporting Standards.

Per IT Marshall
Partner
12 September 2011

Deloitte & Touche – Registered Auditors

Building 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 Officer GM Pinnock Audit DL Kennedy Risk Advisory NB Kader Tax & Legal Services L Geeringh Consulting

L Bam Corporate Finance JK Mazzocco Human Resources CR Beukman Finance TJ Brown Clients NT Mtoba Chairman of the Board MJ Comber Deputy Chairman of the Board.

A full list of partners and directors is available on request.

110

Pan African Resources PLC Annual Report 2011

Independent Auditor ’s Report - United Kingdom
To The Members Of Pan African Resources Plc

We have audited the financial statements of Pan African Resources Plc for the year ended 30 June 2011 which
comprise 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 financial reporting framework that
has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as
adopted by the European Union and, as regards the parent company financial statements, as applied in accordance
with the provisions of the Companies Act 2006.

This report is made solely to the Group’s members, as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken so that we might state to the Group’s members those
matters we are required to state to them in an auditor’s 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 Group and the Group’s
members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibilities Statement, the directors are responsible for the preparation
of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit
and express an opinion on the financial 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 Ethical
Standards for Auditors.

Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give
reasonable assurance that the financial 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 significant accounting estimates made by the directors, and the overall presentation of the financial statements.
In addition, we read all the financial and non-financial information in the annual report to identify material
inconsistencies with the audited financial statements. If we become aware of any apparent material misstatements
or inconsistencies we consider the implications for our report.

Opinion on financial statements
In our opinion:
• The financial 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 2011 and of the group’s profit for the year then ended,

• The group financial statements have been properly prepared in accordance with IFRSs as adopted by the

European Union,

• The parent company financial statements have been properly prepared in accordance with IFRSs as adopted by

the European Union and as applied in accordance with the provisions of the Companies Act 2006, and

• The financial statements have been prepared in accordance with the requirements of the Companies Act 2006.

Separate opinion in relation to IFRSs as issued by the IASB
As explained in note 1 to the group financial 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 financial statements comply with IFRSs as issued by the IASB.

Pan African Resources PLC Annual Report 2011

111

Opinion on other matter prescribed by the Companies Act 2006
In our opinion the information given in the Directors’ Report for the financial year for which the financial statements
are prepared is consistent with the financial statements.

Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us 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 financial statements are not in agreement with the accounting records and returns, or
• Certain disclosures of directors’ remuneration specified 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 Auditor
London, UK
12 September 2011

112

Pan African Resources PLC Annual Report 2011

Certificate 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
12 September 2011

Pan African Resources PLC Annual Report 2011

113

Consolidated Statement of Comprehensive Income
for the year ended 30 June 2011

Group

Company

30 June 2011
(Audited)

30 June 2010
(Audited)

30 June 2011
(Audited)

30 June 2010
(Audited)

Notes

79,208,399

68,506,394

(157,763)
79,050,636

(162,791)
68,343,603

(45,345,417)

(40,553,886)

(2,885,243)
30,819,976

(3,125,093)
24,664,624

-
-

Revenue

Gold sales

Realisation costs
On - mine revenue

Cost of production

Depreciation
Mining Profit

Other (expenses)/income

(2,796,657)

(1,929,787)

20,471,875

8,165,247

Impairment
Royalty costs

Net income before finance
income and finance costs
Finance income

Finance costs

Profit before taxation
Taxation

Profit after taxation

-
(2,368,239)

(335,401)
(837,378)

-
-

(335,401)
-

25,655,080

21,562,058

20,471,875

7,829,846

4 & 9

802,022

661,645

772,957

468,490

10
13

(40,128)

(67,915)

(79)

26,416,974
(9,248,309)

22,155,788
(7,655,913)

21,244,832
-

8,298,257
-

17,168,665

14,499,875

21,244,832

8,298,257

Other comprehensive income:
Foreign currency translation differences

3,814,677

2,379,762

1,855,200

Total comprehensive income for the year

20,983,342

16,879,637

23,100,032

8,298,257

Profit attributable to:
Owners of the parent

Non-controlling interest

17,168,665

14,277,232

21,244,832

8,298,257

222,643

17,168,665

14,499,875

21,244,832

8,298,257

Total comprehensive income attributable to:

Owners of the parent
Non-controlling interest

20,983,342
-

16,809,093
70,544

23,100,032
-

8,298,257
-

20,983,342

16,879,637

23,100,032

8,298,257

From continuing operations:
Basic Earnings per share (pence)

Diluted Earnings per share (pence)

1.20

1.19

1.04

1.03

114

Pan African Resources PLC Annual Report 2011

Consolidated Statement of Financial Position
at 30 June 2011

Group

Company

30 June 2011 30 June 2010 30 June 2011 30 June 2010

Notes

(Audited)
£

ASSETS

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

59,052,015

37,495,010

189,657

27,642

14,214,426

13,087,880

21,000,714

53,259,921

3,013,385

2,740,546

97,280,540

74,324,150

53,449,578

53,287,563

1,457,202

1,126,374

27,146,884

10,984,384

4,254,401

3,794,659

121,000

162,337

10,123,822

12,756,262

11,546,466

14,240,891

15,835,425

17,677,295

38,814,350

25,387,612

113,115,965

92,001,445

92,263,928

78,675,175

14,440,406

14,095,406

14,440,406

14,095,406

50,932,830

49,732,830

50,932,830

49,732,830

8,310,542

4,495,865

1,855,200

861,450

754,394

777,585

739,519

37,607,283

25,814,783

22,102,231

6,233,564

(10,701,093)

(10,705,308)

1,560,000

Equity attributable to owners of the parent

90,746,110

73,486,877

91,668,252

72,361,319

Total equity

Non - Current liabilities
Long term provisions **

Long term liabilities **

Deferred taxation

Current liabilities
Trade and other payables *

Payable to other group companies

Shareholders for dividend

Current tax liability

TOTAL EQUITY AND LIABILITIES

90,746,110

73,486,877

91,668,252

72,361,319

3,386,591

3,222,780

181,285

115,418

27,329

9,841,695

8,092,332

13,409,571

11,430,530

27,329

8,193,750

6,507,053

568,347

766,534

576,985

575,838

5,738,018

8,960,284

7,084,038

568,347

6,313,856

113,115,965

92,001,445

92,263,928

78,675,175

*Trade and other payables includes an amount of £1,465,299 (£41,411 for the Company) relating to the leave pay accrual which was classified as a short term provision in the prior year. This

is in accordance with IAS:19 Employee Benefits. The leave pay accrual balance as at 30 June 2009 was £1,151,895.

** Long term liabilities includes an amount of £115,418 relating to the post retirement benefits which was classified as a long term provision in the prior year. This is in accordance with

IAS:19 Employee Benefits. The post retirement benefits balance as at 30 June 2009 was £136,602.

The financial statements of Pan African Resources plc, registered number 3937466 were approved by the Board of
directors on 07 September 2011 and signed on its behalf by :

Jan Nelson
Chief Executive Officer

Jacobus Loots
Financial Director

Pan African Resources PLC Annual Report 2011

115

Consolidated and Company Statement Of Cash Flows
for the year ended 30 June 2011

Group

Company

30 June 2011

30 June 2010

30 June 2011

30 June 2010

Notes

16 610 289

18 325 307

(5 680 503)

(128 716)

NET CASH GENERATED
FROM/(USED IN) OPERATING
ACTIVITIES

INVESTING ACTIVITIES

Dividends received

21 650 960

9 032 496

Additions to property, plant and
equipment, mineral rights

Additions to intangibles

(21 033 991)

(5 935 346)

(181 183)

(17 075)

(800 619)

(976 373)

Loans to subsidiaries

(14 614 028)

(642 941)

Funding of rehabilitation trust fund

122 145

147 458

NET (CASH USED IN) /
GENERATED FROM INVESTING
ACTIVITIES

(21 712 465)

(6 764 261)

6 855 749

8 372 480

FINANCING ACTIVITIES

Borrowings repaid

(954 759)

Loans from subsidiaries

(5 738 018)

5 738 018

Shares issued

1 545 000

48 000

1 545 000

Share issue costs

(5 866)

NET CASH FROM / (USED IN)
FINANCING ACTIVITIES

1 545 000

(912 625)

(4 193 018)

4 777 393

NET (DECREASE) / INCREASE
IN CASH AND CASH EQUIVA-
LENTS

Cash and cash equivalents at the begin-
ning of the year

(3 557 176)

10 648 421

(3 017 772)

13 021 157

12 756 262

2 389 301

14 240 891

1 507 134

Effect of foreign exchange rate changes

924 736

(281 460)

323 347

(287 400)

CASH AND CASH
EQUIVALENTS AT THE END OF
THE YEAR

10 123 822

12 756 262

11 546 466

14 240 891

116

Pan African Resources PLC Annual Report 2011

Consolidated and Company Statement of Changes in Equity
for the year ended 30 June 2011

GROUP

Translation

Retained

Realisation

Merger

Non-

Total

Capital

Premium

reserve

option

earnings

of equity

reserve

controlling

account

reserve

interest

Balance at 30
June 2009

11,125,891 37,899,997

1,964,004

549,690 11,537,551

- (10,705,308)

3,988,577 56,360,402

Issue of shares

2,969,515 11,838,699

(10,701,093)

- (4,059,121)

48,000

(5,866)

2,531,861

- 14,277,232

204,704

Issue of shares

345,000

1,200,000

3,814,677

- 17,168,665

- (5,376,165)

107,056

(5,866)

(152,099)

2,379,762

222,643 14,499,875

204,704

1,545,000

3,814,677

- 17,168,665

- (5,376,165)

107,056

14,095,406 49,732,830

4,495,865

754,394 25,814,783

(10,701,093)

(10,705,308)

- 73,486,877

Issue of shares

2,969,515 11,838,699

14,440,406 50,932,830

8,310,542

861,450 37,607,283

(10,701,093)

(10,705,308)

- 90,746,110

11,125,891 37,899,997

626,003 (2,064,693)

1,560,000

- 49,147,198

(5,866)

8,298,257

113,516

- 14,808,214

(5,866)

8,298,257

113,516

14,095,406 49,732,830

739,519

6,233,564

1,560,000

- 72,361,319

Issue of shares

345,000

1,200,000

1,855,200

- 21,244,832

- (5,376,165)

38,066

1,545,000

1,855,200

- 21,244,832

- (5,376,165)

38,066

14,440,406 50,932,830

1,855,200

777,585 22,102,231

1,560,000

- 91,668,252

Share issue costs

Current year
movement

Profit for the year

Share Based payment
- Charge for the year

Balance at 30
June 2010

Current year
movement

Profit for the year

Dividends paid

Share Based payment
- Charge for the year

Balance at 30
June 2011

COMPANY

Balance at 30
June 2009

Share issue costs

Current year
movement

Profit for the year

Dividend Issue

Charge for the year

Balance at 30
June 2010

Current year
movement

Profit for the year

Dividend Expense

Share Based payment
- Charge for the year

Balance at 30
June 2011

Pan African Resources PLC Annual Report 2011

117

Notes to the Financial Statements:
Accounting Policies & Financial Reporting Terms

1. General Information

Pan African is a Company incorporated in England and Wales under the Companies Act 1985. The Group has a dual
primary listing on the AIM Market (‘AIM’) of the London Stock Exchange and JSE Limited (‘JSE’). The nature of the
Group’s operations and its principal activities relate to gold and PGE mining and exploration activities. The financial
statements are presented in Pounds Sterling. Foreign operations are included in accordance with the policies set out
below. The individual financial results of each Group Company are maintained in their functional currencies, which
are determined by reference to the primary economic environment in which it operates.

