Integrated annual report
for the year ended 30 June 2016
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P R O F I TA B L E • S U S TA I N A B L E • S TA K E H O L D E R S • G R O W T H
Flap
Investment case
About this report
Salient features
Chairman’s review
1
2
Strategic report:
Business overview
STRATEGIC REPORT: BUSINESS OVERVIEW
Mapungubwe:
South Africa’s
lost city of gold
One thousand years ago, Mapungubwe in Limpopo
province was the centre of the largest kingdom
in the subcontinent, where highly sophisticated
people traded gold and ivory with China, India and
Egypt. The Iron Age site was declared a World
Heritage site by Unesco in July 2003.
Mapungubwe is an area of open savannah adjacent
to the northern border of South Africa and the
borders of Zimbabwe and Botswana. It thrived as
a sophisticated trading centre from around 1220
to 1300. Unesco describes Mapungubwe as the
centre of the largest kingdom in the subcontinent
before it was abandoned in the 14th century. It
was home to an advanced culture of people – the
ancestors of the Shona people of Zimbabwe. They
traded with China and India, had a flourishing
agricultural industry, and grew to a population of
around 5 000.
The University of Pretoria excavated the site since
its discovery in 1932 and now has a collection of
artifacts made of gold and other materials, as well
as human remains. The most spectacular of the
gold discoveries is a little rhinoceros made of gold
foil. The rhino has come to symbolise the high
culture of Mapungubwe as well as being a symbol of
leadership among the Shona people of Zimbabwe.
http://www.southafrica.info/about/history/mapungubwe.htm
Credit: © Roger de la Harpe/Africa Media Online
Gold rhino (152mm x 42mm x 55mm, weighing 42.8g, 24ct gold). Ar tifact recovered
from Mapungubwe Hill. Nor thern Province. South Africa. Made from multiple pieces of
f ine gold foil originally tacked with tiny gold nails onto a wooden core (now decayed).
Photographed at the Mapungubwe Museum, University of Pretoria
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Group highlights and challenges
6
7 Our history
8 Our organisation
10 Operating assets
Strategic report:
Strategy
STRATEGIC REPORT: STRATEGY
BARBERTON
is a town born
out of gold
In 1881 gold was discovered in the Barber ton
area by Tom McLachlan, who found alluvial gold
at Jamestown. However, due to the location
(the hot Lowveld region was rife with malaria)
no-one wanted to go there until Auguste
Rober ts discovered gold in Concession Creek
on 20 June 1883. This discovery resulted in a
gold rush to the area.
The town was named after Graham Hoare
Barber (1835 to 1888) who discovered a rich
gold-bearing reef there in 1884. Barber ton
became a municipality in 1904. At first it was
just a simple mining camp but grew when Edwin
Bray, a prospector, discovered gold in the hills
above Barber ton in 1885 and with 14 par tners
star ted the Sheba Reef Gold Mining Company.
Considered one of the ‘mining wonders of the
world’ the Sheba Mine holds the record of being
the richest and oldest working mine in the world.
Large amounts of money flowed into Barber ton
and the first Stock Exchange to operate in the
then Transvaal opened its doors. Barber ton
flourished for only a brief period and soon the
inhabitants began to move away to the newly
discovered gold fields on the Reef.
https://en.wikipedia.org/wiki/Barberton,_Mpumalanga
Credit: Ludwig Sevenster
Entrance to underground Sheba Mine
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14
Chief Executive Offi cer’s review
22 Our purpose, vision and strategy
26
28
Stakeholder value creation and
distribution
Business model
30
Enterprise risk management
approach
34
Stakeholder engagement
Strategic report:
Performance review
STRATEGIC REPORT: PERFORMANCE REVIEW
Discovery
of GOLD in
South Africa
Gold was discovered on a Transvaal farm,
Langlaagte, on the Witwatersrand in 1886 by
two prospectors. This discovery caused a turning
point in South African history. Far more than
diamonds, it changed South Africa from an
agricultural society to become the largest gold
producer in the world. The gold discovered ran
for miles and miles underground, ‘an endless
treasure of gold’.
As news of the gold find spread throughout
Southern Africa, various mining towns developed
along the curve of the underground gold reef.
This curve was named the Witwatersrand,
attracting hundreds and hundreds of people
seeking their for tune.
http://www.randrefinery.com/brochures/Rand%20Refinery%20-%20
The%20Story%20of%20Gold.pdf
Credit: © Museum Africa/Africa Media Online
George Harrison Park, Langlaagte
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38
45
47
Financial Director’s review
Five-year review
Operational review and
performance
56 Operational production
60
Abridged mineral resources and
mineral reserves report
Employee review
Safety, health and environment
review
Community review
Transformation
69
74
79
80
Supplementary information
This report represents one of three elements of
Pan African Resources’ 2016 fi nancial year-end
communication strategies with stakeholders, the
other two being:
• Online supplementary information, which
contains additional non-fi nancial disclosures
referencing GRI
• Pan African Resources’ mineral resources
and mineral reserves report, which provides
technical information on the mineral assets
compliance with the South African Code for
Reporting of Mineral Resources and Mineral
Reserves (the SAMREC Code)
The above supplementary information, together with this 2016
integrated annual report, is available on the group’s website at
www.panafricanresources.com
Feedback
We welcome any feedback stakeholders may have
on our integrated annual report. Please contact
info@paf.co.za with your feedback. Online copies of
our integrated annual report are available on our
website
http://www.panafricanresources.com.
A limited number of hard copies are available on
request from the Company Secretary, whose details
appear on the inside back cover.
Navigational tools
The following tools will assist you throughout
the report
For further
reading on our website
www.panafricanresources.com
For further reading
in this report
Transparency and
accountability
TRANSPARENCY AND ACCOUNTABILITY
The missing
KRUGER
millions
Lost in: 1890
Estimated value: USD250,000,000
Contents: gold coins, ingots, gold dust
During the Second Anglo-Boer War, the Boers
realised that their capital, Pretoria, would soon
be captured by British troops so they swiftly
commandeered as much gold as they could from
government reserves, banks and the mines. They
also minted many thousands of new gold coins.
Much of this gold is believed to have travelled with
the Boer President, Paul Kruger, as he journeyed
eastwards through Middelburg, Machadodorp and
Waterval Boven towards Mozambique to escape
the advancing British. He departed for France by
boat on 19 October 1900. The gold remained
behind, hidden somewhere in the bushveld of the
North Eastern Transvaal and it has never been
officially found.
http://www.southcapecoins.co.za/news/the-mystery-of-the-missing-
kruger-millions
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84 Board of directors
86
Executive and operations
management
88 Corporate governance review
93 Remuneration review
Annual fi nancial
statements
ANNUAL FINANCIAL STATEMENTS
GOLD and
the concept of
MONEY
Gold’s beauty, scarcity, unique density (no other
metal outside the platinum group is as heavy),
and the ease at which it could be melted, formed,
and measured made it a natural trading medium.
Gold gave rise to the concept of money itself:
por table, private, and permanent. Gold and silver
in standardised coins came to replace bar ter
arrangements and made trade much easier. Gold
increased trade between South Africa and the
rest of the world. For the main trading nations,
namely Europe and the United States, gold was
of value because their currencies were backed
by gold. This was known as the gold standard.
Under the gold standard, these countries had
to keep gold in a bank vault to the value of
the currency they issued. For example, if the
government of a country wanted to print more
money, it had to buy gold to back that money. If
that country did not produce gold itself, it had to
impor t gold from another country.
http://www.randrefinery.com/brochures/Rand%20Refinery%20-%20
The%20Story%20of%20Gold.pdf
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107 Audit committee report
109
Directors’ statement of
responsibility
109
Certifi cate of the Company
Secretary
110 Directors’ report
Independent auditors report
112
113
114
119
– United Kingdom
– South Africa
Consolidated and separate annual
fi nancial statements
Notes to the consolidated and
separate annual fi nancial statements
Shareholders’
information
SHAREHOLDERS’ INFORMATION
Gold as an INVESTMENT
Of all the precious metals, gold is the most popular as an investment as investors
generally buy gold as a way of diversifying risk, hedging against inflation, deflation
or currency devaluation. The gold market is subject to speculation and volatility
as are other markets; however compared to other precious metals used for
investment, gold has the most effective safe haven and hedging properties across
a number of asset classes. Gold has been used throughout history as money
and like most commodities, the price of gold is driven by supply and demand
including demand from speculation. Given the huge quantity of gold stored
above-ground compared to the annual production, the price of gold is mainly
affected by changes in demand from speculators, through investment demand,
rather than changes in annual production (supply).
Central banks and the International Monetary Fund play an important role in the
gold price. At the end of 2004 central banks and official organisations held
19 percent of all above-ground gold as official gold reserves. It is generally accepted
that the price of gold is closely related to interest rates. As interest rates rise
the general tendency is for the gold price, which earns no interest, to fall, and
as interest rates dip, for the gold price to rise. As a result, the gold price can be
closely correlated to central banks through the monetary policy decisions made
by them related to interest rates. The price of gold can be influenced by a number
of macro-economic variables which include the price of oil, the use of quantitative
easing, currency exchange rate movements and returns on equity markets.
The most traditional way of investing in gold is by buying bullion gold bars.
In some countries, like Canada, Austria, Liechtenstein and Switzerland, these
can easily be bought or sold at the major banks. Alternatively, there are
bullion dealers that provide the same service. Bars generally carry lower price
premiums than gold bullion coins. However larger bars carry an increased risk
of forgery due to their less stringent parameters for appearance.
Gold coins are a common way of owning gold. Bullion coins are priced
according to their fine weight, plus a small premium based on supply and
demand, The sizes of bullion coins range from one-tenth of an ounce to two
ounces, with the one-ounce size being most popular and readily available.
South Africa’s Krugerrand is the most widely held gold bullion coin, with
46 million troy ounces (1,400 tonnes) in circulation.
http://www.randrefinery.com/brochures/Rand%20Refinery%20-%20The%20Story%20of%20Gold.pdf
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Shareholders’ analysis
184
185 Notice of annual general meeting
191
Form of proxy – United Kingdom
193
195 Glossary
ibc Company information
ibc
Form of proxy – South Africa
Shareholders’ diary
About this report
Scope and boundary
Scope and boundary
We are pleased to present Pan African Resources’ integrated annual
We are pleased to present Pan African Resources’ integrated annual
report (the report). The report presents, to our shareholders and
report (the report). The report presents, to our shareholders and
other stakeholders, an overview of the group’s fi nancial and non-
other stakeholders, an overview of the group’s fi nancial and non-
fi nancial information for the period 1 July 2015 to 30 June 2016.
fi nancial information for the period 1 July 2015 to 30 June 2016.
The report includes the activities of the holding company, Pan African
The report includes the activities of the holding company, Pan African
Resources, and all of its operations and subsidiaries. The group’s
Resources, and all of its operations and subsidiaries. The group’s
subsidiaries are incorporated in South Africa and their functional
subsidiaries are incorporated in South Africa and their functional
currency is ZAR. The group’s business is conducted in ZAR and the
currency is ZAR. The group’s business is conducted in ZAR and the
accounting records are maintained in this same currency, with the
accounting records are maintained in this same currency, with the
exception of precious metal product sales, which are conducted in
exception of precious metal product sales, which are conducted in
USD, prior to conversion into ZAR. The ongoing review of the results
USD, prior to conversion into ZAR. The ongoing review of the results
of the operations conducted by executive management and the
of the operations conducted by executive management and the
board is also performed in ZAR. The report includes abbreviations
board is also performed in ZAR. The report includes abbreviations
page 195.
page 195.
and terms which have been defi ned in the glossary on
and terms which have been defi ned in the glossary on
KING III
KING III
IIRC
IIRC
GRI
GRI
IFRS
IFRS
Process for defi ning report content
Process for defi ning report content
The process for defi ning the report content was guided by the
The process for defi ning the report content was guided by the
recommendations contained in the International Integrated Reporting
recommendations contained in the International Integrated Reporting
Framework, issued by the International Integrated Reporting Council
Framework, issued by the International Integrated Reporting Council
in December 2013. We continue to embed the guiding principles
in December 2013. We continue to embed the guiding principles
and content elements contained in the International Integrated
and content elements contained in the International Integrated
Reporting Framework. The content in the report focuses on those
Reporting Framework. The content in the report focuses on those
issues which materially impact our ability to create and sustain value
issues which materially impact our ability to create and sustain value
over the short (one year), medium (two to three years) and long
over the short (one year), medium (two to three years) and long
term (beyond three years). Pan African Resources appreciates that
term (beyond three years). Pan African Resources appreciates that
its business operations use various forms of capital, including fi nancial
its business operations use various forms of capital, including fi nancial
capital, human capital, natural capital, intellectual capital, manufactured
capital, human capital, natural capital, intellectual capital, manufactured
capital and social and relationship capital. Consideration of the six
capital and social and relationship capital. Consideration of the six
forms of capital is shown in our business model on
forms of capital is shown in our business model on
page 26.
page 26.
Further, the report has been prepared in line with the London
Further, the report has been prepared in line with the London
Stock Exchange’s (LSE) Alternative Investment Market (AIM), the
Stock Exchange’s (LSE) Alternative Investment Market (AIM), the
LSE’s international market for smaller growth companies, and the
LSE’s international market for smaller growth companies, and the
Johannesburg Stock Exchange’s (JSE) Listings Requirements. We have
Johannesburg Stock Exchange’s (JSE) Listings Requirements. We have
ororooorpooooorararaaatetettet
applied the majority of principles of the King Report on Corporate
applied the majority of principles of the King Report on Corporate
nccccce ononononon
Governance (King III), with an explanation for non-complian
Governance (King III), with an explanation for non-compliance on
page 89. The UK Corporate Governance Code (UK Code)
odedededede) )
page 89. The UK Corporate Governance Code (UK Co
innnnnababababability
was considered in the preparation of the report. The sustainability
was considered in the preparation of the report. The sustainability
information contained in this report and online was prepared based
information contained in this report and online was prepared based
on the GRI G3.1 standard disclosure guidelines. A separate GRI report
on the GRI G3.1 standard disclosure guidelines. A separate GRI report
is available on our website at
www.panafricanresources.com.
www.panafricanresources.com.
is available on our website at
The abridged mineral resources and mineral reserves report was
The abridged mineral resources and mineral reserves report was
based on the Mining and Metals Sector Disclosure Guidelines. The
based on the Mining and Metals Sector Disclosure Guidelines. The
annual fi nancial statements have been prepared in accordance with
annual fi nancial statements have been prepared in accordance with
the International Financial Reporting Standards (IFRS), the South
the International Financial Reporting Standards (IFRS), the South
African Institute of Chartered Accountants Financial Reporting
African Institute of Chartered Accountants Financial Reporting
Guides, as issued by the Accounting Practices Committee, and the
Guides, as issued by the Accounting Practices Committee, and the
requirements of the UK Companies Act 2006 (UK Companies Act).
requirements of the UK Companies Act 2006 (UK Companies Act).
Assurance
Assurance
Pan African Resources’ external auditors, Deloitte LLP, as the
Pan African Resources’ external auditors, Deloitte LLP, as the
statutory auditor and Deloitte & Touche SA as the local auditor for
statutory auditor and Deloitte & Touche SA as the local auditor for
JSE reporting purposes, have independently audited the fi nancial
JSE reporting purposes, have independently audited the fi nancial
statements for the year ended 30 June 2016. Their unmodifi ed audit
statements for the year ended 30 June 2016. Their unmodifi ed audit
reports are set out on
pages 112 and 113.
pages 112 and 113.
reports are set out on
Forward-looking statements
Forward-looking statements
Statements in this report that address exploration activities, mining
Statements in this report that address exploration activities, mining
potential and future plans and objectives of Pan African Resources
potential and future plans and objectives of Pan African Resources
are forward-looking statements and forward-looking information
are forward-looking statements and forward-looking information
that involve various risks, assumptions and uncertainties and are not
that involve various risks, assumptions and uncertainties and are not
statements of fact. The directors and management of Pan African
statements of fact. The directors and management of Pan African
Resources believe that the expectations expressed in such forward-
Resources believe that the expectations expressed in such forward-
looking statements or forward-looking information are based on
looking statements or forward-looking information are based on
reasonable assumptions, expectations, estimates and projections.
reasonable assumptions, expectations, estimates and projections.
However, these statements should not be construed as being
However, these statements should not be construed as being
guarantees or warranties (whether expressed or implied) of future
guarantees or warranties (whether expressed or implied) of future
performance. There can be no assurance that such statements will
performance. There can be no assurance that such statements will
prove to be accurate and actual values, results and future events
prove to be accurate and actual values, results and future events
could differ materially from those anticipated in these statements.
could differ materially from those anticipated in these statements.
Important factors that could cause actual results to differ materially
Important factors that could cause actual results to differ materially
from statements expressed in this report include, among others, the
from statements expressed in this report include, among others, the
actual results of exploration activities; technical analysis; the lack of
actual results of exploration activities; technical analysis; the lack of
availability to Pan African Resources of necessary capital on acceptable
availability to Pan African Resources of necessary capital on acceptable
terms; general economic, business and fi nancial market conditions;
terms; general economic, business and fi nancial market conditions;
political risks; industry trends; competition; changes in government
political risks; industry trends; competition; changes in government
regulations; delays in obtaining governmental approvals; interest rate
regulations; delays in obtaining governmental approvals; interest rate
fl uctuations; currency fl uctuations; changes in business strategy or
fl uctuations; currency fl uctuations; changes in business strategy or
development plans and other risks. Although Pan African Resources
development plans and other risks. Although Pan African Resources
has attempted to identify important factors that could cause actual
has attempted to identify important factors that could cause actual
results to differ materially, there may be other factors that cause results
results to differ materially, there may be other factors that cause results
not to be as anticipated, estimated or intended. Pan African Resources
not to be as anticipated, estimated or intended. Pan African Resources
is not obliged to publicly update any forward-looking statements
is not obliged to publicly update any forward-looking statements
included in this report, or revise any changes in events, conditions
included in this report, or revise any changes in events, conditions
or circumstances on which any such statements are based, occurring
or circumstances on which any such statements are based, occurring
after the publication date of this report, other than as required by
after the publication date of this report, other than as required by
regulation.
regulation.
Statement from the board of directors
Statement from the board of directors
The board acknowledges its responsibility to ensure the integrity
The board acknowledges its responsibility to ensure the integrity
of the integrated annual report. The board has applied its collective
of the integrated annual report. The board has applied its collective
mind in the preparation and presentation of the report and is
mind in the preparation and presentation of the report and is
satisfi ed that the report addresses all material matters and fairly
satisfi ed that the report addresses all material matters and fairly
presents the integrated performance of Pan African Resources.
presents the integrated performance of Pan African Resources.
Keith Spencer
Keith Spencer
Chairman
Chairman
20 September 2016
20 September 2016
Cobus Loots
Cobus Loots
Chief Executive Offi cer
Chief Executive Offi cer
Investment case
Pan African Resources is a mid-tier African-focused precious metals producer.
The key enablers of our strategy are:
People
Fostering relationships through action, integrity
and honesty
Action
Leadership, planning and control
Disciplined approach to capital management
• Management team that continues to drive shareholder value
Preferred gold investment
• Profi table production growth from long-life assets
rong statement of
• Limited gearing with strong statement of
fi nancial position
ability
Committed to sustainability
m
• Focused on achieving zero harm
ero harm
ally
• Legacy of environmentally
responsible mining,
rehabilitation liabilities
are well-funded
• Strong relationships with
th
labour, government and
d
communities
LE
P
O
E
P
RESULT S
Results
targets without compromimimiisese
Delivering on all our targets without compromise
le gold
Maximising sustainable gold
Positive impact on earnings
• Long-life quality gold mining operations
Barberton Mines – up to 22 years’ life of
mine and Evander Mines – 16 years’ life
of mine
• Signifi cant resource and reserve
base, with a focus on bringing
A
C
T
I
O
N
these ounces to account in the
form of cash fl ows and earnings
• Ability to conclude further
value-accretive acquisitions
• Strong track record
of replenishing mineral
reserves by targeting
exploration and
development to increase
the life of mine
• Gold mining assets provide a
safe haven investment in volatile
equity markets
Proven business model, committed to low-cost production
and, successful organic growth with occasional opportunistic
value-accretive transactions
• Culture of delivery – Barberton Mines’ BTRP and Evander Mines’ ETRP
Delivering consistent and increasing returns
• Attractive dividend yield and sector-leading dividend
pay-out with a track record of dividend growth
• Attractive profi tability and cash fl ow generation
• Quality assets delivering strong returns
• PGM and coal assets do not detract from gold focus, but increase
return to shareholders
• Focused on strong and sustainable margins
• Total mineral resources gold of 34.9Moz and 0.6Moz of platinum
group elements and attractive project pipeline
• People focused
• High-margin assets allow for dividend to be maintained
• Project delivery: BTRP payback – 18 months, ETRP
forecasted payback – less than four years and the Uitkomst
Colliery – forecasted payback of less than fi ve years
Salient features
16.5%
Gold sold:
204,928oz
(2015: 175,857oz)
43.1%
Revenue:
ZAR3,632.8 million
(2015: ZAR2,539.4 million)
163.1%
Earnings per share:
30.20 cents per share
(2015: 11.48 cents per share)
156.1%
Headline earnings:
ZAR547.1 million
(2015: ZAR213.6 million)
160.2%
Profi t after tax:
ZAR547.0 million
(2015: ZAR210.2 million)
3.5%
All-in costs per kilogram:
ZAR410,206/kg
(2015: ZAR425,084/kg)
34.6%
Proposed fi nal dividend:
ZAR0.15438 per share (2015: ZAR0.11466 per share)
equating to ZAR300 million (2015: ZAR210 million)
Group revenue
ZAR millions
Headline earnings
ZAR millions
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
600
500
400
300
200
100
0
Gold sold
Ounces
250,000
200,000
150,000
100,000
50,000
0
Revenue and cost per kg
ZAR/kg
600,000
500,000
400,000
300,000
200,000
100,000
0
2012
2013 2014 2015 2016
2012
2013 2014 2015 2016
2012
2013 2014 2015 2016
2012
2013 2014 2015 2016
Group revenue
Headline earnings
Underground
Surface
Tailings
Cash cost
All-in sustaining costs
All-in costs
Average spot price received
Pan African Resources integrated annual report 2016
1
Chairman’s review
Keith Spencer
Chairman
“Our 2016 fi nancial year was characterised by a
much improved gold price as well as a signifi cant
increase in the gold produced by our operations. Group
profi ts increased 160.2% to ZAR547 million and all-in
sustaining costs increased 0.9% to ZAR405,847/kg.
The group’s proposed dividend of ZAR300 million for
the 2016 fi nancial year is sector leading, with a fi ve-
year historical average dividend yield in excess of 5%.”
In general, the year under review delivered
attractive returns in the global gold industry,
with the USD gold price rallying early in
2016. Investor sentiment towards the sector
improved due to a number of factors,
including continued global economic volatility
and uncertainty.
Locally, the rand continued along a volatile
path, resulting in an overall depreciation
during the year under review of almost 30%
against the average ZAR/USD exchange rate.
This depreciation assisted group earnings,
both in GBP and ZAR. Although the rand
strengthened following year-end, it remains
vulnerable to further depreciation if South
Africa is downgraded to non-investment
grade at the end of 2016. A downgrade
will negatively impact the country’s ability to
attract foreign investment to fund economic
growth, increase South Africa’s cost of
borrowing and add to infl ationary pressures.
In August 2016, South Africa also went to the
polls in one of the most fi ercely contested
local government elections since the advent
of democracy. The elections were peaceful
and well organised, with the governing African
National Congress losing support nationally
and also in major metropolitan areas. The
manner in which these elections were
conducted is encouraging for South Africa’s
young democracy.
Despite a volatile operating environment, Pan
African Resources experienced an excellent
fi nancial and operational performance on the
back of the strong rand gold price and the
much improved operational performance
at Evander and Barberton Mines. Gold
revenue at Evander Mines rose 58.3% to
ZAR1,538.3 million as the underground
head grade improved to 5.7g/t, largely due
to mining at 8 Shaft’s newly-established
25 level. The Evander Tailings Retreatment
Plant also enhanced production growth and
delivered low-cost, high-margin gold ounces.
Barberton Mines’ gold sales rose by 7.1%
to 113,281oz with a head grade of 11.0g/t
2 Pan African Resources integrated annual report 2016
and the Barberton Tailings Retreatment Plant
contributed 28,591oz.
Phoenix Platinum’s performance was
negatively affected by International Ferro
Metals Limited’s (IFM) business rescue
proceedings announced in August 2015
in respect of its South African subsidiary
(IFMSA), with processing and mining activities
suspended. In July 2016, Phoenix Platinum
reached agreement to allow for the cession
of its IFMSA agreement to the new owner
of the IFMSA assets, TC Smelters Proprietary
Limited. This agreement has provided Phoenix
Platinum with security of tenure going
forward. The platinum price that has been
trending upward since the beginning of 2016,
together with productivity improvements
implemented at Phoenix Platinum, should
contribute positively to the operation’s sales
and performance going forward. The Uitkomst
Colliery, which was acquired during the year,
contributed ZAR11.4 million in earnings
which was in line with expectations.
Group profi ts increased 160.2% to
ZAR547 million and all-in sustaining costs
increased by only 0.9% to ZAR405,847/kg.
The group’s fi nal proposed dividend of
ZAR300 million for the 2016 fi nancial year
is sector leading, with a fi ve-year historical
average dividend yield in excess of 5%. During
the year under review, the group’s net debt
position increased marginally, despite the
cash acquisition of the Uitkomst Colliery and
funds used for a portion of the Shanduka
Gold Proprietary Limited (Shanduka Gold)
transaction. Following year-end, the group’s
liquidity position improved further, resulting in
limited gearing and a strong fi nancial position
for future acquisitive or organic growth
opportunities. Further details on the group’s
fi nancial results are included in the reviews
by the Chief Executive Offi cer and Financial
Director on
pages 14 and 38 respectively.
Apart from our solid fi nancial and operational
performance, other key highlights during the
year included fi nalising the acquisition of the
Uitkomst Colliery as well as the conclusion
of the Shanduka Gold transaction. The group
assumed control of the Uitkomst Colliery
operations on 31 March 2016 which, as
testament to the group’s track record of
project delivery, was immediately cash-
generative and has a forecast payback period
of four years. The board remains confi dent
that this acquisition will contribute to group
earnings and cash fl ows going forward. The
Shanduka Gold transaction concluded in
June 2016 realised material value for
Pan African Resources’ shareholders via an
investment – at a discounted price – in
Pan African Resources’ shares through
Shanduka Gold, on an earnings-accretive basis.
It also allows the group to preserve its black
economic empowerment (BEE) ownership, in
compliance with prevailing BEE legislation and
provides funding headroom to swiftly access
potential growth opportunities. Further details
on this transaction are included in the reviews
by the Chief Executive Offi cer and Financial
pages 14 and 38 respectively.
Director on
Due to the inherent risk associated with
mining, there can be no compromise at
Pan African Resources regarding our efforts to
reduce the danger associated with unhealthy
or unsafe conditions in the workplace. Safety
is one of the group’s key priorities and
we have a robust governance process in
place that includes policies, procedures and
standards to reinforce behaviours in support
of our strategic objective of zero harm.
Regrettably, we experienced one fatality at
Evander Mines on 26 June 2016. We extend
our deepest condolences to the family, friends
and colleagues of our deceased colleague,
Mr Joaquim Armando Muxhanga. Measures
to further improve the group’s safety
performance continue to be introduced.
The group embraces the targets for social
development and community upliftment
as encapsulated in the Mining Charter.
Our operations made good progress
in achieving these goals, most notably
meeting employment equity targets at
management level. The group maintains its
commitment to improving living conditions
for mineworkers at all operations. The
transformation trusts at our gold mining
operations continued to generate funds
to invest back into our communities by
encouraging suppliers to contribute 1% of
their contract value to these transformation
trusts. A total of ZAR1.7 million was
collected on behalf of these trusts during the
year under review. The group recognises the
immense need to uplift the communities
in which we operate and invested
ZAR21.0 million in corporate social
investment and socio-economic
development initiatives to alleviate the
social and economic challenges facing these
communities.
Pan African Resources is committed to
maintaining good relationships with our labour
unions through a proactive, consultative,
open-door approach. We are pleased to note
that we successfully concluded multi-year
wage agreements across our operations at
Barberton and Evander Mines and did not
experience signifi cant labour disruptions
during the year under review. South Africa’s
labour environment will remain challenging in
the short to medium term and we appreciate
that all parties have to cooperate to ensure
the sustainability of our industry into the
future.
In keeping with the group’s belief that its
employees and associated communities
should benefi t from mining activities, we
will be implementing our BEE transaction at
Uitkomst Colliery by 31 December 2016
– employee share ownership schemes are
already in place at our gold mining operations.
The programme at Uitkomst Colliery
will provide employees, the community
and a strategic partner with a direct 9%
shareholding through a trust structure. Value
will be created for benefi ciaries based on
the profi tability of the Uitkomst Colliery
operation’s performance.
Skills shortages remain a challenge in South
Africa and many students do not have the
resources for tertiary education. To effect
a positive change, the group entered into
a memorandum of understanding with
the University of Johannesburg to provide
bursaries for 16 mining and engineering
students over a period of three years. These
students will also be exposed to practical
on-the-job training at the group’s operations
and this initiative provides an alternative talent
pipeline for the group going forward. Further
page 71.
detail on this initiative is shown on
One of Pan African Resources’ key strategic
pillars is sustainability. This entails continuous
environmental management and oversight
to minimise the negative impact of our
operations on natural resources and the
environment. I am pleased to note that there
were no signifi cant reportable environmental
incidents or impacts on biodiversity at any of
our operations during the year under review.
The group constantly rehabilitates old mining
areas and had a healthy rehabilitation trust
fund balance of ZAR321.5 million as at year-
end for restoring environmental disturbances.
The estimated cost of rehabilitation is
reviewed annually and appropriately adjusted
for changes in legislation or technology.
Pan African Resources is committed to the
highest standards of governance. We strive to
embed sound corporate governance practices
into our daily operations and processes, as
part of our robust corporate governance
framework, taking into account both local
(King III) and international (UK Code) best
practice. The board has been kept apprised
of developments relating to the new version
of the King Code (King IV), which is a more
practical approach to good corporate
governance. King IV follows an outcomes-
based rather than a rule-based approach,
which should promote greater accountability
and transparency. The board does not foresee
any signifi cant obstacles in implementing
King IV once it is fi nalised later in 2016.
As we head into the 2017 fi nancial year, we
are well placed to further explore growth
opportunities, either acquisitively or organically,
backed by our dynamic management team
and strong fi nancial position. One such
opportunity relates to the Elikhulu tailings
retreatment project (Elikhulu), where the
board has mandated a feasibility study to
provide guidance on how best to proceed.
The results of this study will be available in
November 2016, after which shareholders
will be notifi ed.
I would like to thank my fellow board
members for their continued active
participation in our business and their insights
during the year under review. I also warmly
thank the executive management team, who
showed great commitment and determination
in delivering on key objectives during the year
under review. Thank you to our shareholders
and employees, all business partners and
industry regulators for your ongoing support
of Pan African Resources.
Keith Spencer
Chairman
20 September 2016
Pan African Resources integrated annual report 2016
3
STRATEGIC REPORT: BUSINESS OVERVIEW
Mapungubwe:
South Africa’s
lost city of gold
One thousand years ago, Mapungubwe in Limpopo
province was the centre of the largest kingdom
in the subcontinent, where highly sophisticated
people traded gold and ivory with China, India and
Egypt. The Iron Age site was declared a World
Heritage site by Unesco in July 2003.
Mapungubwe is an area of open savannah adjacent
to the northern border of South Africa and the
borders of Zimbabwe and Botswana. It thrived as
a sophisticated trading centre from around 1220
to 1300. Unesco describes Mapungubwe as the
centre of the largest kingdom in the subcontinent
before it was abandoned in the 14th century. It
was home to an advanced culture of people – the
ancestors of the Shona people of Zimbabwe. They
traded with China and India, had a fl ourishing
agricultural industry, and grew to a population of
around 5 000.
The University of Pretoria excavated the site since
its discovery in 1932 and now has a collection of
artifacts made of gold and other materials, as well
as human remains. The most spectacular of the
gold discoveries is a little rhinoceros made of gold
foil. The rhino has come to symbolise the high
culture of Mapungubwe as well as being a symbol of
leadership among the Shona people of Zimbabwe.
http://www.southafrica.info/about/history/mapungubwe.htm
Credit: © Roger de la Harpe/Africa Media Online
Gold rhino (152mm x 42mm x 55mm, weighing 42.8g, 24ct gold). Ar tifact recovered
from Mapungubwe Hill. Nor thern Province. South Africa. Made from multiple pieces of
f ine gold foil originally tacked with tiny gold nails onto a wooden core (now decayed).
Photographed at the Mapungubwe Museum, University of Pretoria
+1
+3
79
Au
Gold
196.97
2-8-18-32-18-1
Group highlights and challenges
HIGHLIGHTS
t
ifi
Significant
Signifi cant increase in gold production of
i
i
16.5% to 204,928oz
ZAR gold price increased by 21.6% to
ZAR542,850/kg
Completion of the Shanduka Gold transaction
for ZAR546.9 million, effectively improving
earnings per share by 17.7% going forward
Acquisition of the Uitkomst Colliery for a cash
consideration of ZAR148 million
BTRP continues to perform above expectations,
producing 28,591oz of gold
ETRP produced 18,151oz, of which 6,724oz
were from tailings sources and 11,427oz
from surface feedstock material
Share price increased by 108% from
ZAR1.80 to ZAR3.75
Maintenance of an industry-leading dividend
yield throughout the low precious metals
price cycle
ZAR21.0 million invested in CSI and SED
initiatives
ZAR33.3 million invested in human resources
development
CHALLENGES
sion in safet
Regress
Regression in safety
Regress
accident rates
Volatile commodity prices
and exchange rates
Subdued growth outlook for
the South African economy
6 Pan African Resources integrated annual report 2016
STRATEGIC REPORT:
BUSINESS OVERVIEW
Our history
2007
Acquired 74% of
Barberton Mines from
Metorex Limited
(Metorex)
2001 – 2006
Exploration phase
2000
Incorporated as Viking
Internet PLC in February
Admitted to AIM in May
2016
2009
Acquired the remaining
26% of Barberton Mines
from Shanduka in exchange
for 295.7 million shares in
the company
Exercised the option to
acquire 100% of Phoenix
Platinum from Metorex for
cash in May
2013
Finalised the acquisition of
100% of the share capital
of Evander Mines for a total
net purchase consideration
of ZAR1.3 billion
Commissioned Barberton
Tailings Retreatment Plant
2015
Commissioned Evander
Tailings Retreatment Plant
Acquired the Uitkomst Colliery on 31 March for a cash consideration
of ZAR148 million
Acquired shares held by Standard Bank of South Africa Limited and the shares held
by Jadeite Limited therefore gaining control in Shanduka Gold. Pan African Resources
acquired the stake for ZAR546.9 million, a signifi cant discount to prevailing market
price. The transaction was funded from Pan African Resources’ operational cash
fl ows and a vendor consideration placement through an issue of shares
Pan African Resources integrated annual report 2016
7
Our
organisation
Organisational
structure
100%
95%
100%
100%
100%
Emerald Panther
Investment 91
Pty Ltd
(Incorporated in South Africa)
Barberton
Mines Pty Ltd
(Incorporated in South Africa)
Barberton Mining Operations
Phoenix Platinum
Mining Pty Ltd
(Incorporated in South Africa)
Phoenix Platinum, Chrome
Tailings Retreatment Project
Pan African Resources
Funding Company
Pty Ltd
Pan African Resources
Management Services
Company Pty Ltd
(Incorporated in South Africa)
(Incorporated in South Africa)
5%
ESOP
(Employees)
100%
Evander Gold
Mines Ltd
(Incorporated in South Africa)
ESOP
(Employees)
5%
95%
Evander Gold
Mining Pty Ltd
(Incorporated in South Africa)
Evander Mining Operations
Key features
49.9%
Economic benefi t
derived of 97%
PAR Gold Pty Ltd
(Incorporated in South Africa)
100%
Pan African Resources
Coal Holdings Pty Ltd
(Incorporated in South Africa)
100%
100%
Uitkomst Colliery Pty Ltd
Nyambose Pty Ltd
(Incorporated in South Africa)
Uitkomst Colliery Operation
(Incorporated in South Africa)
Dual listed on London’s AIM and South Africa’s JSE
Market capitalisation at 30 June 2016 of ZAR7.3 billion (2015: ZAR3.3 billion)
Diversifi ed shareholder base, major South African and international institutions
PAR Gold Proprietary Limited (PAR Gold) as empowerment partner with a
22.5% direct shareholding, equating to an effective 23.1% BEE ownership for
purposes of the Mineral and Petroleum Resources Development Act (MPRDA).
The mining operation’s BEE ownership exceeds the MPRDA 26% requirement
by combining the BEE shareholding in Pan African Resources (23.1%) and the
on-mine employee share ownership schemes (5%)
AFRICAN MID-TIER
PRECIOUS METALS
BUSINESS
Quality assets with a production
capacity in excess of 200,000oz
of gold per annum
Focused on maintaining and
increasing profi table
production ounces
8 Pan African Resources integrated annual report 2016
STRATEGIC REPORT:
BUSINESS OVERVIEW
Our operations
BOTSWANA
LIMPOPO
LIMPOPO
MPUMALANGA
Nelspruit
Rustenburg
GAUTENG
Zeerust
Phoenix
Platinum
Pretoria
Middelburg
BTRP
Barberton
Witbank
Kruger
National
Park
Barberton
Mines
Johannesburg
NORTH WEST PROVINCE
Vryburg
Kuruman
Taung
Potchefstroom
Klerksdorp
NORTHERN CAPE
FREE STATE
Cash fl ow generative and dividend paying
Progressive dividend policy and track record of sector-leading dividend
payouts
A fi ve-year historical average dividend yield in excess of 5%
Low level of gearing with strong balance sheet
Access to funding facilities of ZAR1.2 billion
Evander Mines
ETRP
2
Secunda
Ermelo
SWAZILAND
Newcastle
Uitkomst Colliery
Vryheid
KWAZULU-NATAL
Hluhluwe
St Lucia
Ladysmith
Richards Bay
Dolphin Coast
Pietermaritzburg
SIGNIFICANT
GROWTH PROJECTS
Gold resources base of
34.9Moz
Pan African Resources integrated annual report 2016
9
Operating assets
BOTSWANA
MPUMALANGA
LIMPOPO
Zeerust
Rustenburg
Phoenix
Platinum
Pretoria
GAUTENG
Middelburg
Nelspruit
BTRP
Barberton
Johannesburg
NORTH WEST PROVINCE
Potchefstroom
Klerksdorp
Vryburg
Kuruman
Taung
NORTHERN CAPE
FREE STATE
Kruger
National
Park
Barberton
Mines
Evander Mines
Witbank
2
Secunda
ETRP
SWAZILAND
Ermelo
Newcastle
Uitkomst Colliery
Vryheid
Hluhluwe
KWAZULU-NATAL
St Lucia
Ladysmith
Richards Bay
Dolphin Coast
Pietermaritzburg
Pan African Resources is a mid-tier
African-focused precious metals
producer with a production capacity
in excess of 200,000oz gold, 10,000oz
PGEs and 400,000 tonnes coal per
annum. The group’s assets include:
Barberton Mines
three gold mines and the BTRP in Mpumalanga
Evander Mines
a gold mine in Mpumalanga, ETRP and several
brownfield projects
Phoenix Platinum
the CTRP in the North West province
Uitkomst Colliery
an underground coal mining operation located
in the KwaZulu-Natal province
Group Mineral Resources (Moz)
Gold
Group Mineral Reserves (Moz)
Gold
Operation
Headcount
Life of mine
36
6
34.9
34.9
58
13
10.0
34.9
87
PGEs 4E
PGEs 4E
17
0.6
34.9
17
50
0.2
34.9
50
66
Barberton Mines
Employees: 1,835
Contractors: 422
22 years
Barberton
Tailings
Retreatment
Plant (BTRP)
Employees: 56
Contractors: 38
14 years
Evander Mines
Employees: 2,406
Contractors: 772
16 years
Evander Tailings
Retreatment
Plant (ETRP)
Employees: 12
Contractors: 7
16 years
Group Mineral Resources (Mt)
Coal
Group Mineral Reserves (Mt)
Coal
Phoenix
Platinum
Employees: 3
Contractors: 58
9 years
17
19
34.9
23.3
64
22.2
12.6
34.9
77.8
Measured
Indicated
Inferred
Proved
Probable
10 Pan African Resources integrated annual report 2016
Uitkomst
Colliery
Employees: 115
Contractors: 326
22 years
STRATEGIC REPORT:
BUSINESS OVERVIEW
Description and location
Operational statistics
Resources and Reserves
Located in a greenstone belt, this
is a low-cost, high grade operation
comprising three mines: Fairview,
Sheba and New Consort and a
recently commissioned tailings
retreatment plant (BTRP).
