Annual Report 2012
The African Focused Precious Metals Producer
Pan African Resources PLC
Annual Report 2012
a
b
Our vision is to continue
to build our precious
metals mining business in Africa
by remaining focused on:
Profitable
Sustainable
Stakeholder
Growth
Achieving this through
People
Action
Results
“In the real world ... it’s the relationships
– the formal and informal networks of
people – that really govern how the
organisation runs and how value is
created”. Michael Schrage – Wall Street
Journal – March 1990.
We believe that our People – their
inside and not their outside – are
our most valuable asset. Pan African
Resources believes in fostering these
relationships by walking the talk with
regards to integrity and honesty. Our
employees must share in the wealth
created by the team and hence we
strive to improve compensation and the
standards of living.
Making it happen, motion, movement,
response to name but a few synonyms.
People who have a sense of belonging
and ownership make things happen.
Action requires proper planning, leading,
organising and controlling. These are the
basic principles of any business. We at
Pan African Resources believe in getting
things done the right way.
“With the right attitude, human beings
can move mountains. With the wrong
attitude, they can be crushed by the
smallest of grains.”
A group of people who have entered
into a positive relationship and who
believe in having a positive attitude
towards any challenge that they are
faced with, inevitably leads to achieving
the planned/desired results. Achieving
our targets is beneficial to all. We will
continue to strive towards achieving all
of our targets set without compromising
the safety and health of our employees.
Overview of Company Assets and Key
Strategic Metrics
100%
Ownership
100%
Ownership
100%
Ownership
Barberton Mines†
South Africa
BTRP – Barberton Tailings†
Retreatment Plant, South Africa
Evander Gold Mines*
South Africa
• 95koz of Au production per annum
• Head grade: 10g/t
• LOM: > 17 years
• Reserve : 11.34Mt
• 20koz of Au production per annum
• Head grade: 1.38g/t
• LOM: > 10 years
• Reserve: 6.91Mt
• 100koz of Au production per annum
• Head grade: 7.43g/t
• LOM: > 15 years
• Reserve: 28.21Mt
@ 3.17g/t (1.16Moz)
• Resource: 17.14Mt
@ 5.35g/t (2.95Moz)
† Including BTRP.
@ 0.54g/t (0.120Moz)
• Resource: 6.91Mt
@ 1.38g/t (0.306Moz)
@ 8.45g/t (7.66Moz)
• Resource: 109.55Mt
@ 8.16g/t (28.74Moz)
† Included in Barberton Mines’ estimates.
* Excludes surface tailings.
† A further 6Mt of additional tailings have also
been valued for possible retreatment.
In
production
In construction phase:
first production
June 2013
In production.
Acquisition expected
to be completed by
December 2012
2
• Debt free
• Unhedged
• Profitable
•
Consistent dividend payer
Our strategy is
to focus on:
• Low cash cost base
• High grade margins
• Long life producing assets
100%
Ownership
Total Group:
Excluding Evander Gold Mines
and Manica
• 115koz of Au production per annum
• Reserve: 11.34Mt
@ 3.17g/t (1.16Moz)
• Resource: 17.14Mt
@ 5.35g/t (2.95Moz)
Including Evander Gold Mines*
• 215koz of Au production per annum
• Reserve: 39.5Mt @ 6.94g/t
(8.8Moz) only underground,
does not include Evander Gold
Mines surface resources
• Resource: 126.7Mt @ 7.77g/t
(31.6Moz) only underground,
does not include Evander Gold
Mines’ surface resources
100%
Ownership
30%-45%
Ownership
Phoenix Platinum
South Africa
Manica Gold
Mozambique
• Resource: 50.55Mt
@ 1.82g/t (2.97Moz)
• 12koz 6E
• Plant feed grade: 3.16g/t
• LOM: > 17 years
• Reserve: 4.05Mt
@ 1.41g/t (0.183Moz)
• Resource: 4.85Mt
@ 3.16g/t (0.493Moz)
Building
to mid-tier status
In
production
Divest of asset to
Terranova Minerals NL
on ASX for strategic
shareholding. Will retain
stake of not less than 30%
*
The Evander Gold Mines transaction is still subject to a number of conditions precedent and successful completion cannot be guaranteed. Shareholders should take cognisance
of this when combined figures for Evander Gold Mines are shown.
Pan African Resources PLC
Annual Report 2012
3
Geographic Location
of Mining Operations and Projects
Towns close to project locations
Towns and cities on main roads
Neighbouring countries
Provinces
Botswana
Pilansberg Game Reserve
Mozambique
Limpopo
Kruger National Part
Loskop Dam
Nelspruit
Barberton Mines/BTRP
Middleburg
Barberton
Mafikeng
Kalahari
Desert
Phoenix Platinum
Zeerust
Rustenburg
Gauteng
Pretoria
Johannesburg
Witbank
Northern Cape
South Africa
North West Province
Potchefstroom
Vryburg
Klerksdorp
Kuruman
Taung
Free State
Evander Gold Mines
Secunda
Ermelo
Swaziland
Mpumalanga
KwaZulu-Natal
0
40
80
KILOMETRES
N
W
E
S
Company 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%
100%
100%
100%
100%
Emerald Panther
Investments 91
(Pty) Limited
Barberton Mines
(Pty) Limited
(Incorporated in South Africa)
Phoenix Platinum Mining
(Pty) Limited
(Incorporated in South Africa)
Mistral Resource
Development Corporation
(British Virgin Isles)
Brampton Capital
Overseas Limited
(British Virgin Isles)
Barberton Mining Operations
Phoenix Platinum Chrome
Tailings Retreatment Project
Dormant
100%
2%
98%
PT Sands
(Pty) Limited
(Incorporated in South Africa)
Explorata Limitada
(Incorporated in Mozambique)
Manica Gold Project
Mozambique
4
Table of Contents
Our Vision
1
Overview of Company Assets and Key Strategic Metrics 2
Geographic Location of Mining Operations and Projects 4
4
Company Structure
6
Financial Highlights
8
Salient Features
9
Financial Summary
10
Report Profile
11
Directors’ Responsibility Statement
Leadership Statements
Chairman’s Report
Chief Executive Officer’s Report
Financial Director’s Report
Our Business Philosophy
Stakeholder Engagement
Corporate Social Investment
The Transformation Trust
Sinqobile School Project
Umjindi Jewellery Project
Sinqobile Life Skills Centre
Sinqobile Vegetable Project
Bursaries for Tertiary Education
Operations
Barberton Gold Mining Operations
Phoenix Platinum CTRP
Barberton Tailings Retreatment Plant
Mineral Resources Management (General)
Corporate Governance
Board of Directors
Gap Analysis
Risk Management
Key Performance Indicators (KPIs)
Audit Committee Report
Remuneration Report
Annual Financial Statements
Table of contents
Notice of Annual General Meeting
Explanatory Notes
Glossary of Terms and Abbreviations
Contact Details
Form of Proxy – Pan African Resources PLC
13
14
16
26
31
32
36
38
39
40
41
42
43
45
46
64
74
78
83
91
96
98
100
102
103
105
106
155
156
158
162
163
Pan African Resources PLC
Annual Report 2012
5
Financial Highlights in Context
of the Four Business Pillars
1. Profitable
• Gross revenue from gold sales increased by 27.65% to £101.1 million
(2011: £79.2 million).
• Earnings before Interest, Taxation, Depreciation and Amortisation (‘EBITDA’)
increased 57.89% to £45.0 million (2011: £28.5 million).
• Attributable profit increased by 69.77% to £29.2 million (2011: £17.2 million).
• Earnings per share (‘EPS’) increased by 68.33% to 2.02p (2011: 1.20p).
• Profit margin* increased by 57.19% to US$918/oz (2011: US$584/oz).
*
Profit margin is calculated by deducting the total cash cost in US$/oz sold from the average US$/oz spot price received.
3. Stakeholder
• At Barberton the safety record declined somewhat as the Lost Time Injury
Frequency Rate (‘LTIFR’) increased to 3.26 (2011: 2.2) and the Serious
Injury Frequency Rate (‘SIFR’) increased to 0.74 (2011: 0.66).
• Salaries, wages, bonuses and retirement amounted to £23.8 million
(2011: £21.7 million) representing 23.54% of Group’s total revenue.
• Completed and opened Sinqobile Primary School at Barberton Mines
for 950 learners.
• Continue to support Umjindi Jewellery Project, Sinqobile
Vegetable Project and Sinqobile Skills Development Project.
6
2. Sustainable
• The Group’s cash balance increased by 96.04% to £19.8 million (2011: £10.1 million).
• The Group capital expenditure incurred was £17.4 million (2011: £21.0 million).
• In Rand terms, the cost of production increased by 12.39%
to ZAR566.0 million (2011: ZAR503.6 million).
• Initiated bursary fund around Barberton area.
4. Growth
• Announced the acquisition of 100% of Evander Gold Mines.
• Construction of Barberton Tailings Retreatment Plant under way.
• Completed construction of Phoenix Platinum Chrome Tailing Retreatment Plant
and produced first PGE concentrate at Phoenix.
• Gold reserve† inventory increased by 16.0% to 1.16Moz (2011: 1.0Moz).
• Gold resource† inventory increased by 4.41% to 5.92Moz (2011: 5.67Moz).
• Gold sold increased by 2.44% to 94.449oz (2011: 92.197oz).
†
Movement in the reserve and resource inventory includes Manica, but excludes the potential
impact of the Evander Gold Mines transaction.
Pan African Resources PLC
Annual Report 2012
7
Salient Features
Statement of Comprehensive Income
Revenue
EBITDA
Profit After Taxation
Headline Earnings
Mining Profit
Cost of Production
Impairment Costs
EPS
HEPS
Weighted Average Number of Shares in Issue
Statement of Financial Position
Non-Current Assets*
Current Assets**
Total Equity
Non-Current Liabilities
Current Liabilities
Operating Performance
Barberton Mines
Tonnes Milled
Head grade
Gold Sold
Spot Price Received
Total Cash Costs
Total Cash Costs
Capital Expenditure
30 June 2012
30 June 2011 Percentage Change
(£)
(£)
(£)
(£)
(£)
(£)
(£)
(Pence)
(Pence)
101,068,596
45,017,891
29,241,634
29,289,872
51,523,558
(46,122,811)
(48,238)
2.02
2.03
1,445,202,485
79,208,399
28,540,323
17,168,665
17,168,665
30,819,976
(45,345,417)
0
1.20
1.20
1,432,666,738
(£)
(£)
(£)
(£)
(£)
86,075,303
28,478,961
102,625,655
14,001,365
11,062,459
(t)
(g/t)
(oz)
(US$/oz)
(US$/oz)
(ZAR/kg)
(£)
308,095
10.45
94,449
1,694
776
193,360
10,739,237
97,280,540
15,835,425
90,746,110
13,409,571
8,960,284
296,200
10.55
92,197
1,366
781
175,520
6,773,729
27.60
57.73
70.32
70.60
67.18
1.71
100
68.33
69.17
0.87
(11.52)
79.84
13.09
4.41
23.46
4.02
(0.95)
2.44
24.01
(0.64)
10.16
58.57
* At year end Phoenix Platinum had not reached steady state production, therefore all income and expenditure was capitalised.
** Excluding non-current assets held for sale at 30 June 2012 of £13.1 million (2011: £nil).
The Group had a dynamic and
busy year, maintaining production
at our flagship Barberton Mines;
bringing Phoenix Platinum into
production in line with our growth
strategy and successfully bidding
for Evander Gold Mines.
K Spencer, Chairman
8
Financial Summary
Attributable Profit
Headline Earnings Per Share
35,000,000
30,000,000
25,000,000
20,000,000
£
15,000,000
10,000,000
5,000,000
2008
_
2009
2010
5,025,460
335,401
2011
_
2012
48,238
5,460,074
4,403,540
14,277,232
17,168,665
29,241,634
Impairment
Attributable
Profit
Gold Produced
z
o
105,000
100,000
95,000
90,000
85,000
80,000
75,000
70,000
Surface
Underground
2.50
2.00
1.50
1.00
e
c
n
e
p
0.50
2.03
1.20
1.07
0.85
0.52
2008
2009
2010
2011
2012
Revenue
120,000,000
100,000,000
80,000,000
£
60,000,000
53,000,352
40,000,000
39,254,557
20,000,000
101,068,596
79,208,399
68,506,394
2008
13,513
82,436
2009
3,955
94,909
2010
_
97,483
2011
_
92,043
2012
1,068
93,381
2008
2009
2010
2011
2012
Pan African Resources PLC
Annual Report 2012
9
Report Profile
This annual report covers the 2012 financial year from
1 July 2011 to 30 June 2012, and follows on from the annual
report published for Pan African Resources’ (‘Pan African’) in the
previous financial year. The report was compiled in accordance
with International Financial Reporting Standards (‘IFRS’), the King
Report on Corporate Governance in South Africa (‘King III’),
the UK Companies Act and the JSE Listings Requirements.
This report outlines the activities of the holding company Pan
African which is incorporated in the UK, and its subsidiaries in
all primary markets where Pan African operates. Its subsidiaries
are Barberton Mines (Pty) Limited (‘Barberton Mines’) and
Phoenix Platinum Mining (Pty) Limited (‘Phoenix Platinum’)
which are both operating in South Africa and Explorata Limitada
(‘Manica’) which is operating in Mozambique. The report covers
the Group’s operational and financial performance.
The report also covers the Company’s engagement processes
with our many stakeholders, and reports on successes and
challenges with our Corporate and Social Investment (‘CSI’)
and Local Economic Development (‘LED’) projects.
The Board recognises that this report does not meet some
of the standards set by the guidelines laid out in King III in terms
of reporting on our ‘non-financial matters’. We have, however,
attempted to produce a meaningful report, which should assist
the reader in contextualising our Company within a socio,
economic and environmental landscape, including developments
and outlook for the year ahead. Our journey towards improved
integrated reporting is set to continue.
The source data for this report was gathered at our various
operations and consolidated at Group level to provide accurate
information to stakeholders.
Forward-looking statements
This report may contain statements that are ‘foward-looking
statements’. Other than the historical facts, they may address,
without limitation, exploration activities, mining potential and
future plans and objectives of Pan African.
The Directors and management of Pan African are of the
belief that the expectations expressed in such forward-looking
statements or forward-looking information are based on
reasonable assumptions, expectations, estimates and projections.
However, such statements should not be construed as being
guarantees or warranties (whether expressed or implied) of
future performance and reflect Pan African’s view at the date
of publication of this report.
Pan African is not obliged to publicly update or revise these
forward-looking statements on events or circumstances
occurring after the date of publication of this report.
Directors’ Responsibilities
The Directors are responsible for preparing the annual report
and the financial statements in accordance with applicable law
and regulations.
Company law requires the Directors to prepare such financial
statements for each financial year. Under that law, the Directors
are required to prepare the Group financial statements in
accordance with International Financial Reporting Standards
(‘IFRS’) as adopted by the European Union and Article 4 of
the IAS Regulation, and have also chosen to prepare the parent
Company financial statements under IFRS as adopted by the
European Union. Under company law the Directors must not
approve the accounts unless they are satisfied that they give a
true and fair view of the state of affairs of the Company and of
the profit or loss of the Company for that period. In preparing
these financial statements, International Accounting Standards
requires that Directors:
• properly select and apply accounting policies;
• present information, including accounting policies, in a
manner that provides relevant, reliable, comparable and
understandable information;
• provide additional disclosures when compliance with the
specific requirements in IFRS 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; and
• make an assessment of the Company’s ability to continue as
a going concern.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company’s
transactions and disclose with reasonable accuracy at any time
the financial position of the Company and enable them to ensure
that the financial statements comply with the Companies Act
2008. They are also responsible for safeguarding the assets of
the Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company’s website. Legislation in the United Kingdom governing
the preparation and dissemination of financial statements may
differ from legislation in other jurisdictions.
10
Directors’ Responsibility Statement
We confirm that to the best of our knowledge:
1. the financial statements, prepared in accordance with International Financial Reporting Standards, as adopted by the EU, give a
true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the
consolidation taken as a whole; and
2. the management report, which is incorporated into the Directors’ report, includes a fair review of the development and performance
of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with
a description of the principal risks and uncertainties that they face; and
3. that the Directors are not aware of any legal proceedings or other material conditions that may impact the mining or exploration
activities of the Group; and
4. the Directors confirm that the Group holds title to the mining rights as set out in this report.
By Order of the Board
Jan Nelson
Chief Executive Officer
26 September 2012
Busi Sitole
Financial Director
26 September 2012
Pan African Resources PLC
Annual Report 2012
11
Our sustainability is intrinsically
linked to our stakeholders and we
remain cognisant of our responsibilities
to our employees, our communities
and our stakeholders.
Chairman
Chief Executive Officer
Financial Director
Pan African Resources PLC
Annual Report 2012
13
Chairman’s Report
“
With the proposed
acquisition of
Evander Gold Mines
the decision was
taken to not declare
a dividend for the
year. We intend to
resume a dividend
payment in 2013.
“
The gold market remained strong during the year as the
world economies struggled through turbulent times with gold
providing a safe-haven investment. As long as these economies
are uncertain, we believe that the fundamentals for gold will
remain sound and that the gold price outlook for the short to
medium term will continue to be favourable. Platinum Group
Metals, classified as both precious and industrial metals, are in
oversupply and will continue as such that way until the world
economy starts recovering or supply is reduced.
Economic growth in South Africa, as with the developed
world, has slowed over the past year and inflationary pressures
continue. Costs over the past year were well controlled at the
operations, however, the cost of electricity from the state-owned
utility Eskom will be a concern. In the past number of years,
electricity increases significantly above the inflation rate have
been implemented and once again this year double-digit price
increases are anticipated. Management at our operations have
put programmes in place to minimise electricity wastage and to
explore alternative energy sources.
Our sustainability is irrevocably linked to the communities in
which we operate, and we are aware of our responsibilities
not only to our employees but also to the greater community.
It is our policy to treat all our employees equally and as fairly
as possible, and the operations are structured to deliver
performance while operating safely. We are committed to the
14
highest levels of transparency and ethical conduct in all facets
of the Group right down to the rock face. We understand that
good Corporate Governance is essential and are committed
to complying with all legislation of the countries in which we
operate, as well as the rules of the stock exchanges on which
we are listed. To this end, we have instituted a system of internal
controls and auditing as well as a risk management programme
which we constantly review.
We were pleased that the South African Government has
confirmed that nationalisation of the mines and the mining
industry is not a policy objective, which has caused a degree of
uncertainty among investors in the past.
The Group had a dynamic and busy year, maintaining production
at its flagship Barberton Mines; bringing Phoenix Platinum into
production; and in line with our growth strategy, and succeeding
successfully in bidding for Evander Gold Mines subject to a
number of conditions precedent. Evander Gold Mines is a high
margin asset that should improve the Group’s gold production
to more than 200koz a year.
Pan African Resources outperformed the JSE all-share index and
the AIM all-share index by 63.44% and 62.80% respectively, and
the JSE mining index and the FTSE 350 mining index by 82.99%
and 74.49% over the past year. Shareholders received a 30% plus
return based solely on the share price escalation and more with
the reinvestment of their received dividend.
The year’s excellent safety record was unfortunately marred by a
fatal accident at Barberton Mines in May 2012. The focus remains
to continue to improve on our already impressive statistics with
the ultimate goal that no one is injured while at work.
operations. This acquisition will bring much needed ore reserves
into the Group and is considered the highlight of the year.
The first two phases of the Sinqobile School in Barberton were
completed and the doors opened to 950 pupils in July 2012.
The Sinqobile Life Skills Centre provided training to various
young community members in technical skills, which is intended
to provide them with a base for further training and gainful
employment in the future. These skills include sewing, bread
baking, welding and brickmaking. The Sinqobile Vegetable Project
has been expanded and the Umjindi Jewellery Project continues
to attract interest in that sector. To this end, a Transformation
Trust has been created which is funded jointly by Barberton
Mines as well as suppliers who donate a percentage of the cost
of goods and their services provided.
After the financial year end Pan African Resources announced
the sale of the Group’s Mozambique-based exploration project,
Manica to Auroch Minerals Mozambique, a wholly-owned
subsidiary of Australian-listed Terranova Minerals NL. Our
strategy is no longer to bring exploration projects up the value
curve and consider Auroch’s executive team to be better suited
in bringing this asset into production. Pan African Resources will
remain a minority shareholder in Auroch.
Pan African’s dividend policy is to pay an annual dividend, subject
to the capital requirements of the Company. With the proposed
acquisition of Evander Gold Mines, available cash will be used
to fund the transaction. Consequently, the decision was taken
to not declare a dividend for the year. We remain committed
to continue with the Company’s dividend policy and intend to
resume the dividend payment in the 2013 financial year should
normal legal and commercial considerations permit us to.
Barberton Mines had another solid production year and,
together with a continued high gold price, produced record
profits. The team directed its sizeable capital expenditure
budget into rehabilitating ageing infrastructure and exploring for
new orebodies. Construction work on the Barberton Tailings
Retreatment Plant is progressing well and the commissioning
of the plant remains scheduled for the second half of 2013.
The criminal mining problem of the past, where illegal miners
entered the mines and stole exposed gold ore, has been
managed well with no major incidents reported during the year.
During the year, Cyril Ramaphosa resigned as Chairman due
to other commitments and, as Deputy Chair, I succeeded Cyril.
Cyril, as Chairman of our major shareholder Shanduka, still
remains involved and we extend our thanks and that of the Board
to him for his wise counsel during his tenure as Chairman. Earlier
in the year, we welcomed Phuti Mahanyele and Hester Hickey
to the Board. Phuti, the CEO of Shanduka, brings the input from
our major shareholder and Hester, who has mining, accounting
and auditing background, joined as an Independent Director and
has taken over the Chairmanship of the Audit Committee.
Phoenix Platinum Retreatment Operation
commenced
production during the year and after the anticipated teething
problems settled down to start producing concentrate in
November 2011. The concentrate is sold to a local refinery for
final extraction of Platinum Group Metals.
I would like to offer my sincere thanks to my fellow Directors,
Jan Nelson our CEO, and to all the staff at the corporate office
and at the operations for their tireless efforts during a very
successful year. I would also like to thank all the shareholders for
their continued support.
On 30 May 2012, Pan African Resources entered into an
agreement with Harmony to acquire Evander Gold Mines for a
total price of £116.2 million. The Company intends to fund the
purchase consideration by a combination of an issue of shares,
available cash and debt. These operations are located in the far
eastern limb of the Witwatersrand Basin. The mines are in the
upper quartile of gold grade in the basin and are high margin
Keith Spencer
26 September 2012
Pan African Resources PLC
Annual Report 2012
15
Chief Executive Officer’s Report
“
Our successful
bid for Evander
Gold Mines is a
game changer and
propels the Group
into mid-tier status.
On completion,
the Group expects
to double gold
production output.
“
Reflecting on Our
Road to Success
Over the past five years, we have transformed Pan African
Resources from an explorer with limited cash resources into a
highly profitable, precious metals producer. The Company has
grown significant cash reserves, developed and delivered on
an organic growth pipeline of projects, achieved a heightened
operational excellence and paid dividends.
The announcement of the acquisition of the Evander Gold Mines
will ensure that the Group will continue to be able to deliver
stakeholder returns well into the future.
Applying a Responsible and
Sustainable Business Approach
The Company has developed a simple yet very powerful model
to ensure that all the stakeholders involved in the business are
aligned to our common vision, which is to build a sustainable
and profitable African focused precious metals mining group.
We intend to realise our vision through the strategic acquisition
and development of assets close to or in production, that have
(a) significant grade margin, (b) a low cash cost profile and
(c) a significant production life. We will also continue to seek
Pan African Resources views itself as
a partner with the communities and
environments in which we operate.
Harmonious, mutually beneficial
relationships and interactions are crucial
to the sustainability of our business.
16
and develop strategic partnerships to achieve our vision as we
have successfully done in the past.
Our intention is that all stakeholders participate in defining the
strategic objectives and also in the action plans that are required
to support our vision. Ideally, this creates a platform whereby
all stakeholders can map out their requirements of the Group,
and also gain an understanding of the collective expectations
of the Group. In this way, everyone understands the realities
and collective sacrifices to be made. During the year we have
successfully engaged our employees, investors, communities
and regulators, but admit that certain stakeholders’ engagements
were more focused and beneficial than other groups. We
will continue to embark on a process to expand our focus
and feedback to all stakeholder groups.
With the Engagement and
Support of Our Communities
In South Africa, in particular, and for that matter the rest of the world,
a sustainable and successful business cannot be built in isolation
from the environment in which we operate. This is important from
an environmental, legislative and commercial perspective but even
more so in taking into consideration the communities close to our
mining operations. The community provides a useful resource and
can be of great support commercially, politically and economically.
Our growth has not come at the expense of this stakeholder
group and we have proactively engaged them to ascertain their
ideas, needs and requirements.
Our Social and Labour Plan activities stem from proper and
due consultation with the relevant role players in the local
communities. Over the year, we completed numerous local
economic development and social responsibility projects at the
request of the communities. One project that we completed
this year and that we are extremely proud of, is the construction
of the Sinqobile Primary School that can accommodate
950 learners. We opened the doors to the school in July 2012
with the assistance of local community members at a cost of
ZAR6.7 million. We are delighted that our local children will have
a better chance in life with an improved primary education from
this new school. Other successful ongoing projects include the
Umjindi Jewellery Project, which received full accreditation with
the MQA, and the Vegetable Project that was handed over to its
beneficiaries and the Provincial Department of Agriculture.
An Integrated Business Approach
Company ‘well-being’ is only sustainable if all stakeholders share and buy into
the Company vision and strategy.
Shareholders
Profitability
and sustainability
of business
Communities around
our mining operations
Employees and
business partners
Arrows represent a common understanding, respect and attitude towards safe performance behaviour delivering on Company
strategy that rewards all stakeholders.
Pan African Resources PLC
Annual Report 2012
17
Chief Executive Officer’s Report
Continued
Community support will only come if we jointly develop a
long-term programme of intellectual and capital support that
will see the community grow and prosper with the mining
operation. In addition to our ongoing CSI initiative, the Board
has allocated capital resources of ZAR500,000 for 2013 for a
Youth Development and Employment programme at Barberton
Mines to be directly overseen by me. For further details on our
community projects, refer to page 36.
Through a Well-skilled
and Enabled Team
The Company represents a diverse skill talent pool of mining
professionals with a proven track record of delivery over the
past five years. These individuals have contributed to the success
and empowering culture of Pan African Resources.
On the completion of the Evander Gold Mines transaction,
the Group will grow to a team of over 5,000 people from our
current 2,000 people. This team represents a diverse cultural and
ethnic make-up with many years of practical mining experience.
The Group experience profile covers all aspects of mining.
Very few other mid-tier producers have such a diverse resource
pool available with such honed talent.
Our commitment to and
implementation of community
development projects and two-way communication approach
to our employees have ensured few disruptions to our mining
operations. Stakeholder engagement will continue to be part of
our focus and we will continue to allocate a considerable amount
of time to engage with all stakeholders, ensuring employees remain
focused on the business objectives and obtaining feedback and
addressing stakeholder issues in a timely and harmonious manner.
1
2
3
4
5
6
7
8
1 Jan Nelson – Chief Executive Officer
2 Ron Holding – Executive: Mining Operations
3 Busi Sitole – Financial Director
4 Casper Strydom – General Manager: Barberton Mines
5 Thandeka Ncube – Executive: Corporate and Social Development
6 Manny da Silva – General Manager: Evander Gold Mines
7 Andre vd Bergh – Executive: Human Resources
8 Pieter Wiese – Executive: New Business
18
It all Starts With the Right Orebody
A critical part of the success of Pan African Resources rests
on the quality of our orebodies. The Board has developed and
implemented certain key criteria that our orebodies must meet.
This applies to the development of our organic projects as well
as to the choice of our acquisitions.
The Group remains focused on only mining and developing
orebodies within the precious metals sector in South Africa
with a:
• high grade margin;
• low cash cost profile; and
• long Life of Mine (‘LOM’).
Creating an Enabling
Environment: Our
Competitive Advantage
Labour costs represent an average of 49% of total cost. Some
may see this as a disadvantage, especially in light of the South
African landscape we operate in, but we see this as a significant
competitive advantage. The Group nurtures a culture of
engagement with our labour force through the creation of an
enabling environment that allows all individuals to apply their
minds and share their ideas in their areas of focus. We continue
to believe that if all our people are encouraged to actively think
about the business, we will see a positive impact on productivity.
The above criteria will ensure that we retain a significant margin
between our cash costs and metal price received. Should metal
prices decline, the Group will be able to continue to generate
profit margins due to the quality and mining cost profile of
the orebodies. The Group has also, over the past three years,
implemented a Mineral Resource Management programme to
ensure that focus remains on mining at optimum grade and
the life of operations are extended to ensure sustainability.
Over the past year, we have invested £3.2 million in our
orebodies, creating the flexibility and infrastructure required
to create cost efficiencies and extend LOM.
Group Capital Expenditure
Phoenix Platinum Mineral Rights
Phoenix Platinum Plant Construction
Barberton Mines BTRP
Barberton Mines Maintenance Capital
Barberton Mines Development Capital
300,000,000
250,000,000
200,000,000
150,000,000
R
A
Z
100,000,000
50,000,000
0
12 months
ended
2008
12 months
ended
2009
12 months
ended
2010
12 months
ended
2011
12 months
ended
2012
By creating an enabling environment for our People, they are
able, through their actions, to impact on our orebody. This is
how we ensure that we deliver Results that we are proud of.
P (People) A (Action) R (Results) is our productivity recipe. Easy
to remember because it’s also the acronym by which we are
known.
We don’t expect people to be productive and strive for an
improvement in productivity if underground conditions are not
conducive to such improvements. As a result, the Company
works with our people to ensure that we create a safe
underground environment which allows continued improvement
in performance. The Group has more than doubled capital
expenditure over the past five years, which is one of the
reasons the Company is able to continue to deliver results on a
sustainable basis.
Creating an enabling environment is not just about money –
it is also about listening to the people in the organisation and
allowing them to make decisions. It is about clear and brutal
honesty focused on the issue and not the person. It is about
adopting a culture of respect and trust. It is also about allowing
people to learn by making mistakes.
Pan African Resources PLC
Annual Report 2012
19
Chief Executive Officer’s Report
Continued
In an environment where mining inflation is increasing on average
by 14% and limited improvements are possible on most costs, it
is a clear advantage to be able to impact on 49% of our cost base
by investing in our people!
In Continued Pursuit
of Operational Excellence
Barberton Mines Limited (‘BML’)
Our Core Asset
Barberton Mines sold 94,449oz of gold during the year, an
increase of 2.44% from the previous year (2011: 92,197oz).
Mining operations accounted for 308,095 tonnes milled, an
increase of 4.02% from the prior year (2011: 296,200 tonnes).
The increase in tonnes milled was mostly due to surface
stockpiles totalling 26,054 tonnes (at a head grade of 1.8g/t),
yielding 1,068oz of gold.
Head grade and overall recoveries remained relatively constant
at 10.45g/t (2011: 10.55g/t) and 91.22% (2011: 90.80%)
respectively.
Total cash costs per ounce decreased by 0.64%
to
US$776/oz (2011: US$781/oz). However, in Rand per kilogram
terms, total cash costs increased by 10.16% to ZAR193,360/kg
(2011: ZAR175,520/kg).
Total capital expenditure at Barberton Mines increased by
57.35% to £10.7 million (2011: £6.8 million). Maintenance capital
expenditure of £3.1 million (2011: £3.6 million) and development
capital expenditure of £3.1 million (2011: £3.2 million) were
incurred. The BTRP capital expenditure at the end of the
financial year totalled £4.5 million.
Barberton Tailings Retreatment
Plant (‘BTRP’)
Adding Significant Organic Production
Growth at Barberton Mines
As a consequence of successful metallurgical test work carried
out on composite drill hole samples drilled during the previous
financial year, the potential of retreating the Bramber tailings
dam was assessed in a feasibility study. The project viability
was confirmed in an independent review by Venmyn Rand
(Pty) Limited and during November 2011 the Company’s
Board of Directors (‘Board’) approved capital of £23.2 million
(ZAR300 million) for the BTRP Project at Barberton Mines.
Detailed engineering process and
flow design, to treat
approximately 1.2Mt per annum, was carried out by Basil Read
Matomo. When in production, the BTRP will increase the annual
gold production profile at Barberton Mines by 20,000oz to
115,000oz. With a cost structure of US$700/oz this project is
well in line with the Company’s strategy of developing low cost,
high margin projects.
The construction of the BTRP on a site adjoining the Bramber
Tailings Storage Facility (‘TSF’) is well underway and on target
to commence cold commissioning in April 2013. Additional land
adjacent to the current tailings dam extension has been acquired
for a TSF and the Environmental Impact Assessment (‘EIA’) is
to be completed by December 2012. The TSF will be ready
for use when the commissioning phase of the BTRP begins by
end April 2013.
The life of the BTRP Project has been augmented by auger
drilling on an additional 6Mt of tailings at the Consort Tailings
dam, extending the Life of Project from six to ten years.
Final commissioning is scheduled to be completed in June 2013
and production build-up is planned from July 2013.
Phoenix Platinum Chrome Tailings
Retreatment Plant (‘CTRP’)
First Production of Platinum Group Metals
The Phoenix Project has a total South African Code for
Reporting of Exploration Results, Mineral Resources and Mineral
Reserves (‘SAMREC’) compliant resource of 493,000oz PGM
4Es (4,853,000 tonnes at 3.16g/t PGM 4Es in situ).
The project is expected to produce 211,000oz PGM 6Es at a
plant recovery of 45% over the 17-year life of the operation
with a planned annual retreatment capacity of 240,000 tonnes.
The total capital cost required to construct and commission
the plant was £8.5 million (ZAR104 million). The cost for the
plant was funded from existing cash resources within the Group.
A sale of concentrate agreement was concluded with Western
Platinum Limited (‘WPL’), a subsidiary of Lonmin PLC, during
November 2011.
The construction of the CTRP was completed in November
2011 with the first low-grade concentrate delivered to WPL at
the end of December 2011.
During the hot commissioning phase the metallurgists continued
with CTRP stabilisation to achieve steady state concentrate
production. The International Ferro Metals Limited (‘IFM’) feed
source to the CTRP prior to January 2012 originated from the
IFM Lesedi underground operations and this sulphide rich tailings
material was the basis of the original CTRP project flotation test
work. Due to financial considerations IFM drastically cut back on
20
the Lesedi underground tonnes and moved mining operations to
the low-cost opencast oxidised ore section at Skychrome.
This opencast material is highly oxidised and contains poor
quality chrome and low PGE grades. Feeding this current arisings
material into the CTRP is not ideal as the highly oxidised tailings
do not float properly. The metallurgy of oxidised tailings negatively
affects recovery and grade, leading to poor PGE concentrate
production. The oxide to sulphide ratio contained in the run of
mine ore from the IFM opencast pits will reduce proportionately
with the increase in depth of the mining cut. Various options
are being investigated to address the effect of the highly oxidised
feed source, recoveries and final concentrate grade.
Manica Gold Exploration Project
Investment of Project as Separate Listed Vehicle
with a New Strategic Partner On Track
During the period under review the Group entered into
negotiations with certain strategic partners to divest of the
project. A separate management team was put in place
to a) assist the Group with its divestment strategy and b)
ensure compliance with its current obligations on the project.
The Group’s divestment strategy allows for the project to be
disposed for a consideration of cash and shares over a period
of three years. During this period the Group will remain a non-
controlling shareholder and will not assume management nor
financial responsibility for advancing the project. Further details
of the status of this strategy are provided in the ‘Events after the
reporting period’ section.
Acquisition of Evander Gold Mines
Game Changer for the Group (Propelling Pan
African Resources into Mid-tier Status)
On 30 May 2012 Pan African Resources advised shareholders
that it entered into an agreement (‘Acquisition Agreement’) with
Harmony which was amended on 15 August 2012 to acquire the
entire issued share capital and claims against Evander Gold Mines
for a total purchase consideration of £116.2 million, subject to
certain terms and conditions more fully described below.
Background to Evander Gold Mines
and Rationale for the Transaction
Evander Gold Mines, currently a wholly-owned subsidiary
of Harmony, mines and produces gold and related products
and is located in Mpumalanga, South Africa. Evander Gold Mines’
total underground resources represent 28.74Moz (110Mt
@ 8.16g/t) and a reserve of 7.66Moz (28Mt @ 8.45g/t) and its
operations comprise, inter alia:
• Evander 8 Shaft, which has an expected Life of Mine of more
than 15 years and is producing approximately 100,000oz
of gold per annum;
• Various development projects comprising Evander South,
Rolspruit and Poplar;
• Evander Gold Mines’ surface resources of 1.89Moz (203Mt
@ 0.29g/t) comprising existing tailings dumps; and
• Kinross metallurgical processing
facility and associated
infrastructure and buildings.
The Evander Gold Mines operations generated production profit,
as published by Harmony, for the full year ended 30 June 2012
of £52 million, before tax and other charges, up from £16.7 million
for the previous year. This was mainly the result of Harmony
investing approximately £21 million to upgrade and improve
the underground rock handling and ventilation infrastructure at
Evander 8 Shaft.
Evander Gold Mines meets Pan African’s investment criteria of a
long life, high grade, high margin, quality asset. Upon completion of
the transaction, the Group will increase its underground reserve
from 1.02Moz (3.9Mt @ 8.0g/t) to 8.8Moz (39.5Mt @ 6.94g/t)
and its underground resource from 2.45Moz (8.3Mt @ 9.22g/t)
to 34.7Moz (177Mt @ 6.08g/t) The acquisition is expected to be
earnings accretive, and potentially allows the Group to double
its current gold production profile. Upon completion of the
transaction the single mine risk of the Group will be removed.