Effective 1 July 2010, the Group changed its functional currency from Pounds Sterling to South African Rands, to
reflect the Group’s primary economic environment and operating currency. For the purpose of the consolidated
financial statements, the results and financial position of each Group Company is expressed in Pounds Sterling. The
financial statements have been prepared on the going concern basis.

The financial statements have also been prepared in accordance with the International Financial Reporting Standards
(‘IFRS’) adopted by the European Union and South Africa.

2. Accounting Policies

Basis Of Preparation And General Information

The annual financial statements have been prepared under the historical cost basis, except for certain financial
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.

Historical Reverse Acquisition

On 31 July 2007 the Company acquired 74% of Barberton Mines in a share-for-share transaction. IFRS3 ‘Business
Combinations’ defines 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 financial position of the Group, its cash flows and liquidity position are described in note 29. In addition, note
29 to the financial statements includes the Group’s objectives, policies and processes for managing its capital, its
financial risk management objectives, details of its financial instruments and its exposure to credit risk.

Management is not aware of any material uncertainties which may cast significant doubt on the Group’s ability
to continue as a going concern. Based on the current status of the Group’s finances, 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 financial commitments for the
foreseeable future. Accordingly, the directors continue to adopt the going concern basis in preparing the financial
statements.

New And Revised International Financial Reporting Standards Not Yet Adopted

The Group applies all applicable IFRS in preparation of the financial statements. Consequently, all IFRS statements
that were effective at 30 June 2011 and are relevant to its operations have been applied.

At the date of authorisation of these financial statements, the following standards and interpretations, which have
been applied in these financial statements, were in issue and effective as at 30 June 2011.

118

Pan African Resources PLC Annual Report 2011

New/Revised International Financial Reporting Standards

Effective Date

First-time Adoption of International Financial Reporting Standards

Annual periods beginning on or after

IFRS 1

— Amendments relating to oil and gas assets and determining whether an arrangement

1 January 2010

contains a lease

IFRS 2

Share-based Payment
— Amendments relating to group cash-settled share-based payment transactions

Annual periods beginning on or after
1 January 2010

IFRS 3

Business Combinations
— Amendments resulting from May 2010 Annual Improvements to IFRSs

Annual periods beginning on or after
1 July 2010

IFRS 5

Non-current Assets Held for Sale and Discontinued Operations
— Amendments resulting from April 2009 Annual Improvements to IFRSs

Annual periods beginning on or after
1 January 2010

IFRS 8

Operating Segments
— Amendments resulting from April 2009 Annual Improvements to IFRSs

Annual periods beginning on or after
1 January 2010

IAS 1

Presentation of Financial Statements
— Amendments resulting from April 2009 Annual Improvements to IFRSs

Annual periods beginning on or after
1 January 2010

IAS 7

Statement of Cash Flows
— Amendments resulting from April 2009 Annual Improvements to IFRSs

Annual periods beginning on or after
1 January 2010

IAS 17

Leases
— Amendments resulting from April 2009 Annual Improvements to IFRSs

Annual periods beginning on or after
1 January 2010

IAS 27

Consolidated and Separate Financial Statements
— Amendments resulting from May 2010 Annual Improvements to IFRSs

Annual periods beginning on or after
1 July 2010

IAS 32

Financial Instruments: Presentation
— Amendments relating to classification of rights issues

Annual periods beginning on or after
1 February 2010

IAS 36

Impairment of Assets
— Amendments resulting from April 2009 Annual Improvements to IFRSs

Annual periods beginning on or after
1 January 2010

IFRS 1

First-time Adoption of International Financial Reporting Standards
— Limited Exemption from Comparative IFRS 7 Disclosures for First-time Adopters

Annual periods beginning on or after
1 July 2010

IAS 39

Financial Instruments: Recognition and Measurement
— Amendments resulting from April 2009 Annual Improvements to IFRSs

Annual periods beginning on or after
1 January 2010

IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments

Annual periods beginning on or after
1 July 2010

Pan African Resources PLC Annual Report 2011

119

At the date of authorisation of these financial statements, the following standards and interpretations, which have
not been applied in these financial statements, were in issue but not yet effective:

New/Revised International Financial Reporting Standards

Effective Date

IFRS 1

First-time Adoption of International Financial Reporting Standards

— Amendments resulting from May 2010 Annual Improvements to IFRSs

Annual periods beginning on

or after 1 January 2011

IFRS 1

First-time Adoption of International Financial Reporting Standards

Annual periods beginning on

— Replacement of ‘fixed dates’ for certain exceptions with ‘the date of transition to IFRSs’

or after 1 July 2011

IFRS 1

First-time Adoption of International Financial Reporting Standards

Annual periods beginning on

— Additional exemption for entities ceasing to suffer from severe hyperinflation

or after 1 July 2011

IFRS 7

Financial Instruments: Disclosures

— Amendments resulting from May 2010 Annual Improvements to IFRSs

Annual periods beginning on

or after 1 January 2011

IFRS 7

Financial Instruments: Disclosures

Annual periods beginning or after

— Amendments enhancing disclosures about transfers of financial assets

1 July 2011

IFRS 9

Financial Instruments

— Classification and Measurement

IFRS 10

Consolidated Financial Statements

IFRS 11

Joint Arrangements

IFRS 12 Disclosure of Interests in Other Entities

IFRS 13

Fair Value Measurement

IAS 1

Presentation of Financial Statements

— Amendments resulting from May 2010 Annual Improvements to IFRSs

Annual periods beginning on

or after 1 January 2013

Annual periods beginning on

or after 1 January 2013

Annual periods beginning on

or after 1 January 2013

Annual periods beginning on

or after 1 January 2013

Annual periods beginning on

or after 1 January 2013

Annual periods beginning on

or after 1 January 2011

IAS 1

Presentation of Financial Statements

Annual periods beginning on

— Amendments to revise the way other comprehensive income is presented

or after 1 July 2012

IAS 12

Income Taxes

— Limited scope amendment (recovery of underlying assets)

IAS 19

Employee Benefits

Annual periods beginning on

or after 1 January 2012

Annual periods beginning on

— Amended Standard resulting from the Post-Employment Benefits and Termination Benefits projects

or after 1 January 2013

IAS 24

Related Party Disclosures

— Revised definition of related parties

IAS 27

Consolidated and Separate Financial Statements

— Reissued as IAS 27 Separate Financial Statements (as amended in 2011)

Annual periods beginning on

or after 1 January 2011

Annual periods beginning on

or after 1 January 2013

IAS 28

Investments in Associates

Annual periods beginning on

— Reissued as IAS 28 Investments in Associates and Joint Ventures (as amended in 2011)

or after 1 January 2013

IAS 34

Interim Financial Reporting

— Amendments resulting from May 2010 Annual Improvements to IFRSs

IFRIC 13

Customer Loyalty Programmes

— Amendments resulting from May 2010 Annual Improvements to IFRSs

Annual periods beginning on

or after 1 January 2011

Annual periods beginning on

or after 1 January 2011

IFRIC 14 AS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction

Annual periods beginning on or after

— November 2009 Amendments with respect to voluntary prepaid contributions

1 January 2011

120

Pan African Resources PLC Annual Report 2011

The impact of the adoption of the these standards and interpretations still needs to be considered, but is not
expected to have a material impact on the financial results.

Basis of Consolidation

The consolidated financial statements incorporate the financial statements of the Group and entities controlled
by the Group (its subsidiaries) to 30 June each year. Control is achieved where the Group has the power to
govern the financial and operating policies of an investee enterprise so as to obtain benefits 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. The
acquiree’s identifiable 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 classified 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 acquisition 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 identifiable assets, liabilities and
contingent liabilities recognised. If, after reassessment, the Group’s interest in the net fair value of the acquiree’s
identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess is
recognised immediately in profit 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.

Property, 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 after feasibility stage to develop new ore bodies, to define 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.

Pan African Resources PLC Annual Report 2011

121

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 profit 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 proved 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 Assets

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.

Research, Development, Mineral Exploration And Evaluation Costs

Research, development, mineral exploration and evaluation costs are expensed in the year in which they are incurred
until they result in projects that the group:

Evaluate as being technically or commercially feasible,

•
• Has sufficient resources to complete development, and
• Can demonstrate will generate future economic benefits

Once these criteria are met, all directly attributable development costs and on-going mineral exploration and
evaluation costs are capitalised within other intangible assets. Capitalisation of pre-production expenditure ceases
when the mining property is capable of commercial production.

Capitalised pre-production expenditure is assessed for impairment in accordance with the group accounting policy
stated below.

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 (‘CGU’) to which the
asset belongs. Impairment losses are immediately recognised as an expense. A reversal of an impairment loss is
recognised 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 identifiable 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 benefit from the synergies of the combination. CGUs 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 CGU is less than the carrying amount of the CGU, the impairment loss is
allocated first 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

122

Pan African Resources PLC Annual Report 2011

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 profit 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 financial statements and the corresponding tax basis used
in the computation of taxable profit. 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 profit 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 profit.

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 assets reflects 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 identifiable 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 sufficient taxable profits will be available to allow all or parts of the
assets to be recovered.