Mining Charter rating: 3
Production (tonnes milled):
Produced (oz/annum):
Capacity:
Tonnage (capacity):
Head grade:
Sustainable capital per annum:
Acquired:
Located at Barberton Mines, the
R325.7 million gold tailings
retreatment plant commenced
construction in April 2012, was
completed on schedule and within
budget, and achieved its inaugural gold
pour in June 2013.
Mining Charter rating: 3
Production (tonnes milled):
Produced (oz/annum):
Capacity:
Tonnage (capacity):
Head grade:
Sustainable capital per annum:
Developed:
268,383
84,690oz of Au per annum
95,000oz of Au per annum
300,000 tonnes per annum
11.0g/t
ZAR120 million
74% from Metorex 2007:
remaining 26% from
Shanduka 2009
959,215
28,591oz of Au per annum
30,000oz of Au per annum
1.2 million tonnes per annum
1.7g/t
ZAR5 million
Steady-state production
commenced in 2013
Located in the Witwatersrand basin,
current operations comprise 8 Shaft,
several potential development
projects – Poplar, Evander South,
Rolspruit and Elikhulu (a surface
tailings retreatment project), the
Kinross metallurgical processing plant
and tailings storage facility.
Mining Charter rating: 3
A tailings retreatment project which
will exploit historically generated
gold tailings deposited in the Kinross
tailings storage facility and surface
sources.
Mining Charter rating: 3
Production (tonnes milled):
Produced (oz/annum):
Capacity:
Tonnage (capacity):
Head grade:
Sustainable capital per annum:
Acquired:
408,281
73,496oz
95,000oz of Au per annum
480,000 tonnes per annum
5.7g/t (includes development
waste tonnes)
ZAR148 million
100% from Harmony in March 2013
Production (tonnes milled):
Produced (oz/annum):
Capacity:
Tonnage (capacity):
Head grade:
Sustainable capital per annum:
Developed:
1,841,986 tonnes per annum
18,151oz of Au per annum
20,000oz of Au per annum
2.4 million tonnes per annum
Tailings: 0.3g/t
Surface feedstock: 1.1g/t – 1.3g/t
ZAR2 million
Steady-state production
commenced in 2015
Resources:
Reserves:
Exploration:
Cash cost:
9.0Mt @ 10.15g/t (2.9Moz)
4.9Mt @ 9.17g/t (1.4Moz)
Ongoing
USD694/oz
Resources:
Reserves:
Exploration:
Cash cost:
20.8Mt @ 1.27g/t (0.8Moz)
13.3Mt @ 1.46g/t (0.6Moz)
Ongoing
USD315/oz
Resources:
Reserves:
Exploration:
Cash cost:
92.4Mt @ 9.78g/t (29.0Moz)
29.0Mt @ 8.32g/t (7.6Moz)
Ongoing
USD954/oz
Resources:
Reserves:
Exploration:
Cash cost:
214.5Mt @ 0.30g/t (2.0Moz)
35.8Mt @ 0.31g/t (0.4Moz)
Ongoing
USD587/oz
Phoenix Platinum is a tailings plant
which extracts platinum group metals
from chrome tailings.
Mining Charter rating: 3
Production (tonnes milled):
Produced (oz/annum):
Capacity:
Tonnage (capacity):
Head grade:
Sustainable capital per annum:
Developed:
248,981 tonnes per annum
8,339
12,000oz of PGEs per annum
360,000 tonnes per annum
3.1g/t
ZAR1 million
Steady-state production
commenced in 2012
Resources:
Reserves:
Exploration:
Cash cost:
6.2Mt @ 3.16g/t (0.6Moz)
2.7Mt @ 2.54g/t (0.2Moz)
Ongoing
USD613/oz
An underground coal mining
operation located in the KwaZulu-
Natal province.
Mining Charter rating: New entity,
to be rated in the near future
Production (tonnes mined):
Coal washed and sold
(tonnes/annum):
Tonnage (capacity):
Kcal:
Sustainable capital per annum:
Acquired:
128,022 run-of-mine per annum
136,102
420,000 tonnes per annum
>6 000
ZAR10 million
100% on 31 March 2016
Resources:
Reserves:
Exploration:
Cash cost:
23.3Mt
12.6Mt
Ongoing
USD45/tonne
Pan African Resources integrated annual report 2016
11
STRATEGIC REPORT: STRATEGY
BARBERTON
is a town born
out of gold
In 1881 gold was discovered in the Barber ton
area by Tom McLachlan, who found alluvial gold
at Jamestown. However, due to the location
(the hot Lowveld region was rife with malaria)
no-one wanted to go there until Auguste
Rober ts discovered gold in Concession Creek
on 20 June 1883. This discovery resulted in a
gold rush to the area.
The town was named after Graham Hoare
Barber (1835 to 1888) who discovered a rich
gold-bearing reef there in 1884. Barber ton
became a municipality in 1904. At first it was
just a simple mining camp but grew when Edwin
Bray, a prospector, discovered gold in the hills
above Barber ton in 1885 and with 14 par tners
star ted the Sheba Reef Gold Mining Company.
Considered one of the ‘mining wonders of the
world’ the Sheba Mine holds the record of being
the richest and oldest working mine in the world.
Large amounts of money flowed into Barber ton
and the first Stock Exchange to operate in the
then Transvaal opened its doors. Barber ton
flourished for only a brief period and soon the
inhabitants began to move away to the newly
discovered gold fields on the Reef.
https://en.wikipedia.org/wiki/Barberton,_Mpumalanga
Credit: Ludwig Sevenster
Entrance to underground Sheba Mine
+1
+3
79
Au
Gold
196.97
2-8-18-32-18-1
Chief Executive Offi cer’s review
Cobus Loots
Chief Executive Offi cer
“The Pan African Resources group delivered
an outstanding set of results for the 2016
fi nancial year. These results include a year of
record gold production and profi ts and the
largest dividend payment to date.
Our gold mining operations delivered
exceptional results, producing in excess of
200,000oz of gold for the fi nancial year.
The performance from Evander Mines, in
particular, demonstrated the potential of the
operation, with production increasing by 30.8%
year-on-year. Results were also assisted by the
rand gold price and a full year’s production
from the ETRP.
Our robust fi nancial position, well-established
cash-generative operations, decentralised
hands-on management structure and cost-
conscious culture differentiate us from our
peers. These attributes give Pan African
Resources a competitive advantage for further
growth through our project pipeline and also
position the group to capitalise on potential
acquisition opportunities.”
14 Pan African Resources integrated annual report 2016
STRATEGIC REPORT:
STRATEGY
HIGHLIGHTS
f th ZAR
Reco er oo
Recovery of the ZAR gold price, a recent
improvement in the USD gold price and much
h
improved investor sentiment towards the sector
or
Excellent group fi nancial performance:
– Revenue increased 43.1% to
ZAR3,632.8 million
– Adjusted EBITDA increased 89.3% to
ZAR969.5 million
– Profi t after tax increased 160.2% to
ZAR547.0 million, a record for the group
– Dividend proposed increased by 42.9%
to ZAR300 million
Dividend policy amended to ensure
sustainability of future payments
Outstanding operational performance
– Gold production up 16.5% to 204,928oz
– All-in sustaining costs increased by only
0.9% to ZAR405,847/kg
– All-in costs in USD reduced 23.9% to
USD879/oz
– Evander Mines returned to profi tability
– Barberton Mines’ BIOX® recoveries
restored to previous levels
Concluded two signifi cantly value-accretive
transactions
– Completed an investment of 49.9% in
Shanduka Gold, allowing the group to
preserve and protect its BEE status on
a substantially earnings-accretive basis
– Finalised the acquisition of the
Uitkomst Colliery
Group well positioned for future profi tability
– Completing a defi nitive feasibility study
on Elikhulu at Evander Mines
– Internal team dedicated to investigating
acquisition opportunities
CHALLENGES
sion in safet
Regress
Regression in safety accident
Regress
rates – measures implemented
to address this and improve
safety performance
Subdued growth outlook for the
South African economy
Possible downgrade of South
Africa’s sovereign credit rating to
non-investment grade
Phoenix Platinum’s performance
hampered by business rescue
proceedings at IFM – however,
outlook for Phoenix Platinum is
now improved
Pan African Resources integrated annual report 2016
15
Chief Executive Offi cer’s review
continued
USD vs ZAR gold price – fi ve years
Relative performance rebased to 100
250
200
150
100
50
0
30/06/2011
30/06/2016
USD gold price ZAR gold price
Demand graphs from the World Gold Council
Tonnes
1,400
1,200
1,000
800
600
400
200
0
March 2015
April 2015
January 2016
February 2016
Investment Jewellery Electronics Central banks and other institutions
Source: http://www.gold.org/supply-and-demand/interactive-gold-market-charting
4,568t
Total gold demand
4,537t
Total gold supply
Jewellery Investment Technology Central banks and other institutions
Total mine supply Recycled gold
Source: http://www.gold.org/supply-and-demand/interactive-gold-market-charting
16 Pan African Resources integrated annual report 2016
Overview
On completing a review of any fi nancial year
one not only refl ects on the year past and
these themes that characterised the period,
but also how it compares to previous years,
as often, only by comparison can one
gauge and assess performance. This review
captures my thoughts on Pan African
achievements to date and its
future prospects.
The economic environment
and the gold market
As a member of the Pan African Resources
board since 2009, I have had the benefi t of
providing input to a number of integrated
reports and annual results. If there is one
matter that has remained unchanged in this
period, it is the uncertainty that continues
to dominate global fi nancial markets and
the international geopolitical landscape. The
global economy is still grappling with the
effects of the 2008 fi nancial crash and the
response of central banks to this crisis. While
equity markets have recovered and rallied
and the United States economy appears
to have turned a corner, the uncertainty
remains, and a normal interest rate cycle has
not yet resumed.
The realisation that the infl uence of central
banks cannot extend indefi nitely and that
lower interest rates may be prevalent for
some time to come resulted in a rally in the
USD gold price in early 2016, signifi cantly
improved investor sentiment towards gold
producers and a rally in gold equities.
Instability in the Middle East, the refugee
crisis and terror attacks in Europe and the
UK decision to exit the European Union
added to the demand for safe-haven assets,
with the World Gold Council reporting that
the fi rst half of 2016 saw the second-highest
gold demand on record. The investment case
for gold once again appears attractive.
Despite the impact of favourable value
drivers, we remain mindful that the current
global and local mining industry remains a
challenging operating environment. Analysts
believe the higher gold price should not
only be attributed to current uncertainties
and predict a series of macro-economic
and geopolitical events that could result in
further global instability.
STRATEGIC REPORT:
STRATEGY
Our operating environment
in South Africa
South Africa as a mining investment
destination does not enjoy favour with
many international investors, and to some
extent, the negative perceptions are justifi ed.
Legislative uncertainty, labour unrest and
electricity shortages are some of the
elements that make operations challenging. It
would, however, be remiss to consider these
diffi culties without also taking into account
the positive aspects to operating in South
Africa. These include:
• World class constitution and legal systems
• A functioning and stable democracy
• A century and more of deep-level and
general mining experience
• Access to technical skills and expertise and
a well-trained workforce
• Excellent roads and other infrastructure,
with our operations experiencing no
major power disruptions in the year under
review.
Currently, Pan African Resources only
has operations in South Africa, and we
have equipped and skilled our group to
operate successfully and sustainably in the
country. Hopefully, by continuing to operate
successfully, Pan African Resources and other
South African miners can, over time, increase
investor appetite for our country.
During the year under review, the rand came
under severe pressure against the USD and
other currencies, and by year-end it had
depreciated on average by 26.7% against
the USD. The weakening in our operating
ZAR/USD exchange rate – fi ve years
ZAR/USD
18
16
14
12
10
8
6
4
2
0
30/06/2011
30/06/2016
ZAR/USD exchange rate
currency increased the average ZAR gold
price received for the year by 21.6%, which
assisted margins. Even though the effect of
the weaker rand was less pronounced in our
reporting currency (GBP), it also assisted
GBP earnings.
Although the weaker rand will result in
infl ationary cost pressures over time our
operating teams have done well to contain
costs during the fi nancial year.
South Africa faces a possible sovereign credit
rating downgrade to sub-investment grade,
which could lead to a further depreciation
in the rand. It is therefore vital that we
remain vigilant and continue to look for
opportunities to differentiate ourselves
and profi tably grow our business further,
attract investments and provide shareholder
returns in the form of dividends and capital
appreciation in the company’s share price.
Pan African Resources’ operations
We cannot control or predict the price
we receive for our gold. Exchange rate
fl uctuations make proceeds from gold
receipts even more diffi cult to forecast.
Our focus is therefore on those factors
we can control or infl uence positively,
which includes gold production from
operations and the cost of production.
In the prior year Evander Mines’ lower
grades severely affected the operation’s
profi tability, however, operating diffi culties
have been addressed, as is evidenced by the
excellent operating performances delivered
by Evander Mines.
Key operational highlights and features of the past year include the following:
Total group gold production increased by 16.5% to 204,928oz (2015: 175,857oz). The gold production was a record for the Pan African
Resources group and above the 2016 forecast of 200,000oz for the year.
Underground production from Evander Mines recovered and 8 Shaft produced 73,496oz (2015: 53,746oz), an increase of 36.7% over
the prior year. We are now fi rmly established on the new 25 mining level and this should support a consistent performance from the
underground mine going forward.
The ETRP at Evander Mines contributed low-cost, high-margin ounces to the operation. The plant, which reprocesses CIL tailings,
delivered 6,724oz (2015: 2,494oz) from its tailings sources and 11,427oz (2015: 13,842oz) from surface feedstock sources at an all-in
sustaining cost of ZAR275,661/kg (2015: ZAR266,453/kg). The performance from the ETRP was in line with expectations and we
expect a payback of the capital expenditure for this operation in less than four years. The ETRP serves as a large pilot plant for Elikhulu.
This is detailed in the mineral resources and growth section of this review.
Barberton Mines produced 113,281oz (2015: 105,776oz), which is a 7.1% year-on-year improvement. The BTRP, included in the
production number above, produced 28,591oz (2015: 24,283oz) at an all-in sustaining cost of ZAR155,080/kg (2015: ZAR185,280/kg).
Pan African Resources integrated annual report 2016
17
Chief Executive Offi cer’s review
continued
Phoenix Platinum’s performance in the
current year has been hampered by the
business rescue proceedings announced
by IFM in August 2015 regarding its South
African subsidiary (IFMSA), as well as the
drought and associated water shortages
affecting re-mining and processing. In
addition, PGM prices remained subdued
during the 2016 fi nancial year.
The 2010 agreement between Pan African
Resources, Phoenix Platinum and IFMSA
allowed for the construction of the
Phoenix Platinum plant on IFMSA property.
Phoenix Platinum obtained a portion of its
feedstock from IFMSA’s processing activities,
as well as electricity, water and other services.
When IFMSA entered business rescue,
mining activities and Phoenix Platinum’s
access to the current arising feedstock were
suspended. Phoenix Platinum is currently
processing tailings from old dumps close to
the plant.
In terms of the business rescue proceedings,
Samancor Chrome Limited’s subsidiary,
TC Smelters Proprietary Limited
(TC Smelters) was selected as the successful
bidder to acquire IFMSA’s assets. In July 2016,
Pan African Resources reached an agreement
with TC Smelters, assigning the tailings
treatment agreement to TC Smelters. Even
though the agreement does not guarantee
current arising feedstock to Phoenix
Platinum, as this will be dependent on the
way in which TC Smelters uses the IFMSA
assets, it places Phoenix Platinum in a
position where it should be able to continue
operations under similar conditions to those
prior to the business rescue proceedings.
Moreover, it ensures that Phoenix Platinum´s
operations and interests are safeguarded.
Phoenix Platinum also has alternative sources
of feedstock, which were processed during
the business rescue proceedings. With the
platinum price now on an upward trajectory,
Phoenix Platinum is well placed to improve
cash fl ows and value to the group.
Safety, health and environment
The group’s board-approved integrated
safety, health, environment, quality and
community (SHEQC) committee policy is
cascaded throughout our operations and our
SHEQC performance is driven by the group’s
philosophy of continuous improvement. It
is also used to incentivise management and
employees. The group’s SHEQC is the board
sub-committee responsible for the oversight
and management of SHEQC and keeping
the board apprised of SHEQC matters
relating to compliance, discipline and action
plans pertaining to incidents and accidents.
The general managers at the mines remain
ultimately accountable for SHEQC within
their operations.
From a safety perspective we experienced
a regression in our group safety accident
rates at Evander Mine. In particular the
lost time injury frequency rate (LTIFR) and
reportable injury frequency rate (RIFR)
increased. As safety is non-negotiable, we are
actively pursuing measures to reduce injury
frequency rates by stepping up management
oversight and control of safety across all
operations.
We recognise that mining carries
inherent health risks. As such, we assume
full responsibility for providing a work
environment that minimises these risks by
promoting work practices conducive to
the long-term wellbeing of our employees,
ensuring adequate oversight of workplaces
and employees and by providing appropriate
healthcare facilities and resources.
The group is committed to responsible
stewardship of natural resources and the
environment by eliminating or minimising
the negative impacts of our operations.
Environmental management is well
entrenched in management practices
throughout the group. We strive to
continually improve our environmental
performance.
Further detail on our safety, health and
environmental performance is on
page 74.
Dividend policy and payment
We continue to acknowledge our
shareholders’ desire for an attractive cash
return on their investment. To this end, the
Pan African Resources board is pleased
to recommend the largest ever dividend
payment of ZAR300 million (approximately
GBP16 million) for approval at the upcoming
AGM. We have also revisited our dividend
policy, as detailed below, to provide the
market with more certainty on future
payments and to ensure that our dividend is
sustainable.
Pan African Resources aspires to pay a
regular dividend to shareholders. In balancing
this cash return to shareholders with the
group’s strategy of generic and acquisitive
growth, it believes that a target pay-out
ratio of 40% of net cash generated from
operating activities, after allowing for the cash
fl ow impact of sustaining capital, contractual
debt repayments and also the cash fl ow
impact of once-off items, is appropriate. This
measure aligns dividend distributions with
the cash-generation potential of the business.
In proposing a dividend, the board will also
take into account the company’s fi nancial
condition, future prospects, satisfactory
solvency and liquidity assessments and other
factors deemed by the board to be relevant
at the time.
Value-enhancing and earnings-
accretive transactions
During the past year Pan African Resources’
executive management, guided by our board,
completed two material value-enhancing and
earnings-accretive transactions. The details of
these are as follows:
Shanduka Gold transaction
(the transaction)
Shanduka Gold was Pan African Resources’
primary South African empowerment partner
for a number of years. Immediately prior to
the transaction detailed below, Shanduka Gold
was owned by the following entities:
• The Mabindu Business Development Trust
(Mabindu) (49.5%)
• Jadeite Limited (Jadeite) (33.6%),
a subsidiary of China Investment
Corporation
• Standard Bank of South Africa Limited
(SBSA) (16.9%).
Shanduka Gold´s only assets are its 22.46%
interest in Pan African´s issued ordinary
share capital and its interest in a notional
loan of ZAR558 million at 30 June 2016.
During the 2016 fi nancial year, after a
restructuring of the Shanduka Group,
Pan African acquired all of SBSA and Jadeite’s
shares in Shanduka Gold at a signifi cant
discount to the prevailing Pan African share
price and the valuation of the shares acquired.
Approximately 0.6% of the Shanduka Gold
shares acquired from Jadeite were retained
by Jadeite for sale at a future date to an
18 Pan African Resources integrated annual report 2016
STRATEGIC REPORT:
STRATEGY
independent third party nominated by
Pan African Resources. Pan African Resources
therefore acquired a 49.9% direct interest
in Shanduka Gold, but consolidates the full
interest in Shanduka Gold from an accounting
perspective. Shanduka Gold was subsequently
renamed PAR Gold.
This transaction allowed Pan African to:
• Address operational and value dilution
risks presented by the possible dilution of
its BEE ownership
• Gain further fl exibility and commensurate
certainty as to its ability to comply with the
BEE legislation
• Partner with Mabindu in furthering
Pan African Resources’ BEE ownership in a
meaningful, mutually benefi cial and ongoing
basis. More detail on Mabindu is provided
on
page 181
• Realise further value for shareholders
through a reinvestment in the company
via Shanduka Gold on an earnings and
dividends-accretive basis.
This transaction did not affect the group’s
operations or its ability to continue paying
dividends. More detail on the fi nancial effects
of this transaction, and the structure of
Shanduka Gold post-transaction, is included
in the Financial Director’s review.
Uitkomst Colliery transaction
On 4 April 2016, Pan African Resources
announced it had completed the acquisition
of Uitkomst Colliery through a wholly
owned subsidiary, Pan African Resources
Coal Holdings Proprietary Limited, and
that it had assumed effective control of the
Uitkomst Colliery on 31 March 2016. The
total purchase price of ZAR148 million was
less than the ZAR200 million previously
announced to the market and was funded
from existing facilities and internally
generated cash fl ows.
Uitkomst Colliery, located in Utrecht,
KwaZulu-Natal, is a high-quality thermal-
coal resource with the added benefi t
of metallurgical applications, such as a
substitute for coke in steelmaking. This
coal mine has 115 plant employees and
326 contractors. It produces approximately
34,000 tonnes of saleable coal per month,
has approximately 23.3Mt of resources
and a life of mine of 22 years at current
production levels.
Pan African Resources share price relative to market – fi ve years
Relative performance rebased to 100 and exchange rate
0
0
1
o
t
d
e
s
a
b
e
r
e
c
n
a
m
r
o
f
r
e
p
e
v
i
t
a
e
R
l
350
300
250
200
150
100
50
0
30/06/2011
30/06/2016
19
17
15
13
11
9
7
5
E
x
c
h
a
n
g
e
r
a
t
e
Pan African Resources FTSE/JSE gold price index ZAR/USD exchange rate
Pan African Resources price relative to peers – fi ve years
Relative performance rebased to 100
500
450
400
350
300
250
200
150
100
50
0
30/06/2011
30/06/2016
Pan African Resources Sibanye Anglo Gold Ashanti Harmony Gold
Gold Fields Newmont FTSE/JSE gold price index
Pan African Resources consolidated the Uitkomst Colliery results for three months in the 2016
fi nancial year (from 31 March 2016) and the mine contributed ZAR11.4 million in earnings
during this period. We expect the payback on this investment to be less than fi ve years.
Share price performance
The Pan African Resources share price increased signifi cantly, by 108% in ZAR terms from
ZAR1.80 to ZAR3.75 during the year under review. In GBP terms the share price increased 100%
from 9.5 pence to 19.0 pence.
The share price was supported by the depreciation of the ZAR:USD exchange rate and the
increase in the gold price to USD1,325 by year-end.
For the past fi ve years, Pan African Resources has consistently outperformed the FTSE/JSE
gold index and its gold mining peers. The share price resilience is supported by our quality
gold assets and our ability to consistently generate free cash fl ows during all gold pricing
environments.
Pan African Resources integrated annual report 2016
19
Chief Executive Offi cer’s review
continued
Strategy
During the year under review we made signifi cant progress with the group strategic objectives, which are
aimed at improving margins and driving profi table production growth, within a sustainable and zero harm
framework. Our strategy is underpinned by key strategic pillars, namely profi table, sustainable, stakeholders
and growth and the key enablers of our strategy are people, action and results. Our robust fi nancial
position, well-established cash-generative operations, decentralised hands-on management structure and
cost-conscious culture differentiate us from our peers. These attributes give Pan African Resources a
competitive advantage for further growth through our project pipeline and position the group to capitalise
on potential acquisition opportunities.
People
Action
We remain committed to our people and safety, which is
evident in the way we operate and manage the group, as well
as in our strategic objective of zero harm. This commitment
extends to providing a working environment conducive to
health and safety and ensuring our employees are given the
relevant skills and equipment to perform their work in a safe and
productive manner. Each of our operations has its own unique
in-house safety training programme and all employees undergo
medical examinations regularly. Despite these measures, mining
retains an element of risk and it is with heartfelt regret that
we experienced a fatality at Evander Mines when Mr Joaquim
Armando Muxhanga, a locomotive driver, was fatally injured on
26 June 2016, while on duty. The Pan African Resources board
and management extend their deepest condolences to
Mr Muxhanga’s family, friends and colleagues. Additional measures
have subsequently been put in place in an effort to prevent any
recurrences of accidents of this nature.
We strive to promote a culture in which employees at all levels
engage openly with management and employee engagement is
ongoing. We successfully concluded multi-year wage agreements
with the relevant unions and continue to proactively engage
the unions and our employees to further strengthen relations.
Barberton Mines secured a two-year agreement ending on
30 June 2017 and Evander Mines secured a three-year
agreement ending on 30 June 2018. The effective employee
wage increases were above South African infl ation and we
believe our people are fairly remunerated for their services.
Transformation for the group goes beyond compliance with
the Mining Charter and agreed social and labour plans – it is
embedded within our culture and we continued to achieve
good progress in meeting employment equity targets and
delivering on our other initiatives.
During the year under review we invested ZAR21.0 million in
corporate social investment and socio-economic development
programmes to uplift the communities surrounding the
areas in which we operate. We appreciate the needs of our
communities and continue our upliftment initiatives by working
closely with local municipalities.
We pride ourselves on delivering value to our shareholders
and being well positioned to capitalise on acquisitive and
organic growth opportunities. This is evident in our acquisition
of Uitkomst Colliery, the Shanduka Gold transaction and our
plans to explore organic growth at our gold mining operations,
as discussed below.
Mineral Resources and Mineral Reserves and
organic growth
At Evander Mines, there are opportunities to open two
previously closed shafts (7 Shaft and 9 Shaft) – the 9 Shaft
“A-block” is particularly attractive due to its shallow reef –
with estimated resources of about 300,000m2 at a grade of
1,207cmg/t (contained 322,000 oz).
Following receipt of a positive high-level economic and
technical assessment of the Elikhulu tailings retreatment
project at Evander, the company has mandated DRA Projects
Proprietary Limited to complete a defi nitive feasibility study
on the project. The results of the study will be available in
November 2016, at which time shareholders will be apprised.
Elikhulu will potentially treat slimes at a processing capacity
of up to 12 million tonnes per annum, at a head grade of
0.29g/t from the Winkelhaak, Leslie and Kinross tailings storage
facilities. The total mineral resource for Elikhulu is 178.7 million
tonnes at 0.29g/t (1.7M in-situ ounces) with a life of mine of
approximately 14 years and 1.7Moz of contained gold.
The project is estimated to yield approximately 50,000oz of
gold per annum in the initial eight years of production while
treating the Kinross and Leslie tailings storage facilities and then
approximately 38,000oz per annum for the remaining six years
from processing the Winkelhaak tailings storage facility.
To ensure the low-grade mining cycles at Evander Mines are
mitigated, the mine will spend development capital to
improve mining fl exibility and reduce grade variability.
The continued focus on improving tonnages processed by
the retreatment plant resulted in the ETRP reaching its full
capacity of 200,000 tonnes per month from tailings and surface
feedstock material.
20 Pan African Resources integrated annual report 2016
STRATEGIC REPORT:
STRATEGY
Results
Group fi nancial performance
The group delivered an excellent fi nancial performance during
the year under review. Group revenue increased 43.1% to
ZAR3,632.8 million (2015: ZAR2,539.4 million), favourably
impacted by an increase of 16.5% in gold sold as well as an
increase of 21.6% received in the average ZAR gold price of
ZAR542,850/kg (2015: ZAR446,274 /kg). The group’s total cost
of production increased by 16.8% to ZAR2,321.4 million
(2015: ZAR1,987.4 million), due to infl ation and higher
production numbers.
The group’s cash generation increased greatly during the year
under review and is a key benchmark of our success, enabling
us to acquire the Uitkomst Colliery and fund a portion of the
Shanduka Gold transaction with internally generated cash.
As a result, we are well positioned to maintain our sector-
leading dividend payout and take advantage of future growth
opportunities.
Details of our fi nancial performance are contained in the
Financial Director’s review on
page 38.
Looking ahead
The group is well positioned to increase profi table production
through organic and acquisitive growth, while continuing to create
shareholder value.
In the next year, the key focus areas for the group, from an
operational perspective, include:
• Safety and compliance across operations
• Barberton Mines: Renewed focus on creating additional fl exibility
and effi ciencies to improve tonnages mined and gold produced
from underground operations. The management team is currently
considering options to improve the future tonnage output at
Fairview Mines’ deeper levels and assessing future exploration
targets
• Evander Mines: The operation will continue to invest in
development capital expenditure to ensure improved fl exibility is
achieved to maintain current levels of production
• Phoenix Platinum aims to optimise resources from Elandskraal and
Kroondal to maintain and improve production and cash fl ows
• Uitkomst will focus on ensuring that stable production is maintained
and review the possibility of expanding run-of-mine production to
900,000t per annum.
From an internal growth perspective, the following opportunities will
be prioritised:
• Finalising the feasibility study on the Elikhulu project and, if the
feasibility is successful, progressing towards full-scale production
within two years
• Drilling the Evander 2010 pay channel for grade continuity and
assessing options to exploit this orebody
• Assessing further growth projects at Evander Mines.
The group will also continue to evaluate acquisitive gold
opportunities. Any project considered will however be subject to
the group’s stringent capital allocation criteria, which requires any
investment to be in a position to contribute profi table production
ounces within a short- to medium-term timeframe and deliver the
requisite returns to our shareholders.
Appreciation
A lot of hard work and perseverance has gone into delivering a successful
operational and fi nancial performance and I am extremely grateful to each
and every member of Pan African Resources’ team. Going forward, it is
important that we remain focused on maintaining this excellent fi nancial
and operating performance and further increasing shareholder value.
On behalf of the executive team, I extend thanks to our management,
our general managers and all staff who allow Pan African Resources to
operate successfully. I also thank my fellow directors for their support and
guidance. We look forward to the year ahead.
Strategic report
Our strategic report including the investment case and from
pages 1 to 81, was reviewed and approved by the board
on 20 September 2016.
Cobus Loots
Chief Executive Offi cer
20 September 2016
Pan African Resources integrated annual report 2016
21
Our purpose, vision and strategy
Our purpose is to exploit mineral deposits in a way that creates value for our
stakeholders and for the betterment of society.
Our vision is to continue to build and grow a mid-tier precious metals producer
that delivers on this purpose.
Our growth strategy is executed by identifying and
exploiting mining opportunities that create stakeholder
value by driving growth in our mineral reserve and resource
base; production; earnings; cash fl ows in a margin-accretive
manner; and by capturing the full precious metals mining value
chain by focusing on:
• Low-cost base
• High margins
• Growth in mineral reserve base and profi table production
• Maximising recovered grade and production tonnes
• Positive impact on earnings, in a sustainable manner.
We actively foster and encourage an
entrepreneurial culture which, in a consistent
manner, creates value for stakeholders by fi rst
identifying and then executing opportunities
within our business and operations. This culture
further contributes to seeking new investments,
thereby bolstering our portfolio of mining assets.
The group is profi table and cash generative
at the current gold price, with the ability to fund
all on-mine sustaining capital expenditure
internally and also meet its other funding and
growth commitments.
The Chief Executive Offi cer’s review discusses
the group’s strategic progress in greater detail
on
page 20.
The key enablers of our strategy are:
Fostering relationships
through action,
integrity and honesty
LE
P
O
E
P
A
C
T
I
O
N
Vision, leadership,
planning and control
RESULT S
Delivering on all our targets without compromise,
maximising sustainable gold, and positive impact on earnings
22 Pan African Resources integrated annual report 2016
STRATEGIC REPORT:
STRATEGY
The four business pillars upon which our strategy is based include:
Strategy scorecard
Strategic pillar Deliverable
2016 objectives
2016 progress
Profi table
Good progress
Moderate progress
Limited progress
Self-
assessment
on progress
during 2016
Link to
principal risk
• Financial
• Reserves and
resources
Attributable profi t
Improve profi tability at
operations
Profi ts increased by 160.2% and EPS
by 163.1%
HEPS
Improve group HEPS
HEPS improved by 158.8% to
30.20 cents per share
EBITDA
Improve group cash
generation
EBITDA increased by 89.3% to
ZAR969.5 million
Cost containment
measured on an all-in
sustaining cost basis and
total cash cost
Operational profi t
Grade improvement/
maintenance
Cost containment
Gross profi t
margin from gold
operations
Optimal grade/
tonnage production
profi les for
operations and
business plans
All-in sustaining costs increased by 0.9% to
ZAR405,847/kg. Total cash cost declined by
3.2% to ZAR338,242/kg
Mining profi ts increased by 201.8%
to ZAR1,066.6 million
(2015: ZAR353.4 million)
Barberton Mines maintained its grade of
11.0g/t and the grade at Evander Mines
improved to 5.7g/t. The fl oat feed head
grade at Phoenix Platinum increased to
3.1g/t following the curtailment of its arising
tailings from IFM and reverting to processing
tailings
Pan African Resources integrated annual report 2016
23
Our purpose, vision and strategy continued
Strategic pillar Deliverable
2016 objectives
2016 progress
Sustainable
Good progress
Moderate progress
Limited progress
Self-
assessment
on progress
during 2016
Link to
principal risk
Optimising mineral
reserves for
sustainable life of
mine production
profi le
Implement earnings
and cash fl ow accretive
growth
Operating profi t
margins
Improved operating
margins
Life of mine increased to 22 years
(2015: 20 years) at Barberton Mines and
Evander Mines remained at 16 years
(2015: 16 years). Following IFM being
placed in business rescue, the life of mine
at Phoenix Platinum declined to 9 years
(2015: 28 years)
Mining profi ts increased by 201.8%
to ZAR1,066.6 million
(2015: ZAR353.4 million)
• Financial
• Reserves and
resources
• Safety
• Environmental
degradation
• Reputational
Maintaining cost infl ation
per kilogram
All-in cash cost of production decreased
by 3.5% to ZAR410,206/kg
(2015: ZAR425,084/kg)
All-in cash cost of
production per
kilogram
Environmental
compliance
Zero harm
Safety record
No fatalities
Suffi cient working
capital for
maintenance and
growth
Reduced debt and
improved working capital
• Group capital expenditure reduced to
ZAR302.4 million (2015: ZAR352 million)
No environmental transgressions
and fi nes
Severity of accidents: one fatality at
Evander Mines (2015: one fatality at
Barberton Mines)
• Net cash fl ow generated by operations
before investing and fi nancing activities
increased to ZAR581.4 million
(2015: ZAR95.7 million)
Ongoing commitment to empowering
employees by reinforcing group values
and culture
Strengthening of operational management
structures
Ongoing engagement with communities
The group spent ZAR33.3 million
(2015: ZAR29.1 million) on skills
development and training
Enabling company
culture
Benchmarking of group
values and culture
Decentralised
and effective
management
Decentralised
management structures
in place
Engagement with
local communities
Maintain engagement
with communities
Skills development
and training
Maintain skills and
development training
24 Pan African Resources integrated annual report 2016
STRATEGIC REPORT:
STRATEGY
Strategic pillar Deliverable
2016 objectives
2016 progress
Stakeholders
Good progress
Moderate progress
Limited progress
Self-
assessment
on progress
during 2016
Link to
principal risk
Ongoing
engagement
Improve and
maintain stakeholder
communication and
relationships
Social labour plans
and Mining Charter
compliance
Finalise negotiations of
operational employee
share ownership plan
Return on
shareholder funds
Maintain dividend
payments
Dividend paying
Safety record
Improved safety across
all operations
Ongoing engagement with all stakeholders
• Reputational
• Legal
• Safety
• Financial
Operational employee share ownership
plans in place at gold mining operations and
at the implementation of a BEE transaction
at Uitkomst Colliery equating to 9% of the
issued share capital of the operation
The dividend payment was maintained
and ZAR210 million was paid during
December 2015
Dividend policy amended to ensure
sustainability of future payments
Severity of accidents: one fatality at
Evander Mines (2015: one fatality at
Barberton Mines) and regression in accident
rates (LTIFR and RIFR)
Growth
Union engagement
and relationships
Ongoing improvement in
labour relations
Concluded multi-year wage agreements
across all operations. Ongoing union
engagement and minimal labour unrest
Labour legislative
compliance
Minimising section 54
stoppages and fi nes
Ongoing engagement and interaction with
the DMR and other regulators
Wage increases
– appropriate
remuneration
policies
Appropriate levels of
compensation across the
group
Remuneration benchmarking takes place
and all senior personnel remuneration is
approved by remuneration committee
Contributions to
revenue authorities
Contributing to taxes
and royalties
Income tax and royalty paid of
ZAR269.6 million (2015: ZAR151.2 million)
CSI spend
Contributions to CSI
projects
The group spent ZAR21.0 million
(2015: ZAR20.8 million) on corporate social
investment initiatives
Organic growth
(achieved
within existing
infrastructure)
Acquisitive
growth (achieved
outside of existing
infrastructure)
Replacement of
mineral reserve
projects for
depleted projects
Organic growth in
production profi le
3.0Moz or 9.4% gross annual increase in
group gold resources to 34.9Moz
(2015: 31.9Moz)
Acquisitive growth
Acquisition of the Uitkomst Colliery and
commencement of a defi nitive feasibility
study on Elikhulu
Maintenance of life
of mine of existing
operations
Barberton Mines 22 years
(2015: 20 years), Evander Mines 16 years
(2015: 16 years) and Phoenix Platinum
9 years (2015: 28 years)
Refer to the 2016 MR&MR report for
further details
• Profi table
• Single country risk
• Reserves and
resources
• Integration of
acquisitions and
construction of
new plants
Pan African Resources integrated annual report 2016
25
Business model
INPUTS
BUSINESS
ACTIVITIES
S
We use each of the six
forms of capital in our business
activities to create and preserve
shareholder value
AL CAPITAL
FINANCIAL CAPITAL
it
• Shareholder equity
• Internally generated operational
cash fl ows after dividend
• Debt facilities
MANUFACTURED CAPITAL
• Property, plant and equipment
and mineral rights
HUMAN CAPITAL
ZAR2 874 4
ZAR2,874.4 million
illi
ZAR581.4 million
ZAR1,200 million
ZAR3,772.5 million
• Employees’ skills and experience
4,441 employees
INTELLECTUAL CAPITAL
• Mining and prospecting licences
• Key personnel for managing the BIOX® process
• Management’s combined expertise
We are committed to
low-cost production and
optimising extraction effi ciency
through our mining activities,
while ensuring we invest in the
communities within which we
operate and maintain a legacy
of environmentally
responsible mining
MINING ACTIVITIES
Barberton Mines and
Barberton Tailings Retreatment
Plant
Evander Mines and Evander
Tailings Retreatment Plant
Phoenix Platinum Chrome
Tailings Retreatment Plant
(CTRP)
Uitkomst Colliery
(effective 31 March 2016)
OTHER ACTIVITIES
Growing the business through organic and acquisitive
opportunities such as:
• Uitkomst Colliery
SOCIAL AND RELATIONSHIP CAPITAL
• Elikhulu Tailing Retreatment Project
• Investing in our communities
• Stakeholder relations – unions, regulators, communities
NATURAL CAPITAL
• Energy consumption
• Water consumption
Stakeholder engagement with shareholders, investors,
employees, unions, regulators, communities, suppliers, customers
Embracing best practice corporate governance
Uplifting communities through corporate social investment and
socio-economic enterprise development
EXTERNAL
ENVIRONMENT
GOLD /PGE/
COAL MARKET
REGULATORY
ENVIRONMENT
26 Pan African Resources integrated annual report 2016
STRATEGIC REPORT:
STRATEGY
S
OUTPUTS
ES
OUTCOMES
Our outputs support
our vision to continue to
build a precious metals business
b
in Africa by remaining focused
on our four strategic pillars:
profi table, sustainable,
stakeholders and growth
Through our business
activities and the use of
capital inputs, we continue
to have a positive impact on
the economy and the
communities within which
we operate:
FINANC
FINANCIAL CAPITAL
FINANC
CIAAL CAPI
AL CAPITAL
• Revenues generated
t d
• Gold revenue
• PGE revenue
• Coal revenue
ZAR3,632.8 million
• Internally generated operational
cash fl ows after dividend
ZAR581.4 million
• Dividends paid to shareholders
ZAR210 million
• Interest payments to debt funders ZAR31.1 million
• Reinvestment in infrastructure
ZAR302.4 million
• Government taxes and royalties paid ZAR269.6 million
MANUFACTURED CAPITAL
• Reserves
• Resources
• Production
Gold 10.0Moz
PGE 0.2Moz
Coal 12.6Mt
Gold 34.9Moz
PGE 0.6Moz
Coal 23.3Mt
204,928oz of gold per annum
PGE 8,339oz per annum
Coal approximately 400,000
tonnes per annum
HUMAN CAPITAL
• One fatality
• Skills development and training
ZAR33.3 million
• Employee remuneration
ZAR1,040.1 million
SOCIAL AND RELATIONSHIP CAPITAL
• Corporate social investment and
socio-economic development
spend
ZAR21.0 million
NATURAL CAPITAL
• Energy consumption
• Water consumption
• Carbon emissions
1,451,761Gj
16,422m3
0.1CO2e/t milled
• Supporting South Africa’s economy through the taxes paid and
employment for a large number of people
• Supporting entrepreneurs, other sectors and industries through
our supply chain
• Supporting 24 students with full-time bursaries in the fi elds
of geology, mining engineering, mechanical engineering,
BSc Actuarial Science, BCom Economics and mine surveying
• Investing in communities through the group’s transformation
trusts, which collected a total of ZAR1.2 million
• Producing precious metals in support of the increased investor
demand as they seek protection against economic and currency
volatility
• Supporting the automotive industry through the supply of
platinum group metals to the catalytic converter industry
• Creating employment and skills development opportunities to
communities through initiatives such as Umjindi Jewellery and
Sinqobile Life Skills Centre
• Limiting environmental degradation
• Minimising the occurrence of illegal mining
• Creating shareholder value through dividend distributions
• Supporting South Africa’s transformation goals
CAPITAL
AND FOREIGN
EXCHANGE
MARKETS
ENERGY
CONSTRAINTS
LABOUR AND
COMMUNITIES
Pan African Resources integrated annual report 2016
27
Stakeholder value creation and distribution
Through the use of our fi nancial, human, manufactured and natural capital resources, Pan African Resources
endeavours to create value and positively impact all stakeholders with whom it interacts, including communities,
employees, government, shareholders and suppliers. During the year under review, the group created
ZAR3,544.3 million in value (2015: ZAR2,541.0 million), which was distributed to our various stakeholders
as depicted below.