Transaction Terms and Conditions
Conditions Precedent (‘Conditions’):
The Transaction is subject to, inter alia, the fulfilment or, where
possible, waiver of the following conditions:
• The Transaction being unconditionally approved by the
South African competition authorities by no later than
31 August 2012 (condition fulfilled on 26 July 2012);
• Evander Gold Mines entering into a new electricity supply
agreement with Eskom by no later than 31 October 2012, on
terms and conditions acceptable to Pan African Resources
(condition not yet fulfilled);
• Pan African Resources obtaining irrevocable undertakings
from shareholders controlling no less than 50% of Pan
African’s issued share capital, to vote in favour of the
Transaction by no later than 31 October 2012 (condition
fulfilled on 3 September 2012);
• Pan African Resources obtaining all the requisite approvals
for the Transaction from the stock exchanges upon which it
is listed by no later than 31 October 2012 (condition not yet
fulfilled);
• Pan African Resources obtaining approval from shareholders
for the Transaction and all resolutions ancillary to the
implementation of the Transaction, by no later than
31 October 2012 (condition not yet fulfilled); and
Pan African Resources PLC
Annual Report 2012
21
Chief Executive Officer’s Report
Continued
• The parties to the Transaction (‘Parties’) obtaining the
necessary consent for the Transaction from the Department
of Mineral Resources (‘DMR’) in terms of Section 11 of the
Mineral and Petroleum Resources Development Act 28
of 2002 by no later than 30 June 2013 (condition not yet
fulfilled).
In terms of the Acquisition Agreement, the Purchaser is
entitled to waive the Condition pertaining to Irrevocable
Undertakings and each of Harmony and the Purchaser
is entitled to extend the relevant date for fulfilment of
the Conditions pertaining to Shareholder Approval for
a period of 30 days. The closing date for the Transaction
shall be the later of 30 November 2012 or the tenth
business day after which all the conditions precedent to
the Transaction are fulfilled or waived, as the case may be.
The intention of the Parties is that the Closing Date shall
be 30 November 2012.
Except for the condition to enter into a new electricity
supply agreement with Eskom (expected to occur before
31 October 2012) and obtaining the necessary consent from the
DMR in terms of Section 11, all other conditions not yet fulfilled
can only be fulfilled upon shareholders’ approval of the transaction.
Purchase Consideration
In terms of the Acquisition Agreement, Pan African Resources
shall acquire the entire issued share capital of and claims against
Evander Gold Mines for a total consideration of £116.2 million
(ZAR1.5 billion) to be settled in cash in the following manner:
• Pan African Resources shall pay to Harmony an amount of
no less than £77.5 million (ZAR1 billion) (‘Deposit’) upon
the fulfilment or waiver of all the Conditions, other than the
necessary Consent for the transaction from the Department
of Mineral Resources in terms of Section 11 of the Mineral
and Petroleum Resources Development Act 28 of 2002; and
• Pan African Resources shall pay to Harmony the remainder
of the Purchase Consideration, being no more than £38.7
million (ZAR500 million), in cash, upon fulfilment of the
Consent for the Transaction from the Department of
Mineral Resources in terms of Section 11 of the Mineral
and Petroleum Resources Development Act 28 of 2002.
In the event that the above condition is not fulfilled and the
Transaction is not implemented, Harmony shall be required
to repay the Deposit to Pan African Resources, with interest,
calculated at 5% per annum, thereon. The Deposit shall be
secured by various security cessions and mortgage bonds
over the assets of Evander Gold Mines and the gold proceeds
earned by Evander Gold Mines. All cash and profits generated
by Evander Gold Mines from 1 April 2012 onwards are for
the benefit of Pan African Resources.
22
Break Fee
• The Parties have agreed to a Break Fee arrangement in terms
of which Pan African Resources shall pay to Harmony a Break
Fee of £3.87 million (ZAR50 million);
• The Full Break Fee was payable in two separate tranches and
shall be deducted from the Purchase Consideration in the
event that the Transaction is successfully implemented;
• The first tranche of the Full Break Fee is an amount
of £1.55 million (ZAR20 million) and was paid within five
business days of the Signature Date (paid on 31 May 2012);
• The second tranche of the Full Break Fee is an amount
of £2.32 million (ZAR30 million) which was paid within
five business days from the date upon which the Condition
pertaining to Irrevocable Undertakings was fulfilled or
waived, as the case may be (paid on 16 August 2012);
• The parties have agreed that the Full Break Fee will be
deductible from the £77.5 million (ZAR1 billion) deposit;
• If the Condition pertaining to Irrevocable Undertakings were
not fulfilled or waived, the First Tranche Break Fee shall be
non-refundable;
• The Full Break Fee shall be non-refundable in the event that
the Transaction is not concluded as a result of the Condition
pertaining to Shareholder Approval not being fulfilled; and
• In all other instances, the Full Break Fee shall be refundable
to Pan African Resources.
Funding the Transaction
When considering the funding of the Transaction, Pan African
Resources has formulated an approach consistent with its
philosophy of ensuring that its business provides profitable,
sustainable stakeholder growth.
With this in mind, Pan African Resources intends funding the
Transaction through a combination of:
• third party Debt Financing (‘Debt Financing’);
• its current cash reserves and cash generated through the
operations of and potential strategic disposals of non-core
assets by Pan African Resources and Evander Gold Mines
until the Closing Date (‘Cash Reserves’); and
• to the extent necessary, through the issue of new ordinary
shares in the share capital of Pan African Resources for cash.
Debt Financing
Pan African Resources is in the process of securing additional
Debt Financing from third party lenders upon terms and
conditions acceptable to Pan African Resources to a total amount
not exceeding £46.5 million (ZAR600 million) for the Group.
In terms of the Subscription Commitments, the Bookbuild
Participants have committed to, inter alia:
• follow their rights in terms of the Rights Offer; and/or
• apply for so many excess Rights Offer Shares in terms
of the Rights Offer, so as to ensure a total minimum
capital commitment to the Rights Offer of £54.2 million
(ZAR700 million) (‘Secured Capital’).
The combination of the Subscription Commitments, the Voting
Undertakings and the Secured Capital allows Pan African
Resources and/or Special Purpose Vehicle (‘SPV’) to:
• discharge its/their obligations to Harmony in respect of a
portion of the Purchase Consideration (or the Deposit, as
the case may be); and
• extend the Rights Offer to both the JSE and AIM markets
and thereby allow the majority of its shareholders trading
or residing within jurisdictions that are not restricted from
participating in the Rights Offer (further details of which
will be set out in the Rights Offer circular to shareholders)
to participate in the Rights Offer.
On 3 September 2012 Pan African Resources signed the
Bookbuild commitment agreements.
The Subscription Price constitutes a discount of approximately:
• 3.7% relative to the closing price of the Shares as traded on the
exchange operated by the JSE Limited (‘JSE’) on 30 May 2012,
being the date when the Evander Gold Mines transaction was
announced;
• 3.7% relative to the volume weighted average Share price as
traded on the JSE for the 30 trading days ended on 30 May
2012; and
• 4.2% relative to the volume weighted average Share price as
traded on the JSE over the period from the Announcement
date up to and including 15 August 2012, being the period
during which the Bookbuild was conducted.
Pan African Resources will compensate the Bookbuild Participants
for providing the Subscription Commitments by paying them a
liquidity fee equal to 2% of the Secured Capital.
Cash Resources
As at 25 September 2012 Pan African Resources has available
cash resources in the amount of approximately £20.2 million
(ZAR261 million), a portion of which may be utilised for purposes
of partially settling the Purchase Consideration. Furthermore,
cash generated from Pan African’s Barberton Mines and Phoenix
Platinum operations up until the Closing Date may be utilised for
purposes of partially settling the Purchase Consideration.
In addition, the purchase consideration shall be reduced by
any distributions made by Evander Gold Mines from interim
period profits. As a result, Pan African Resources is confident
that a considerable contribution towards the settlement of the
purchase consideration may arise from a combination of cash
resources and distributions.
Equity Capital Raising
Pan African Resources intends to finance a portion of the
Purchase Consideration through the issue of new Pan African
Resources ordinary shares (‘Rights Offer Shares’) by way of a
rights offer (‘Rights Offer’), as referred to in the announcement
published on 30 May 2012 (‘Announcement’).
Pan African Resources authorised a bookbuild exercise
(‘Bookbuild’), which was conducted with, inter alia, the lead
institutional shareholders of the Company and Pan African’s
Black Economic Empowerment
Shanduka
Resources (‘Bookbuild Participants’) with a view to obtaining
sufficient capital subscription commitments to secure the funding
of a portion of the Purchase Consideration and, in particular, the
potential ZAR1 billion deposit (‘Deposit’) which, at Harmony’s
election, may become due and payable on 30 November 2012.
shareholder,
On 17 August 2012 Pan African Resources announced that
the Bookbuild Participants had collectively and irrevocably
committed to:
• subscribe for Rights Offer Shares up to an aggregate
amount of £54.2 million (ZAR700 million), upon the Rights
Offer and the Transaction being approved by shareholders
(‘Subscription Commitments’); and
• vote in favour of all the requisite resolutions (‘Transaction
Resolutions’) pertaining to the Transaction, the Rights Offer
and matters ancillary thereto (‘Voting Undertakings’).
The Subscription Commitments were given by the Bookbuild
Participants at an issue price of ZAR1.90 per Rights Offer Share
(‘Subscription Price’). The aggregate Voting Undertakings secured
by Pan African Resources represent approximately 57% of the
current total issued ordinary shares of the Company (‘Shares’).
Pan African Resources PLC
Annual Report 2012
23
Chief Executive Officer’s Report
Continued
The Bookbuild outcome is summarised in the table below:
Bookbuild Participants
Voting
Undertakings
(Shares)
Subscription
Commitments
(Rands)
Investec Asset Management
141,785,423
231,000,000
Coronation Asset Management
160,000,000
220,000,000
Shanduka Gold
366,168,585
125,000,000
Allan Gray
97,074,447
75,000,000
Public Investment Corporation
39,894,492
19,282,500
Directors and others*
18,942,752
29,717,500
Total voting undertakings/
subscription commitments**
823,865,699
700,000,000
*
Including JP Nelson, RG Still and JAJ Loots, being Directors of Pan African Resources
(‘Directors’) and who hold or represent certain direct and/or beneficial and/or other
indirect/non-beneficial Shares. No other Directors hold Shares as at the date of this
announcement.
** Total Voting Undertakings will represent 56.9% of the current shares in issue.
Pro Forma Financial Effects
and Salient Dates
The pro forma financial effects of the Transaction on the
reported financial information of Pan African Resources, as well
as the salient dates and times relating to the implementation of
the Transaction will be announced by Pan African Resources as
soon as they have been determined.
Categorisation and Circular
The Transaction is classified as a category 1 Transaction for Pan
African Resources in accordance with Section 9 of the JSE Limited
Listings Requirements. A circular containing further information
pertaining to the Transaction will be posted, together with a
notice of a general meeting, to shareholders in due course.
Group Risk Profile
Understanding and Maintaining
Our Competitive Advantage
The major strategic advantage of the Group has been its ability
to keep cash costs down, generate profit and pay a dividend.
On an operational level this has been the result of our high grade
of orebodies, the technical skill base of our people and a small
company management culture.
Group cash costs will increase with the acquisition of Evander
Gold Mines, but this will be offset by the higher mining grades
and more consistent pay shoots at Evander Gold Mines. Inclusive
24
of the Group’s tailings retreatment projects (Phoenix Platinum
on a gold ounce equivalent basis and BTRP) overall Group
cash costs remain the same in spite of rising mining inflation of
about 14%.
The Group will continue to drive Mineral Resource Management
to ensure optimum grade profiles are achieved on a sustainable
basis. Capital and management resources will continue to be
allocated to improve underground working conditions in order
to drive productivity and efficiency and control cost escalation.
The Company will continue to be managed on the basis of
separate management teams at each operation with support
from a small corporate executive team. The acquisition
of Evander Gold Mines also expands the operational and skills
base of the Group considerably.
The Board believes that this approach will ensure that Pan African
Resources remains a viable business irrespective of commodity
cycle fluctuation and a rising cost inflation environment.
The Board continues to monitor and rank the key risks identified
by the executive and individual management teams. Action
plans are discussed and, where appropriate, implemented
to ameliorate risks.
regret
is with
Mine Safety and Health
that on
to
that we have
It
29 May 2012 at approximately 19:20 an underground general
shaft worker, Mr Christopher Makhosonke Hlela was fatally
injured underground when a measuring flask of a rock loading
station at the Fairview No 3 Shaft bottom dislodged and struck him.
report
The failure of the measuring flask could not be foreseen or
detected by weekly inspections; no single action was identified
as the reason for the death of Mr Hlela. No other person
contravened the requirements of the Act or regulations,
however, the following actions were recommended and have
been implemented at the mine:
• The mine must revise the design, construction, operation and
maintenance of box fronts, chutes and measuring flasks.
• The code of practice for the safe operation of draw points,
tipping points, rock passes and box fronts must be revised.
• The code of practice must include the timely replacement
of parts of the equipment that may fail.
• Procedures and training must be amended to provide for
the changes in the risk assessment and code of practice.
All relevant persons must be retrained.
• A system of inspections and planned task observations must
be implemented to ensure compliance to training, rules and
legislation.
The Group remains committed to the safety and health of all its
employees and continues to review its procedures on a regular
basis as part of its focus on a behaviour-based safety approach.
Our Future: Driving Operational
Performance, Organic Growth
and Strategic Partnerships
The offer to acquire Evander Gold Mines from Harmony marks
a significant milestone in the future growth of the Company.
On successful completion, the transaction will allow the Group
to double gold production output. Mineral reserves will increase
from just over 1Moz to close to 9Moz ensuring a sustainable
future. A pipeline of brownfield projects will become available
around current mining areas that can be developed to unlock
future value. Such development will be funded from internal cash
flows without impeding on future dividend payments.
No major project development will be undertaken without
shareholder approval.
In the coming year:
• No further major acquisitions.
• Successful integration of Evander Gold Mines.
• Commissioning of BTRP.
• Continue to safely optimise profits from the operations in
the Group.
• Complete the divestment of Manica Project.
• Resume dividend payment.
The Group will continue to differentiate itself from its peer
group and pursue its strategy of investment into orebodies with
high grades, high margins and a long life. Our people, through
their actions, will produce the results and we will continue
to invest in their well-being and skills upliftment.
I would like to offer my sincere thanks to my fellow Directors
and to all the staff at the Corporate Office and the Operations
for their tireless efforts during a very successful year. We would
also like to thank all the shareholders for their continued support
and we look forward to continuing our journey as an emerging
mid-tier precious metals producer.
Jan Nelson
26 September 2012
Pan African Resources PLC
Annual Report 2012
25
Financial Director’s Report
“
Strong annual results
with five years
of consistently
improved profits.
“
This report needs to be read in conjunction with the consolidated
annual financial statements on pages 114 to 154.
As mentioned in the Chairman’s and CEO’s reports, Pan African
Resources has delivered an exceptional set of results for the year
ended 30 June 2012.
2012 Features
• Group revenue in ZAR terms exceeded ZAR1bn (2011:
ZAR879.7) and in £ terms, £101.1 million (2011: £79.2 million).
• EPS and HEPS up 68.33% and 69.17% to 2.02p (2011: 1.20p)
and 2.03p (2011: 1.20p) respectively.
• Cash and cash equivalents
increased by 96.04% to
£19.8 million (2011: £10.1 million).
• Successful implementation of a new Enterprise Resource
Planning (‘ERP’) system at Barberton Mines which is expected
to improve financial control and reporting.
• All BTRP capital funded from internal cash flows.
• Successful bid for the acquisition of Evander Gold Mines
from Harmony.
26
Key Drivers of the
Group’s Results
Exchange Rates
Pan African Resources is incorporated in England and Wales, and
its reporting currency is Pound Sterling (‘£’). 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 Company
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’s
consolidated financial results. In the current financial year, the
average ZAR:£ exchange rate was 12.27:1 (2011: 11.11:1), and
the closing ZAR:£ exchange rate was 12.91:1 (2011: 10.94:1).
The year-on-year change in the average and closing exchange
rates of 10.44% and 18.01% respectively must be taken into
account for the purposes of comparing year-on-year results.
The annual average and year end closing ZAR:US$ exchange
rates were 7.75:1 (2011: 6.99:1), and the closing ZAR:US$
exchange rate was 8.27:1 (2011: 6.83:1). The year-on-year
change in the average and closing exchange rates of 10.87% and
21.08% respectively must be taken into account for the purposes
of comparison.
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’s consolidated
financial results. In the current financial year the average MZN:£
exchange rate was 42.76:1(2011: 52.64:1) and the closing
MZN:£ exchange rate was 43.25:1(2011: 45.33:1). The year-
on-year change in the average and closing exchange rates of
18.77% and 4.59% respectively must be taken into account for
the purposes of comparing year-on-year results.
Commodity Prices
During the year, the Group realised an average gold price of
US$1,694/oz (ZAR422,215/kg), an increase of 24.01% (37.64%)
from US$1,366/oz (ZAR306,757/kg). During the reporting
period, the gold price varied between a low of US$1,483/oz
and a high of US$1,985/oz. In ZAR terms the gold price varied
between a low of ZAR321,608/kg and a high of ZAR467,512/kg.
Platinum Group Metals’ (‘PGM’) prices were lower during the
year under review averaging US$992/oz primarily because of the
slowdown in the global economy. However, short-term supply
pressure should support prices at current levels for the next
year, which will be our first year of reporting PGM revenue from
Phoenix Platinum.
Inflation and Cost Escalation
The Group experienced cost of production inflation in ZAR
terms of 12.39% during the year under review. The impact of
inflation on the Group’s unit costs was mitigated to some extent
by the Group’s cost and efficiency improvement initiatives.
Statement of Comprehensive Income
Gross revenue from gold sales increased by 27.65% to
£101.1 million (2011: £79.2 million). The increase in revenue
was mainly attributed to a 24.01% increase in the average US$
gold spot price received to US$1,694/oz (2011: US$1,366/oz).
The increase in gross revenue was however negatively impacted
by the appreciation of the £ against the ZAR during the reporting
period, the £ appreciating by 10.44% from ZAR:£11.11 to 12.27.
The average US$:ZAR exchange rate was 10.87% weaker at
ZAR7.75 compared to the previous year (2011: ZAR6.99),
which positively
in ZAR.
The effective ZAR gold price was 37.64% higher at ZAR422,215/kg
(2011: ZAR306,757/kg).
impacted
received
revenue
Group mining profit grew by 67.21% to £51.5 million
(2011: £30.8 million). The profit margin in ZAR terms
also substantially increased by 74.38% to ZAR228,855/kg
(2011: ZAR131,237/kg) due to the favourable gold price received
during the year under review. The total cash cost per kilogram
increased by 10.16% to ZAR193,360/kg (2011: ZAR175,520/kg).
In US$ terms the total cash cost per ounce decreased by 0.64%
to US$776/oz (2011: US$781/oz).
Total Cash Cost vs Average Gold Price Received
1 800
1 600
1 400
1 200
1 000
800
600
400
200
z
o
/
$
S
U
Total Cash Cost/oz
Average Gold Price
Received $/oz
12 months
ended
2008
12 months
ended
2009
12 months
ended
2010
12 months
ended
2011
12 months
ended
2012
Pan African Resources PLC
Annual Report 2012
27
Financial Director’s Report
Continued
Cost of production only increased by 1.77% to £46.1 million
(2011: £45.3 million). In Rand terms, cost of production increased
by 12.39% to ZAR566.0 million (2011: ZAR503.6 million).
This increase is mainly attributable to a 27.13% increase in
electricity costs to ZAR62.8 million (2011: ZAR49.4 million),
engineering and technical services costs increasing by 21.65%
to ZAR50 million (2011: ZAR41.1 million) and salary, wages and
other staff expenses increasing by 18.72% to ZAR275.9 million
(2011: ZAR232.4 million). These increases were offset by the
reduction in security costs, which were down by 12.76% to
ZAR29.4 million (2011: ZAR33.7 million) and processing costs
reducing by 5.11% to ZAR50.1 million (2011: ZAR52.8 million).
Cash Cost Breakdown
Cash Cost Breakdown (excluding Capex)
Year ended 30 June 2012 (%)
11
9
9
4
5
13
49
Totals:
£46,122,811
R566,031,940
US$776/oz
increased by 58.33% to £3.8 million (2011: £2.4 million) due
to increased revenue.
EBITDA for the year under review was £45.0 million
(2011: £28.5 million), an increase of 57.89%. EPS increased by
68.33% to 2.02p (2011: 1.20p) and HEPS were up 69.17% to
2.03p (2011: 1.20p), supported by increased revenue from gold
sales. The HEPS was slightly higher in comparison to the EPS due
to an impairment charge of £0.05 million. The impairment relates
to Barberton Mines’ Segalla plant which is held for sale; the net
book value was impaired to the agreement sale price.
Group income tax increased by 41.30% to £13.0 million
(2011: £9.2 million), in line with the increase in profits before
tax. During the year under review, South Africa’s gold mining
income tax formula was reduced due to the introduction
of withholding tax on dividends that replaced the secondary
tax on companies resulting in the ZAR effective tax rate of
Barberton Mines decreasing to 29.1% (2011: 34.5%).
Accounting for the
Phoenix Project
The construction of the Phoenix CTRP (‘Chrome Tailings
Retreatment Plant’) was completed in early November 2011,
with hot commissioning commencing thereafter and the first
concentrate being produced at the beginning of December
2011. During the testing phase, all the expenditures incurred
were capitalised and the plant was declared to be brought into
use for accounting purposes in July 2012.
Cash Cost Breakdown (excluding Capex)
Year ended 30 June 2011 (%)
Statement of Financial Position
10
8
10
5
7
14
46
Totals:
£45,345,417
R503,592,598
US$781/oz
Other expenses
to £5.9 million
increased 110.71%
(2011: £2.8 million) largely due to once off costs associated
with Evander Gold Mines’ acquisition amounting to £0.9 million,
costs related to the sale of Manica amounting to £0.5 million,
community project costs of £1.2 million and cash-settled share
option expense of £0.8 million. The royalty charge for the year
28
Statement of financial position improved significantly during
the year. The increase was, however, partly offset by the effects of
the stronger closing £ currency against the Rand which resulted
in a negative translation reserve of £1.9 million in 2012 compared
to a positive translation reserve of £8.3 million in 2011.
Current assets excluding non-current assets held for sale,
increased by 80.38% to £28.5 million (2011: £15.8 million).
This was primarily due to a higher cash balance and an increase
in debtors due to the higher value of gold shipped on the
last day of the financial year compared to the previous year.
Net asset value (‘NAV’) per share increased by 13.06% to 7.09p
(2011: 6.28p) and tangible NAV per share increased by 22.83%
to 4.73p (2011: 3.85p).
Non-current assets decreased by 11.51% to £86.1 million
(2011: £97.3 million), mainly due to assets which have been
classified as held for sale. These assets relate to Manica assets and
Barberton’s Segalla plant. Pan African Resources entered into
an agreement with Terranova Minerals NL to sell the Group’s
interest in the Manica Project detailed further under ‘Events
after the reporting period’ note in the Directors’ report. This
transaction is expected to be finalised within the next financial
year.
Current liabilities increased by 23.33% to £11.1 million
(2011: £9.0 million) due to outstanding income and royalty tax.
The Group remains debt free with an untapped revolving credit
facility of £11.6 million.
Statement of Cash Flow
The Group’s cash and cash equivalents increased by 96.04% to
£19.8 million (2011: £10.1 million). This increase was mainly due
to increased cash generated from operations of £30.6 million
(2011: £16.6 million), up by 84.34% from 2011 after making
significant payments
including dividends of £7.4 million
(2011: £5.4 million), income tax of £8.4 million (2011: £8.3 million)
and royalty charge of £3.3 million (2011: £2.4 million). Cash used
in investing activities of £17.4 million mainly related to capital
expenditures for Barberton’s maintenance and development
capital expenditures, Phoenix and Barberton Tailings Project.
Looking Ahead
Our key financial focus for the 2013 financial year will include
the following:
• maximising margins by containing costs based on a forecasted
average gold price of ZAR400,000/kg, PGM basket price
of US$1,030/oz, and exchange rates of US$:ZAR 8.34 and
£:ZAR 13.26;
• maximising cash generation and increasing our revolving
credit facility to ensure sufficient funding for BTRP and on
mine capital expenditure;
• securing funding for the Evander Gold Mines transaction by
concluding the rights issue with our shareholders and finalising
debt finance with third parties; and
• integrating Evander Gold Mines’ financial systems into the
Pan African Resources Group, which will include migrating
Harmony’s shared services over to Pan African Resources.
Thank You
Many thanks to the Board and to my colleagues and in particular
Jan Nelson for their assistance and support since my appointment
in December 2011.
Busi Sitole
26 September 2012
Shareholders received a 30%+
return based solely on our
share price escalation.
B Sitole, Financial Director
Pan African Resources PLC
Annual Report 2012
29
In South Africa, in particular, and
for that matter the rest of the world,
a sustainable and successful business
cannot be built in isolation from the
environment in which one operates.
Stakeholder Engagement
Towards Sustainability
Corporate Social Investment
Pan African Resources PLC
Annual Report 2012
31
Stakeholder Engagement
Broad Based Black Economic
Empowerment (BBBEE) or Black
Economic Empowerment (BEE)
Pan African Resources is committed to the principles and
objectives of BBBEE and reports on its achievements based on
the BBBEE pillars as discussed below.
Ownership
Pan African Resources enjoys a constructive and valuable
relationship with its BEE partner, Shanduka Resources via
its wholly-owned
subsidiary Shanduka Gold. Shanduka
owns 25.28% of the Group and actively assists with fulfilling
government requirements regarding BEE as well as engaging with
the management team on ideas and opportunities.
Human Resources Development
and Employment Equity
Pan African Resources complies with both the Employment
Equity Act and the Skills Development Act. The Group submitted
a Workplace Skills Plan, an Annual Training Report and an
Employment Equity Report for the financial year 2011/2012. We
were also audited by the Department of Labour in February
2012 during which all of these reports were discussed with
the Company’s Employment Equity Committee. One non-
conformance had been issued which has subsequently been
addressed. We have also established a Future Forum Committee
that convenes quarterly.
The progress made in terms of our Employment Equity targets
is as follows:
2012
Target
%
2012
Actual
%
2014
Target
%
20
28
32
44
57
90
20
27
32
45
57
90
40
40
50
60
70
90
Top Management
Senior Management
Middle Management
Junior Management
Other officials
Learnerships
Procurement and
Enterprise Development
Pan African Resources supports the development of small and
medium Black-owned enterprises. Procurement spent from BEE
entities was as follows:
Capital Goods
Services
Consumable Goods
Actual
2012
%
26
42
34
Target
2014
%
40
70
50
Community Development and
Corporate Social Investment
Details of the community projects and our CSI initiatives can be
viewed from page 36 in this report.
Communication
The Company believes that communication is a two-way
process, and the communication efforts are conducted formally
on a daily, monthly and quarterly basis in line with the needs of
each stakeholder group.
We consider our communication efforts to be at the heart
of much of our success over the last five years. We foster
good relationships with all our stakeholders who include our
employees, our recognised unions (NUM and UASA), the
community, local government and our shareholders.
Formal communication takes place via recognised structures,
which include monthly shaft committee meetings, branch
committee meetings, the local community forum, the IDP
and LED offices as well as the in-house, day-to-day informal and
formal meetings between supervisors, managers and employees.
The communication process is enhanced through a monthly
management briefing and on a quarterly basis, a roadshow and
straight talk session conducted by the CEO.
Labour Unions
Barberton Mines
South African labour relations are highly regulated and the Group
complies with the Labour Relations Act, the Basic Conditions
of Employment Act and the Employment Equity Act. Under
these regulations, our activities are monitored by state agents
with whom we meet annually.
Management at Barberton Mines engages with their labour force
via the legally recognised NUM and UASA unions.
Phoenix Platinum
Phoenix employs approximately 50 contractors and five full-
time employees on the plant. Contractual agreements with
the contractors are revisited in January each year and market-
related increases apply. The five full-time employees’ salaries
are negotiated directly at Head Office.
32
Shareholder Report
Pan African Resources conducts a proactive investor relations
programme during the year which enables dialogue with all
shareholders and analysts to communicate the Company’s
strategy, rationale
investment case.
for acquisitions and
The programme includes:
• presentations and dial-in conference calls at the time of annual
and interim results;
• attendance and speaking at sector and commodity-related
conferences in South Africa, the United Kingdom, Europe and
the United States;
• briefing meetings and calls with all major institutions and
interested research houses during the year;
• hosting of site visits and investor lunches; and
• proactive SENS and press announcements and relationship
building with stakeholders to promote understanding of
the Group.
Top 16 Shareholders Movement: 2012 Compared to 2011
Shares in issue 1,448,262,361 (2011: 1,444,040,711)
Investment Managers
Rank
Name
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
Shanduka Gold (Pty) Limited
Coronation Fund Managers
Allan Gray Investment Council
Investec Asset Management (South Africa)
Investec Asset Management (UK)
Public Investment Corporation of the Republic of South Africa
Sunvest Corporation
Barclays Personal Investment Management
RMB Asset Management (Pty) Limited
Hargreaves Lansdown Asset Management
US Global Investors
TD Direct Investing
Selftrade
LSV Asset Management
Kagiso Asset Management
Old Mutual Life Assurance
Commentary
• Geographical ownership
including Black
Economic
Empowerment:
o SA
o UK
o Channel Islands
o US
o Other
56.12%
24.17%
4.82%
3.01%
11.88%
Jun 2012
Number
of Shares
366,168,585
158,571,455
114,466,244
92,067,989
51,516,434
39,894,492
33,200,000
21,912,325
21,536,511
20,642,400
15,000,000
14,754,970
12,125,540
11,988,716
11,741,397
10,194,755
Jun 2012
%
25.28
10.95
Jun 2011
%
25.36
16.06
7.9
6.36
3.56
2.75
2.29
1.51
1.49
1.43
1.04
0.95
0.84
0.83
0.81
0.7
7.78
10
0.88
–
2.29
1.7
0.69
1.16
0.56
1.08
0.97
0.22
0.48
–
Directors’ ownership:
o J Nelson:
o R Still:
o C Loots:
1,122,442 (beneficial)
2,000,000 (beneficial)
14,224,696 (indirect non-beneficial)
65,000 (beneficial)
Pan African Resources PLC
Annual Report 2012
33
Stakeholder Engagement
Continued
Share Price Performance 2012
PAN SJ Equity (R1) 200.00 unch
GOLDS Comdty (R2) 1,605.05 +60
JMNNG Index (R3) 29,229.32 -86.20
PAN SJ Equity – Volume 0.679 -3.392
220
200
180
160
1,900
1,850
1,800
1,750
1,700
1,650
1,605.05
140
37,000
36,000
35,000
34,000
33,000
32,000
31,000
30,000
1,550
29,000
120
20
15
10
5
n
o
i
l
l
i
M
Jul 2011
JSE Limited Commentary
• Pan African’s JSE share price is up 70.63% for the year to
close at 200 cents per share on 29 June 2012, with a high
of 215 cents on 8 February 2012 and a low of 126 cents on
8 August 2011.
• A total of 556 million shares were traded during the year at
a total value of R1.023 billion with an average of 2.2 million
trades per day.
• Pan African’s share outperformed the JSE all-share by 63.44%
and the JSE mining index by 82.99% over the year.
AIM Commentary
• Pan African’s AIM share price is up 40.91% for the year with a
high of 18.25p on 27 February 2012 and a low of 10.88p on
8 August 2011.
• A total of 362 million shares were traded during the year at
a total value of R53.7 million with an average of 1.4 million
trades per day.
0.679
Jul 2012
Source: Bloomberg.
• Pan African’s share outperformed the AIM all-share index
by 62.80% and the FTSE 350 mining index by 74.49% over
the year.
Shareholder Returns
JSE-listed shareholders received a return of 37.93% over the
year based solely on the share price escalation, and would have
received a 43.67% return if they had reinvested the annual
dividend back into the share.
AIM-listed shareholders received a return of 15.88% over the
year based solely on the share price escalation, and would have
received a 20.06% return if they had reinvested the annual
dividend back into the share.
34
Towards a Sustainable Business
Pan African Resources believes that in order to create an
operationally sustainable business, the flow of communication
and interests of stakeholders must overlap. Only through the
consideration of all the stakeholders, will the business succeed in
aligning the needs and requirements of all, so that the business
can operate in balance and harmony.
The South African Government has set targets for the mining
industry in terms of social development and community
upliftment that are laid out in the Mining Charter. We strive
to meet as well as exceed these targets as the creation of a
community where opportunity and development is available to
all supports our efforts for a successful mining operation.
The stakeholder groups need to constantly overlap, in terms
of understanding and communication, to create the core of
collective interest. Should any of the stakeholders move away
from the core, the business shall falter in its attempts to remain
sustainable.
Employees and communities should also benefit from our mining
activities, and we continue to undertake a number of community
projects to which we provide funding and support. Our goal is
that these projects become fully sustainable organisations in their
own right.
An Integrated Business Approach
Company ‘well-being’ is only sustainable if all stakeholders share and buy into
the Company vision and strategy.
Shareholders
Profitability
and sustainability
of business
Communities around
our mining operations
Employees and
business partners
Arrows represent a common understanding, respect and attitude towards safe performance behaviour delivering on Company
strategy that rewards all stakeholders.
Pan African Resources PLC
Annual Report 2012
35
Corporate Social Investment
The Group conducts a number of specified
CSI projects and also responds to ad hoc
requests for support in the communities.
Various local home-based care/drop-in centres and soup kitchens
in and around Umjindi are continuously being supported through
the provision of meals to TB/HIV patients, orphans and the frail.
Amount spent
‘Making a
difference in the
community’
ZAR2.2m
During the year, the Group has responded to requests and:
• assisted building churches;
• funded the St Johns mission with financial support to their
HIV orphans;
• supported HIV and AIDS programmes at five local primary
schools; and
• assisted with waste management recycling programmes at
various schools.
The team at Barberton Mines is committed to making a difference
and will continue and enforce efforts in order to ensure a better
life for all our employees and the communities surrounding us.
36
Pan African Resources PLC
Annual Report 2012
37
The Transformation Trust
The Transformation Trust’s aim is
to improve the quality of life of the
local surrounding communities.
The Group established a Transformation Trust in 2011 with the
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 our Social
and Labour Plan (‘SLP’) obligations, Barberton Mines will provide
some ZAR5.6 million seed funding into the Trust for a range
of developmental projects. The Trust is also being offered as a
vehicle to suppliers to Barberton Mines for socio-economic and
enterprise development projects.
‘Fully
functional
July 2012’
The Trust became fully functional from July 2012 and the first
invoices were sent to suppliers during October 2012, which
will continue on a quarterly basis. The Trust has been structured
so that the contributions of suppliers will count towards their
BBBEE Scorecards. The Trust has brought its project portfolio in
line with the Integrated Development Plan of the Umjindi Local
Municipality for implementation in the 2012/2013 financial year.
38
Sinqobile School Project
We are especially pleased that during
this financial year, Pan African’s
subsidiary, Barberton Mines, in
partnership with Adopt-a-School
completed and officially handed
over the Sinqobile School Project
to the Department of Education.
Amount spent
Milestones achieved
ZAR6.7m
• Opening of
16 classrooms
• A 100m road to
link the school to
the township
Located in the Sinqobile Township, which surrounds the
Barberton Mines, the primary school will provide education
facilities to 950 learners from the Sinqobile community and
surrounding areas including learners from two existing schools,
the Dixie Primary School, which is in a poor condition, and
the Fairview Primary school, which is currently overcrowded.
identified the need
The project was initiated in 2006, under Barberton Mines Socio-
Economic Development Plan, when Fairview Primary School’s
Governing Body in consultation with the recently formalised
Sinqobile Community
for additional
education facilities for the community. Through the municipal
township establishment process, Umjindi Local Municipality
donated 4 hectares of land for a primary school in Sinqobile
Township. The completed phases (phase one and two) of the
project which were officially opened on 16 July 2012, include
16 classrooms, a kitchen facility, a sports field, two ablution
blocks, school furniture and fencing. A 100m road was included
to link the school to the Sinqobile Township.
The maintenance of the school will become the responsibility
of the Department of Education, but Barberton Mines will
continue to be involved.
Pan African Resources PLC
Annual Report 2012
39
Umjindi Jewellery Project
The Project is the first institution
in Mpumalanga to provide
training in precious metal arts
and jewellery manufacturing.
The purpose of the project is to provide much needed artisan
skills to the previously disadvantaged youth in the community.
Students are taught the skill of precious metal arts and jewellery
manufacturing through practical training and a mentorship
programme. Jewellery manufacturing skills are constantly revised
with new techniques and machinery.
Amount spent
ZAR4.2m
‘Full
accreditation
from MQA’
Two senior full-time goldsmiths were appointed this year to
ensure skills transfer and a high quality of training to trainees.
The project also received full accreditation with the MQA
(Mining Qualifications Authority) and can now provide
certificated training up to Level 4, which provides learners with a
qualification that enables them to be employed in the jewellery
industry. This project is the first training institution in Mpumalanga
to be able to provide such training.
The 14 students currently attending the project, have produced a
variety of jewellery, inspired by the local people and environment.
The jewellery is marketed and sold through an agreement with
the Jacaranda Tree Company, which markets the jewellery on
the project’s behalf in London through the John Lewis stores.
This marketing campaign has not gained the required traction
from the project and further local marketing initiatives have been
considered, including a marketing website which is set to go live
in the next financial year.
40
Sinqobile Life Skills Centre
This Life Skills Development
Centre provides technical skills in
arc welding, sewing, bread baking
and brick manufacturing.
During the 2011/2012 financial year, the centre trained
120 young people from the surrounding communities in
various technical skills. As a direct result of this initiative, three
primary cooperatives have been established which operate
out of the skills centre. The initiatives have created numerous
self-employment opportunities to those associated members
through small business developments.
Amount spent
Milestones achieved
ZAR1.0m
• 12 local members
graduated in welding
• Five women shortlisted
to join Sewing
Cooperative
The centre developed further initiatives during the 2011/2012
financial year.
The Umjindi Welding Primary Cooperative Limited
After initial training in arc welding, 12 young local members
graduated to this primary cooperative that awarded the students
the opportunity to utilise their welding skills and manufacture
window frames for the Sinqobile School Project.
The cooperative also supplies various households and hardware
stores such as MICA Barberton with quality steel window frames
and other steel-related products.
Kuhlekwethu Sewing Cooperative Limited
A number of female trainees from the sewing class of March 2011
presented their future plans and vision of supplying Barberton
Mines with quality work-wear and boilermaker suits. Five women
were shortlisted to join the sewing cooperative and in May 2012,
Barberton Mines awarded the sewing cooperative an opportunity
to supply the mine with about 100 work-wear suits a month, at
an agreed upon sales price, with effect from July 2012. Samples
of their work have been sent to the SABS and are awaiting their
quality stamp of approval.