Revenues, expenses and assets are recognised net of the amount of associated VAT, unless VAT incurred is not
recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of the asset
or as part of the expense. Receivables and payables are stated inclusive of the amount of VAT receivable or payable.
The net amount of VAT recoverable from, or payable to, the taxation authority is included with other receivables or
payables in the consolidated statement of financial position.

Provisions

Provisions are recognised when the Group has a legal or constructive obligation resulting from past events, it is
probable that an outflow of resources embodying economic benefits 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 benefits 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 Assets

The Group leases certain property plant and equipment. A lease is classified as a finance lease if it transfers
substantially all the risks and rewards incidental to ownership to the Group. Other leases are classified 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.

Pan African Resources PLC Annual Report 2011

123

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 translated at the rates ruling at the Statement of Financial Position date. Profits and losses arising
on exchange are recorded 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 classified as equity and are recognised as income or
expenses in the period in which the operation is disposed. Translation differences on foreign loans to subsidiaries
which are classified 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
identified 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 Benefits

Payments to defined contribution retirement benefit plans are charged as an expense as they fall due. Payments
made to state-managed schemes are dealt with as defined contribution plans where the Group’s obligations under
the schemes are equivalent to those arising in a defined contribution retirement benefit plan and are charged as an
expense as they fall due.

Post-Retirement Benefits Other Than Pension

Historically Barberton Mines provided retirement benefits 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.

Equity Participation Plan

Equity-settled share-based payments to employees are measured at the fair value of the equity instruments at the
grant date. 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 reflects the revised estimate, with
corresponding adjustments to the equity-settled employee benefits reserve.

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Pan African Resources PLC Annual Report 2011

Cash Participation Plan

Cash-settled share-based payments to employees are measured at the fair value of the cash instruments at the grant
date. The fair value determined at the grant date of the cash-settled share based payments is expensed on a straight-
line basis over the vesting period, based on the Group’s estimate of cash instruments that will eventually vest. At
each Statement of Financial Position date, the Group revises its estimate of the number of cash 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 reflects the revised estimate, with corresponding adjustments to the cash-
settled employee benefits liability.

Provision For Environmental Rehabilitation Costs

Long-term environmental obligations are based on Barberton Mines and Phoenix Platinum’s environmental plans,
in compliance with current environmental and regulatory requirements. The provision is 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 cleanup at closure.

Contributions To Rehabilitation Trust

Contributions are made to a dedicated environmental rehabilitation trust to fund the estimated cost of rehabilitation
during and at the end of the life of the group’s mines. The trust’s assets are recognised separately on the balance
sheet as non-current assets at fair value. Interest earned on funds invested in the environmental rehabilitation trust
is accrued on a time proportion basis and credited to the provision for environmental rehabilitation costs.

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 significant 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 financial
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:

It is probable that delivery will be made,

•
• The item is on hand, identified and ready for delivery to the buyer at the time the sale is recognised,
• The buyer specifically acknowledges the deferred delivery instructions, and
• The usual payment terms apply.

Loans And Receivables

Trade receivables, loans and other receivables that have fixed 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.

Pan African Resources PLC Annual Report 2011

125

Impairment Of Financial Assets

Financial assets, other than those at Fair Value Through Profit 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 financial asset, the
estimated future cash flows of the financial asset have been negatively impacted.

Derecognition Of Financial Assets

The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire,
or when it transfers the financial asset and substantially all the risks and rewards of ownerships 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 financial asset, the Group continues to recognise the financial asset and also recognises a collateralised
borrowing for the proceeds received.

Financial Liabilities And Equity Instruments Issued By The Group

Classification as debt or equity

Debt and equity instruments are classified as either financial 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 classified as either financial liabilities FVTPL or “other financial liabilities”.

Financial liabilities at FVTPL Financial liabilities are classified as at FVTPL where the financial liability
is either held for trading or it is designated as at FVTPL.

A financial liability is classified 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 identified portfolio of financial instruments that the Group manages together and has a recent
actual pattern of short-term profit-taking, or
It is a derivative that is not designated and effective as a hedging instrument.

•

A financial liability other than a financial liability held for trading may be designated as at FVTPL upon initial
recognition if:
•

Such designation eliminates or significantly reduces a measurement or recognition inconsistency that would
otherwise arise, or

• The financial liability forms part of a Group of financial assets or financial 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 profit or loss. The
net gain or loss recognised in profit or loss incorporates any interest paid on the financial liability. The Group has
no financial liabilities classified as FVTPL.

126

Pan African Resources PLC Annual Report 2011

Other financial liabilities

Other financial 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 financial 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 financial liability or, where appropriate, a shorter period.

Derecognition of financial liabilities

The Group derecognises financial liabilities only when the Group’s obligations are discharged, cancelled or they
expire.

Derivative financial instruments

In the ordinary course of its operations, the Group may enter into a variety of derivative financial 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 Statement of Comprehensive Income immediately unless the derivative is designated and effective as a hedging
instrument, in which event the timing of the recognition in Statement of Comprehensive Income 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 flow hedges, or hedges of net
investments in foreign operations. Hedges of foreign exchange risk or firm commitments are accounted for as cash
flow 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 flows 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 profit
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 qualifies for hedge accounting. The adjustment to the carrying
amount of the hedged item arising from the hedged risk is amortised to profit or loss from that date.

Cash flow hedge

The effective portion of changes in the fair value of any derivatives that are designated and qualify as cash flow hedges
are deferred in equity. The gain or loss relating to the ineffective portion is recognised immediately in profit 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 profit or loss in the periods when the hedged item is recognised in profit or loss, in the

Pan African Resources PLC Annual Report 2011

127

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-financial asset or a non-financial 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 qualifies 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 profit 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 profit 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 insignificant risk of
changes in value.

Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating
decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing
performance of the operating segments, has been identified as the Pan African Resources executive committee.
Management has determined the operating segments of the group based on the reports reviewed by the executive
committee that are used to make strategic decisions. The executive committee considers the business principally
according to the nature of the products and service provided, with the segment representing a strategic business
unit. The reportable operating segments derive their revenue primarily from mining, extraction, production and
selling of gold and PGM’s.

Gold Pour, Fairview

128

Pan African Resources PLC Annual Report 2011

3. Critical Accounting Estimates And Judgements

In preparing the annual financial 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 financial 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 significant effect on the amounts recognised in the financial 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, this includes the estimation of cash flows 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. During the 2011 financial year, the LOM was
increased from 10 to 17 years.
Estimates made of legal or constructive obligations resulting in the raising of provisions, and the
expected date of probable outflow of economic benefits to assess whether the provision should be
discounted, and
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 involved in feasibility studies related to exploration and growth projects.

Pan African Resources PLC Annual Report 2011

129

Notes to the Financial Statements (continued)
for the year ended 30 June 2011

Group

Company

30 June 2011

30 June 2010

30 June 2011

30 June 2010

REVENUE

Gold sales

79,208,399

68,506,394

Finance income

802,022

661,645

772,957

468,490

80,010,421

69,168,039

772,957

468,490

COST OF PRODUCTION

Salaries and wages

(20,926,658)

(18,064,485)

Mining

Processing*

Engineering &
technical services*

Electricity

Security

(6,364,329)

(5,494,006)

(4,757,202)

(3,939,696)

(3,702,615)

(4,404,500)

(4,445,681)

(3,528,059)

(3,034,428)

(2,714,009)

Administration and Other

(2,114,504)

(2,409,131)

(45,345,417)

(40,553,886)

*In the current year the Load Haul Dump truck costs were reallocated from Processing to Engineering and technical
services.

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, firstly in Barberton
Mines located in Barberton South Africa, the Group’s corporate and exploration activities and Phoenix Platinum
Mining. The Chief Executive Officer reviews the operations in accordance with the disclosures presented below.

130

Pan African Resources PLC Annual Report 2011

30 June 2011

30 June 2010

Barberton
Mines

Phoenix
Platinum*

Corporate
& Growth
Projects

Group

Barberton
Mines

Phoenix
Platinum*

Corporate
& Growth
Projects

Group

Revenue

Gold sales

79,208,399

Realisation costs

(157,763)

On - mine revenue

79,050,636

Cost of production

(45,345,417)

Depreciation

(2,885,243)

Mining Profit

30,819,976

- 79,208,399 68,506,394

(157,763)

(162,791)

- 79,050,636 68,343,603

- (45,345,417) (40,553,886)

- (2,885,243)

(3,125,093)

- 30,819,976 24,664,624

- 68,506,394

(162,791)

- 68,343,603

- (40,553,886)

- (3,125,093)

- 24,664,624

Other expenses **

(288,930)

(12,943)

(2,494,784)

(2,796,657)

(173,988)

(1,755,799)

(1,929,787)

Impairment costs

Royalty costs

(2,368,239)

- (2,368,239)

(837,378)

(335,401)

(837,378)

Net income /
(loss) before fi-
nance income and
finance costs

28,162,807

(12,943)

(2,494,784)

25,655,080 23,653,258

(2,091,200)

21,562,058

Finance income

29,065

Finance costs

(40,128)

772,957

802,022

193,155

(40,128)

(67,836)

468,490

661,645

(79)

(67,915)

Profit /(loss) be-
fore taxation

28,151,744

(12,943)

(1,721,827)

26,416,974 23,778,577

(1,622,789)

22,155,788

Taxation

(9,251,933)

3,624

- (9,248,309)

(7,655,913)

- (7,655,913)

Profit /(loss) after
taxation

Other
comprehensive
income:

Foreign currency
translation differ-
ences

Total compre-
hensive income /
(loss) for the year

18,899,811

(9,319)

(1,721,827)

17,168,665 16,122,664

(1,622,789)

14,499,875

1,737,540

269,848

1,807,289

3,814,677

1,936,738

443,024

2,379,762

20,637,351

260,529

85,462

20,983,342

18,059,402

443,024

(1,622,789)

16,879,637

*Costs directly attributable to Phoenix Platinum, along with attributable overheads, are capitalised to capital under construction.
** Other expenses are excluding inter-company management fees and dividends.