Pan African Resources remains committed
to creating value for all stakeholders and
recognises that all its capital resources are
interconnected – as one capital resource is
increased or created, another is depleted. To
ensure future sustainability, it is important to
balance the use of these capital resources.
As depicted in the group’s business model
on
page 26, capital inputs are used in
its mining activities to create value, which is
distributed to various stakeholders by way
of payment for services and goods, salaries
and wages, corporate social investment, taxes
and dividends. The mining industry is heavily
dependent on various factors to sustain
value creation, some of which are beyond its
control. The group is cognisant of the need to
explore other opportunities, either through
organic or acquisitive growth, to ensure it
can sustain and enhance the value it creates.
The recent opportunistic acquisition of the
Uitkomst Colliery and the Shanduka Gold
transaction are examples of non-operational
value creation during the 2016 fi nancial year.
Further, the group is exploring the merits of
a number of organic surface and brownfi eld
developments at both its gold mining
operations with the intent of growing the
existing production profi le. In addition
to organic and acquisitive growth, the
group reinvested ZAR771.3 million (2015:
ZAR396.3 million), which is 21.8% of the total
value created, to sustain its existing operations.
Creating value for employees is important
to ensure the group attracts and retains
its talent. The group has a total of 4,441
employees (2015: 4,4391) and distributed
ZAR1,040.1 million (2015: ZAR910.8 million)
in salaries during the year under review,
which in turn impacts the communities
within which these employees reside – as
well as the broader economy as salaries
are expended. In addition, the group has
implemented employee share ownership
schemes, which seek to align the aspirations of
the group’s employees at its operations with
that of management and shareholders. These
employee share ownership schemes enable
employees to participate directly in the value
created at their respective operations. Further
detail on the employee share ownership
programme is shown on
page 177.
Distributions to suppliers for the
provision of services and goods totalled
ZAR1,284.8 million (2015: ZAR828.1 million),
which has a direct and broad economic
impact on the manufacturing, engineering
and chemical sectors.
The group strives to uplift, both economically
and socially, the communities within which it
operates. The social value created is driven
through the respective operations’ social
and labour plans (SLPs) that include relevant
social upliftment projects based on the needs
of these communities. The group distributed
ZAR21.0 million (2015: ZAR20.8 million)
through its corporate social investment and
socio-economic development initiatives.
Further detail on the group’s upliftment
projects is shown on
page 79.
The group’s contribution to the fi scus,
comprising the skills development levy and
corporate taxes, was ZAR186 million
(2015: ZAR82.8 million). These taxes
contribute to the infrastructure development,
educational needs, health, social and various
other services rendered by the government
in pursuit of the economic and social
upliftment of South Africa.
Shareholder value, measured as total
shareholder’s return, is determined by share
price performance and dividend declarations.
The group’s sector-leading dividend and track
record of sustained dividend payments is a
key differentiating factor relative to its peer
group. Over the past fi ve years, the group’s
total dividends paid amounted to
ZAR803.9 million (GBP46.7 million).
1 Comparatives restated to include 113 Uitkomst Colliery employees.
Group employees total is 4,326 excluding Uitkomst Colliery employees.
28 Pan African Resources integrated annual report 2016
The recently announced Shanduka Gold
transaction further enhanced shareholder
returns by reducing, from an accounting
perspective, the number of issued shares by
17.7%. Further detail on this transaction is
shown on
pages 18, 44 and 181.
Value creation and distribution
2016
36.3% Suppliers
29.3% Employees
21.8% Reinvested
5.9% Shareholders
5.2% Taxation
0.9% Finance costs
0.6% Corporate social investment
2015
32.6% Suppliers
35.8% Employees
15.6% Reinvested
10.2% Shareholders
3.3% Taxation
1.7% Finance costs
0.8% Corporate social investment
STRATEGIC REPORT:
STRATEGY
Chamber of Mines June 2016 fact sheet
The gold and diamond mining industry represents a signifi cant portion of South Africa’s mineral production
Chamber of Mines members contribute about ZAR11.3 billion in taxes to the South African economy
The industry employs about 462,000 people
The South Africa mining market
Pan African Resources’ sustainability and response to its operating environment are guided by its philosophy as shown below. We pursue
our strategic goals through leadership that creates shared value and alignment between the company’s vision and values, its strategy as
well as the needs and expectations of its stakeholders. See
page 22 for more information.
v
e r a t e
p
o lv
e t o o
ain in
c t u r e c
c
n
p ly c
n t in fr a str u
n it y s u
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e
m
e r n
h
p
e
Lic
m
m
o
• G
o
v
• C
n t
cit y
e
a
m
p
e
a
Macro environment
• Slow eradication of poverty, unemployment
• Subdued economic growth
and inequality
PURPOSE,
VISION AND
VALUES
erienced leadership
p
x
• E
•
LEADERSHIP
AND OUR
CULTURE
•
L
i
c
e
n
R
e
•
g
s
i
E
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v
g
o
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l
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n
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y
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p
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P
r
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•
r
t
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icit
ainin
r
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ALIGNED
COMMUNICATION
SHARED
VALUE AND
VALUES
STAKEHOLDER
ENGAGEMENT
•
A
•
b
o
C
C
C
C
S
t
r
u
v
e
-i
c
t
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tt
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m
ti
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s
Labour
• Evolving labour environment, union rivalry
• Productivity
OUR
STRATEGY
e
E m powerm ent
erm ent
• Offers potential opportunities
• Group em powerm ent
Pan African Resources integrated annual report 2016
29
Enterprise risk management approach
The Pan African Resources board is ultimately responsible for setting the risk appetite
of the group, identifying strategic risks and opportunities and managing these risks and
opportunities.
The board is guided by the audit committee and by its own internal risk assessments and regularly reviews the risk reports from the operations.
Further, the board ensures the appropriate risk management programmes are in place and monitors the implementation of mitigating factors
against key risk indicators.
Factors impacting the group’s ability to create value in the short, medium and long term are grouped into the main categories listed below.
The group’s material issues and challenges are informed by these factors as well as the nature of the individual operations’ activities (internal
environment) and the external environment. These issues, if not effectively managed, could impact the group’s sustainability and its ability to
continue to create value. The group’s principal risks are clustered under these material issues and the management of these risks is imperative
for the group to execute its strategy in a risk-conscious manner.
• Macro-economic: to an extent beyond the group’s control, although the effects can be anticipated to a degree and managed or mitigated
• Financial: managed and monitored proactively through a centralised treasury, capital allocation discipline, balance sheet gearing levels and
adherence to risk management and internal control policies
• Operational: managed proactively by implementing policies and process controls
• Strategic: impacting the group’s ability to execute its strategy and therefore it can anticipate and proactively address these.
Factors impacting value creation
Material issue
Principal risk
Macro-economic
Financial
Operational
Managing our evolving regulatory environment
and volatile commodity prices
Financial sustainability in a challenging economy
and macro-economic volatility
Operating in a safe and healthy environment
with continuous stakeholder engagement
• Evolving regulatory environment and volatile
commodity markets
• Financial
• Safety
• Health and wellness
• Operational execution
• Industrial action
Strategic
Extracting reserves and resources in a
responsible manner
• Reserves and resources
• Capital allocation – integration of acquisitions
and construction of new plants
Respecting the natural environment
• Environmental degradation
Attracting and retaining key talent
• Succession planning and skills retention
Operating in a dynamic regulatory environment
and challenging local economy
• Legal
• Reputational
• Concentrated sovereign risk
Management has processes in place to defi ne and align the macro-economic, fi nancial, operational and strategic objectives with the group’s
risk appetite. Risks are identifi ed and analysed in a risk matrix format, based on the impact of the risk and the likelihood of the risk occurring.
Controls in the form of policies, procedures and standards are established to monitor and/or mitigate the risk on an ongoing basis. These
controls and actions are implemented at the level of individual operations, across a group discipline or at executive management level. The
residual risks are those risks that remain after the mitigating effect of controls.
Strategic workshops are conducted quarterly to evaluate risks and the appropriateness and effectiveness of risk mitigating measures.
The table on
page 31 describes each principal risk the group is exposed to and how it is mitigated and aligned to the group’s strategic pillars.
Common risks across the mine level are predominantly related to safety and operational while head offi ce risks are more strategic and fi nancial
in their nature. All risks are managed in conjunction with the audit committee and board.
30 Pan African Resources integrated annual report 2016
STRATEGIC REPORT:
STRATEGY
Risk register
Substantially achieved
Moderate progress
Not achieved
Principal risk
Nature of risk
Controls in place to mitigate the risk
Self-
assessment
on progress
during 2016
Link to
strategic pillar
Macro-economic
Evolving
regulatory
environment
and volatile
commodity
markets
Uncertainty
surrounding mining
and environmental
legislation
• Strengthening the group’s empowerment credentials and monitoring
changing legislation to ensure compliance
• Broad-based employee share ownership programme in place at
• Profi table
• Sustainable
• Stakeholders
operational level
• Annual independent assessment of status
• Incentives linked to the achievement of objectives
• Enterprise development funding
• Community development spend
• Training and development of own candidates through structured
training plans
• Cultivate good working relationships with regulators and with
representatives of the national or local government
Financial
Financial
Volatile commodity
prices
• Adherence to treasury and fi nancial risk management policies to
ensure fi nancial risk remains within board-approved limits
• Strategic hedging of gold prices and exchange rates
• Focus on production costs so as to maximise margins
Poor capital allocation
decisions
Weak cash fl ow
generation and
excessive debt levels
• Capital allocation is based on stringent investment criteria and subject
to board oversight
• Ongoing monitoring of working costs and capital expenditure, cash
• Profi table
• Sustainable
• Growth
fl ow generation and group debt levels
• Conservative debt levels
• Standby facilities to bridge working capital defi cits
Financial risk
• Selective hedging and monitoring of currency, liquidity, commodity and
interest rate exposures within board-approved risk levels
Financial cybercrime
• Robust internal controls
• Fidelity insurance cover
• Internal audit reviews
Operational
Safety
Mine accidents
• Legal compliance, standards and procedures in place, plan task
observation and regular audits conducted
• In addition to the above, ongoing examination of workplace conditions
• Monthly and quarterly inspections by safety department and quarterly
risk engineering reviews
Ambient working
conditions
• Installation of a refrigeration plant at Barberton in the next fi nancial
year to reduce ambient temperatures
• Sustainable
• Stakeholders
• Improvement of ventilation conditions using various methods
• Ongoing monitoring of working conditions
• Emergency service providers at operations and emergency training in
place
• Strict access control
• Security actions, including proactive approach by on-mine security
• Involvement of police and regulatory bodies
Onerous logistic
challenges in
responding to
emergency trauma
situations
Illegal miners pose
a risk to employees
and contractors
underground and on
surface
Pan African Resources integrated annual report 2016
31
Enterprise risk management approach continued
Principal risk
Nature of risk
Controls in place to mitigate the risk
Substantially achieved
Moderate progress
Not achieved
Self-
assessment
on progress
during 2016
Link to
strategic pillar
Operational continued
Safety
continued
Risk of a safety
incident or section
54 stoppages due to
regulatory issues
• Continued emphasis on safety compliance and implementation of risk
management systems such as proximity detection systems
• Sustainable
• Stakeholders
• Governance of SHEQC which is decentralised and subject to group
standardisation and oversight
Legislative breaches
• Ongoing training, audits, reviews and compliance
Health and
wellness
Employees working in
unhealthy workplace
conditions
• Medical surveillance and monitoring of occupational diseases
• Annual medical examinations for all employees and contractors
• Daily monitoring of workplace conditions for heat, noise and airborne
• Sustainable
• Stakeholders
Industrial action
Strike actions
Operational
execution
Challenges associated
with ageing
infrastructure and
power interruptions
pollutants
• Provision of medical facilities or medical aid coverage
• Appropriate occupational health practices
• Medical health hubs
• Managed health programmes
• Behaviour-based training, disease management programmes and
awareness programmes
• Prevalence testing, wellness programmes and anti-retroviral treatment
• Proactive, strong relationships with representative unions
• Recognition agreements
• Multi-year wage agreements in place
• Appropriate remuneration practices
• Compliance with all relevant South African labour legislation including
the Mining Charter and implementation of SLPs
• People, systems and procedures in place to ensure successful
continuing operations
• Active managed engineering risk registers for all operations
• Scheduling of operations to take account of constraints
• Performance monitoring systems instituted
• Planned routine maintenance contracts
• Refurbishment, major overhaul and capex investment
• Support generators for critical functions and back-up generators
provide limited power to processing plants
• Energy-effi cient programmes to reduce consumption
• Engagement with Eskom on planned and unplanned power
interruptions
• Power management and load monitoring
• Production performance monitoring systems implemented
• Profi table
• Stakeholders
• Profi table
• Sustainable
• Growth
Environmental
degradation
Risk of environmental
damage
• Environmental management plans in place
• Land rehabilitation trust funds in place to minimise and mitigate the
• Sustainable
• Stakeholders
environmental effects of mining
• Pollution control and water catchment dams
• Continuous training and monitoring of environmental damage
detection systems, such as scavenger borehole and pumping
• Compliance with water use licence guidelines
• Control of arsenic in contained storage areas
• Specifi c action plans in place to deal with fl ooding incidents
• Cyanide constraints dealt with by procuring additional solid cyanide
briquette from alternative sources and continued engagement with
principal supplier to ensure a sustainable supply
32 Pan African Resources integrated annual report 2016
STRATEGIC REPORT:
STRATEGY
Principal risk
Nature of risk
Controls in place to mitigate the risk
Substantially achieved
Moderate progress
Not achieved
Self-
assessment
on progress
during 2016
Link to
strategic pillar
• Sustainable
• Stakeholders
• Profi table
• Sustainable
• Stakeholders
• Growth
• Sustainable
• Growth
• Monitoring of ventilation systems and upgrading, where necessary
• Strategies in place to identify value-enhancing organic and acquisitive
growth opportunities
• Conducting an independent geological review and mine optimisation
study
• Extensive change management experience
• Project management skills in place
Operational continued
Environmental
degradation
continued
Ventilation
requirements are
constrained with
limited capacity to
supply required
volumes
Strategic
Reserves and
resources
Declining resource
and reserve base
Geological reporting
of quality and
quantity of reserves
Inability to integrate
acquisitions and
manage new projects
Capital allocation
– integration of
acquisitions and
construction of
new plants
Succession
planning and
skills retention
Inability to attract and
retain staff
• Recruitment strategies and succession programmes in place
• Structured retention incentives – current, annual and long-term
• Regularly benchmarked market-related remuneration
• Growth opportunities and career planning for employees
• Profi table
• Sustainable
• Stakeholders
• Growth
Skills shortage
• Apprenticeships and learnerships in place
• Bursary in place for tertiary students
• Ongoing market research conducted on availability of scarce category
Legal
Regulatory
compliance
skills
• Comprehensive training including job-based skills training
• Policies, standards and procedures in place to ensure compliance
• Regular compliance review by advisers and sponsors
• Register of all titles
• Compliance with water use licence guidelines
• Outsourced legal, tax and internal audit functions
• Continuous engagement with regulators on compliance
• Stakeholders
Reputational
Underperforming
market expectations
• Ongoing market communication and monitoring to ensure alliance
• Sustainable
with shareholder expectations
• Stakeholders
Stakeholder/
community
expectations
Not adhering to
anti-bribery and
corruption legislation
• Stakeholders/community engagement with appropriate initiatives in
• Growth
place to support local communities
• Anti-bribery and corruption policies in place
• A culture of zero tolerance towards corruption
• Ongoing training and awareness
• Specifi c internal controls to mitigate bribery risk
• Independent internal and external audit functions
Concentrated
sovereign risk
Operations limited to
a single jurisdiction
• Future growth plans to focus on diversifi cation of operational base
• People, systems and procedures in place to ensure successful
• Sustainable
• Growth
continuing operations in South Africa
Pan African Resources integrated annual report 2016
33
Stakeholder engagement
Stakeholders are integral to the group’s growth, value creation
n
and sustainability. They have also been identifi ed as one of our
r
four key strategic pillars which include: profi table, sustainable,
stakeholders and growth. Stakeholder feedback and concerns
are therefore carefully considered when reviewing and refi ning
g
strategy, which fosters realistic perceptions by our stakeholders
rs
of our business, decisions and performance.
te office
At an operational level, stakeholder engagement is the responsibility of the general and human resources managers and at a corporate offi ce
level the Chief Executive Offi cer assumes this responsibility. Key concerns raised operationally are governed by the management committee
and at a board level the SHEQC committee oversees stakeholder concerns.
at a corporat
rces mana ers and at a corporat
A detailed account of Pan African Resources’ stakeholders and their key concerns, as identifi ed, is set out in the table below.
Stakeholder
What matters to stakeholders Nature of engagement
Investors
• Return on investment
• Financial performance
• Operational performance
• Union relationships
• Safe mining
• Accreditations and
regulatory compliance
• Resources and reserves
reporting
• Sustainability of the business
Employees
• Safety
• Transformation
• Job security
• Reward and incentives
• Holistic and occupational
health
• Skills development and
training
• Results presentations and
roadshows
• Site visits
• Regulatory communications
• Ad hoc one-on-one
meetings with investor
community
• Interim and full-year results
announcements
• Integrated annual report
• Financier communications
with respect to the group’s
capital structure and
compliance with conditions
of existing debt agreements
• Media releases
• Group website
• Bargaining council forums
• Shaft committees
• Health and safety structures
• Supervisory and disciplinary
structures
• Social media
• Publicity and posters
• Policy and procedure
• Environmental exposure
documents
• One-on-one supervision
• Contract negotiations
• Performance assessments
How feedback
informs strategy
• Poll results and feedback
from presentations and
one-on-one meetings
discussed at executive
management level
Responsibility
• Chief Executive Offi cer
• Financial Director
• Discussed at operational,
executive and board level
• Operational human
resource managers
• Group Executive Human
Resources
• Group SHEQC manager
34 Pan African Resources integrated annual report 2016
STRATEGIC REPORT:
STRATEGY
Stakeholder
What matters to stakeholders Nature of engagement
How feedback
informs strategy
Suppliers
Communities
Unions
Government
departments
Customers
• Group fi nancial performance
• Payment track record
• Growth project pipeline
• Loyalty
• Job creation
• Corporate social investment
• Environmental conservation/
protection
• One-on-one meetings
• Discussed at operational
and executive
management level
• Community meetings
• Media
• Discussed at the SHEQC
committee, Exco and
board level
Responsibility
• General managers and
fi nancial managers
• Group procurement
manager
• General managers
• Community liaison
managers at each
operation
• CSI offi cers at each
operation
• Health and safety
• Transformation
• Job security
• Fair remuneration and
reward
• Employee committees
• Branch committees
• Shaft committees
• Mine committees
• Transformation
• Mining Charter compliance
• Job creation
• Safe mining
• Profi table mining
• Quality
• Timeous delivery
• Price
• Volumes
• Regular and frequent
communication with
Departments: DMR, Labour,
Water Affairs, Education
and Public Works and local
municipalities’ independent
development plans
• One-on-one meetings
• Discussions between
• Group Executive Human
union and management
occur on the mines
and the outcomes
are conveyed to the
corporate offi ce
• Discussed at operational,
executive and board level
• Discussed at executive
management and board
level
Resources
• Shaft/mine/ branch
committees
• General managers
• Chief Executive Offi cer
• Discussed at executive
management and board
level
• General managers
• Metallurgical managers
Pan African Resources integrated annual report 2016
35
STRATEGIC REPORT: PERFORMANCE REVIEW
Discovery
of GOLD in
South Africa
Gold was discovered on a Transvaal farm,
Langlaagte, on the Witwatersrand in 1886 by
two prospectors. This discovery caused a turning
point in South African history. Far more than
diamonds, it changed South Africa from an
agricultural society to become the largest gold
producer in the world. The gold discovered ran
for miles and miles underground, ‘an endless
treasure of gold’.
As news of the gold find spread throughout
Southern Africa, various mining towns developed
along the curve of the underground gold reef.
This curve was named the Witwatersrand,
attracting hundreds and hundreds of people
seeking their for tune.
http://www.randrefi nery.com/brochures/Rand%20Refi nery%20-%20
The%20Story%20of%20Gold.pdf
Credit: © Museum Africa/Africa Media Online
George Harrison Park, Langlaagte
+1
+3
79
Au
Gold
196.97
2-8-18-32-18-1
Financial Director’s review
Deon Louw
Financial Director
“ Pan African Resources’ share
price recovered materially in
the 2016 fi nancial year, with
year-on-year capital growth of
108%, outperforming its peers.”
HIGHLIGHTS
CHALLENGES
Volatile
Volatile gold price and exchange
Volatile
gold price
rate environment
Cost pressures in excess of
infl ation
Regulatory uncertainty
pertaining to amended mining
and environmental legislation
Evolving labour landscape
Pa ment ot
Payment of a ZAR210 million dividend in
December 2015
f ZAR21
Increase in net profi t after tax of 160.2%
Reduction in the USD all-in sustaining costs per
ounce by 20.4% to USD870/oz and a 0.9%
increase in the ZAR all-in sustaining cost per
kilogram to ZAR405,847/kg
Acquisition of the Uitkomst Colliery with effect
from 31 March 2016 for ZAR148 million
Completion of the Shanduka Gold transaction
resulting in an effective 23.83% (22.46% post
dilution) indirect shareholding in Pan African
Resources with effect from 7 June 2016
Increase in net cash generation from operating
activities after dividends, by 507.5% to
ZAR581.4 million (2015: ZAR95.7 million),
illustrating the disproportional positive
correlation between the increase in profi ts
and cash generation
38 Pan African Resources integrated annual report 2016
STRATEGIC REPORT:
PERFORMANCE REVIEW
Key fi nancial statistics
Revenue
Cost of production
Mining profi t
EBITDA
Profi t after taxation
Headline earnings
EPS (cents/pence)
HEPS (cents/pence)
Weighted average number of
shares in issue (millions)
For the year ended
30 June 2016
For the year ended
30 June 2015
Movement
ZAR
millions
3,632.8
(2,321.4)
1,066.6
969.5
547.0
547.1
30.20
30.20
GBP
millions
169.4
(108.2)
49.7
45.2
25.5
25.5
1.41
1.41
ZAR
millions
2,539.4
(1,987.4)
353.4
512.1
210.2
213.6
11.48
11.67
GBP
millions
141.1
(110.4)
19.6
28.4
11.7
11.9
0.64
0.65
1,811.4
1,811.4
1,830.4
1,830.4
ZAR
%
43.1
16.8
201.8
89.3
160.2
156.1
163.1
158.8
(1.0)
GBP
%
20.1
(2.0)
153.6
59.2
117.9
114.3
120.3
116.9
(1.0)
Value creation
Pan African Resources remains committed to creating value for all stakeholders. For shareholders, specifi cally, value is determined by capital
appreciation in the company’s share price and distributions in the form of dividends and share buy-backs. The distribution of stakeholder value
created by the group is detailed on
The table below benchmarks the group’s progress against our fi nancial objectives and their link to our strategic pillars.
page 28, which illustrates the substantial contribution by the group to the South African economy.
FY2016
objective
Maintain
attractive
dividend
payments
Improve
profi tability
from current
operations
Implement
earnings and cash
fl ow accretive
growth
Progress in FY2016
• ZAR210 million fi nal dividend was paid in December 2015 and a
ZAR300 million dividend is proposed for the 2016 fi nancial year
Substantially achieved
Moderate progress
Not achieved
Self-
assessment
on progress
during 2016
Link to
strategic pillars
• Stakeholders
• The group’s profi ts increased across all operations with the exception of Phoenix Platinum,
• Profi table
due to the reasons explained in the Chief Executive Offi cer’s review on
page 18
• Barberton Mines recovered from the oil contamination at its BIOX® plant and Evander
Mines recovered from its low-grade mining cycle
• Uitkomst made its fi rst contribution to group profi ts with a net profi t after tax of
ZAR11.4 million for the quarter ended 30 June 2016, which is consistent with our profi t
expectations from the mine
• The group strategically entered into a two-year hedge in July 2015 to protect its cash fl ows
and dividend from short-term declines in the gold price. The fair value mark-to-market
adjustment on the collar resulted in a post-tax loss of ZAR82 million
• The group’s gold production increased to 204,928oz, a 16.5% increase relative to the
prior year
• Production ounces declined at Phoenix Platinum due to water shortage and the termination
of tailings from IFM, which was placed in business rescue
• Profi table
• Growth
Pan African Resources integrated annual report 2016
39
Financial Director’s review continued
Operating environment
The local gold mining environment enjoyed
a recovery as the gold price improved and
the rand depreciated during the year under
review. The gold price of ZAR542,850/kg
compared favourably with the ZAR446,274
received during the corresponding period.
Margin expansion was further assisted by a
marginal increase in all-in sustaining costs to
ZAR405,847/kg relative to the ZAR402,221/kg
incurred in the previous corresponding
period, which demonstrates the group’s
culture of stringent cost control.
The group’s profi tability is affected by various
external and economic drivers, the most
signifi cant of which are:
• USD precious metal spot prices –
determines the price received for gold and
PGE produced
• USD/ZAR exchange rate – determines the
value received in ZAR for gold and other
metals produced and ultimately the group’s
revenue.
This also drives specifi c production costs
and capital goods through infl ation and the
cost of imported goods and consumables
• South African general infl ation, wages and
other price increases determine the rate
of increase in the group’s operating costs –
the most signifi cant of which is employee
costs, followed by electricity costs
• GBP/ZAR exchange rate – infl uences the
group’s reporting performance in GBP,
its reporting currency for accounting
purposes
• Interest rates – determines the cost of
debt fi nance and the return on surplus
cash resources.
USD precious metal spot price
During the course of the year the average
USD gold price declined 4% to USD1,164
per ounce relative to the USD1,212 per
ounce received during the previous
corresponding fi nancial period. The average
PGE basket price achieved (applying the
Phoenix Platinum prill split) was substantially
lower than that of the previous year at
USD617/oz (2015: USD839/oz), after taking
into account the terms of the off-take
agreement with Western Platinum Limited,
a subsidiary of Lonmin PLC.
USD/ZAR exchange rate
The group records its revenue from precious
metals sales in ZAR and the depreciation in
the value of the ZAR relative to the USD
during the year had a compensating effect
on the weaker USD metals price revenue
received. The average ZAR/USD exchange
rate was 26.7% weaker at ZAR14.51:1
(2015: ZAR11.45:1). Despite the lower
USD gold price, the average ZAR gold
price received increased by 21.6% to
ZAR542,850/kg (2015: ZAR446,274/kg), as
a result of the aggressive depreciation in the
ZAR/USD exchange rate.
The average ZAR PGE basket price received
decreased by 6.8% to ZAR8,952/oz
(2015: ZAR9,603/oz) as a consequence
of the declining PGM prices, offset by the
depreciating ZAR/USD exchange rate.
South African infl ation, wage
rate and other cost increases
During the year CPI was reported at 6.3%
(2015: 4.7%) while PPI was recorded at 7.4%
(2015: 3.3%). Annual wage negotiations were
completed successfully during the period
under review, with Barberton entering into
a two-year agreement at an average annual
increase of 9% and Evander a three-year
agreement with an average annual increase
of 8%.
Electricity price infl ation
Although the problems in national electricity
generation appear to have been overcome,
increased breakdowns in the distribution
network have been experienced in the past
year. Electricity is the group’s second largest
cost contributor at ZAR323.2 million
(2015: ZAR275.4 million), representing
13.9%, of the group’s total cost of production.
Electricity increases in the current year
amounted to 17.4% (2015: 8.6%) compared
to the NERSA-approved Eskom increases of
12.7% for the past fi nancial year.
The higher-than-average cost increase in our
fi nancial statements relates to the electricity
costs from ETRP, which was in production for
the full year, and the newly acquired Uitkomst
Colliery. Eskom’s most recent announcement,
in March 2016, points to average increases of
9.4% which will further increase the group’s
electricity costs going forward.
GBP/ZAR exchange rate
Given that the ZAR’s performance against
the GBP is a key determinant of the GBP
results, it is important for shareholders to be
aware of the effect this exchange rate has
on reported results. The value of the ZAR
against the GBP deteriorated for the most
part of the year under review. The average
ZAR/GBP exchange rate was 19.2% weaker
at ZAR21.45:1 when compared to the
previous year (2015: ZAR18.00:1).
Interest rates
The group incurs a margin of 250 basis
points above the Johannesburg Interbank
Agreed Rate (JIBAR) on any balance
outstanding on its revolving credit facility
(RCF) and receives interest on surplus funds
at quoted bank call account rates. Changes
in interest rates affect the group’s interest
expense and income. JIBAR at 30 June 2016
was quoted at 7.1% (2015: 6.0%).
40 Pan African Resources integrated annual report 2016
STRATEGIC REPORT:
PERFORMANCE REVIEW
Overview of the group’s fi nancial performance
Revenue, costs, profi tability and dividend analysis
Performance
2016 fi nancial year commentary
Revenue
The group’s revenue, year-on-year, increased by 43.1% to ZAR3,632.8 million (2015: ZAR2,539.4 million). The increase was
predominantly due to, inter alia:
• Gold sold increased 16.5% to 204,928oz (2015: 175,857oz)
• The average ZAR gold price received by the group increased 21.6% to ZAR542,850/kg (2015: ZAR446,274/kg), as a result
of the weakening of the ZAR/USD exchange rate
• Consolidation of the Uitkomst Colliery revenue of ZAR98 million effective from 31 March 2016
The increase in the average ZAR gold price by 21.6% was a result of the following movements:
• The group realised an average gold price of USD1,164/oz, a decrease of 4% from the USD1,212/oz achieved in the prior
reporting period
• The average ZAR/USD exchange rate was 26.7% weaker at ZAR14.51:1 (2015: ZAR11.45:1)
Cost of production
The group’s total cost of production increased by 16.8% to ZAR2,321.4 million (2015: ZAR1,987.4 million). The group’s
cost of production incorporated a full year’s production costs for the ETRP of ZAR154.8 million (2015: ZAR54.1 million)
and the Uitkomst Colliery coal production costs of ZAR91.8 million (2015: nil).
Pan African Resources’ gold cost of production per the statement of comprehensive income increased by 12.3% to
ZAR2,155.5 million (2015: ZAR1,919.6 million) affected by the following:
• The group’s gold operations salaries and wages increased by 12.5% to ZAR967.7 million (2015: ZAR860.1 million), which
was predominately due to:
– The incremental increase in salaries and wages following the wage agreements at Barberton and Evander Mines
– Higher production incentives following increased productivity at the gold operations. Barberton Mines’ production
incentives increased by ZAR13.7 million equating to 1.6% of the total year-on-year increase. Evander Mines’
production incentives increased by ZAR4.3 million contributing an additional 0.5% to the year-on-year increase in
labour costs
– The ETRP salary and wages increased by ZAR4.7 million resulting in an additional 0.5% increase year-on-year following
a full production year
• The group’s gold operations electricity costs increased by 16.8% to ZAR317.3 million (2015: ZAR271.6 million). The
NERSA-approved increase applied to electricity consumption was 12.7% for the period under review. The additional
increase was predominantly as a result of the electricity costs associated with the ETRP being in production for the full
year, amounting to ZAR9.9 million (2015: ZAR2.1 million)
• The ETRP and associated surface feedstock material cost of production was ZAR154.8 million (2015: ZAR54.1 million)
following a full year’s production (prior year ETRP cost production related to a four-month period)
The gold cost of production excluding ETRP and surface feedstock has increased by 7.2% to ZAR2,000.7 million
(2015: ZAR1,865.5 million).
The PGE cost of production increased by 9.3% to ZAR74.1 million (2015: ZAR67.8 million), predominately due to:
• Salaries and wages increasing by 3.1% to ZAR20.2 million (2015: ZAR19.6 million). The Phoenix Platinum employee
incentives decreased following lower production levels
• Refi ning and processing costs increased by 10.8% to ZAR48.3 million (2015: ZAR43.6 million), following additional
transporting costs to move tailings material from the Kroondal tailings site, and incurring higher chrome refi ning costs as
a result of a higher chrome prevalence in tailings processed
• Electricity costs increased by 13.5% to ZAR4.2 million (2015: ZAR3.7 million)
The group’s realisation costs increased 65.3% to ZAR20.5 million (2015: ZAR12.4 million) due to additional refi ning costs
associated with the extraction and recovery of gold contained at Evander Mines’ processing plant’s infrastructure.
Depreciation increased 20.5% to ZAR224.3 million (2015: ZAR186.1 million) following increased charges associated with
the commissioning of the ETRP and Evander Mines’ 8 Shaft 25 level development.
The group’s cost of production per kilogram of gold declined 3.2% to ZAR338,242/kg (2015: ZAR349,410/kg). The decline
is attributed to:
• Gold sold increasing by 16.5% to 204,928/oz (2015: 175,857/oz), resulting in a lower unit cost of production
• Improved head grades mined compared to the previous year
Cash costs
All-in sustaining cash
costs
The group’s all-in sustaining cash cost of production per kilogram of gold (including direct cost of production, royalties,
associated corporate costs and overheads and sustaining capital expenditure) increased 0.9% to ZAR405,847/kg
(2015: ZAR402,221/kg). The group’s all-in sustaining cash costs were primarily impacted by:
• Increased gold production and the improved head grades compared to the prior year
Pan African Resources integrated annual report 2016
41
Financial Director’s review continued
Performance
2016 fi nancial year commentary
All-in cost
Other income and
expenditure
The all-in cost per kilogram (sustaining cost of production and once-off expansion capital) declined 3.5% to ZAR410,206/kg
(2015: ZAR425,084/kg), due to the increase in gold production and the completion of the ETRP, which contributed
ZAR95.1 million in capital costs to the 2015 cost base.
Barberton Mines entered into a short-term strategic hedge (the cost collar) in July 2015, when the prevailing spot gold
price was ZAR440,000/kg, to protect its cash fl ows and the group’s annual dividend against severe adverse movements in
the ZAR gold price. During the current reporting period, the group recorded a pre-tax net unrealised mark-to-market fair
value loss of R117.6 million on the cost collar, offset by a realised cost collar derivative income of ZAR3.8 million, resulting
in a net pre-tax fair value cost collar loss for the year of ZAR113.8 million (2015: pre-tax realised cost collar derivative
income of ZAR44.8 million). The economic consequence of the mark-to-market fair value adjustment is to lock in revenue
on 25,000oz of gold production from Barberton Mines at ZAR625,000/kg (the closing ZAR gold price at 30 June 2016) for
the twelve-month period commencing 1 October 2016. The group currently only has this gold collar derivative in place.
Pan African Resources’ share price increased signifi cantly by 108% to ZAR3.75 from ZAR1.80 during the current reporting
period, which resulted in an increase in the group’s cash-settled share option costs. The pre-tax effect of cash-settled share
option costs for the current reporting period amounted to ZAR100.6 million (2015: pre-tax ZAR6.1 million gain).
The fair value adjustment of the group’s rehabilitation liability resulted in the liability reducing by ZAR38.2 million
(2015: increased by ZAR19.7 million). The rehabilitation investment increased by ZAR9.2 million (2015: ZAR33.9 million).
Finance income and
costs
Finance income increased to ZAR9.5 million (2015: ZAR6.3 million), while fi nance cost decreased to ZAR31.1 million
(2015: ZAR44.2 million), following improved cash fl ows generated.