Tenteleni Brick Cooperative Limited
This cooperative consists of seven members who have been
skilled in and produce stock bricks for the Sinqobile School
Project. The members provide the bricks and Adopt-a-School
are invoiced at an agreed price. The cooperative also supplies
surrounding households with stock bricks and supplies.
Pan African Resources PLC
Annual Report 2012
41
Sinqobile Vegetable Project
The Sinqobile Vegetable Project
was started in 2006 as a means to
plant, grow and produce seasonal
vegetables, such as cabbages, spinach,
beetroot, lettuce, onions, carrots, green
peppers, green beans and pumpkins.
Amount spent
ZAR0.2m
‘Blueprint
in our
Community’
Operating a 1,200m2 piece of land donated by the mine,
the produced vegetables are sold to the local supermarkets, such
as Pick n Pay, hawkers, schools and households.
In February 2012, the team at Barberton Mines officially handed
over the Vegetable Project to its seven beneficiary members and
the Provincial Department of Agriculture. The Mines will continue
to transfer business management skills to the beneficiaries
through continued monitoring and mentoring of the project and
also provide the required water and electricity.
The Vegetable Project has yielded successful results and is deemed
a blueprint for such future projects. A similar project is therefore
earmarked for the Umjindi trust area and is budgeted for in
the 2012/2013 financial year at a cost of ZAR240,000.
This project, albeit small, is a real success story and proof of
the successes that can be achieved.
42
Bursaries for Tertiary Education
The scheme provides full-time bursaries
in Geology, Accountancy, Mine
Engineering and Mine Surveying.
Following on our theme of learning and development of our
employees and community, the Group designed a bursary
scheme to provide full-time bursaries to 10 students.
Candidates are sourced from our local communities, with the
intention of offering them job opportunities to fill the scarce skills
vacancies within Barberton Mines on completion of their studies.
Amount spent
Milestones achieved
ZAR0.9m
• 10 candidates chosen
to study at universities
in South Africa
• Four more students
will be chosen for
next year to study.
The bursary scheme covers full tuition fees, accommodation,
prescribed text books, on-site mentoring, three weeks’ vacation,
job in a year and a monthly allowance of ZAR800 for a period of
10 months, per academic year.
This year we announced the election of the 10 candidates who
were chosen from our labour sending area. The graduates will
study at recognised South African Universities in their chosen
fields, including Geology, Accountancy, Mine Engineering and
Mine Surveying.
Pan African Resources intends to recruit a further four candidates
next year bringing the approved complement to 14, which will
be ongoing.
Pan African Resources PLC
Annual Report 2012
43
Barberton Mines had another solid
production year and together with a
continued high gold price, produced
record profits. The team directed
its sizeable capital expenditure
budget into rehabilitating ageing
infrastructure and exploring for new
orebodies. Construction work on the
Barberton Tailings Retreatment Plant
is progressing and the commissioning
of the plant remains scheduled
for the second half of 2013.
Barberton Gold Mining Operations
(‘BGMO’)
Phoenix Platinum Chrome Tailings
Retreatment Plant (‘CTRP’)
Barberton Tailings Retreatment
Plant Project (‘BTRP’)
Mineral Resources Management
New Business
Pan African Resources PLC
Annual Report 2012
45
Barberton Gold Mining Operations
Operation at a Glance
Operation Name
Barberton Gold Mining Operations
Parent and ownership percentage
Pan African Resources PLC (100% attributable)
Company name
Country of operation
Provincial jurisdiction
Number of employees
Number of contractors
Commodity being mined
Geological setting
Mining method
Extraction method
Name Plate Annual Production
Tonnage (t)
Head Grade (g/t)
Gold produced (oz)
Cash cost
Capex per annum
LOM
Barberton Mines (Pty) Limited (South African incorporated)
South Africa
Mpumalanga
1,800
400
Gold
Sediments and metavolcanics with a Greenstone Belt
Underground semi-mechanised up-dip cut
and fill and up-dip room and stick
Concentrator and BIOX®
315,000
10.45g/t
95,000oz
US$776/oz
GBP6.6 million
17 years
Head grade and overall recoveries
have been maintained above 10g/t over
the past five years and continue to
highlight the quality of the orebody.
46
Setting the Scene
Barberton first produced gold in 1886 after the discovery of the
first gold nugget by Edwin Bray.
During the 1970s and 1980s AngloVaal consolidated various
operations in the area including Sheba, New Consort and Agnes
Mines. In 1998 the Company acquired Fairview Mine from the
then owners Goldfields (previously Gencor). In 2003 AngloVaal
sold the operations, excluding Agnes, to Metorex and in 2006
Metorex reversed Barberton Mines into Pan African Resources
PLC.
The Barberton Mines mining complex consists of three mines:
Fairview, New Consort and Sheba. Barberton currently
produces approximately 95,000oz of gold per annum.
Barberton Mines is the birthplace of BIOX® (‘Biological
Oxidation’), an environmentally-friendly process of releasing
the gold from the sulphide that surrounds it, using bacteria that
perform this process naturally.
The Barberton Mines’ management is currently investing
significant capital to expand production over the next six years
with its new BTRP which is currently under construction.
The Barberton Mines continues to achieve its strategic goal of
being one of the lowest cash cost producers of gold, producing
an average of US$776/oz.
Key Historical Developments
Date
Development
31 July 2007
21 August 2009
26 October 2010
14 July 2011
28 April 2011
10 November 2011
2 March 2012
4 April 2012
14 June 2012
30 June 2012
Pan African Resources acquired 74% of BML from Metorex (24% held by
Shanduka). Metorex retained the management contract
Pan African Resources acquired Shanduka’s 26% shareholding in Barberton
Mines
Barberton Mines’ Transformation Trust was approved by the Master of the
High Court
Amended Recognition Agreement with the National Union of Mineworkers
concluded
Barberton Mines’ Mining Rights conversions for Fairview, Sheba and New
Consort Mines were executed (awaiting registration)
Pan African Resources Board approval granted for the BTRP Project
Agreement concluded with Matomo Basil Read to construct the BTRP
Project
BTRP earthworks commenced
BTRP gold room construction commenced
Phases 1 and 2 of the Sinqobile School completed (opened school post-
period on 16 July 2012 to 950 primary learners)
Pan African Resources PLC
Annual Report 2012
47
Barberton Gold Mining Operations
Continued
Safety, Health, Environment,
Community (‘SHEC’) Policy
The Barberton team follows a robust Safety, Health, Environment
and Community (‘SHEC’) system at Barberton Mines and is
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.
Safety
It is with regret that we have to report that on 29 May 2012 an
underground general shaft worker, Mr Christopher Makhosonke
Hlela was fatally injured when a measuring flask of a rock loading
station at the Fairview No 3 Shaft bottom dislodged and struck him.
The failure of the measuring flask could not be foreseen or
detected by weekly inspections and no single action was
identified as the reason for the death of Mr Hlela. No person
contravened the requirements of the Act or Regulations,
however, the following actions were recommended and have
been implemented at the mine:
Total Recordable Injury Frequency Rate
• the mine must revise the design, construction, operation
and maintenance of box fronts, chutes and measuring flasks;
• the code of practice for the safe operation of draw points,
tipping points, rock passes and box fronts must be revised;
• the code of practice must include the timely replacement
of parts of the equipment that may fail (reliability centred
maintenance);
• procedures and training must be amended to provide for
the changes in the risk assessment and code of practice – all
relevant persons must be retrained; and
• a system of inspections and planned task observations must
be implemented to ensure compliance to training, rules and
legislation.
The Group remains committed to the safety and health of all its
employees and continues to review its procedures on a regular
basis as part of its focus on a behaviour-based safety approach.
The Barberton Mines’ operating sections, comprising the
Fairview, Sheba and New Consort mines, showed decline year-
on-year in its overall safety performance. The LTIFR increased
to 3.26 (2011: 2.2) and the SIFR increased to 0.74 (2011: 0.66).
The Total Recordable Injury Frequency Rate (‘RIFR’) also
increased to 25.1 (2011: 22.6). Although Barberton Mines
showed a slight decline on its year-on-year safety performance,
results are below the 2014 targets as set by the DMR.
e
t
a
R
y
c
n
e
u
q
e
r
F
y
r
u
n
j
I
l
e
b
a
d
r
o
c
e
R
l
a
t
o
T
60
50
40
30
20
10
0
48
12 months
ended
30 June 2008
12 months
ended
30 June 2009
12 months
ended
30 June 2010
12 months
ended
30 June 2011
12 months
ended
30 June 2012
Accident Rates
s
r
u
o
h
n
a
m
n
o
i
l
l
i
m
r
e
p
e
t
a
R
7
6
5
4
3
2
1
0
6.4
4.2
4.8
3.1
Lost Time Injury Rate
Serious Injury Rate
3.26
1.7
2.2
1.1
0.7
0.74
12 months
ended
30 June 2008
12 months
ended
30 June 2009
12 months
ended
30 June 2010
12 months
ended
30 June 2011
12 months
ended
30 June 2012
12 months
ended
2008
12 months
ended
2009
12 months
ended
2010
12 months
ended
2011
12 months
ended
2012
Fatal Injury Frequency Rate (‘FIFR’)
1.43
0
0.18
–
0.18
Health
Barberton Mines established primary healthcare clinics at each
of the three mines. They provide services to the category
4-8 employees, constituting a workforce of 1,450 people. These
employees do not have medical aid schemes and the service
forms part of their benefit packages. The cost to company is
approximately £0.3 million (ZAR4 million) a year.
A full-time AIDS counsellor was appointed at the beginning of
2011 and through her initiatives 72% of the labour force was
voluntarily tested for HIV. Of the tested group, 40% tested
positive and of these 26% are currently on antiretrovirals (‘ARVs’).
HIV and TB campaigns are undertaken on a bi-annual basis to
create awareness and have been favourably received by the
employees.
Environment
Long-term environmental obligations are based on Barberton
Mines’ environmental plans,
in compliance with current
environmental and regulatory requirements. Full provision is
made based on the net present value of the estimated cost
of restoring the environmental disturbance that has occurred
up to the statement of financial position date. Increases due
to additional environmental disturbances are capitalised and
amortised over the remaining lives of the mines. The estimated
cost of rehabilitation is reviewed annually and adjusted as
appropriate for changes in legislation or technology. Cost
estimates are not reduced by the potential proceeds from the
sale of assets or from plant clean-up at closure.
Environmental Compliance
Decommissioning and 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 up to complete closure.
The rehabilitation trust fund and rehabilitation provision balances
as at 30 June 2012 were £2.7 million and £3.2 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.
Pan African Resources PLC
Annual Report 2012
49
Barberton Gold Mining Operations
Continued
Risks
Mining and exploration activities are always done in a way
where best practice is considered to minimise the impact to
the environment. The updated Environmental Monitoring
Programme has been submitted to the DMR and is still awaiting
approval. An environmental performance audit has been done
and non-compliance issues are being dealt with.
The following factors are considered the highest risks regarding
environmental compliance:
Water pollution
and renewal of the
water licence
Biodiversity and
land management
Water compliance
Rehabilitation plans for restoration
Alien invasive plants
Addressing unwanted vegetation
Waste management
Removal of all waste
generated by the mine
Mitigation of Risks
The following actions were put into place to ameliorate the
abovementioned risks:
Water Pollution and Water Licence Renewal
The water licences for New Consort and Fairview have been
approved while the approval of the Sheba water licence is
pending. Water quality is considered a major focus point and
water management issues are constantly reviewed to improve
water use at the mine. As part of the continuous assessment
of the impact of mining activities to the receiving environment,
aquatic bio-assessments are conducted annually to monitor the
state of the natural streams arising in the mining area. Monitoring
programmes are compliant with regulations of the Department of
Water Affairs as well as the Department of Environmental Affairs.
Biodiversity and Land Management
The rehabilitation plan is focused on restoring disturbed areas
back to their original state by using the most natural methods
possible.
Alien Invasive Plants
The mine has introduced a control and management programme
for alien vegetation. This programme is well supported by the
Government Departments.
Waste Management
Barberton Mines is fully committed to managing waste and a
waste contractor has been appointed to remove all waste from
the mine to a recycling site where the waste is sorted and
recycled.
Barberton Mines is totally reliant on the State Energy Producer,
Eskom for electricity. The team undertook to install solar panels
at the mine in an attempt to do a feasibility regarding renewal
energy. After a test phase of six months, independent consultants
TWP reviewed the operations of the pilot project and reported
that a full scale project would not be cost-effective for the mine.
As a result, the pilot project solar panels are now only used to
feed excess electricity back into the grid.
Community Development
Refer to page 36 in this report.
Management Team
Name
Age Designation
Qualification
Experience
Casper Strydom
54
General Manager National Higher Diploma Metalliferous Mining
Mine Managers Certificate
36 years of mining-
related experience
Pierre Human
51
Manager: Mining
Jonathan Irons
46
Manager:
Metallurgy
Mine Overseers Certificate of Competency
Mine Managers Certificate of Competency
MDP Stellenbosch
National Higher Diploma Extractive Metallurgy
Programme for Management Development
(GIBS – University of Pretoria)
Competence levels include Refractory
Gold Extraction Technologies –
(Roasting and Hydrobiological)
30 years of mining-
related experience
25 years of metallurgy-
related experience
Hans Grobler
Barry Naicker
Neal Reynolds*
Essie Esterhuizen
49
38
29
53
Manager:
Engineering
Mechanical Engineers Certificate of Competency
Pr Certificated Engineer
31 years of engineering-
related experience
Manager: Mineral
Resources
BSc (Honours) Geology and Economic Geology
Graduate Diploma in Engineering (MRM)
Nine years of geology-
related experience
Manager: Finance
and Administration
BCom (Honours)
CA(SA)
Manager: Human
Resources
Completed the Gencor Learner
Officials Programme
Certificate in Personnel Management
Various other mining industry-related certificates
Skills Development Facilitator – NQF Level 5
Five years of financial-
related experience
31 years of human
resources related
experience
* Post period of reporting Mr N Reynolds has been moved to Corporate Office and replaced by Mr TP Maepa.
Operational Performance
Production Results for 2012
Financial Year:
2012
2011
2010
2009
2008
Tonnes Milled – Underground
Tonnes Milled – Surface
Head Grade
Recovered Grade
Overall Recovery
Production: Underground
Production: Surface/Calcine Dumps
Gold Sold
Average Price: Spot
Average Price: Hedge
Average Price: Spot
Average Price: Hedge
Total Cash Cost US$/oz Sold
Total Cash Cost R/kg Sold
Total Cost per Tonne
Total Mining Cost per Tonne
Capital Expenditure
Exchange Rate – Average
Exchange Rate – Closing
Exchange Rate – Average
Exchange Rate – Closing
(t)
(t)
(g/t)
(g/t)
(%)
(oz)
(oz)
(oz)
(R/kg)
(R/kg)
(US$/oz)
(US$/oz)
(US$/oz)
(R/kg)
(R/t)
(R/t)
(£)
(ZAR/£)
(ZAR/£)
(ZAR/US$)
(ZAR/US$)
282,041
26,054
10.45
9.53
91
93,381
1,068
94,449
422,215
–
1,694
–
776
193,360
1,844
1,830
10,741,230
12.27
12.91
7.75
8.27
296,200
–
10.55
9.67
91
92,043
–
92,197
306,757
–
1,366
–
781
175,520
1,707
1,648
6,773,729
11.11
10.94
6.99
6.83
313,167
–
10.61
9.68
91
97,483
–
98,091
267,876
–
1,098
–
650
158,711
1,537
1,486
5,918,271
11.93
11.53
7.59
7.65
313,952
–
10.32
9.40
91
94,909
3,955
97,353
251,740
–
867
–
469
136,178
1,313
1,256
4,052,665
14.39
12.66
9.03
7.72
315,305
–
8.90
8.13
91
82,436
13,513
99,078
193,159
105,850
823
451
476
111,272
1,088
1,045
2,901,792
14.68
15.56
7.30
7.80
Pan African Resources PLC
Annual Report 2012
51
Barberton Gold Mining Operations
Continued
Capital Expenditure
Organic Growth Projects
During the year under review, a total of £10.7 million was spent
on capital expenditure of which £3.1 million was for capital
development projects.
Consort – 40 Level Development
Development to the east through the pegmatite was successful.
Development on the shale will continue in the next financial
year. Further exploration drilling from strategic points will target
the position of the footwall lens/serpentinite to determine the
extent of mineralisation.
The drilling progress of the projects for the period under review
are summarised below:
2012
(Metres)
2011
(Metres)
Resource
Target
(Oz)
359
303
123
109
267
197
294
491
0
6,000
17,000
11,000
149
278,000
34
10,000
123
26,000
Project
Sheba – 36ZK
Sheba – Edwin Bray to
Thomas and Joe’s Luck Area
54 Level Rossiter Orebody
Fairview – 3 Shaft
Deepening
Consort – 40 Level
Station Establishment
Consort – 50 Level
Decline West
Sheba – 36ZK
Good progress was made with this project, and a mineable block
has been delineated (36ZK 1,030 hanging wall 2,820 tonnes
@ 13.82g/t) and stoping will commence in the next financial
year. Further exploration drilling will be conducted during the
next financial year to delineate the various Cross Fractures
(1010, 990, 970 and 950 X/Fractures).
Sheba – Edwin Bray, Thomas and Joe’s Luck Area
Incline development towards the high grade surface borehole
intersections was carried out during the period under review.
Additional infill exploration drilling is in progress for the next
financial year.
Fairview – 54 Level Rossiter Orebody
This project has been completed and as a result the indicated
resource block was converted to a measured resource
(50g/t over a 3.8m). On-reef mining is in progress.
Fairview – 3 Shaft Deepening
Good progress was made with this project, where the
development of a return airway was designed to provide
sufficient ventilation at workable temperature. A further change
was made to commence with a decline towards the 68 level
down dip of the 11 high grade block.
Consort – 50 Level Decline West
A station was successfully established on 52 level and the shaft
decline will be developed to 53 level in the new financial year.
On-Mine Development
The on-mine development for the period under review is
summarised below:
On-Mine Development for 2012
New Consort
Fairview
Sheba
metres
g/t metres
g/t metres
Reef Development
Stope Development
Waste Development
548
357
1,348
4.04
5.47
581
229
1,563
8.45
6.10
1,057
73
2,527
g/t
3.38
7.46
Maintenance Capital (excluding BTRP)
The maintenance capital at Barberton Mines amounted to
£3.1 million. Expenditure on processing plant maintenance
capital was £0.19 million for the year, as a result of purchasing
a new concentrator truck in relation to the Sheba plant and
installation of new pumps at Sheba and Consort Plants. The
BIOX® Plant incurred £0.27 million in upgrading compressors and
blowers. The total metallurgical maintenance and replacement
expenditure for the year under review amounted to £0.7 million.
The capital expenditure on the maintenance of engineering
equipment and infrastructure totalled £1.4 million for the year.
Upgrading the mining equipment fleet was a key focus area
during the year with expenditure of £0.2 million to rebuild load
haul dumpers. The purchase of a front-end loader and tipper
truck cost £0.2 million. Expenditure on the refurbishment
of shafts and headgears amounted to £0.2 million.
The balance of the maintenance capital was largely spent on the
final implementation of a new financial system for £0.24 million
and replacement of light vehicles for £0.7 million.
Efficiency/Optimisation
Drivers and Focus Areas
Optimisation of Mill Capacity
Due to the current high gold price, minimal capital expenditure
requirements and low operating costs, additional low-grade
52
surface material has been identified for treatment. This feed
source averages approximately 4,300 tonnes per month and
results in 95kg of gold per annum which is required to replace
the reduction in gold from the Sheba section.
Ventilation at Fairview
The ventilation model is being revised to determine the
refrigeration requirement to maintain the production efficiency of
the workforce as we mine from deeper areas at the Fairview Mine.
Additional Workable Areas
Shallow low-grade blocks in old areas are being investigated to
optimise the upper level orebodies. With the higher gold price
many blocks that were historically not mined are now viable.
To make them available for mining, re-equipping is required on an
ongoing basis in order to open these payable blocks.
Outlook and Future
The management team at Barberton Mines remains committed
to producing 95,000oz of gold for the next financial year at the
lowest cost and as safely as possible.
The BTRP Project is progressing as per schedule and the
potential of increasing Barberton’s production by 20,000oz in
the financial year 2013/2014 is on track.
Barberton Mines remains committed to its community projects
over the next year. Phase 3 of the Sinqobile School Project
has been approved and is intended for completion in the new
financial year.
Mineral Resource
Management (‘MRM’)
Description and Geographic Location
Barberton Mines is situated in the Magisterial District of
Barberton, Mpumalanga Province, Republic of South Africa, some
370km east of Johannesburg and 47km south-east of Nelspruit.
The geographic location of Barberton Mines is set in the map
above.
Geological Setting
The ore horizons at Barberton are classified as Achaean
epigenetic lode gold orebodies within a granite greenstone
terrain. The distribution and localisation of these orebodies in
the Barberton Greenstone Belt (‘BGB’) can be largely attributed
to the combined influence of granite emplacement structural
deformation and thermal metamorphism (Competent Person’s
Geographic Location
Nelspruit
Malelane
Kaapmuiden
Noordekaap
New Consort Mine
Sheba Mine
Barberton
Fairview Mine
Internatio
nal B
order
Bulembu
Piggs Peak
LEGEND:
0
20km
Forbes Reef
Mining Licence
Prospecting Right
National Road
Regional Road
Railway
Barberton Greenstone Belt
Report, SRK, 2007). The majority of the known gold deposits
of the BGB can be found in the James and Sheba Hills in the
north and north-east of the Barberton Mountain Land and in
the Moodies Hills, an area immediately south-west of Barberton.
Additional gold deposits occur along and adjacent to the major
strike and faults as well as in a few localities in Swaziland near the
granite greenstone contacts.
The locations and geometries of these orebodies are structurally
controlled. They all occur in the vicinity of the Sheba Shear/
Fault Zone, which developed between the Ulundi and Eureka
Synclines. The Sheba Shear Fault Zone is a complex, refolded,
arcuate, south-dipping shear/fault system. The geometries of
the orebodies have variable dips, strikes and widths due to the
complex deformational history of the host rocks. Some of the
orebodies are continuous for several hundred metres along
strike and down dip, whereas others are not traceable between
adjacent crosscuts and drill holes of the Sheba, New Consort
and Fairview Mines (Competent Person’s Report, SRK, 2007).
Two types of ore can be found in the Sheba, Fairview and New
Consort Mines:
• Refractory ore (sulphides): this is the dominant ore type
within the Achaean gold orebodies in the Barberton region.
The gold particles occur trapped within sulphide minerals
especially in pyrite and arsenopyrite.
features
• Gold-bearing quartz veins: the gold-quartz lodes generally
represent tectonically produced dilatant
filled
with vein-type gold ores as a consequence of mobilisation
of essentially siliceous and/or carbonated solutions by
metamorphic processes. The dilatant and shear zones
generally provide free-milling gold ore, the gold occurring in
the form of irregular gold grains which may be accompanied
by variable, but usually small quantities of sulphides.
Pan African Resources PLC
Annual Report 2012
53
Barberton Gold Mining Operations
Continued
Geological Map of the Sheba Hills Area
Barberton Greenstone Belt
Jamestown schist belt
New Consort Mine
0
4
8
Nelspruit Batholith
(3105 Ma)
KILOMETRES
e
clin
n
y
s
a
k
e
r
u
E
Sheba Hills
Eureka City
Sheba shear zone
Sheba Mine
Fairview Mine
Ulundi syncline
Shear zone
Moodies Group with ironstone
Fig Tree Group
Onverwacht Group
Kaap Valley Pluton
(3227 Ma)
Underground Exploration and
Development Results
During the past year 2,186m of reef, at an average grade of
4.90g/t, and 5,438m of waste were completed, of which 3,556m
was geologically mapped.
Barberton Mines collared 187 underground boreholes during
the year and drilled 14,528m of core. A total of 133 significant
intersections were returned of which 103 were above the
pay limit and a further 30 marginal grade intersections.
The average value of all 45 economic intersections comes to
24.26g/t over a width of 182cm.
Almost all the gold in the Barberton region occurs in gold-bearing
veins, either alone as the dominant ore type or in association with
the complex sulphidic ores. In the Fairview Mine, gold-quartz
veins in the Moodies Quartzite are in places accompanied by
minor pyrite, arsenopyrite, chalcopyrite and galena. In the Sheba
Mine, free gold occurs mainly in siliceous fractures in brittle chert
horizons. In the New Consort Mine, some gold occurrences in
gold-bearing quartz veins have also been recorded, in addition to
those associated with complex sulphidic ores.
Type of Mining and Mining Description
Barberton Mines has continued with the application of the
semi-mechanised cut and fill method and increased its usage.
This method is appropriate for the geological environment.
The method is mined in an updip direction and involves drilling
holes vertically into the stope back. A variation of this, with
horizontally-directed holes (called breast stoping), is used in
stopes with shorter strike lengths and/or poor rock conditions.
Breast stoping has a lower production potential than the
standard updip method. As the stope is mined it is filled with
development waste to provide a working platform. The amount
of development is thus determined by the need to open up new
areas without having to hoist waste out of the mine.
54
The following are the most significant results obtained during the year:
Operation
Bh No
New Consort
New Consort
New Consort
New Consort
Sheba
Sheba
Sheba
Sheba
Fairview
Fairview
Fairview
Fairview
37NE-5
3#CT-6
22W4-6
20IV-4
33 ZKH 03
29 ST 20
29 ST 24
36 ZK W01
Bh 5849
Bh 5864
Bh 5861
Bh 5799
cm
100.00
192.00
188.00
188.00
71.00
764.00
113.00
82.00
1,626.00
1,383.00
77.00
70.00
g/t
Description
111.0
55.8
19.6
21.5
300.4
15.7
34.1
42.7
50.2
43.8
21.2
8.8
To be accessed via SI 14
3 Shaft resource extension
Confirms extension of W4 beyond pegmatite
Ivora mineralisation below 20 level
Footwall mineralisation on the ZK-Horizon
Stockwork extension
Stockwork extension
Mineralisation on the ZK Main Fracture
Downdip extension of 11 Block
Downdip extension of 11 Block
Low grade flanks of 11 Block
Low grade flanks of 11 Block
Mineral Resource Management
Strategy (‘MRM’)
The principal objective of this initiative is to improve the liaison
between geology, survey, evaluation and planning activities in
order to create more integrated plans that are more aligned
to value. The key operational focus is to integrate all intellectual
capital and technical data in order to enhance the Mineral
Resource confidence and volume that results in an improved
LOM to the operations.
Thus, MRM at Barberton Mines has the role of identifying,
optimising and realising the value of the mineral asset through
converting it from an initial Inferred Resource through to a
proved Reserve, and ultimately to a saleable product. The MRM
framework developed and implemented hinges on integrated
areas of responsibility, necessitating a common approach and
leading to a team-based interaction.
Competent Person’s Statement
Pan African Resources defines its Mineral Resources and Mineral
Reserves in line with the SAMREC Code and its definitions.
Estimates
Resource Estimation
The grade and the structure in the ore shoots are highly erratic
in nature and most of the data for evaluating Resource blocks
is derived from development adjacent to the mining blocks and
from the position of the present mining areas. This is unlike the
blocks used by other typical Witwatersrand mining operations
where the value of Resource blocks are estimated and classified
well ahead of the mining areas current mining areas. The continuity
of grade values within the ore shoots is derived primarily from
short range statistical projections, based on experience that has
been gained from historical mining of the orebody and gained
from the study of its tectonic structure. Mineral Resources and
Reserves are block defined based on this information.
The tectonic structure and orebody geometry has been
modelled using the Lynx orebody modelling system. This system
allows the three-dimensional structure of the mineralised volume
to be viewed graphically. This is used as a tool for visualising
grade continuity and is an aid for mine planning.
Reef drill-hole intersections are defined as all samples intersecting
the reef, irrespective of the sample grade and inclusive of at least
one sample in the footwall and another in the hangingwall of
the reef.
For both diamond cored drill-hole and underground sampling,
a minimum sampling width of 150cm is used in the case
of mechanical mining and 100cm for conventional scraper
type stoping. Where the reef width is less than this value,
hangingwall and footwall samples are included.
Where an individual sample value is greater than 100g/t,
the grade is capped at 100g/t. This is done at the sample level and
also over the whole channel width. It has been found historically
that if sample values over 100g/t are capped, these abnormally
high sample grade values will not lead to over-valuation of the
mean value of the stretch samples which are used to assign
values to nearby Resource blocks.
Block Tonnage and Grade Estimation
Each mine is split into sub-areas defined by reef type and
infrastructure design. Within these areas, ore Resource blocks
are defined adjacent to development ends and stoped areas.
Measured reserve blocks are generally 20m on strike and 10m
in the dip direction. Where blocks are defined adjacent to a
development end only, the grade and true width of the reef
in the block are estimated by calculating the arithmetic mean
or ‘stretch average’ of the samples along the development end.
If the sample spacing is at the standard 3m, the block value is
derived by calculating the average value of the samples. If the
sample interval is variable, the block is assigned the length-
weighted arithmetic mean of the strip averages. If the Resource
Pan African Resources PLC
Annual Report 2012
55
Barberton Gold Mining Operations
Continued
block is surrounded by other sampling, either by previous stope
sampling or exploration boreholes, the block is assigned values
based on the mean of the surrounding sampling, weighted by
the inverse of the distance from the sampling to the centre
of indicated and inferred blocks. In each case, one mean value
is determined for each channel sampling section first and the
means are then averaged.
The number and spacing of drill-holes intersecting the reef is
dictated by the position of the exploration development with
respect to the orientation of the reef being explored. Because
of this, there is no set drill-hole spacing and the number of drill-
holes available to estimate block values varies from place to
place. This parameter cannot therefore be used as a Resource
classification criterion.
Mineral Resource Blocks
In selecting Resource blocks to be included in a Mineral Resource
statement, a cut-off grade of 2.0g/t is applied. This is not an
economic cut-off, but is historical in the Barberton area.
However, some Resource blocks that are below the cut-off grade
are included within the 17-year forecast plan for Pan African
Resources, where the blocks are required to be mined as part
of the mining method of the total Resource either for geological
or geotechnical considerations. Some blocks are within safety
and shaft pillars and some cannot be mined from the current
infrastructure or using the currently employed mining methods
or strategies, so are therefore included in the Resources but
excluded from the reserves. To convert a Resource block into a
Reserve block, it must satisfy one of the following:
• Immediately available blocks – Resource blocks that are
adjacent to current mining areas with all mining infrastructure
in place and are fully equipped with services; or
• Not-immediately available blocks – Resource blocks which
can be made available within a short period; and
• Mining infrastructure is in place, but has yet to be equipped
with services.
A block tonnage is calculated for each Resource block using the
estimated true thickness, the block area and by using an average
specific gravity for each of the operating mines (sections).
A density ranging from 2.73 to 3.03t/m3 is used on the three mines,
depending on the characteristics of the ore. It is known that there
is a strong correlation between gold grades and density of ore that
contain high sulphide mineralisation. Because gold mineralisation is
often closely associated with sulphide mineralisation, in parts of the
mine gold grade – rock density correlations are used in estimating
tonnages. The Zwartkoppies Reef, however, is known to contain
less sulphide mineralisation and the gold within this reef is mostly
free gold and hence a lower value 2.73t/m3 is used. Development
and waste rock is also assigned a density of 2.73t/m3. The specific
gravity (‘SG’) values have generally been accepted as being
‘historically’ correct. Orebodies that contain free gold are assigned a
density of 2.73t/m3.
56
Further to the above framework, Barberton Mines 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 the existing pay limit methodology
and offers a number of advantages:
• the unique statistical properties of the specific orebody is
taken into account;
• it eliminates the need for adjustments and unpaid 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 2013 financial year Pan African Resources will
continue its drive towards MRM excellence by improving
geological understanding, data recording quality and focusing on
ensuring sustainability through appropriately focused exploration
targets.
Classification of Mineral Inventory
The Resource blocks are classified into Measured, Indicated and
Inferred Resources based on the following criteria, according to
the SAMREC Code:
• Measured Mineral Resources: Measured blocks are bound
by sampled development or stope faces on at least one
side. Measured Mineral Resource blocks are also delineated
immediately adjacent to reef drives. In this case, their extent is
limited to a distance of 10m up and down dip along the plane
of the orebody.
• Indicated Mineral Resources: Indicated blocks are blocks
bounded by measured blocks or where the down dip
continuation of a block has been demonstrated by drill-
hole intersections. Indicated Resource blocks are adjacent to
Measured Resource blocks and are normally the extension
of Measured Resources based on diamond drilling or other
information.
• Inferred Mineral Resources: Blocks where geological
interpretation suggests that continued mineralisation is likely
even where no drilling information is available. These blocks
occur adjacent to indicated Mineral Resource blocks.
Other mining blocks that have previously been closed for
economic reasons, but can be brought back into production
when economic conditions improve are termed Dormant
Blocks. These blocks have been included in the Mineral Resource
using the same classification criteria as those applied to areas that
are presently available for mining. The outside Sections include
Victory Hill, Margret, Mamba, Catscove, Pan and OW 5.
Modifying Factors
The table below reflects historical achievements for Mineral Reserve Block Factor (‘BF’), Overall Plant Recovery Factor (‘PRF’) and
Mine Call Factor (‘MCF’). Modifying factors used for converting Resources to Reserves and for the Life of Mine plan are deduced from
these historical achievements.
Efficiencies and Factors
NEW CONSORT
Block Factor
Overall Recovery
Mine Call Factor
FAIRVIEW
Block Factor
Overall Recovery
Mine Call Factor
SHEBA
Block Factor
Overall Recovery
Mine Call Factor
Current
12/13
Plan
100.0
90.5
95.0
89.3
90.5
97.5
91.0
92.5
100.0
11/12
10/11
09/10
08/09
07/08
06/07
05/06
04/05
03/04
02/03
100.0
89.8
90.0
100.0
90.9
81.5
91.0
92.6
100.0
114.4
89.1
99.5
94.3
90.2
84.8
91.0
92.0
125.9
125.0
89.7
89.3
120.5
90.9
90.0
86.9
91.7
126.3
122.2
91.6
83.4
101.6
90.8
80.1
107.6
92.8
109.8
97.5
91.9
86.1
117.5
90.5
84.0
112.4
92.7
90.1
69.9
92.4
99.8
90.4
90.9
82.1
110.9
92.6
86.1
97.3
93.5
107.8
114.3
90.3
82.5
109.9
93.0
99.9
84.5
93.0
86.2
110.8
90.3
85.7
66.3
90.3
85.9
95.0
88.3
79.4
100.2
89.3
91.7
88.7
89.2
90.6
94.8
93.7
99.9
100.5
92.8
111.8
104.0
92.3
99.7
Commodity Prices Used
A gold price of US$1,500.00/oz was used for the conversion of Mineral Resources to ore reserves at an exchange rate of
ZAR8.29/US$ resulting in a gold price of ZAR400,000/kg.
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 2013 financial business plan are as follows:
3#
PC#
MMR Section
New Consort Total
New Consort Mine
Pay limit
Sheba Mine
Pay limit
Fairview Mine
Pay limit
5.21g/t
7.13g/t
8.01g/t
6.73g/t
Above Adit Level
MRC & ZK Shafts
Sheba Total
4.30g/t
1#
4.32g/t
5.02g/t
3#
6.43g/t
5.00g/t
Fairview Total
5.90g/t
Pan African Resources PLC
Annual Report 2012
57
Barberton Gold Mining Operations
Continued
Fairview
The optimiser was used to guide the planning process and
inputs were determined by both corporate and the mine. Inputs
included the attainment of a 50% profit margin at a gold price
of ZAR400,000/kg and a total mining cost of ZAR1,798/tonne
giving the cut-off grade of 1.7g/t. However, the overall mining mix
grade would have to be maintained at 3.53g/t and this would
only be achieved by mining 36.7% of ore between the 1.7g/t cut
off and the optimal cut off of 5.14g/t (ie average 3.42g/t) and
the rest at an average grade of 16.95g/t. For practicality, however,
the cut-off was rounded off to 2.0g/t.
Sheba
Again for Sheba a 50% profit margin was applied at the same gold
price of ZAR400,000/kg and a total mining cost of ZAR1,878/tonne
giving a cut-off of 5.09g/t. The overall mining mix grade would
have to be maintained at 12.18g/t to achieve this. Again for
practicality, the cut-off was rounded off to 2.0g/t.
New Consort
New Consort’s current measured and indicated reserves are
limited. Current ore reserve generation projects are in place
together with exploration drilling to assist in the conversion
of resource to reserve and this is a major focus area. A
lower profit margin of 20% was applied to New Consort as
a guideline resulting in a cut-off of 7.55g/t. The overall mining
mix grade would have to be maintained at 13.58g/t to achieve
this. Again for practicality, the cut-off was rounded off to 2.0g/t.
The mining mix grade of 5.66g/t would have to be achieved
by planning.
Barberton Mines – Total
Even though Consort remains a challenge to sustain the current
production profile into its LOM plan, tremendous strides have
been made in a Mineral Resource Management strategy of
increasing the resource base on a year-to-year basis. Barberton
Mines as a whole will achieve its mining mix grade for the
2012/2013 financial year of 8.25g/t planned grade vs 4.07g/t
mining mix grade from the optimiser for a 25% overall profit
margin.