Segmental Assets

43,333,140

16,990,521

31,791,590

92,115,251

43,420,283

4,858,063

22,722,385

71,000,731

Segmental
Liabilities

Goodwill

Net Assets (ex-
cluding goodwill)

Capital Expendi-
ture

20,212,973

1,556,006

600,876

22,369,855

18,049,443

85,206

379,919

18,514,568

21,000,714

23,120,167

15,434,515

31,190,714

69,745,396

25,370,840

4,772,857

22,342,466

52,486,163

6,773,729

14,079,722

180,540

21,033,991

5,918,271

17,075

5,935,346

All assets are held within South Africa with the exception of £10.7 million (2010:£8.7 million) relating to Manica which is held in Mozambique.

Pan African Resources PLC Annual Report 2011

131

Notes to the Financial Statements (continued)
for the year ended 30 June 2011

Group

Company

30 June 2011

30 June 2010

30 June 2011

30 June 2010

OPERATING LEASES

At the financial year end, the Group and Company had outstanding commitments
under non-cancellable operating leases mainly in respect of office equipment, security
cameras, building rentals and compressors, which fall due as follows:

Not later than one year

194,641

204,240

108,451

41,407

Later than one year and
no later than five years

Minimum lease payments
under operating leases
recognised as an
expense in the year:

381,925

121,350

344,077

576,566

325,590

452,528

19,865

61,272

226,374

182,762

48,532

23,237

Leases are negotiated for an average term of three to five years.

OTHER (EXPENSES) /INCOME

Dividends received
- subsidiaries

Management Fees

21,650,960

9,032,496

1,306,054

885,163

Foreign exchange (loss) / gain

(40,366)

101,369

(40,366)

101,369

Operating leases

(226,374)

(182,762)

(48,532)

(23,237)

Company depreciation

(25,416)

(9,980)

(25,416)

(9,980)

Directors fees

Auditors fees

(243,445)

(216,785)

(243,445)

(216,785)

(119,549)

(120,352)

(72,999)

(79,472)

Salaries head office

(764,356)

(708,060)

(764,356)

(708,060)

Investor and public relations

(218,886)

(153,861)

(218,886)

(153,861)

New Business

(266,969)

(49,079)

(266,969)

(49,079)

Legal fees

(186,074)

(63,087)

(60,368)

(63,087)

Sundry other expense

(705,222)

(527,190)

(743,802)

(550,220)

(2,796,657)

(1,929,787)

20,471,875

8,165,247

132

Pan African Resources PLC Annual Report 2011

Group

Company

30 June 2011

30 June 2010

30 June 2011

30 June 2010

FINANCE INCOME / (COSTS)

Interest received - Bank

802,022

661,645

772,957

468,490

Interest paid - Bank

(40,128)

(67,915)

(79)

761,894

593,730

772,957

468,411

PROFIT BEFORE TAXATION

Profit for the year has been arrived at after charging:

Management fee
expense / (income)

- Metorex

- Shanduka

335,289

81,761

76,688

- Barberton Mines

(1,306,054)

(885,163)

Equity settled share option
expense (Refer to note 33)

Cash settled share options
expense (Refer to note 27)

107,056

204,704

38,066

113,516

68,414

26,919

Depreciation

2,885,243

3,125,093

25,416

9,980

Impairment costs

335,401

Staff costs

21,691,014

18,772,545

764,356

708,060

Royalty costs*

2,368,239

837,378

Operating leases

226,374

182,762

48,532

23,237

* Royalty costs increased by 182.82% due to Barberton Mines commencing payment of the new South African mining
royalty tax upon its implementation in March 2010 which resulted in the 2010 financial year only incurring 4 months
royalty expense. Therefore in the current year, full year’s revenue was subject to the South African mining royalty tax.

Pan African Resources PLC Annual Report 2011

133

Notes to the Financial Statements (continued)
for the year ended 30 June 2011

Group

Company

30 June 2011

30 June 2010

30 June 2011

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
financial statements

Audit of the Company’s
subsidiaries pursuant
to legislation

(Over) / Under provision of
audit fee in the prior year

10,500

10,000

10,500

10,000

68,965

48,180

68,965

48,180

46,551

40,880

(7,817)

19,280

(7,817)

Total audit fees

118,199

118,340

71,648

Other services rendered
by the Auditors

Total Non-Audit Fees

1,351

2,012

1,351

All fees are paid within South Africa with the exception of £28,624 (2010:£25,500) which is paid to the UK.

19,280

77,460

2,012

12 STAFF COSTS

The average number of employees were:

Corporate and
Growth Projects

Mining

Their aggregate remuneration comprised:

1,757

1,768

1,783

1,795

Salary and Wages

20,227,325

17,503,662

737,120

682,278

Other Retirement Costs
(Refer to note 30)

1,463,689

1,268,883

27,236

25,782

21,691,014

18,772,545

764,356

708,060

134

Pan African Resources PLC Annual Report 2011

Group

Company

30 June 2011

30 June 2010

30 June 2011

30 June 2010

13 TAXATION

INCOME TAX EXPENSE

South African normal taxation

- current year

- prior year

Deferred taxation

8,151,100

7,283,602

10,421

(356,490)

- current year

1,086,788

728,801

Total taxation charge

9,248,309

7,655,913

Profit before taxation

26,416,974

22,155,788

21,244,832

8,298,257

Taxation at the domestic
taxation rate of 28%

Non-deductible expenses/
(exempt income)

7,396,753

6,203,621

5,948,553

2,323,512

29,976

151,229

(5,917,782)

(2,503,143)

Taxation rate differential

1,821,580

1,301,063

Tax effect of utilisation
of tax losses

(30,771)

179,631

Taxation expense for the year

9,248,309

7,655,913

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

6.90

0.11

35.01

28.00

5.87

28.00

0.68

(27.86)

(30.16)

34.55

(0.14)

0.00

2.16

0.00

There are no significant unrecognised temporary differences associated with undistributed profits of overseas subsidiaries.
South African mining tax on mining income is determined according to a formula which takes into account the profit 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 profits.

Pan African Resources PLC Annual Report 2011

135

Notes to the Financial Statements (continued)
for the year ended 30 June 2011

30 June 2011

30 June 2010

Weighted
average
number
of shares

Earnings
Per share
(Pence)

Net profit

Weighted
average
number
of shares

Earnings
Per share
(Pence)

Net profit

14 EARNINGS PER SHARE

Basic and Diluted Earnings Per Share

Basic and diluted earnings per share are based on the Group’s profit for the year attributable to owners of the parent,
divided by the weighted average number of shares in issue during the year.

From continuing operations

Basic EPS

17,168,665 1,432,666,738

1.20

14,277,232 1,366,268,709

1.04

Share options

6,157,835

(0.01)

13,611,714

(0.01)

Diluted EPS

17,168,665 1,438,824,573

1.19

14,277,232 1,379,880,423

1.03

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:

Earnings as reported

17,168,665 1,432,666,738

1.20

14,277,232 1,366,268,709

1.04

Adjustments:

Impairment costs

- 1,432,666,738

335,401 1,366,268,709

0.03

Headline earnings
per share *

17,168,665 1,432,666,738

1.20

14,612,633 1,366,268,709

1.07

Share options

6,157,835

(0.01)

13,611,714

(0.01)

Diluted headline
earnings per share

17,168,665 1,438,824,573

1.19

14,612,633 1,379,880,423

1.06

* Headline earnings per share is required to be disclosed in terms of the Listing Requirements of the JSE Limited.

Group

(Pence)

Group

(Pence)

30 June 2011

30 June 2010

6.28

3.85

5.21

2.80

Net asset value per share

Tangible net asset value per share

15 DIVIDENDS

The Board of Directors recommend a final dividend for the year ended 30 June 2011 of 0.5135p per share (2010: Final
dividend of 0.3723p paid), to be approved by shareholders at the forthcoming annual general meeting of the Company.

136

Pan African Resources PLC Annual Report 2011

Mineral

Rights and

Capital

Mining

Building and

Plant and

Under

Shafts and

Land*

Property

Infrastructure

Machinery

Construction

Exploration Other

Total

PROPERTY PLANT AND EQUIPMENT AND MINERAL RIGHTS

Group

COST

Balance at 30
June 2009

Additions

Impairment**

Foreign currency
translation reserve

Balance at 30
June 2010

Transfer from
other intangible
assets***

Additions

Disposal

Foreign currency
translation reserve

Balance at 30
June 2011

27,636

10,856,214

1,589,448

11,466,433

20,196,910

326,062

44,462,703

24,760

1,811,948

4,081,563

17,075

5,935,346

(294,916)

2,706

1,062,711

156,442

1,184,752

2,117,419

120

4,524,150

30,342

11,918,925

1,770,650

14,463,133

26,395,892

48,341

54,627,283

1,061,675

8,019,557

124,366

2,317,359

6,056,098

4,332,003

184,608

21,033,991

1,648

826,948

98,054

820,725

92,121

1,499,424

9,028

3,347,948

31,990

21,827,105

1,993,070

17,601,217

6,148,219

32,227,319

241,977

80,070,897

ACCUMULATED DEPRECIATION

Balance at 30

June 2009

Charge for
the year

Foreign currency
translation reserve

Balance at 30
June 2010

Charge for
the year****

Foreign currency
translation reserve

Balance at 30
June 2011

CARRYING AMOUNT

- (2,266,469)

(637,028)

(3,604,411)

- (6,145,041)

(8,519)

(12,661,468)

(358,353)

(112,550)

(961,664)

- (1,682,546)

(9,980)

(3,125,093)

(234,186)

(66,229)

(385,903)

(659,394)

- (1,345,712)

- (2,859,008)

(815,807)

(4,951,978)

- (8,486,981)

(18,499)

(17,132,273)

(203,797)

(65,287)

(1,373,257)

- (1,242,902)

(25,416)

(2,910,659)

(158,369)

(45,299)

(289,825)

(479,823)

(2,634)

(975,950)

- (3,221,174)

(926,393)

(6,615,060)

(10,209,706)

(46,549)

(21,018,882)

At 30 June 2010

30,342

9,059,917

954,843

9,511,155

17,908,911

29,842

37,495,010

At 30 June 2011

31,990 18,605,931

1,066,677 10,986,157

6,148,219 22,017,613

195,428 59,052,015

Pan African Resources PLC Annual Report 2011

137

Notes to the Financial Statements (continued)
for the year ended 30 June 2011

Mineral

Rights and

Mining

Building and

Property

Infrastructure

Plant and
Machinery

Capital
Under
Construction

Shafts and
Exploration Other

Land*

Total

PROPERTY PLANT AND EQUIPMENT AND MINERAL RIGHTS (Continued)
Company

COST

Balance at 30
June 2009

Additions

Balance at 30
June 2010

Additions

Foreign currency
translation reserve

Balance at 30
June 2011

ACCUMULATED DEPRECIATION

Balance at 30
June 2009

Charge for
the year

Balance at 30 June
2010

Charge for the
year

Foreign currency
translation reserve

Balance at 30 June
2011

CARRYING AMOUNT

At 30 June 2010

At 30 June 2011

29,066

17,075

46,141

181,183

8,882

236,206

(8,519)

(9,980)

(18,499)

(25,416)

(2,634)

(46,549)

27,642

189,657

* Details of land are maintained in a register held at the offices 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 final impairment of the exploration machinery in the Central African Republic which was finally written off in the closure and

deregistration of the company.