Profi t after tax and
headline earnings
Profi t after tax increased 160.2% to ZAR547.0 million (2015: ZAR210.2 million) and the corresponding headline earnings
increased 156.1% to ZAR547.1 million (2015: ZAR213.6 million), primarily impacted by:
• Revenue increased by ZAR1,093.4 million, supported by higher gold production and an increase in the effective ZAR gold
EPS and HEPS
price received
• Cost of production increased by ZAR334.0 million
• Depreciation increased by ZAR38.2 million following increased charges associated with the commissioning of the ETRP
and Evander Mines’ 8 Shaft 25 level development
• Other income and expenditure increased by ZAR265.8 million, due to the pre-tax net cost collar mark-to-market fair value
adjustment of ZAR113.8 million (2015: realised cost collar derivative income of ZAR44.8 million), and higher cash-settled
share option costs linked to the increase in the share price amounting to ZAR100.6 million (2015: ZAR6.1 million gain)
• Royalty costs increased by ZAR30.4 million linked to the increased gold revenues
• Taxation increased by ZAR102.2 million due to the improved operational performance
The group’s EPS in ZAR increased 163.1% to 30.20 cents (2015: 11.48 cents). The group’s HEPS in ZAR increased
by 158.8% to 30.20 cents (2015: 11.67 cents). The difference between the EPS and HEPS resulted from adjusting the
attributable earnings for the loss on the disposal of fi xed assets and the associated impairment upon the sale of Auroch
Minerals NL in the prior reporting period. Refer to the statement of comprehensive income for the reconciliation between
EPS and HEPS.
The EPS and HEPS is calculated by applying the group’s weighted average number of shares to the attributable and headline
earnings, which decreased by 1% to 1,811.4 million shares (2015: 1,830.0 million shares). The decrease in the shares was
attributed to eliminating the Shanduka Gold Proprietary Limited shares held in Pan African Resources with effect from
7 June 2016.
Taxation
Dividend
The group’s total taxation charge increased 137.4% to ZAR176.6 million (2015: ZAR74.4 million) due to the group’s
improved fi nancial performance.
The group paid a fi nal dividend of ZAR210 million or GBP9.7 million (2014: ZAR258 million or GBP14.9 million) on
24 December 2015 relating to the 2015 fi nancial year, equating to ZAR0.11466 per share or 0.53 pence per share
(2014: ZAR0.14100 per share or 0.82 pence per share).
In light of the materially improved operational and fi nancial performance the board has proposed an increased dividend of
ZAR300 million or approximately GBP16 million equating to ZAR0.15438 per share or approximately 0.82338 pence per
share. This dividend is subject to approval at the AGM, which will take place on 25 November 2016.
The GBP proposed fi nal dividend was calculated based on 1,943,206,554 total shares in issue and an illustrative exchange
rate of ZAR18.75:1. Shareholders on the London register should note that a revised exchange rate will be communicated
prior to approval at the AGM.
42 Pan African Resources integrated annual report 2016
STRATEGIC REPORT:
PERFORMANCE REVIEW
Financial position and resource
allocation
Non-current assets increased 7.3%
to ZAR4,450.9 million (2015:
ZAR4,147.1 million). The increase
was partly attributable to further capital
expenditure during the year amounting to
ZAR302.4 million (2015: ZAR352.0 million),
less depreciation of ZAR224.3 million
(2015: ZAR186.1 million).
Included in non-current assets is the
rehabilitation trust fund balance of
ZAR321.5 million (2015: ZAR312.3 million),
which increased by ZAR9.2 million as a result
of capital growth in the underlying investment
portfolio. The rehabilitation trust fund’s
investment portfolio comprises investments in
guaranteed equity-linked notes, government
bonds, equities and cash holdings.
Current assets increased 30.7% to
ZAR434.2 million (2015: ZAR332.3 million)
due to:
• Cash on hand decreased to
ZAR52.6 million (2015: ZAR64.2 million)
• Accounts receivable increased to
ZAR277.8 million (2015:
ZAR184.5 million) predominately due to:
– Uitkomst Colliery contributed an
additional ZAR55.3 million to the
group’s accounts receivable at
30 June 2016
– The increase in the average ZAR gold
prices resulted in an increase in the
average gold receivable held
year-on-year
• Inventory increased to ZAR87.0 million
(2015: ZAR67.6 million) mainly due to
consolidating additional Uitkomst Colliery
coal inventory of ZAR11.8 million
• Current tax asset increased to
ZAR16.8 million (2015: ZAR16.0 million).
Despite the cash funding of the Uitkomst
Colliery of ZAR148 million, the cash
consideration of ZAR182 million used
to fund a portion of the Shanduka Gold
transaction and the payment of a
ZAR210 million dividend, the group’s
net debt increased only marginally from
ZAR321.1 million at 30 June 2015 to
ZAR339.6 million at 30 June 2016.
Operational cash generation, after
providing for the dividend payments and
before capital expenditure, improved to
ZAR581.4 million for the year under review
relative to ZAR95.7 million for the previous
corresponding period, which illustrates
the robust cash-generative capacity of the
group in light of the improved operational
performance and favourable movement in
the ZAR price of gold.
Non-current liabilities increased by
4.8% to ZAR1,372.4 million
(2015: ZAR1,309.5 million), the
composition of which is as follows:
• Non-current portion of the
revolving credit facility increased
to ZAR279.3 million
(2015: ZAR224.1 million)
• Non-current portion of the gold loan
balance decreased to ZAR26.6 million
(2015: ZAR82.0 million), due to the gold
loan term ending on 31 October 2017
• Non-current portion of cash-settled
share option liability ZAR55.4 million
(2015: ZAR7.3 million)
• Non-current post-retirement benefi ts was
ZAR1.3 million (2015: ZAR1.4 million)
• Long-term rehabilitation provisions
reduced to ZAR206.4 million
(2015: ZAR236.4 million)
• Deferred taxation liability increased
to ZAR803.4 million
(2015: ZAR758.3 million).
Current liabilities increased to
ZAR639.6 million (2015: ZAR431.4 million),
predominately due to:
• The increase in the cost collar mark-to-
market liability by ZAR117.8 million
(2015: nil)
• Uitkomst Colliery accounts payable
contributed ZAR29.3 million (2015: nil)
• The current portion of the revolving credit
facility increased to ZAR31.1 million
(2015: ZAR21.6 million)
• The current portion of the gold loan
decreased to ZAR55.2 million
(2015: ZAR57.8 million)
• The current portion of the cash-settled
share option liability increased to
ZAR54.2 million (2015: ZAR18,0 million).
The increase in the group’s retained
earnings by ZAR337 million is due to the
profi t after taxation of ZAR547.0 million
(2015: ZAR210.2 million) and the dividend
of ZAR210 million (2015: ZAR258 million)
for the 2016 fi nancial year.
Share capital and premium increased by
ZAR340 million following the issue of
111,711,791 shares to part fund the Shanduka
Gold transaction, referred to below.
Financial risk management
The group manages its fi nancial risk and
liquidity by means of a centralised treasury
function in Pan African Resources Funding
Company Proprietary Limited (Funding
Company), a wholly owned subsidiary of
Pan African Resources, with the objective of
centrally managing all aspects of the group’s
fi nancial risk. The group’s philosophy is to
hedge only specifi c exposures arising from
capital investments and transactional fl ows
and limit hedging to a maximum of 25%
of the group’s annual production. Hedging
will only be entered into to cover specifi c
operational risks and capital expenditure.
Revolving credit facility
The group’s existing revolving credit facility is
provided by a consortium of local banks.
The ZAR800 million facility has a tenure of
fi ve years, with a two-year accordion option,
at the group’s election (subject to approval
from the credit committees of the
respective banks), to increase the facility to
ZAR1.1 billion. The revolving credit facility
bears interest at JIBAR plus a margin of 2.5%
and provides Pan African Resources with
access to a long-term fl exible debt facility
to fund its organic and acquisitive growth
ambitions.
Working capital and debt
management
The group manages its debt levels within
prudency limits approved by the board and
based on the recommendations of the audit
and risk committee after taking into account
the variability in group cash fl ow generation,
capital expenditure programmes and the
board’s ambitions to continue declaring a
sector-leading dividend.
Capital allocation discipline
The board is conscious of the aspirations
of our stakeholders for value creation and
all capital allocation decisions are subject
to rigorous scrutiny and pre-defi ned
risk-adjusted return parameters to ensure
this objective is fulfi lled. Of paramount
consideration in all such capital allocation
decisions is the group’s ability to successfully
execute on investment opportunities
Pan African Resources integrated annual report 2016
43
Looking ahead
Our focus for the 2017 fi nancial year
continues to be on cost containment and
the cash fl ow generation of our existing
operations, while developing the latent
potential of these operations. Further,
we continue to look into the merits of
acquisitive growth opportunities that meet
our investment criteria and will contribute
to the group’s profi tability in the short to
medium term.
Deon Louw
Financial Director
20 September 2016
Financial Director’s review continued
and realise the required returns over the
investment horizon. The attractive returns
being earned on the capital invested in the
BTRP, the ETRP and the recent Uitkomst
Colliery and Shanduka transactions bear
testimony to our success in this regard.
Our investment return criterion is to earn
a minimum real return of 15% per annum,
after adjusting for project-specifi c and
sovereign risks. Further, to ensure our returns
are robust, we endeavour to invest only in
projects that fall into the lower half of the
cost curve and of which the execution risk is
within our capability.
The Elikhulu tailings retreatment project is a
near-term growth prospect which is currently
undergoing such an evaluation process.
Should the board approve the investment
decision on this project, the intent is to
fi nance it with a dedicated debt facility that
will limit the impact on the group’s existing
cash fl ows, borrowing capacity and ability
to continue paying dividends. A number
of fi nance options are being evaluated for
the funding of the project and the group
does not foresee any diffi culty in raising the
requisite funding on competitive terms.
Share price and return
performance
Pan African Resources’ share price recovered
materially in the 2016 fi nancial year with
year-on-year capital growth of 108% from
ZAR1.80 to ZAR3.75, outperforming its
peers, as refl ected in the UK FTSE and
JSE J150 gold indices.
Dividend policy
Pan African Resources aspires to pay a regular
dividend to shareholders. In balancing this
cash return to shareholders with the group’s
strategy of generic and acquisitive growth, it
believes that a target pay-out ratio of 40% of
net cash generated from operating activities,
after allowing for the cash fl ow impact of
sustaining capital, contractual debt repayments
and also the cash fl ow impact of once-off
items, is appropriate. This measure aligns
dividend distributions with the cash-generation
potential of the business. In proposing a
dividend, the board will also take into account
the company’s fi nancial condition, future
prospects, satisfactory solvency and liquidity
assessments and other factors deemed by the
board to be relevant at the time.
Shanduka Gold transaction
Conclusion of the Shanduka Gold
transaction, which is explained in detail in
the Chief Executive Offi cer’s review on
page 18, resulted in PAR acquiring control
of Shanduka Gold, representing 436,358,058
Pan African Resources shares, an effective
17.7% of Pan African Resources’ issued
share capital. The acquisition was funded by
a cash tranche of ZAR187.3 million and an
equity placement of 111,711,791 shares for
ZAR359.6 million. The accounting treatment
of the transaction is akin to that of a share
buy-back with the acquired shares being
designated as treasury shares, in terms of
which the full shareholding of 436,358,058
shares is eliminated on consolidation.
The number of shares taken into account for calculating undiluted earnings per share is
reconciled below:
Pan African shares
Opening balance shares
Issue of shares – vendor placement
Elimination of shares held by Shanduka Gold
Closing balance
Reduction in number of shares
Shares
1,831,494,763
111,711,791
(436,358,058)
1,506,848,496
324,646,268
%
change
–
6.1
(23.8)
–
17.7
44 Pan African Resources integrated annual report 2016
STRATEGIC REPORT:
PERFORMANCE REVIEW
Five-year review
Salient features – fi ve-year information
Operating performance
Gold mining tonnes milled
Gold tailings processed
Gold head grade
– mining operations
Gold head grade
– tailings operations
Gold sold
(t)
(t)
(g/t)
(g/t)
(oz)
Gold spot price received
Total gold mining cash costs
(USD/oz)
(USD/oz)
Coal sold
PGE 6E sold
(t)
(oz)
2016
2015
2014
2013
2012
676,664
2,801,021
908,958
1,618,794
7.7
0.9
204,928
1,164
725
136,102
8,339
5.4
1.0
175,857
1,212
949
–
10,245
948,149
815,736
5.8
1.6
188,179
1,303
897
–
7,204
512,869
308,095
–
8.6
–
130,493
1,553
815
–
6,480
–
10.6
–
94,449
1,694
776
–
–
2016
2015
2014
2013
2012
ZAR
millions
GBP
millions
ZAR
millions
GBP
millions
ZAR
millions
GBP
millions
ZAR
millions
GBP
millions
ZAR
millions
GBP
millions
Statement of
comprehensive income
Revenue
Cost of production
Mining profi t
EBITDA
Impairment costs
Profi t after taxation
Headline earnings
Dividends
Statement of fi nancial position
Non-current assets
Current assets
Total equity
Non-current liabilities
Current liabilities
Cash fl ows
Net cash generated from
operating activities
Capital expenditure
Net movements in cash and
cash equivalents (%)
3,632.8
169.4
2,539.4
141.1
2,608.8
154.6
1,848.1
133.5
1,240.3
(2,321.4)
(108.2)
(1,987.4)
(110.4)
(1,795.9)
(106.4)
(985.1)
(71.2)
(566.0)
1,066.6
969.5
–
547.0
547.1
49.7
45.2
–
25.5
25.5
353.4
512.1
(1.0)
210.2
213.6
19.6
28.4
(0.1)
11.7
11.9
637.8
745.5
–
452.1
452.0
(210.0)
(9.7)
(258.0)
(14.9)
(240.3)
(14.7)
37.8
44.2
776.8
735.2
56.1
53.1
–
(242.3)
(16.1)
26.8
26.8
558.9
487.0
–
42.6
35.2
–
632.3
552.5
(0.6)
358.9
359.7
(95.6)
4,450.9
230.6
4,147.1
220.1
3,941.5
223.4
3,726.2
249.3
1,143.8
434.2
2,874.4
1,372.4
639.6
21.9
332.3
17.2
423.4
23.5
401.5
26.7
367.8
151.0
2,738.5
147.2
2,788.4
159.4
2,568.8
172.2
1,357.5
102.6
69.5
32.2
1,309.5
431.4
67.9
22.4
1,144.1
432.4
63.5
24.0
1,200.9
361.2
80.0
24.1
180.8
142.9
14.0
11.1
101.1
(46.1)
51.5
45.0
–
29.2
29.3
(7.4)
86.1
28.5
581.4
302.4
28.5
14.1
95.7
352.0
5.4
19.6
360.3
363.0
22.2
21.5
668.0
381.6
48.3
27.6
375.2
30.6
(213.9)
(17.4)
(11.7)
(1.5)
(36.9)
(1.7)
29.6
1.7
(216.0)
(15.6)
140.8
11.5
Note 1: At 30 June 2012, Phoenix Platinum had not reached steady state production, therefore all income and expenditure was capitalised.
Note 2: Current assets at 30 June 2016 excluded non-current assets held for sale of ZAR1.3 million (GBP0,1 million), 30 June 2013, ZAR3.2 million (GBP0.2 million) and at
30 June 2012, ZAR169.6 million (GBP13.1 million).
Pan African Resources integrated annual report 2016
45
Five-year review continued
2016
2015
2014
2013
2012
ZAR
GBP
ZAR
GBP
ZAR
GBP
ZAR
GBP
ZAR
GBP
(%)
(Ratio)
(Ratio)
(Ratio)
(Ratio)
19.0
0.12
0.35
24.0
0.7
16.9
0.10
0.34
24.8
0.7
7.7
0.12
0.63
7.3
0.8
7.9
0.11
0.58
7.2
0.8
16.2
0.04
0.14
38.9
1.0
16.8
0.04
0.13
37.9
1.0
21.8
0.04
0.13
41.6
1.1
24.7
0.04
0.12
41.9
1.1
26.4
(0.19)
(0.46)
28.5
(0.19)
(0.44)
301.1
417.0
2.6
2.6
Key ratios
Return on shareholders’
funds
Net debt: equity ratio
Net debt: EBITDA
Interest cover
Current ratio
Statistics
Shares in issue (millions)
(Number)
1,943.2
Weighted average number
of shares in issue
(Number)
1,811.4
1,831.5
1,830.4
1,830.0
1,827.2
1,822.8
1,619.8
1,448.3
1,445.2
Earnings per share (EPS)
(Cents/pence)
30.20
1.41
11.48
0.64
24.74
1.47
34.51
2.63
24.83
2.02
Headline earnings per share
(HEPS)
(Cents/pence)
30.20
1.41
11.67
Net asset value (NAV)
(Cents/pence)
190.75
10.02
149.52
Dividends per share (DPS)
(Cents/pence)
11.47
(%)
(Ratio)
5.1
12.4
0.53
4.3
13.5
14.10
6.3
15.7
0.65
8.04
0.82
6.7
14.9
24.74
152.37
13.15
5.6
10.79
1.47
8.71
0.81
5.7
9.69
30.07
140.93
–
–
5.5
2.17
9.45
–
–
4.8
24.89
93.74
6.60
3.0
9.7
2.03
7.09
0.51
3.6
7.3
Dividend yield
Price earnings
Volume of shares traded
(millions)
Volume traded as
percentage of number
in issue
(Number)
650.7
461.6
573.2
527.9
435.5
199.8
760.3
459.2
606.9
424.2
(%)
33.5
25.5
31.3
28.8
23.8
10.9
41.7
25.2
41.9
29.3
Number of transactions
(Number)
35,926
20,784
29,855
21,221
28,498
11,496
30,814
16,121
21,827
13,593
Value of shares traded
(millions)
Traded prices
– last sale in year
– high
– low
– average price per
share traded
(Number) 1,540.6
58.2
1,266.7
64.3
1,029.6
28.3
1,762.4
74.4
1,342.6
60.2
(Cents/pence)
(Cents/pence)
(Cents/pence)
375.0
400.0
122.0
19.0
19.0
6.3
180.0
278.0
180.0
9.5
15.5
9.5
267.0
294.0
186.0
14.3
16.8
11.8
191.0
299.0
185.0
12.8
21.0
11.8
242.0
299.0
180.0
14.8
17.4
9.5
(Cents/pence)
225.0
12.4
222.3
12.2
236.0
14.2
233.0
16.2
218.0
14.2
46 Pan African Resources integrated annual report 2016
STRATEGIC REPORT:
PERFORMANCE REVIEW
Operational review and performance
Barberton Mines
Casper Strydom
General Manager
Historical overview
Barberton Mines consists of three mines: Fairview, Sheba
and New Consort and the BTRP. Fairview produces 50%
of Barberton Mines’ gold production with Sheba and New
Consort producing 30% and 20% respectively. Operating three
mines continues to provide fl exibility and versatility in terms of
resource allocation.
The mix of high grade ore from the mines is planned monthly to
maintain the targeted grade/tonnage profi le and gold production,
giving Barberton Mines the advantage of managing cash fl ows
from an early stage in the mining process. The operation
has a proven track record of consistently delivering a solid
performance, driven to a large extent by an embedded culture of
cost control.
The mining methods used are underground semi-mechanised
cut and fi ll by either up-dip or breast mining. An estimated 16%
to18% of gold is recovered by sweeping and vamping contractors
focusing on worked-out areas and mining high grade pillars.
Gold is extracted using the BIOX® gold extraction process, an
environmentally friendly process, which uses bacteria to release
gold from the sulphide ore.
Gold was originally discovered in the Barberton area in 1886
and comprises the sediments and metavolcanics within the
Barberton Greenstone Belt. Barberton Mines has therefore been
mined for over a century with current production practices now
embedded. Given the aged mine infrastructure, the operations
undergo ongoing maintenance and refurbishment.
Historically Barberton Mines’ relative isolation has spurred
creative engineering solutions, which contribute to its cost
control. Facilities established over the years, such as an
in-house workshop for maintenance of the mines’ fl eet not
only help control costs but also allow for in-house manufacture
or customisation of equipment. Barberton Mines has been
ISO 9001:2008 certifi ed for 10 years.
Pan African Resources integrated annual report 2016
47
HIGHLIGHTS
ld
ld i
Gold sold i
Gold sold increased by 7.1% to
increased b
113,281oz (2015: 105,776oz)
Remained one of the lowest-cost
producers in the South African
gold industry with an all-in cost
of R354,417/kg
CHALLENGES
ed depth of
Increase
Increased depth of mining at
Increase
Fairview resulting in increased
underground temperatures
Low grade at New Consort
operations
Operational review and performance continued
Barberton Mines continued
Gold sold
Ounces
120,000
110,000
100,000
90,000
80,000
70,000
60,000
50,000
2012
2013
2014
2015
2016
Underground Surface BTRP
Production statistics – Mining and surface
Tonnes
350,000
300,000
250,000
200,000
150,000
100,000
50,000
2012
2013
2014
2015
2016
Fairway Sheba Consort Vamping tonnes Head grade
Production statistics – BTRP
Tonnes
1,000,000
950,000
900,000
850,000
800,000
750,000
700,000
2.0
1.5
1.0
2014
2015
2016
BTRP BTRP head grade
48 Pan African Resources integrated annual report 2016
Sales and production
Overall Barberton Mines operation
(including BTRP)
Barberton Mines’ (including BTRP) gold
sold increased by 7.1% to 113,281oz
(2015: 105,776oz). The total combined ZAR
cash cost per kilogram increased marginally
to ZAR279,226/kg (2015: ZAR278,859/kg).
The combined USD cash costs per ounce
decreased by 21% to USD599/oz
(2015: USD758/oz).
Some challenges facing Barberton Mines
included a reduction in the grade at the
New Consort mining operations and
increased temperatures experienced at
the deeper levels of the Fairview mining
operation. The installation of a refrigeration
system is underway at Fairview and will be
in operation by the end of the 2017
fi nancial year.
Underground mining
Tonnes mined from underground mining
operations increased to 268,383t
(2015: 260,749t), while the head grade
improved to 11g/t (2015: 10.9g/t) which
resulted in improved gold sold of 84,690oz
(2015: 81,493oz).
Barberton Mines’ (excluding BTRP) ZAR cash
costs per kilogram terms increased by 4.7%
to ZAR323,799/kg (2015: ZAR309,289/kg),
whilst USD cash costs per ounce decreased
by 17.4% to USD694/oz (2015: USD840/oz).
BTRP
Tonnes processed by the BTRP reduced
marginally to 959,215t (2015: 971,627t). The
head grade of the Bramber tailings processed
increased to 1.7g/t (2015: 1.4g/t). The overall
recoveries were 54% (2015: 57%). This
resulted in the gold sold from the BTRP
increasing to 28,591oz (2015: 24,283oz) for
the year.
The BTRP’s ZAR cash costs decreased
by 16.7% to ZAR147,162/kg
(2015: ZAR176,734/kg) and USD cash
costs per ounce were USD315/oz
(2015: USD480/oz).
The BTRP remains one of the lowest-cost
producers in the gold industry.
11
10
9
8
STRATEGIC REPORT:
PERFORMANCE REVIEW
Cost of production
Barberton Mines’ cost of production
increased by 7.2% to ZAR983.7 million
(2015: ZAR917.4 million). The main cost
increases included salaries and wages (up
16.5%), predominantly due to an incremental
increase following multi-year wage
agreements, as well as higher production
incentives, following increased productivity
by the operations. Electricity costs
(up 10.8%) were well managed below
the 12.7% NERSA-approved increases.
Capital expenditure
Total capital expenditure at Barberton Mines
increased by 24.1% to ZAR139.7 million
(2015: ZAR112.6 million). Maintenance
capital expenditure of ZAR54.5 million
(2015: ZAR44.2 million) and development
capital expenditure of ZAR63.4 million
(2015: ZAR53.7 million) was incurred.
Expansion capital of ZAR21.8 million
(2015: ZAR14.7 million) comprised
ZAR8.1 million for completion of the
Eskom line extension to the BTRP and
ZAR13.7 million for the Royal Sheba
development at Sheba Mine. In the
prior fi nancial year Barberton Mines spent
ZAR14.7 million on the development of the
Fairview ventilation raise borehole project to
improve operating environment conditions.
Looking ahead
Three-shaft deepening at Fairview
operations remains a priority to increase
fl exibility and ultimately additional tonnages.
The management team remains committed
to improving the safety performance and
working with the DMR to reduce safety
stoppages.
Cash cost breakdown (excluding BTRP)
Cash cost breakdown (including BTRP)
2016
2016
51% Salaries
13% Mining
7% Processing
9% Engineering
11% Electricity
3% Security
6% Other
46% Salaries
12% Mining
16% Processing
7% Engineering
11% Electricity
3% Security
5% Other
2015
2015
48% Salaries
14% Mining
8% Processing
9% Engineering
11% Electricity
3% Security
7% Other
42% Salaries
12% Mining
19% Processing
8% Engineering
10% Electricity
3% Security
6% Other
Capital expenditure (including BTRP)
ZAR millions
350
300
250
200
150
100
50
0
2012
2013
2014
2015
2016
Development capital Maintenance capital BTRP
Pan African Resources integrated annual report 2016
49
Operational review and performance continued
Evander Mines
Band Malunga
General Manager
HIGHLIGHTS
Historical overview
Evander Mines exploits the Kimberley reef in the Evander
basin, part of the greater Witwatersrand basin. Mining methods
employed are underground conventional scraper mining and rail
bound equipment with some trackless mechanised development.
With 8 Shaft at a depth of 2.5km, it takes the workforce
approximately an hour to reach the mining area via a lift and
locomotive and two chairlifts. The rock is then hauled along
11 conveyors from the rock face to the bottom of 7 Shaft,
where it is hoisted to surface. The gold is extracted at
a CIL hybrid plant.
50 Pan African Resources integrated annual report 2016
ld
d b
ld i
i
Gold sold i
Gold sold increased by 30.8%
to 91,647oz (2015: 70,081oz)
primarily due to a turnaround in
production and an increase in head
grade
Underground head grade improved
to 5.7g/t (2015: 4.6g/t) largely due
to increased mining on 25 level on
8 Shaft
ETRP and associated surface
sources production increased to
18,151oz (2015: 16,336oz)
CHALLENGES
One fat
One fatality and safety
One fat
tality and sa
stoppages halting production
Legacy infrastructure requiring
maintenance
STRATEGIC REPORT:
PERFORMANCE REVIEW
Gold sold – underground and surface sources
Ounces
120,000
100,000
80,000
60,000
40,000
20,000
0
6
5
4
3
2
1
0
2012
2013
2014
2015
2016
Underground Surface ETRP
Production statistics – underground and surface sources
Tonnes
800,000
700,000
600,000
500,000
400,000
300,000
200,000
100,000
0
2012
2013
2014
2015
2016
Underground Surface Head grade – underground and surface
Note: All surface sources production is allocated to the ETRP from 1 March 2015.
Production statistics – ETRP
Tonnes
2,000,000
1,600,000
1,200,000
800,000
400,000
0
2015
2016
ETRP ETRP head grade
1.0
0.5
0
Pan African Resources integrated annual report 2016
51
Sales and production
For the year under review Evander Mines’
gold sold increased by 30.8% to 91,647oz
(2015: 70,081oz).
Underground mining
Underground tonnes milled increased by
6.9% to 408,281 (2015: 381,986t). The
increase in tonnes milled refl ects benefi ts
derived from investing and increased
maintaining the 8 Shaft infrastructure.
The head grade increased by 23.9% to 5.7g/t
(2015: 4.6g/t). Gold sold from underground
operations increased by 36.7% to 73,496oz
(2015: 53,746oz) due to the improved
tonnages mined and higher head grades
achieved.
Evander Mines’ (excluding ETRP) ZAR cash
costs per kilogram terms decreased by 6.4%
to ZAR445,078/kg (2015: ZAR475,338/kg),
whilst USD cash costs per ounce
decreased by 26.1% to USD954/oz
(2015: USD1,291/oz).
ETRP
The ETRP was in production for the full
fi nancial year compared to four months in the
prior year.
Evander Mines’ ETRP and associated surface
sources production increased by 11.1% to
18,151oz (2015: 16,336oz). In the prior year
surface sources of 9,813oz was reported
in mining and surface operations and for
comparability purposes included in the prior
year’s gold sold amounts for the ETRP.
The ETRP’s ZAR cash costs per
kilogram amounted to ZAR273,965/kg
(2015: ZAR266,453/kg), equating to
USD cash costs per ounce of USD587/oz
(2015: USD688/oz).
Cost of production
The total cost of production
(including off-mine costs) increased by
17.9% to ZAR1,172.2 million
(2015: ZAR993.8 million). The cost of
production includes additional costs in
relation to the new ETRP plant and related
surface feedstock of ZAR154.8 million
(2015: ZAR54.1 million). The cost of
production (excluding the ETRP costs)
therefore only increased by 8.3% to
ZAR1,017.4 million (2015: ZAR939.7 million).
The main cost increases included salaries
and wages (up 9.2%), predominantly due
to an incremental increase following a
multi-year wage agreement. Processing costs
(up 125.6%) increased due to the ETRP
being in production for the full fi nancial year.
Electricity costs (up 20.1%) increased due to
the 12.7% NERSA-approved increase and
the additional ETRP electricity costs incurred.
Capital expenditure
Total capital expenditure at Evander
Mines was ZAR153.8 million
(2015: ZAR238.2 million). Maintenance
capital expenditure was ZAR29.4 million
(2015: ZAR38.7 million) and development
capital expenditure was ZAR118.4 million
(2015: ZAR104.4 million). Expansion capital
of ZAR6.0 million (2015: ZAR95.1 million)
was spent on development of the 26 level
and for the prior year the expansionary
capital related to the completion of the
ETRP construction.
Looking ahead
There will be a review of the 18 to 24 level
vent shaft hoisting project to ascertain the
feasibility of using the current vent shaft for
hoisting ore. This will eliminate the use of the
current 4.2km conveyor belt system.
Operational review and performance continued
Evander Mines continued
Cash cost breakdown (excluding ETRP)
Cash cost breakdown (including ETRP)
2016
2016
50% Salaries and wages
8% Mining
6% Processing
9% Engineering and technical services
20% Electricity
2% Security
5% Other
44% Salaries and wages
7% Mining
17% Processing
8% Engineering and technical services
18% Electricity
1% Security
5% Other
2015
2015
50% Salaries and wages
13% Mining
4% Processing
7% Engineering and technical services
19% Electricity
1% Security
6% Other
48% Salaries and wages
12% Mining
9% Processing
6% Engineering and technical services
18% Electricity
1% Security
6% Other
Capital expenditure (including ETRP)
ZAR millions
250
200
150
100
50
0
2012
2013
2014
2015
2016
Development capital Maintenance capital ETRP
52 Pan African Resources integrated annual report 2016
STRATEGIC REPORT:
PERFORMANCE REVIEW
Phoenix Platinum
Bertin McLeod
Plant Manager:
Metallurgy
Historical overview
Phoenix Platinum recovers PGEs from CTRP located
on IFL’s Lesedi Mine. The Buffelsfontein, Elandskraal
and Kroondal mineral resources originate from
the mining of chromitite seams from the Bushveld
Igneous Complex. The Bushveld Igneous Complex
is host to the world’s largest deposits of PGEs. The
operation is expected to produce PGEs over a life of
mine of 9 years. It has a total process capacity of 360kt per
annum. The PGEs are extracted in the fl otation plant and the
toll
concentrate is delivered to Lonmin’s Mooi Nooi Smelter for toll
extraction. The CTRP was designed to treat sulphide material
from the Lesedi Mine, which is supplied to Phoenix Platinum
with sulphide-rich material, as a current arising.
HIGHLIGHTS
CHALLENGES
li d
Finalised a
Finalised an agreement with
TC Smelters Proprietary Limited to
restore plant conditions prior to the
business rescue proceedings
Proactively secured feedstock from
alternative suppliers
business res
IFMSA
IFMSA business rescue resulted
IFMSA
in loss of feedstock from Lesedi
Mine
Feedstock sourced from
alternative supplier was of a
lower grade
No tailings deposition facility
available while IFMSA was in
business rescue
Pan African Resources integrated annual report 2016
53
Operational review and performance continued
Phoenix Platinum continued
Sales and production
Phoenix Platinum’s operational performance
was negatively impacted by the curtailment
in current arisings from IFMSA’s Lesedi Mine,
due to IFMSA’s business rescue proceedings.
As a result, ounces sold decreased to
8,339oz (2015: 10,245oz). However, with the
new agreement in place between Pan African
Resources and TC Smelters Proprietary
Limited, tailings deposition onto the IFMSA
TSF resumed from June 2016. Phoenix
Platinum is now positioned to continue
operations under similar conditions to
those prior to the business rescue
proceedings. Phoenix Platinum secured
feedstock from alternative suppliers
(Elandskraal and Kroondal), however the
grade of feedstock was lower than that
received from Lesedi Mine.
Overall plant recoveries remained stable at
43% (2015: 44%).
The effective average ZAR PGE basket price
received decreased by 6.8% to ZAR8,952/oz
(2015: ZAR9,603/oz). Cost per ounce of
production increased to ZAR8,890/oz
(2015: ZAR6,621/oz) following the lower
ounce production. In USD terms the PGE
basket price received decreased by 26.5% to
USD617/oz (2015: USD839/oz). The USD
cash costs per ounce decreased by 6.1% to
USD613/oz (2015: USD578/oz).
Cost of production
The cost of production increased by 9.3% to
ZAR74.1 million (2015: ZAR67.8 million).
The main cost increases were salaries
and wages (up 2.9%), lower-than-average
infl ationary increases due to lower incentives
earned in line with the lower production
achieved, refi ning and processing increases
(up 10.8%) following additional transport
costs to move tailings material from the
Kroondal tailings site, and higher chrome
refi ning costs as a result of higher chrome
content in the concentrate dispatched
to Lonmin. Electricity costs (up 12.1%)
increased in line with the NERSA-approved
increase of 12.7%.
Capital expenditure
Total capital expenditure at Phoenix
Platinum increased to ZAR6.8 million
(2015: ZAR0.6 million) due to the installation
of a scrubber and high-energy agitation cells.
Looking ahead
Phoenix Platinum has invested in high-energy
agitation cells and a scrubber, which is
expected to signifi cantly improve throughput
and recoveries and ultimately lead to
improved ounces.
PGE ounces sold
Ounces
Production statistics
Tonnes and g/t
12,000
10,000
8,000
6,000
4,000
2,000
0
2013
2014
2015
2016
300,000
250,000
200,000
150,000
100,000
50,000
0
2013
2014
2015 2016
H
e
a
d
g
r
a
d
e
(
g
/
t
)
5
4
3
2
1
0
PGEs sold
Plant feed tonnes Head grade
54 Pan African Resources integrated annual report 2016
STRATEGIC REPORT:
PERFORMANCE REVIEW
Uitkomst Colliery
HIGHLIGHTS
Johan Gloy
General Manager
i d th
Acq ired th
Acquired the Uitkomst Colliery
operations on 31 March 2016
h Uitk
The operation produces yields of
high grade coal suitable for export
or metallurgical markets
Surplus demand for coal production
CHALLENGES
Volatile
Volatile coal market
Volatile
coal marke
Historical overview
The group assumed effective control over the Uitkomst Colliery
on 31 March 2016, which was followed by a smooth operational
integration process. This operation produces yields of high grade
coal suitable for export or metallurgical markets. In addition,
it produces approximately 30,000 to 35,000 tonnes of saleable
coal per month from its underground mining operation, with
approximately 23.3Mt of resources and a life of mine of 22 years.
Sales and production
The Uitkomst Colliery earnings for the period 1 April 2016 to
30 June 2016 were ZAR11.4 million. The coal plant was fed with
128,022t of coal and a total of 136,102t was sold. The coal sales were
higher than the coal feed due to coal acquired and sold that was not
processed through the plant.
Uitkomst Colliery contributed ZAR98 million to the group’s revenue
during the last quarter. The average revenue per tonne received was
ZAR720/t or USD48/t.
Managing coal seam heights
above 1.2 metres
Cost of production
Cost of production amounted to ZAR91.8 million which equated to
ZAR674/t or USD45/t for the period under review.
Operating costs
2016
8% Salaries and wages
38% Mining costs
20% Processing costs
11% Engineering and technical services
2% Electricity costs
5% Administration and other costs
16% Inventory adjustment
Capital expenditure
Capital expenditure incurred amounted to ZAR0.9 million.
Looking ahead
Identify and incorporate additional coal sources to fi ll the coal wash
plant’s surplus capacity, which will also meet the surplus demand
requirements for our coal in the area. The Uitkomst Colliery will
be reviewing options to possibly increase the coal production from
50,000t to 75,000t per month in the future.