Cut-off and Average-Mining-
Grade (‘AMG’) Calculation
The developed 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 orebody 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 programme
that requires the following as inputs:
• The database inventory of all Mineral Resource blocks;
• An assumed gold price – ZAR400,000/kg;
• Planned production rates for each mine;
• Mine Call Factor;
• Plant Recovery; 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:
Unit Fairview Sheba
New
Consort
Total
Barberton
Mines
Optimal Cut-offs
Marginal Cut-offs
g/t
g/t
5.14
1.70
5.09
4.85
7.55
3.50
5.60
1.4
AMG (Face Grade)
(Optimal)
AMG (Head
Grade) (Optimal)
g/t
16.95
12.18
13.27
15.64
g/t
16.53
12.18
12.61
15.25
Marginal Tonnes
(25% profit margin) Tonnes
Mining Mix Grade
MCF
PRF
g/t
%
%
Gold Price
ZAR/g
AMG (Face Grade)
AMG (Head Grade)
Pay Limits @
ZAR400/g
Reserve Grade
g/t
g/t
g/t
g/t
36.7
3.53
97.5
90.5
400
12.40
12.09
5.1
11.17
101
4.96
100
92.5
400
6.20
6.20
5.08
6.69
215
5.66
95
90
400
8.10
7.33
7.41
8.04
2,848
4.07
95
90
400
8.25
8.04
5.51
9.54
58
Mineral Inventory
Mineral
Reserves
Classification
Proved
Probable
Tonnes
kt
1,565
9,771
Contained
Gold
kg
Grade
(g/t)
7.49
2.49
11,731
24,342
koz
377
782
Please note due to rounding some errors may occur
Total Proved
and Probable
11,337
3.18
36,073
1,159
Mineral
Resources
Classification
Tonnes
kt
Grade
(g/t)
Measured
3,201
Indicated
10,033
Inferred
3,911
8.18
3.87
6.82
Contained
Gold
kg
26,193
koz
842
38,799
1,247
26,695
858
Total Measured
and Indicated
Total Mineral
Resource
13,234
4.91
64,993
2,089
17,146
5.35
91,688
2,947
The following table illustrates the detailed version of each section’s Mineral Resource:
BGMO Mineral Resources estimate per mine as at 31 March 2012
Mineral Resource – March 2012
Operations
Classification
Sheba
Consort
Fairview
TOTAL MINES
Slimes Dumps
SURFACE ORE
Outside Sections
TOTAL
Measured
Indicated
Inferred
Total
Measured
Indicated
Inferred
Total
Measured
Indicated
Inferred
Total
Measured
Indicated
Inferred
Total
Measured
Indicated
Inferred
Total
Total
Measured
Indicated
Inferred
Total
Measured
Indicated
Inferred
Total
Tonnes
1,013,500
1,318,100
1,807,400
4,139,100
373,300
184,800
294,200
852,400
1,815,000
829,800
643,800
3,288,500
3,201,800
2,332,700
2,745,500
8,280,000
–
7,194,400
1,054,000
8,248,400
220,700
–
285,000
112,100
397,400
3,201,800
10,033,100
3,911,500
17,146,400
g/t
7.75
5.48
4.67
5.68
9.13
11.50
9.12
9.64
8.23
19.70
20.67
13.56
8.18
11.02
8.90
9.22
–
1.56
1.30
1.52
1.81
–
5.16
8.03
5.97
8.18
3.87
6.82
5.35
kg
7,851
7,227
8,432
23,510
3,408
2,126
2,683
8,216
14,934
16,350
13,310
44,594
26,193
25,703
24,425
76,321
–
11,225
1,370
12,595
400
–
1,472
900
2,373
26,193
38,799
26,695
91,688
oz
252,410
232,369
271,098
755,877
109,568
68,340
86,251
264,160
480,154
525,649
427,919
1,433,722
842,132
826,358
785,268
2,453,758
–
360,878
44,053
404,931
12,858
–
47,333
28,946
76,278
842,132
1,247,427
858,266
2,947,826
Pan African Resources PLC
Annual Report 2012
59
Barberton Gold Mining Operations
Continued
Barberton Mines Mineral Reserves estimate per mine as at 31 March 2012
Mineral Reserve – March 2012
Operations
Classification
Sheba
Consort
Fairview
TOTAL MINES
Slimes Dumps
Surface Ore
TOTAL
Proved
Probable
Total
Proved
Probable
Total
Proved
Probable
Total
Proved
Probable
Total
Probable
Probable
Proved
Probable
Total
Tonnes
532,200
1,393,500
1,925,700
93,500
142,400
235,900
940,100
864,900
1,805,000
1,565,800
2,400,800
3,966,600
7,194,000
176,600
1,565,800
9,771,800
11,337,600
g/t
7.10
4.27
5.05
8.44
7.77
8.04
7.62
15.03
11.17
7.49
8.36
8.02
0.57
1.19
7.49
2.49
3.18
kg
3,777
5,957
9,734
790
1,107
1,897
7,164
13,003
20,167
11,731
20,067
31,797
4,065
210
15,796
20,277
36,073
oz
121,446
191,507
312,953
25,390
35,585
60,975
230,319
418,065
648,384
377,155
645,156
1,022,312
130,701
6,750
507,857
651,906
1,159,763
Year-on-Year Mineral Inventory Reconciliation
Resource @ March 2011
Resource @ March 2012
+/- Variance
% Variance Year-on-Year
Resource Table
kt
g/t
t Au
koz
kt
g/t
t Au
koz
kt
g/t
t Au
koz
kt
g/t
t Au
koz
Measured
2,750
8.45 23,300
750
3,200
8.18 26,200
840
450
-0.27
2,900
90
16.36
-3.18
12.45
12.00
Indicated
Inferred
7,340
5.50 40,300
1,300 10,030
3.87 38,800
1,250
2,690
-1.63
-1,500
-50
36.65
-29.64
-3.72
-3.85
2,510
8.01 20,100
650
3,910
6.82 26,700
860
1,400
-1.19
6,600
180
55.78
-14.80
32.84
32.31
Total
12,600
6.64 83,700
2,700 17,140
5.35 91,700
2,950
4,540
-1.29
8,000
220
36.03 -19.46
9.56
9.26
Total Measured
and Indicated
10,090
6.30 63,600
2,050 13,230
4.91 65,000
2,090
3,140
-1.39
1,400
40
31.12 -22.06
2.20
1.95
Reserve @ March 2011
Reserve @ March 2012
+/- Variance
% Variance Year-on-Year
Reserve Table
kt
g/t
t Au
koz
kt
g/t
t Au
Proved
1,220
7.30
8,900
290
1,570
7.49 11,700
koz
380
kt
g/t
t Au
koz
kt
g/t
t Au
koz
350
0.20
2,800
90
28.69
2.69
31.46
31.03
Probable
2,610
8.51 22,200
710
9,770
2.49 24,300
780
7,160
-6.01
2,100
70 274.33
-70.71
9.46
9.86
Total
3,830
8.12 31,100
1,000 11,340
3.17 36,000
1,160
7,510
-4.95
4,900
160 196.08
-60.90
15.76
16.00
*
Frans Chadwick, the Chief Surveyor at Barberton Mines, signs off mineral Resources for Barberton Mines. He is a member of the South African Council for Professional and Technical Surveyors (PLATO)
(PMS0033). The reported Mineral Resource Statements are SAMREC Compliant and the Resource numbers in the Mineral Resource and Mineral Reserve tables have been rounded to reflect the
appropriate level of confidence. Mineral Reserves are reported as subsets of Mineral Resources. Some errors may occur due to rounding.
60
Frans Chadwick, the Chief Surveyor at Barberton Mines, signs off
Mineral Resources for Barberton Mines. He is a member of the
South African Council for Professional and Technical Surveyors
(PLATO) (PMS0033). Mr Chadwick is based at Fairview Mine,
GMO Building, Barberton, 1300.
The reported Mineral Resource Statements are SAMREC
Compliant and the Resource numbers in the Mineral Resource
and Mineral Reserve tables have been rounded to reflect the
appropriate level of confidence. Mineral Reserves are reported
as subsets of Mineral Resources.
Mr Chadwick has confirmed in writing that the information
disclosed is compliant with Section 12 of the JSE Listings
Requirements and Table 1 of the SAMREC Code 2009, and
that it may be published in the form and context in which it is
intended.
F Chadwick
26 September 2012
Commentary on the Mineral Resources
and Mineral Reserves 2012
As at 31 March 2012, Barberton Mines reported a Mineral
Reserve of 1,159,763oz and Mineral Resource of 2,947,826oz
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.
During the 2012 financial year the following significant changes to
the Resources occurred:
• The majority of additional resources were added from surface
tailings dams and dumps associated with the Barberton
Mining Operations (these include the Harper and Bramber
dumps/dams);
• An addition of 220,730 tonnes at a grade of 1.81g/t were
included from surface ore and stockpiles as an Indicated
Resource; and
• 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 2012:
• Increased Barberton Mines’ Mineral Reserve by 161,709oz
contained gold;
• Increased Barberton Mines’ Mineral Resource by 255,462oz
contained gold;
• Increased Barberton Mines’ Measured Mineral Resource
by 93,954oz contained gold;
• Decreased Barberton Mines’ Indicated Mineral Resource by
49,371oz contained gold; and
• Increased Barberton Mines’ Inferred Mineral Resource
by 210,880oz contained gold.
Summary Comment on Mineral
Resource Movement
Year-on-year, Barberton Mines’ Mineral Resources had a positive
variance of 255,462oz contained gold. This was a result of the
addition of new resources from an aggressive exploration
strategy at each of our operations. Confirmation of the depth
extensions of the MRC orebody on the Fairview lower levels
also added significant resources to Barberton Mines.
Summary Comment on Mineral
Reserve Movement
There was a year-on-year positive variance of 90,000oz with
respect to the Mineral Reserves. As indicated in the table below,
Barberton Mines’ ore reserves as at 31 March 2012 reflected a
year-on-year mining depletion of 72,480oz.
Mineral Resource
Reconciliation:
2011 to 2012
Balance as at March 2011
Mined during 2012
Addition
Balance as at March 2012
Variance
Mineral Reserve
Reconciliation:
2011 to 2012
Balance as at March 2011
Mined during 2012
Addition
Balance as at March 2012
Variance
Gold (kg)
Gold (koz)
83,742
2,254
10,200
91,688
7,946
2,692
72
328
2,947
255
Gold (kg)
Gold (koz)
31,043
2,254
7,284
36,073
5,030
998
72
234
1,159
162
Pan African Resources PLC
Annual Report 2012
61
Barberton Gold Mining Operations
Continued
Grade Tonnage Curves
Mineral Reserve metal figures are fully inclusive of all mining dilutions and gold losses, and are reported as mill delivered tonnes and
recovered grades.
New Consort Tonnage Grade Curve (face values)
Sheba Tonnage Grade Curve (face values)
250,000
200,000
150,000
100,000
50,000
0
0
Cum face tonnes
Cum face grade
5
10
15
20
25
30
35
Fairview Tonnage Grade Curve (face values)
Cum face tonnes
Cum face grade
2,000,000
1,800,000
1,600,000
1,400,000
1,200,000
1,000,000
800,000
600,000
400,000
200,000
0
0
-200 000
35
30
25
20
15
10
5
0
70
60
50
40
30
20
10
2,500,000
2,000,000
1,500,000
1,000,000
500,000
0
0
Cum face tonnes
Cum face grade
80
70
60
50
40
30
20
10
0
10
20
30
40
50
60
70
80
Mineral Reserve Sensitivity
The graph below illustrates ore reserve sensitivities to a changing
gold price below and above ZAR275,000/kg.
MRM Risks
The risks relating to the MRM at Barberton Mines are set out
below:
• Delivery on operational plans:
o timeous delivery of capital ore reserve generation – thus
increasing reserve flexibility;
o focused grade control management – dilution, vamping,
sweepings and mining to an optimal cut-off grade;
o enhanced management on quality mining to optimise
mining mixes; and
10
20
30
40
50
60
70
0
o focused management of VTN’s operational targets.
Ore Reserve Sensitivities
1,200,000
1,000,000
800,000
z
o
600,000
400,000
200,000
0
200,000
250,000
300,000
350,000
400,000
ZAR/kg Gold Price
450,000
500,000
550,000
600,000
Ounces
g/t
818
10.08
919
9.11
945
8.75
1,001
8.25
1,022
8.02
1,035
7.90
1,058
7.60
1,061
7.53
1,061
7.51
62
g/t
12.00
10.00
8.00
6.00
4.00
2.00
0.00
• Volatility in gold and exchange rates;
• Grade distribution within resource – thus affecting block
factors and mine call factors. Exploration drilling and on-reef
development programme to add more integrity to grade
estimates; and
• Geometry of orebodies – thus affecting the tonnages of the
resource. Reef development and exploration drilling to add
confidence on geometry of orebodies. 3D modelling tools
used to enhance the integrity of tonnages.
MRM – The Way Forward
Focus for the 2013 financial year will include the following:
• To access historically mined out areas and remnant Resource
blocks to produce and explore in these areas;
• To focus exploration on continuing to define short-term
mining blocks and converting these Indicated and Inferred
Mineral Resources to the higher confidence measured
category; and
• To continue a longer term focus on extending and exploring
the extensions of orebodies on all mines.
Mining Rights and Tenure
The mining rights relating to Barberton Mines are set out below:
Mine Name
Mining Licence
Mining Area
Ore reserve
generation
ameliorates
production
problems
associated with
mining flexibility.
New Consort
Mine
MP 30/5/1/2/2/190
MR
Fairview Mine
MP 30/5/1/2/2/191
MR
Lots 130, 131, 134, 135, 136, 137 and 159 of Section
A Kaap Block, Lots 191, 192, 193, 194, 195, 196, 197,
198, 199, 200, 259, 260, 261, 262, 265, 269 and 281 of
Section D Kaap Block and the farms Dublin 302 JU,
Tinto 300 JU, Segalla 306 JU and Whitwick 301 JU.
159 of Section A Kaap Block, Lots 191, 192,
193, 194, 195, 196, 197, 198, 199, 200, 259, 260,
261, 262, 265, 269 and 281 of Section D Kaap
Block and the farms Dublin 302 JU, Tinto 300
JU, Segalla 306 JU and Whitwick 301 JU.
Area (ha)
Expiry Date
2,520.81
27 April 2021
3,033.86
27 April 2021
Sheba Mine
MP 30/5/1/2/2/189
MR
Lots 135, 137, 138, 139, 140, 141, 142, 153, 155,
156, 157, 158, 159, 160, 166, 167 and 169 of
Section A Kaap Block and the farm Camelot 320 JU.
1,705.06
27 April 2021
The mineral rights pertaining to Barberton Mines were issued
by the Department of Mineral Resource (‘DMR’), in terms of
Item 7 of Schedule II of the Mineral and Petroleum Resources
Development Act (‘MPRDA’).
Mineral rights to Barberton Mines comprise three separate
mining rights for the three different mining operations. All three
operations’ old order rights were converted to the sole and
exclusive right to mine on 28 April 2011 (registration of the
mining rights is pending due to administrative backlog beyond
the mine’s control). The description of the mining area of all
these mines is situated in the Mpumalanga Magisterial District
of Barberton and the commodity is gold. All three of these
mining rights will continue to be in force for a period of 10
years ending on 27 April 2021. There are thus no complications
regarding the mining rights during the short-term future.
Ongoing prospecting is taking place in the mining licence area to
continuously assess the extent of the gold mineralisation.
Pan African Resources PLC
Annual Report 2012
63
Phoenix Platinum CTRP
Operation at a Glance
Operation Name
Phoenix Platinum CTRP
Parent and ownership percentage
Pan African Resources PLC (100% attributable)
Holding company
Country of operation
Provincial jurisdiction
Number of employees
Number of contractors
Commodities being mined
Geological setting
Mining method
Extraction method
Name Plate Annual Production
Tonnage (t)
Plant Feed Grade (g/t)
PGMs produced (oz)
Cash cost
Capex per annum
LOM
Phoenix Platinum (Pty) Limited (South African incorporated)
South Africa
North West
5
50
Platinum (56.5%), Palladium (27%), Rhodium (16%)
and Gold (0.05%) (‘PGE 4Es’)
Bushveld Igneous Complex. Chrome seams containing
PGMs from International Ferro Metals (‘IFM’)
Current arisings tailings produced by IFM during their mining operation
are delivered directly to the CTRP and material from old tailings dams
SMD bead milling and flotation (concentrate is delivered
to Lonmin’s Mooinooi Smelter for toll extraction)
240,000
3.16g/t
12,000oz 6E
US$450/oz
£0.4 million (ZAR5 million)
17 years
The construction of the CTRP was
completed in November 2011 with
the first low grade concentrate
delivered at the end of December 2011.
64
Setting the Scene
The Phoenix Project has a total South African Code for
Reporting of Exploration Results, Mineral Resources and Mineral
Reserves (‘SAMREC’) compliant resource of 493,000oz PGM
4Es (4,853,000 tonnes at 3.16g/t PGM 4Es in situ).
The project is expected to produce 211,000oz PGM 6Es at a
plant recovery of 45% over the 17-year life of the operation
with a planned annual retreatment capacity of 240,000 tonnes.
The total capital cost required to construct and commission
the plant was £8.5 million (ZAR104 million). The cost for the
plant was funded from existing cash resources within the Group.
A sale of concentrate agreement was concluded with Western
Platinum Limited (‘WPL’) during November 2011.
The construction of the CTRP was completed in November
2011 with the first low grade concentrate delivered to WPL at
the end of December 2011.
During the hot commissioning phase the metallurgists continued
with CTRP stabilisation to achieve steady state concentrate
production. The IFM feed source to the CTRP prior to January
2012 originated from the IFM Lesedi underground operations
and this sulphide rich tailings material was the basis of the original
CTRP project flotation test work. Due to financial considerations
IFM drastically cut back on the Lesedi underground tonnes and
moved mining operations to the low-cost opencast oxidised ore
section at Skychrome.
This opencast material being highly oxidised, contains poor
quality chrome and low PGE grades. Feeding this material into
the CTRP is not ideal as the highly oxidised tailings do not
float properly. The metallurgy of oxidised tailings negatively
affects recovery and grade, leading to poor PGE concentrate
production. The oxide to sulphide ratio contained in the run of
mine ore from the IFM opencast pits will reduce proportionately
with the increase in depth of the mining cut. Various options are
being investigated to address the effect of the highly oxidised
feed source, recoveries and final concentrate grade.
Key Historical Developments
Date
Development
21 May 2009
November 2010
November 2010
March 2011
Pan African Resources acquired Phoenix
Agreement reached with IFM to make use of IFM’s infrastructure (electric power and water) and
to construct the CTRP for Phoenix on the IFM property
Agreement concluded with Matomo Basil Read to construct the CTRP
Construction of the CTRP commenced
September to November 2011
Retreat Tailings dam No 2 followed by the construction of the Tailings Storage Facility Extension
November 2011
November 2011
December 2011
Sale of Concentrate Agreement signed with Western Platinum Limited (‘WPL’)
CTRP commissioning commenced with first non-spec concentrate produced in December 2011
Commenced CTRP Hot Commissioning with first low grade saleable concentrate supplied to
WPL end December 2011, and to stabilise the CTRP to achieve a steady state for concentrate
specifications
May 2012
Commenced final ramp-up of production
Pan African Resources PLC
Annual Report 2012
65
Phoenix Platinum CTRP
Continued
Safety, Health, Environment
and Community Development
(‘SHEC’) Policy
Phoenix operates under the IFM Mining Right and complies with
the IFM Health, Safety and Environmental Policy which is in line
with the Pan African Resources policy.
Environmental and Safety Results for 2011/2012 financial year
Description
Plant Spillage Incidents
Return to Work Injuries
Lost Time Injuries
Reportable Injuries
LTIFR
RIFR
Safety
2011/2012
6
3
0
0
0
0
Baseline risk assessments together with associated specific issue
based appraisals form the foundation of the safety programme.
A behavioural training programme motivates employees to
operate in a responsible and safe manner.
All safety occurrences are fully investigated and corrective
actions designed and prescribed. Where necessary, remedial
training is carried out.
Health
The services of an independent contractor have been secured
to monitor the Occupational Exposures at the CTRP and to
measure employee compliance.
Phoenix has embarked on an HIV and TB initiative to ensure the
well-being of our employees. Confidential testing is encouraged
and ARVs supplied where needed.
Environment
Introduction
Phoenix Platinum endeavours to comply with all environmental
compliance needs and mitigation into potential risks has been
put into place.
As a wholly-owned subsidiary of Pan African Resources, Phoenix
Platinum complies with the Safety, Health, Environment and
Community Development Policy of Pan African Resources.
66
Phoenix Platinum strives to ensure that all environmental risks
are identified within the CTRP and its surrounding areas, and the
mitigation to these risks are implemented. Due to the location
of the CTRP, Phoenix Platinum complies with the Environmental
Management Plan of International Ferro Metals (‘IFM’).
Environmental Compliance
Financing
A financial quantum assessment was performed by Prescali
Environmental Consultants (Pty) Limited in terms of the Mineral
and Petroleum Resources Development Act, No 28 of 2002
during June 2012. The outcome indicated a closure liability of
£0.1 million (ZAR1.2 million) if the mine/plant were to be shut
down immediately.
The abovementioned liability is currently small enough to be
covered from normal company cash flows and there is no need
at this point in time to investigate other options to finance the
liability.
Risks
The highest risks to Phoenix Platinum regarding environmental
compliance are:
Ground Pollution
Tailings spillage
in a non-controlled
environment, CTRP spillage, incorrect
hydrocarbon disposal and waste handling.
Air Pollution
Dust pollution from trucks.
Water Pollution
Chemical (Reagent) contamination in
water source.
Mitigation of Risks
The following actions were put into place to ameliorate the
abovementioned risks:
Ground Pollution
• A communication network has been set-up between
the tailings dam operator and the CTRP personnel to
immediately report any tailings line damage. By doing this,
spillage is minimised and the problem is rectified immediately.
• The remining area at the CTRP poses the highest risk for
ground pollution; actions have already been put in place to
remedy the non-conformances.
• An oil store has been constructed to control hydrocarbons
and chemicals and the appropriate spillage kits were made
available. Waste drums used to separate the waste in the plant
have been strategically placed to ensure waste separation.
Air Pollution
• Spray water trucks are used to keep the roads wet to ensure
that any dust emissions from truck movements are minimised.
Water Pollution
• Reagent dosages are constantly monitored to ensure that
residual chemicals are below national standards.
Community Development
Phoenix sources 70% of its labour force from the local
communities in which it operates. In addition to this Phoenix
strives to use local businesses to source material for the
operation of the plant.
Management Team
Phoenix Platinum is wholly owned by PAR and the management operates in a flat structure. The Plant Manager: Metallurgy reports
directly into the Phoenix Board (Jan Nelson, Ron Holding and Busi Sitole). The plant is operated by Metanza while the Tailings Storage
Facility is operated by Fraser Alexander.
Name
Age Designation
Qualification
Bertin Mcleod
35
Plant Manager:
Metallurgy
BTech: Chemical Engineering
Management Development Certificate
Experience
10 years of platinum
industry experience
Avinash Kandhai
30
Cost Accountant
BTech: Accounting
Senior Management
Development Certificate
Phumzile Mokoena
24 Metallurgist
BTech: Chemical Engineering
Hendrik Snyman
38 Manager: Metanza
BEng Metallurgical (Extractive)
(CTRP)
Certificate in Business Management
Certificate in Leadership Programme
Professional Engineer
Seven years of mining
experience and eight years
of financial experience
One year of metallurgy-
related experience
16 years of metallurgy-
related experience
Hector Mapheto
31 Operations
BSc Eng Chemical
Manager: CTRP
Professional Engineer
Seven years of metallurgy-
related experience
Frans Grobler
49
Area Manager
Matric – 1980
28 years of tailings dams experience
(TSF Operations)
Daniel Maponya
31
Site Manager
National Diploma: Engineering Civil
(TSF Operations)
Mine Residue Deposits Certificate
BTech: Engineering Water
Four years of tailings
dams experience
Pan African Resources PLC
Annual Report 2012
67
Phoenix Platinum CTRP
Continued
Operational Performance
Production Results for 2012
Operating Months
Plant Feed
Head Grade
Overall Plant Recovery
Percent Cr2O3
Ounces Produced 6E PGE
Basket Price Received
Total Cash Cost
Cash Cost Per Tonne
Capital Expenditure
Exchange Rate – Average
Dec
2011
11,625
4.21
28
2.46
439
961
7,853
727
5,938
27
224
195,545
8.17
(t)
(g/t)
(%)
(%)
(oz)
($/oz)
(ZAR/oz)
($/oz)
(ZAR/oz)
($/oz)
(ZAR/oz)
($/oz)
(ZAR/oz)
Jan
2012
Feb
2012
14,239
3.32
9
2.57
122
940
7,523
2,575
20,599
22
176
19,327
4.22
20
2.39
587
1,048
8,015
577
4,414
18
134
854,882 2,126,370
7.65
8.00
Mar
2012
18,382
4.20
17
2.4
405
1,028
7,785
882
6,678
19
147
553,910
7.57
Apr
2012
15,616
4.63
20
1.94
439
990
7,733
781
6,102
22
172
271,745
7.81
May
2012
21,994
3.92
27
2.87
777
929
7,537
586
4,756
21
168
0
8.11
Jun
2012
23,281
4.64
24
2.81
705
918
7,681
664
5,560
20
168
958,446
8.37
Efficiency/Optimisation
Drivers and Focus Areas
Plant Recoveries
The projects identified to improve plant recoveries included the
optimisation of the mill grind, reagent suites and the feed source
variability. The following actions took place for the stated projects
respectively:
• increased sampling campaigns for different mill conditions;
• additional laboratory test work required; and
• ongoing test work on feed sources and monitoring poor
quality (oxidised) feed sources.
Improve Concentrate Grades
In order to improve concentrate grades, the following projects
were identified for the optimisation of the plant parameters: mill
grind, flotation, metallurgy and mass pull. The following actions
took place respectively:
• increase sampling campaigns for different mill conditions;
• optimise flotation resonance time; and
• optimise mass flow and training.
Minimise Chrome Penalties
In order to reduce the chrome content, a high PGE 6E grade
concentrate was produced and low chrome grade feed sources
were targeted.
68
Long-Term TSF
The following projects were identified for long-term TSF: Site
selection, Environmental Impact Assessment (‘EIA’) approval
and Design and Construction. The following actions took place
respectively:
• identified Portion 22/23 of Buffelsfontein farm;
• complete EIA process; and
• finalise design and allocate construction contract.
Successes and Challenges
Successes
• No lost time or reportable accidents reported.
• All major commissioning problems identified and fixed.
• A common reagent suite was identified for all ore types.
• Plant design throughput achieved.
Challenges
• Unplanned oxidised material received
IFM
beneficiation plant decreased the recoverable ounces from
the plant. In order to reduce the impact, a portion of this feed
is bypassed directly to the tailings dam and the lost tonnage is
made up by remining.
from the
• The feed well of the feed thickener restricted plant throughput.
This was fixed in April 2012.
• As part of the commissioning the nozzles at the remining had
to be adjusted to maximise throughput. This was completed
in April 2012.
• A design modification had to be made on the remaining
grizzly to improve throughput, completed May 2012.
Geographic Location
Rustenburg
Sterkstroom M
a
r
e
t
l
w
a
n
e
Brits
R 5 6 6
R
511
R
24
’
5
4
°
5
2
R
30
AQPSA
Samancor Millsell Mine
Xstrata Kroondal Mine
N4
Kroondal dump
Middelkraal
Dam
Elandskraal dumps and pits
IFM
N4
Bapong
N4
2
1
5
R
IFM surface area
IFM mining area
Buffelsfontein Dams and Current Arisings
Mooinooi
Planned Phoenix CTRP location
Hartebeespoort Dam
Olifantsnek
Dam
Buffelspoort
Dam
27°15’
27°30’
0
5km
2
1
5
R
LEGEND:
Rivers
Dams
Towns
Roads
Railway
27°45’
Powerlines
Protected Natural Environment
Active Mines
Other Tailings Retreatment Facilities
Project Boundaries
• Limited tailings deposition, the current tailings dam at IFM
is only designed for 20,000 tonnes per month. When the
oxidised material is bypassed the tailings tonnage to the dam
increases and poses a risk to the capacity of the dam.
Outlook and Future
The management team at Phoenix will strive to produce PGM
6Es safely and at the lowest possible cost. The team is focused
on producing 12,000oz for the next financial year through driving
efficiencies, delivering on the Environmental Impact Assessment
for the new TSF and securing additional resources. Management
will continue to increase their involvement with all stakeholders.
Mineral Resource Management
Mining and Treatment Background,
Current Arising Feed and Method
of Reclamation (Remining)
from Tailings Dams
Phoenix Platinum recovers Platinum Group Metals (‘PGMs)
from tailings dumps, dams and current arisings through Mineral
Rights Agreements pertaining to the Buffelsfontein (‘IFM’) Tailings
Dams and current arisings, the Elandskraal dumps and pits and
the Kroondal dump. The tailings, dumps and current arisings are
covered through various agreements and are the feed source for
240ktpa Chrome Tailings Retreatment Plant.
The tailings dumps are mechanically reclaimed by excavator
and 30 ton dump trucks from the tailings dams and trammed
to the CTRP remining section. This material is hydraulically
repulped at the remining section and pumped through the
screening and classifying section and then into the thickener.
The thickened slurry is then ultra fine milled in a SMD bead
mill prior to treatment in the flotation section. The concentrates
produced are then discharged into a storage tank for collection
and delivery to the PGM smelter.
Description and Geographic Location
Phoenix Platinum is a tailings retreatment operation, processing
tailings from chrome seam mining. The geographic location of the
Phoenix Platinum Project is set out above:
Mineral Resources, Reserves and
Life of Mine Management
Competent Person’s Statement
As at 30 June 2012, Phoenix Platinum amended the Reserve
and Resource Statement. The Measured and Indicated Mineral
Resources are inclusive of those resources modified to produce
the Reserves. Mineral Reserves are reported as plant delivered
tonnes at the grade recovered. The Mineral Resource estimate
has been compiled in accordance with the SAMREC Code.
The verification and validation of the data was managed by
Mr Eugene Nel, Professional Metallurgist, who is accredited with
the Engineering Council of South Africa (‘ECSA’).
Pan African Resources PLC
Annual Report 2012
69
Phoenix Platinum CTRP
Continued
ENC Minerals were requested to review the Mineral Resource
update for 2012 and to convert the Resource Estimation into
a SAMREC compliant Mineral Reserve for the Phoenix PGM
Project. The 2010 base Resource calculations were used as
a basis for this review and update. Based on the information
supplied, ENC Minerals has accepted this as being a true and
accurate measurement of the initial Mineral Resource.
Subsequent to the 2011 Resource measurement, additional
deposition of material took place on the Buffelsfontein tailings
dam prior to the Phoenix processing plant becoming operational.
The measured tonnes of material were obtained from the
production database of IFM and this has been included as an
Indicated Resource in the statement.
For the purpose of converting the Mineral Resource to a
Mineral Reserve we have based our calculations on results of
test work done during the design phase of the project as well
as process efficiency data measured during the initial phase of
operation. In addition, the test work and process data results
were compared with operating results achieved at other similar
operations in order to validate the recovery values achieved.
The Phoenix Platinum Resource to Reserve Conversion
Based on these two inputs we believe that an overall average
recovery of 45% will be achievable by the current process design.
It is highly likely that the recovery for individual sections of each
resource will vary depending on the area of resource being
mined. Test work was, however, done on composite samples
covering the complete resource area and, therefore, the average
projected recovery value of 45% has been used throughout the
Resource to Reserve conversion.
The Resource to Reserve conversion is attached to this report.
Yours sincerely
E Nel (Pr Tech Eng)(MBA)
Managing Director
ENC Minerals
Resource
Category
Mass
(kt)
Measured
Indicated
Inferred
Total
Measured
Indicated
Inferred
Total
Measured
Indicated
Inferred
Total
Measured
Indicated
Inferred
Total
218
208
426
1,149
145
42
1,336
260
30
120
410
2,172
1,597
443
641
2,681
PGM
Grade
4E
(g/t)
3.66
3.39
3.53
2.45
2.04
2.00
2.39
2.00
2.00
2.00
2.00
2.54
3.66
3.66
3.66
3.66
Project
Mineral Resources (Dams,
Dumps and Pits)
Buffelsfontein Tailings Dams
Elandskraal Dumps and Pits
Kroondal Dumps
Total In situ Resource
Mineral Resources (Current
Arisings)
Buffelsfontein Current
Arisings
Total Dams, Dumps, Pits and
Current Arisings
PGM
Metal
(kg)
PGM
Metal
(oz)
Reserve
Category
Mass
(kt)
Projected
metal-
lurgical
recovery
(%)
Recover-
able
PGM
Metal
(kg)
Recover-
able
PGM
Metal
(oz)
PGM
Grade
4E
(g/t)
797
705
26,000
Proven
23,000 Probable
218
208
1,502
2,813
296
84
3,193
520
60
240
820
5,515
Total
49,000
90,000
Proven
9,000 Probable
3,000
102,000
17,000
Total
Proven
2,000 Probable
8,000
27,000
178,000
Total
5,845
1,621
2,348
9,814
188,000
Proven
52,000 Probable
75,000
315,000
Total
426
1,149
145
1,294
260
30
290
2,010
1,597
443
45%
45%
45%
45%
45%
45%
45%
45%
45%
45%
45%
45%
1.65
1.53
1.59
1.10
0.92
1.08
0.90
0.90
0.90
1.16
359
317
12,000
10,000
676
1,266
133
22,000
41,000
4,000
1,399
234
27
45,000
8,000
1,000
261
2,336
9,000
76,000
1.65
1.65
2,630
729
85,000
23,000
2,040
45%
1.65
3,360
108,000
4,853
3.16
15,329
493,000
4,050
45%
1.41
5,696
184,000
This Reserve conversion was compiled by Mr Eugene Nel, a registered Professional Engineering Technologist with the Engineering Council of South Africa (Reg no. 200570019). Mr Nel is also a member of the South African Institute of Mining and
Metallurgy as well as the Mine Metallurgical Managers’ Association with 15 years’ experience in the mineral processing field. Mr Nel is based at ENC Minerals head office situated at Wellness World Office Park 2B, Ifafi, 0216, Hartbeespoort, South
Africa.
70
Year-On-Year Mineral Inventory Reconciliation
Phoenix Platinum Resource Statement
Resource at June 2011
Resource at June 2012
± Variances
Project
Resource
Category
Mass
(kt)
PGM Grade
4E (g/t)
PGM Metal
(kg)
PGM Metal
(oz)
Mass
(kt)
PGM Grade
4E (g/t)
PGM Metal
(kg)
PGM Metal
(oz)
Mass
(kt)
PGM Grade
4E (g/t)
PGM Metal
(kg)
PGM Metal
(oz)
Mineral Resource (Dams, Dumps and Pits)
Mineral Resource (Dams, Dumps and Pits)
Mineral Resource (Dams, Dumps and Pits)
Buffelsfontein Tailings
Dams
Elandskraal Dumps
and Pits
Measured
Indicated
Inferred
Total
Measured
Indicated
Inferred
Total
Measured
Kroondal Dumps
Indicated
Total Resource
Buffelsfontein Current
Arisings
Inferred
Total
Measured
Indicated
Inferred
Total
Total Dams, Dumps, Pits and
Current Arisings
218
3.66
797
26,000
218
208
218
1,149
145
42
1,336
260
30
120
410
1,964
3.66
2.45
2.04
2.00
2.39
2.00
2.00
2.00
2.00
2.45
797
2,813
296
84
3,193
520
60
240
820
26,000
426
90,000
1,149
9,000
3,000
145
42
102,000
1,336
17,000
2,000
8,000
27,000
260
30
120
410
4,810
155,000
2,172
3.66
3.39
3.52
2.45
2.04
2.00
2.39
2.00
2.00
2.00
2.00
2.54
208
208
704
23,000
704
23,000
797
704
1,501
2,813
296
84
3,193
520
60
240
820
26,000
23,000
49,000
90,000
9,000
3,000
102,000
17,000
2,000
8,000
27,000
5,514
178,000
208
0.09
704
Mineral Resource (Current Arisings)
Mineral Resource (Current Arisings)
Mineral Resource (Current Arisings)
1,597
443
641
2,681
4,646
3.66
3.66
3.66
3.66
3.15
5,845
1,621
2,348
9,814
188,000
1,597
52,000
75,000
443
641
315,000
2,681
14,624
470,000
4,853
3.66
3.66
3.66
3.66
3.16
5,845
1,621
2,348
9,814
188,000
52,000
75,000
315,000
–
15,328
493,000
207
–
0.01
–
704
–
23,000
The PGM 4E Mineral Reserve estimation is in accordance with the SAMREC code. The responsible Competent Person is Mr Eugene Nel (Pr Tech Eng)(MBA), a registered Professional Engineering Technologist with the Engineering Council of South Africa
(Reg no. 2005070019). Mr Nel is also a member of the South African Institute of Mining and Metallurgy as well as the Mine Metallurgical Managers Association with 15 years’ experience in the mineral processing field. Mr Nel is based at ENC
Minerals head office situated at Wellness World Office Park 2B, Ifafi, 0216, Hartbeespoort, South Africa. The competent person consents to the inclusion of the report of the matters based on the information based in the form and context in which it
appears.
Phoenix Platinum Reserve Statement
Reserve at June 2011
Reserve at June 2012
± Variances
Project
Reserve
Category
Mass
(kt)
PGM Grade
4E (g/t)
PGM Metal
(kg)
PGM Metal
(oz)
Mass
(kt)
PGM Grade
4E (g/t)
PGM Metal
(kg)
PGM Metal
(oz)
Mass
(kt)
PGM Grade
4E (g/t)
PGM Metal
(kg)
PGM Metal
(oz)
Mineral Resource (Dams, Dumps and Pits)
Mineral Resource (Dams, Dumps and Pits)
Mineral Resource (Dams, Dumps and Pits)
Buffelsfontein Tailings
Dams
Elandskraal Dumps
and Pits
Kroondal Dumps
Proved
Probable
Total
Proved
Probable
Total
Proved
Probable
Total
218
218
1,149
145
1,294
260
30
290
Total Reserve
1,802
1.65
1.65
1.10
0.92
1.08
0.90
0.90
0.90
1.12
359
12,000
359
1,266
133
1,399
234
27
261
12,000
41,000
4,000
45,000
8,000
1,000
9,000
218
208
426
1,149
145
1,294
260
30
290
2,019
66,000
2,010
1.65
1.52
1.59
1.10
0.92
1.08
0.90
0.90
0.90
1.16
208
208
1.52
(0.06)
317
317
10,000
10,000
359
317
676
1,266
133
1,399
234
27
261
12,000
10,000
22,000
41,000
4,000
45,000
8,000
1,000
9,000
2,336
76,000
208
0.04
317
10,000
Mineral Reserves (Current Arisings)
Mineral Reserves (Current Arisings)
Mineral Reserves (Current Arisings)
Buffelsfontein
Current Arisings
Proved
Probable
Total
Total Dams, Dumps, Pits and Current
Arisings
1,597
443
2,040
3,842
1.65
1.65
1.65
1.40
2,630
730
3,360
85,000
23,000
108,000
1,597
443
2,040
5,379
174,000
4,050
1.65
1.65
1.65
1.41
2,630
730
3,360
85,000
23,000
108,000
5,696
184,000
208
0.01
317
10,000
The PGM 4E Mineral Reserve estimation is in accordance with the SAMREC code. The responsible Competent Person is Mr Eugene Nel (Pr Tech Eng.)(MBA), a registered Professional Engineering Technologist with the Engineering Council of South
Africa (Reg no. 2005070019). Mr Nel is also a member of the South African Institute of Mining and Metallurgy as well as the Mine Metallurgical Managers Association with 15 years’ experience in the mineral processing field. Mr Nel is based at ENC
Minerals head office situated at Wellness World Office Park 2B, Ifafi, 0216, Hartebeespoort, South Africa. The competent person consents to the inclusion of the report of the matters based on the information based in the form and context in which it
appears.