*** Reclassification of Phoenix exploration expenditures from exploration and evaluation assets to Property plant and equipment as per

IFRS6 (“Exploration for and evaluation of mineral resources”) due to technical feasibility and commercial viability of the project being

demonstrated.

****The direct mining depreciation excluding other depreciation totals £2,885,243 as reflected as disclosed in Statement of Comprehensive

Income. The other depreciation which is not mining related of £25,416 is now reflected in Other (expenses)/income in note 8.

138

Pan African Resources PLC Annual Report 2011

OTHER INTANGIBLE ASSETS

EXPLORATION AND EVALUATION ASSETS

Balance at 30 June 2009

Exploration expenditure

Foreign currency translation reserve

Balance at 30 June 2010

Transfer to property plant and
equipment and mineral rights

Exploration expenditure

Foreign currency translation reserve

Balance at 30 June 2011

Group

30 June 2011

12,038,616

976,373

72,891

13,087,880

(1,061,675)

800,619

1,387,602

14,214,426

note 16

The exploration and evaluation assets relate to the Manica project in Mozambique.

Pan African Resources PLC Annual Report 2011

139

Notes to the Financial Statements (continued)
for the year ended 30 June 2011

Group

Company

30 June 2011

30 June 2010

30 June 2011

30 June 2010

GOODWILL

Goodwill acquired in a business combination is allocated at acquisition to the CGUs that are expected to benefit from
that business combination.

Opening and
Closing Balance

21,000,714

The Group tests the goodwill carrying amount annually for impairment, or more frequently if there are indications
that goodwill may be impaired. The goodwill carrying amount is not considered to be 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 12.10% (2010:12%)
for Barberton Mines and 12.6% (2010:12%) for Manica Gold Project, which reflect current market assessments of the
time value of money and the risks specific to the CGUs to the extent not already reflected in the cash flows being
discounted, an average gold price of US$1,372 and exchange rate of ZAR7.50 to the dollar over the life of projects. The
life of projects were estimated at 17 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.

140

Pan African Resources PLC Annual Report 2011

INVESTMENTS

Investments

Company

30 June 2011

30 June 2010

53,259,921

At 30 June 2011 the Company held the following shares in subsidiary undertakings:

Name of
Undertaking

Country of

Incorporation Principal Activity

Proportion
of capital
effectively held
by Company

Carrying
Amount 2011

Carrying
Amount 2010

Barberton Mines South Africa

Mining

100%

45,770,663

Explorator
Limitada

Mistral Resource
Development
Corporation

Mozambique

Exploration

100%

88,972

British Virgin Isles Exploration

100%

584,705

Brampton Capital
Overseas Limited British Virgin Isles Exploration

Phoenix Platinum South Africa

Mining

100%

2,485,000

4,330,581

53,259,921

Pan African Resources PLC Annual Report 2011

141

Notes to the Financial Statements (continued)
for the year ended 30 June 2011

Group

Company

30 June 2011

30 June 2010

30 June 2011

30 June 2010

20 REHABILITATION TRUST FUND

Funds held in trust fund

3,013,385

2,740,546

INVENTORIES

Consumable Stores

1,555,693

1,222,381

Provision for obsolete stock

(98,491)

(96,007)

1,457,202

1,126,374

22 TRADE AND OTHER RECEIVABLES

Trade receivables

1,880,730

2,905,338

49,400

48,589

Other receivables
and prepayments

624,948

347,054

71,600

86,483

VAT Receivable

1,748,723

542,267

27,265

4,254,401

3,794,659

121,000

162,337

The average credit period is:

Number of days

The ageing of trade receivables is current and is consistent with that of prior year.
No interest is charged on trade receivables.
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.

142

Pan African Resources PLC Annual Report 2011

Group

Company

30 June 2011

30 June 2010

30 June 2011

30 June 2010

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.

Cash and cash equivalents

10,123,822

12,756,262

11,546,466

14,240,891

CREDIT FACILITIES

The Group has the following credit facilities at 30 June 2011:

Nedbank Limited
Revolving credit Facility

Absa Bank Limited
overdraft facility

Guarantee

Credit Card

13,712,029

1,828,271

1,647,389

619,112

587,222

9,141

8,670

16,168,553

2,243,281

The Group has secured a three year revolving credit facility with Nedbank Limited. The facility carries an interest rate
of JIBAR plus 3% and is secured against a portion of Barberton Mines’ fixed assets and guaranteed by Pan African
Resources and Phoenix Platinum. The overdraft facility and asset finance facilities are unsecured. The overdraft facility
attracts interest at prime in South Africa. The Group has not yet utilised the facilities as it has sufficient cash on hand.

Pan African Resources PLC Annual Report 2011

143

Notes to the Financial Statements (continued)
for the year ended 30 June 2011

Group

Company

30 June 2011

30 June 2010

30 June 2011

30 June 2010

SHARE CAPITAL

Authorised

2,000,000,000 (2010: 2,000,000,000) ordinary shares of £0.01 each

20,000,000

Issued and fully paid up 1,444,040,711 (2010: 1,409,540,711) ordinary shares of £0.01 each

14,440,406

14,095,406

14,440,406

14,095,406

34,500,000 new ordinary shares in respect of share options exercised:

The following cash issue of shares were made during the year:
During the period under review the Company announced the issue and allotment of:
•
• On 25 August 2010 4,000,000 shares issued to N Steinberg at 4 pence per share.
• On 6 October 2010 6,000,000 shares issued to J Nelson at 2 pence per share.
• On 4 November 2010 4,000,000 shares issued to R Still at 4 pence per share.
• On 4 November 2010 7,500,000 shares issued to Pangea Exploration (Pty) Ltd

(“Pangea”) at 4 pence per share.

• On 10 November 2010 3,000,000 shares issued to J Yates at 5.5 pence per share.
• On 25 November 2010 4,000,000 shares issued to M Bevelander at 7 pence per

share.

• On 25 November 2010 4,000,000 shares issued to E Victor at 5.5 pence per share.
• On 25 November 2010 2,000,000 shares issued to E Victor at 7 pence per share.

Current number of share options outstanding at 30 June 2011 is 18,503,750 (2010: 55,145,000).
Participation is the share-based and other long-term incentive shemes is restricted to employees and directors.

Rob Still exercised all outstanding share options on 4 November 2010 and his shareholding equates to less than 5% of the Group’s

total number of shares in issue.

144

Pan African Resources PLC Annual Report 2011

Group

Company

30 June 2011

30 June 2010

30 June 2011

30 June 2010

TRADE AND OTHER PAYABLES

Trade and other payables

6,264,168

4,064,830

273,730

200,338

Accruals*

1,868,026

2,442,223

233,061

375,500

VAT Payable

Total Trade and
other Payables

61,556

8,193,750

6,507,053

568,347

575,838

*Accruals include an amount of £1,465,299 (£41,411 for the company) relating to the leave and bonus pay accrual
which was classified as a short term provision in the prior year. This is in accordance with IAS:19 Employee Benefits.

The average credit period is:

Number of days

The fair value of trade payables is not materially different from the carrying value presented.

PROVISIONS

Rehabilitation

Total

Rehabilitation

Total

Balance at 30 June 2009

2,796,503

Provided during the year

147,458

Utilised during the year

Foreign currency translation

278,819

Balance at 30 June 2010

3,222,780

Utilised during the year

(11,214)

Foreign currency translation

175,025

Balance at 30 June 2011

3,386,591

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.

Pan African Resources PLC Annual Report 2011

145

Notes to the Financial Statements (continued)
for the year ended 30 June 2011

Group

Company

30 June 2011

30 June 2010

30 June 2011

30 June 2010

LONG-TERM LIABILITIES

Cash Settled Share Options*

Opening Balance

Expense for the year

Foreign currency translation

Closing Balance

Post Retirement Benefits

Opening Balance

Utilised for the year

Foreign currency translation

Closing Balance

68,414

1,042

69,456

115,418

(9,710)

6,121

111,829

136,602

(33,407)

12,223

115,418

26,919

410

27,329

Total

181,285

115,418

27,329

*On 9 May 2011, Pan African established a cash settled share appreciation programme entitling selected executives and
employees of the Pan African Group, as approved by the board of Directors of Pan African, to be allocated notional
shares in Pan African. These notional shares will confer the conditional right on the participant to be paid a cash
settlement equal to the appreciation in the Pan African share price from the date of allocation to the date of surrender
or deemed surrender of notional shares. Participation in the share appreciation program is subject to the agreement of
a selected participant and acceptance by said participant of the rules and regulations governing the share appreciation
programme.

The share appreciation settlement will be determined no later than the sixth anniversary of the date that the notional
shares were allocated. However the participant can elect, subject to approval by PAR Remuneration Committee
(“Remco”), to surrender his/her notional shares and receive the share appreciation settlement at a date prior to the
sixth anniversary date.

The share appreciation settlement will be regarded as remuneration for income tax purposes and thus will be subject
to the deduction of PAYE and all other taxes and contributions via the payroll of the relevant Pan African Group
Company, which are for the account of the participant.

No share appreciation settlement shall be made until after the period, calculated from the date the notional shares
were allocated, of:

• two years has elapsed, in which event not more than 25% of the total number of notional shares allocated,

• three years has elapsed, in which event not more than 50% of the total number of notional shares allocated,

• four years has elapsed, in which event all of the notional shares allocated,

• or any lesser amount of notional shares, may be surrendered. Notional shares which a participant is entitled to
surrender are referred to as “surrenderable notional shares”.

Remco may, by resolution, cause any of these dates to be anticipated or, with the consent of the participant
concerned, postponed to such extent as it may determine.