In addition, the BEE transaction as noted on
concluded during the 2017 fi nancial year.
page 80 will be
Pan African Resources integrated annual report 2016
55
Operational production
Gold operations
Underground and
surface operations
Tailings operations
Total continuing operations
Year
ended
30 June
Units
Barberton
Mines
Evander
Mines
Total
BTRP
ETRP
Barberton
Mines
Total
Evander
Mines
Total
Group
Total
Tonnes milled –
underground
Tonnes milled –
surface (note 1)
Tonnes milled –
total underground
and surface
Tonnes processed –
tailings (note 2)
Tonnes processed –
surface feedstock
Tonnes processed
– total tailings and
surface feedstock
Tonnes milled and
processed – total
Head grade –
underground
Head grade –
surface
Head grade – total
underground and
surface
Head grade –
tailings
Head grade –
surface feedstock
Head grade – total
tailings and surface
feedstock
Head grade – total
Recovered grade
Overall recovery
– underground
operations
Overall recovery –
tailings operations
Gold production
– underground
operations
Gold production –
surface operations
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
(t)
(t)
(t)
(t)
(t)
(t)
(t)
(t)
(t)
(t)
(t)
(t)
(t)
(t)
(g/t)
(g/t)
(g/t)
(g/t)
(g/t)
(g/t)
(g/t)
(g/t)
(g/t)
(g/t)
(g/t)
(g/t)
(g/t)
(g/t)
(g/t)
(g/t)
(%)
(%)
(%)
(%)
(oz)
(oz)
(oz)
(oz)
258,405
408,281
666,686
254,673
381,986
636,659
9,978
6,076
–
9,978
266,223
272,299
268,383
408,281
676,664
260,749
648,209
908,958
–
–
–
–
–
–
–
–
–
–
–
–
258,405
408,281
666,686
254,673
381,986
636,659
9,978
6,076
–
9,978
266,223
272,299
268,383
408,281
676,664
260,749
648,209
908,958
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
959,215
1,445,044
959,215
1,445,044
2,404,259
971,627
507,444
971,627
507,444
1,479,071
–
–
396,942
139,723
–
–
396,942
396,942
139,723
139,723
959,215
1,841,986
959,215
1,841,986
2,801,201
971,627
647,167
971,627
647,167
1,618,794
268,383
408,281
676,664
959,215
1,841,986
1,227,598
2,250,267
3,477,865
260,749
648,209
908,958
971,627
647,167
1,232,376
1,295,376
2,527,752
11.0
10.9
1.2
1.4
10.7
10.7
–
–
–
–
–
–
10.7
10.7
9.8
9.7
92
91
–
–
5.7
4.6
–
1.1
5.7
3.2
–
–
–
–
–
–
5.7
3.2
5.6
3.0
98
97
–
–
7.8
7.1
1.2
1.1
7.7
5.3
–
–
–
–
–
–
7.7
5.3
7.3
5.0
95
93
–
–
84,428
73,496
157,924
81,315
53,746
135,061
262
178
–
9,813
262
9,990
–
–
–
–
–
–
1.7
1.4
–
–
1.7
1.4
1.7
1.4
0.9
0.8
–
–
54
57
–
–
–
–
–
–
–
–
–
–
0.3
0.3
1.3
1.1
0.5
0.5
0.5
0.5
0.3
0.3
–
–
46
54
–
–
–
–
11.0
10.9
1.2
1.4
10.7
10.7
1.7
1.4
–
–
1.7
1.4
3.7
3.3
2.9
2.7
92
91
54
57
5.7
4.6
–
1.1
5.7
3.2
0.3
0.3
1.3
1.1
0.5
0.5
1.5
1.8
1.3
1.7
98
97
46
54
7.8
7.1
1.2
1.1
7.7
5.3
0.9
1.0
1.3
1.1
0.9
1.0
2.2
2.6
1.8
2.2
95
93
52
56
84,428
73,496
157,924
81,315
53,746
135,061
262
178
–
9,813
262
9,990
56 Pan African Resources integrated annual report 2016
Gold production –
tailings operations
Gold production –
surface feedstock
Gold sold (note 2)
Average ZAR gold
price received
Average USD gold
price received
ZAR cash cost
ZAR all-in sustaining
cost
ZAR all-in cost
USD cash cost
USD all-in sustaining
cost
USD all-in cost
ZAR cash cost per
tonne (note 3)
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
STRATEGIC REPORT:
PERFORMANCE REVIEW
Underground and
surface operations
Tailings operations
Total continuing operations
Year
ended
30 June
Units
Barberton
Mines
Evander
Mines
Total
BTRP
ETRP
Barberton
Mines
Total
Evander
Mines
Total
Group
Total
35,315
26,776
11,427
4,029
(oz)
(oz)
(oz)
(oz)
(oz)
(oz)
–
–
–
–
–
–
–
–
–
–
–
–
28,591
24,283
–
–
6,724
2,494
11,427
4,029
28,591
24,283
–
–
6,724
2,494
11,427
4,029
84,690
81,493
73,496
158,186
63,558
145,051
28,591
24,283
18,151
113,281
91,647
204,928
6,523
105,776
70,081
175,857
(ZAR/kg)
544,618
539,202
542,102
547,862
541,483
545,437
539,654
542,850
(ZAR/kg)
446,246
447,474
446,784
447,387
430,797
446,508
445,922
446,274
(USD/oz)
(USD/oz)
1,167
1,212
1,156
1,216
1,162
1,214
1,174
1,215
1,161
1,113
1,169
1,213
1,156
1,216
1,164
1,212
(ZAR/kg)
323,799
445,078
380,150
147,162
273,965
279,226
411,168
338,242
(ZAR/kg)
309,289
475,338
382,048
176,734
266,453
278,859
455,896
349,410
(ZAR/kg)
413,422
526,817
466,109
155,080
275,661
348,231
477,044
405,847
(ZAR/kg)
375,914
532,767
444,644
185,280
266,453
332,151
507,980
402,221
(ZAR/kg)
418,628
529,438
470,114
164,168
275,661
354,417
479,145
410,206
(ZAR/kg)
382,620
539,315
451,280
185,280
735,262
337,317
557,553
425,084
(USD/oz)
(USD/oz)
(USD/oz)
(USD/oz)
(USD/oz)
(USD/oz)
(ZAR/t)
(ZAR/t)
694
840
886
1,021
897
1,039
3,178
3,006
131.6
109.3
954
1,291
1,129
1,447
1,135
1,465
2,492
1,450
153.8
143.1
815
1,038
999
1,208
1,008
1,226
2,764
1,896
285.4
252.5
Capital expenditure
(note 4)
2016
(ZAR million)
2015
(ZAR million)
Revenue
2016
(ZAR million)
1,434.6
1,232.6
2,667.2
2015
(ZAR million)
1,131.1
884.6
2,015.7
Cost of production
2016
(ZAR million)
2015
(ZAR million)
852.9
783.9
1,017.4
1,870.3
939.7
1,723.6
All-in sustainable
cost of production
All-in cost of
production
Adjusted EBITDA
(note 5)
Average exchange
rate
2016
(ZAR million)
1,089.0
1,204.3
2,293.3
2015
(ZAR million)
952.8
1,053.2
2,006.0
2016
(ZAR million)
1,102.7
1,210.3
2,313.0
2015
(ZAR million)
2016
(ZAR million)
2015
(ZAR million)
2016
2015
(ZAR/USD)
(ZAR/USD)
969.8
422.4
301.8
14.51
11.45
1,066.2
2,036.0
204.3
32.4
14.51
11.45
626.7
334.2
14.51
11.45
315
480
332
503
352
503
136
137
8.1
3.3
487.2
337.9
130.8
133.5
137.9
139.9
145.9
139.9
307.4
203.7
14.51
11.45
587
688
591
688
591
1,899
84
84
–
95.1
305.7
87.4
154.8
54.1
155.7
54.1
155.7
149.2
153.3
15.0
14.51
12.04
599
758
746
902
760
916
801
744
139.7
112.6
881
1,238
1,023
1,380
1,027
1,515
521
767
153.8
238.2
725
949
870
1,093
879
1,155
620
756
293.5
350.8
1,921.8
1,538.3
3,460.1
1,469.0
972.0
2,441.0
983.7
917.4
1,172.2
2,155.9
993.8
1,911.2
1,226.9
1,360.0
2,586.9
1,092.7
1,107.3
2,200.0
1,248.6
1,366.0
2,614.6
1,109.7
1,215.4
2,325.1
729.8
505.5
14.51
11.45
357.6
1,087.4
47.4
14.51
11.45
552.9
14.51
11.45
Note 1: Surface source tonnes allocated to ETRP from 1 March 2015.
Note 2: ETRP production for January and February 2015 was capitalised according to IAS 16 (204,024t producing 17kg gold).
Note 3: Split between ETRP and surface feedstock cost per tonne is R44.92/t and R220.25/t respectively, averaging at R84/t.
Note 4: Included in Evander Mines capital for the prior year is an amount of ZAR95.1 million relating to the construction of the ETRP.
Note 5: Adjusted EBITDA is represented by earnings before interest, taxation, depreciation and amortisation, impairments and loss on disposal of associate.
Pan African Resources integrated annual report 2016
57
Operational production continued
PGE operations
Tonnes processed – tailings
Head grade – tailings
Overall recovery
PGE sold
Average ZAR PGE price received
Average USD PGE price received
ZAR cash cost
ZAR all-in sustaining cost
ZAR all-in cost
USD cash cost
USD all-in sustaining cost
USD all-in cost
ZAR cash cost per tonne
Capital expenditure
Revenue
Cost of production
All-in sustainable cost of production
All-in cost of production
Adjusted EBITDA (note 1)
Average exchange rate
Year
ended
30 June
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
Units
(t)
(t)
(g/t)
(g/t)
(%)
(%)
(oz)
(oz)
(oz)
(oz)
(USD/oz)
(USD/oz)
(ZAR/oz)
(ZAR/oz)
(ZAR/oz)
(ZAR/oz)
(ZAR/oz)
(ZAR/oz)
(USD/oz)
(USD/oz)
(USD/oz)
(USD/oz)
(USD/oz)
(USD/oz)
(ZAR/t)
(ZAR/t)
(ZAR million)
(ZAR million)
(ZAR million)
(ZAR million)
(ZAR million)
(ZAR million)
(ZAR million)
(ZAR million)
(ZAR million)
(ZAR million)
(ZAR million)
(ZAR million)
(ZAR/USD)
(ZAR/USD)
Tailings
operations
Phoenix
Platinum
248,981
262,119
3.08
3.31
43
44
8,339
10,245
8,952
9,603
617
839
8,890
6,621
10,113
7,016
10,600
7,016
613
578
697
613
731
613
298
259
6.8
0.6
74.7
98.4
74.1
67.8
84.3
71.9
88.4
71.9
(4.8)
27.7
Total
248,981
262,119
3.08
3.31
43
44
8,339
10,245
8,952
9,603
617
839
8,890
6,621
10,113
7,016
10,600
7,016
613
578
697
613
731
613
298
259
6.8
0.6
74.7
98.4
74.1
67.8
84.3
71.9
88.4
71.9
(4.8)
27.7
14.51
11.45
14.51
11.45
Note 1: Adjusted EBITDA is represented by earnings before interest, taxation, depreciation and amortisation, impairments and loss on disposal of associate.
58 Pan African Resources integrated annual report 2016
STRATEGIC REPORT:
PERFORMANCE REVIEW
Coal operations
Tonnes processed – underground
Tonnes processed – coal acquired
Tonnes processed – total underground and acquired
Tonnes – total
Yield
Coal washed – underground and acquired
Coal traded – no processing required
Coal sold
Average ZAR coal price received
Average USD coal price received
ZAR cash cost
ZAR all-in sustaining cost
ZAR all-in cost
USD cash cost
USD all-in sustaining cost
USD all-in cost
Capital expenditure
Revenue
Cost of production
All-in sustainable cost of production
All-in cost of production
Adjusted EBITDA (note 1)
Average exchange rate
Three months
ended
30 June
Units
Total
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
(t)
(t)
(t)
(t)
(t)
(t)
(t)
(t)
(%)
(%)
(t)
(t)
(t)
(t)
(t)
(t)
(ZAR/t)
(ZAR/t)
(USD/t)
(USD/t)
(ZAR/t)
(ZAR/t)
(ZAR/t)
(ZAR/t)
(ZAR/t)
(ZAR/t)
(USD/t)
(USD/t)
(USD/t)
(USD/t)
(USD/t)
(USD/t)
(ZAR million)
(ZAR million)
(ZAR million)
(ZAR million)
(ZAR million)
(ZAR million)
(ZAR million)
(ZAR million)
(ZAR million)
(ZAR million)
(ZAR million)
(ZAR million)
(ZAR/USD)
(ZAR/USD)
128,022
–
38,354
–
166,376
–
166,376
–
68.3
–
113,634
–
22,468
–
136,102
–
720
–
48
–
674
–
657
–
657
–
45
–
44
–
44
–
0.9
–
98.0
–
91.8
–
89.4
–
89.4
–
10.8
–
15.01
–
Note 1 – Adjusted EBITDA is represented by earnings before interest, taxation, depreciation and amortisation, impairments and loss on disposal of associate.
Pan African Resources integrated annual report 2016
59
Abridged Mineral Resources
and Mineral Reserves report
The 2016 Abridged Mineral Resources and Mineral Reserves Report (MR&MR)
is available on the company’s website at
www.panafricanresources.com.
A summary of the report including the group mineral resource and reserve
statement as at 30 June 2016 has been provided in this report.
Gold
Relationship between exploration results, mineral resources and mineral reserves showing
Pan African Resources’ attributable resources and reserves as at 30 June 2016.
EXPLORATION RESULTS
RESOURCES
Total 34.9Moz Au
Inferred
12.3Moz Au
Indicated
20.4Moz Au
Measured
2.2Moz Au
RESERVES
Total 10.0Moz Au
Probable
8.7Moz Au
Proved
1.3Moz Au
PGEs 4E*
Relationship between exploration results, mineral resources and mineral reserves showing
Pan African Resources’ attributable resources and reserves as at 30 June 2016.
EXPLORATION RESULTS
RESOURCES
Total 0.6Moz PGEs 4E
Inferred
0.4Moz PGEs 4E
Indicated
0.1Moz PGEs 4E
Measured
0.1Moz PGEs 4E
RESERVES
Total 0.2Moz PGEs 4E
Probable
0.1Moz PGEs 4E
Proved
0.1Moz PGEs 4E
* PGEs 4E are stated as PGE 4E (Pt, Pd, Au, Rh).
Coal
Relationship between exploration results and mineral resources showing Pan African
Resources’ attributable resources as at 30 June 2016.
EXPLORATION RESULTS
RESOURCES
Total 23.3Mt
Inferred
4.0Mt
Indicated
4.3Mt
Measured
15.0Mt
RESERVES
Total 12.6Mt
Probable
2.8Mt
Proved
9.8Mt
Scope of report
This version of the Pan African Resources
Mineral Resources and Mineral Reserves
Report 2016 (MR&MR) conforms to the
standards determined by the South African
Code for the Reporting of Exploration
Results, Mineral Resources and Mineral
Reserves (the SAMREC Code, 2007 edition)
and forms part of Pan African Resources’
integrated annual report including the
annual fi nancial statements for the year
ended 30 June 2016. The entire suite
of documents is available in full on
www.panafricanresources.com.
The mineral resource is inclusive of the
mineral reserve component, unless otherwise
stated. Information is presented either by
operation, mine or project, as indicated.
The tables and graphs used to illustrate
developments across the operations of
Pan African Resources in FY16 include:
• Mineral resources tables by commodity
• Mineral reserves modifying factors
• Mineral reserves tables by commodity
• A comparison of the mineral reserves
and mineral resources estimates with the
previous year together with explanations of
material differences
• Appointed competent persons.
Matters on which detail is provided in this
version include regional geology, location,
exploration drilling organic ore reserve
projects, type of mining, production fi gures
and mineral tenure.
Reporting Code
The guiding principle in the MR&MR is to
ensure integrity, transparency and materiality
in informing all stakeholders on the status of
the group’s mineral asset base. Pan African
Resources uses the SAMREC Code, which
sets out the internationally recognised
procedures and standards for reporting
Mineral Resources and Mineral Reserves
in South Africa, developed by the South
African Institute of Mining and Metallurgy as
the recommended guideline for reserve and
resource reporting for JSE-listed companies.
Distinct effort has also been made to comply
with AIM Rules for Mining and Oil and Gas
Companies of the London Stock Exchange.
60 Pan African Resources integrated annual report 2016
STRATEGIC REPORT:
PERFORMANCE REVIEW
The guiding principle in the MR&MR
The guiding principle in the MR&MR
is to ensure integrity, transparency
is to ensure integrity, transparency
and materiality in informing all
and materiality in informing all
stakeholders on the status of the
stakeholders on the status of the
group’s mineral asset base; also
group’s mineral asset base; also
informing our life of mine planning
informing our life of mine planning
and the sustainable future of
and the sustainable future of
Pan African Resources.
Pan African Resources.
Barry Naicker
Group Mineral
Resource Manager
Reporting in compliance with
SAMREC Code
To meet the requirement of the South
African Code for the Reporting of
Exploration Results, Mineral Resources and
Mineral Reserves (SAMREC Code) that the
material reported as a Mineral Resource
should have “reasonable and realistic
prospects for eventual economic extraction”,
Pan African Resources has determined an
appropriate cut-off grade which has been
applied to the quantifi ed mineralised body.
In determining the cut-off grade, Pan African
Resources uses a gold price of ZAR550,000/kg.
At our underground mines, the optimal
cut-off is defi ned as the lowest grade at
which an orebody can be mined to maximise
total profi ts, under a specifi ed set of mining
parameters. The mineral resource optimiser
tool developed in-house was applied to the
mineral resource inventory.
The optimiser programme requires the
following inputs to convert the mineral
resource to the mineral reserve:
• The on-mine database inventory of all
mineral resource blocks
• An assumed gold price – ZAR450,000/kg
• Planned production rates for each mine
• Mine call factor (MCF)
• Plant recovery factors
• Historical cash operating costs and other
effi ciency factors.
The mineral reserves represent that portion
of the Measured and Indicated Mineral
Resources above cut-off in the LOM plan,
and have been estimated after considering
the modifying factors affecting extraction.
A range of disciplines has been involved at
each mine in the life of mine planning process
including geology, surveying, planning, mining
engineering, rock engineering, metallurgy,
fi nancial management, human resources
management and environmental management.
Note: mineral resources are inclusive of the
mineral reserve, unless otherwise stated.
Rounding of numbers contained in this
report may result in minor computational
discrepancies.
Competent person
The competent person for Pan African
Resources, Mr Barry Naicker, the group
Mineral Resource Manager, signs off the
MR&MR for the group and has reviewed and
nd
approved the information contained in this
announcement in writing. He is a member
of the South African Council for Scientifi c
Professions (400234/10). Mr Naicker has
15 years of experience in economic geology
gy
and mineral resource management.
He is based at 1st Floor, The Firs, corner
Cradock and Biermann Avenues,
Rosebank 2196, Gauteng.
Pan African Resources integrated annual report 2016
61
Abridged Mineral Resources and Mineral Reserves report continued
Strategy
Pan African Resources has an exceptional asset base and attractive growth opportunities, in both
established projects and brownfi eld exploration prospects. Strategy in this regard is based on
global best practice in mineral resource management (MRM) to aggressively explore and develop
projects that will become next generation long-term business units.
The MRM framework aims at optimally exploiting the group’s mineral inventory ethically and responsibly. Best practices are aligned
to mitigate risks, ensuring longevity and sustainable operations. A range of disciplines has been involved at each mine in the life of
mine planning process including geology, surveying, planning, mining engineering, rock engineering, metallurgy, fi nancial management,
human resources management and environmental management. PAR has the legal entitlement to the minerals being reported
and PAR is unaware of any material risks and legal proceedings that could impact the MR&MR declared in this report.
Highlights
• Positive pre-feasibility study (PFS) of the Elikhulu tailings retreatment project, the company mandated
DRA Projects Proprietary Limited to conduct a defi nitive feasibility (DFS) study on the project. The study will be
completed by November 2016
• 3.0Moz or 9.4% gross annual increase in group gold resources to 34.9Moz (2015: 31.9Moz)
• Down dip extension of the high grade 11 Block of the MRC orebody by a further 70 metres
• This extension to the MRC orebody resulted in additional mineral reserves at Fairview Mine, thereby extending
the life of mine of Barberton Mines to 22 years
• Positive grade/tonnage profi le for the 25 – 26 levels at Evander 8 Shaft, thereby maintaining the life of mine
of Evander Mines to 16 years
• Surface exploration drilling commenced at Evander Mines targeting the 2010 Payshoot orebody
• 23.3Mt of mineable tonnage in situ coal from Uitkomst Colliery
The evolution of a project from initial testing to commissioning can take 12 to 18 months or longer, and involves a series of study stages to
reach investment approval and implementation.
We distinguish the group from our peers by having a clear focus on growth and only mining resources that must be profi table in all parts of the
price cycle, in order to deliver long-term economic value to Pan African Resources. The graph below demonstrates the group’s mineral assets within
the value chain and how value is released through acquisitions and projects such as BTRP, Elikhulu, ETRP, Royal Sheba and Uitkomst Colliery.
EXPLORATION
DEVELOPMENT
PROJECT
MINE CONSTRUCTION
MINE
PRODUCTION
Mineral
Resources
Reconnaissance
Inferred
Proved
Probable
Measured
Indicated
Evander 7 Shaft
No.3 Decline
Royal Sheba
2010 Payshoot
Rolspruit
Poplar
Elikhulu
Evander 9 Shaft A Block
Evander South
Mineral
Reserves
Barberton Mines
Evander 8 Shaft
Phoenix Platinum
BTRP
ETRP
Uitkomst Colliery
DESKTOP STUDY
DISCOVERY
FEASIBILITY
STUDY
PROJECT
COMMISSIONING
E
U
L
A
V
T
C
E
J
O
R
P
62 Pan African Resources integrated annual report 2016
STRATEGIC REPORT:
PERFORMANCE REVIEW
Progress
Sustainable
Progress
Substantially achieved
Moderate progress
Not achieved
Mineral Resource Gold 34.9Moz, PGEs 0.6Moz, Coal 23,3Mt
Organic growth projects: Evander Shaft 8 – 26 level,
Fairview Mine – MRC orebody and Royal Sheba
Brownfi eld projects: Elikhulu PFS completed now progressing
with DFS, 2010 Payshoot – surface exploration drilling in
progress, Evander 9 Shaft A Block and Rolspruit
Accretive acquisitions
Profi table
High grade/low cost producer
Barberton Mines: 11.0g/t*
Evander Mines: 5.7g/t*
Phoenix Platinum: 3.7g/t*
* Head grade
Uitkomst Colliery – high grade thermal coal
Attributable profi t
Earnings per share
A working strategy
This strategy includes:
• Improving the conversion of mineral
resources to mineral reserves by accessing,
developing and exploiting underground
orebodies and surface assets
• Unlocking the value of major organic
projects
• Identifying new expansion opportunities
to sustain growth.
Stakeholders
Mineral tenure secured
Progress
Growth
Progress
Mineral Reserve Gold 10.0Moz, PGEs 4E 0.2Moz, Coal 12.6Mt
Compliance with all relevant South African labour legislation
Cash-generative
Compliance with MPRDA, Mining Charter and implementation
of social and labour plans
Proactive, strong relationships with regulators, organised labour
and communities
Attractive dividend
Continual low cash cost gold production
Barberton Mines – 22*
Evander Mines – 16*
Phoenix Platinum – 9*
BTRP – 14*
ETRP – 16*
Uitkomst Colliery – 22*
* Life of mine – years
Pan African Resources integrated annual report 2016
63
Abridged Mineral Resources and Mineral Reserves report continued
Highlights
In the context of achieving our vision, the MR&MR report encompasses our
four strategic pillars as below:
High grade/low cost
Barberton Mines 11.0g/t*
producer
ETRP
Evander Mines
5.7g/t*
Phoenix Platinum 3.7g/t*
P
ROFIT A B
E
L
Evander Mines
* Head grade
Mineral Resources
Gold 34.9Moz up 9.4%
PGEs 0.6Moz
Coal 23.3Mt
Organic growth projects
Barberton Mines – MRC orebody extension,
Royal Sheba and Evander Shaft 8 – 26 level
Brownfi eld projects
Rolspruit, 2010 Payshoot, Evander 9 Shaft A Block
DFS on Elikhulu to be
completed by November 2016
2010 Payshoot – surface exploration
drilling in progress
S
USTAI N A B
L E
S
T
AKEHO L D E R S
Mineral tenure
Stakeholder engagement
Longevity in operations
Local economic development
Organised labour
Mineral Reserves
Life of mine
Gold 10.0Moz down 3.8%
Barberton Mines
22 years
GROW T H
PGEs 0.2Moz
Coal 12.6Mt
Life of mine increased
Evander Mines
16 years
Phoenix Platinum
9 years
BTRP
ETRP
14 years
16 years
Uitkomst Colliery
22 years
64 Pan African Resources integrated annual report 2016
STRATEGIC REPORT:
PERFORMANCE REVIEW
Gold
Group gold Mineral Resources
The group’s attributable gold mineral resources increased from 31.9 million ounces (Moz) in
June 2015 to 34.9Moz in June 2016, equating to an annual increase of 3.0Moz, or 9.4%. This
increase can be attributed to additional resources estimated for the Elikhulu project at Evander
Mines and a higher gold price used for the declaration of the group’s gold mineral resource.
Group gold % changes during 2016
Mineral Resources
Contained gold
9.4%
As at 30 June 2016
Category
Mineral Resource
Pan African Resources
Measured
Indicated
Inferred
Total
Tonnes
million
6.6
261.3
69.4
337.3
Grade
g/t
10.27
2.42
5.56
3.22
Tonnes
67.8
633.5
386.0
1 087.3
Moz
2.2
20.4
12.3
34.9
Group gold Mineral Reserves
The group’s attributable mineral reserves decreased from 10.4Moz in June 2015 to 10.0Moz in
June 2016 – an annual decrease of 0.4Moz, or 3.8%.
As at 30 June 2016
Category
Mineral Reserve
Pan African Reserves
Proved
Probable
Total
Tonnes
million
5.0
77.3
82.3
Grade
g/t
7.78
3.51
3.71
Contained gold
Tonnes
38.8
271.8
310.6
Moz
1.3
8.7
10.0
The decrease in the group’s gold mineral reserve can be attributed to mining depletion during the
year under review.
Mineral Reserves
(3.8%)
Platinum Group Elements (PGEs 4E)
Group PGEs 4E Mineral Resources
The group’s attributable PGEs 4E mineral resources did not change materially for the year under
review.
Contained PGEs 4E
Group – PGEs 2016 (%)
Mineral Resources
As at 30 June 2016
Category
Mineral Resource
Pan African Resources
Measured
Indicated
Inferred
Total
Tonnes
million
1.4
1.3
3.5
6.2
Grade
g/t
2.43
2.65
3.65
3.16
Tonnes
Moz
0%
3.4
3.4
12.6
19.0
0.1
0.1
0.4
0.6
Group PGEs 4E Mineral Reserves
The group’s attributable PGEs 4E mineral reserves decreased from 0.5Moz in June 2015 to 0.2Moz in
June 2016 – an annual decrease of 0.3Moz or 60%. This decrease is attributed to the exclusion of the
mineral reserves from the Lesedi Mine, current arisings. Following IFM being placed in business rescue,
the PGEs 4E mineral reserves at Phoenix Platinum declined year-on-year by 0.3Moz.
Mineral Reserves
As at 30 June 2016
Category
Mineral Reserve
Pan African Reserves
Proved
Probable
Total
Tonnes
million
1.4
1.3
2.7
Grade
g/t
2.43
2.65
2.54
Contained PGEs 4E
Tonnes
Moz
(60%)
3.4
3.4
6.8
0.1
0.1
0.2
Pan African Resources integrated annual report 2016
65
Abridged Mineral Resources and Mineral Reserves report continued
Coal
Group coal Mineral Resources
The group’s attributable coal mineral resource was declared as 23.3Mt as at June 2016.
Resources
Raw coal qualities (ad)
Class
MTIS (Mt)
Measured
Indicated
Inferred
Total
Class
Proved
Probable
Total
15.0
4.3
4.0
23.3
Reserves
MTIS (Mt)
9.8
2.8
12.6
RD
1.50
1.51
1.50
Yield
%
73.9
76.2
IM
%
2.5
2.5
2.4
IM
%
2.7
2.8
Ash
%
23.5
23.8
23.4
VM
%
24.3
23.9
23.4
FC
%
49.8
49.8
50.9
Run of mine qualities (12% ash product)
Ash
%
12.0
12.0
VM
%
28.0
27.5
FC
%
57.3
57.8
CV
MJ/kg
24.75
24.62
25.02
CV
MJ/kg
28.96
29.00
TS
%
1.23
1.14
1.03
TS
%
0.96
0.97
MTIS – mineable tonnes in situ | RD – relative density | IM – inherent moisture | FC – fi xed carbon | CV – calorifi c value | TS – total sulphur
Group organic growth
Current exploration drilling as well as accessing and developing of our orebodies were maintained during the year. The strategy of converting
mineral resource to mineral reserve was progressed by moving organic projects further up the mining value chain towards commissioning.
The tables below refl ect the progress of near-mine growth projects that have contributed ounces to the mineral resource for the year.
Group: Exploring the orebody – exploration drilling
Operation
Barberton Mines
Evander Mines
Total
metres
Number of
boreholes
Average
channel
width
cm
Number of
intersections
above
cut-off
Average
grade
g/t
Total
expenditure
Rm
9,916
567
118
9
146
27
50
1
17.46
16.20
7.0
0.6
Exploration drilling projects at Barberton Mines yielded positive results on all three operations (see table on
page 67).
• At Fairview Mine, exploration drilling confi rmed a further 70m down-dip extension of the MRC orebody with a high-grade intersection of
125.8b0g/t over 680cm. The depth extent of this orebody is open-ended.
66 Pan African Resources integrated annual report 2016
STRATEGIC REPORT:
PERFORMANCE REVIEW
Recent borehole results are detailed below:
Borehole number
Fairview Mine Bh 5951
Sheba Mine Bh SWR 15
New Consort Bh 14L19
New Consort Bh 33C2
Group: Accessing the orebody – on-reef development
Operation
Barberton Mines
Evander Mines
Barberton Mines: Developing the orebody – capital ore reserve projects
Project
Sheba Mine – pillar development
Sheba Mine – Edwin Bray to Thomas and Joe’s Luck area
Fairview Mine – 11 Level Royal Reef
Fairview Mine– 1# ore reserve opening
Fairview Mine – 3 Shaft deepening
Fairview Mine – 64-68 Level
Sheba Mine – Western Cross
Royal Sheba
Consort – 33-45PC
Consort – MMR pillar development
8 – 3 #
Evander Mines: Developing the orebody – capital ore reserve projects
Project
2 Decline 24–25 Level
25 A block ventilation
Channel
width
cm
680
100
100
100
Total
on-reef
development
m
926
330
Year end
30 June
2016
m
Year end
30 June
2015
m
Year end
30 June
2014
m
Grade
g/t
125.80
28.90
22.80
17.00
Average
grade
g/t
4.41
41.59
Potential
resource
oz
540
27
–
131
64
581
133
189
387
–
17
824
5
–
84
26
447
295
165
258
–
327
23,599
351
13,246
171
17,000
–
14,821
154
1,600
–
860,766
295
32,022
71
206,750
–
10,000
193
173 (new target area)
900
253
Year end
30 June
2016
m
356
87
Year end
30 June
2015
m
904
10
Year end
30 June
2014
m
686
925
Potential
resource
oz
1,200,000
Pan African Resources integrated annual report 2016
67
Abridged Mineral Resources and Mineral Reserves report continued
Group growth projects
Elikhulu
Following receipt of a positive PFS of the Elikhulu tailings retreatment project, the company has mandated DRA Projects Proprietary Limited to
conduct a DFS on the project. The results of the study will be completed by November 2016, after which shareholders will be apprised.
In March 2016, SRK independently estimated the mineral resource of the Elikhulu project at 178.7Mt @ 0.29g/t (1.7Moz).
2010 Payshoot
A surface exploration drilling programme was initiated during the year to defi ne additional mineral resources for the 2010 Payshoot orebody.
The 2010 Payshoot is a secondary payshoot originating from the main Kinross Payshoot and can be accessed from the No.3 decline at
Evander Mines 7 Shaft. Previous surface holes in this area delivered results up to 36.04g/t over a Kimberley reef width of 49cm. The potential
mineral resource of the 2010 Payshoot is estimated at 6.3Mt @ 10.82g/t (2.2Moz).
The company’s current generic growth projects are summarised below:
Evander Mine projects
Elikhulu
2010 Payshoot
Category
Resource
Resource
Tonnes
million
178.7
6.3
Grade
g/t
0.29
10.82
Ounces
Moz
Depth below
surface
m
1.7
2.2
On surface
1,800 – 2,500
Z-400
Z-400
1
6
.
1
m
8 7 . 0 0 0
00110
- 6 0 d 0 m 0 . 0 s
1 7 0 d 0 m 0 . 0 s
6 2 . 1 9 0 1 / 0 1 / 0 1 : 5 8 4 9
5 8 4 9
6 2 . 1 9 0 1 / 0 1 / 0 1
F v _ s u l
F V W B o r e h o l e s
00122 01
f o n t 0 0 1
00110
8 7 . 0 0 0
- 6 0 d 0 m 0 . 0 s
1 7 0 d 0 m 0 . 0 s
6 2 . 1 9 0 1 / 0 1 / 0 1 : 5 8 4 9
5 8 4 9
6 2 . 1 9 0 1 / 0 1 / 0 1
F v _ s u l
F V W B o r e h o l e s
00122 01
f o n t 0 0 1
35°
1 4 5 . 9 2
00110
- 7 9
6 6 . 5
- 5 0 2 . 1 9
4 6 4 3 9 . 3 4 2 8
- 1 1 7 1 0 . 8 4 3 2
2 0 1 1 / 1 0 / 1 2
S Z
N M R T
5 8 6 4
1 9 0 1 / 0 1 / 0 1
6 2
F v _ s u l
f o n t 0 0 1
0 . 0 0 0
- 7 8 d 4 8 m 0 . 0 s
00122 01
6 6 d 3 0 m 0 . 0 s
6 2 . 1 9 0 1 / 0 1 / 0 1 : 5 8 6 4
5 8 6 4
6 2 . 1 9 0 1 / 0 1 / 0 1
F v _ s u l
F V W B o r e h o l e s
00122 01
f o n t 0 0 1
00110
1 4 5 . 9 2
- 7 9
6 6 . 5
- 5 0 2 . 1 9
4 6 4 3 9 . 3 4 2 8
- 1 1 7 1 0 . 8 4 3 2
2 0 1 1 / 1 0 / 1 2
S Z
N M R T
5 8 6 4
1 9 0 1 / 0 1 / 0 1
6 2
F v _ s u l
0 . 0 0 0
- 7 8 d 4 8 m 0 . 0 s
6 6 d 3 0 m 0 . 0 s
6 2 . 1 9 0 1 / 0 1 / 0 1 : 5 8 6 4
5 8 6 4
6 2 . 1 9 0 1 / 0 1 / 0 1
F v _ s u l
F V W B o r e h o l e s
1 5 5 . 1 3 0
00110
- 5 5 d 0 m 0 . 0 s
5 8 d 0 m 0 . 0 s
6 4 . 1 9 0 1 / 0 1 / 0 1 : 5 8 1 6
5 8 1 6
6 4 . 1 9 0 1 / 0 1 / 0 1
F v _ s u l
F V W B o r e h o l e s
00122 01
f o n t 0 0 1
00110
1 5 5 . 1 3 0
- 5 5 d 0 m 0 . 0 s
5 8 d 0 m 0 . 0 s
6 4 . 1 9 0 1 / 0 1 / 0 1 : 5 8 1 6
5 8 1 6
6 4 . 1 9 0 1 / 0 1 / 0 1
F v _ s u l
F V W B o r e h o l e s
00122 01
f o n t 0 0 1
(cid:125)
3
2
4
2
2
5 . 3 ; 0 . 8
9 . 2 ; 0 . 8
6 . 0 ; 0 . 8
9 . 6 ; 0 . 9
7 . 2 ; 0 . 8
4 . 3 ; 0 . 8
9 . 2 ; 0 . 9
8 . 6 ; 0 . 8
2 . 8 ; 0 . 8
7 . 5 ; 0 . 8
2 . 3 ; 0 . 8
1 . 2 ; 0 . 9
4
2
5
3
1
5
2
6
4
1
;
2
1 .
8
0 .
.5
1
0
;
1 .
5 . 3 ; 0 . 9
4 . 6 ; 0 . 8
3 . 3 ; 0 . 7
9
9
.
;0
9
1
2
0.
4 . 3 ; 0 . 7
1 . 0
3 . 1 ;
5 . 9 ; 0 . 8
7 . 8 ; 0 . 8
1
0 . 7
7 . 6 ;
9 . 7 ; 0 . 7
0 . 5 ; 0 . 8
1
1
9
4
8
5
0 ;
0 .
0 .
1 .
1 .
6
.6
;
;
8
0
0
0 .6
0
6
-
66.50MRC11E
/
280
2.02
Z-600
Z-800
Ch
Gwk
Gns
Gwk
Ch
Gns
Ch
Gns
Gns
Ch
Ch
GwkGwk
0 .7
Gns
3 ;
1 .
66.50MRC11
/
732
25.19
1 8 1 . 7 4 0
00110
- 5 5 d 0 m 0 . 0 s
3 d 0 m 0 . 0 s
6 4 . 1 9 0 1 / 0 1 / 0 1 : 5 9 4 0
5 9 4 0
6 4 . 1 9 0 1 / 0 1 / 0 1
F v _ s u l
f o n t 0 0 1
F V W B o r e h o l e s
00122 01
00122 01
f o n t 0 0 1
00110
1 8 1 . 7 4 0
- 5 5 d 0 m 0 . 0 s
3 d 0 m 0 . 0 s
6 4 . 1 9 0 1 / 0 1 / 0 1 : 5 9 4 0
5 9 4 0
6 4 . 1 9 0 1 / 0 1 / 0 1
F v _ s u l
F V W B o r e h o l e s
66.50MRC11
/
732
29.72
(cid:125)
13.9 ;0.8
155.1 ;0.6
120.2 ;0.7
192.2 ;0.7
139.4 ;0.6
277.3 ;0.6
153.8 ;0.7
166.5 ;0.7
20.2 ;0.8
10.0 ;0.7
3.9 ;0.8
66MRC11 M
/
594
25.24
66MRC11D
/
576
7.69
66MRC11E
/
510
11.08
66MRC11B
/
564
10.83
1 .5 ;0 . 7
(cid:125)
5. 9 ;0.7
3.9 ;0.8
92.5 ;0.8
149.0 ;0.7
63.1 ;0.8
12.6 ;0.6
6.0 ;0.7
1 .5
;0 .9
0 . 8 ; 0 .8
3.4 ;0.8
2.1 ;0.7
2.7 ;0.7
10.7 ;0.8
71.5 ;0.8
126.0 ;0.8
262.0 ;0.6
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-
Z-800
68 Pan African Resources integrated annual report 2016
STRATEGIC REPORT:
PERFORMANCE REVIEW
Employee review
Our people are one of the
three enablers that assist
the group in executing
its strategy. As such, we
recognise our employees
as fundamental to the
sustainability of the business
and appreciate that we also
have a responsibility beyond
our own employees, in the
wider employment context.
HIGHLIGHTS
sful c
Successful c
Successful conclusion of multi-year wage agreements
conclus
Integration of employees at the Uitkomst Colliery operation into the
Pan African group
Finalisation of a memorandum of understanding (MoU) with the
University of Johannesburg (UJ) formalising the provision of bursaries
over a three-year period
Finalisation of the employee share ownership programmes for
Evander Mines
Low staff turnover at the majority of operations
CHALLENGES
henin
Strengthenin
Strengthening relations with communities surrounding our operations
and with the unions
ng rela
Ageing workforce, especially the rock drill operators
Increased rate of unemployment in the communities surrounding our
operations
LOOKING
AHEAD
Continuousuous
Continuous stakeholder and employee engagement to ensure
alignment with the company’s vision and strategic objectives
stakeh
Reinforcing succession planning and training of staff in specialised
positions
Successful implementation of all elements of the SLPs
Aligning human resource policies and practices at the Uitkomst Colliery
with those of the group
Pan African Resources integrated annual report 2016
69
Employee review continued
Key performance indicators
Employee statistics
Employees
– Permanent
– Contractors
Employee turnover
Human resources development
spend
Total number of operational employees by
age group
20 – 30 years
30 – 40 years
40 – 50 years
50+ years
Total operations
Unit
(Number)
(Number)
(Number)
(%)
(ZAR million)
(Number)
(Number)
(Number)
(Number)
(Number)
2016
6,062
4,441
1,621
6.4
33.3
582
1,156
1,129
1,574
4,441
The SLP covers
• Employment equity
• Human resources
development
• Local economic development
• Preferential procurement
• Downscaling/retrenchments
• Housing and living conditions
• Nutrition and health
• Adult education
20151
5,863
4,439
1,424
7.0
29.1
793
1,057
1,239
1,350
4,439
1 Comparatives restated to include 113 Uitkomst Colliery employees. Group employees total
is 4,326 excluding Uitkomst employees.
Employee statistics per operation
Barberton Mines
Evander Mines
Phoenix Platinum Uitkomst Colliery Corporate offi ce
Group
Employment type
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
20151
Employees
Contractors
Total
% of workforce
South African
1,891
460
2,351
1,882
460
2,342
2,418
772
3,190
2,427
577
3,004
3
62
65
3
58
61
115
326
441
113
329
442
14
1
15
14
0
14
4,441
1,621
6,062
4,439
1,424
5,863
98.0
97.1
76.18
73.0
100.0
100.0
99.3
99.6
100.0
100.0
86
86
1 Comparatives restated to include 113 Uitkomst Colliery employees. Group employees total is 4,326 excluding Uitkomst employees.
Overview of progress
Substantially achieved
Moderate progress
Not achieved
Our focus for 2016
What we achieved
Self-
assessment
Maintaining a stable workforce and low turnover rate
Integrating the group’s new employees following the Uitkomst
Colliery acquisition
Aligning employees, through greater engagement, with the objectives
of the respective operational business plans by creating a sense
of belonging through the revised incentive and employee share
ownership programmes
Implementing an effective and effi cient communication strategy.