Pan African Resources PLC
Annual Report 2012
71
Phoenix Platinum CTRP
Continued
Mineral Rights
The respective Mineral Rights for the different Phoenix properties are outlined in the table below.
Farm
Ptns/Re
Type
Number
Start
Expiry
Right
Date
Size
(ha)
Holding
company
ML88/2003 22/12/03
21/12/2022
328.9083 IFM
Minerals
Chrome
and PGMs
Buffelsfontein
Tailings Dams
and Current
Arisings
Buffels-
fontein
465JQ
Mining
License
(Conversion
lodged
10/05/2006)
Ptn 11
constituted
by Ptns 20,
21, 22, 23,
24, 104.
Re Ptn 1
Ptn 12
Elandskraal
Dumps
and Pits
Elandskraal
469JQ
A Ptn of
Ptn 155
Notarial
Lease
Agreement
Akte van
Transport
T31466/1965
N/a as
Dumps are
new order
Mining Right
30/5/07
Kroondal
Dump
Kroondal
304JQ
Ptns of
Ptns 92, 93
and 102
Original
Mining
Permit
MP 82/2002 15/10/02
Initial period
of eight
years
Renewable
for three
periods of
five years
after initial
eight-year
period
100%
owned
82.2270
88.8491
(Mining
Area)
Minco
Chrome
and PGMs
PGMs
9.4400 Phoenix
Platinum
through
cession from
GB Mining
The management team at
Phoenix will strive to produce
PGM 6Es safely and at the
lowest possible cost.
72
Barberton Tailings Retreatment Plant
The Project at a Glance
Operation Name
Barberton Tailings Retreatment Plant Project (BTRP)
Parent and ownership percentage
Pan African Resources PLC (100% attributable)
Holding company
Country of operation
Provincial jurisdiction
Number of employees
Number of contractors
Commodity being mined
Geological setting
Mining method
Extraction method
Name Plate Annual Production
Tonnage (t)
Plant Feed Grade (g/t)
Gold produced (oz)
Cash cost
Capex per annum
LOM
Barberton Mines (Pty) Limited (South African incorporated)
South Africa
Mpumalanga
25
50
Gold
Tailings dams situated at Fairview and New Consort Mines
Hydro-mining of tailings dams
CIL
1,200,000
1.47g/t
20,000oz – 25,000oz
US$700/oz
£23.2 million (ZAR300 million)
10 years
BTRP is on track for final commissioning
in June 2013 with planned output
of 20,000koz per annum.
74
Setting the Scene
As a consequence of successful metallurgical test work carried
out on composite drill hole samples drilled during the previous
financial year, the potential of retreating the Bramber tailings dam
was assessed in a feasibility study on the proposed construction
of a tailings retreatment plant (‘BTRP’) at Fairview Mine. The
viability of a retreatment plant was confirmed in an independent
review by Venmyn Rand (Pty) Limited.
The construction of the BTRP on a site adjoining the Bramber
Tailings Storage Facility (‘TSF’) began in April 2012 and is well
underway and on target to commence cold commissioning in
April 2013. Additional land adjacent to the current tailings dam
extension has been acquired for a TSF and the Environmental
Impact Assessment (‘EIA’) is due to be completed by December
2012 followed by the tailings dam construction.
flow design to treat
Detailed engineering, process and
approximately 1.2Mt per annum was carried out by Basil Read
Matomo.
The life of the BTRP has been augmented by auger drilling on
additional 6Mt of tailings at the Consort Tailings dam, extending
the Life of Project from six to ten years.
When in production, the BTRP will increase the annual production
profile at Barberton Mines by 20,000oz to 115,000oz a year.
Final commissioning is scheduled to be completed in June 2013
and production build-up is planned from July 2013.
With a cost structure of $700/oz this project falls well in line
with the Company’s strategy of developing low cost, high margin
projects.
Management Team
Name
Age
Designation
Qualification
Experience
Casper Strydom
54
General Manager National Higher Diploma
36 years of mining-related experience
Metalliferous Mining
Mine Manager’s Certificate
Jonathan Irons
46
Manager:
Metallurgy
National Higher Diploma
Extractive Metallurgy
25 years of metallurgy-
related experience
Programme for Management
Development (GIBS –
University of Pretoria)
Competence levels include refractory
gold extraction technologies –
(roasting and hydrobiological)
Government Certificate of Competency
24 years of engineering-
related experience
Richard Kunneman
51
Engineering
Manager
Pan African Resources PLC
Annual Report 2012
75
Barberton Tailings Retreatment Plant
Continued
The Construction
Plant Construction
Progress
July
August
September October November December
January
February
March
April
May
June
2012
2013
Contract Approval
Complete
Process Design
Complete
Drawings and
Design
Complete
Ground Breaking
Ceremony
Complete
Bulk Earthworks
Complete
Civil Construction
In Progress
Mechanical/
Structural/E&I
Construction
Commissioning
Major Infrastructure
In Progress
To
Commence
Water Reticulation
In Progress
Electrical
Reticulation (Eskom)
In Progress
Environmental Impact Assessment
EIA
In Progress
Water Use Licence
Amendment
In Progress
Tailings Storage Facility
Design
In Progress
Construction
To
Commence
76
BTRP Life of Mine (‘LOM’)
The table below outlines the sources of material that will
constitute the tonnage profile for the LOM plan for the BTRP.
Slimes Dump
Tonnes Grade (g/t) Ounces (oz)
Slimes Dump
Tonnes Grade (g/t) Ounces (oz)
Bramber Low Grade
2,369,655
Bramber High Grade
758,496
Harper South
Harper North
1,082,970
2,693,250
0.5
1.59
0.66
0.24
37,933
Bramber Low Grade
2,369,655
38,769
Bramber High Grade
758,496
22,807
Harper South
21,093
Harper North
Barberton Tailings Retreatment Project as per the LOM 2013. NB: Segalla Calcine
Project was not included for the LOM Plan 2013, advanced metallurgical testing in
progress.
Segalla Calcine
Total
0.5
1.59
0.66
0.24
1.08
0.57
37,933
38,769
22,807
21,093
10,096
130,701
1,082,970
2,693,250
290,000
7,194,000
Tailings Material available for BTRP
Available Feedstock – Slimes Dumps
Tailings material available for BTRP (including Segalla Calcine Project).
z
o
45,000
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
Bramber Low Grade
Bramber High Grade
Harper South
Harper North
Segalla Calcine
Ounces
37,933
Tonnage
2,369,655
38,769
758,496
22,807
1,082,970
21,093
2,693,250
10,096
290,000
LOM – Treatment Schedule
30,000
25,000
20,000
z
o
15,000
10,000
5,000
0
Tonnes
3,000,000
2,500,000
2,000,000
1,500,000
1,000,000
500,000
0
Tonnes
1,400,000
1,200,000
1,000,000
800,000
600,000
400,000
200,000
0
12 months
ended
2014
12 months
ended
2015
12 months
ended
2016
12 months
ended
2017
12 months
ended
2018
12 months
ended
2019
12 months
ended
2020
12 months
ended
2021
12 months
ended
2022
12 months
ended
2023
12 months
ended
2024
Ounces
24,993
24,993
26,715
28,155
17,887
18,242
10,480
4,347
4,347
4,347
4,347
Total Tailings Tonnage
1,200,000
1,200,000
1,200,000
1,200,000
1,200,000
1,200,000
963,000
180,000
180,000
180,000
180,000
Attributed ounces towards LOM Plan 2013, (Segalla Calcine 9,768oz excl. in Business Plan 2013, metallurgical studies in progress).
Pan African Resources PLC
Annual Report 2012
77
Mineral Resources Management (General)
MRM Approach
Pan African’s MRM philosophy is that a detailed understanding of
the orebody undoubtedly contributes to its optimal extraction.
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. The 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 orebody are
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 tools 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 2013 financial year, Pan African will continue its
drive towards MRM excellence through improving geological
understanding, data recording quality and concentrating on
ensuring sustainability though 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.
Outlook
The management team’s intention for the 2013 financial year will
be to facilitate a smooth transition of the proposed acquisition,
especially with regards to technical services like geology, Mineral
Resource Management, and integration of other orebody-related
matters between operations. The team will continue to consider
additional growth opportunities in the platinum sector.
Mineral Reporting Code
Pan African Resources defines its Mineral Resources and Mineral
Reserves in line with the SAMREC Code and its definitions.
See relevant Competent Persons’ Statements under the
various sections.
Mineral Resource and Reserve Classification Structure is Applied by the Group as Outlined Below:
(reported as in situ mineral estimates)
78
Mineral Resource Definitions
(According to SAMREC Code)
Inferred Mineral Resource:
Inferred Mineral Resource is that 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.
Probable Mineral Reserve:
Probable Mineral 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.
Indicated Mineral Resource:
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 a 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:
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.
Mineral Reserve definitions
A Mineral 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.
Proved Mineral Reserve:
Proved Mineral 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,
and
governmental factors. Such modifying factors must be disclosed.
legal, environmental,
social
Group Consolidated and
Other Mineral Resource and
Mineral Reserve Estimates
For ease of reference, the detailed Mineral Resource and Mineral
Reserve Estimates for each operation can be found under
the Operational Review – Mineral Resource Section above
(ie Barberton Mines and Phoenix Platinum).
Pan African Resources PLC
Annual Report 2012
79
Mineral Resources Management (General)
Continued
Please find below the Consolidated Mineral Reserve and Mineral Reserve Estimates for the Group (both including and excluding the
Manica Project Estimate) as well as the Mineral Resource and Reserve Estimates of Manica (unchanged since 2011) and Evander Gold
Mines (as stated by Harmony, 2012).
Consolidated Mineral Resource and Reserve Estimate for the Group as at 30 June 2012 – Barberton Mines (Excluding Manica)
Mineral Resources
Mineral Reserves
Category
Measured
Indicated
Inferred
Total M&I
TOTAL
Tonnes (Mt)
Grade (g/t)
Contained
Au (koz)
Contained
Au (kt)
Category
Tonnes (Mt)
Grade (g/t)
Contained
Au (koz)
Contained
Au (kt)
3.20
10.03
3.91
13.23
17.15
8.18
3.87
6.82
4.91
5.35
842
26.193
Proved
1,247
38.799
Probable
1.57
9.77
7.49
2.49
377
783
11.731
24.342
860
2,090
2,950
26.700
65.000
Please note due to rounding some errors may occur.
91.700
TOTAL P&P
11.34
3.18
1,160
36.070
Consolidated Mineral Resource and Reserve Estimate as at 30 June 2012 – Barberton Mines (Including Manica)
Mineral Resources
Mineral Reserves
Tonnes (Mt)
Grade (g/t)
Contained
Au (koz)
Contained
Au (kt)
Category
Tonnes (Mt)
Grade (g/t)
Contained
Au (koz)
Contained
Au (kt)
14.76
23.02
29.91
37.78
67.70
3.13
2.68
2.51
2.86
2.70
1,482
1,987
2,417
3,470
5,887
46.17
61.72
75.01
107.89
Proved
Probable
1.57
9.77
7.49
2.49
377
783
11.731
24.342
Please note due to rounding some errors may occur.
182.90
TOTAL P&P
11.34
3.18
1,160
36.070
Category
Measured
Indicated
Inferred
Total M&I
TOTAL
Mineral Resource Estimate for Manica as at 30 June 2012
(Unchanged from 2011 financial year)
Mineral Resources
Category
Tonnes (Mt)
Grade (g/t)
Measured
Indicated
Inferred
Total M&I
TOTAL
11.56
12.99
26.00
24.55
50.55
1.73
1.76
1.90
1.75
1.82
Contained
Au (koz)
Contained
Au (kt)
640
19.980
740
22.920
1,590
49.280
1,380
42.90
2,970
92.180
80
Mineral Resource and Reserve Estimate for the Group as at 30 June 2012 – including Pro Forma Impact of the Evander Mineral
Resource and Mineral Reserves (excluding all surface sources at Evander Gold Mines)
Mineral Resources
Mineral Reserves
Category
Measured
Indicated
Inferred
Total M&I
TOTAL
Tonnes (Mt)
Grade (g/t)
Contained
Au (koz)
Contained
Au (kt)
6.29
74.62
45.78
80.91
126.70
10.52
8.18
6.72
8.36
7.77
2,132
19,627
9,897
21,760
31,657
66.19
610.50
307.83
676.69
Category
Proved
Probable
Tonnes (Mt)
Grade (g/t)
Contained
Au (koz)
Contained
Au (kt)
3.59
35.96
7.32
6.90
847
7,973
26.23
248.14
Please note due to rounding some errors may occur.
984.52
TOTAL P&P
39.55
6.94
8,820
274.37
Consolidated Platinum Projects Mineral Resource and Mineral Reserve Estimate for the Group as at 30 June 2012
Mineral Resources
Mineral Reserves
Tonnes (Mt)
Grade (g/t)
Contained
Au (koz)
Contained
Au (kt)
Category
Tonnes (Mt)
Grade (g/t)
Contained
Au (koz)
Contained
Au (kt)
3.22
0.83
0.80
4.05
4.85
3.09
3.25
3.33
3.12
3.16
321.00
86.00
86.00
407.00
493.00
9.98
2.68
2.67
12.656
Proved
Probable
3.22
0.83
7.18
3.59
144.32
38.80
4.49
1.21
Please note due to rounding some errors may occur.
15.328 TOTAL P&P
4.05
1.41
184
5.70
Category
Measured
Indicated
Inferred
Total M&I
TOTAL
New Business
Strategy
The New Business Development and Growth strategy for the
financial year under review had two primary goals, both of which
were executed with success during the period.
These two goals were in line with the two-tier strategy adopted
in the previous financial year, namely to grow internally and to
identify an acquisitive gold opportunity in South Africa that fits
into the Company’s growth criteria of low cost, high margin
assets, being close to or already producing, and with additional
growth potential.
As part of Pan African’s Barberton Mines internal growth
process, a feasibility study was completed for the BTRP Project.
After an independent review, the Board approved capital for the
project. Construction on site has commenced. Please refer to the
relevant section for more details.
As part of its acquisitive growth strategy, Evander Gold Mines
was identified as a potential target. A technical due-diligence
team was assembled to investigate the asset and a positive
recommendation to the Investment Committee and Board
of Directors was made to pursue the acquisition opportunity
which resulted in the Company making an offer to Harmony
that was accepted in May 2012. It is believed that the asset meets
all of Pan African’s Business Model philosophies based on the
following four guiding pillars:
Profitability: Evander Gold Mine’s Operating Shaft, Evander 8
Shaft, generated production profit, as published by Harmony, for
the full year ended 30 June 2012 of £52 million, before tax and
other charges.
Sustainability: Evander 8 Shaft has a Life of Mine of at least
15 years (Reserves of 1.19Moz Au), maintaining a recovered
grade of 7.0g/t average over the 15 years.
Stakeholder Value: The acquisition of the Evander Gold Mines
would benefit all Stakeholders through Pan African’s involvement
in the local communities and applying its business philosophies
through best practises across its operations.
Growth: The proposed acquisition would almost double the gold
production output base of Pan African Resources, and increase
its Resource and Reserve base significantly. Evander Gold Mines
does have a pipeline of attractive projects that most certainly
could contribute to further growth in Pan African Resources.
Focus for the 2013 financial year will be to facilitate a smooth
transition of the proposed acquisition, especially with regards to
technical services like geology, Mineral Resource Management,
and integration of other orebody-related matters between
operations while other growth opportunities will still be
considered, especially on the platinum side.
Pan African Resources PLC
Annual Report 2012
81
Regulatory and Statutory
Board of Directors
GAP Analysis
Risk Management
KPIs
Audit Committee Report
Remuneration Report
Pan African Resources PLC
Annual Report 2012
83
Corporate Governance
Statement of Compliance
Pan African Resources strives to comply with the UK Companies
Act, the King Code of Governance for South Africa, 2009 (‘King
III’) and the JSE Listings Requirements and AIM rules as far as
possible for an organisation of this size.
Significant Changes Regarding
Size, Structure or Ownership
No significant changes occurred during the period under review.
The Board of Directors ensures that the business of the
enterprise is conducted with integrity and in accordance with
the highest standards of corporate governance practice.
Board of Directors
Purpose and Function
The Board embraces best practice principles based on the
understanding that sound governance practices are fundamental
to earning the trust of our stakeholders. This is critical to
sustaining the Group’s success and preserving shareholder value.
Sponsor
One Capital is, in accordance with the Listings Requirements
of the JSE, the Company’s appointed Sponsor. One Capital
is therefore responsible to ensure that the Company is at all
times guided and advised as to the application of the Listings
Requirements of the JSE.
Nominated Adviser and Joint
Brokers - United Kingdom
Canacord Genuity Limited was appointed as the Company’s
Nominated Adviser (NOMAD) and Joint Broker together with
finnCap Limited on 5 April 2012. The duty of NOMAD and Joint
Broker is to advise the Group on compliance concerning the
AIM Rules and continuing obligations as an AIM quoted company.
Restrictions on Share Dealings
All Directors and employees are prohibited from dealing in
shares during any period in which price sensitive information
is available. The CEO distributes memoranda informing the
affected parties of these periods. Should a senior employee or
Director wish to trade Pan African Resources shares, written
permission must be granted from either the Chief Executive
Officer or Financial Director.
Interim Results
Currently external auditors do not review interim results.
The Board recognises that good governance is essential to
protect the interests of all stakeholders. Business is conducted
in accordance with the principles of openness, integrity and
accountability. The Board’s purpose is to ensure that it retains
full and effective control over the Company which it directs
and controls by ensuring that management is guided by established
goals and strategies. The Board is committed to applying
and enforcing appropriate corporate governance principles
and maintaining oversight and monitoring of performance
and ensuring that shareholder interests are a priority at all
times. The Board is currently in a process of determining the
gaps and ensuring that the Company implements processes to
comply with the requirements of King III.
Except or as disclosed, Pan African Resources 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 Resources Group, which has affected or will materially
affect Pan African Resources or its investment interest or
subsidiaries.
Board Composition
Pan African Resources has a Board of seven Directors. The
Chairman is an Independent Non-Executive Director, a further
four are Non-Executive Directors and two are Executive
Directors. The Group Board composition has been considered
to ensure that there is a clear balance of power and authority at
Board level, ensuring that no individual has unfettered powers of
decision-making.
Access to Management and
Independent Advice
Board members have access to the executive management
of the Company at all times. All Board members are entitled to
seek independent third-party expert advice, when considered
necessary. From time to time, members of the executive
management are requested to attend Board meetings to present
projects or updates.
84
Delegation of Authority
The Board has formed various committees to enable Directors
to excel in areas of experience. In doing so, the Board as a
whole has delegated authority in certain areas to 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 Chairman is Keith Spencer who is an Independent Non-
Executive Director, as required by the JSE. The Chief Executive
Officer is Jan Nelson who is also an Executive Director.
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 seven members.
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. Corrective measures are effected immediately should
they be needed from time to time. During the period under
review, these quarterly checks culminated in the appointment
of an additional Director with skills to supplement those of the
current members of the Audit Committee.
Resignations
Rowan Smith resigned on 20 July 2011.
Cyril Ramaphosa resigned on 14 December 2011.
Appointments
Phuti Mahanyele was appointed on 20 July 2011.
Busi Sitole was appointed on 14 December 2011.
Hester Hickey was appointed on 12 April 2012.
External Advisers
No external advisers regularly attend Board or other committee
meetings.
Chairman and Chief
Executive Officer
The roles of Chairman and Chief Executive Officer are held by two
different people and are separate and distinct. The offices of the
Chairman of the Board and Chief Executive Officer are also separate.
There is at all times a clearly defined division of responsibilities in
both offices to ensure a balance of authority and power.
Rotation of Directors
In accordance with the Company’s Articles of Association,
a Director appointed since the last AGM is required to be
re-elected at the next AGM of the Company. In addition, the Articles
of Association require that one-third of the Directors or if their
number is not a multiple of three, then the number nearest to but
not less than one-third, retire from office. Accordingly, Busi Sitole and
Hester Hickey, having been appointed since the last AGM, will retire
and offer themselves for re-election at the forthcoming AGM, and
Jan Nelson, Cobus Loots and Rob Still will retire by rotation and
offer themselves for re-election at the forthcoming AGM.
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.
Attendance at Board Meetings
During the year under review, the Board of Pan African Resources held at least one Board meeting per quarter as required by the
Articles of Association. Meeting dates and attendance are set out below:
11 Aug
2011
14 Nov
2011
3 Jan
2012
17 Jan
2012
6 March
2012
30 March
2012
26 April
2012
8 May
2012
14 June
2012
√
√
–
√
√
√
*
√
√
–
√
–
√
*
√
√
–
–
–
√
√
√
√
–
√
√
√
√
√
√
–
√
√
√
√
√
√
*
√
√
√
√
√
√
√
√
–
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
Name
Keith Spencer
Jan Nelson
Hester Hickey
Cobus Loots
Phuti Mahanyele
Rob Still
Busi Sitole
√ Attended
– Not attended
* Not a Board member but attended as an invitee
Pan African Resources PLC
Annual Report 2012
85
Corporate Governance
Continued
Induction and Development
New Board members are evaluated and an induction process is
tailored to introduce them to the organisation in an appropriate
manner. Existing Board members are available at all times to
ensure that there is a smooth induction of new Board members.
Where Board members require additional training, the Company
makes resources available.
Board Committees
The Board has instituted sub-committees to allow the Directors
best suited in terms of skills and experience to manage various
areas of responsibility. The formation of these committees does
not in any way absolve the Board of its overall responsibility to
the shareholders and the Company and, as such, each committee
is required to report back to the Board at each Board meeting.
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 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 put
in place to rectify such deviations. Investment and technical
decisions form part of the Board’s responsibilities.
86
Committee Directors
Appointed
Meetings
Attended
Responsibilities
Activities during the
period under review
Audit
Hester Hickey
(Chairman)
12 April 2012 22 June 2012
• Overseeing integrated
• The Audit Committee has
21 September
2012
5 September
2011
14 February
2012
22 June 2012
21 September
2012
Rob Still
(Independent)
18 August
2008
Cobus Loots 6 March 2012 21 September
2012
reporting process and, in
particular, has regard to all
factors and risks that may
impact on the integrity
of the integrated report.
• Ensuring that a combined
assurance model is
applied to provide a
coordinated approach to
all assurance activities.
• Overseeing the internal
audit function, and in
particular responsible
for the appointment,
performance assessment
and/or dismissal thereof.
• Reviewing the expertise,
resources and experience
of the Company’s finance
function and the suitability
of the expertise and
experience of the Financial
Director every year.
• Forming an integral
component of the risk
management process
and specifically oversees
financial reporting risks;
internal financial controls;
and fraud risks as it relates
to financial reporting.
• Recommending the
appointment of the external
auditor and oversees the
external audit process.
reviewed the expertise and
experience of the Financial
Director, and her expertise
and experience are considered
appropriate for her position.
• All non-audit services
rendered by the Group’s
external auditors during
the year were approved.
• 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 were identified by
the Audit Committee.
• The Audit Committee believes
the current financial control
environment is adequate.
• The Audit Committee has
satisfied itself of the auditor
being 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 Resources 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.
Pan African Resources PLC
Annual Report 2012
87
Corporate Governance
Continued
Committee Directors
Appointed
Remune-
ration
Phuti
Mahanyele
(Chairman)
20 July 2011
Meetings
Attended
28 February
2012
15 June 2012
Rob Still
9 September
2004
28 February
2012
15 June 2012
Nominations Keith Spencer
(Chairman)
20 October
2009
14 December
2011
6 March 2012
Rob Still
20 October
2009
14 December
2011
Phuti
Mahanyele
6 March 2012
6 March 2012 14 December
2011
6 March 2012
Activities during the
period under review
• The committee met twice
during the year under review
and adopted a Remuneration
Policy that facilitates
the delivery of superior
long-term results for the
business and shareholders
and promotes sound risk
management principles.
• Furthermore, it supports
the attraction, retention,
motivation and alignment
of the talent we need to
achieve our business goals.
• We have become
a member of the
PricewaterhouseCoopers
Remchannel Survey during
the period under review
with a view to having
access to an authoritative
benchmark in determining
remuneration of individuals.
• The committee met twice
during the year. At these
meetings it reviewed the
composition of the main
Board, in particular the
positions of the Chairman,
the Deputy Chairman,
Financial Director and the
position of an additional
Independent Director.
• The committee also reviewed
and made changes to the
Board sub-committees.
Responsibilities
• Reviewing the performance
of the Executive Directors,
employees and executive
management.
• Determining remuneration
and the basis of the service
agreements with due
regard to the interests
of shareholders.
• Determining the payment
of any bonuses to Executive
Directors and the granting
of options to employees,
including Executive Directors,
under the Company’s
share option scheme.
• Determining the required
capabilities of Director
nominees for election
to the Board.
• Identifying and recommending
candidates to fill vacancies
occurring between
shareholder meetings.
• Reviewing, evaluating and
recommending changes to
the Company’s Corporate
Governance guidelines.
• Reviewing the Company’s
policies and programmes that
relate to matters of corporate
citizenship, including public
issues of significance to the
Company and its stakeholders.
88
Committee Directors
Appointed
Meetings
Attended
Safety,
Health,
Environment
and
Community
(SHEC)
Keith Spencer
(Chairman)
12 October
2009
11 August
2011
15 November
2011
12 June 2012
Jan Nelson
12 October
2009
11 August
2011
Ron Holding 12 October
2009
15 November
2011
12 June 2012
11 August
2011
15 November
2011
12 June 2012
Thandeka
Ncube
6 March 2012 12 June 2012
Hester Hickey 12 April 2012 12 June 2012
Responsibilities
• Establishing a safety,
health, environment and
community policy framework
for the Company.
• Strategically reviewing the
safety performance of all
operations compared to
the policy framework.
• Implementing corrective
measures when necessary
to achieve the objectives
of the policy framework.
• Establishing a Social and
Ethics Committee as a sub-
committee of SHEC that
will perform the functions
required on behalf of the
Company and its subsidiaries.
Activities during the
period under review
• The committee met three
times in the year. 11 August
2011, 15 November 2011
and 12 June 2012.
• During each occasion
detailed debate was held
on all serious accidents.
• The circumstances around
the fatal accident of
Mr Christopher Hlela and
the subsequent DMR report
in terms of Section 72 of
the Mine Health and Safety
Act, No 29 of 1996 was
dealt with in great detail.
• The General Manager at
BML was requested to
attend two of the meetings.
• The committee approved the
commencement of Phase 2
of the building of the Sinqobile
School during the year.
• The SHEC Committee
believes that it has complied
with its legal, regulatory
or other responsibilities.
Internal Audit
The Audit Committee is responsible for overseeing internal audit
in the Pan African Group. Currently the internal audit function
within Pan African Resources is currently 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 audit 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
Resources Directors.
An internal audit programme is determined and approved
annually by the Audit Committee which defines the reviews
to be undertaken during each financial year and focuses on
the adequacy and effectiveness of systems of internal control
and 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 terms of financial
loss, loss of other assets, misstatement or lack/circumvention
of internal controls. In line with integrated assurance principles,
the internal audit plan also takes into consideration the assurance
provided by other activities within the organisation, thereby
seeking to eliminate any duplication of assurance efforts.
As a part of the annual reporting of the Internal Audit Function,
a written assessment of the effectiveness of the Group’s system
of internal controls and risk management, including internal
financial controls, is provided to the Audit Committee that is
based on the areas reviewed. This assessment forms part of
the Audit Committee’s recommendation to the Board and
determines whether adequate and appropriate internal controls
are in place over operational and financial processes, that
Pan African Resources PLC
Annual Report 2012
89
Corporate Governance
Continued
significant business, financial and other risks have been identified
and are being suitably managed, and that satisfactory standards
of governance, reporting and compliance are in operation, in
order for the Board to report thereon.
The internal audit plan is reviewed and updated by the Audit
Committee on a regular basis with input from Executive
Management and the external auditors.
Information Technology Governance
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 selected Microsoft
Dynamics AX as the Enterprise Resource Planning (‘ERP’) system
that would best suit its current system requirements. Microsoft
Dynamics AX was successfully implemented during the financial
year under review. The Group’s internal auditors performed a
data migration review to provide assurance on the correctness
of the data migrated from Pastel to Microsoft Dynamics AX,
and performed a full post implementation review after year
end. The Pan African Group will investigate the possible roll-out
of Microsoft Dynamics AX across all companies in the Group
during the next financial year.
Code of Conduct
On 1 November 2009, Pan African Resources committed to the
following Code of Ethics:
“As leaders and employees of Pan African Resources, 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, 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 inconsistent 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 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.”
Bribery and Corruption Policy
The Board has introduced a Bribery and Corruption Policy.
The Board has adopted a zero-tolerance approach to bribery
and corruption and will uphold all laws relevant to countering
bribery and corruption in all jurisdictions in which the Group
operates. This policy has been communicated to all employees
and contractors.
Company Secretary
St James’s Corporate Services Limited has been the Group’s
Company Secretary since 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 Company’s expense, should
they believe that course of action would be in the best interest
of the Group.
The Company Secretary, in conjunction with the Company’s legal
advisers, is responsible for drawing the attention of the Directors
to their legal duties and, in collaboration with the Company’s
NOMAD, is responsible for ensuring that new Directors are
effectively informed in terms of their duties and responsibilities.
The Company Secretary, together with the Company’s investor
relations representatives, provides a direct communication link
with investors and liaises with the Company’s share registrars
on all issues affecting shareholders. The Company Secretary
maintains the statutory books of the Company and also provides
mandatory information required by various regulatory bodies
and stock exchanges on which the Company is listed.
90
Board of Directors
Executive Directors
Jan Nelson (42)
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 Pan African Resources from an exploration
company to a gold mining company. He was the driver behind
the acquisitions of Barberton Mines and Phoenix Platinum
and currently the Evander Gold Mines acquisition which will
add further production gold ounces revenue to the Company.
He surrounds himself with a competent mining team that
is well positioned to build the Company to a mid-tier gold
producer.
Busi Sitole (36)
Financial Director
Appointment date: 14 December 2011
Qualifications: BCom (Hons), CA(SA)
Busi joined Pan African Resources in April 2011 as a Finance
Executive and was appointed as the Financial Director in
December 2011. She is a Chartered Accountant with a
BCom degree from the University of Cape Town and BCom
Honours from the University of KwaZulu-Natal. She joined the
Shanduka Group in December 2007 as a transactor responsible
for sourcing, executing as well as including capital raising and
monitoring the company’s investments. She also sat on several
boards of the company’s investee companies. Prior to joining
the Shanduka Group, she was a Financial Manager at RMB
Treasury Agency Businesses, New Treasury Products Marketer at
Absa Capital and Finance Manager at Standard Bank Structured
Finance, where she also completed her three years of articles as
a trainee accountant.
Pan African Resources PLC
Annual Report 2012
91
Board of Directors
Continued
Rob Still (57)
Independent Non-Executive Director
Appointment date: 9 September 2004
Qualifications: BCom (Hons), CTA
Committees: Audit, Remuneration, Nominations
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 worldwide and has held Executive and
Non-Executive Directorships in companies listed in South Africa,
Australia, Canada and the United Kingdom. He has also been
Chairman to Zimbabwe Platinum Mines Limited and Metorex
Limited. 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) and Zimbabwe Platinum Mines Limited.
Non-Executive Directors
Keith Spencer (62)
Independent Non-Executive Chairman
Appointment date: 8 October 2007
Qualifications: BSc Eng (Mining)
Committees: SHEC (Chairman), Nominations (Chairman)
Keith is a qualified mining engineer with 35 years of practical
mining experience, and has managed some of the largest gold
mines in the world. In 1984, Keith was appointed as General
Manager of Greenside Colliery and in 1986 he moved to Kloof
Gold Mine as General Manager. In 1989, he was appointed
as consulting engineer for Gold Fields of South Africa to
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 two 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. He was appointed as Chairman of
the Board on 14 December 2011.
92
Phuti Mahanyele (41)
Non-Executive Director – Deputy Chairman
Appointment date: 20 July 2011
Qualifications: BA Economics, MBA
Committees: Remuneration (Chairperson), Nominations
Cobus Loots (34)
Non-Executive Director
Appointment date: 14 December 2011
Qualifications: CA(SA), CFA® Charterholder
Committees: Audit
Cobus is a principal with Shanduka Resources (Pty) Limited.
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 to pursue
a career in finance. Cobus’ experience includes mining specific
acquisitions and finance, as well as the management of both
exploration and producing mineral assets.
Phuti is the CEO of Shanduka Group (Pty) Limited. She joined
Shanduka in 2004 as the Managing Director of Shanduka Energy
(Pty) Limited, a subsidiary company of the Shanduka Group, led
by Cyril Ramaphosa. She was previously the Head of the Project
Finance South Africa Unit at the Development Bank of Southern
Africa. Prior to that, Phuti was Vice President at Fieldstone where
she joined the firm in New York in 1997 and later transferred
to the South African office. Phuti holds a BA Economics from
Rutgers University (State University of New Jersey, USA) and an
MBA from De Montfort University in Leicester, United Kingdom.
She completed the Kennedy School of Government Executive
Education Programme’s Global Leadership and Public Policy
for the 21st Century at Harvard University in 2008. She is a
member of the boards of a number of Shanduka Group investee
companies. Phuti was appointed as the Deputy Chairperson on
14 December 2011.
Pan African Resources PLC
Annual Report 2012
93
Board of Directors
Continued
Hester Hickey (58)
Non-Executive Director
Appointment date: 12 April 2012
Qualifications: BCompt, BCom (Hons), CA(SA)
Committees: Audit (Chairperson), SHEC
Hester completed her articles at Fisher Hoffman Stride and,
after a period as partner of Ironside Greenwood, joined BDO
Spencer Stewart in 1990 as National Technical and Training
Manager. She joined Transnet in 1994 as Acting Head of Internal
Audit, in order to implement and execute a transformation
process and particularly, to transform the Internal Audit
Department of Transnet from a traditionally focused unit to a
more modern risk-based function. In 1998, after a period with
Ernst & Young and Liberty Life, Hester joined AngloGold Ashanti,
initially as Group Internal Audit Manager and later as Executive
Officer: Head of risk – a position she held until recently. Hester
is a registered Chartered Accountant and previously served
as Chairman of the South African Institute of Chartered
Accountants (SAICA). She currently performs board evaluations
for the Institute of Directors.
94
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 has done a lot to address the deficiencies identified in the previous financial year and will work hard
in further implementing King III requirements in the next year. Work has commenced on the upgrading of the risk management process
and we are in the process of introducing a formal Information Technology governance process. The list below is not exhaustive, but
deals with details currently considered as mandatory by King III.
King III Principle
Current Deficiency
Corrective Action Proposed
Principle 1.3 of King III
• The report states that the Board is
To be included in the next annual report.
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.
• A recent evaluation of the Board and
its committees has not been reported
upon and there is no overview of this
evaluation.
• No final charter has been adopted for
the Audit Committee, and terms of
reference for the Internal Audit
function remain outstanding.
• The Audit Committee should
comprise at least three members who
are Independent Non-Executives with
the Chairman being Independent
Non-Executive.
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. This review
resulted in a process to appoint a further
Director with skills to supplement those
of the current members of the Audit
Committee.
The Company has started working on the
charters for internal audit and the Audit
Committee, as well as a formal terms of
reference for the Audit Committee, which
will be finalised and presented to the
Board for approval in the next year and is
to be included in the next annual report.
The Company is aware that the
committee must comprise at least three
Independent Non-Executives. To address
the matter, the Company has appointed a
new Independent Non-Executive Director
who is also the Chairperson of the Audit
Committee. The Audit Committee now
comprises two Independent Non-
Executive Directors, however, the
Chairman of the Company who is also an
Independent Non-Executive Director is
frequently invited to attend the Audit
Committee meetings.
Principle 2.22 of King III
Principle 3.10 of King III
96
King III Principle
Current Deficiency
Corrective Action Proposed
Principle 9.3 of King III
• No independent assurance has been
performed on sustainability
information.
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.
Overall
• There is no formal policy detailing the
procedures for appointments to the
Board.
• There is no formal policy detailing the
The Board applies rigorous criteria for
the selection of new members. A formal
policy will, however, be adopted in
the next year.
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.
Pan African Resources PLC
Annual Report 2012
97
Risk Management
No Risk
Risk Comment
Mitigation Actions
1
Commodity price
2
Inflation
3
4
5
Underground
mining flexibility
Reliance on vamping
contractors
Integrating new
acquisitions and
construction of
new plants
A fall in the gold price below our notional
cost of production for any sustained period
may lead to losses and require the Group
to curtail or suspend certain operations.
The annual increase of cost of production
could result in significant cost pressures
for the mining industry. The Group’s profits
and financial condition could be affected
if the mining cost of inflation is not in line
with the increase in the price of gold.
The Group’s operational results may be
affected due to the reliance on high grade
platforms at Barberton Mines’ Fairview
Mine, which could affect the Group’s
operational results and profitability
should these platforms be stopped for
safety incidents and lack of grades.
Barberton Mines relies on receiving
approximately 20% of its yearly
production from vamping contractors.
This highlights the following risks:
• Significant decrease in vamping
tonnages would affect the financial
performance of the Group.
• The availability of old workable areas
to be vamped could result in lower
production levels.