146

Pan African Resources PLC Annual Report 2011

The participant is entitled, within a period of 60 days after the date of resignation, to surrender all his/her surrendable
notional shares and request the payment of the share appreciation bonus in respect thereof. If the participant is subject
to retirement (including early retirement approved by the company after the age of 55 in terms of company policy),
retrenchment, death or permanent disability, the participant or the participants estate is entitled, within a period of 6
months after the termination date, to surrender all his/her surrenderable notional shares and request the payment of
the share appreciation settlement in respect thereof.

Participation in share-based and other long-term incentive schemes is restricted to employees and directors.

Details of the share options outstanding during the year, in relation to this scheme, are as follows:

Pan African Cash Settled Share Options

30 June 2011

30 June 2010

Weighted
average exercise

price (Rands) Number of options

Outstanding at 1 July

Granted during the year

Exercised during the year

Forfeited in the year

Outstanding and
exercisable at 30 June

1.15

33,669,103

1.15

33,669,103

These fair values were calculated using the Binomial pricing model. The inputs in the model were as follows:

Weighted average
share price

Weighted average
exercise price

Expected volatility

Expected Life

Risk free rate

1.12

1.15

70.33%

4-5 years

7.56-7.84%

Expected Dividend Yield

4.00%

The Group recognised total expenses of £68,414 (2010: £ Nil) relating to cash-settled share based payments transactions
during the reporting period.

Vesting Schedule

Description Grant date

Vesting
period
(years)

Vesting
period
(days)

Vesting date

Valuation
(Rand)

Options
granted

Options
expected
to vest

Tranche 1

Tranche 2

Tranche 3

Totals

9 May 2011

731

1,096

1,461

9 May 2011

0.54

8,417,276

7,596,592

0.56

8,417,276

7,216,762

0.58 16,834,551 13,711,847

33,669,103 28,525,201

Pan African Resources PLC Annual Report 2011

147

Notes to the Financial Statements (continued)
for the year ended 30 June 2011

Group

Company

30 June 2011

30 June 2010

30 June 2011

30 June 2010

28 DEFERRED TAXATION

Deferred Tax Liabilities

Property, plant
and equipment

Provisions

Other

Net deferred
tax liabilities

10,469,324

8,881,636

(623,950)

(789,304)

(3,679)

9,841,695

8,092,332

Reconciliation of deferred tax liabilities:

Net deferred liabilities
at the beginning
of the year

Deferred tax charge
for the year

8,092,332

6,752,432

1,086,788

728,801

Translation difference

662,575

611,099

Net deferred liabilities
at the end of the year

9,841,695

8,092,332

Deferred tax assets not recognised for PAR company amounted to £2,385,719 (2010: £2,157,007).

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:

Cash and cash equivalents

(10,123,822)

(12,756,262)

(11,546,466)

(14,240,891)

Net interest-bearing assets

(10,123,822)

(12,756,262)

(11,546,466)

(14,240,891)

Equity

90,746,110

73,486,877

91,668,252

72,361,319

Net debt to equity ratio (%)

(0.11)

(0.17)

(0.13)

(0.20)

148

Pan African Resources PLC Annual Report 2011

Group

Company

30 June 2011

30 June 2010

30 June 2011

30 June 2010

FINANCIAL INSTRUMENTS (Continued)

Categories of Financial Instruments:

Financial Assets:

Cash and Cash Equivalents

10,123,822

12,756,262

11,546,466

14,240,891

Receivables

1,880,730

3,794,659

49,400

162,337

Financial Liabilities:

Trade and other payables

8,132,194

5,041,754

506,791

575,838

Financial Risk Management Objectives

The Group seeks to minimise the effects of financial risks by using derivative financial instruments to hedge risk
exposures where appropriate. The use of financial 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
financial derivatives and non-derivative financial 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 financial
instruments, including derivative financial instruments, for speculative use.

Credit Risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to
the Group. The Group has adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient
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 £4,879 (2010:£11,916) relating to other receivables,
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.

30 June 2011

30 June 2010

Customers Above 5%

1,831,330

2,856,749

Market Risk
The Group’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates and
the gold price. Where appropriate, the Group enters into a variety of derivative financial instruments to manage its
exposure to foreign currency risk and the commodity price risk. Market risk exposures are measured using sensitivity
analysis.

Pan African Resources PLC Annual Report 2011

149

Notes to the Financial Statements (continued)
for the year ended 30 June 2011

FINANCIAL INSTRUMENTS (Continued)

Foreign currency risk

The Group undertakes certain transactions in foreign currencies. Hence, exposures to exchange rate fluctuation 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 fluctuations in gold prices and exchange rates
on specific transactions. The contracts are matched with anticipated future cash flows from gold sales.

Interest rate and liquidity risk

Fluctuations in the interest rates impact on short-term investment and financing 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
financial 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

Foreign currency / gold price sensitivity

2011

2010

Closing rate at

30 June 2011

Average Rate for
the year ended
30 June 2011

10.94

11.11

$1,509

$1,366

Impact of 10% currency or gold
price movement on profit

5,341,923

4,485,530

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:

South African
Rands

GBP

Total

2011

Assets

Liabilities

2010

Assets

Liabilities

150

15,835,425

8,193,750

15,835,425

8,193,750

3,273,465

14,403,830

17,677,295

4,507,327

534,427

5,041,754

Pan African Resources PLC Annual Report 2011

FINANCIAL INSTRUMENTS (Continued)

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 fixed and
floating 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 flows and matching maturity profiles of
financial assets and liabilities.

The Group has access to financing facilities at its mining operations, of which the total unutilised portion is currently
£13,998,153 (2010: £133,720). The Group expects to meets its other obligations from operating cash flows and
proceeds of maturing financial assets.

Liquidity risk analysis

The following table indicates the Group’s remaining contractual maturity from its financial liabilities:

Weighted Average
Interest Rate

Less than 12
months

1-5 years

Total

Group

2011

Trade and other Payables

Long Term Liabilities

Other Short Term Liabilities

8,132,194

181,285

Pan African Resources PLC Annual Report 2011

151

Notes to the Financial Statements (continued)
for the year ended 30 June 2011

FINANCIAL INSTRUMENTS (Continued)

Liquidity risk analysis (Continued)

Weighted Average
Interest Rate

Less than 12
months

1-5 years

Total

Group

2010

Trade and other Payables

Long Term Liabilities

Other Short Term Liabilities

Company

2011

Trade and other Payables

Long Term Liabilities

Other Short Term Liabilities

2010

Trade and other Payables

Long Term Liabilities

Other Short Term Liabilities

4,064,830

506,791

200,338

27,329

200,338

Fair value of financial instruments

The directors consider that the carrying amounts of financial assets and liabilities recorded approximate their fair
values.

152

Pan African Resources PLC Annual Report 2011

POST RETIREMENT BENEFIT INFORMATION

All employees are required to be members of either the Barberton Retirement Fund, Sentinel Retirement Fund,
Mine Workers Provident Fund or the Shanduka Group Provident Fund. These are defined 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 £1,463,689 (2010: £1,268,883) represent employer contributions payable
to the schemes by the Group at rates specified in the rules of the scheme. The calculation of the provision for post
retirement medical benefits is performed internally by management using the South African Revenue Services life
expectancy tables as the benefits payable are a fixed amount per pensioner.

COMMITMENTS , CONTINGENT LIABILITIES AND GUARANTEES

Group

Commitments

The Group had outstanding open orders contracted for at year end of £3,671,395 (2010: £111,905).

Authorised commitments for the new financial year not yet contracted for totalled £9,641,450.

Contingent liabilities

The Group had no contingent liability in the current financial year or prior year.

Guarantees

The Group had guarantees of £13,712,029 in favour of Nedbank Limited (2010: Nil) and £352,185 (2010: £334,044)
in favour of Eskom, and £266,927 (2010: £253,178) in favour of the Department of Mineral Resources at year end.

Company

There were no commitments, contingent liabilities and guarantees for the Company for the year ended 30 June 2011
(2010: £nil).

Pan African Resources PLC Annual Report 2011

153

Notes to the Financial Statements (continued)
for the year ended 30 June 2011

32 DIRECTORS EMOLUMENTS

The key management personnel for which remuneration has been disclosed are the directors:

Executive directors

Emoluments

Share options exercised

Total

Non-executive directors

Emoluments

Total

Total Remuneration

30 June 2011

30 June 2010

311,592

372,993

684,585

260,278

156,328

153,918

156,328

153,918

840,913

414,196

Individual

Share options
exercised

Cost to
Company

Bonuses

Total 2011

Total 2010

Executive

Mr J Nelson

372,993

194,741

29,734

597,468

197,411

Mr J A J Loots*

87,117

62,867

Total

372,993

281,858

29,734

684,585

260,278

Individual

Non-Executive

Mr R G Still

Mr J Hopwood

Mr K C Spencer

Mr R M Smith*

Mr C M
Ramaphosa*

Total

38,235

43,559

26,135

48,399

156,328

38,235

26,823

24,832

43,559

37,720

26,135

22,632

48,399

41,911

156,328

153,918

154

Pan African Resources PLC Annual Report 2011

32 DIRECTORS EMOLUMENTS (continued)

*Directors fees accruing to these directors are paid by the Company to Shanduka Group (Pty) Ltd.
In terms of the cash settled share appreciation scheme, 5,805,006 share options were granted to Mr J Nelson (refer to
note 27).

Non Executive Directors
During the year under review, the non-executive directors were Mr R G Still, Mr K Spencer, Mr CM Ramaphosa and Mr
RM Smith.

No retirement fund contributions are currently made by the Company on behalf of directors.

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 :

30 June 2011

30 June 2010

Chairperson

Member

Chairperson

Member

Board of Directors Chairman

Board of Directors
Deputy Chairman

Board of Directors

Remuneration Committee

Audit Committee

SHEC Committee

Nominations Committee

41,139

24,199

7,260

9,680

7,260

18,875

4,840

7,260

4,840

35,624

20,956

6,287

8,382

6,287

16,345

4,191

6,287

4,191

Mr K C Spencer

Mr J Hopwood*

Total

Mr K C Spencer

Mr J Nelson

Mr R G Still

Mr J Hopwood

Total

Total options
Outstanding
1 July 2010

3,000,000

1,000,000

4,000,000

Average option
price (pence)

Total options
30 June 2011

6.2

3,000,000

1,000,000

4,000,000

Total options
Outstanding
1 July 2009

Average option
price (pence)

Total options
Outstanding
30 June 2010

3,000,000

6,000,000

4,000,000

1,000,000

14,000,000

6.2

2.0

2.5

6.2

3,000,000

6,000,000

4,000,000

1,000,000

14,000,000

* Mr J Hopwood share options have fully vested and his estate has not yet exercised these options.