This was achieved at most operations except Evander
Mines where a high turnover was experienced in the
engineering department
Smooth transition upon completion of the acquisition
– focus will now be on aligning all policies and practices
with that of the group
Revised incentive schemes at Barberton Mines and
Evander Mines
Ongoing communication strategy in place at all
operations
70 Pan African Resources integrated annual report 2016
STRATEGIC REPORT:
PERFORMANCE REVIEW
Pan African Resources in partnership with University of Johannesburg – supporting education in
the fi elds of various mining disciplines
“We are grateful for the opportunity to partner with a reputable learning institution such as UJ and we are certain that this
partnership will be a success.” Andre van den Bergh, Executive Human Resources
Education enables students to improve on their skills and reach their career and personal ambitions as well as ensuring that
they make a meaningful contribution to the South African economy, where the unemployment rate is about 26.6%1. Education
has always been a focus for Pan African Resources, mainly through our gold mining operations, which have learnerships and
bursary programmes in place and have promoted mathematics and science in the local community through the Mining Expo
in Barberton.
As we entered into the 2017 fi nancial year, we expanded on the support we currently offer to students in the fi elds of the
mining disciplines such as mining engineering, mineral surveying, metallurgy and geology, through a partnership with UJ. This
partnership formalised the provision of bursaries to students over a three-year period. The group currently offers bursary
support to 11 UJ students, with the aim of increasing those numbers to 16 over the coming year(s). With the expertise
of UJ, we will identify the most deserving students to be recipients of these bursaries as and when they become available.
Recipients will be sourced from the local communities within the areas in which we operate and in accordance with our SLP
development plan. Further, we also intend to offer development and mentorship support and where possible, training on site
at our operations to enable students to benefi t from the programme.
1 http://www.tradingeconomics.com/south-africa/unemployment-rate.
Offi cial signing ceremony
Pan African Resources integrated annual report 2016
71
Employee review continued
At year-end the group had a total staff
complement of 6,062 (2015: 5,863). We
identify our people as the fi rst and primary
driver of our four-pronged business strategy.
Phoenix Platinum employs three individuals
and operations at the processing plant are
outsourced to a specialist metallurgical
company, Metanza, which is responsible
for employment at the operation. The
Uitkomst Colliery employs 115 (2015: 113)
permanent staff and 326 contractors are
outsourced from a specialist mining company
(Khethekile Mining), which is responsible for
contractor employment at the operation.
Our employees provide the bedrock of
our group, often working in challenging
conditions to enable Pan African Resources
to successfully conduct its core business.
We also recognise that we have a
responsibility beyond our own employees in
the wider employment context. Accordingly,
wherever possible we employ from and upskill
the communities surrounding our operations.
Our operations are controlled by mining
rights and each operation has developed
a social and labour plan (SLP), which
has been submitted to the DMR. The
elements covered in the SLP are shown
on
page 70.
During the year under review, Pan African
Resources entered into a partnership with
UJ for the provision of bursaries over a
three-year period – please see details on
page 71. Furthermore, UJ is collaborating
with Pan African Resources on an additional
project – uncovering mineral content in
calcine samples collected from Pan African
Resources.
Employee relations
Pan African Resources has a unionised
workforce and it complies with all applicable
legislation and bargaining arrangements.
In addition, each operation has a strategic,
proactive and consultative engagement
process with unions and employees to
further strengthen relations. In concluding
Barberton Mines’ wage negotiations, the
NUM embarked upon a protected strike
which was amicably resolved.
Skills development and training
Pan African Resources is committed to
human resources development and spent
ZAR33.3 million on training for the year
under review (2015: ZAR29.1 million).
Barberton Mines and Evander Mines have
on-site accredited training centres offering
a range of occupational skills training
e
programmes, while Phoenix Platinum and the
Uitkomst Colliery provide on-site training
or outsource training where applicable.
Learnership programmes are also in place at
the operations.
Performance management
Pan African Resources recognises that
managing and reviewing employee
performance and fostering employee
development are critical to achieving
strategic priorities and overall success.
All group employees from the head of
department and above to chief executive
level have defi ned key performance
indicators (KPIs), which are aligned with
the group’s strategic objectives. These KPIs
include production and personal-related
KPIs, the weighting of which depends on the
employee’s role and position. Assessments
take place annually with the employee’s line
manager and remuneration is linked to the
score achieved by the employee.
Talent management
Talent management is important in attracting,
developing, motivating and retaining
productive, engaged employees.
Through its talent management approach,
Pan African Resources aims to create a high-
performance, sustainable organisation that
meets its strategic and operational objectives.
To ensure adequate succession planning, key
individuals who perform critical roles within
the group have been earmarked as part of
the group’s retention and performance plan
over a three-year lock-in period from 2016
to 2018. Regular engagements are conducted
with these individuals to ensure development
requirements needed for them to fulfi l their
position are proactively addressed.
Disabled employees
The group is committed to providing
equal opportunity for individuals in all
aspects of employment. The group gives
every consideration to applications for
employment by disabled persons where the
requirements of the job may be adequately
Our employees provide
the bedrock of our group,
often working in challenging
conditions to enable
Pan African Resources
to successfully conduct its
core business.
fi lled by a disabled person. Where existing
employees become disabled, it is the group’s
policy, wherever practicable, to provide
continuing employment under similar terms
and conditions and to provide training, career
development and promotion wherever
appropriate.
Remuneration
Pan African Resources ensures its employees
are fairly remunerated for their roles.
Remuneration is dependent on the individual
job grading and the group undertakes
relevant research to ensure its remuneration
is market related. Remuneration for
employees consists of a basic salary
and benefi ts including medical aid and
pension. In addition, short-term incentive
rewards are paid monthly, quarterly and
annually, depending on the level of the
employee. All remuneration and incentives
are measured objectively against the
individual’s KPIs.
In addition, the group’s equity share option
and share appreciation bonus plans are in
place to appropriately incentivise selected
employees at managerial level within
the group. This ensures retention of key
skills required for the group’s sustainable
performance and to align management
interests with those of its shareholders. The
group implemented its employee share
ownership programme at its gold and coal
mining operations. This programme seeks to
align the objectives of Pan African Resources
with that of management and shareholders.
The remuneration review on
provides further detail on the group’s
remuneration philosophy as well as detail
on executive and non-executive directors’
remuneration.
page 93
72 Pan African Resources integrated annual report 2016
STRATEGIC REPORT:
PERFORMANCE REVIEW
OUR
PEOPLE
People and safety remains at the heart of our culture and is
evident in the way we operate and manage the group.
Pan African Resources integrated annual report 2016
73
Safety, health and environment review
Our formal integrated
SHEQC policy, which
is board approved,
fi lters down through
the group. Our SHEQC
performance, as with
all performances within
the group, is driven by
the group philosophy of
continuous improvement.
It is also used as a
basis for incentivising
management and
employees.
HIGHLIGHTS
mplementeente
Implemented a group SHEQC dashboard programme to further
improve focus on safety
ed a gr
Successful implementation of safety “stop notes” – an internal safety
stoppage instruction system
Increased voluntary counselling and testing of HIV/Aids
Increased awareness of health-related lifestyle diseases
No environmental fi nes at operations
CHALLENGES
tality
One fatality
One fatality at Evander Mines
y at Eva
Behaviour and culture of employees towards safety
DMR safety stoppages
Illegal miners on the increase, posing a safety threat to the workforce
Managing lifestyle diseases despite awareness improvements
Ensuring all operations focus on reducing greenhouse gas emissions
LOOKING
AHEAD
shing
Establishing
Establishing and implementing a behavioural safety-based programme
g and im
Establishing a group health strategy within the next two years
Preventing new cases of noise-induced hearing loss
Maintaining zero environmental fi nes
74 Pan African Resources integrated annual report 2016
STRATEGIC REPORT:
PERFORMANCE REVIEW
Key performance indicators
Safety, health and environmental statistics
Safety
Total recordable injury frequency rate (TRIFR)
Lost time injury frequency rate (LTIFR)
Reportable injury frequency rate (RIFR)
Fatal injuries
Health
HIV/Aids – voluntary counselling and testing
Noise-induced hearing loss cases reportable
Sporotrichosis
Environment1
Total water consumption
Total electricity consumption
Total GHG emissions
Environmental fi nes and penalties
1 Environment fi gures exclude the Uitkomst Colliery.
Units
2016
2015
(Rate/million man hours)
(Rate/million man hours)
(Rate/million man hours)
(Number)
(Number)
(Number)
14.57
3.50
2.04
1
2,516
56
0
11.14
2.29
1.11
1
2,399
26
5
(000m3)
(Gj)
(tCO2e/t milled)
(Number)
16,422
1,451,761
1.0
0
12,249
1,376,815
1.1
0
Overview
A safe and healthy mining culture, with
minimal impact on the environment, is a
business imperative that underpins the
group’s four key strategic pillars – profi table,
sustainable, stakeholders and growth. Pan
African Resources expends considerable
effort in promoting a safe and healthy
work environment. The group’s SHEQC
objectives aim to achieve a sustained
SHEQC management culture by promoting
safety performance through zero harm to
our employees and minimal impact on the
environment. The group has an enabling
culture where employees at all levels are
encouraged to engage freely around SHEQC
matters, as well as adhering to policies and
procedures conducive to achieving this
objective.
SHEQC governance and
compliance
The board assumes ultimate responsibility
for the group’s SHEQC performance. The
SHEQC sub-committee is responsible for
the oversight and management of SHEQC
and keeping the board apprised of SHEQC
matters relating to compliance, discipline and
action plans around incidents and accidents.
The general managers at the mines remain
ultimately accountable for SHEQC on their
operations.
Meetings are held as deemed appropriate
but no fewer than four are held annually.
Membership, responsibilities and attendance
of the SHEQC committee meetings are
shown on
page 90. The group’s SHEQC
policy extends to safety, health, environment,
quality and communities and contains specifi c
guidelines.
Pan African Resources is committed
to conducting its mining operations in
strict compliance with the mining licence
conditions set by the DMR, the Mine
Health and Safety Act 29 of 1993, as
amended from time to time, and other
relevant legal requirements. Guidance and
advice is provided by the group SHEQC
manager, together with the safety, health
and environmental offi cials at the group’s
operations, within the group philosophy of
continuous improvement. Legal requirements
are treated as minimum requirements.
Regular internal audits are performed by the
operations’ safety, health and environmental
offi cials. Further, monthly SHEQC
performance reviews are carried out to
ensure compliance with SHEQC standards
and procedures.
Mining operations are subject to various
environmental legislative requirements
and the group ensures adherence to
these by ongoing monitoring through a
robust SHEQC governance framework.
Environmental aspects and impact
assessments have been conducted at all
our operations. The aspects and impact
registers are available for each operation.
The operations review their risk registers
quarterly.
Pan African Resources integrated annual report 2016
75
Safety, health and environment review continued
Safety
Overview of progress
Substantially achieved
Moderate progress
Not achieved
Self-
assessment
Our focus for 2016
What we achieved
Achieving and maintaining a fatality-free year
One fatality at Evander Mines
Continuing to improve safety indicators towards achieving zero harm Improvements noted in operations
Establishing cross-operations safety, health and environmental audit
teams and conducting internal audits bi-annually
Establishing a central electronic safety, health and environmental
system for improved management control
Establishing formal Fatal Risk Standards that will incorporate
elements such as: fall of ground, gassing, trackless mobile machinery,
rail-bound equipment and underground fi res
Internal audits are ongoing
Implemented a central electronic database system at all
operations with the exception of Phoenix Platinum and
Uitkomst Colliery
Code of practices in place that serve as best practice
The group safety trend for TRIFR, LTIFR and
RIFR has regressed compared to the 2015
rates. The group fatal injury frequency rate
(FIFR) remained at 0.07 (2015: 0.07). We are
committed to continually improving safety and
we endeavour to work towards zero harm.
Regrettably one fatality occurred at Evander
Mines on 26 June 2016, where Mr Joaquim
Armando Muxhanga, a locomotive driver,
was fatally injured while on duty. The cause of
this fatality was miscommunication between
the locomotive driver and the locomotive
guard. Subsequently, changes were made to
the following:
• The signal communication processes
between the locomotive drivers and the
locomotive guards
• All locomotives drivers and guards were
retrained on the tramming standard
• All locomotive drivers and guards were
retrained on signalling, safe coupling and
uncoupling of hoppers.
The board and management extend their
deepest condolences to the family, friends
and colleagues of Mr Joaquim Armando
Muxhanga.
Each mining operation has its unique in-
house training programmes, aligned to the
group’s strategic objective of zero harm.
Safety, health and environmental training is
included in induction for new employees as
well as in refresher courses when employees
return from leave. Training also includes
job-specifi c training. To address the ongoing
safety risk that illegal miners pose at our
gold mine operations, a biometric clocking
system has been installed to prevent, as
far as possible, illegal miners accessing the
underground operations.
To further improve on document control,
the group implemented a safety dashboard
system that will assist in the close-out of
all actions, management of safe operating
procedures and code of practices.
During the year under review, the group
implemented an internal safety stoppage
instruction system where any employee
is able to stop operations posing a risk to
employees’ safety. This was implemented
to improve our safety performance and to
address the group’s challenges of DMR safety
stoppage instructions. The group continues
to actively engage and strengthen relations
with the DMR Inspectorate.
As a result of a review of the way in which
safety data is collated and reported across
operations, management identifi ed that
reporting of safety incidents at Evander
Mines had been understated and that the
information from the 2015 fi nancial year
was not an appropriate base to benchmark
the 2016 safety statistics. Following internal
management investigations, the system for
reporting of safety statistics was rectifi ed
and a new safety tracking database
was implemented across all operations,
to ensure the accurate and complete
reporting of safety data going forward
for future benchmarking. In addition, the
management structure at Evander Mines
was revised to bolster the safety reporting.
A turnaround strategy was implemented to
reduce accidents and instil a culture of safe
behaviour, which included:
• The introduction of a safe production
intervention strategy aimed at curbing the
accident rates
• The implementation of a stop note
initiative that empowered all employees
to immediately stop unsafe working
environments
• The introduction of a new safe declaration
procedure, which incorporates an intense
incident investigation process to identify
root causes of safety
• The restructuring of the safety department
• The implementation of regular internal
safety audits.
Following the implementation of the
abovementioned measures, there was a
noticeable improvement in Evander Mines’
safety rates in the third and fourth quarters
of FY2016.
76 Pan African Resources integrated annual report 2016
STRATEGIC REPORT:
PERFORMANCE REVIEW
Health
Overview of progress
Substantially achieved
Moderate progress
Not achieved
Our focus for 2016
What we achieved
Continuing education and awareness initiatives
Ongoing at all operations
Self-
assessment
Targeting a 10% increase in the uptake of voluntary counselling
and testing
The group achieved a 4.9% increase in the uptake of
voluntary counselling and testing
hearing loss (NIHL). Barberton Mines
also focuses on a seventh disease –
sporotrichosis1 – and noted a decrease in
the suspected cases of sporotrichosis. There
was an increase in the participation in
HIV/Aids voluntary counselling and testing,
which is a testament to the focus on health
and wellness at our operations. Campaigns
are conducted regularly on HIV/Aids and
TB prevention initiatives. NIHL increased at
our gold operations due to an enhanced
diagnosis system implemented in FY2015,
which proactively identifi ed old NIHL cases.
Subsequent to 2008, no new NIHL cases
were identifi ed. The management of NIHL
cases remains a focus and all employees are
issued with hearing protection devices and
receive regular training.
Employees diagnosed with lifestyle-related
diseases such as hypertension and diabetes
are regularly monitored and educational
programmes are provided. Testing for these
diseases also forms part of the medical
surveillance programme, in an attempt to
combat these diseases at an early stage.
Occupational hygiene stressors are
monitored by a qualifi ed occupational
hygienist and quarterly reports are submitted
to the DMR. Each employee has an individual
health risk profi le. All operations’ crystalline
silica occupational exposure limits were
below the legislative requirement of
0.05mg/m3 for the year under review. All
employees are trained in the correct use of
personal protective equipment (PPE).
We recognise that mining carries inherent
health risks. Effectively managing associated
conditions and diseases is a direct investment
by the group in our people, and managing
their health is in the interests of our long-
term sustainability. The group provides a
work environment that minimises health
risks by ensuring adequate surveillance of
workplaces and employees. This promotes
work practices conducive to the long-term
wellbeing of employees. The group provides
appropriate and adequate healthcare facilities
and resources.
Management of the major diseases at our
mining operations remains a top priority.
At all operations, occupational health and
employee wellness includes the management
of the Big 6 diseases: HIV/Aids, TB, diabetes,
hypertension, silicosis and noise-induced
Environment
Overview of progress
Our focus for 2016
What we achieved
Continuing to embed and establish internal
environmental targets and objectives within all operations
Continuing to create awareness and change behaviour in
respect of environmental impacts
The targets and objectives have been embedded within operations
and these are measured on an ongoing basis
Over and above the policies and procedures in place, we
implemented a SHEQC dashboard to reinforce awareness and
change behaviours
Self-
assessment
Pan African Resources is committed to responsible stewardship of natural resources and the environment to eliminate or minimise the negative
impacts of our operations.
Environmental management is integrated into management practices throughout our operations. The group is steadfast in its commitment to
enhancing its approach to reducing its impact on the environment and its environmental objectives include:
• Achieving zero penalties for environmental breaches
• Achieving the internal environmental targets established for reducing the group’s carbon footprint
• Ensuring compliance with water use licence conditions.
1 Sporotrichosis is an infection caused by a fungus called Sporothrix schenckii.
Pan African Resources integrated annual report 2016
77
Safety, health and environment review continued
Environmental impact assessments have been conducted and impact and aspect registers are available for each operation, which are reviewed
annually to ensure compliance with environmental legislation. All operations have assessed the environmental risk associated with the transport
of goods and materials and established that there are no signifi cant environmental impacts from these activities. Any cyanide transported to
Barberton Mines and Evander Mines is taken by a supplier-approved transporter. Emergency response trailers are stationed onsite at Barberton
Mines, BTRP and Evander Mines to deal with spillages.
Water
Water quality in the areas surrounding operations is vigilantly monitored and managed. Surrounding surface and ground water is monitored
to prevent polluted water being discharged. The discharge of water by our operations through controlled releases into the environment is
pre-determined through regulatory requirements and is in line with our water use licences.
Expenditure on environmental protection
Barberton Mines
Evander Mines
Phoenix Platinum
Group total
ZAR
2016
ZAR
2015
ZAR
2016
ZAR
2015
ZAR
2016
ZAR
2015
ZAR
2016
ZAR
2015
Pollution control and prevention
Rehabilitation
Environmental – operational
Total
919,258
637,583
267,359
1,824,200
1,041,862
542,670
254,039
1,838,572
549,328
319,966
1,080,899
1,950,193
687,640
322,585
1,068,821
2,079,046
250,443
–
497,205
747,648
245,722
–
187,336
433,058
1,468,586
957,549
1,845,463
4,271,598
1,975,224
865,255
1,510,196
4,350,675
The group’s expenditure on environmental protection of ZAR4.3 million remained on par with that of the prior year. Evander Mines’ operational
expenditure reduced marginally and Phoenix Platinum’s expenditure increased due to the use of the water bowser for dust suppression and
sewage removal.
Land rehabilitation trust funds
Barberton Mines
Evander Mines
ZAR
2016
ZAR
2015
ZAR
2016
ZAR
2015
Total
ZAR
2016
ZAR
2015
Total
44,514,220
43,242,175
276,984,119
269,068,978
321,498,340
312,311,153
Land rehabilitation minimises and mitigates the environmental effects of mining. Rehabilitation management at the group’s operations is an
ongoing process. The rehabilitation trust fund had a balance of ZAR321.5 million (2015: ZAR312.3 million) at year-end, which increased by
ZAR9.2 million as a result of growth in investments. The rehabilitation trust funds comprise investments in guaranteed equity-linked notes,
government bonds and equities.
78 Pan African Resources integrated annual report 2016
STRATEGIC REPORT:
PERFORMANCE REVIEW
Community review
Pan African Resources
strives to minimise potential
negative social impacts
caused by our mining
operations while promoting
opportunities for the local
communities. We are
committed to monitoring,
measuring and managing
the social and economic
impacts created by our
operations, in line with our
approved SLPs.
Our operations engage in a range of
development projects and community
relations activities, which promote sustainable
welfare within the communities. In addition,
wherever possible, the group promotes
responsible and ethical management of its
supply chain by encouraging suppliers to
support local economic development.
HIGHLIGHTS
spen
Group spen
Group spend on corporate social investment (CSI) and socio-economic
development (SED) initiatives amounted to ZAR21.0 million
nd on c
CHALLENGES
Finding suitasuita
Finding suitable local suppliers to assist with community projects and
able loc
with supplying our operations
LOOKING
AHEAD
Continuallyually
Continually uplifting the communities within which we operate
upliftin
Overview of progress at all operations
Substantially achieved
Moderate progress
Not achieved
Our focus for 2016
What we achieved
Continually uplifting the communities within which we operate
Initiatives are ongoing across our operations
Self-
assessment
Positively impacting our
communities
At the mines, management is proactive
in building and maintaining stakeholder
relationships with the local communities
and has forged close working relationships
with ward councillors and local leaders.
(See stakeholder engagement on
pages
34 and 35 of the integrated annual report.)
In terms of the MPRDA, mines are required
to develop and implement comprehensive
SLPs, human resources development
programmes, mine community development
plans, a housing and living conditions plan,
employment equity plan, and other processes
to save jobs and manage downscaling
and/or closure. Progress reports are
submitted annually to the DMR.
The group is committed to upholding
the human rights of all our employees,
contractors, suppliers and the communities
in which we operate. We recognise people’s
rights to culture, heritage and tradition
through supporting indigenous cultural
heritage.
Barberton Mines received a heartfelt
letter of thanks from a Grade 10 learner
at Emjindini Senior Secondary School, on
behalf of all the learners, following the mine’s
involvement in upgrading the school. The
letter can be found on the group’s website on
www.panafricanresources.com in the
sustainability section.
Pan African Resources integrated annual report 2016
79
Transformation
Employee share ownership
programme: Qualifi cations
criteria for annual dividend
distributions
Permanent employee of
operation
Employed in a non-
managerial position
Employed by entity prior
to the commencement of
the fi nancial year in respect
of which the dividend
distribution is made
Remained employed by
operation on last day of
fi nancial year in respect
of which the dividend
distribution is made
Allocation of benefi t
Each qualifying benefi ciary
receives an equal benefi t
Good leavers during a
period receive a pro-rata
dividend distribution for that
period
80 Pan African Resources integrated annual report 2016
Transformation
Pan African Resources acknowledges
that integrating genuine transformation,
which permeates the group, is critical for
the sustainability of its business in South
Africa. We are committed to integrating
real transformation throughout the group,
under the auspices of the Mining Charter
and social and labour plans. The group does
not currently rank its B-BBEE contribution
at group level but per operation current
contributions are rated as per the Mining
Charter requirements. Oversight of progress
against transformation targets is monitored
by the SHEQC committee.
Recent Mining Charter
developments
To further align the mining industry with the
B-BBEE Act and the Department of Trade
and Industry (DTI) codes, the revised
B-BBEE Mining Charter draft, published
on 15 April 2016, includes changes to its
predecessor, the 2010 Mining Charter.
According to the draft, ownership, housing
and living conditions, and human resources
development elements are ring-fenced,
which means 100% compliance will be
required at all times and mines have three
years to comply with revised targets.
Ownership
Pan African Resources strategic
BEE partner
In August 2009 Shanduka Gold exchanged its
shareholding of 26% in Barberton Mines for
a 21% shareholding in Pan African Resources
and acquired an additional 5% from Metorex,
making the black-owned and managed
Shanduka Gold a 26% shareholder in Pan
African Resources. Shanduka is a black-
owned investment holding company with
interests in a diverse portfolio of listed and
private companies, primarily in the resources
and food and beverage industries. Following
limited dilution due to a rights issue, at
30 June 2016, Shanduka Gold (subsequently
renamed PAR Gold) held 22.46% of
Pan African Resources’ shares. By applying
provisions of the MPRDA and Mining
Charter to the Pan African Resources share
register and discounting shareholders who
qualify as organs of state and public entities,
we calculate as at 30 June 2016 that this
equates to an effective 23.1% BEE ownership
at a holding company level for purposes of
the MPRDA.
Operational ownership
Barberton Mines
On 1 June 2015, Barberton Mines
implemented an employee share ownership
programme. A newly established employee
trust (the trust) will effectively own 5% of
the issued share capital of Barberton Mines.
The transaction was fi nanced by Barberton
Mines on a notional basis with preference
share funding attracting a real return of 2%
per annum and without any dilution to Pan
African Resources. A portion of dividends
issued is retained to repay the notional
fi nancing. The portion retained ranges from
50% to 80% over the period of the scheme.
Barberton Mines’ total BEE ownership
equates to 28.1% by combining the
Pan African Resources BEE ownership and
the employee share ownership programme.
Evander Mines
In July 2015, a similar scheme was
implemented at Evander Mines with the
same terms and conditions as the Barberton
Mines programme amounting to 5%`
ownership. The employee share ownership
programme seeks to align the aspirations
of Pan African Resources’ employees at
its operations with that of management
and shareholders. Value will be created for
benefi ciaries based on the profi tability of
each operation’s performance. Assuming
that regular dividends are declared by
these operations, benefi ciaries will receive
dividends from the scheme from year one.
In addition, benefi ciaries will receive an
annual distribution from the BEE trusts and
any capital appreciation will be distributed
to the benefi ciaries upon winding up of the
programme after a minimum of 10 years.
Evander Mines’ total BEE ownership equates
to 28.1% by combining the Pan African
Resources BEE ownership and the employee
share ownership programme.
Uitkomst Colliery
The Uitkomst Colliery will be implementing
a BEE transaction similar to those currently
in place at Barberton and Evander. The BEE
transaction will result in an additional 9%
historically disadvantaged on-mine ownership
in the Uitkomst Colliery. This 9% ownership
will be held by broad-based trusts and by
a strategic entrepreneur’s trust. The BEE
transaction will be fi nanced by the Uitkomst
STRATEGIC REPORT:
PERFORMANCE REVIEW
Colliery on a notional basis, with the notional funding accruing interest linked to the prime interest rate. This transaction results in limited dilution
to Pan African Resources and 80% of dividends issued to the BEE shareholders will be retained to repay the notional funding over a period of
10 years.
Management and control
Our group board includes one male black board director as at 30 June 2016.
Employment equity
Representation of HDSAs
Senior management
Middle management
Junior management
Representation of women
Women employed at mine
Women in mining (core business)
Percentage of women in mining/core
positions
Skills development
Detail on this pillar is provided on
page 72.
Preferential procurement
Supply chain management
Pan African Resources’ primary procurement
objective is to control costs, initiate savings
and manage inventory across its operations
through centralised strategic sourcing.
In addition, the group is committed to
increasing spend from black-owned and black
women-owned businesses.
Pan African Resources is committed to
continually uplifting the communities within
which it operates, through its projects and
initiatives and proactive strategic sourcing.
Procurement governance
Pan African Resources’ procurement
governance process ensures maximum
effi ciency and ethical conduct when
procuring goods and services within its
operations. A group procurement policy
is in place and relevant employees at each
operation are trained in these procurement
procedures and practices. The tender process
is governed by a tender committee at each
operation, to ensure Pan African Resources
complies fully with all relevant regulation,
Barberton Mines
Evander Mines
Phoenix Platinum
Corporate
Unit
2016
2015
2016
2015
2016
2015
2016
2015
(%)
(%)
(%)
(Number)
(Number)
(%)
44.4
57.1
49.1
134
81
4.3
37.5
55.2
41.0
126
73
3.9
44.4
44.8
78.3
265
81
6.6
50
41
76
263
81
6.2
100.0
50.0
100
100.0
50.0
100.0
40.0
100.0
100.0
40.0
100.0
100.0
–
–
–
–
–
–
4
–
3
–
26.7
21.4
including the UK Bribery Act 2010. Monthly
procurement and inventory reports are sent
to the corporate offi ce.
Centralised contracts
The group has implemented a procurement
plan for its high-value commodities, with the
intent of meeting the group’s procurement
objectives mentioned above.
Transformation trusts
Wherever possible, the group promotes
responsible and ethical management of
its supply chain by encouraging suppliers
to support local economic development.
Transformation trusts for Barberton and
Evander generate additional funds to
invest back into the community, through
encouraging its suppliers to contribute 1%
of their contract value to these trusts. The
objective of these trusts is to improve the
quality of life of the local community, to
create jobs and to promote socio-economic
development. A total of ZAR1.2 million
was collected on behalf of Barberton Mines
Transformation Trust (BMTT) during the
2016 fi nancial year. The Evander Mines
Transformation Trust (EMMT) was formed
in the prior fi nancial year and has collected
ZAR0.5 million since it was incorporated.
Socio-economic development
Detail on this pillar is provided on the group’s
website on
www.panafricanresources.com
in the sustainability section.
Housing and living conditions
In line with the Mining Charter requirements,
the gold mining operations have made a
considerable investment in upgrading and
converting old hostels into single and family
accommodation units. At our Barberton and
Evander mining operations a total of 4.3%
and 38.0% employees respectively live in
hostel accommodation and employees who
do not live in company accommodation
receive an appropriate housing allowance.
Barberton’s Fairview hostel upgrade and
conversion was completed, as was the
renovation of ablution blocks at New
Consort Mine.
Historically disadvantaged
South Africans (HDSAs)
The Mining Charter requires 40% of
specialised functions be fi lled by HDSAs.
Our operations made good progress
in achieving this goals, most notably meeting
employment equity targets at management
level.
Pan African Resources integrated annual report 2016
81
TRANSPARENCY AND ACCOUNTABILITY
The missing
KRUGER
millions
Lost in: 1890
Estimated value: USD250,000,000
Contents: gold coins, ingots, gold dust
During the Second Anglo-Boer War, the Boers
realised that their capital, Pretoria, would soon
be captured by British troops so they swiftly
commandeered as much gold as they could from
government reserves, banks and the mines. They
also minted many thousands of new gold coins.
Much of this gold is believed to have travelled with
the Boer President, Paul Kruger, as he journeyed
eastwards through Middelburg, Machadodorp and
Waterval Boven towards Mozambique to escape
the advancing British. He departed for France by
boat on 19 October 1900. The gold remained
behind, hidden somewhere in the bushveld of the
North Eastern Transvaal and it has never been
offi cially found.
http://www.southcapecoins.co.za/news/the-mystery-of-the-missing-
kruger-millions
+1
+3
79
Au
Gold
196.97
2-8-18-32-18-1
Board of directors
Name
Age
Qualifi cations
Designation
Appointed
Committee member
Skills and experience
Keith Spencer
66
BSc Eng (Mining)
Hester Hickey
62
CA(SA), BCompt (Hons)
Thabo Mosololi
46
BCom (Hons), CA(SA)
Independent non-executive director
Independent non-executive director
12 April 2012
9 December 2013
Audit, remuneration
Thabo brings a wealth of experience
in fi nancial management, corporate
governance and audit, having
qualifi ed as a chartered accountant
with KPMG in 1994. Since then, he
has served on various boards as
a member and chairman of audit
committees in the resources and
other industries in South Africa.
He is currently a director of MFT
Investment Holdings, a family-owned
investment company strategically
placed to capitalise on B-BBEE
investment opportunities.
Audit (Chairperson), SHEQC
Hester worked at AngloGold
Ashanti, initially as group internal
audit manager and later as executive
offi cer: head of risk. Prior to this
she worked at Ernst & Young and
Liberty Life and was acting head
of internal audit at Transnet. In her
early career she lectured at the
University of Witwatersrand, was
a partner at Ironside Greenwood
and was the national technical and
training manager at BDO Spencer
Steward. Hester has also previously
served as the chairperson of SAICA.
She currently performs board
evaluations and director training
for the IoDSA and serves on the
following boards: Northam Platinum
Limited, Omnia Limited, Cashbuild
Limited and African Dawn Capital
Limited. Hester is also a trustee on
the Sentinel Pension Fund.
Independent non-executive director
– Chairman
8 October 2007
Audit, SHEQC (Chairman)
Keith is a qualifi ed mining engineer
with 48 years’ practical mining
experience. He 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 moved to Kloof
Gold Mine as general manager. In
1989 he was appointed consulting
engineer for Gold Fields, South
Africa including 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, South Africa. In 1999 Keith
joined Metorex, fi rst as a private
consultant and later as a permanent
member of the executive, managing
the Wakefi eld Coal operations,
O’kiep Copper Company, Barberton
Mines and Metmin Manganese Mine.
In 2001 Keith became operations
director for Metorex.
Board meeting attendance
4/4
4/4
4/4
84 Pan African Resources integrated annual report 2016
TRANSPARENCY AND
TRANSPARENCY AND
ACCOUNTABILITY
ACCOUNTABILITY
Rowan Smith
52
BSc (Hons), BCom (Hons)
Cobus Loots
38
CA(SA), CFA® Charterholder
Deon Louw
54
CA(SA), CFA® Charterholder,
PGD (Tax Law), AMCT (UK)
Executive director – Financial Director
1 March 2015
Deon has extensive fi nance and
business experience, which includes
investment banking, advisory and
business administration in the
fi nance and mining sectors. He
has fulfi lled the roles of fi nancial
director of Sentula Mining Limited,
chief fi nancial offi cer of Shanduka
Coal, Director of Resource Finance
Advisers and Head of resource
structured fi nance at Investec Bank.
Deon was appointed as Financial
Director on 1 March 2015.
Executive director
– Chief Executive Offi cer
26 August 2009
SHEQC
Cobus served articles with Deloitte
& Touche and became an audit
manager with the fi rm before leaving
to pursue a career in fi nance. His
experience includes mining-specifi c
acquisitions and fi nance as well as
the management of both exploration
and production of mineral assets,
most recently before 2009 as
managing director of Shanduka
Resources. Cobus has been a
director of Pan African Resources
since 2009 (Financial Director during
2009–2011 and a non- executive
director during 2011–2013). He
served as joint Chief Executive
Offi cer alongside Ron Holding until
assuming the offi ce of Financial
Director on 1 October 2013. Cobus
was appointed Chief Executive
Offi cer on 1 March 2015.
Independent non-executive director
8 September 2014
Remuneration (Chairman)
Rowan has nearly three decades
of collective experience in the
resources and investment banking
industries. He was a founding
shareholder and managing director
of Shanduka Resources, which he
helped develop from a start-up in
2002 until his departure in 2012. Key
milestones achieved at Shanduka
Resources included signifi cant
investments in Mondi Shanduka
Newsprint, Mondi Packaging, Kangra
Coal, Shanduka Coal (with Glencore),
Pan African Resources, DRA Projects,
Lonmin (through Incwala), Assore
and Lace Diamonds. Rowan’s
post-investment involvement
included his representation on
the executive committees and
boards of most of the investee
companies, including an executive
directorship of the Shanduka group.
Before Shanduka, Rowan was a
director of Investec Bank’s Mining
Finance team in Johannesburg and
worked on a number of debt and
equity-based transactions in the
sub-Saharan region. He also worked
for Swiss-based Société Générale
de Surveillance in Geneva, which
entailed the management of audits
on mineral consignments throughout
the world. He started his career as a
valuation geologist at the Harmony
mine. Rowan is currently chairman
of Rail2Rail, an adviser to Athena
Capital and a director of Hlanganani
Capital.
3/4
4/4
4/4
Pan African Resources integrated annual report 2016
85
Executive and operations management
Executive management (Exco)
Cobus Loots (38)
Chief Executive Offi cer
CA(SA), CFA® Charterholder
Committee: SHEQC
See directorate on page 84 for CV
Anaki Karigeni (48)
Chief Operating Offi cer
BSc Mining Engineering, MSc Project Management
Committee: SHEQC
24 years of mining-related experience
Deon Louw (54)
Financial Director
CA(SA), CFA® Charterholder, PGD (Tax Law), AMCT (UK)
See directorate on page 84 for CV
André van den Bergh (60)
Executive: Human Resources
Diploma in Human Resources Management, Diploma in
Labour Relations Management
Committee: SHEQC
41 years of mining-related experience
86 Pan African Resources integrated annual report 2016
TRANSPARENCY AND
ACCOUNTABILITY
Operations committee (Opsco)
Casper Strydom (58)
General Manager: Barberton Mines
National Higher Diploma, Metalliferous Mining
Mine Managers Certifi cate
40 years of mining-related experience
Band Malunga (43)
General Manager: Evander Mines
BTech Mining Engineering
23 years of mining-related experience
Johan Gloy (48)
General Manager: Uitkomst Mine
National Higher Diploma Extractive Metallurgy,
BTech Environmental Management, MDP
Stellenbosch, Registered Competent Person –
Metallurgy – South African Council for Natural
Scientifi c Professions, Registered with Engineering
Council of South Africa
25 years of gold and coal mining-related
experience
Bertin McLeod (39)
Plant Manager: Metallurgy Phoenix Platinum
BTech: Chemical Engineering Management
Development Certifi cate, Senior Management
Development Certifi cate
14 years of platinum industry experience
Wayne Allen (47)
Group Consulting Engineer
National Diploma Engineering, Mechanical
Engineer’s Certifi cate of Competency,
MAP (Wits), AMRE (SA)
24 years of mining-related experience
Barry Naicker (43)
Group Mineral Resource Manager
MEng Mineral Resource Management (Wits),
Grad Dip Engineering (MRM), BSc (Hons)
Geology and Economic Geology
15 years of mining-related experience
Mandla Ndlozi (45)
Group SHEQC Manager
NADSM (Unisa), EIA (PU for CHE), MDP
(GIBS), SAMTRAC (NOSA), Integrated SHEQ
Management (University of North-West)
Committee: SHEQC
17 years of mining-related experience
Neal Reynolds (33)
Group Financial Controller
BCom Accounting (Hons), CA(SA)
8 years of mining-related experience
Niel Symington (35)
Group Management Accounting and IT Manager
BCom Accounting, Professional Accountant (SA)
8 years of mining-related experience
Pan African Resources integrated annual report 2016
87
Corporate governance review
Pan African Resources’ board is committed to responsibility, accountability, fairness and transparency in accordance with King III, the UK Code
and applicable laws and regulations, refl ecting integrity in all business dealings. The board aims to integrate this responsible corporate citizenship
into the group’s business strategy, audits and assessments and to embed sound corporate governance practices into daily operations and
processes throughout the group. The standards of disclosure relating to corporate governance at the group are regulated by the UK Companies
Act, the SA Companies Act, AIM Rules, the JSE Listings Requirements and King III. In addition, the board has considered the principles of
corporate governance contained in the UK Code and the guidance published by the Institute of Chartered Accountants in England and Wales
concerning the internal control requirements of the UK Code.