• A decrease in vamping grades from
workable areas could result in lower
production levels.
Difficulties or delays in integrating new
acquisitions and construction of new plants
could affect profitability of the Group.
6
Safety risks
Safety incidents could lead to the
suspension and potential closure of
operations for indeterminate periods.
In the event that the gold price falls to a
level near to the operations notional cost
of production then a review of all projects,
capital expenditure and costs would be
performed to focus on cash preservation.
The Group’s focus on cost management
is to ensure that all costs are monitored
and addressed in detail and that sufficient
cash flows are available to address
all stakeholder requirements.
Increase diamond drilling ahead of development
to minimise stoppages of stopes.
Increase future capital expenditure on
Fairview to ensure flexibility.
The Group will be diversifying its production
risk in terms of doubling its production in the
short term by acquiring Evander Gold Mines.
The management team review the
performance of the vamping contractor daily.
The team re-evaluate the sweeping and vamping
MRM inventories that are available for vamping
contractors’ operations and the cost thereof.
Apply the MRM strategy to the vamping
contractors’ operations.
The BTRP construction plan is monitored
daily to ensure progress is on plan.
For new acquisitions, the management
team will ensure that the Group has
sufficient resources that also understand
the new operation in all departments.
The Group ensures strict compliance with
safety regulations and internal policies.
The Group also monitors and addresses
all incidents to ensure that safety
improvement occurs.
98
No Risk
Risk Comment
Mitigation Actions
7
Sustainable community
development
Non-compliance to community
development can lead to the licence
being revoked by the DMR and an
uprising by surrounding communities.
8 Water use licences
in South Africa
The majority of our South African operations
are lawful users with existing water
permits in terms of the Water Act of 1954.
The Group’s operations have applied for
water use licences in terms of the National
Water Act, 1998. The Group’s operations
have been issued water licences in respect
of most of its shafts. Our water licence for
Sheba Mines is still outstanding although
we remain the legal historical users.
9
10
Compliance with
Corporate Governance
and public disclosure
requirements
The Group is focused and committed to
maintaining high standards of Corporate
Governance and public disclosure in
order to comply with the standards
of both the JSE and the UKLA.
Potential liability
for occupational
health diseases
There may be claims in the future with regard
to occupational health diseases which could
lead to large legal fees being incurred.
11
Environmental
regulations
12
HIV/AIDS
13
Labour
14
BIOX® Recoveries
Mining groups are subject to extensive
environmental regulations and non-
compliance could result in potential
closure of mining operations or delay
in the construction of the Barberton
Tailings Retreatment Project due to
pending environmental requirements.
The incidence of HIV/AIDS in South
Africa has a significant impact on
communities with the loss of mining
skills and experienced mine workers.
HIV/AIDS also results in loss of production
and increased medical costs for employees.
The Group has two competing unions
(ie NUM and AMCU) on its Barberton
Mines’ operation. The effect of union
rivalry could significantly impact production
and the Group’s cost structure.
The Group’s profitability is highly sensitive
due to downtime or fall in recoveries
within the BIOX® Plant.
The Group reviews and addresses sustainable
community development in line with the
available cash flows and profitability of
the operations. For projects that have been
undertaken this year, refer to page 36.
The management team at Barberton Mines
is liaising with the Department of Water
Affairs as to the status of the water licence,
and if there are any further requirements
to perform to obtain the licence.
The Group has appointed a JSE sponsor and a
UK NOMAD to ensure compliance with regards
to Corporate Governance and public disclosure.
The Group ensures that safety is guaranteed
at all times by providing employees with
Personal Protective Equipment (‘PPE’).
Safety regulations are well practiced
throughout the operations and entrance
and exit medical screenings take place.
The respective management
teams of the operations ensure that they
engage with an environmental specialist
to ensure compliance with changes in
regulations and compliance thereof.
Both Phoenix and Barberton Mines, on a
regular basis, have HIV/AIDS campaigns
to ensure awareness and promotion of
healthy living. Barberton Mines also ensures
that ARVs are available for employees
who are infected with HIV/AIDS. This year
approximately 70% of Barberton employees
went for voluntary testing and counselling.
The Executive Committee and Board will
perform a strategic workshop with respect to
the risks associated with the competing unions.
The Barberton Mines’ management
team has ensured that sufficient capital
expenditure is spent to ensure that the plant’s
efficiencies are maintainable in the future.
Pan African Resources PLC
Annual Report 2012
99
Key Performance Indicators (KPIs)
Level KPI
Measurable
(US$/oz) Costs
2012
776
2011 % Change Achievement Comment
781
(0.64) Moderate
Decreased largely due to devaluation
of ZAR exchange rate by 10.87%. In
ZAR terms the total cost per kilogram
increased by 10.16% therefore increase
is mainly attributable to the ZAR
exchange rate devaluation in the current
financial year.
Gold sold ounce increase due to an
additional 1,068oz of low grade sources
being processed and sold in the current
financial year, as well as higher head
grades achieved from underground
mining.
Mainly attributable to Phoenix Platinum
and Barberton Tailings Retreatment Plant
capitalised expenditures as well as
Barberton on mine capital expenditures.
Current year effective rate has
decreased due to Barberton Mines
moving to the lower tax formulae as per
relevant regulations, and due to the gold
operation increasing its capital
expenditure, which for gold mines is a
tax deduction in the year the capital
expenditure is incurred.
Total tonnes increased due to processing
of low grade surface sources.
Processing of low grade surface sources
diluted the current year’s recovered
grades.
Gold Sold Revenue
94,449
92,197
2.44 Good
e
t
a
r
o
p
r
o
C
Capital
Expendi-
ture
Growth
£17.4 million £21.0 million
(19.05) Good
Income
Tax
Effective
tax rate
29.11%
35.01%
(16.85) Good
Tonnes
Volume
308kt
296kt
4.05 Good
Quality
9.53g/t
9.68g/t
(1.51) Moderate
Recovered
Grade
(g/t)
(%) Total
Recovery
i
g
n
n
M
i
Gold sales
91.22%
91.00%
0.24 Moderate
No significant change.
BEE
Mining title
26.00%
26.00%
0.00 Good
Fatal
Accidents
Safety
Resource
Base
Sustain-
ability
h
t
w
o
r
G
1
–
1
Poor
5,887koz
5,670koz
3.81 Good
The Group complies with relevant
legislation.
Safety still remains the Group’s top
priority and focus area.
The total resource base increased by
3.81% due to a combination of
underground slimes and other surface
sources added to the inventory in
the Measured and Inferred Categories.
100
Audit Committee Report
Chairman of the Audit Committee, and internal audit are invited
to attend each Audit Committee meeting.
Accounting Practices
and Internal Control
Based on the available and communicated information together
with discussions with the independent external auditor, the
committee is satisfied that there was no material breakdown
in the internal accounting controls during the financial year
under review. The committee reviewed the auditor’s report
to those charged with governance and can report that there
were no material issues requiring immediate additional attention.
The value added issues raised are receiving the appropriate
attention to ensure increased effectiveness in all areas of financial
and business systems and controls.
On behalf of the Audit Committee
HH Hickey
Chairman: Audit Committee
26 September 2012
Financial Statements
The committee has evaluated the Group financial statements
for the year ended 30 June 2012 and, based on the information
provided to the committee, considers that the Group complies,
in all material respects, with the requirements of the Act and
International Financial Reporting Standards (‘IFRS’).
The requirements of King III are continuously being assessed and
improved on with significant issues resolved.
External Auditor
The committee nominated the South African and UK firm
of Deloitte & Touche for re-appointment as external auditors
of the Pan African Group.
The committee satisfied itself through enquiry that the external
auditors are independent as defined by the Companies Act and
as per the standards stipulated by the auditing profession.
The Audit Committee,
in consultation with executive
management, agreed to the terms of the engagement. The audit
fee for the external audit has been considered and approved for
the 2012 financial year end, taking into consideration such factors
as the timing of the audit, the extent of the work required and
the scope.
The committee approved a non-audit services policy which
determines the nature and extent of any non-audit services
which Deloitte & Touche may provide to the Company.
The policy allows for limited tax and corporate governance
advice as well as the provision of reporting accountant services
in relation to capital market transactions
Financial Director
Due to the resignation of Cobus Loots as the Financial Director
of the Group in December 2011, Busi Sitole was appointed as
the new Financial Director. The committee has assessed and is
satisfied that the Group Financial Director, Busi Sitole, has the
appropriate skill, expertise and experience as required by the JSE
Listings Requirement 3.84(h).
Internal Auditor
The committee plays an oversight role of internal audit by
approval of the Internal Audit Plan and review of the reporting
of any findings on a regular basis. The committee satisfied
itself that the internal audit function is independent and has
the necessary resources, standing and authority to discharge
its duties. The Head of Internal Audit has direct access to the
102
Remuneration Report
All the Executive Directors have employee contracts with the
Company and are remunerated by the Company for services
performed.
In accordance with the Company’s Articles of Association,
Non-Executive Directors are entitled to Directors’ fees (refer to
note 32). These fees are paid quarterly.
The Remuneration Committee comprises one Independent
Non-Executive Director and one Non-Executive Director.
The CEO, the Financial Director and the Executive: HR are
regularly invited to attend the committee meetings but are
excluded from the meeting in the event that their remuneration
and/or benefits are discussed. The Remuneration Committee
meets at least twice a year. It reviews the performance of the
CEO, executives and senior management and sets the scale,
structure and basis of their remuneration and the terms of
their service agreements with due regard to the interest of all
stakeholders and the performance of the Company.
Basic salary and benefits are reviewed annually against competitive
market data and analysis (PWC Remchannel Survey) and are
adjusted accordingly.
Short-term incentives are paid annually and are based on the
Company’s performance. The collective Key Performance Areas
(‘KPAs’) account for 80% and are based on gold sold, costs
and safety whereas the individual KPAs account for 20% and
are specific to the individual concerned. The performance areas
are objective measurements based on the Company’s actual
achievements versus the set business plan for the financial year.
Share Options
The Equity Share Option Plan was discontinued in 2008 and
replaced with the Pan African Share Appreciation Bonus Plan.
The main objective of the Share Appreciation Bonus Plan is
to give appropriate incentives to selected employees who are
employed at a managerial level within the Group, to ensure
retention of key skills required for the ongoing profitable
performance and growth of Pan African Resources, its subsidiary
companies and any other entities which Pan African Resources
controls (‘the Group’ and ‘Group Company/ies’), and to align
management interests with those of the shareholders of Pan
African Resources.
Further details in terms of the Equity Share Option Plan and the
terms of the Share Appreciation Bonus Plan can be obtained
from the Company Secretary.
Pan African Resources PLC
Annual Report 2012
103
Directors’ Report
Independent Auditor’s Reports
Certificate of the Company
Secretary
Consolidated and Company
Statement of Comprehensive
Income
Consolidated and Company
Statement of Financial Position
Consolidated and Company
Statement of Cash Flows
Consolidated and Company
Statement of Changes in Equity
Notes to the Financial Statements
Pan African Resources PLC
Annual Report 2012
105
Table of Contents
Annual Financial Statements
Directors’ report
Independent Auditor’s Report – South Africa
Independent Auditor’s Report – United Kingdom
Certificate of the Company Secretary
Consolidated and Company Statement of
Comprehensive Income
Consolidated and Company Statement of
Financial Position
Consolidated and Company Statement of
Cash Flows
Consolidated and Company Statement of
Changes in Equity
Notes to the Financial Statements: Accounting
Policies and Financial Reporting Terms
105
107
111
112
113
114
115
116
117
118
106
Directors’ Report
The Directors present their annual report and the audited
financial statements for the year ended 30 June 2012.
Principal Activities
The Group’s principal activity during the year was of gold and
platinum mining activities. A full review of the activities of the
business and of future prospects are contained in the Chief
Executive Officer’s report and Financial Director’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 100.
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 8.
The Pan African Board previously stated the Company’s policy
is to pay an annual dividend, subject to the capital requirements
of the Company. This policy has not changed. However, taking
into account the funding required to implement the Evander
Gold Mines transaction and the concomitant proposed rights
offer, and following discussions with our major shareholders, the
Board of Directors has decided to forego the declaration of a
dividend in respect of the 2012 financial year. The final dividend
paid for the year ended 30 June 2011 was £7.4 million.
The Board remains committed to continue with the Company’s
dividend policy and intends to resume the dividend payment
in the 2013 financial year, normal legal and commercial
considerations permitting. Pan African Resources is positive that
the Evander Gold Mines transaction, once implemented, will
further support the Group’s cash flows and drive to enhance
shareholder returns through dividends.
Policy for Payment of Creditors
It is the Company’s policy to settle all agreed transactions within
the terms established with suppliers. The Company’s credit days
are a maximum of 60 days.
Risk Management
The key business risks to which the Company is exposed have
been considered and are addressed on pages 98 and 99.
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 are 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.
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.
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;
• prior approval of all significant expenditure including all major
investment decisions; and
• review and debate of treasury and other policies.
The Board has reviewed the operation and effectiveness of the
Group’s system of internal control for the financial year and the
period up to the date of approval of the financial statements.
Pan African Resources PLC
Annual Report 2012
107
Directors’ Report
Continued
Going Concern
The Group is currently generating significant levels of cash from
its operations, is debt-free and has a revolving credit facility of
£11.6 million with a major bank which it has not yet utilised.
However, the terms of its agreement to acquire Evander
Gold Mines from Harmony will require it to make a significant
(approximately £116.2 million) cash payment once all the
outstanding conditions precedent have been met. The Directors
currently envisage that the required funding will be met by a
combination of existing cash, additional equity (for which
irrevocable shareholder undertakings of £54 million have been
obtained), cash held by Evander Gold Mines and debt funding. The
level of debt funding required is expected to exceed the capacity
of the current revolving credit facility, but we have secured credit
committee approval from a major bank for the required increase
in the size of the facility and are satisfied that the remaining steps
to obtain final approval are procedural in nature.
The Group’s ability to fund the transaction and meet the working
capital needs of the enlarged Group thereafter is also sensitive
to a number of other factors including, but not limited to,
changes in gold price, production rates and cost levels. We have
therefore produced cash flow forecasts and run sensitivities in
respect of the above factors as well as considered the potential
impact on our funding position of a national strike in the South
African mining sector between now and the completion of
the transaction. In the event there are unexpected adverse
changes to the Group’s cash flows, the Directors are confident
that the Group could manage its financial affairs in a number of
ways, including a reduction in discretionary capital expenditure,
obtaining additional debt funding and, in the event of a short-
term downturn, a focus on higher grade ores and working capital
management.
Having taken into consideration the above factors, the Directors
believe that the Group’s forecasts and projections show that the
Company and Group will be able to complete the Evander Gold
Mines’ acquisition, meet all its other contractual commitments
and have adequate resources to continue in operational
existence for the foreseeable future, being 12 months from the
date of this report. Accordingly, the Directors continue to adopt
the going concern basis in preparing the results for the year
ended 30 June 2012.
Events After the Reporting Period
Acquisition of Evander Gold
Mines from Harmony
Readers are referred to the detailed description of the
transaction in the CEO’s report.
108
On 17 August 2012 Pan African Resources issued an update on
the Evander Gold Mines’ acquisition status. Pan African Resources
announced that 57% of the shareholders had committed to vote
in favour of the transaction and that it had secured £54.2 million
(ZAR700 million) through rights offer commitments.
Pan African Resources has made a further payment of £2.5 million
(ZAR30 million) to Harmony in respect of the second tranche
of the Break Fee in terms of the Agreement. Therefore the full
Break Fee, being an amount of £4.1 million (ZAR50 million), has
been paid by Pan African Resources to Harmony. Pan African
Resources and Harmony have furthermore agreed that the
Break Fee shall be set off against the £77.5 million (ZAR1 billion)
Deposit. The balance of the Deposit (if it becomes payable, at
Harmony’s election) shall therefore constitute a total amount of
£73.6 million (ZAR950 million).
The Secured Capital, in addition to Pan African’s existing cash
funds available and, to the extent necessary, draw-downs by Pan
African Resources from existing debt funding facilities, will be
sufficient to allow Pan African Resources to make payment of the
Deposit. Pan African Resources intends to fund the balance of
the Purchase Consideration through a combination of, inter alia,
third party debt financing and funds generated from Pan African’s
existing operations.
The Group is in the process of finalising the debt component of
£46.5 million (ZAR600 million) required for part of the financing
of the Evander Gold Mines’ transaction.
Disposal of Manica Gold Project
1. Introduction
On 29 August 2012, Pan African Resources announced that it
entered into an agreement to dispose of 100% of its Manica
Gold Project (‘Manica’) to Auroch Minerals Mozambique (Pty)
Limited, a wholly-owned subsidiary of Terranova Minerals
NL (‘Terranova’), for a total potential purchase consideration
(‘Purchase Consideration’) of AUD6 million (GBP4 million/
ZAR52.4 million) payable in cash, and 96,666,668 shares in
Terranova (‘Terranova Shares’), subject to certain terms and
conditions more fully described below (‘Transaction’).
2. Purchase Consideration
In terms of the Agreement, Pan African Resources shall receive
the first portion of the Purchase Consideration comprising
AUD2 million (GBP1.3 million/ZAR17.5 million) and 25,000,000
shares in Terranova upon the fulfilment or, where possible, waiver
of the conditions precedent to the Transaction.
The remaining portion of the Purchase Consideration shall only
become payable in tranches upon achievement of the following
milestones by Manica during the four-year period following the
completion of the Transaction:
• the delineation of at least 400,000oz of Joint Ore Reserves
Committee Code (‘JORC’) Inferred Gold Resource of oxide
ore with a cut-off grade of 1.25g/t being defined on the
Northern and/or Southern shear zones of Manica’s mining
concession (‘Concession’) (‘400koz Milestone’);
• the delineation of at least 1,000,000oz of a JORC Inferred
Gold Resource of oxide ore with a cut-off grade of 1.25g/t
being defined on the Northern and/or Southern shear zones
of the Concession (‘1,000koz Milestone’);
• the completion of a positive Bankable Feasibility Study (‘BFS’)
on either the oxide or sulphide ore on the Concession which
recommends the construction of a mine with at least a
10-year life and production scope of 50,000oz per annum and
at any time after completion of the BFS, the Board of Directors
of Terranova elects to commence construction of the mine as
recommended in the BFS and has financing arranged for the
construction of the mine (‘BFS Milestone’); and
• the production of either oxide or sulphide ore at the plant
constructed at Manica to process ore from the Concession
at the capacity specified in the BFS (‘Capacity Milestone’).
The remaining portion of the Purchase Consideration shall
be settled upon the achievement of the various milestones
described above as follows:
• AUD1,000,000 (GBP658,700/ZAR8,728,300) and 20,066,667
Terranova shares upon achievement of the 400koz milestone;
• AUD1,000,000 (GBP658,700/ZAR8,728,300) and 20,066,667
Terranova shares to be paid and issued upon achievement of
the 1,000koz milestone;
• AUD1,000,000 (GBP658,700/ZAR8,728,300) and 24,366,667
shares or a payment of AUD7,310,000
Terranova
(GBP4,815,097/ZAR63,803,873)
in cash, at Terranova’s
election, to be paid and/or issued upon achievement of the
BFS milestone; and
• AUD1,000,000 (GBP658,700/ZAR8,728,300) and 7,166,667
Terranova
(GBP1,416,205/
ZAR18,765,845) in cash, at Terranova’s election, to be paid
and/or issued upon achievement of the capacity milestone.
shares or AUD2,150,000
Pan African Resources expects to utilise the cash portion of
the Purchase Consideration for the funding of the construction
and development of its Bramber Tailings Retreatment Project
and expects to retain the Terranova Shares received in terms
of the Transaction so as to continue to participate in the
development of Manica through Terranova.
3. Conditions Precedent to the Transaction
The implementation of the Transaction remains subject to the
fulfilment or, where possible, waiver of, inter alia, the following
conditions precedent within six months of the date of
the Agreement:
• Terranova raising capital of not less than AUD5 million
(GBP3.3 million/ZAR43.6 million), at a price of not less than
AUD0.30 (GBP0.20/ZAR2.62) per share, to fund the initial
working capital requirements required for the development
of Manica;
• Terranova obtaining a report prepared by an independent
expert stating that the Transaction is fair and reasonable to
Terranova’s shareholders;
• Terranova obtaining all the necessary regulatory approvals,
on acceptable terms, as are required to give effect to the
Transaction; and
• Terranova and Pan African Resources, to the extent required,
obtaining all the necessary shareholder approvals required to
implement the Transaction.
the Transaction
remains conditional upon
Furthermore,
Terranova, within one month of the date of the Agreement,
confirming that it is satisfied with the results of a due diligence
exercise to be concluded over Manica.
The Transaction shall become effective upon the fulfilment or,
where possible, waiver of all the conditions precedent to the
Transaction.
4. Details of Manica and Terranova
Manica is a gold exploration project situated in central
Mozambique approximately 4km north of the town of Manica,
which lies approximately 270km inland of the port city of Beira,
Mozambique. The project, which spans 42km2, is positioned in the
Beira Corridor, which contains major road and rail infrastructure
linking Zimbabwe to Beira and has a JORC resource of some
3Moz at 1.83g/t Au. The area surrounding Manica is well known
for hosting gold mines such as Penhalonga, Rezende, Monarch and
Old West. The reefs in these mines have typically been classified
as porphyry mineralisation within quartz-diorites where gold is
hosted in quartz veins.
Listed on the Australian Securities Exchange, Terranova is a
mineral exploration company which is involved in the acquisition,
exploration and evaluation of gold and copper assets. Terranova
has gold projects in Western Australia including the Beete Gold,
Peninsula Gold projects in the eastern fields Region and the
Crawford Copper Project in the Crawford Belt of the Gascoyne
Province, although going forward Terranova’s primary focus will
be on Manica. Terranova currently has 42.5 million fully diluted
shares (this includes 20 million partially paid shares) in issue.
Directors
The following were Directors during the year under review:
Mr KC Spencer*
Ms P Mahanyele (appointed 20 July 2011)
Pan African Resources PLC
Annual Report 2012
109
Directors’ Report
Continued
Mr JP Nelson
Ms YB Sitole (appointed 14 December 2011)
Mr JAJ Loots
Mr RG Still*
Mrs HH Hickey* (appointed 12 April 2012)
Mr MC Ramaphosa (resigned 14 December 2011)
Mr RM Smith (resigned 20 July 2011)
* Independent
Auditor
Deloitte LLP has been appointed as United Kingdom 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 has expressed their willingness to continue in office
as auditors and a resolution to re-appoint them will be proposed
at the forthcoming Annual General Meeting.
By Order of the Board
Jan Nelson
Chief Executive Officer
26 September 2012
110
Independent Auditor’s Report - South Africa
To the Shareholders of Pan African Resources PLC
We have audited the consolidated and separate financial statements of Pan African Resources PLC set out on pages 114 to 154, which
comprise the statements of financial position as at 30 June 2012, and the statements of comprehensive income, statements of changes
in equity and statements of cash flows for the year then ended, and the notes, comprising a summary of significant accounting policies
and other explanatory information.
Directors’ Responsibility for the Financial Statements
The Company’s directors are responsible for the preparation and fair presentation of these 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 consolidated and separate 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 financial statements. The
procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the 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 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 entity’s internal control. An audit also
includes evaluating the appropriateness of accounting principles used and the reasonableness of accounting estimates made by the
directors, as well as evaluating the overall presentation of the financial statements.
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 consolidated and separate financial statements present fairly, in all material respects, the consolidated and separate
financial position of Pan African Resources PLC as at 30 June 2012, 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.
Deloitte & Touche
Per MLE Tshabalala
Partner
26 September 2012
Pan African Resources PLC
Annual Report 2012 111
Independent Auditor’s Report - United Kingdom
To the Shareholders of Pan African Resources PLC
We have audited the financial statements of Pan African Resources Plc for the year ended 30 June 2012 which comprise the Group
and Parent Company Statement of Comprehensive Income, the Group and Parent Company Statement of Financial Position, the
Group and Parent Company Cash Flow Statement, the Group and Parent Company Statement of Changes in Equity and the related
notes 1 to 37. The financial reporting framework that has been applied in their preparation is applicable by law and International
Financial Reporting Standards (IFRSs) as adopted by the European Union.
This report is made solely to the Company’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 Company’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 Company and the Company’s members as a body, for our audit work, for this report, or for
the opinions we have formed.
Respective Responsibilities of Directors and 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 2012
and of the Group’s and the Parent Company’s profit for the year then ended;
• the financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union; and
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
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.
112
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.
David Paterson (Senior statutory auditor)
for and on behalf of Deloitte LLP
Chartered Accountants and Statutory Auditor
London, United Kingdom
26 September 2012
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 Limited
26 September 2012
Pan African Resources PLC
Annual Report 2012 113
Consolidated and Company Statement of
Comprehensive Income
for the year ended 30 June 2012
Revenue
Gold sales
Realisation costs
On-mine revenue
Cost of production – Gold
Depreciation
Mining profit
Other expenses
Impairment
Royalty costs
Net income before finance income and
finance costs
Finance income
Finance costs
Profit before taxation
Taxation
Profit after taxation
Other comprehensive income:
Foreign currency translation differences
Group
Company
30 June 2012
(Audited)
£
30 June 2011
(Audited)
£
30 June 2012
(Audited)
£
30 June 2011
(Audited)
£
Notes
4
5
16
8
4 & 9
9
10
13
101,068,596
(163,217)
100,905,379
(46,122,811)
(3,259,010)
51,523,558
(5,916,227)
(48,238)
(3,848,450)
41,710,643
652,267
(136,765)
42,226,145
(12,984,511)
79,208,399
(157,763)
79,050,636
(45,345,417)
(2,885,243)
30,819,976
(2,796,657)
–
(2,368,239)
25,655,080
802,022
(40,128)
26,416,974
(9,248,309)
–
–
–
–
–
–
21,644,712
–
–
21,644,712
551,154
–
22,195,866
–
–
–
–
–
–
–
20,471,875
–
–
20,471,875
772,957
–
21,244,832
–
29,241,634
17,168,665
22,195,866
21,244,832
(10,248,051)
3,814,677
(7,013,252)
1,855,200
Total comprehensive income for the year
18,993,583
20,983,342
15,182,614
23,100,032
Profit attributable to:
Owners of the parent
Non-controlling interest
Total comprehensive income attributable to:
Owners of the parent
Non-controlling interest
29,241,634
–
17,168,665
–
22,195,866
–
21,244,832
–
29,241,634
17,168,665
22,195,866
21,244,832
18,993,583
–
20,983,342
–
15,182,614
–
23,100,032
–
18,993,583
20,983,342
15,182,614
23,100,032
Earnings per share
Diluted earnings per share
14
14
2.02
2.01
1.20
1.19
–
–
–
–
114
Consolidated and Company
Statement of Financial Position
as at 30 June 2012
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
Non-current assets held for sale
Total assets
EQUITY AND LIABILITIES
Capital and reserves
Share capital
Share premium
Translation reserve
Share option reserve
Retained income
Realisation of equity reserve
Merger reserve
Equity attributable to owners of the
parent
Total equity
Non-current liabilities
Long-term provisions
Long-term liabilities
Deferred taxation
Current liabilities
Trade and other payables
Payable to other Group companies
Current tax liability
Group
Company
30 June 2012
(Audited)
£
30 June 2011
(Audited)
£
30 June 2012
(Audited)
£
30 June 2011
(Audited)
£
Notes
16
17
18
19
20
21
34
22
23
35
24
26
27
28
25
34
62,411,655
–
21,000,714
–
2,662,934
59,052,015
14,214,426
21,000,714
–
3,013,385
126,209
–
–
50,101,244
–
189,657
–
–
53,259,921
–
86,075,303
97,280,540
50,227,453
53,449,578
1,868,735
–
6,828,047
19,782,179
1,457,202
–
4,254,401
10,123,822
–
19,505,668
1,621,219
17,812,893
–
27,146,884
121,000
11,546,466
28,478,961
15,835,425
38,939,780
38,814,350
13,135,215
–
13,155,070
–
127,689,479
113,115,965
102,322,303
92,263,928
14,482,623
51,149,299
(1,937,509)
904,902
59,432,741
(10,701,093)
(10,705,308)
14,440,406
50,932,830
8,310,542
861,450
37,607,283
(10,701,093)
(10,705,308)
14,482,623
51,149,299
(5,158,052)
792,143
36,881,921
–
1,560,000
14,440,406
50,932,830
1,855,200
777,585
22,102,231
–
1,560,000
102,625,655
90,746,110
99,707,934
91,668,252
102,625,655
90,746,110
99,707,934
91,668,252
3,043,954
868,881
10,088,530
3,386,591
181,285
9,841,695
14,001,365
13,409,571
–
429,565
–
429,565
7,709,729
–
3,352,730
8,193,750
–
766,534
886,569
1,298,235
–
11,062,459
8,960,284
2,184,804
–
27,329
–
27,329
568,347
–
–
568,347
Total equity and liabilities
127,689,479
113,115,965
102,322,303
92,263,928
The financial statements of Pan African Resources PLC, registration number 3937466 were approved by the Board of Directors on
26 September 2012 and signed on its behalf by :
Jan Nelson
Chief Executive Officer
Busi Sitole
Financial Director
Pan African Resources PLC
Annual Report 2012 115
Consolidated and Company
Statement of Cash Flows
for the year ended 30 June 2012
Net Cash Generated from/(Used in)
Operating Activities
Investing Activities
Dividends received
Deposit
Additions to property, plant and
equipment, mineral rights
Additions to intangibles
Loans to subsidiaries
Funding of rehabilitation trust fund
Net (Cash Used in)/Generated from
Investing Activities
Financing Activities
Loans from subsidiaries
Shares issued
Net Cash from/(Used in) Financing
Activities
Net Increase/(Decrease) in Cash and
Cash Equivalents
Cash and cash equivalents at the
beginning of the year
Effect of foreign exchange rate changes
Cash and Cash Equivalents at the end
of the year
Group
Company
30 June 2012
(Audited)
£
30 June 2011
(Audited)
£
30 June 2012
(Audited)
£
30 June 2011
(Audited)
£
Notes
37
30,575,270
16,610,289
(8,392,150)
(5,680,503)
–
(1,548,779)
–
–
24,500,396
(1,548,779)
21,650,960
–
(17,424,906)
(505,273)
–
115,970
(21,033,991)
(800,619)
–
122,145
(13,202)
–
(6,836,569)
–
(181,183)
–
(14,614,028)
–
(19,362,988)
(21,712,465)
16,101,846
6,855,749
24
–
258,686
–
1,545,000
1,298,235
258,686
(5,738,018)
1,545,000
258,686
1,545,000
1,556,921
(4,193,018)
11,470,968
(3,557,176)
9,266,617
(3,017,772)
10,123,822
(1,812,611)
12,756,262
924,736
11,546,466
(3,000,190)
14,240,891
323,347
23
19,782,179
10,123,822
17,812,893
11,546,466
116
Consolidated and Company Statement
of Changes in Equity
for the year ended 30 June 2012
GROUP
Balance at
30 June 2010
Issue of shares
Total comprehensive
income
Dividends paid
Share-based payment
– charge for the year
Balance at
30 June 2011
Issue of shares
Total comprehensive
income
Profit for the year
Dividends paid
Share-based payment
– charge for the year
Balance at
30 June 2012
COMPANY
Balance at 30 June
2010
Issue of shares
Total comprehensive
income
Dividend issue
Charge for the year
Balance at
30 June 2011
Issue of shares
Total comprehensive
income
Dividends paid
Share-based payment
– charge for the year
Balance at
30 June 2012
Share
capital
Share
premium
account
Translation
reserve
Share
option
reserve
Retained
earnings
Realisation
of equity
reserve
Merger
reserve
Total
14,095,406 49,732,830
1,200,000
345,000
4,495,865
–
754,394 25,814,783 (10,701,093) (10,705,308) 73,486,877
1,545,000
–
–
–
–
–
–
–
–
–
–
3,814,677
–
–
–
17,168,665
(5,376,165)
–
107,056
–
–
–
–
–
–
20,983,342
(5,376,165)
–
107,056
14,440,406 50,932,830
216,469
42,217
8,310,542
–
861,450 37,607,283 (10,701,093) (10,705,308) 90,746,110
258,686
–
–
–
–
–
–
–
–
– (10,248,051)
–
–
–
–
–
–
–
29,241,634
–
(7,416,176)
–
–
43,452
–
–
–
–
–
–
–
–
–
18,993,583
–
(7,416,176)
43,452
14,482,623 51,149,299
(1,937,509)
904,902 59,432,741 (10,701,093) (10,705,308) 102,625,655
14,095,406 49,732,830
1,200,000
345,000
–
–
739,519
–
6,233,564
–
–
–
–
–
–
–
1,855,200
–
–
–
–
38,066
21,244,832
(5,376,165)
–
14,440,406 50,932,830
216,469
42,217
1,855,200
–
777,585 22,102,231
–
–
–
–
–
–
–
–
(7,013,252)
–
–
–
22,195,866
(7,416,176)
–
14,558
–
–
–
–
–
–
–
–
–
–
–
1,560,000 72,361,319
1,545,000
–
–
–
–
23,100,032
(5,376,165)
38,066
1,560,000 91,668,252
258,686
–
–
–
15,182,614
(7,416,176)
–
14,558
14,482,623 51,149,299
(5,158,052)
792,143 36,881,921
–
1,560,000 99,707,934
Pan African Resources PLC
Annual Report 2012 117
Notes to the Financial Statements: Accounting
Policies and Financial Reporting Terms
for the year ended 30 June 2012
1 GENERAL INFORMATION
Pan African is a company incorporated in England and Wales under the Companies Act 2006. The Company 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.
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.
Historic Reverse Acquisition
On 31 July 2007 the Company acquired 74% of Barberton Mines (Pty) Limited (‘Barberton’) in a share-for-share transaction.
IFRS 3 ‘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 these financial statements. 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, foreign currency, commodity price, interest rate and liquidity 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. Further details are provided (refer to page 26 in front section).
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 adopted by the
European Union that were effective at 30 June 2012 and are relevant to its operations have been applied.
118
At the date of authorisation of these financial statements, the following standards and interpretations, which have been applied in these
financial statements, for the first time, were in issue and effective as at 30 June 2012:
New and Revised International Financial Reporting Standards
Effective Date
Pre-payments of a Minimum Funding Requirement
Applies to annual periods beginning on or after
1 January 2011 (applied retrospectively from the
beginning of the earliest comparative period presented)
Amendments to IFRS 7 Financial Instruments: Disclosures
Applies to annual periods beginning on or after 1 July 2011
Severe Hyperinflation and Removal of Fixed Dates for
First-time Adopters (Amendments to IFRS 1)
Applicable to annual periods beginning on or after
1 July 2011
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 and Revised International Financial Reporting Standards
Effective Date
IAS 27 Separate Financial Statements (2011)
IAS 28 Investments in Associates and Joint Ventures (2011)
IFRS 9 Financial Instruments (2009)
IFRS 9 Financial Instruments (2010)
IFRS 10 Consolidated Financial Statements
IFRS 11 Joint Arrangements
IFRS 12 Disclosure of Interests in Other Entities
IFRS 13 Fair Value Measurement
Applicable to annual reporting periods beginning on or
after 1 January 2013
Applicable to annual reporting periods beginning on or
after 1 January 2013
Applies on a modified retrospective basis to annual periods
beginning on or after 1 January 2015
Applies to annual periods beginning on or after
1 January 2015
Applicable to annual reporting periods beginning on or
after 1 January 2013
Applicable to annual reporting periods beginning on or
after 1 January 2013
Applicable to annual reporting periods beginning on or
after 1 January 2013
Applicable to annual reporting periods beginning on or
after 1 January 2013
Deferred Tax: Recovery of Underlying Assets (Amendments to IAS 12) Applicable to annual periods beginning on or after
IAS 19 Employee Benefits (2011)
Presentation of Items of Other Comprehensive
Income (Amendments to IAS 1)
Disclosures – Offsetting Financial Assets and
Financial Liabilities (Amendments to IFRS 7)
Offsetting Financial Assets and Financial
Liabilities (Amendments to IAS 32)
Government Loans (Amendments to IFRS 1)
1 January 2012
Applicable to annual reporting periods beginning on or
after 1 January 2013
Applicable to annual reporting periods beginning on or
after 1 July 2012
Applicable to annual periods beginning on or after
1 January 2013 and interim periods within those periods
Applicable to annual periods beginning on or after
1 January 2014
Applicable to annual periods beginning on or after
1 January 2013
Pan African Resources PLC
Annual Report 2012 119
Notes to the Financial Statements: Accounting
Policies and Financial Reporting Terms Continued
for the year ended 30 June 2012
New and Revised International Financial Reporting Standards
Effective Date
Annual Improvements 2009 – 2011 Cycle
IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine
Applicable to annual periods beginning on or after
1 January 2013
Applies to annual periods beginning
on or after 1 January 2013
The impact of the adoption of the above standards and interpretations still needs to be considered, but is not expected to have a
material impact on the financial results.
Basis of Consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company
(its subsidiaries) to 30 June each year. Control is achieved where the Company has the power to govern the 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 acquisitions is recognised as an asset, and initially measured at cost, being the excess of the cost of the business
combination over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. If, after
re-assessment, 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 within capital under construction
until commercial levels of production are achieved. Capital under construction is not depreciated. All revenue generated during the
commissioning phase is capitalised back to the property, plant and equipment as per IAS 16.
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.
120
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 life of mine (‘LOM’) to their residual values using the units-of-production method based on estimated
proven and probable ore reserves.
Other mining plant and equipment is depreciated on the straight-line basis over the shorter of the LOM or their estimated useful lives.
Depreciation of Non-Mining 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 10 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 that they 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, the recoverable
amount of the asset being the higher of fair value less costs to sell or value in use 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 CGUs expected to benefit from the synergies of
the combination. Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more frequently
when there is an indication that the CGU may be impaired. If the recoverable amount of the 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
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.
Pan African Resources PLC
Annual Report 2012 121
Notes to the Financial Statements: Accounting
Policies and Financial Reporting Terms Continued
for the year ended 30 June 2012
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 or 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 or liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than
a business combination) of other assets or 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
or 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.
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.
122
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 or liabilities denominated in such other currencies are translated at the rates
ruling at the Statement of Financial Position date. Profits or 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 or 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 of. Translation differences on foreign loans to subsidiaries which are classified as equity loans are also
accounted for as equity.