Pan African Resources PLC Annual Report 2011

155

Notes to the Financial Statements (continued)
for the year ended 30 June 2011

DIRECTORS’ EMOLUMENTS (Continued)

Directors’ Interest in Shares

As at 30 June 2011 the CEO, Mr J P Nelson held 1,122,442 shares in Pan African Resources.

As at 30 June 2011 the Financial Director, Mr J A J Loots held 65,000 shares.

As at 30 June 2011 the Non Executive Director, Mr R G Still held 2,000,000 shares. 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-beneficial interest in Pangea’s
holding in the Company. Pangea holds 2.90% of the current issued share capital of Pan African.

Substantial Shareholdings

As at 24 June 2011 the substantial shareholdings of which the Company is aware are as follows:

Shares in issue:

Name

Shanduka Gold (Pty) Ltd

Coronation Fund Managers

Investec Asset Management (South Africa)

Allan Gray Investment Council

EQUITY SETTLED SHARE OPTIONS

Number of Shares

Percentage held

366,168,585

217,335,477

149,619,143

111,214,383

25.36

15.05

10.36

7.70

On 1 September 2005, the Company established a share option programme relating to equity-settled share options
entitling specific employees, officers, 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, shares 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:

(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,

156

Pan African Resources PLC Annual Report 2011

EQUITY SETTLED SHARE OPTIONS (Continued)

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. Participation in share-based and other long-term incentive schemes is restricted to employees and directors.

The number of vested share options to which an option holder is entitled to expires after of 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:

30 June 2011

30 June 2010

Weighted average
exercise price

Number of
options

Weighted average
exercise price

Number of
options

Outstanding at 1 July

4.8p

55,145,000

4.7p

52,945,000

Granted during the year

Exercised during the year

Forfeited during year

4.5p

6.2p

(34,500,000)

(2,141,250)

Outstanding 30 June 2011

5.2p

18,503,750

6.1p

4.0p

4.8p

3,400,000

(1,200,000)

55,145,000

Vested

Unvested

Vested

Unvested

Total number share
options at year end

11,013,750

7,490,000

40,019,583

15,125,417

Pan African Resources PLC Annual Report 2011

157

Notes to the Financial Statements (continued)
for the year ended 30 June 2011

EQUITY SETTLED SHARE OPTIONS (Continued)

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 the 20 March 2010, with the following inputs:

Share Price

Exercise Price

Expected volatility

Expected life

Risk-free interest rate

30 June 2010

R0.68

58.61%

3-6 years

8.15%

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 1 to 4 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 £107,056 (2010: £204,704) related to equity settled share-based payment transactions during the reporting period.

RELATED PARTY TRANSACTIONS

The Group entered into the following transactions and held year end balances with related parties:

Statement of
Comprehensive
Income

Statement of
Financial Position

30 June 2011

30 June 2010

30 June 2011

30 June 2010

21,650,960

9,032,496

(1,306,054)

(885,163)

(211,078)

(181,707)

(81,761)

20,052,067

(335,289)

(76,688)

7,553,649

11,224,272

15,922,612

8,982,300

2,002,084

27,146,884

10,984,384

(5,738,018)

* Dividends Received

* Fee Received from
Barberton Mines

* Admin Fee Received
from Phoenix Platinum

Fee paid to Metorex

Fee paid to Shanduka

Loans to subsidiaries

* Explorator Limitada

* Phoenix Platinum

* Barberton Mines

* These related party transactions related to Pan African and eliminate on consolidation. As at 30 June 2011 the foreign
currency translation reserve related to these transactions amounted to £1,548,471.

158

Pan African Resources PLC Annual Report 2011

EVENTS AFTER THE REPORTING PERIOD

Listing of Manica as a separate entity to unlock optimal shareholder value.

On 22 June 2011, Pan African announced that it was exploring optimal ways to bring its Manica gold project located in
Mozambique (“Manica Project”) to account. On 19 August 2011 the Company advised that a process to list its Manica
Project as a separate entity on an appropriate international exchange (“Separate Listing“), has now commenced.

The Company announced the appointment of Ms Phuti Malabie as a Non-Executive director effective from 20 July 2011.
Ms Malabie’s appointment follows the resignation of Mr Rowan Smith as a Non-Executive director of Pan African with
effect from 20 July 2011.

Group

Company

30 June 2011

30 June 2010

30 June 2011

30 June 2010

RECONCILIATION OF PROFIT BEFORE TAXATION TO CASH GENERATED BY/(USED
IN) OPERATIONS
Profit before taxation

26,416,974

22,155,788

21,244,832

8,298,257

Adjusted for:

4,692,474

3,908,846

(22,333,516)

(9,042,010)

Dividends Received

Impairment

Equity Settled Share
options costs

Net finance income

Royalty Costs

Company Depreciation

Depreciation - Mining

Operating cash flows before
working capital changes

Working capital changes

Increase in inventories

(increase) / decrease in
trade and other receivables

Increase / (decrease) in
trade and other payables
and provisions

Non-cash items

Cash generated by/
(utilised in) operations

Income taxes paid

Royalties paid

Net finance income

Dividends paid

Net cash from / (used
in) operating activities

113,516

(468,411)

9,980

(743,753)

146,626

175,470

(761,894)

2,368,239

25,416

2,885,243

(21,650,960)

(9,032,496)

335,401

204,704

(593,730)

837,378

3,125,093

64,985

(772,957)

25,416

31,109,448

26,064,634

(1,088,684)

858,377

(330,828)

(857,137)

(768,011)

11,389

(459,742)

(1,593,446)

41,337

(139,051)

1,916,375

(267,428)

2,019,795

(515,475)

(7,491)

(22,457)

285,677

31,967,825

25,207,497

(1,077,295)

(597,127)

(8,310,193)

(2,433,072)

761,894

(5,376,165)

(6,685,351)

(790,569)

593,730

772,957

468,411

(5,376,165)

16,610,289

18,325,307

(5,680,503)

(128,716)

Pan African Resources PLC Annual Report 2011

159

Notes to the Financial Statements (continued)
for the year ended 30 June 2011

RECONCILIATION OF PROFIT BEFORE TAXATION TO CASH GENERATED BY/(USED
IN) OPERATIONS (continued)

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

Taxation paid during year

Royalty paid during the year:

Royalty costs unpaid
at beginning of year

Royalty costs unpaid
at end of year

Royalty costs charge
for the year

Foreign currency translation

Royalty paid

Group

9,248,309

7,655,913

(1,086,788)

(728,801)

8,161,521

6,927,112

528,566

253,659

(689,543)

(528,566)

309,649

33,146

8,310,193

6,685,351

48,419

(76,991)

(48,419)

2,368,239

837,378

93,405

1,610

2,433,072

790,569

160

Pan African Resources PLC Annual Report 2011

SHAREHOLDER ANALYSIS

Shareholder spread

Number of
shareholders

Percentage

Number of
Shares

Percentage

1 - 1,000 shares

1,001 - 10,000 shares

10,001 - 100,000 shares

100,001 - 1,000,000 shares

1,000,001 shares and over

322

1,928

2,105

452

143

6.51

208,237

38.95

11,102,019

42.53

77,250,073

9.13

135,003,470

2.89

1,220,476,912

Total

4,950

100

1,444,040,711

0.01

0.77

5.35

9.35

84.52

100

Distribution of shareholders

Number of
shareholders

Percentage

Number of
Shares

Percentage

0.53

192,396,683

13.32

Banks

Brokers

Close Corporations

Endowment Funds

Individuals

3,986

80.53

130,309,443

0.22

1.39

0.18

4,202,539

5,682,361

2,385,003

0.08

11,972,616

0.26

35,923,236

0.89

254,527,694

11.56

270,319,952

1.31

1,901,846

1.39

99,916,585

0.29

0.39

0.17

9.02

0.83

2.49

17.63

18.72

0.13

6.92

1.35

427,262,733

29.59

0.30

7,240,020

4,950

100.00

1,444,040,711

0.50

100.00

572

Insurance Companies

Investment Companies

Mutual Funds

Nominees and Trusts

Other Corporations

Pension Funds

Private Companies

Public Companies

Total

Pan African Resources PLC Annual Report 2011

161

Notes to the Financial Statements (continued)
for the year ended 30 June 2011

SHAREHOLDER ANALYSIS (Continued)

Public / Non-Public shareholder

Number of
shareholders

Percentage

Number of
Shares

Percentage

Non - Public Shareholders

Directors including Pangea
Exploration (Pty) Ltd

Strategic Holder (more than 10%)

Public Shareholders

Total

Beneficial holding
of 3% or more

Shanduka Gold (Pty) Ltd

Coronation Fund Managers

Investec Asset Management
(South Africa)

Allan Gray Investment Council

4,943

4,950

0.001

778,135,055

53.89

0.001

45,011,850

0.001

733,123,205

0.999

665,905,656

3.12

50.77

46.11

100.00

1,444,040,711

100.00

Number of
shareholders

Percentage

366,168,585

217,335,477

149,619,143

111,214,383

25.36

15.05

10.36

7.70

162

Pan African Resources PLC Annual Report 2011

Plant Construction, Phoenix Platinum

Pan African Resources PLC Annual Report 2011

163

Notice of Annual General Meeting

NOTICE IS HEREBY GIVEN that the 2011 Annual
General Meeting of Pan African Resources Plc will be
held at the offices of Fasken Martineau LLP, Third Floor,
17 Hanover Square, London W1S 1HU on Tuesday, 1
November 2011 at 10h00 (all times stated are United
Kingdom times unless otherwise stated) to consider
and, if thought fit, 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 2011.

2. To approve the payment of a final dividend for the
year ended 30 June 2011 of 0.5135p per ordinary
share.

3. To re-elect Mr K C Spencer as a Director of the
Company, who retires by rotation pursuant to the
Articles of Association of the Company.

4. To re-elect Mr M C Ramaphosa as a Director of the
Company, who retires by rotation pursuant to the
Articles of Association of the Company.