Governance framework
BOA R D
A
U
DIT COM M I
T
T EE
R
E
M
U
N
E
R
ATION C O M
E
E
T
MIT
S
H
E
Q
C CO M M I
T EE
T
Chairman: Keith Spencer
Chairperson: Hester Hickey
Chairman: Rowan Smith
Chairman: Keith Spencer
Members
Hester Hickey
Thabo Mosololi
Rowan Smith
Cobus Loots
Deon Louw
Invitees
Exco and Opsco for ad hoc
presentations to the board
Members
Thabo Mosololi
Keith Spencer
Invitees
Cobus Loots,
Chief Executive Offi cer
Deon Louw,
Financial Director
External auditors
Internal auditors
Financial executives
Members
Thabo Mosololi
Invitees
Cobus Loots,
Chief Executive Offi cer
Deon Louw,
Financial Director
André van den Bergh,
Group Human Resources
Executive
Members
Hester Hickey
Cobus Loots
Anaki Karigeni
Mandla Ndlozi
André van den Bergh
Sozabile Nkuna1
Invitees
General managers –
Barberton Mines, Evander
Mines, Phoenix Platinum and
the Uitkomst Colliery
1 Sozabile Nkuna is a representative
from Phembani
The board
The Pan African Resources board is responsible and accountable for the performance and affairs of the group and has full control over all
subsidiaries and operations. It acts as the focal point for and custodian of our corporate governance. In doing so, it ensures the group remains
a responsible corporate citizen, cognisant of the impact our operations may have on the environment and society in which we operate, while
acting in accordance with our own code of conduct. At reporting date, our unitary board comprised six directors. The Chairman, Keith Spencer,
is an independent non-executive director. Executive directors are the Chief Executive Offi cer and the Financial Director. A brief CV of all
directors is provided on
pages 84 and 85. The entire board performs the function and responsibility of the nominations committee.
There were no changes to the board during the year under review.
Our board refl ects a balance of executive and non-executive directors, the majority of whom are independent. More importantly, the board
refl ects signifi cant experience in mining and related activities and collectively has a wealth of industry knowledge, adding depth to board
discussions. The responsibilities of the independent non-executive Chairman and the Chief Executive Offi cer and the other non-executive and
executive directors are strictly separated to ensure profi cient decision-making. No single director is positioned to exercise unfettered decision-
making, which protects against the infl uence of possible personal interests and ensures that the interests of all stakeholders are represented and
88 Pan African Resources integrated annual report 2016
TRANSPARENCY AND
ACCOUNTABILITY
taken into account. The Chairman provides
independent board leadership and guidance
and facilitates suitable deliberation on all
matters requiring the board’s attention. He
further ensures the board operates effi ciently
and collectively. The Chief Executive Offi cer
and Financial Director, supported by the
executive committee, are accountable for
strategy implementation and the day-to-day
operational decisions and business activities.
Non-executive directors are not involved in
the daily operations of the company.
A formal board charter is in place to regulate
the parameters within which the board
operates and to ensure the application of
good corporate governance in compliance
with the group’s code of conduct. A copy of
the board charter is available from the group
Company Secretary on request.
Rotation and re-election of directors
In terms of King III and the group’s
constitutional documents, one-third of the
directors, excluding any director appointed
since the previous AGM, must retire from
offi ce at each annual general meeting on
a rotation basis. The directors to retire are
those who have been longest in offi ce since
their last election. Retiring directors may
make themselves available for re-election
provided that they remain eligible as required
by the constitutional documents and in
compliance with the AIM Rules and JSE
Listings Requirements. Accordingly,
Mrs HH Hickey and Mr T Mosololi retire by
rotation and offer themselves for re-election.
A brief CV of each director standing for
re-election at the AGM is contained on
pages 84 and 85.
Board evaluation
An annual effectiveness self-evaluation is
undertaken in respect of the board and the
audit committee.
Share dealings
All group employees at Paterson Grading
D and above (which includes operational
management, executive and operational
management) with access to fi nancial and
any other price-sensitive information are
prohibited from dealing in Pan African
Resources shares during ‘closed periods’,
as defi ned by the AIM and JSE Listings
Requirements, or while the company is
trading under a cautionary announcement.
An appropriate communication is sent to
all such employees alerting them that the
company is entering a closed period. Should
any of the relevant employees wish to
trade Pan African Resources shares, written
permission must be obtained from either the
Chief Executive Offi cer or Financial Director
and confi rmed with the South African
and UK based corporate advisers prior
to the trade taking place. There were no
contraventions of this policy during the year.
Succession planning
The board, which fulfi ls the role of
nominations committee, is responsible
for succession planning for the board
of directors and executive and senior
management. The board regularly reviews
the group’s succession strategy. In general,
succession plans are in place for the
incumbent key executives, with an informal
‘on-the-job’ mentor programme for identifi ed
successors supporting this process.
New appointments
The board identifi es, interviews and proposes
potential candidates to the board. The board
evaluates each individual in the context of
the board as a whole. The objective remains
having a board that can best perpetuate our
success and represent shareholder interests
through the exercise of sound judgement,
using its diversity of experience. The group
ensures all new directors are informed of the
AIM and JSE rules with the assistance of the
UK Nomad and JSE sponsor, given that all
appointees are accomplished board directors
and familiar with the fi duciary duties expected
of them. New appointees are provided with
the latest annual and interim results, integrated
annual report and minutes of previous
board meetings. It is intended that a formal
induction programme will be introduced in
the near future.
Ongoing development
All directors receive ongoing training on
relevant matters and directors who are
chartered accountants comply with SAICA
continued professional development
requirements. The UK-based Nomad ensures
the directors remain up to date with AIM
regulations, while the South African sponsor
ensures the same regarding the JSE Listings
Requirements. The Company Secretary
and Chairman of the audit committee are
responsible for keeping the board abreast of
new legislation, recommendations and best
practice.
Ethical leadership
The board strives to ensure that the group
conducts its business with integrity, leading by
example. This commitment is formalised in a
code of conduct which applies beyond the
board and includes all employees of
the group. The code sets out the group’s
values and practices over and above
requirements of formal governance codes
and legal requirements mentioned above.
It is designed to provide guidance on ethical
conduct in all areas and across all activities.
To supplement the effectiveness of the code
of conduct, directors, executive management
and operational management receive ongoing
training in regulations and in ethical leadership.
Pan African Resources has a zero-tolerance
approach to bribery and corruption.
A separate bribery and corruption policy is in
place, which is communicated to all employees
as well as to mine contractors, all of whom
are expected to comply fully. In the event
of a breach by an employee of the code of
conduct, policies or practices above, the group
human resources disciplinary procedures
are followed. No breaches by senior group
employees were reported during the year.
King III compliance
In line with King III’s ‘apply or explain’ approach,
the directors will continue to state the
extent to which the company applies good
corporate governance principles to create and
sustain value for stakeholders over the short,
medium and long term. To optimally manage
its application of King III, the company has
adopted the IoDSA Governance Assessment
Instrument, allowing for the maintenance of a
register recording its progress in applying the
principles of King III as well as the JSE Listings
Requirements. Principle 2.25 (paragraph 153)
recommends that non-executive directors’
fees should comprise a base fee, which may
vary according to factors including the level
of expertise of each director, as well as
an attendance fee per meeting. The group
remunerates its non-executive directors
based on a fi xed fee, as the board’s input
extends beyond the attendance at
meetings. The group’s King III checklist can
be found on the group’s website on
www.panafricanresources.com.
Pan African Resources integrated annual report 2016
89
Corporate governance review continued
Board committees
Pan African Resources has an audit committee, remuneration committee and an SHEQC committee to assist the board in discharging its
collective responsibility of corporate governance. The SHEQC committee serves as a social and ethics committee in terms of the South African
(SA) Companies Act requirements. All committees have satisfi ed their responsibilities during the year in compliance with their formal charters.
A copy of these charters is available from the group Company Secretary on request.
The key issues discussed at these board committees are tabled below.
Committee
Audit committee
Remuneration committee
SHEQC committee
Key issues discussed in 2016
Integrated report sign-off for 30 June 2016
Interim report sign-off for 31 December 2015
Review of internal and external audit reports
Control environment at Evander Mines
Group internal control policy and standardisation process
Uitkomst Colliery, Shanduka Gold transaction and gold loans
Detailed on
page 94
Safety performance, challenges and improvements at all operations
Quantifi cation of specifi c measurements that are required from a sustainability perspective
Environmental monitoring and management
Board and committee meetings attendance
The board meets quarterly with additional meetings as and when necessary. Attendance at board and committee meetings is set out below.
In addition to these meetings, ad hoc meetings and calls are held regularly. Not all of these are recorded in the table below.
Keith Spencer Hester Hickey Cobus Loots Thabo Mosololi Rowan Smith
Deon Louw
PAR board meeting
14 September 2015
3 December 2015
18 February 2016
14 June 2016
Pre-audit committee meeting
10 July 2015
Audit committee meeting
14 September 2015
3 December 2015
18 February 2016
Remuneration committee meeting
30 July 2015
3 December 2015
SHEQC committee meeting
10 September 2015
2 December 2015
30 March 2016
13 June 2016
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
X
√
√
√
√
√
√
√
√
√
√
√
√
√
√
Note: The above attendance schedule does not include special board meetings and discussions relating to the Shanduka Gold/PAR Gold transaction. These took place as follows:
18 April 2016, 13 May 2016, 26 May 2016, 1 June 2016.
90 Pan African Resources integrated annual report 2016
TRANSPARENCY AND
ACCOUNTABILITY
Advisers
One Capital is the company’s appointed
sponsor in accordance with the JSE Listings
Requirements. One Capital is responsible for
ensuring the company is at all times guided
and advised as to the application of the JSE
Listings Requirements. The group appointed
BMO Capital Markets Limited as joint broker
(effective 22 June 2016) alongside Numis
Securities Limited and Peel Hunt LLP.
IT governance
The board is responsible for IT governance,
which is governed by an IT charter. The
framework consists of an IT steering
committee which includes the Financial
Director, the Chief Information Offi cer
and Executive: Human Resources. This
steering committee is responsible for
directing, controlling and measuring the IT
activities and processes of the group. It also
keeps the board apprised of the group’s
IT performance on a regular basis. Each
operation has formal business continuity
and disaster management plans in place,
which are the responsibility of the respective
general managers.
Compliance
The group complies with all applicable
legal acts and regulations.
Independent advice
All independent non-executive directors
have unrestricted access to management
and the group’s external auditor. Further, all
directors are entitled to seek independent
professional advice on any matters pertaining
to the group as they deem necessary and at
the group’s expense.
Company Secretary
Pan African Resources outsources the
company secretarial function to St James’s
Corporate Services Limited. The Company
Secretary advises the board of any relevant
regulatory changes and/or updates. The
Company Secretary keeps records of
shareholder registers, meeting attendance
registers, meeting minutes, resolutions,
directors’ declarations of personal interest(s),
all notices and circulars issued by the
company, guidance on directors’ duties and
good governance. The Company Secretary is
well versed in all relevant updates to current
legislation and regulation and is responsible
for advising the board in this regard. Further,
the Company Secretary reviews the rules
and procedures applicable to the conduct
of the board. Wherever necessary the
sponsor, Nomad and other relevant experts
are involved in ensuring that the directors
have adequate information to suffi ciently
discharge their responsibilities in the best
interests of the company. The appointment
and removal of the Company Secretary is a
matter for the board as a whole. The audit
committee reviews the Company Secretary’s
qualifi cations and competence and provides
recommendations to the board. The board
is comfortable that the Company Secretary,
St James’s Corporate Services Limited,
maintains an arm’s length relationship with
the board at all times and is suffi ciently
qualifi ed and skilled to act in accordance with
and update directors in terms of the UK and
international regulations and legislation.
Pan African Resources integrated annual report 2016
91
Corporate governance review continued
Risk governance
The board is ultimately responsible for the management of risk and a formal risk governance process is in place to ensure the board adequately
discharges its responsibility, as described below. The board regularly reviews the risk reports from the operations, ensuring the appropriate
risk management programmes and monitoring of progress against key risk indicators are being effectively implemented. The roles of the audit
committee and internal and external functions, as they relate to risk management, are described below and the group’s key risks are set out
on
pages 30 to 33.
BOARD OF DIRECTORS
AUDIT
COMMITTEE
INTERNAL
AUDIT
FUNCTION
EXECUTIVE
MANAGEMENT
OPERATIONS
EXTERNAL
AUDIT
FUNCTION
The internal
audit function is
outsourced to BDO,
which evaluates the
effectiveness and
general compliance
of controls aimed at
addressing risks within
the group.
Executive
management
implements
operational controls
to ensure the
validity, accuracy and
completeness of
fi nancial information.
It ensures that
employees assume
responsibility for
conducting themselves
in accordance with
established policies
and procedures, to
minimise the potential
occurrence of any
risk event and to
seek opportunities to
improve performance
and effi ciencies.
Initiatives to mitigate
risks at operational
level are designed to
ensure continuous,
safe and responsible
production of gold,
PGEs and coal.
Risks are identifi ed at
risk workshops and
in an annual strategy
session. Each of the
group’s operations
maintains a risk
register, which includes
risk identifi cation, risk
mitigating factors and
responsibilities.
External audit reports
on the fair presentation
of fi nancial information
on a statutory reporting
level in compliance
with IFRS as adopted
by the EU and
Article 4 of the
IAS Regulation,
UK Companies Act and
the SA Companies Act.
The board, assisted by
the audit committee,
evaluates the
effectiveness and
independence of the
external auditors – the
South African and UK
fi rm of Deloitte
& Touche.
This committee
reports directly to
the board and has
several responsibilities
including internal
control, internal audit,
risk management
and assurance.
The committee meets
at least three times a
year (attendance
is outlined on
page 90)
and makes
recommendations
to the board, which
retains ultimate
responsibility with
regard to risk
tolerance levels. It also
works closely with the
internal audit function
and approves and
reviews the internal
audit plan and its
execution.
92 Pan African Resources integrated annual report 2016
TRANSPARENCY AND
ACCOUNTABILITY
Remuneration review
Message from the Chairman of
the remuneration committee
Dear Pan African stakeholders
I am pleased to present the 2016 Pan African
Resources remuneration report on behalf of
our remuneration committee and board.
The 2016 fi nancial year was a particularly
rewarding period for Pan African Resources
and also for many of our stakeholders,
including our shareholders. Our group
delivered record gold production and,
as a result, also produced record profi ts.
We recognise that, in part, this excellent
performance was also a result of increased
gold prices. However, this gold price
increase was only after a number of years
of depressed prices and investor sentiment,
where the group, our management and
employees continued to work tirelessly to
ensure the sustainability of our operations
and to increase gold production.
Following the fi nalisation of the Uitkomst
Colliery acquisition, a review of its
remuneration policies, processes and
procedures formed part of our due diligence
and we do not foresee major challenges with
fi nalising this integration.
Even though stakeholders generally focus on
the remuneration of senior executives and
group directors contained in this report, it
is important to highlight the progress of our
remuneration committee and management
in aligning the interests of all employees to
those of shareholders. We are particularly
pleased that we have successfully concluded
multi-year wage agreements at our gold
operations, and also that we have now
implemented employee share ownership
plans (ESOP) at Barberton and Evander
Mines. The Uitkomst Colliery ESOP will
be fi nalised by 31 December 2016. These
ESOPs allow non-management employees to
benefi t from ownership of the businesses in
which they make a positive contribution.
The remuneration committee (Remco)
assists the board in ensuring that group
remuneration is aligned with the overall
business strategy, with the aim of enabling
Pan African Resources to attract, incentivise
and retain personnel who will create
long-term value for all stakeholders. The
committee reviews current compensation
levels and incentive schemes on a regular
basis to ensure that they remain market
related and fulfi l their purpose as an incentive
to align the interest of the group’s senior
management and employees to that of the
stakeholders. In this regard the committee
draws on PricewaterhouseCoopers’ (PwC)
Remchannel and Aon Hewitt market analysis
to ensure compliance to best practice in
executive compensation. We also benchmark
remuneration of other employees in the
group on a regular basis.
Our previous fi nancial year’s remuneration
report was endorsed by almost 90% of
shareholders voting at the annual general
meeting. However, following an assessment
of current market practices and interactions
with some of our shareholders in the
current year, we again evaluated and adjusted
remuneration structures (specifi cally the
variable and long-term portions of packages)
for executive directors, on a forward-looking
basis. These changes continue to ensure that
senior management directs our business in
a manner that creates long-term value for
shareholders. In our drive for continuous
improvement, we have again improved
the level of disclosure in this year’s report,
specifi cally on matters such as details of
short-term incentive targets for senior
executives.
Providing motivational and shareholder
aligned remuneration structures in a
demanding operating environment will
always be a challenge, however we believe
that we have found an equitable approach to
this sensitive matter.
We do, however, remain receptive to
feedback from our stakeholders on our
remuneration philosophy or any matter
related thereto.
Yours faithfully
Rowan Smith
Chairman, remuneration committee
20 September 2016
Pan African Resources integrated annual report 2016
93
Remuneration review continued
Remuneration philosophy
Pan African Resources’ remuneration
philosophy seeks to reward executive
directors and other senior management
for individual and group performance. It
recognises that these individuals have the
ability to signifi cantly impact the performance
of the group, over the short and long
term. Executive directors and other senior
management carry signifi cant responsibility,
statutory and otherwise, and appropriate
skills are diffi cult to attract and retain in what
is increasingly a challenging environment. It is
therefore critical that remuneration is aligned
to the contribution and performance of the
company, teams and individuals. The group’s
key remuneration objectives include:
• Facilitating the delivery of superior
long-term results for the business and
shareholders and promoting sound risk
management principles
• Reinforcing leadership, accountability,
teamwork and innovation
• Supporting the corporate values and
desired culture
• Supporting the attraction, retention,
motivation and alignment of the talent we
need to achieve our business goals.
The group’s remuneration policy provides
a framework for remuneration to attract,
retain and motivate employees to achieve
the strategic objectives of the organisation,
within its risk appetite and risk management
framework.
The remuneration framework recognises the
following principles:
• Objectivity in short-term incentives
– comprising an annual bonus which
rewards management for matters under
their control or infl uence, but not matters
outside their control such as commodity
prices and exchange rates
• Objectivity in long-term incentives – the
purpose with this component of the
remuneration framework is to align
the long-term interest of the group’s
management and employees with that
of the group’s shareholders through
incentives, which are directly linked to
the increase in the Pan African Resources
share price. These awards generally vest
over a period of four years
• Alignment to shareholders – we believe
that the combination of these incentives
will achieve the objectives set out in the
above philosophy, by aligning the interests
of employees with the shareholder’s
aspirations
• Application of discretion – Remco has
the authority to apply its discretion in the
event where specifi c circumstances are
outside the control of the operations and
these circumstances would be prejudicial
to employees/management.
In order to achieve its remuneration
objectives, Remco, in consultation with and
oversight from the board, retains fl exibility
in terms of how it incentivises and rewards
performance. Remco may therefore, in
the event of exceptional performance by
specifi c members of senior management or
others, approve additional incentives if this
is deemed justifi ed. In the event of any such
payments, the motivation and details are
disclosed in this remuneration report and in
the group fi nancial statements.
Remuneration governance
Remco comprises only independent non-
executive directors, which monitors and
strengthens the credibility of the group’s
executive remuneration system. It reviews
the performance of the Chief Executive
Offi cer, executives and senior management
and sets the scale, structure and basis of their
remuneration and the terms of their service
agreements. The committee also considers
and makes recommendations to the board
on remuneration packages and policies in
this regard.
The Remco Chairman is Mr Rowan Smith
and the membership and attendance of
Remco is shown on
page 90.
Remco meetings are attended by the Chief Executive Offi cer, Financial Director and the Executive Human Resources. None of these individuals
are present when their remuneration is discussed. Some of the key focus areas discussed during the fi nancial year are tabled below.
Focus areas during 2016 fi nancial year
Discussion
Bonus retention incentive agreement
Revision of Evander Mine’s short-term incentive plan
Salary adjustments and benchmarking
Review of executive director remuneration structure
and contract period
Finalising the bonus retention agreements for the nominated employees. This retention
scheme excludes the Chief Executive Offi cer
Revising Evander Mines’ short-term incentive plan to better align with the group’s plan
and strengthen the philosophy of pay for performance
Ensuring that the salary adjustments were in line with the group’s remuneration
philosophy and within the benchmarks provided by PwC Remchannel and Aon Hewitt
market analysis
New structures fi nalised and disclosed in this report. New remuneration structure is
expected to continue to reward performance and ensure long-term alignment with
shareholders
Access to information and advisers
Remco has unrestricted access to the company’s records, facilities and any other resources necessary to discharge its duties and responsibilities.
Remuneration is reviewed annually against competitive market data and analysis from the PwC Remchannel market analysis. In the current year,
directors’ remuneration was also benchmarked against AIM100 and FTSE250 peers. The board approves remuneration proposals from Remco
and submits them to shareholders for endorsement at the annual general meeting.
94 Pan African Resources integrated annual report 2016
TRANSPARENCY AND
ACCOUNTABILITY
Remuneration framework
Basic salary
and benefi ts
Short-term incentives
Remuneration: key features
Long-term incentives
Reviewed
annually against
competitive
market data
and the PwC
Remchannel
• Paid annually at corporate level
• Paid annually at operations
• Measured objectively against the group’s performance or
• The Equity Share Option Plan
• Pan African Resources’ group Share Appreciation Bonus Plan
• Employee ownership programme (Barberton and Evander
personal contribution
Mines)
• Specifi c other schemes for executive directors
Remuneration: criteria for eligibility
Employment
at the group
Executive management (Exco)
Production and Safety KPIs account for 60% of assessment
based on:
• Group’s gold and PGEs sold (ounces)
• Costs of production
• Safety targets (objective measurement based on group’s actual
achievements against set business plans for the fi nancial year)
The main objective of the group Equity Share Option Plan and
Share Appreciation Bonus Plan is to:
• Appropriately incentivise select employees who are employed
at a managerial level within the group
• Ensure retention of key skills required for the group’s ongoing
profi table performance and growth
• Align management interests with those of shareholders
During the last year, executive management achieved the
following percentages in terms of the above criteria:
• Group’s gold and PGEs sold (ounces): 12.7% out of a
possible 18%
• Costs of production: 5.1% out of a possible 10.8%
• Safety targets (objective measurement based on group’s actual
achievements against set business plans for the fi nancial year):
6.6% out of a possible 7.2%
Personal KPIs account for 40% of assessment and are specifi c to
the employee concerned. These personal KPIs are clearly defi ned
and are intended to contribute specifi c positive outcomes to group
results. Examples of personal KPIs during the last year included:
• Successful conclusion of multi-year wage agreements within
mandate provided
• Improved production at Evander Gold Mining
Operational management committees (Opsco)
Production and Safety KPIs account for 60% of assessment based on:
• Group’s gold sold (ounces)
• Costs of production
• Safety targets (objective measurement based on group’s actual achievements against set business plans for the fi nancial year)
Personal KPIs account for 40% (from 1 July 2016: 40%) of assessment and are specifi c to the employee concerned. These personal
KPIs are clearly defi ned and are intended to contribute specifi c positive outcomes to group results. Examples of personal KPIs during
the last year included:
• Successful integration of Uitkomst Colliery into the Pan African Resources group
• Geology model sign-off for Klipspruit Mine (Uitkomst Colliery)
• Effective and cost effi cient implementation of an effi cient and user friendly safety and environmental data system
Operational management on-mine (Manco)
Production and Safety KPIs account for 80% of assessment based on:
• Operation’s gold/PGEs sold (ounces)
• Costs of production
• Safety targets (objective measurement based on group’s actual achievements against set business plans for the fi nancial year)
Personal KPIs account for 20% of assessment and are specifi c to the employee concerned.
Operational heads of department (HODs)
This grouping is paid quarterly. A maximum of 12.5% (from 1 July 2016: 12.5%) per quarter of the individual’s annual cost to company
(CTC) at 100% achievement (therefore a total of 50%) of which only 50% of the 12.5 % will be due and payable per quarter. The other
50% is retained and is only due and payable at the end of the fi nancial year. The quarterly production KPIs are based on the following:
• Operation’s gold/PGEs sold (ounces)
• Costs of production
• Safety targets (objective measurement based on the operation’s actual achievements against set business plans for the fi nancial year)
Pan African Resources integrated annual report 2016
95
Remuneration review continued
Employee remuneration components
page 167, however all non-executive directors,
Remuneration is currently disclosed and presented in GBP in the annual fi nancial statements on
executive directors and employees are remunerated and paid in ZAR. Director and employment contracts are therefore also ZAR denominated.
Element
Key features
Purpose
Eligibility
Factors considered
Guaranteed pay
Executives,
senior managers
and heads of
department
• Pensionable salary
• Leave
• Pension/provident fund
contributions
• Medical contributions
• Travel allowance
• All of the above adds to the
total cost to company of an
employee
Aligned to the value the
individual provides to the group,
including:
• Skills and competencies
required to generate results
• Sustained contribution to the
group
• The value of the role and
contribution of the individual
to the group
Executives, senior
managers and heads
of department
• Group performance
• Outlook for the next fi nancial year
• Individual performance
Collective
bargaining
employees
• Pensionable salary
• Leave
• Medical contributions
• Overtime/housing or living out
Aligned to the value the
individual provides to the group,
including:
• Skills and competencies
Collective bargaining
employees
All relevant factors in the industry
such as annual wage agreements
allowance
• Other fi xed allowances –
underground allowances, rock
drill operator allowances and
meal allowances
required to generate results
• Sustained contribution to the
group
• The value of the role and
contribution of the individual
to the group
Variable pay
Short-term
incentives
• Paid annually at corporate level
• Paid monthly, quarterly
or annually at operations
depending on the level of
employee
• Measured objectively against
the group’s performance or
personal contribution
Designed to drive and reward
medium-term results, refl ecting
the level and time horizon of
risk. This includes fi nancial and
non-fi nancial results and metrics
at an organisation, division and
individual (and team) level
Executives,
managers and heads
of department –
paid annually
• Group fi nancial and strategic
performance
• Business unit (team) fi nancial and
strategic performance
• Individual contribution to team
performance
• Individual performance, including
alignment with corporate values
and meeting performance
objectives
• Contribution to meeting risk and
compliance requirements at group,
team and individual level, risk and
compliance requirements also
comprise a gateway to whether a
payment is made and the size of
the payment
• Notwithstanding fi nancial
performance and the individual
contribution and performance, if
the individual, team or group does
not meet or only partially meets
risk and compliance requirements,
no award or a reduced award may
be made
96 Pan African Resources integrated annual report 2016
TRANSPARENCY AND
ACCOUNTABILITY
Element
Key features
Purpose
Eligibility
Factors considered
Variable pay continued
Short-term
incentives
continued
Retention
bonus- short-
to medium-
term incentive
(excluding
Chief Executive
Offi cer)
Long-term
incentives
• Once-off payment in advance
to key personnel to ensure
their continued employment
for the three-year retention
period
• Three-year lock-in period is
from 1 July 2015 to 30 June
2018
• Claw-back clause included if
three-year service period is
interrupted
• Alignment to shareholders’
investment horizon and
aspirations
• Equity linked
• Measured objectively against
the group’s performance or
personal contribution
Long-term
incentives
– equity
participation
plans
• Alignment of the aspirations
of Pan African Resources’
employees at its operations
with that of management and
shareholders
• Discretionary
Special
remuneration
benefi ts –
sign-on, retention
and termination
benefi ts
Collective bargaining
employees
• Eligibility to participate in the
scheme
• The maximum variable
remuneration as a percentage
of total cost to company of an
individual
• The parameters for production
targets to be achieved
• The personal KPIs for each
participant
• Key personnel identifi ed to ensure
sustainability
Designed to retain key personnel
for a lock-in period of three
years – 1 July 2015 to 30 June
2018
Select key
personnel, excluding
the Chief Executive
Offi cer
Discretionary remuneration
designed to drive and reward
long-term growth and sustained
company value and align the
interests of shareholders and
participants. These may or may
not be share options, share
appreciation retention schemes
or the like. It should be the
intention to structure any form
of long-term incentive in such a
way as to retain and attract the
necessary skills for the group
and to ensure that it is market
related
To align the interests of
employees with those of
shareholders through providing
direct participation in the
benefi ts of future company
performance
Designed to retain and attract
certain scarce skills, especially at
the heads of department and
senior management levels
Executives and
others approved by
the board
Seniority and level of responsibility
Collective bargaining
employees
Seniority and level of responsibility
Heads of
department and
senior managers
Experience and relevant qualifi cations
The detailed remuneration of the group’s independent non-executive directors, executive directors and prescribed offi cers is disclosed in the
fi nancial statements on
pages 167 to 170.
Pan African Resources integrated annual report 2016
97
Remuneration review continued
Risk management and
remuneration
Pan African Resources recognises the need
to fairly remunerate employees in order
to attract and retain talent. However, it is
cognisant of the need to ensure that effective
risk management is part of its remuneration
consideration, in order to drive the correct
behaviour. As such, all employees’ KPIs include
specifi c elements that are aligned to the
group’s long-term goals, including zero harm.
Safety is imperative to the mines’ operations
and the group’s remuneration philosophy
reinforces the need for the delivery of
superior long-term results, while promoting
sound risk management principles.
Non-executive director
remuneration
Remco advises the board on fees for
non-executive directors. In determining
the annual fees, Remco considers the
directors’ responsibilities throughout the year,
scarcity of skills, the group’s performance,
market-related conditions and local and
international comparative remuneration.
King III recommends that fees should
comprise a base fee and an attendance fee
per meeting. The board agreed that a fi xed
fee for directors’ services on the board and
sub-committees was more appropriate,
as the board’s input extends beyond the
attendance at meetings. When, as a result
of a specifi c transaction or circumstances,
non-executive directors are required to
spend signifi cantly more time and effort than
is normally expected in preparing for and
attending board meetings and discussions,
Remco considers additional fees to
compensate non-executive directors for
this additional time and effort.
Non-executive fees are paid on a quarterly
basis. There are no contractual arrangements
for compensation for loss of offi ce.
Regulatory requirements taken into account
when determining non-executive directors’
remuneration include the SA Companies
Act, the UK Companies Act, JSE Listings
Requirements, King III and the UK Code.
Exco, Opsco and mine
management (Manco)
remuneration
Remco is responsible for making
recommendations to the board on the
remuneration of the Chief Executive Offi cer,
those who report directly to him and
selected other senior staff. Remuneration
is reviewed on an annual basis and takes
into account the group’s and operations’
fi nancial and strategic performance, individual
contribution to the group’s and operations’
performance, alignment with group values
and the contribution in meeting risk and
compliance requirements. Where the
individual, team or group does not meet
or partially meets requirements, no award
or a reduced award may be made. An
annual benchmarking exercise, through
the PwC Remchannel market analysis, is
utilised to determine a fair market-related
remuneration. Individual KPIs are agreed
upon annually and contain various elements,
as shown on
pages 100 to 101.
Remuneration comprises fi xed and
variable (short- and long-term incentives)
remuneration. Short-term incentives
have certain parameters, shown on
pages 96 and 97, to ensure a performance-
based culture. The board and executive
committee retain discretion to determine
which parameters apply and their weighting to
refl ect immediate priorities. There will be times
when it is appropriate, and in shareholders’
best interest, to attach more signifi cant weight
to (for example) one or more of production,
fi nancial or transformation imperatives as
circumstances dictate.
98 Pan African Resources integrated annual report 2016
TRANSPARENCY AND
ACCOUNTABILITY
The maximum variable remuneration percentages applied are tabled below.
Position
2016 maximum variable remuneration
(as a % of total remuneration)
Chief Executive Offi cer
Executive committee and Financial Director
Senior managers and others approved by the board
Up to 90%
Up to 60%
Up to 50%
Regulatory requirements taken into account when determining non-executive directors’ remuneration include the SA Companies Act, the
UK Companies Act, JSE Listings Requirements, King III and the UK Code.
Variable remuneration conditions
Position
Maximum variable remuneration
(as a % of total remuneration)
Qualifi cation criteria at 100% achievement
Chief Executive
Offi cer
Up to 90%
60% based on the following production parameters:
• Total group gold and PGMs sold – weight 50%
• Total group cost per kilogram – weight 30%
• Group safety – weight 20%
Executive
committee
Up to 60%
Up to 50%
Up to 50%
Senior
managers at
corporate level
approved by
Remco
Senior
managers at
operational
level approved
by Remco
40% based on personal KPIs determined by the Remco. KPIs relate to pre-determined,
defi nitive outcomes which add tangible value to the group. KPIs for the 2016 fi nancial year
are detailed below
60% based on the following production parameters:
• Total group gold and PGMs sold – weight 50%
• Total group cost per kilogram – weight 30%
• Group safety – weight 20%
40% based on personal KPIs determined by the Chief Executive Offi cer in consultation with
the Remco. KPIs relate to specifi c pre-determined outcomes
60% based on the following production parameters:
• Total group gold and PGMs sold – weight 50%
• Total group cost per kilogram – weight 30%
• Group safety – weight 20%
40% based on personal KPIs which relate to specifi c pre-determined outcomes set by the
Chief Executive Offi cer
80% based on the following production parameters per individual operation:
• Total gold or PGMs sold – weight 50%
• Total cost per kilogram – weight 30%
• Operational safety – weight 20%
20% based on personal KPIs which relate to specifi c pre-determined outcomes set by the
Chief Operating Offi cer and General Manager
Pan African Resources integrated annual report 2016
99
Remuneration review continued
Executive director operational and personal KPI performance analysis
2016 fi nancial year
Cost to
company
ZAR
Production
parameters
%
Personal
KPIs
%
Total
incentive
%
Evidence of achievement
(note 1)
3,500,000
36.7
(max 54)
36
(max 36)
72.7
(max 90)
Executive
director
Cobus Loots
(Chief
Executive
Offi cer)
Deon Louw
(Financial
Director)
2,750,000
24.5
(max 36)
24
(max 24)
48.5
(max 60)
Contractual
2016
ZAR
incentive
Transaction
bonus
ZAR
(note 2)
Total
2016
ZAR
incentive
2,544,500
4,000,000
6,544,500
1,333,750
2,000,000
3,333,750
Production parameters per
operation are weighted on
budgeted profi t contribution:
• Barberton Mines production
and safety 31.53% (max
34.06%)
• Evander Mines production and
safety 4.73% (max 17.78%)
• Phoenix Platinum production
and safety 0.44% (max 2.16%)
Personal KPIs:
• Successful conclusion of the
Uitkomst Colliery transaction
before 30 June 2016:
Transaction was successfully
concluded on 31 March 2016.
Percentage achieved – 18%
(max 18%)
• Conclusion of wage
negotiations at all of the
operations: Multi-year
agreements concluded with the
NUM, AMCU and UASA within
the approved board mandates.
Percentage achieved – 18%
(max 18%)
Production parameters per
operation are weighted on
budgeted profi t contribution:
• Barberton Mines production
and safety 21% (max 22.7%)
• Evander Mines production and
safety 3.2% (max 11.9%)
• Phoenix Platinum production
and safety 0.3% (max 1.4%)
Personal KPIs:
• Facilitation of an action plan
to improve effi ciencies and
production at Evander Mines:
Gold production increased by
30.8%. Percentage achieved –
12% (max 12%)
• Facilitation of and ensuring
that the due diligence process
with regard to a potential gold
acquisition is completed by
30 June 2016: Due diligence and
valuation timeously completed,
however negotiations terminated.
Percentage achieved – 12%
(max 12%)
Note 1: In addition to the initial KPIs agreed for the 2016 fi nancial year, Remco also noted the following achievements when assessing executive director performance for the
2016 fi nancial year:
• Material production improvements at Evander Mines and Barberton Mines
• Successful completion of due diligence on a potential gold acquisition target
• Evander Mines successfully concluded profi table refi ning contract for secondary gold resources obtained from the Kinross CIL plant (example: gold recovered from mill fl oor etc.)
• ETRP operating in accordance with and better than initial project expectations
• Progress with addressing safety challenges in group companies
Note 2: Following the conclusion of the high value and earnings-accretive Shanduka Gold transaction and related vendor consideration placement of Pan African Resources shares,
the Remco noted the value created for shareholders exceeded ZAR800 million or approximately 17% of Pan African Resources’ market capitalisation. In light of this, Remco deemed it
appropriate to review the executive director’s remuneration to include a transaction bonus following the successful conclusion of this transaction.
100 Pan African Resources integrated annual report 2016
TRANSPARENCY AND
ACCOUNTABILITY
2015 fi nancial year
Cost to
company
ZAR
Production
parameters
%
Personal
KPIs
%
Total
incentive
% Evidence of achievement
3,500,000
6.4
(max 22)
33
(max 33)
39.4
(max 55)
Executive
director
Cobus Loots
(Chief
Executive
Offi cer)
2,750,000
7
(max 24)
36
(max 36)
43
(max 60)
Deon Louw
(Financial
Director)
(note 1)
Total
ZAR
incentive
1,379,000
393,892
Production parameters per operation are weighted on
budgeted ounces produced:
• Barberton Mines production and safety 3.7% (max 12.1%)
• Evander Mines production and safety 1.8% (max 9%)
• Phoenix Platinum production and safety 0.9% (max 0.9%)
Personal KPIs:
• All subsidiaries to achieve a minimum of 40% HDSA
representation in the specifi c DOL categories: All subsidiaries
above the 40% requirement. Barberton Mines Manco at 44%,
Evander Mines’ Manco at 56%, Phoenix Platinum’s Manco at
100% and all other groupings as defi ned by the DOL were
above 40%. Percentage achieved – 16.5% (max 16.5%)
• Implement at least one value-accretive transaction/structure for
the Pan African Resources group: Operational gold trading and
conclusion of two concentrate gold sales. Percentage achieved –
8.25% (max 8.25%)
• Present and have approved at least one investment opportunity
to the Pan African Resources board: Two opportunities presented
and approved by the board. Percentage achieved 8.25% (max
8.25%)
Production parameters per operation are weighted on
budgeted profi t contribution:
• Barberton Mines production and safety 4% (max 13.2%)
• Evander Mines production and safety 2% (max 9.8%)
• Phoenix Platinum production and safety 1% (max 1.0%)
Personal KPIs:
• Conclude a new revolving credit facility and general banking
facilities for the group by 30 June 2015: Successfully concluded
a ZAR800 million revolving credit facility and a ZAR100 million
general banking facility before 30 June 2015. Percentage achieved
– 18% (max 18%)
• Obtain board approval and implement a group treasury
function by 30 June 2015: Successfully approved and implemented
by 30 June 2015. Percentage achieved – 18% (max 18%)
Note 1: Deon Louw was appointed on 1 March 2015 and his incentive was calculated on a pro-rata basis.
Executive director service contracts
The Pan African Resources Chief Executive Offi cer and Financial Director have entered into three-year employment contracts effective
1 March 2015 with the group, and are remunerated in ZAR for services performed. In terms of these contracts no amounts are payable at inception
or termination at the end of the contract term. There is no limitation on the number of times an executive director may stand for board re-election.
Subsequent to fi nancial year-end, the Pan African Resources’ Remco and board noted that the executive directors had only 18 months remaining
in terms of their current contracts of employment. The board then reviewed the option of extending their contracts for the following purposes:
• Ensuring retention of highly competent and motivated management team
• Ensuring continuity and stability of senior management
• Continuity in executive management remains important in achieving group strategic initiatives and for the conclusion of imminent projects such
as the Elikhulu tailings.
Pan African Resources integrated annual report 2016
101
Remuneration review continued
Remco also reviewed the terms of the executive directors’ contracts and agreed the following amendments to align contracts to market best
practice performance-based remuneration, addressing the following elements:
• Basic remuneration
• Short-term incentives linked to operational performance and personal performance
• Long-term equity-settled performance incentives to ensure individual and group performance which aligns with the interests of shareholders.
Such long-term incentives should be linked to shareholder returns relative to Pan African Resources’ peers.