Inventories
Inventories include the gold bullion on hand, PGM concentrate, gold or PGM in process and consumable stores.
Bullion on hand and PGM concentrate 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.
Gold or PGM in process inventories represent materials that are currently in the process of being converted to a saleable gold or
PGM product. The gold or PGM in process inventories are valued only if they are reliably measurable and are valued at the average
cost of the material fed to process plus the in-process conversion costs.
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
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.
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 Company’s estimate of cash instruments that will eventually vest. At each Statement of Financial Position date, the
Company 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.
Pan African Resources PLC
Annual Report 2012 123
Notes to the Financial Statements: Accounting
Policies and Financial Reporting Terms Continued
for the year ended 30 June 2012
Provision for Environmental Rehabilitation Costs
Long-term environmental obligations are based on Barberton Mines and Phoenix Platinum 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 clean up 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 Statement of Financial Position 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:
(a) it is probable that delivery will be made;
(b) the item is on hand, identified and ready for delivery to the buyer at the time the sale is recognised;
(c) the buyer specifically acknowledges the deferred delivery instructions; and
(d) 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 will be immaterial.
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.
124
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 at 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 will 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.
Other Financial Liabilities
Other financial liabilities are initially valued at fair value and 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 have expired.
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 remeasured 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
Pan African Resources PLC
Annual Report 2012 125
Notes to the Financial Statements: Accounting
Policies and Financial Reporting Terms Continued
for the year ended 30 June 2012
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 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 or 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.
Non-Current Assets Held-For-Sale
A non-current asset is designated as held-for-sale when its carrying amount will be recovered principally through a sale transaction rather
than through continuing use and the asset is available for immediate sale in its present condition and the sale is highly probable. A sale
is considered highly probable if management is committed to a plan to sell the non-current asset, an active divestiture programme has
been initiated, the non-current assets is marketed at a price reasonable to its fair value and the disposal is expected to be completed
within one year from classification. Non-current assets held-for-sale are stated at lower of carrying value and fair value less cost to sell
and are reviewed for impairment at each subsequent reporting date.
At the time of classification as held-for-sale, these assets are reviewed for impairment. The impairment charged to the income statement
is the excess of the carrying value of the non-current asset and its expected net selling price (fair value less costs to sell). At each
subsequent reporting date, the carrying values are reassessed for possible impairment. A reversal of impairment is recognised for any
subsequent increase in net selling price but not in excess of the cumulative impairment loss already recognised. No depreciation is
provided on non-current assets from the date they are classified as held-for-sale.
126
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 PGMs.
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 or liabilities at the date of the financial statements
and the reported amounts of revenue or 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
(this includes the scope and timing of work required, the related costs and the discount rate used);
• Estimates made in determining the recoverable amount of assets, this includes the estimation of cash flows and the discount rates
used (including future production levels, commodity price and costs);
• Estimates made in determining the life of the mines;
• The Life of Mine is determined from development plans based on mine management’s estimates and includes total mineral reserve
and a portion of the mineral resource. These plans are updated from time to time and take into consideration the actual current
cost of extraction, as well as certain forward projections. These projections are reviewed by the Board;
• Estimates made of legal or constructive obligations resulting in the raising of provisions, and the expected date of probable outflow
of economic benefits to assess whether the provision should be discounted;
• Estimates of mineral resources and ore reserves in accordance with the SAMREC Code (2000) for South African properties. Such
estimates relate to the category for the resource (measured, indicated or inferred), the quantum and the grade;
• Estimates of the recoverability 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 and hence the recoverability of any related capital
expenditure.
Pan African Resources PLC
Annual Report 2012 127
Notes to the Financial Statements Continued
for the year ended 30 June 2012
Revenue
Gold sales
Finance income
Cost of Production
Salaries and wages
Mining
Processing
Engineering and technical services
Electricity
Security
Administration and Other
Group
£
30 June 2012
£
30 June 2011
Company
£
30 June 2012
£
30 June 2011
101,068,596
652,267
101,720,863
(22,477,760)
(6,026,400)
(4,081,816)
(4,070,486)
(5,114,015)
(2,393,207)
(1,959,127)
79,208,399
802,022
80,010,421
(20,926,658)
(6,364,329)
(4,757,202)
(3,702,615)
(4,445,681)
(3,034,428)
(2,114,504)
(46,122,811)
(45,345,417)
–
551,154
551,154
–
772,957
772,957
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
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: Barberton Mines, 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:
30 June 2012
30 June 2011
Barberton
Mines
£
Phoenix
Platinum*
£
Corporate
and
Growth
Projects
£
Group
£
Barberton
Mines
£
Phoenix
Platinum*
£
Corporate
and
Growth
Projects
£
Group
£
Revenue
Gold sales***
Realisation costs
On-mine revenue
Cost of production
Depreciation
Mining profit
Other expenses**
Impairment costs
Royalty costs
Net income/(loss) before finance
income and finance costs
Finance income
Finance costs
Profit/(loss) before taxation
Taxation
101,068,596
(163,217)
100,905,379
(46,122,811)
(3,259,010)
51,523,558
(1,484,792)
(48,238)
(3,848,450)
46,142,078
96,202
(136,765)
46,101,515
(13,058,128)
–
–
–
–
–
– 101,068,596
(163,217)
–
79,208,399
(157,763)
– 100,905,379
(46,122,811)
–
(3,259,010)
–
79,050,636
(45,345,417)
(2,885,243)
–
–
–
–
–
–
–
–
–
–
79,208,399
(157,763)
79,050,636
(45,345,417)
(2,885,243)
–
(59,957)
–
–
–
(4,371,478)
–
–
51,523,558
(5,916,227)
(48,238)
(3,848,450)
30,819,976
(288,930)
–
(2,368,239)
–
(12,943)
–
–
–
(2,494,784)
–
–
30,819,976
(2,796,657)
–
(2,368,239)
(59,957)
4,911
–
(4,371,478)
551,154
–
41,710,643
652,267
(136,765)
28,162,807
29,065
(40,128)
(55,046)
73,617
(3,820,324)
–
42,226,145
(12,984,511)
28,151,744
(9,251,933)
(12,943)
–
–
(12,943)
3,624
(2,494,784)
772,957
–
25,655,080
802,022
(40,128)
(1,721,827)
–
26,416,974
(9,248,309)
Profit/(loss) after taxation
33,043,387
18,571
(3,820,324)
29,241,634
18,899,811
(9,319)
(1,721,827)
17,168,665
Other comprehensive income:
Foreign currency translation differences
Total comprehensive income/(loss) for
the year
(3,840,331)
550,605
(6,958,325) (10,248,051)
1,737,540
269,848
1,807,289
3,814,677
29,203,056
569,176
(10,778,649)
18,993,583
20,637,351
260,529
85,462
20,983,342
Costs directly attributable to Phoenix Platinum, along with attributable overheads, are capitalised to capital under construction.
*
** Other expenses exclude inter-company management fees and dividends.
*** All gold sales were made in RSA and the majority of revenue generated was to a single customer.
4
5
6
128
30 June 2012
30 June 2011
Barberton
Mines
£
Phoenix
Platinum*
£
Corporate
and
Growth
Projects
£
Group
£
Barberton
Mines
£
Phoenix
Platinum*
£
Corporate
and
Growth
Projects
£
Group
£
6
Segmental Analysis continued
Segmental Assets (Total assets
excluding goodwill)
Segmental Liabilities
Goodwill
Net Assets (excluding goodwill)
Capital Expenditure
48,864,455
23,552,791
–
25,311,664
10,739,237
19,617,673
275,378
–
19,342,295
6,672,468
38,206,637 106,688,765 43,333,140
25,063,824 20,212,973
1,235,655
21,000,714
–
–
81,624,941 23,120,167
36,970,982
17,424,906
13,202
6,773,729
16,990,521
1,556,006
–
15,434,515
14,079,722
31,791,590
600,876
–
31,190,714
180,540
92,115,251
22,369,855
21,000,714
69,745,396
21,033,991
All assets are held within South Africa with the exception of £13.1 million (2011: £10.7 million) relating to Manica which is held in Mozambique.
7 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
Later than one year and no later than five years
Later than five years
Group
£
30 June 2012
Company
£
30 June 2011
£
30 June 2012
£
30 June 2011
125,066
211,447
–
194,641
381,925
–
99,221
192,256
–
336,513
576,566
291,477
108,451
344,077
–
452,528
Minimum lease payments under operating leases
recognised as an expense in the year:
135,073
226,374
87,684
48,532
Leases are negotiated for an average term of three to five years. The current lease agreement increases by 8% annually.
Pan African Resources PLC
Annual Report 2012 129
Notes to the Financial Statements Continued
for the year ended 30 June 2012
8 Other (Expenses)/Income
Dividends received – subsidiaries
Management fees
Foreign exchange gain/(loss)
Operating leases
Non-mining depreciation
Non-Executive Directors’ fees
Executive Directors’ fees
Equity settled share option expense
Auditor’s fees
Salaries corporate office
Investor and public relations
New business
Cash settled share option expense
Legal fees
Community projects
Other net (expense)/income
9
Finance Income/(Costs)
Interest received – Bank
Interest paid – Bank
10 Profit Before Taxation
Group
Company
30 June 2012
£
30 June 2011
£
30 June 2012
£
30 June 2011
£
–
–
850,775
(135,073)
(57,617)
(205,120)
(363,638)
(43,452)
(141,692)
(1,301,623)
(229,683)
(1,629,808)
(775,049)
(116,943)
(1,183,416)
(583,888)
–
–
(40,366)
(226,374)
(25,416)
(156,328)
(684,585)
(107,056)
(119,549)
(764,356)
(218,886)
(266,969)
(68,414)
(186,074)
(228,145)
295,861
24,500,396
1,486,277
850,775
(87,684)
(46,985)
(205,120)
(363,638)
(14,558)
(85,574)
(1,301,623)
(229,683)
(1,629,808)
(425,430)
(76,313)
(9,378)
(716,942)
21,650,960
1,306,054
(40,366)
(48,532)
(25,416)
(243,445)
(684,585)
(38,066)
(72,999)
(764,356)
(218,886)
(266,969)
(26,919)
(60,368)
(5,385)
11,153
(5,916,227)
(2,796,657)
21,644,712
20,471,875
652,267
(136,765)
515,502
802,022
(40,128)
761,894
551,154
–
551,154
772,957
–
772,957
Profit before taxation has been arrived at after charging:
Management fee expense/(income)
– Shanduka
– Barberton Mines
– Phoenix Platinum
Equity settled share option expense (refer to note 33)
Cash settled share options expense (refer to note 27)
Depreciation
Impairment costs
Staff costs
Royalty costs
Operating leases
11 Auditor’s Remuneration
Fees payable to the Company’s auditors for the audit
of the Company’s annual financial statements
Audit of the consolidated financial statements
Audit of the Company’s subsidiaries pursuant to
legislation
Under/(over) provision of audit fee in the prior year
77,887
–
–
43,452
775,049
3,316,627
48,238
23,779,383
3,848,450
135,073
81,761
–
–
107,056
68,414
2,885,243
–
21,691,014
2,368,239
226,374
–
(1,241,823)
(244,453)
14,558
425,430
46,985
–
1,301,623
–
87,684
12,077
58,824
56,118
8,496
10,500
68,965
46,551
(7,817)
12,077
58,824
–
8,496
Total audit fees
135,515
118,199
79,397
Other services rendered by the auditors
Total non-audit fees
6,177
6,177
1,351
1,351
6,177
6,177
–
(1,306,054)
–
38,066
26,919
25,416
–
764,356
–
48,532
10,500
68,965
–
(7,817)
71,648
1,351
1,351
All fees are paid to Deloitte South Africa with the exception of £32,000 (2011: £28,624) which is paid to Deloitte LLP (UK).
130
12 Staff Costs
The average number of employees were:
Corporate and Growth Projects
Mining
Their aggregate remuneration comprised:
Salaries and wages
Other retirement costs (refer to note 30)
13 Taxation
Income tax expense
South African normal taxation
– current year
– prior year
Deferred taxation
– current year
Group
£
30 June 2012
Company
£
30 June 2011
£
30 June 2012
£
30 June 2011
15
1,820
1,835
11
1,757
1,768
12
–
12
22,302,552
1,476,831
20,227,325
1,463,689
1,253,599
48,024
23,779,383
21,691,014
1,301,623
11,134,846
–
8,151,100
10,421
1,849,665
1,086,788
–
–
–
10
–
10
737,120
27,236
764,356
–
–
–
Total taxation charge
Profit before taxation
Taxation at the South African taxation rate of 28%
Non-deductible expenses/(exempt income)
Taxation rate differential
Tax effect of utilisation of tax losses
12,984,511
42,226,145
11,823,321
12,167
1,149,023
–
9,248,309
26,416,974
7,396,753
29,976
1,821,580
–
–
22,195,866
6,214,842
(6,169,150)
–
(45,692)
–
21,244,832
5,948,553
(5,917,782)
–
(30,771)
Taxation expense for the year
12,984,511
9,248,309
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
2.72
0.03
–
30.75
%
28.00
6.90
0.11
–
35.01
–
%
28.00
–
(27.79)
(0.21)
0.00
–
%
28.00
–
(27.86)
(0.14)
0.00
There are no significant unrecognised temporary differences associated with undistributed profits of 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 £12 million unredeemed capital carried forward,
deductible against future profits.
During the year under review South Africa’s gold mining income tax formula was reduced upon the introduction of withholding
tax on dividends that replaced the secondary tax on companies resulting in the effective tax rate of Barberton Mines decreasing
to 29.1% (2011: 34.5%).
Pan African Resources PLC
Annual Report 2012 131
Notes to the Financial Statements Continued
for the year ended 30 June 2012
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.
30 June 2012
Weighted
average
number of
shares
Net profit
£
Earnings
per share
(Pence)
Net profit
£
30 June 2011
Weighted
average
number of
shares
From continuing operations
Basic EPS
Share options
29,241,634 1,445,202,485
8,085,456
–
2.02
(0.01)
17,168,665 1,432,666,738
6,157,835
–
Diluted EPS
29,241,634 1,453,287,941
2.01
17,168,665 1,438,824,573
Earnings
per share
(Pence)
1.20
(0.01)
1.19
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
per share
(Pence)
1.20
0.00
0.00
30 June 2012
Weighted
average
number of
shares
Net profit
£
Earnings
per share
(Pence)
Net profit
£
30 June 2011
Weighted
average
number of
shares
29,241,634 1,445,202,485
2.02
17,168,665 1,432,666,738
Earnings as reported
Adjustments:
Impairment costs
Loss on disposal of property,
plant and equipment
48,238
17,922
– 1,432,666,738
– 1,432,666,738
0.01
0.00
2.03
(0.01)
Headline earnings per share*
Share options
29,307,794 1,445,202,485
8,085,456
–
17,168,665 1,432,666,738
6,157,835
–
1.20
(0.01)
Diluted headline earnings per
share
29,307,794 1,453,287,941
2.02
17,168,665 1,438,824,573
1.19
* Headline earnings per share is required to be disclosed in terms of the Listing Requirements of the JSE Limited.
Net asset value per share
Tangible net asset value per
share*
*
(Total assets less goodwill, non-current assets held for sale, non-current liabilities and current liabilities).
Group
(Pence)
30 June 2012
(Pence)
30 June 2011
7.09
4.73
6.28
3.85
132
15 Dividends
The Board of Directors has recommended that no dividend be declared for the year ended 30 June 2012 (2011: final dividend
of 0.5135p paid). This is due to the purchase of Evander Gold Mines (Pty) Limited which requires significant cash funding from
Pan African Resources PLC (refer to note 36).
16 Property, Plant and Equipment and Mineral Rights
Mineral
Rights and
Mining
Property
£
Building
and
Infra-
structure
£
Plant
and
Machinery
£
Capital
Under
Construc-
tion*****
£
Shafts
and
Explor-
ation
£
Land*
£
Other
£
Total
£
Group
Cost
Balance at 30 June 2010
Transfer from other
intangible assets***
Additions
Foreign currency translation
reserve
Balance at 30 June 2011
Transfer from other
intangible assets***
Additions
Disposal
Impairment**
Foreign currency translation
reserve
Re-classified as non-current
assets held for sale
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
1,061,675
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
–
170,041
–
–
120,885
814,845
–
–
–
263,455
–
–
–
2,544,706
(18,876)
(48,238)
–
9,938,461
–
–
–
3,603,515
–
–
–
89,883
–
–
120,885
17,424,906
(18,876)
(48,238)
(13,332)
(4,208,205)
(317,765)
(2,813,744) (1,433,315)
(5,105,568)
(41,454) (13,933,383)
–
–
–
(742,089)
–
–
–
(742,089)
Balance at 30 June 2012
188,699
18,554,630
1,938,760
16,522,976
14,653,365
30,725,266
290,406
82,874,102
Pan African Resources PLC
Annual Report 2012 133
Notes to the Financial Statements Continued
for the year ended 30 June 2012
16 Property, Plant and
Equipment and Mineral
Rights continued
Accumulated Depreciation
Balance at 30 June 2010
Charge for the year
Foreign currency translation
reserve
Balance at 30 June 2011
Charge for the year****
Disposal
Reclassified as non-current
assets held for sale
Foreign currency translation
reserve
Balance at 30 June 2012
Carrying amount
At 30 June 2011
At 30 June 2012
Cost
Balance at 30 June 2010
Additions
Foreign currency translation
reserve
Balance at 30 June 2011
Additions
Transfer from other
intangible assets***
Foreign currency translation
reserve
Balance at 30 June 2012
Mineral
Rights and
Mining
Property
£
Building
and
Infra-
structure
£
Plant
and
Machinery
£
Capital
Under
Construc-
tion*****
£
Shafts
and
Explor-
ation
£
Land*
£
Other
£
Total
£
–
–
–
–
–
–
–
–
–
(2,859,008)
(203,797)
(815,807)
(65,287)
(4,951,978)
(1,373,257)
(158,369)
(45,299)
(289,825)
(3,221,174)
(264,219)
–
(926,393)
(57,985)
–
(6,615,060)
(1,674,409)
954
–
–
446,047
505,546
144,498
1,142,580
(2,979,847)
(839,880)
(6,699,888)
–
–
–
–
–
–
–
–
–
(8,486,981)
(1,242,902)
(18,499) (17,132,273)
(2,910,659)
(25,416)
(479,823)
(2,634)
(975,950)
(10,209,706)
(1,262,397)
–
(46,549) (21,018,882)
(3,316,627)
(57,617)
954
–
–
–
446,047
1,623,460
9,977
3,426,061
(9,848,643)
(94,189) (20,462,447)
31,990
18,605,931
1,066,677
10,986,157
6,148,219
22,017,613
195,428
59,052,015
188,699
15,574,783
1,098,880
9,823,088
14,653,365
20,876,623
196,217
62,411,655
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
46,141
181,183
46,141
181,183
8,882
8,882
236,206
13,202
236,206
13,202
–
–
(39,114)
(39,114)
210,294
210,294
134
Mineral
Rights and
Mining
Property
£
Building
and
Infra-
structure
£
Plant
and
Machinery
£
Capital
Under
Construc-
tion*****
£
Shafts
and
Explor-
ation
£
Land*
£
Other
£
Total
£
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(18,499)
(25,416)
(18,499)
(25,416)
(2,634)
(2,634)
(46,549)
(46,985)
(46,549)
(46,985)
9,449
9,449
–
(84,085)
(84,085)
–
–
189,657
189,657
126,209
126,209
16 Property, Plant and
Equipment and Mineral
Rights continued
Accumulated Depreciation
Balance at 30 June 2010
Charge for the year
Foreign currency translation
reserve
Balance at 30 June 2011
Charge for the year
Foreign currency translation
reserve
Balance at 30 June 2012
Carrying amount
At 30 June 2011
At 30 June 2012
*
**
***
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 Segalla Plant held at Barberton Mines, refer to note 35.
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 (refer to note 17).
**** The direct mining depreciation, excluding other depreciation, totals £3,259,010 (2011: £2,885,243) as reflected and disclosed in Statement of Comprehensive Income.
The other depreciation which is not mining related of £57,617 (2011: £25,416) is now reflected in Other (expenses)/income in note 8.
***** Capital under construction refers to capital spent on the Phoenix and the Barberton treatment plants.
17 Other Intangible Assets
Exploration and evaluation assets
Balance at 30 June 2010
Exploration expenditure
Transfer to property, plant and equipment and mineral rights
Foreign currency translation reserve
Balance at 30 June 2011
Exploration expenditure
Transfer to property, plant and equipment and mineral rights
Foreign currency translation reserve
Transfer to assets held for sale*
Balance at 30 June 2012
*
The exploration and evaluation assets transferred to non-current assets held for sale relate to the Manica Project in Mozambique.
Group
£
30 June 2012
13,087,880
800,619
(1,061,675)
1,387,602
14,214,426
505,273
(120,885)
(1,711,403)
(12,887,411)
–
note 16
note 16
note 35
Pan African Resources PLC
Annual Report 2012 135
Notes to the Financial Statements Continued
for the year ended 30 June 2012
18 Goodwill
Goodwill acquired in a business combination is
allocated at acquisition to the cash generating units
that are expected to benefit from that business
combination.
Group
£
30 June 2012
Company
£
30 June 2011
£
30 June 2012
£
30 June 2011
Goodwill
21,000,714
21,000,714
–
–
The Group tests the goodwill carrying amount annually for impairment or more frequently if there are indications that goodwill
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 the discount rate using post-tax rate of 11.88% (2011: 12.10%) for Barberton Mines which
reflects 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$1,492 and an exchange rate of ZAR8.34 to the Dollar
over the life of projects. The life of project was estimated at 17 years for Barberton Mine. Changes in selling prices and direct costs
are based on past practices and expectations of future changes in the market.
19 Investments
Investments
Company
£
30 June 2012
£
30 June 2011
50,101,244
53,259,921
At 30 June 2012 the Company held the following shares in subsidiary undertakings:
Name of undertaking
Barberton Mines (Pty) Limited
Explorator Limitada*
Mistral Resource Development
Corporation*
Brampton Capital Overseas
Limited*
Phoenix Platinum Mining (Pty)
Limited
Emerald Panther Investments 91
(Pty) Limited**
Country of
incorporation
Principal
activity
South Africa
Mozambique
Gold Mining
Exploration
British Virgin Isles
Exploration
British Virgin Isles
Exploration
Proportion
of capital
effectively held
by Company
100%
100%
100%
100%
Carrying
amount
2012
Carrying
amount
2011
45,770,663
–
45,770,663
88,972
–
–
584,705
2,485,000
South Africa
Platinum Mining
100%
4,330,581
4,330,581
South Africa
Shelf Company
100%
–
–
50,101,244
53,259,921
* Transferred to non-current assets held for sale during the financial year under review
** Emerald Panther Investments 91 (Pty) Limited is a shelf company acquired to facilitate the acquisition of Evander Gold Mines Limited from Harmony (refer to note 36).
136
20 Rehabilitation Trust Fund
Funds held in trust fund (refer to note 26)
2,662,934
3,013,385
21 Inventories
Consumable stores
Mineral stocks
Provision for obsolete stock
22 Trade and Other Receivables
Trade receivables
Other receivables and prepayments
VAT receivable
Deposit*
Group
£
30 June 2012
Company
£
30 June 2011
£
30 June 2012
£
30 June 2011
1,964,622
9,116
(105,003)
1,555,693
–
(98,491)
1,868,735
1,457,202
–
–
–
–
–
–
–
–
–
–
4,176,485
249,253
853,530
1,548,779
1,880,730
624,948
1,748,723
–
17,977
54,463
–
1,548,779
49,400
71,600
–
–
6,828,047
4,254,401
1,621,219
121,000
*
The deposit relates to a non-refundable amount paid to Harmony
as a ‘break fee’ with regards to the Evander Gold Mines (Pty)
Limited acquisition (refer to note 36). This payment will be
deducted off the purchase price payable on completion as per
the acquisition agreement.
The average credit period is:
Number of days
15
9
The ageing of trade receivables is current and is consistent with that of the prior year. No balances are past due or impaired.
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.
Pan African Resources PLC
Annual Report 2012 137
Notes to the Financial Statements Continued
for the year ended 30 June 2012
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
Credit facilities
The Group has the following credit facilities at
30 June 2012:
Nedbank Limited revolving credit facility*
Absa Bank Limited overdraft facility
Guarantee**
Credit card
US$ trading facility***
*
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.
** The guarantees relate to £298,345 for Eskom, and £226,122 for
the DMR.
*** The US$ trading facility relates to facilities held by Barberton Mines
for the purposes of trading US$ on US$ gold sales.
24 Share Capital
Authorised
2,000,000,000 (2010: 2,000,000,000) ordinary
shares of £0.01 each
Issued and fully paid up 1,448,262,361
(2011: 1,444,040,711) ordinary shares of £0.01 each
Group
£
30 June 2012
Company
£
30 June 2011
£
30 June 2012
£
30 June 2011
19,782,179
10,123,822
17,812,893
11,546,466
11,615,841
1,587,498
1,143,979
38,719
7,356,700
13,712,029
1,828,271
619,112
9,141
–
–
77,439
–
–
–
21,742,737
16,168,553
77,439
–
–
–
–
–
–
20,000,000
20,000,000
20,000,000
20,000,000
14,482,623
14,440,406
14,482,623
14,440,406
During the period under review the Company announced the issue and allotment of 4,221,650 new ordinary shares in respect
of share options exercised:
• On 28 October 2011 200,000 shares issued to F Chadwick at 7 pence per share.
• On 24 November 2011 723,650 shares issued to D Negri at 6 pence per share.
• On 3 April 2012 500,000 shares issued to N Spruijt at 7 pence per share.
• On 27 April 2012 450,000 shares issued to C Strydom at 7 pence per share.
• On 27 April 2012 850,000 shares issued to C Strydom at 5 pence per share.
• On 27 April 2012 288,000 shares issued to P Human at 7 pence per share.
• On 27 April 2012 850,000 shares issued to P Human at 5 pence per share.
• On 27 April 2012 360 000 shares issued to R Le Roux at 7 pence per share.
• Current number of share options outstanding at 30 June 2012 is 14,282,100 (2011: 18,503,750).
138
Group
£
30 June 2012
Company
£
30 June 2011
£
30 June 2012
£
30 June 2011
25 Trade and Other Payables
Trade and other payables
Accruals
VAT payable
3,140,458
4,532,185
37,086
6,264,168
1,868,026
61,556
166,869
681,689
38,011
Total trade and other payables
7,709,729
8,193,750
886,569
273,730
233,061
61,556
568,347
The average credit period is:
Number of days
The fair value of trade payables is not materially
different from the carrying value presented.
26 Provisions
Balance at 30 June 2010
Provided during the year
Utilised during the year
Foreign currency translation
Balance at 30 June 2011
Provided during the year
Utilised during the year
Foreign currency translation
Balance at 30 June 2012
Balance at 30 June 2011
Long-term provisions
Balance at 30 June 2012
Long-term provisions
25
50
Group
Company
Decomissioning
and
rehabilitation
£
Decomissioning
and
rehabilitation
£
Total
£
Total
£
3,222,780
–
(11,214)
175,025
3,386,591
115,970
–
(458,607)
3,222,780
–
(11,214)
175,025
3,386,591
115,970
–
(458,607)
3,043,954
3,043,954
3,386,591
3,386,591
3,386,591
3,386,591
3,043,954
3,043,954
3,043,954
3,043,954
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Rehabilitation provision
The provision includes the estimate of the costs of decommissioning and 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
decommission and rehabilitate environmental disturbances caused by mining operations. These costs are expected to be incurred
over the 17-year Life of Mine.
Pan African Resources PLC
Annual Report 2012 139
Notes to the Financial Statements Continued
for the year ended 30 June 2012
27 Long-Term Liabilities
Cash settled share appreciation arrangement*
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
Total
Group
£
30 June 2012
Company
£
30 June 2011
£
30 June 2012
£
30 June 2011
69,456
775,049
(46,992)
797,513
111,829
(24,586)
(15,875)
–
68,414
1,042
69,456
115,418
(9,710)
6,121
71,368
111,829
27,329
425,430
(23,194)
429,565
–
–
–
–
–
26,919
410
27,329
–
–
–
–
868,881
181,285
429,565
27,329
*
On 9 May 2011, PAR established a cash settled share appreciation programme entitling selected executives and employees of the PAR Group, as approved by the Board
of Directors of PAR, to be allocated notional shares in PAR. These notional shares will confer the conditional right on the participant to be paid a cash settlement equal to
the appreciation in the PAR share price from the date of allocation to the date of surrender or deemed surrender of notional shares. Participation in the share appreciation
programme 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 the 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 PAR 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’.
Remuneration Committee 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.
The participant is entitled, within a period of 60 days after the date of resignation, to surrender all his/her surrenderable 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 participant’s estate is entitled, within a period of six 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.
140
27 Long-Term Liabilities continued
Details of the notional shares outstanding during the year, in relation to this scheme, are as follows:
PAR cash settled share appreciation arrangements
Outstanding at the beginning of the year
Granted during the year
Exercised during the year
Forfeited in the year
Outstanding and exercisable at the end of the year
30 June 2012
30 June 2011
Weighted
average
exercise price
(Rands)
1.15
–
–
1.15
1.15
Weighted
average
exercise price
(Rands)
–
1.15
–
–
1.15
Number
of options
33,669,103
–
–
(1,806,000)
31,863,103
Number
of options
–
33,669,103
–
–
33,669,103
Cash settled share appreciation arrangements have to be valued annually at fair value.
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/strike price
Expected volatility
Expected life
Risk-free rate
Expected dividend yield
30 June 2012
30 June 2011
R1.96
R1.15
50.00%
3-4 years
5.83-6.14%
4.00%
R1.12
R1.15
70.33%
4-5 years
7.56-7.84%
4.00%
The Group recognised total expenses of £775.049 (2010: £68.414) relating to cash-settled share appreciation arrangement
payment transactions during the reporting period.
Vesting Schedule
Description
Tranche 1
Tranche 2
Tranche 3
Total
Vesting
period
(years)
Vesting
period
(days)
Vesting
date
Valuation
(Rand)
Options
granted
Options
expected
to vest
2
3
4
731 9 May 2013
1,096 9 May 2014
1,461 9 May 2015
7,965,776
7,965,776
7,189,113
0.97
0.99
6,829,657
1.01 15,931,551 12,976,348
Grant date
9 May 2011
9 May 2011
9 May 2011
31,863,103 26,995,118
Participation in share-based and other long-term incentive schemes is restricted to employees and Directors.
Pan African Resources PLC
Annual Report 2012 141
Notes to the Financial Statements Continued
for the year ended 30 June 2012
28 Deferred Taxation
Deferred tax liabilities
Property, plant and equipment
Provisions
Other
Net deferred tax liabilities
Reconciliation of
deferred tax liabilities:
Net deferred liabilities at the
beginning of the year
Deferred tax charge for the year
Translation difference
Net deferred liabilities at the end
of the year
Group
£
30 June 2012
Notes
Company
£
30 June 2011
£
30 June 2012
£
30 June 2011
10,841,728
(673,643)
(79,555)
10,469,324
(623,950)
(3,679)
10,088,530
9,841,695
13
9,841,695
1,849,665
(1,602,830)
8,092,332
1,086,788
662,575
10,088,530
9,841,695
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Deferred tax assets not recognised for PAR Company amounted to £169,980 (2011: £234,620).
Assessed loss carried forward for PAR Company amounted to £607,071 (2011: £837,929).
29 Financial Instruments
The Group manages its capital to ensure that it will be able to continue as a going concern while maximising the return to
shareholders through the optimisation of the debt and equity balances. The Group’s overall strategy remains unchanged from the
prior year.
Components of capital:
Cash and cash equivalents
Net interest-bearing assets
Equity
Group
£
30 June 2012
Company
£
30 June 2011
£
30 June 2012
£
30 June 2011
(19,782,179)
(10,123,822)
(17,812,893)
(11,546,466)
(19,782,179)
102,625,655
(10,123,822)
90,746,110
(17,812,893)
99,707,934
(11,546,466)
91,668,252
Net debt to equity ratio (%)
(19.28)
(11.00)
(17.87)
(13.00)
Categories of financial instruments:
Financial assets:
Cash and cash equivalents
Receivables
Financial liabilities:
Trade and other payables
19,782,179
4,176,485
10,123,822
1,880,730
17,812,893
17,977
11,546,466
49,400
7,672,643
8,132,194
849,483
506,791
142
29 Financial Instruments continued
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 £16,763 (2011: £4,879) 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.
Customers above 5%
30 June 2012
30 June 2011
2,570,181
1,831,330
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.
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
2012
2011
Closing rate at
30 June 2012
Average rate
for the year
ended
30 June 2012
12.91
$1,599
12.27
$1,694
Impact of 10%
currency or gold
price movement
on profit
£
6,411,352
5,341,923
Pan African Resources PLC
Annual Report 2012 143
Notes to the Financial Statements Continued
for the year ended 30 June 2012
29 Financial Instruments continued
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:
2012
Assets
Liabilities
2011
Assets
Liabilities
Impact of
10% currency
movement on
translation
reserve
South African
Rands
28,478,961
11,062,459
25,889,965
10,056,781
15,835,425
8,193,750
14,395,841
7,448,864
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 £11,615,841
(2011: £13,998,153). The Group expects to meets its other obligations from operating cash flows and proceeds of maturing
financial assets.
144
29 Financial Instruments continued
Liquidity risk analysis continued
The following table indicates the Group’s remaining contractual maturity from its financial liabilities on an undiscounted basis:
Group
2012
Trade and other payables
2011
Trade and other payables
Company
2012
Trade and other payables
2011
Trade and other payables
Weighted
average interest
rate
Less than
12 months
1-5 years
0%
0%
0%
0%
7,672,643
8,132,194
849,483
506,791
–
–
–
–
Total
£
7,672,643
8,132,194
849,483
506,791
Fair value of financial instruments
The Directors consider that the carrying amounts of financial assets and liabilities recorded approximate their fair values.
30 Post-Retirement Benefit Information
All employees are required to be members of either the Barberton Retirement Fund, Sentinel Retirement Fund, Mineworkers
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 £1,476,831 (2011: £1,463,689) 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 Service’s life expectancy tables as the benefits payable are a fixed amount
per pensioner.
31 Commitments, Contingent Liabilities and Guarantees
Group
Commitments
The Group had outstanding open orders contracted for at year end of £12,305,025 (2011: £3,671,395).
Authorised commitments for the new financial year not yet contracted for totalled £30,197,687 (2011: £9,641,460).
Contingent liabilities
The Group had no contingent liability in the current financial year or prior year.
Guarantees
The Group had guarantees of £11,615,841 in favour of Nedbank Limited (2011: 13,712,029) and £298,345 (2011: £352,185) in
favour of Eskom, and £226,122 (2011: £266,927) 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 2012
(2011: £nil).
Pan African Resources PLC
Annual Report 2012 145
Notes to the Financial Statements Continued
for the year ended 30 June 2012
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
Individual
Executive
Mr JP Nelson
Mr JAJ Loots*^
Miss YB Sitole#
Total
Individual
Non-Executive
Mr RG Still
Ms P Mahanyele*
Mr KC Spencer
Mr RM Smith*^^
Mr MC Ramaphosa*~
Mr JAJ Loots*^
Mrs HH Hickey**
Total
30 June 2012
£
30 June 2011
£
363,638
–
363,638
205,120
205,120
568,758
Total
2012
£
262,755
39,091
61,792
363,638
Total
2012
£
46,102
36,545
76,041
–
21,243
19,448
5,741
311,592
372,993
684,585
156,328
156,328
840,913
Total
2011
£
597,468
87,117
–
684,585
Total
2011
£
38,235
–
43,559
26,135
48,399
–
–
205,120
156,328
Share options
exercised
£
–
–
–
–
Share options
exercised
£
–
–
–
–
–
–
–
–
Cost to
Company
£
216,767
39,091
61,792
317,650
Directors’
fees
£
46,102
36,545
76,041
–
21,243
19,448
5,741
205,120
Bonuses
£
45,988
–
–
45,988
Bonuses
£
–
–
–
–
–
–
–
–
146
32 Directors’ Emoluments continued
Three highest paid Non-Directors (Cost to Company)
R Holding
C Strydom
A van den Bergh
30 June 2012
£
30 June 2011
£
235,972
219,540
158,356
158,014
220,843
147,987
Directors’ fees accruing to these Directors are paid by the Company to Shanduka Group (Pty) Limited.
Director resigned as Executive Director and was appointed as Non-Executive Director on 1 December 2011.
Director was appointed on 1 December 2011.
*
^
#
** Director was appointed on 12 April 2012.
^^ Director resigned on 20 July 2011.
~
Director resigned as the Non-Executive Chairman on 14 December 2011.
Non-Executive Directors
During the year under review, the Non-Executive Directors were Mr RG Still, Mr KC Spencer, Mr RM Smith, Mr MC Ramaphosa,
Ms P Mahanyele, Mr JAJ Loots and Mrs HH Hickey.
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 2012
Chairperson
£
30 June 2012
Member
£
30 June 2011
Chairperson
£
30 June 2011
Member
£
Board of Director’s Chairperson
Board of Director’s Deputy Chairperson
Board of Directors
Remuneration Committee
Audit Committee
SHEC Committee
Nominations Committee
Equity-settled options
Total options
outstanding
1 July 2011
Grant
date
Strike price
(pence)
Mr KC Spencer
Mr J Hopwood*
3,000,000
1,000,000
21 July 2008
21 July 2008
Total
4,000,000
Mr JP Nelson
Mr RG Still
Mr KC Spencer
Mr J Hopwood*
6,000,000
21 July 2005
4,000,000 9 August 2004
21 July 2008
3,000,000
21 July 2008
1,000,000
5.2
5.2
5.2
2.0
2.5
5.2
5.2
39,834
23,432
–
7,030
7,030
7,030
7,030
Options
granted/
(exercised)
during the
period
–
–
(6,000,000)
6 October 2010
(4,000,000) 4 November 2010
–
–
–
–
18,277
4,686
4,686
4,686
4,686
41,139
24,199
–
7,260
9,680
–
7,260
–
–
18,875
4,840
7,260
7,260
4,840
Grant/
(exercise)
date
Grant/
(exercise)
price (pence)
Trans-
ferred out
Total options
30 June 2012
–
–
–
(1,000,000)
3,000,000
–
(1,000,000)
3,000,000
(2.0)
(2.5)
–
–
–
–
–
–
–
–
–
–
3,000,000
1,000,000
4,000,000
Total
14,000,000
–
(10,000,000)
*
Mr J Hopwood was a Non-Executive Director who passed away on 18 March 2010. The Board of Directors approved that his share options be transferred to his spouse.