5. To re-elect Ms P Malabie as a Director of the
Company, who was appointed since the last Annual
General Meeting.

6. To re-appoint Deloitte LLP as auditors of the
Company and to authorise the Directors to
determine their remuneration.

Special Business

As special business, to consider and if thought fit, to pass
the following resolutions of which Resolution 7 will be
proposed as an Ordinary Resolution and Resolutions 8
and 9 will be proposed as Special Resolutions:

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 thereunder, 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 £4,985,173.20; such authority shall, unless
previously revoked or varied by the Company in
general meeting, expire on the conclusion of the
next Annual General Meeting of the Company or
on 31 December 2012, 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.

8. 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 7 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 next Annual General Meeting of
the Company or on 31 December 2012, whichever
is the earlier, and such power is limited to the
allotment of equity securities:
a.

in connection with rights 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 £1,440,040.71 (being 10 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

c. up to a maximum aggregate value of
£722,020.35 (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) and (b) above 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 accordnace
with this resolution shall comply, to the extent
required, with the provisions of the Listing
Requirements of the JSE Limited pertaining to
general issues of shares for cash.

9. That the Company be generally and unconditionally
authorised for the purposes of section 701 of the
Companies Act 2006 (“then Act”) to make market
purchases (as defined in section 693 of the Act) of
ordinary shares of the Company on such terms and

164

Pan African Resources PLC Annual Report 2011

in such manner as the Directors shall determine
provided that:
a.

the maximum aggregate number of ordinary
shares which may be purchased is 72,202,035
(representing approximately 5 per cent of the
issued share capital of the Company at the
date of this notice;
the minimum price (excluding expenses)
which may be paid for each ordinary share is
1p;
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 five
business days on the London Stock Exchange
prior to the date of purchase; and
this authority shall expire at the conclusion
of the next Annual General Meeting of the
Company or on 31 December 2012, 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 the 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
5 October 2011
6 St James’s Place
London
England
SW1A 1NP

Pan African Resources PLC Annual Report 2011

165

Explanatory Notes

Entitlement to attend and vote

1. Pursuant to Regulation 41 of the Uncertificated
Securities Regulations 2001, the Company specifies
that only those members registered on the Company’s
register of members at:
•
•

10h00 on Sunday, 30 October 2011; or,
if the AGM is adjourned, 48 hours 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. 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.

5. 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 fit in relation to any other
matter which is put before the AGM.

Appointment of proxy using hard copy
proxy form

•
•

•

completed and signed; and
sent or delivered to Capita Registrars at PXS,
34 Beckenham Road, Beckenham, 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 Sunday, 30 October 2011.
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 officer 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
certified 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 first-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, PXS, 34 Beckenham Road, Beckenham,
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.

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:

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

166

Pan African Resources PLC Annual Report 2011

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
specifications 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 Sunday,
30 October 2011 (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.

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 officer 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 certified
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 Sunday, 30 October
2011. If you attempt to revoke your proxy appointment
but the revocation is received after the time specified
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 total voting rights

10. As at 18h00 on 4 October 2011, the Company’s
issued share capital comprised 1,444,040,711 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 4 October 2011 was
1,444,040,711.

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
office 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

Pan African Resources PLC Annual Report 2011

167

Glossary of Terms and Abbreviations

Term

Adit

Definition

A mining tunnel that is mined from the side of a mountain or mining pit.

Amira International
Limited

Independent association of minerals companies, which develops, brokers and
facilitates collaborative research projects.

ASTER®

Registered name for a water purification system developed by Goldfields Limited.

Attributable Profit
to the Parent

Profit 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

Coir Geotextile

This is a flotation plant constructed to recover PGMs from chrome tailings.

It is a 100% natural fibre, extracted from coconut husks. They serve as a slope
stabilisation agent prior to vegetation. It adds organic material to the soil, promotes
vegetative growth by absorbing water and preventing the top soil from drying out.
It can provide good soil support for up to three years, allowing natural vegetation
to become established.

Current Arisings

The live tailings discarded by the chrome operators’ washing plant and fed directly
to a CTRP.

Criminal Miners

Trespassers who enter mining operations and illegally remove visible gold.

Decline

Underground evacuation at an inclined angle – normally a shaft.

Deformational Process

Result of tectonic forces on a portion of the earth’s crust, that leads to folding and
shearing. Such deformation can cause changes in pressure and stress fields, which
result in equilibrium imbalance between fluid pressure and litho pressure and thus
fluid flow.

Development Capital

Capital expenditure incurred in development of the workings areas and creation
of additional Mineral Resources to support the mining operations.

Earnings Per Share

Attributable profit to the parent company divided by the weighted average number
of shares.

Effective Tax Rate

Current and deferred taxation as a percentage of net profit before taxation.

Fatal Injury

An injury that caused the death of a person.

Gabions

Used to stabilise against erosion.

168

Pan African Resources PLC Annual Report 2011

Term

Definition

Greenstone Belt

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.

Indicated Resource

A mineral resource reported as an in situ mineralisation estimate – intermediate
level of geoscientific knowledge and confidence.

Inferred Resource

A mineral resource reported as an in situ mineralisation estimate – low level of
geoscientific knowledge and confidence.

Lost Day Severity Rate

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.

Lost Time Injury Rate

The rate of lost time injuries occurring per 1,000,000 hours worked.

Measured Resource

A mineral resource reported as an in situ mineralisation estimate – high level of
geoscientific knowledge and confidence.

Mine Call Factor

Ratio, expressed as a percentage, which the specific product accounted for in
recovery plus residues bears to the corresponding product called for by the
mine’s measuring methods.

Order of Magnitude

Early in a project development of alternatives when requirements are not specified
in great detail, an order of magnitude estimate is developed for each
viable alternative. An order of magnitude estimate is deemed sufficient to compare
alternates.

Plant Recovery Factor

Ratio, expressed as a percentage, of the mass of the specific mineral product
actually recovered from ore treated at the plant to its total specific mineral
content before treatment.

Probable Reserve

A mineral reserve reported as a mineable production estimate – lower level of
geoscientific knowledge and confidence.

Proved Reserve

A mineral reserve reported as a mineable production estimate – higher level of
geoscientific knowledge and confidence.

PVC

Reserve Base

Serious Injury

coated galvanised gabions are used on the side slopes to create a wall against
erosion Alien Invasive Plants. The mine has introduced a control and management
program for alien vegetation. An alien invasive control plan has been drafted.

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.

Pan African Resources PLC Annual Report 2011

169

Glossary of Terms and Abbreviations (continued)

Abbreviation

Definition

BML

BBBEE

BFS

BIOX®

CIL

CTRP

DMR

IRR

JIBAR

Barberton Mines (Pty) Limited

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

Johannesburg Interbank Agreed Rate

Maintenance Capital

Capital expenditure incurred to support or improve the current mining operations

Mining Profit

MPRDA

NPV

Pan African or
the Company

PFS

PGE

PGM

PGM 4E

Mining profit represents the profits 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 Resources PLC

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

Phoenix Platinum Mining (Pty) Limited – The Chromite Tailings Retreatment Plant
in the North-West province, South Africa

SAMREC

Reverse Circulation: drilling method

The South African Resource Committee

The SAMREC Code

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

170

Pan African Resources PLC Annual Report 2011

Contact Details

Corporate Office

Cradock Heights
21 Cradock Avenue
Rosebank
Johannesburg
South Africa
Office: + 27 (0) 11 243 2900
Facsmile: + 27 (0) 11 880 1240

Company Contacts

Jan Nelson
Pan African Resources PLC
Chief Executive Officer
Office: + 27 (0) 11 243 2900

Nicole Spruijt
Pan African Resources PLC
Public Relations & Administration
E-mail: nicole@paf.co.za
Office: + 27 (0) 11 243 2900

Company Secretary

Phil Dexter
St James’s Corporate Services Limited
Company Secretary & Investor Relations (UK)
Office: + 44 (0) 207 499 3916

Consultants and Advisors

Martin Eales
RBC Capital Markets
Nominated Adviser & Broker (UK)
Office: + 44 (0) 207 653 4000

Justine James
Gable Communications
Public Relations - UK
Office: +44 (0)20 7193 7463

Registered Office

6 St James’s Place
London
SW1A 1NP
United Kingdom

Office: + 44 (0) 207 499 3916
Facsmile: + 44 (0) 207 491 1989

Cobus Loots
Pan African Resources PLC
Financial Director
Office: + 27 (0) 11 305 8900

Melanie de Nysschen
Macquarie First South Capital (Pty) Ltd
JSE Regulatory Adviser (RSA)
Office: +27 11 538 2000

Nigel Gordon
Fasken Martineau LLP
Legal Consultant
Office: +44 (0)20 7917 8500

www.panafricanresources.com

Pan African Resources PLC Annual Report 2011

171

Notes

172

Pan African Resources PLC Annual Report 2011

Notes

Pan African Resources PLC Annual Report 2011

173

Notes

174

Pan African Resources PLC Annual Report 2011

The Pan African Pillars

Profitable
Profit describes our commitment to grow the margins between our revenue and ‘all-in’ cost base.
This however is on the condition that profits can never come at the expense or exploitation of
our stakeholders. In short, our stakeholders also need to profit from their association with us.
This means no compromise on safety, credibility, honesty and integrity.

Sustainable
We need to take decisions that will benefit our stakeholders on a continued basis over the life
of the business. We are not about short term gains at the expense of the long term viability of
the business. We need to optimise our returns and minimise our risks, be flexible and adapt to
a changing world. We are part of the environment in which we do business, and cannot stand
divorced from this environment, our responsibilities or our commitments towards it.

Stakeholders
Stakeholders include our shareholders, employees and the communities directly surrounding our
operations. We also need to abide and respect the laws of the countries in which we operate.
We need to be fair and reasonable when dealing with contractors and suppliers and will not
solicit or entertain any form of bribery to enable preferential treatment. We will ensure that
we have a communication platform in place to facilitate effective communications between all
stakeholders and the Company in a constructive manner without prejudice.

Growth
This relates to our continued drive and passion to grow the other pillars of our Company,
namely: profitability, sustainability and stakeholder interest. Our growth, however, cannot simply
be for the sake of trying to be the biggest. Growth must unlock value and must not compromise
our business pillars.

We will always make decisions in the best interest of our stakeholders by
being true to our strategy and the four business pillars that support our
vision.