Pan African Resources PLC
Annual Report 2012 147
Notes to the Financial Statements Continued
for the year ended 30 June 2012
32 Directors’ Emoluments continued
Directors’ interest in shares
As at 30 June 2012 the interests of Directors in the issued share capital of the Company were as follows:
Mr JP Nelson: 1,122,442 ordinary shares (2011: 1,122,422).
Mr JAJ Loots: 65,000 ordinary shares (2011: 65,000).
Mr RG Still: 2,000,000 ordinary shares (2011: 2,000,000). In addition, as a Director of Pangea Exploration (Pty) Limited (‘Pangea’)
and a trustee of a family trust ‘The Alexandra Trust’ which owns 33.33% of Pangea, Mr RG Still is deemed to have an indirect,
non-beneficial interest in the 1,793,796 ordinary shares (2011: 41,824,408) held by Pangea and the 12,430,900 ordinary shares
(2011: Nil) held by the Alexandra Trust.
No trading was undertaken by any of the Directors between financial year end and the date of approval of the annual financial
statements.
Cash settled options
Total
options
outstanding
1 July 2011
Grant
date
Strike price
(pence)
Mr JP Nelson*
Mr RA Holding**
Mr C Strydom**
Mr A van den Bergh**
5,805,000 9 May 2011
5,127,134 9 May 2011
4,650,000 9 May 2011
3,625,177 9 May 2011
19,207,311
0.11
0.11
0.11
0.11
0.11
Options
granted/
(exercised)
during the
period
–
–
–
–
Grant/
(exercise)
date
Grant/
(exercise)
price
(pence)
Total
options
30 June
2012
–
–
–
–
5,805,000
5,127,134
4,650,000
3,625,177
19,207,311
* Executive Director
** Highest paid Non-Directors
33 Equity-Settled Share Options
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, share
options may be released from the share option programme to participants, share options may be exercised by participants and
allocation shares may be delivered to participants as follows for allocations prior to 21 July 2008:
(i) 33.33% of the total number of shares allocated after one year has elapsed from the grant date by the participant of the grant;
(ii) up to 66.67% of the total number of shares allocated after two years have elapsed from the grant date by the participant of
the grant;
(iii) the balance of the shares allocated after three years have elapsed from the grant date by the participant of the grant;
and for allocations subsequent to 21 July 2008 as follows:
(i) 25% of the total number of shares allocated after one year has elapsed from the grant date by the participant of the grant;
(ii) up to 50% of the total number of shares allocated after two years have elapsed from the grant date by the participant of the
grant;
(iii) up to 75% of the total number of shares allocated after three years have elapsed from the grant date by the participant of
the grant; and
(iv) the balance of the shares after four years have elapsed from the grant date by the participant of the grant, provided that the
Board may, at its discretion, anticipate or postpone such dates.
148
33 Equity-Settled Share Options continued
An option holder may not exercise a share option under the share option programme by later than the end of the year preceding
the 10th anniversary of the grant date. Upon death of an option holder, the estate would be entitled to exercise the options
vested to date within 12 months of the date of death, if the options are not exercised the total available share options would
lapse. The Directors have the discretion to approve the vesting of the deceased total number of unvested share options.
The number of vested share options to which an option holder is entitled to expires after a period of six months due to
retirement, redundancy or disability of the option holder.
The exercise price of the share options is converted to GBP at a GBP:ZAR closing exchange rate of 12.91. The number and
weighted average exercise price of share options are as follows:
Outstanding at 1 July
Granted during the year
Exercised during the year
Forfeited during the year
Outstanding 30 June 2012
30 June 2012
30 June 2011
Weighted
average
exercise price
5.2p
–
6.3p
–
6.4p
Number
of options
18,503,750
–
(4,221,650)
–
14,282,100
Weighted
average
exercise price
4.8p
–
4.5p
6.2p
5.2p
Number
of options
55,145,000
–
(34,500,000)
(2,141,250)
18,503,750
30 June 2012
30 June 2011
Vested
Unvested
Vested
Unvested
Total number share options at year end
10,112,100
4,170,000
11,013,750
7,490,000
The fair value of services received for share options granted is based on the fair value of share options granted, measured using
for all issues prior to 20 March 2010 a Black Scholes model and a variant of the Binomial model for issues on 20 March 2010,
with the following inputs:
Share price
Exercise price
Expected volatility
Expected life
Risk-free interest rate
30 June 2010
R0.68
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 one to four years back
from the date of grant. Therefore, volatility of the Company’s share prices was calculated over the period commensurate with the
expected life of the options under consideration, giving more weight to more recent historical data to account for volatility
persistence.
There are no market conditions attached to the exercise of the share options.
The Group recognised total expenses of £43,452 (2011: £107,056) related to equity-settled share-based payment transactions
during the reporting period.
Participation in share-based and other long-term incentive schemes is restricted to employees and Directors.
Pan African Resources PLC
Annual Report 2012 149
Notes to the Financial Statements Continued
for the year ended 30 June 2012
34 Related Party Transactions
The Group entered into the following transactions and held year end balances with related parties:
Dividends received*
Fee received from Barberton Mines*
Admin fee received from Phoenix Platinum*
Fee paid to Metorex
Fee paid to Shanduka
Directors’ fees paid to Shanduka
Loans to subsidiaries
Explorator Limitada*^
Phoenix Platinum*
Mistral Resources*^
Payable to another Group Company
Barberton Mines*
Payable to other related parties
Fee payable to Shanduka **
Statement of comprehensive
income
£
30 June 2012
£
30 June 2011
Statement of financial
position
£
30 June 2012
£
30 June 2011
24,500,396
(1,241,823)
(244,453)
–
(77,887)
(116,328)
21,650,960
(1,306,054)
(211,078)
–
(81,761)
(161,651)
22,819,905
19,890,416
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
19,505,668
–
11,224,272
15,922,612
–
19,505,668
27,146,884
1,298,235
1,298,235
–
–
28,058
28,058
93,543
93,543
* These related party transactions related to Pan African and eliminate on consolidation.
^ Transferred to non-current assets held for sale (refer to note 35).
** Included in trade and other payables.
All of the related party transactions are at arm’s length
150
35 Non-Current Assets Held For Sale
The carrying value of non-current assets held for sale previously classified under other intangible assets (Group) or investments
(Company) on 30 June 2012 are as follows:
Asset name
Country of
incorporation
Principal
activity
Proportion
of capital
effectively
held by
Company
Group
(£)
30 June 2012
Company
(£)
30 June 2012
Group
(£)
30 June 2011
Company
(£)
30 June 2011
Explorator Limitada*
Mozambique Exploration
100% 12,887,411
9,996,393
– Transferred from
Intangibles*
Mozambique Exploration
100% 12,887,411
–
– Transferred from
inter-company loan
account*
Explorator Limitada –
transferred from
investments*
Mistral Resource
Development
Corporation –
transferred from
investments*
Brampton Capital
Overseas Limited –
transferred from
investments*
Barberton Mines –
Segalla Plant **
Mozambique Exploration
100%
–
9,996,393
Mozambique Exploration
100%
–
88,972
British Virgin
Isles
British Virgin
Isles
Exploration
100%
–
584,705
Exploration
100%
–
2,485,000
South Africa
Processing
100%
247,804
–
13,135,215
13,155,070
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
*
As outlined in note 36, Pan African has agreed to sell, free of encumbrances, its wholly-owned subsidiary, Mistral’s shareholdings to Auroch for a AU$2,000,000 cash
consideration and 25,000,000 consideration shares in Terranova, with an option to receive additional Deferred Cash Consideration (if payable) and Deferred Consideration
Shares (if to be issued), the details of which are set out below. The disposal of our Manica exploration project (which is accounted for within the corporate and growth
segment) allows us to remain focused on our strategy of the development and growth of our South African based operating assets.
Should at any time during the period of four years, from the date of the completion of the transaction, any of the deferred
consideration milestones be achieved, then Auroch will pay Pan African the following deferred cash consideration payments upon
achievement of each of the milestones as set out below:
• AU$1,000,000 upon achievement of the 400koz Milestone 1;
• AU$1,000,000 upon achievement of the 1,000koz Milestone 2;
• AU$1,000,000 upon achievement of a Bankable Feasibility Study Milestone; and
• AU$1,000,000 upon achievement of a Capacity Milestone;
collectively, the Deferred Cash Consideration.
In addition, Auroch will issue to Pan African the deferred consideration shares upon the achievement of certain milestones as
set out below:
• 20,066,667 shares to be issued upon achievement of the 400koz Milestone 1;
• 20,066,667 shares to be issued upon achievement of the 1,000koz Milestone 2;
• 24,366,667 shares to be issued upon achievement of the Bankable Feasibility Study Milestone or at Auroch’s election, payment
of AU$7,310,000 in cash; and
• 7,166,667 shares to be issued upon achievement of the Capacity Milestone or at Auroch’s election, payment of AU$2,150,000
in cash collectively the Deferred Consideration Shares.
Pan African Resources PLC
Annual Report 2012 151
Notes to the Financial Statements Continued
for the year ended 30 June 2012
35 Non-current Assets Held For Sale continued
Milestone 1 – 400koz Milestone means delineation of at least 400,000oz of JORC Inferred Gold Resource of oxide ore with a
cut-off grade of 1.25g/t being defined on the northern and/or southern shear zones of the Mining Concession (including the
existing 90,000oz of JORC Inferred Gold Resource of oxide ore at a cut-off grade of 1.25g/t that has already been delineated on
the Mining Concession).
Milestone 2 – 1,000koz Milestone means delineation of at least 1,000,000oz of a Joint Ore Reserves Committee Code (‘JORC’)
Inferred Gold Resource of oxide ore with a cut-off grade of 1.25g/t being defined on the northern and/or southern shear zones
of the Mining Concession (including the existing 90,000oz of JORC Inferred Gold Resource of oxide ore at a cut-off grade of
1.25g/t that has already been delineated on the Mining Concession and any ounces of JORC Inferred Gold Resource of oxide ore
that satisfied the 400koz Milestone).
** Segalla Plant.
The decision was taken to sell the Segalla Plant which forms part of the Barberton Mines’ segment, during the financial year under
review. An offer of £247,805 was received for the plant. The sale is expected to be completed within 12 months.
Cost
Accumulated depreciation
Impairment
Net book value
30 June 2012
(£)
742,089
(446,047)
(48,238)
247,804
36 Events After the Reporting Period
Acquisition of Evander Gold Mines Limited from Harmony
Readers are referred to the detailed description of the transaction in the CEO’s report.
On 17 August 2012 Pan African issued an update on the Evander Gold Mines acquisition status. Pan African announced that 57%
of the shareholders had committed to vote in favour of the transaction and that it had secured £54.2 million (ZAR700 million)
through rights offer commitments.
Pan African has made a further payment of £2.5 million (ZAR30 million) to Harmony in respect of the second tranche of the
Break Fee in terms of the Agreement. Therefore the full Break Fee, being an amount of £4.1 million (ZAR50 million), has been
paid by Pan African to Harmony. Pan African and Harmony have furthermore agreed that the Break Fee shall be set off against
the £77.5 million (ZAR1 billion) deposit. The balance of the deposit (if it becomes payable, at Harmony’s election) shall therefore
constitute a total amount of £73.6 million (ZAR950 million).
The secured capital, in addition to Pan African’s existing cash funds available and, to the extent necessary, draw-downs by Pan
African from existing debt funding facilities, will be sufficient to allow Pan African to make payment of the deposit. Pan African
intends to fund the balance of the purchase consideration through a combination of, inter alia, third party debt financing and funds
generated from Pan African’s existing operations.
The Group is in the process of finalising the debt component of £46.5 million (ZAR600 million) required for part of the financing
of the Evander Gold Mines transaction.
Disposal of Manica Gold Project
Readers are referred to the detailed description of the transaction in the ‘Events after the reporting period’ section of the
Directors’ report. On 29 August 2012 Pan African announced that it entered into an agreement to dispose of 100% of its Manica
Gold Project to Auroch Minerals Mozambique (Pty) Limited, a wholly-owned subsidiary of Terranova Minerals NL, for a total
potential purchase consideration of AUD6 million (GBP4 million/ZAR52.4 million), payable in cash and 96,666,668 shares in
Terranova, subject to certain terms and conditions more fully described in note 35 and the Directors’ report.
152
37 Reconciliation of Profit Before Taxation to
Cash Generated by/(Used in) Operations
Profit before taxation
Adjusted for:
Dividends received
Impairment
Equity and cash settled share options costs
Net finance income
Royalty costs
Non-mining depreciation
Depreciation – Mining
Group
£
30 June 2012
Company
£
30 June 2011
£
30 June 2012
£
30 June 2011
42,226,145
7,516,314
26,416,974
4,692,474
22,195,866
(24,564,577)
21,244,832
(22,333,516)
–
48,238
818,501
(515,502)
3,848,450
57,617
3,259,010
–
–
175,470
(761,894)
2,368,239
25,416
2,885,243
(24,500,396)
–
439,988
(551,154)
–
46,985
–
(21,650,960)
–
64,985
(772,957)
–
25,416
–
Operating cash flows before working capital changes
49,742,459
31,109,448
(2,368,711)
(1,088,684)
Working capital changes
(650,582)
858,377
841,583
Increase in inventories
(Increase)/decrease in trade and other receivables
(Decrease)/increase in trade and other payables,
Long-term liabilities and provisions
Non-cash items
(411,533)
(1,024,867)
(330,828)
(459,742)
(139,062)
924,880
1,916,375
(267,428)
–
48,560
720,458
72,565
11,389
–
41,337
(7,491)
(22,457)
Cash generated by/(utilised in) operations
49,091,877
31,967,825
(1,527,128)
(1,077,295)
Income taxes paid
Royalties paid
Net finance income
Dividends paid
(8,364,216)
(3,251,717)
515,502
(7,416,176)
(8,310,193)
(2,433,072)
761,894
(5,376,165)
–
–
551,154
(7,416,176)
–
–
772,957
(5,376,165)
Net cash from/(used in) operating activities
30,575,270
16,610,289
(8,392,150)
(5,680,503)
Taxation paid during the year:
Taxation charge per the statement of comprehensive
income
Less: deferred taxation
Taxation unpaid at the beginning of the year
Taxation unpaid at the end of the year
Foreign currency translation
£
£
12,984,511
(1,849,665)
11,134,846
689,543
(2,878,642)
(581,531)
9,248,309
(1,086,788)
8,161,521
528,566
(689,543)
309,649
Taxation paid during the year
8,364,216
8,310,193
Royalty paid during the year:
Royalty costs unpaid at the beginning of the year
Royalty costs unpaid at the end of the year
Royalty costs charge for the year
Foreign currency translation
Royalty paid
£
76,991
(474,087)
3,848,450
(199,637)
£
48,419
(76,991)
2,368,239
93,405
3,251,717
2,433,072
Pan African Resources PLC
Annual Report 2012 153
Notes to the Financial Statements Continued
Number
of shareholders
Percentage
Number
of shares
Percentage
457
2,707
2,452
576
154
6,346
3
18
97
9
5,067
20
9
8
92
733
68
116
91
15
6,346
5
3
2
6,341
6,346
7.20
42.66
38.64
9.08
2.43
282,233
14,802,638
87,273,383
171,501,057
1,174,403,050
100
1,448,262,361
0.05
0.28
1.53
0.14
79.85
0.32
0.14
0.13
1.45
11.55
1.07
1.83
1.43
0.24
261,200
13,258,749
7,452,298
1,517,891
154,968,746
14,283,914
33,974,018
1,927,855
259,399,586
472,315,246
1,742,767
96,203,433
386,641,219
4,315,439
100
1,448,262,361
0.08
0.05
0.03
99.92
542,152,178
17,412,138
524,740,040
906,110,183
100
1,448,262,361
366,168,585
158,571,455
114,466,244
92,067,989
51,516,434
0.02
1.02
6.03
11.84
81.09
100
0.02
0.92
0.51
0.10
10.70
0.99
2.35
0.13
17.91
32.61
0.12
6.64
26.70
0.30
100
37.43
1.20
36.23
62.57
100
25.28
10.95
7.90
6.36
3.56
for the year ended 30 June 2012
38 Shareholder Analysis
Register date: 29 June 2012
Issued share capital: 1,448,262,361 shares
Shareholder spread
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
Total
Distribution of shareholders
Banks
Brokers
Close corporations
Endowment funds
Individuals
Insurance companies
Investment companies
Medical aid schemes
Mutual funds
Nominees and trusts
Other corporations
Pension funds
Private companies
Public companies
Total
Public/non-public shareholder
Non-public shareholders
Director
Strategic Holder (more than 10%)
Public Shareholders
Total
Beneficial holding of 3% or more
Shanduka Gold (Pty) Limited
Coronation Fund Managers
Allan Gray Investment Council
Investec Asset Management (SA)
Investec Asset Management (UK)
154
Notice of Annual General Meeting
NOTICE IS HEREBY GIVEN that the 2012 Annual General
Meeting of Pan African Resources PLC will be held at the offices
of Canaccord Genuity Limited, Eighth Floor, 88 Wood Street,
London EC2V 7QR on 30 November 2012 at 10:00 (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 Auditor’s report for the year
ended 30 June 2012.
2
3
4
5
6
7
To re-elect Mr JP Nelson as a Director of the Company, who
retires by rotation pursuant to the Articles of Association
of the Company.
To re-elect Mr JAJ Loots as a Director of the Company, who
retires by rotation pursuant to the Articles of Association
of the Company.
To re-elect Mr RG Still as a Director of the Company, who
retires by rotation pursuant to the Articles of Association
of the Company.
To re-elect Ms YB Sitole as a Director of the Company, who
was appointed since the last Annual General Meeting.
To re-elect Mrs HH Hickey as a Director of the Company,
who was appointed since the last Annual General Meeting.
To increase the maximum ordinary aggregate fees of all of the
Directors of the Company to a sum not exceeding £500,000
per annum, pursuant to Article 97 of the Company’s Articles
of Association.
8
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 resolution which will be proposed as an Ordinary
Resolution;
9
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 £4,970,362.20;
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 2013, 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.
By Order of the Board
St James’s Corporate Services Limited
Company Secretary
7 November 2012
6 St James’s Place
London
England
SW1A 1NP
Pan African Resources PLC
Annual Report 2012 155
Explanatory Notes
Entitlement to attend and vote
1 The Company specifies that only those members registered
on the Company’s register of members at:
• 18:00 on 28 November 2012; or
• if the AGM is adjourned, at 18:00 on the date two days
prior to the adjourned meeting, shall be entitled to attend
and vote at the AGM.
To appoint a proxy using the proxy form, the form must be:
• completed and signed; and
• sent or delivered to 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); no later than
10:00 on 28 November 2012.
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.
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.
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
6 The notes to the proxy form explain how to direct your
proxy how to vote on each resolution or withhold his/her
vote.
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.
156
Termination of proxy
appointments
9 In order to revoke a proxy instruction you will need to inform
the Registrar by sending a signed hard copy notice clearly
stating your intention to revoke your proxy appointment
as above. In the case of a member which is a company, the
revocation notice must be executed under its common seal
or signed on its behalf by an officer of the company or an
attorney for the company.
CREST
12 CREST members who wish to appoint a proxy or proxies
through the CREST electronic proxy appointment service
may do so for the meeting and any adjournment(s) thereof by
using the procedures described in the CREST manual. CREST
personal members or other CREST sponsored members and
those CREST members who have appointed a voting service
provider(s), should refer to their CREST sponsor or voting
service provider(s), who will be able to take the appropriate
action on their behalf.
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 10:00 on 28 November 2012. 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 18:00 on 6 November 2012 the Company’s issued
share capital comprised 1,448,262,361 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 18:00 on
6 November 2012 was 1,448,262,361.
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.
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 10:00 on 28 November 2012
(or 48 hours preceding the date and time for any adjourned
meeting). For this purpose, the time of receipt will be taken
to be the time (as determined by the timestamp applied to
the message by the CREST Applications Host) from which
the issuer’s agent is able to retrieve the message enquiry to
CREST in the manner prescribed by CREST. After this time
any change of instructions to proxies appointed through
CREST should be communicated to the appointee through
other means.
14 CREST members and, where applicable, their CREST sponsors
or voting service providers should note that Euroclear does
not make available special procedures in CREST for any
particular messages. Normal system timings and limitations
will therefore apply in relation to the input of CREST Proxy
Instructions. It is the responsibility of the CREST member
concerned to take (or, if the CREST member is a CREST
personal member or sponsored member or has appointed
a voting service provider(s) to procure that his CREST
sponsor or voting service provider(s) take(s) such action as
shall be necessary to ensure that a message is transmitted
by means of the CREST system by any particular time). In
this connection, CREST members and, where applicable, their
CREST sponsors or voting service providers are referred, in
particular, to those sections of the CREST manual concerning
practical limitations of the CREST system and timings.
Pan African Resources PLC
Annual Report 2012 157
Glossary of Terms and Abbreviations
Term
Adit
Amira International Limited
Definition
A mining tunnel that is mined from the side of a mountain or mining pit.
Independent association of minerals companies, which develops,
brokers and facilitates collaborative research project.
Aster®
Registered name for a water purification system developed by Gold Fields Limited
Attributable Profit to the Parent
Profit on ordinary activities, after tax, minority interests and preference
dividends, attributable to ordinary equity shareholders.
Cash Cost
Chrome Tailings
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.
Discards from a chrome washing plant be it historical
(tailings dams) or new (current risings).
Chrome Tailings Retreatment Programme
This is a flotation plant constructed to recover PGMs from chrome tailings.
Coir Geotextile
Current Arisings
Criminal Miners
Decline
Deformational Process
Development Capital
Earnings Per Share
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.
The live tailings discarded by the chrome operators’
washing plant and fed directly to a CTRP.
Trespassers who enter mining operations and illegally remove visible gold.
Underground evacuation at an inclined angle – normally a shaft.
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.
Capital expenditure incurred in development of the workings areas and
creation of additional Mineral Resources to support the mining operations.
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
Gabions
Greenstone Belt
An injury that causes the death of a person
Used to stabilise against erosion.
Geological zone of variably metamorphosed matic to ultramatic
volcanic sequences with associated sedimentary rocks that occur within
Archaen 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
Inferred Resource
158
A mineral resource reported as an in situ mineralisation estimate –
low level of geoscientific knowledge and confidence.
A mineral resource reported as an in situ mineralisation estimate –
low level of geoscientific knowledge and confidence.
Term
King III
Lost Day Severity Rate
Lost Time Injury Rate
Measured Resource
Mine Call Factor
Order of Magnitude
Plant Recovery Factor
Probable Reserve
Proved Reserve
PVC
Reserve Base
SAMREC
Serious Injury
Underground Mining
Vamping Tons
Definition
Report on Corporate Governance in South Africa.
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.
A rate of lost time injuries occurring per 1,000,000 hours worked.
A mineral resource reported as an in situ mineralisation estimate
– high level of geoscientific knowledge and confidence.
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.
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.
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.
A mineral reserve reported as a mineable production estimate
– lower level of geoscientific knowledge and confidence.
A mineral reserve reported as a mineable production estimate
– higher level of geoscientific knowledge and confidence.
Coated galvanised gabions are used on the side slopes to crate a wall against
erosion alien invasive plants. The mine has introduced a control and management
programme 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.
South African Code for Reporting of Exploration Results,
Mineral Resources and Mineral Reserves.
An injury that incapacitates the employee from performing that
employee’s similar occupation for a period of 14 days or more.
Mining activities occurring below the earth’s surface.
Reef tons emanating from cleaning out of old underground working places.
Pan African Resources PLC
Annual Report 2012 159
Glossary of Terms and Abbreviations Continued
Abbreviation
AMG
ARV
BBBEE
BF
BFS
BGB
BGMO
BIOX®
BML
BTRP
CPR
CSI
CTRP
DMR
EBITDA
ECSA
EIA
ERP
HEPS
IDP
IFM
JORC
JSE
£
KPAs
KPIs
LED
LOM
LTIFR
m
MCF
MPRDA
MQA
MRM
160
Definition
Average Mining Grade
Antiretroviral
Broad Based Black Economic Empowerment
Mineral Reserve Block Factor
Bankable Feasibility Study
Barberton Greenstone Belt
Barberton Gold Mining Operations
Biological Oxidation
Barberton Mines Limited
Barberton Tailings Retreatment Plant
Competent Persons Report
Corporate and Social Investment
Chrome Tailings Retreatment Plant
Department of Mineral Resources
Earnings Before Interest, Taxation, Depreciation and Amortisation.
Engineering Council of South Africa
Environmental Impact Assessment
Enterprise Resource Planning
Headline Earnings Per Share
Integrated Development Plan
International Ferro Metals Limited
Joint Ore Reserves Committee Code
JSE Limited
Pound Sterling
Key Performance Assessments
Key Performance Indicators
Local Economic Development
Life Of Mine
Lost Time Injury Frequency Rate
metres
Mine Call Factor
The South African Mineral and Petroleum Resources Development Act 28 of 2002
Mining Qualifications Authority
Mineral Resources and Mineral Reserves
Abbreviation
Mt
mt
MZM
NAV
NOMAD
NUM
Oz
Definition
Million tonnes
metric tonnes
Meticals
Net Asset Value
Nominated Adviser
National Union of Mineworkers
Ounces
Pan African or the Company
Pan African Resources PLC
PGM
Phoenix Platinum
Plato
PPE
PRF
RIFR
SABS
SAICA
SENS
SG
SHEC
SIFR
SLP
SPV
t
UASA
TSF
WPL
ZAR
Platinum Group Metals
Phoenix Platinum Mining (Pty) Limited – The Chromite Tailings
Retreatment Plant in the North-West province, South Africa
South African Council for Professional and Technical Surveyors
Personal Protective Equipment
Overall Plant Recovery Factor
Recordable Injury Frequency Rate
South African Bureau of Standards
South African Institute of Chartered Accountants
Stock Exchange News Service
Specific Gravity
Safety, Health, Environment and Community
Serious Injury Frequency Rate
Social and Labour Plan
Special Purpose Vehicle
Tonnes
United Association of South Africa
Tailings Storage Facility
Western Platinum Limited
South African Rand
Pan African Resources PLC
Annual Report 2012 161
Contact Details
Corporate Office
Pan African Resources PLC
The Firs, 1st Floor, Office 101
Cnr Biermann and Cradock Avenue, Rosebank
Office: +27 (0)11 243 2900
Facsimile: +27 (0)11 880 1240
Registered Office
6 St James’s Place
London
SW1A INP
United Kingdom
Office: +44 (0)20 7499 3916
Facsimile: +44 (0)20 7491 1989
Company Secretary and UK Investor Relations
St James’s Corporate Services Limited
Phil Dexter/Jane Kirton
Office: +44 (0)20 7499 3916
Consultants and Advisers
JSE Sponsor
One Capital
Cobus Human
Office: +27 (0)11 550 5055
Nominated Adviser and Joint Broker (UK)
Canaccord Genuity Limited
John Prior
Office: +44(0)20 7523 8306
Joint Broker
finnCap Limited
Matthew Robinson/Elizabeth Johnson
Office: + 44(0)20 7220 0500
Legal Consultants
Fasken Martineau LLP
Nigel Gordon
Office: +44 (0)20 7917 8500
UK Public Relations
Gable Communications
Justine James
Office: +44(0)20 7193 7463
SA Investor and Public Relations
Vestor Media and Investor Relations
Louise Brugman
Office: 27 (0)11 787 3015
Cell: 083 504 1186
162
Form of Proxy - Pan African Resources PLC
(Incorporated and registered in England and Wales under Companies Act 1985
with registration number 3937466 on 25 February 2000)
Share code AIM: PAF ISIN: GB0004300496 Share code JSE: PAN
This Form of Proxy is for use by all non-South African shareholders and for South African certificated shareholders and South African own name
dematerialised shareholders only.
I/We, the undersigned, being a member of the above-named company, hereby appoint the Chairman of the Meeting or (see note 1).
Name of proxy
Number of shares proxies appointed over
as my/our proxy to attend, speak and vote on my/our behalf at the Annual General Meeting of Pan African Resources PLC to be held at the office of
Canaccord Genuity Limited, Eighth Floor, 88 Wood Street, London EC2V 7QR at 10:00 on 30 November 2012 and at any adjournment thereof.
If you wish to appoint multiple proxies please see note 1 below. Please also tick here if you are appointing more than one proxy.
The proxy will vote on the undermentioned resolutions, as indicated.
ORDINARY BUSINESS:
For
Against
withheld* Discretionary**
Voting
1
2
3
4
5
6
7
8
To receive the accounts and the reports of
the directors and auditors thereon
To re-elect Mr JP Nelson as a Director of the Company
To re-elect Mr JAJ Loots as a Director of the Company
To re-elect Mr RG Still as a Director of the Company
To re-elect Ms YB Sitole as a Director of the Company
To re-elect Mrs HH Hickey as a Director of the Company
To increase the maximum ordinary aggregate fees of the
Directors to a sum not exceeding £500,000 per annum
To re-appoint Deloitte LLP as auditors of the Company and to
authorise the Directors to determine their remuneration
SPECIAL BUSINESS:
9
To authorise the Directors to allot equity securities
If this form is signed and returned without any indication as to how the
proxy shall vote, he or she will exercise his or her discretion both as
to how he or she votes (and whether or not he or she abstains from
voting).
*
The ‘Vote Withheld’ option is to enable you to abstain on the specified resolution.
Please note a ‘Vote Withheld’ has no legal effect and will not be counted in the
votes ‘For’ and ‘Against’.
** If you select ‘Discretionary’ or fail to select any of the given options, the proxy is
authorised to vote (or abstain from voting) at his or her discretion on the specified
resolution. The proxy is also authorised to vote (or abstain from voting) on any
other business, which may properly come before the meeting.
Print Name:
Signature:
Address:
(BLOCK CAPITALS)
Dated this
day of
2012
For
Against
withheld* Discretionary**
Voting
Notes
1
To appoint as a proxy a person other than the Chairman of the Meeting insert the
full name in the space provided. To appoint more than one proxy you may photocopy
this form. Please indicate the proxy holder’s name and the number of shares in relation
to which they are authorised to act as your proxy (which, in aggregate, should not exceed
the number of shares held by you). Please also indicate if the proxy instruction is one of
multiple instructions being given. All forms must be signed and should be returned together
in the same envelope. A proxy need not be a member of the Company.
2
3
4
5
6
7
This form is for use of shareholders only and will be used only in the event of a poll being
directed or demanded.
You may, if you wish, delete the words “the Chairman of the Meeting” and substitute the
names(s) of your choice. Please initial such alteration.
To be effective, this form of proxy must be lodged at the Company’s Registrars, Capita
Registrars, PXS, 34 Beckenham Road, Beckenham, BR3 4TU or Computershare Investor
Services (Pty) Limited, Ground Floor, 70 Marshall Street, Johannesburg 2001, South Africa
not later than 48 hours before the start of the meeting.
In the case of a corporation, the form must be executed under its common seal or under
the hand of an officer or attorney duly authorised in writing.
In the case of joint holders, the signature of any of them will suffice but the names of all joint
holders should be shown. The vote of the senior joint holder who tenders a vote whether in
person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders,
and for this purpose seniority shall be determined by the order in which the names stand
in the Register of Members in respect of the joint holding.
Dematerialised shareholders in South Africa who are not own name dematerialised
shareholders and who wish to attend the AGM should instruct their CSDP or broker to
issue them with the necessary authority to attend the meeting in person, in the manner
stipulated in the custody agreement governing the relationship between such shareholders
and their CSDP or broker. These instructions must be provided to the CSDP or broker by
the cut-off time and date advised by the CSDP or broker for instructions of this nature.
Dematerialised shareholders in South Africa who are not own name dematerialised
shareholders and who cannot attend but who wish to vote at the AGM should provide
their CSDP or broker with their voting instructions, in the manner stipulated in the custody
agreement governing the relationship between such shareholders and their CSDP or broker.
These instructions must be provided to the CSDP or broker by the cut-off time and date
advised by the CSDP or broker for instructions of this nature.
8
Shares held in uncertificated form (ie. in CREST) may be voted through the CREST Proxy
Voting Service in accordance with the procedures set out in the CREST manual.
Pan African Resources PLC
Annual Report 2012 163
Second Fold
POSTAGE WILL
BE PAID BY THE
ADDRESSEE
NO POSTAGE
NECESSARY
IF POSTED IN
SOUTH AFRICA
l
d
o
F
t
s
r
i
F
BUSINESS REPLY SERVICE
LICENCE NO. J 5563
2107 MARSHALLTOWN
Third Fold
and tuck in flap opposite
Form of Proxy - Pan African Resources PLC
(Incorporated and registered in England and Wales under Companies Act 1985
with registration number 3937466 on 25 February 2000)
Share code AIM: PAF ISIN: GB0004300496 Share code JSE: PAN
This Form of Proxy is for use by all non-South African shareholders and for South African certificated shareholders and South African own name
dematerialised shareholders only.
I/We, the undersigned, being a member of the above-named company, hereby appoint the Chairman of the Meeting or (see note 1).
Name of proxy
Number of shares proxies appointed over
as my/our proxy to attend, speak and vote on my/our behalf at the Annual General Meeting of Pan African Resources PLC to be held at the office of
Canaccord Genuity Limited, Eighth Floor, 88 Wood Street, London EC2V 7QR at 10:00 on 30 November 2012 and at any adjournment thereof.
If you wish to appoint multiple proxies please see note 1 below. Please also tick here if you are appointing more than one proxy.
The proxy will vote on the undermentioned resolutions, as indicated.
ORDINARY BUSINESS:
For
Against
withheld* Discretionary**
Voting
1
2
3
4
5
6
7
8
To receive the accounts and the reports of
the directors and auditors thereon
To re-elect Mr JP Nelson as a Director of the Company
To re-elect Mr JAJ Loots as a Director of the Company
To re-elect Mr RG Still as a Director of the Company
To re-elect Ms YB Sitole as a Director of the Company
To re-elect Mrs HH Hickey as a Director of the Company
To increase the maximum ordinary aggregate fees of the
Directors to a sum not exceeding £500,000 per annum
To re-appoint Deloitte LLP as auditors of the Company and to
authorise the Directors to determine their remuneration
SPECIAL BUSINESS:
9
To authorise the Directors to allot equity securities
If this form is signed and returned without any indication as to how the
proxy shall vote, he or she will exercise his or her discretion both as
to how he or she votes (and whether or not he or she abstains from
voting).
*
The ‘Vote Withheld’ option is to enable you to abstain on the specified resolution.
Please note a ‘Vote Withheld’ has no legal effect and will not be counted in the
votes ‘For’ and ‘Against’.
** If you select ‘Discretionary’ or fail to select any of the given options, the proxy is
authorised to vote (or abstain from voting) at his or her discretion on the specified
resolution. The proxy is also authorised to vote (or abstain from voting) on any
other business, which may properly come before the meeting.
Print Name:
Signature:
Address:
(BLOCK CAPITALS)
Dated this
day of
2012
For
Against
withheld* Discretionary**
Voting
Notes
1
To appoint as a proxy a person other than the Chairman of the Meeting insert the
full name in the space provided. To appoint more than one proxy you may photocopy
this form. Please indicate the proxy holder’s name and the number of shares in relation
to which they are authorised to act as your proxy (which, in aggregate, should not exceed
the number of shares held by you). Please also indicate if the proxy instruction is one of
multiple instructions being given. All forms must be signed and should be returned together
in the same envelope. A proxy need not be a member of the Company.
2
3
4
5
6
7
This form is for use of shareholders only and will be used only in the event of a poll being
directed or demanded.
You may, if you wish, delete the words “the Chairman of the Meeting” and substitute the
names(s) of your choice. Please initial such alteration.
To be effective, this form of proxy must be lodged at the Company’s Registrars, Capita
Registrars, PXS, 34 Beckenham Road, Beckenham, BR3 4TU or Computershare Investor
Services (Pty) Limited, Ground Floor, 70 Marshall Street, Johannesburg 2001, South Africa
not later than 48 hours before the start of the meeting.
In the case of a corporation, the form must be executed under its common seal or under
the hand of an officer or attorney duly authorised in writing.
In the case of joint holders, the signature of any of them will suffice but the names of all joint
holders should be shown. The vote of the senior joint holder who tenders a vote whether in
person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders,
and for this purpose seniority shall be determined by the order in which the names stand
in the Register of Members in respect of the joint holding.
Dematerialised shareholders in South Africa who are not own name dematerialised
shareholders and who wish to attend the AGM should instruct their CSDP or broker to
issue them with the necessary authority to attend the meeting in person, in the manner
stipulated in the custody agreement governing the relationship between such shareholders
and their CSDP or broker. These instructions must be provided to the CSDP or broker by
the cut-off time and date advised by the CSDP or broker for instructions of this nature.
Dematerialised shareholders in South Africa who are not own name dematerialised
shareholders and who cannot attend but who wish to vote at the AGM should provide
their CSDP or broker with their voting instructions, in the manner stipulated in the custody
agreement governing the relationship between such shareholders and their CSDP or broker.
These instructions must be provided to the CSDP or broker by the cut-off time and date
advised by the CSDP or broker for instructions of this nature.
8
Shares held in uncertificated form (ie. in CREST) may be voted through the CREST Proxy
Voting Service in accordance with the procedures set out in the CREST manual.
Pan African Resources PLC
Annual Report 2012 163
Business Reply
Licence Number
RSBH-UXKS-LRBC
Third fold and tuck in
1
l
d
o
F
t
s
r
i
F
PXS
34 Beckenham Road
BECKENHAM
BR3 4TU
Third Fold
In the coming year:
• No further major acquisitions
• Successful integration of Evander Gold Mines
• Commissioning of BTRP
• Continue to safely optimise profits from
the operations in the Group
• Complete the divestment of Manica Project
• Resume dividend payment
The African Focused Precious Metals Producer
ww w. p anaf ri canresources.com
www.panafricanresources.com
www.panafricanresources.com