New contractual arrangements in respect of the Chief Executive Offi cer and Financial Director:
Term
Chief Executive Offi cer
Financial Director
Contract duration
Extended by three years to 28 February 2021 – currently
to 28 February 2018
Extended by three years to 28 February 2021 – currently
to 28 February 2018
Guaranteed remuneration
Benchmarked, adjusted to 17% below the market mean
(PwC Remchannel)
Benchmarked, adjusted to 16% below the market mean
(PwC Remchannel)
Short-term annual incentive
Currently a maximum of 90% of annual CTC. Going
forward adjusted to a maximum of 110% of annual
CTC, however 30% of this bonus is deferred, and only
payable 24 months after initial payment (in shares or
cash, at Remco election), subject to confi rmation that
original KPIs and operational performance was correctly
recorded and benefi ted the group as originally anticipated
Currently a maximum of 60% of annual CTC. Going
forward adjusted to a maximum of 80% of annual
CTC, however 30% of this bonus is deferred, and only
payable 24 months after initial payment (in shares or
cash, at Remco election), subject to confi rmation that
original KPIs and operational performance was correctly
recorded and benefi ted the group as originally anticipated
Participation in the group
phantom share scheme
No further participation in the phantom share scheme
(other than existing allocation) and new long-term
incentive as described below
No further participation in the phantom share scheme
(other than existing allocation) and new long-term
incentive as described below
Minimum shareholding in PAR
Currently no requirement. New requirement is a
minimum initial shareholding to the value of
ZAR2 million, to be held for a minimum of two years.
Requirements to be increased in next fi nancial year
Currently no requirement. New requirement is a
minimum initial shareholding to the value of
ZAR0.5 million, to be held for a minimum of two years.
Requirements to be increased in next fi nancial year
Long-term share incentive
Further alignment with
shareholders
Currently a maximum of 8,000,000 PAR shares, allocated
for no consideration over a three-year period and vesting
on 28 February 2018. Total of 5,133,333 allocated to
date. Currently, allocation is at the discretion of Remco
on the basis of group/executive performance
New allocation of 5,000,000 PAR shares, vesting over the
further additional three-year contract term. Vesting will
however be determined by measuring total shareholder
return (defi ned as share price performance and dividends
to shareholders) against gold sector peers on an annual
basis. Shares vest only when PAR outperforms the sector,
with a pro-rata vesting and all shares vesting in the event
of an outperformance of 8% or more against peers
New long-term incentives therefore vest in approximately
fi ve years from date of original issue
Remco may elect, at its discretion, in circumstances
deemed reasonable/equitable, to apply amended vesting
criteria
In the event of a signifi cant outperformance of the
market (in excess of 8%), Remco may also allocate
additional shares
No current allocation
New allocation of 3,100,000 PAR shares, vesting over the
further three-year contract term. Vesting will however
be determined by measuring total shareholder return
(defi ned as share price performance and dividends to
shareholders) against gold sector peers. Shares vest only
when PAR outperforms the sector, with a pro-rata vesting
and all shares vesting in the event of an outperformance
of 8% or more against peers. Measurement occurs
annually
New long-term incentives therefore vest in approximately
fi ve years from date of original issue
Remco may elect, at its discretion, in circumstances
deemed reasonable/equitable, to apply amended vesting
criteria
In the event of a signifi cant outperformance of the
market (in excess of 8%), Remco may also allocate
additional shares
In the event of a signifi cant acquisition or growth project,
Remco will determine a portion of the annual short-
term bonus “at risk”. If the signifi cant acquisition or
growth project does not deliver into initial expectations,
after-tax portion of bonus “at risk” is to be refunded by
the executive director to the company. In the event that
the signifi cant acquisition or growth project performs
according to or in excess of expectations, a top-up bonus
is payable by the company
In the event of a signifi cant acquisition or growth project,
Remco will determine a portion of the annual short-
term bonus “at risk”. If the signifi cant acquisition or
growth project does not deliver into initial expectations,
after-tax portion of bonus “at risk” is to be refunded
by the executive director to company. In the event that
the signifi cant acquisition or growth project performs
according to or in excess of expectations, a top-up bonus
is payable by the company
102 Pan African Resources integrated annual report 2016
TRANSPARENCY AND
ACCOUNTABILITY
Payment for loss of offi ce for executive directors
Notice periods
Notice periods do not exceed six months
Upon appointment, Remco can agree on an extended notice period for the fi rst year following appointment
Good leaver
Voluntary resignation
Bad leaver
Circumstances
for departure
Retirement, redundancy, death, ill health, injury, disability
or as defi ned by Remco
Where departure is on mutually agreed terms, Remco may
treat the departing executive as a good leaver. Remco uses
its discretion judiciously and shareholders will be notifi ed of
any exercise as soon as reasonable
Termination by
company for
misconduct or poor
performance
Salary and benefi ts
for notice period
Salary and benefi ts continue to be paid to the date of
termination of employment, including any notice period
and/or garden leave period
Salary and benefi ts continue to be
paid to the date of termination of
employment, including any notice
period and/or garden leave
Immediate termination
with no notice period
Bonus accrued prior
to termination
Remco applies its discretion as to whether a time prorated
bonus award may be made and if the bonus will be paid
wholly in cash
Remco applies its discretion as to
whether or not to pay out any
bonus
No accrued bonus
is payable
Prescribed offi cers
The group’s prescribed offi cers are those
individuals who exercise general executive
control over and manage a signifi cant
portion of the group’s business activities or
regularly participate, to a material degree,
in the exercise of general executive control
over a signifi cant portion of the group’s
business activities. In accordance with
these requirements, Pan African Resources’
prescribed offi cers include:
• Anaki Karigeni, Chief Operating Offi cer
• André van den Bergh, Executive Human
Resources
• Casper Strydom, General Manager,
Barberton Mines
• Band Malunga, General Manager, Evander
Mines
• Bertin McLeod, Plant Manager, Phoenix
Platinum.
The prescribed offi cers’ remuneration is
disclosed on
page 168.
Short- and long-term
incentives
Pan African Resources provides both short-
and long-term incentives to executives, senior
management and other persons approved
by the board. The short-term incentives are
largely used to incentivise eligible employees,
based on operational outcomes that are
mainly under management control. The long-
term incentive is used to drive performance
over the longer term (three to fi ve years)
to ensure improved alignment with the
group’s strategic objectives and long-term
sustainability.
Share Appreciation Bonus Plan
The main objective of the Share
Appreciation Bonus Plan (Bonus Plan) is
to provide appropriate incentives to select
employees who are employed at a senior
managerial level within the group. This
ensures retention of key skills required
for the ongoing profi table performance
and growth of Pan African Resources and
to align management interests with those
of shareholders. In terms of the Bonus
Plan, select executives and employees
(participants) of the group will be allocated
notional shares in Pan African Resources.
These notional shares will confer the
conditional right on the participant to be
paid a cash bonus equal to the appreciation
in the Pan African Resources share price,
from the date of allocation to the date of
surrender or deemed surrender of his/her
notional shares (share appreciation bonus).
The share appreciation bonus will lapse no
later than the sixth anniversary of the date
that any notional shares were allocated.
However, the participant can elect, subject
to approval by Remco, to surrender his/her
notional shares and receive the bonus at a
date prior to the sixth anniversary date. The
bonus will be regarded as remuneration for
income tax purposes and will be subject to
the deduction of PAYE and all other taxes
and contributions.
Salary multiples and total
The total bonus scheme exposure and ceiling
levels of eligible employees’ participation in
the Bonus Plan is proposed by Remco and
approved by the board. The multiples agreed
to are shown below and Remco is required
to monitor Pan African Resources’ exposure
to the Bonus Plan in a consistent manner.
Position
Multiples applied in determining the number of options to be issued
Executive committee
Operations committee
Management committee
3.5 times annual cost to company (excluding Chief Executive Offi cer and Financial Director)
3.0 times annual cost to company
2.0 times annual cost to company
Pan African Resources integrated annual report 2016
103
ANNUAL FINANCIAL STATEMENTS
GOLD and
the concept of
MONEY
Gold’s beauty, scarcity, unique density (no other
metal outside the platinum group is as heavy),
and the ease at which it could be melted, formed,
and measured made it a natural trading medium.
Gold gave rise to the concept of money itself:
por table, private, and permanent. Gold and silver
in standardised coins came to replace bar ter
arrangements and made trade much easier. Gold
increased trade between South Africa and the
rest of the world. For the main trading nations,
namely Europe and the United States, gold was
of value because their currencies were backed
by gold. This was known as the gold standard.
Under the gold standard, these countries had
to keep gold in a bank vault to the value of
the currency they issued. For example, if the
government of a country wanted to print more
money, it had to buy gold to back that money. If
that country did not produce gold itself, it had to
impor t gold from another country.
http://www.randrefi nery.com/brochures/Rand%20Refi nery%20-%20
The%20Story%20of%20Gold.pdf
+1
+3
79
Au
Gold
196.97
2-8-18-32-18-1
Physical attributes
of GOLD
Gold is a chemical element in the periodic table
that has the symbol Au and atomic number 79.
Gold is a soft, shiny, yellow, dense, malleable, ductile
(trivalent and univalent) transition metal. Gold does
not react with most chemicals but is attacked by
chlorine, fl uorine and aqua regia1. The metal occurs as
nuggets of gold, or grains of gold in rocks and in alluvial
deposits and is one of the coinage metals. Gold is the
most malleable (able to be hammered into very thin
sheets) and ductile (able to be drawn into a fi ne wire)
of all metals.
It is so malleable that a goldsmith can hammer one
ounce of gold into a thin translucent wafer covering
more than 100 square feet only fi ve millionths of an
inch thick. It would be so thin that 1,000 sheets would
be needed to make up the thickness of one newspaper
page. Its ductility is equally amazing. One ounce of
gold can be drawn into a wire 80,5 kilometres long.
Furthermore, only one ounce of this metal is required
to plate a thread of copper 1,000 miles long.
Gold is also one of the heaviest metals known. It has a
specifi c gravity of 19.3, which means it weighs
19.3 times as much as an equal volume of water.
Gold is a good conductor of heat and electricity, and is
not affected by air and most reagents. Heat, moisture,
oxygen, and most corrosive agents have very little
chemical effect on gold, making it well suited for use in
coins and jewellery; conversely, halogens will chemically
alter gold, and aqua regia dissolves gold.
1 Aqua regia (royal water in Latin) is a very strong acid. It is made by mixing one part nitric acid
and three parts hydrochloric acid. The acid was named by alchemists because it can dissolve the
noble metals gold and platinum.
http://www.randrefi nery.com/brochures/Rand%20Refi nery%20-%20
The%20Story%20of%20Gold.pdf
Gold pouring at Barber ton Mines
+1
+3
79
Au
Gold
196.97
2-8-18-32-18-1
ANNUAL FINANCIAL
STATEMENTS
Audit committee report
Introduction
The committee was appointed at the
AGM held on 27 November 2015. All the
directors are considered by the board to
have an independent and objective mindset.
In terms of the King Code there are three
independent directors. The audit committee
comprises two independent directors and
an independent chairman of the board is the
third member. In terms of the JSE guidelines
the chairman is entitled to be a member of
the committee as long as the committee is
chaired by an independent board director.
This situation has arisen as the company has
a small number of directors. In terms of the
UK Code the audit committee requires a
majority of independent members for AIM
listed companies.
The committee has reporting responsibilities
to the shareholders and the board of
directors of Pan African Resources and is
accountable to them. It operates in line
with a documented charter and complies
with all relevant legislation, regulation and
governance codes and executes its duties in
terms of the requirements of the governance
codes in the UK and South Africa. These
codes include the UK Code and the
King III Code.
The performance of the audit committee
is evaluated against the charter annually
and a self-evaluation of the committee’s
effectiveness is performed by the members
and reviewed by the board.
The independent non-executive directors
of the audit committee are:
• HH Hickey (Chairperson)
• T Mosololi
• KC Spencer (Board Chairman)
Audit committee
responsibilities and duties
The audit and risk committee fulfi ls its
responsibilities and duties as set out in its
charter.
The functions of the audit and risk
committee include:
• Review of the interim and year-end
fi nancial statements and integrated report
culminating with a recommendation to the
board
• Review of the external audit reports, after
audit of the interim and year-end fi nancial
statements
• Assess the external auditors’ independence
and performance
• Authorise the audit fees in respect of the
interim and year-end audits
• Specify guidelines and authorise the award
of non-audit services to the external
auditors
• Review of the internal audit and risk
management reports with, when relevant,
recommendations being made to the
board
• Ensure that a co-ordinated approach to
all assurance activities is in place
• Evaluate the appropriateness and
effectiveness of risk management, internal
controls and the governance processes
• Deal with concerns relating to accounting
practices, internal audit, the audit or
content of annual fi nancial statements
and internal fi nancial controls.
Financial statements
The committee has evaluated the
consolidated and separate fi nancial
statements for the year ended 30 June 2016
and, based on the information provided
to the committee, considers that the
consolidated and separate fi nancial
statements comply, in all material respects,
with the requirements of the UK Companies
Act and IFRS. The requirements from
King III are being continuously assessed and
improved with signifi cant issues resolved.
Risk management
The committee is responsible for ensuring
that a risk management process is in place.
The board focuses on risk management
during the strategy and business planning
phase. The audit committee considers the
risks when the interim results and fi nal
results are produced. The business units
produce and evaluate their risks quarterly.
Continued efforts to improve the risk
management process are ongoing.
The key risks (amongst others) reviewed by
the audit committee during this audit were:
• Revenue recognition and management
override risks that are considered to be
generic risks that need continuous focus
• Going concern is another key focus
area and is extremely important
when the economic climate is diffi cult
and impairment of assets needs due
consideration. In addition, the operating
environment is one of the increasing
costs that puts a strain on our businesses
and there is a great deal of uncertainty
in relation to the current labour
environment. The audit committee
reviewed management’s assumptions and
considered the group’s disclosure on a
going concern basis. The auditors’ report
on the matter was carefully considered
and the committee concluded that the
company is a going concern and made this
recommendation to the board
• The committee reviewed the annual
fi nancial statements and the non-fi nancial
information in the integrated report and
web-based information and concluded the
key risks have been appropriately
reported on.
Subsidiary companies
The functions of the audit committee are
also performed for each subsidiary company
of the group that has not appointed an audit
committee.
External auditor
The committee nominated Deloitte LLP as
the statutory auditor and Deloitte & Touche
SA for JSE reporting requirement purposes,
for reappointment as external auditors of
Pan African Resources.
The committee satisfi ed itself through
enquiry that the external auditors are
independent as defi ned by the UK
Companies Act and the standards stipulated
by the auditing profession.
The audit committee, in consultation with
executive management, agreed to the terms
of engagement. The audit fee for the external
audit has been considered and approved
for the 2016 fi nancial 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.
Pan African Resources integrated annual report 2016
107
Audit committee report continued
Accounting practices and
internal control
Based on the available and communicated
information, together with discussions
with the independent external auditor,
the committee is satisfi ed that there was
no material breakdown in the internal
accounting controls during the fi nancial 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 fi nancial and business systems
and controls.
On behalf of the audit committee
HH Hickey
Audit committee Chairperson
20 September 2016
Financial Director
The directors have considered the
functioning of Pan African Resources’ fi nancial
department and believe that it functions
effectively, with the required controls and
systems in place.
The committee has assessed and is satisfi ed
that Deon Louw has the appropriate skill,
expertise and experience as required
by paragraph 3.84(h) of the JSE Listings
Requirement.
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 fi ndings. The committee satisfi ed
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 chairman
of the audit committee and internal
auditors are invited to attend each audit
committee meeting.
The focus for the year under review
has been on obtaining assurance on the
following:
• Alignment of the group’s internal control
and information technology policies and
procedures
• Review of key risk areas within the control
environment and investigations where this
was necessary at the specifi c operations
• Follow-up reviews on previously identifi ed
control weaknesses and areas of concern.
108 Pan African Resources integrated annual report 2016
ANNUAL FINANCIAL
STATEMENTS
Directors’ statement of responsibility
The directors are responsible for preparing
the integrated annual report and the fi nancial
statements in accordance with applicable law
and regulations.
Company law requires the directors to
prepare such fi nancial statements for each
fi nancial year. Under that law the directors
are required to prepare the group fi nancial
statements in accordance with International
Financial Reporting Standards (IFRSs) as
adopted by the European Union (and
Article 4 of the IAS Regulation) and have
also chosen to prepare the parent company
fi nancial statements under IFRS as adopted
by the EU. Under company law, the directors
must not approve the accounts unless they
are satisfi ed that they give a true and fair
view of the state of affairs and of the profi t
or loss of the group for that period.
In preparing these fi nancial statements, the
IAS 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 specifi c requirements
in IFRS are insuffi cient to enable users
to understand the impact of particular
transactions, other events or conditions
on the entity’s fi nancial position and
fi nancial performance
• Make an assessment of the group’s ability
to continue as a going concern.
The directors are responsible for keeping
adequate accounting records that are
suffi cient to show and explain the group’s
transactions, disclose with reasonable
accuracy at any time the fi nancial position
of the group, and ensure that the fi nancial
statements comply with the UK Companies
Act. They are also responsible for
safeguarding the assets of the company and
therefore responsible 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 fi nancial information included on the
company’s website. Legislation in the United
Kingdom governing the preparation and
dissemination of fi nancial statements may
differ from legislation in other jurisdictions.
Certifi cate of the Company Secretary
I hereby certify that Pan African Resources has lodged with the Registrar of Companies all such returns as are required of a public company in
terms of the UK Companies Act. All such returns are true, correct and up to date.
St James’s Corporate Services Limited
Company Secretary
20 September 2016
Pan African Resources integrated annual report 2016
109
Directors’ report
The directors present their integrated annual
report and the audited fi nancial statements
for the year ended 30 June 2016.
The company’s South African income tax
reference number is 9154588173 and it has
1,943,206,554 shares currently in issue.
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 target credit
days are 30 days from statement date.
Residual risks include the current South
African labour market and associated union
rivalry, USD gold price, USD/ZAR exchange
rate, government and environmental
regulatory frameworks, as well as unforeseen
natural disasters.
The board believes that the current
processes of identifying and dealing with risks
are effective.
Employment policy
Details of the group’s employment policies
are provided on
pages 70 to 72.
Further details of the group’s approach
to risk management are disclosed on
page 30 of the integrated report and
in note 30 to the fi nancial statements.
Capital structure
The company’s issued share capital as at
30 June 2016, together with details of share
allotments and issue of treasury shares
during the year, is set out in note 24 on
page 148.
Purchase of own shares
During the year, the company acquired a
controlling interest of 49.9% in Shanduka
Gold Proprietary Limited. As Shanduka Gold
held 23.83% of Pan African Resources at the
acquisition date, the effect of the transaction
was therefore a share buyback. Further
details are provided in note 41 to the
fi nancial statements.
Risk management
The key business risks for the group have
been considered on
pages 30 to 33.
A separate risk committee is not considered
necessary, as this role is fulfi lled by the
board, its sub-committees and executive
management. The identifi cation 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 and
other board members have the ability to
call 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.
Internal control
The board is responsible for maintaining
a sound system of internal controls to
safeguard shareholders’ investment and
group’s assets. The directors monitor the
operation of internal controls. The objective
of the system is to safeguard group assets,
ensure proper accounting records are
maintained and that the fi nancial information
used within the business and for publication
is reliable. Any such system of internal
control can only provide reasonable but
not absolute assurance against material
misstatement or loss.
Internal fi nancial control procedures
undertaken by the board include:
• Review of monthly fi nancial reports and
monitoring performance
• Review of internal audit reports and
follow-up action of weaknesses identifi ed
by these reports
• Review of competency and experience of
senior management staff
• Prior approval of all signifi cant expenditure,
including all major investment decisions
• 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 fi nancial year and the period
up to the date of approval of the fi nancial
statements.
Principal activities
The group’s principal activity during the year
was mining. A full review of the activities
of the business and of future prospects is
contained in the Chief Executive Offi cer’s
report that accompanies these fi nancial
statements, with fi nancial and non-fi nancial
key performance indicators shown on
page 100.
Results and dividends
The results for the year are disclosed in the
consolidated statement of comprehensive
income on
features of these results can be found on
page 115. The salient
page 1.
The group paid a fi nal dividend of
ZAR210 million or GBP9.7 million
(2014: ZAR258 million or GBP14.9 million)
on 24 December 2015 relating to the 2015
fi nancial year, equating to ZAR0.11466
or 0.53 pence (2014: ZAR0.14100 or
0.82 pence).
Proposed fi nal dividend for approval
at the AGM
The board has proposed an increased
fi nal dividend of ZAR300 million or
approximately GBP16 million, equating to
ZAR0.15438 per share or approximately
0.82338 pence per share. This dividend is
subject to approval at the AGM, which will
take place on 25 November 2016.
The GBP proposed fi nal dividend was
calculated based on 1,943,206,554 total
shares in issue and an illustrative exchange
rate of ZAR18.75:1. Shareholders on the
London register should note that a revised
exchange rate will be communicated prior to
approval at the AGM.
The local dividend tax rate is fi fteen percent
per ordinary share for shareholders who
are liable to pay the dividend tax, resulting
in a net dividend of ZAR0.13123 per share,
and foreign investors who qualify for a lower
dividend tax rate, subject to completing a
dividend tax declaration and submitting it to
Computershare Limited and Capita Asset
Services, who managed the SA and UK
registers respectively.
110 Pan African Resources integrated annual report 2016
ANNUAL FINANCIAL
STATEMENTS
Going concern
The board confi rms that the business is
a going concern and that it has reviewed
the working capital requirements of the
business in conjunction with its future
funding capabilities for at least the next
12 months, from the date of approval of
the annual fi nancial statements, and has
found them to be adequate. The group has
a ZAR800 million revolving credit facility
from a consortium of South African banks
(and a two-year accordion option, subject
to the bank’s credit committee approval,
for an additional ZAR300 million facility)
and access to general banking facilities of
ZAR100 million. At 30 June 2016 the group
had borrowing capacity on the revolving
credit facility and general banking facilities
of ZAR490 million (GBP24.8 million) and
ZAR50 million (GBP2.5 million), respectively,
to assist in funding working capital
requirements. On 1 July 2016 the group
secured an additional general banking facility
of ZAR85 million (GBP4.3 million) for the
Uitkomst Colliery. Management is not aware
of any material uncertainties which may
cast signifi cant doubt on the group’s ability
to continue as a going concern. Should the
need arise the group can cease discretionary
exploration and certain capital expenditure
activities to conserve cash in the short to
medium term.
Indemnities
To the extent permitted by law and the
Articles, the company has made qualifying
third-party indemnity provisions for the
benefi t of its directors during the year, which
remain in force at the date of this report.
Copies of these indemnities are open for
inspection at the company’s registered offi ce.
Auditors
Deloitte LLP has been appointed as the
statutory auditor and Deloitte & Touche
SA has been appointed as auditor for JSE
reporting requirements until the conclusion
of the next AGM.
Each of the persons who are directors at
the date of approval of this integrated annual
report confi rms that:
• As far as the directors are aware, all
relevant information has been provided to
the group’s auditors
• The directors have taken all the steps that
they ought to have taken as directors in
order to make themselves aware of any
relevant audit information and to establish
that the group’s auditors are aware of that
information.
This confi rmation is given and should be
interpreted in accordance with S418 of the
UK Companies Act.
Events after the reporting
period
No material events occurred after the
reporting period review and up to the date
of approval of this integrated annual report.
Deloitte LLP and Deloitte & Touche have
expressed their willingness to continue
in offi ce as auditors, and a resolution to
reappoint them will be proposed at the
forthcoming AGM.
Directors
The following were directors during the year
under review:
KC Spencer
(Independent non-executive Chairman)1
Approval of fi nancial
statements
The board of directors therefore approves
the integrated annual report and associated
fi nancial statements.
JAJ Loots (Chief Executive Offi cer)
By order of the board
GP Louw (Financial Director)
HH Hickey1
T Mosololi1
R Smith1
1 Independent non-executive director.
Cobus Loots
Chief Executive Offi cer
20 September 2016
Pan African Resources integrated annual report 2016
111
Independent auditor’s report
United Kingdom
We have audited the fi nancial statements of
Pan African Resources for the year ended
30 June 2016 which comprise the
consolidated and separate statement of
profi t or loss and comprehensive income,
the consolidated and separate statement
of fi nancial position, the consolidated and
separate statement of cash fl ows, the
consolidated and separate statement of
changes in equity and the related notes
1 to 41. The fi nancial reporting framework
that has been applied in their preparation
is applicable law and International Financial
Reporting Standards (IFRS) 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
fi nancial statements and for being satisfi ed
that they give a true and fair view.
Our responsibility is to audit and express
an opinion on the fi nancial statements
in accordance with applicable law and
International Standards on Auditing
(UK and Ireland). Those standards require us
to comply with the Auditing Practices Board’s
Ethical Standards for Auditors.
Scope of the audit of the
fi nancial statements
An audit involves obtaining evidence about
the amounts and disclosures in the fi nancial
statements suffi cient to give reasonable
assurance that the fi nancial statements are
free from material misstatement, whether
caused by fraud or error. This includes an
assessment of: whether the accounting
policies are appropriate to the group’s
and the parent company’s circumstances
and have been consistently applied and
adequately disclosed; the reasonableness
of signifi cant accounting estimates made by
the directors; and the overall presentation
of the fi nancial statements. In addition,
we read all the fi nancial and non-fi nancial
information in the integrated annual report
to identify material inconsistencies with
the audited fi nancial statements and to
identify any information that is apparently
materially incorrect based on, or materially
inconsistent with, the knowledge acquired by
us in the course of performing the audit. If
we become aware of any apparent material
misstatements or inconsistencies we consider
the implications for our report.
Opinion on fi nancial
statements
In our opinion the fi nancial statements:
• Give a true and fair view of the state of the
group’s and of the parent company’s affairs
as at 30 June 2016 and of the group’s and
the parent company’s profi t for the year
then ended
• Have been properly prepared in
accordance with IFRS as adopted by the
European Union
• Have been prepared in accordance with
the requirements of the Companies
Act 2006.
Opinion on other matters
prescribed by the Companies
Act 2006
In our opinion the information given in the
strategic report and the directors’ report
for the fi nancial year for which the fi nancial
statements are prepared is consistent with
the fi nancial statements.
Matters on which we are
required to report by
exception
We have nothing to report in respect of the
following matters where the Companies Act
2006 requires us to report to you if, in our
opinion:
• Adequate accounting records have not
been kept by the parent company, or
returns adequate for our audit have not
been received from branches not visited
by us
• The parent company fi nancial statements
are not in agreement with the accounting
records and returns
• Certain disclosures of directors’
remuneration specifi ed by law are not
made
• We have not received all the information
and explanations we require for our audit.
Timothy Biggs FCA
Senior statutory auditor
for and on behalf of Deloitte LLP
Chartered Accountants and
Statutory Auditor
London, United Kingdom
20 September 2016
112 Pan African Resources integrated annual report 2016
ANNUAL FINANCIAL
STATEMENTS
Opinion
In our opinion, the consolidated and separate
fi nancial statements present fairly, in all
material respects, the consolidated and
separate fi nancial position of Pan African
Resources as at 30 June 2016, and its
consolidated and separate fi nancial
performance and consolidated and separate
cash fl ows for the year then ended in
accordance with International Financial
Reporting Standards.
Deloitte & Touche
Registered Auditor
Per: MLE Tshabalala
Partner
20 September 2016
Independent auditor’s report
South Africa
To the shareholders of
Pan African Resources
We have audited the consolidated and
separate fi nancial statements of Pan African
Resources set out on
pages 114 to
181, which comprise the statements of
fi nancial position as at 30 June 2016, and
the statements of comprehensive income,
statements of changes in equity and
statements of cash fl ows for the year then
ended, and the notes, comprising a summary
of signifi cant accounting policies and other
explanatory information.
Directors’ responsibility for
the consolidated fi nancial
statements
The company’s directors are responsible
for the preparation and fair presentation of
these consolidated and separate fi nancial
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 fi nancial
statements that are free from material
misstatement, whether due to fraud
or error.
Auditor’s responsibility
Our responsibility is to express an opinion
on these consolidated and separate
fi nancial statements based on our audit.
We conducted our audit in accordance with
International Standards on Auditing. Those
standards require that we comply with
ethical requirements and plan and perform
the audit to obtain reasonable assurance
about whether the consolidated and
separate fi nancial statements are free from
material misstatement.
An audit involves performing procedures to
obtain audit evidence about the amounts
and disclosures in the fi nancial statements.
The procedures selected depend on the
auditor’s judgement, including the assessment
of the risks of material misstatement of the
fi nancial statements, whether due to fraud
or error. In making those risk assessments,
the auditor considers internal control
relevant to the entity’s preparation and fair
presentation of the fi nancial statements in
order to design audit procedures that are
appropriate in the circumstances, but not
for the purpose of expressing an opinion
on the effectiveness of the entity’s internal
control. An audit also includes evaluating
the appropriateness of accounting policies
used and the reasonableness of accounting
estimates made by management, as well as
evaluating the overall presentation of the
fi nancial statements.
We believe that the audit evidence we have
obtained is suffi cient and appropriate to
provide a basis for our audit opinion.
Pan African Resources integrated annual report 2016
113
Consolidated and separate
Statement of fi nancial position
as at 30 June 2016
Assets
Non-current assets
Property, plant and equipment and mineral rights
Other intangible assets
Deferred taxation
Long-term inventory
Goodwill
Investments
Rehabilitation trust fund
Current assets
Inventories
Receivables from other group companies
Current tax asset
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 earnings
Realisation of equity reserve
Treasury capital reserve
Merger reserve
Other reserves
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
Current portion of long-term liabilities
Financial instrument liabilities
Payable to other group companies
Current tax liability
Total equity and liabilities
Consolidated
Separate
Audited
30 June 2016
GBP
Audited
30 June 2015
GBP
Audited
30 June 2016
GBP
Audited
30 June 2015
GBP
Notes
16
17
29
21
18
19
20
21
35
26
22
23
36
24
27
28
29
25
28
30
35
26
190,725,199
123,235
1,117,092
186,861
21,000,714
1,269,228
16,253,708
230,676,037
4,398,813
–
848,946
14,042,357
2,658,947
21,949,063
66,873
252,691,973
19,432,065
108,936,082
(58,583,848)
1,035,888
126,620,650
(10,701,093)
(25,376,743)
(10,705,308)
317,509
150,975,202
150,975,202
10,432,986
18,456,309
40,616,337
69,505,632
18,743,235
6,980,711
5,945,399
–
541,794
32,211,139
252,691,973
181,532,780
202,488
327,748
–
21,000,714
904,818
16,181,925
220,150,473
3,502,569
–
827,298
9,559,010
3,328,850
17,217,727
–
237,368,200
18,314,947
94,846,046
(56,402,515)
1,035,888
110,850,201
(10,701,093)
–
(10,705,308)
(70,679)
147,167,487
147,167,487
12,249,367
16,312,982
39,288,059
67,850,408
16,799,043
5,047,478
–
–
503,784
22,350,305
237,368,200
–
–
–
–
–
124,200,675
–
124,200,675
–
51,716,563
8,469
57,939
77,660
51,860,631
–
176,061,306
19,432,065
108,936,082
(5,875,138)
897,658
43,496,979
–
–
1,560,000
317,509
168,765,155
168,765,155
–
–
–
–
–
–
–
–
–
122,911,964
–
122,911,964
–
31,369,774
141,574
41,531
888,498
32,441,377
–
155,353,341
18,314,947
94,846,046
(7,382,888)
897,658
39,760,855
–
–
1,560,000
(70,679)
147,925,939
147,925,939
–
–
–
–
257,837
–
213,861
–
7,038,314
–
7,296,151
176,061,306
7,213,541
–
7,427,402
155,353,341
The fi nancial statements of Pan African Resources, registered number 3937466, were approved by the board of directors on 20 September 2016
and signed on its behalf by:
Cobus Loots
Chief Executive Offi cer
114 Pan African Resources integrated annual report 2016
Deon Louw
Financial Director
ANNUAL FINANCIAL
STATEMENTS
Consolidated and separate
Statement of profi t or loss and other
comprehensive income
for the year ended 30 June 2016
Revenue
Gold sales
Platinum sales
Coal sales
Realisation costs
On-mine revenue
Gold cost of production
Platinum cost of production
Coal cost of production
Mining depreciation and amortisation
Mining profi t
Other (expenses)/income
Loss in associate
Loss on disposal of associate
Impairments
Royalty costs
Net income before fi nance income and fi nance costs
Finance income
Finance costs
Profi t before taxation
Taxation
Profi t after taxation
Other comprehensive income (net of taxes):
Items that may be reclassifi ed subsequently to
profi t and loss
Fair value movement on available for sale investment
Other movements
Foreign currency translation differences
Total comprehensive income for the year
Profi t attributable to:
Owners of the parent
Total comprehensive income attributable to:
Owners of the parent
Notes
4
4
4
4
5
5
5
16,17
8
19
19
19
9
9
10
13
19
Consolidated
Separate
Audited
30 June 2016
GBP
Audited
30 June 2015
GBP
Audited
30 June 2016
GBP
Audited
30 June 2015
GBP
169,360,532
161,312,220
3,480,338
4,567,974
(956,709)
168,403,823
(100,487,340)
(3,456,007)
(4,279,735)
(10,456,129)
49,724,612
(12,182,895)
–
–
–
(2,799,947)
34,741,770
442,616
(1,448,738)
33,735,648
(8,233,831)
25,501,817
141,076,883
135,611,436
5,465,447
–
(690,538)
140,386,345
(106,644,655)
(3,768,530)
–
(10,337,211)
19,635,949
249,776
(127,950)
(139,970)
(58,424)
(1,647,297)
17,912,084
348,959
(2,458,287)
15,802,756
(4,132,789)
11,669,967
–
–
–
–
–
–
–
–
–
–
–
13,421,553
–
–
–
–
13,421,553
79,755
(6)
13,501,302
(33,810)
13,467,492
–
–
–
–
–
–
–
–
–
–
–
53,880,947
(127,950)
(139,970)
(58,424)
–
53,554,603
53,290
(13,165)
53,594,728
(24,306)
53,570,422
388,188
–
(2,181,333)
23,708,672
(70,679)
5,529
(8,857,195)
2,747,622
388,188
–
1,507,750
15,363,430
(70,679)
–
(1,700,002)
51,799,741
25,501,817
25,501,817
11,669,967
11,669,967
13,467,492
13,467,492
53,570,422
53,570,422
23,708,672
23,708,672
2,747,622
2,747,622
15,363,430
15,363,430
51,799,741
51,799,741
Earnings per share
Diluted earnings per share
14
14
1.41
1.41
0.64
0.64
Pan African Resources integrated annual report 2016
115
Consolidated and company
Statement of changes in equity
for the year ended 30 June 2016
Share
capital
(Note 24)
GBP
18,299,947
15,000
–
–
–
18,314,947
1,117,118
–
–
–
–
19,432,065
Share
capital
(Note 24)
GBP
18,299,947
15,000
–
–
–
18,314,947
1,117,118
–
–
–
19,432,065
Share
premium
GBP
Translation
reserve
GBP
94,792,516
53,530
–
–
–
94,846,046
15,011,206
(921,170)
–
–
–
108,936,082
(47,545,320)
–
(8,857,195)
–
–
(56,402,515)
–
–
(2,181,333)
–
–
(58,583,848)
Share
premium
GBP
Translation
reserve
GBP
94,792,516
53,530
–
–
–
94,846,046
15,011,206
(921,170)
–
–
108,936,082
(5,682,886)
–
(1,700,002)
–
–
(7,382,888)
–
–
1,507,750
–
(5,875,138)
Share
option
reserve
GBP
1,154,891
–
–
–
(119,003)
1,035,888
–
–
–
–
–
1,035,888
Share
option
reserve
GBP
1,016,661
–
–
–
(119,003)
897,658
–
–
–
–
897,658
Group
Balance at 30 June 2014
Issue of shares
Total comprehensive income
Dividends paid
Share based payment – charge for the year
Balance at 30 June 2015
Issue of shares
Share issue costs
Total comprehensive income
Dividends paid
Share buyback
Balance at 30 June 2016
Company
Balance at 30 June 2014
Issue of shares
Total comprehensive income
Dividends paid
Share-based payment – charge for the year
Balance at 30 June 2015
Issue of shares
Share issue costs
Total comprehensive income
Dividends paid
Balance at 30 June 2016
116 Pan African Resources integrated annual report 2016
ANNUAL FINANCIAL
STATEMENTS
Retained
earnings
GBP
Realisation
of equity
reserve
GBP
Treasury
capital
reserve
(Note 41)
GBP
114,106,005
–
11,669,967
(14,925,771)
–
110,850,201
–
–
25,501,817
(9,731,368)
–
126,620,650
(10,701,093)
–
–
–
–
(10,701,093)
–
–
–
–
–
(10,701,093)
–
–
–
–
–
–
–
–
–
–
(25,376,743)
(25,376,743)
Retained
earnings
GBP
Realisation
of equity
reserve
GBP
Treasury
capital
reserve
GBP
1,116,204
–
53,570,422
(14,925,771)
–
39,760,855
–
–
13,467,492
(9,731,368)
43,496,979
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Merger
reserve
GBP
(10,705,308)
–
–
–
–
(10,705,308)
–
–
–
–
–
(10,705,308)
Merger
reserve
GBP
1,560,000
–
–
–
–
1,560,000
–
–
–
–
1,560,000
Other
reserves
GBP
(5,529)
–
(65,150)
–
(70,679)
–
–
388,188
–
–
317,509
Other
reserves
GBP
–
–
(70,679)
–
–
(70,679)
–
–
388,188
–
317,509
Total
GBP
159,396,109
68,530
2,747,622
(14,925,771)
(119,003)
147,167,487
16,128,324
(921,170)
23,708,672
(9,731,368)
(25,376,743)
150,975,202
Total
GBP
111,102,442
68,530
51,799,741
(14,925,771)
(119,003)
147,925,939
16,128,324
(921,170)
15,363,430
(9,731,368)
168,765,155
Pan African Resources integrated annual report 2016
117
Consolidated and separate
Statements of cash fl ows
for the year ended 30 June 2016
Consolidated
Separate
Audited
30 June 2016
GBP
Audited
30 June 2015
GBP
Audited
30 June 2016
GBP
Audited
30 June 2015
GBP
Notes
Net cash generated from operating activities
38
28,464,205
5,364,480
4,600,543
39,723,238
Investing activities
Additions to property, plant and equipment and
mineral rights
Sale of assets and liabilities to PAR Management Services
Additions to other intangible assets
Investments acquired
Loans to subsidiaries
Proceeds on disposals of associate
Proceeds on disposals of property, plant and equipment
and mineral rights
Acquisition of Uitkomst Colliery
Treasury share buyback
Net cash used in investing activities
Financing activities
Proceeds from borrowings
Borrowings repaid
Settlement of equity share option costs
Loans from subsidiaries
Shares issued
Share issue costs
Net cash from/(used in) fi nancing activities
Net (decrease)/increase 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
16
17
19
28
28
34
24
23
(14,079,918)
–
(17,248)
–
–
–
14,620
(5,700,402)
(25,299,095)
(45,082,043)
38,061,147
(38,131,957)
–
–
16,128,324
(921,170)
15,136,344
(1,481,494)
3,328,850
811,591
2,658,947
(19,528,616)
–
(25,740)
(1,037,677)
–
277,732
–
–
–
–
(20,346,789)
–
–
(951,449)
–
(1,037,677)
(8,914,156)
277,732
(20,314,301)
(20,346,789)
(10,625,550)
27,898,927
(14,728,154)
(303,067)
–
68,530
–
12,936,236
(2,013,585)
5,618,323
(275,888)
3,328,850
–
–
–
(175,227)
16,128,324
(921,170)
15,031,927
(714,319)
888,498
(96,519)
77,660
–
(112,476)
–
(28,110,615)
68,530
–
(28,154,561)
943,127
1,803,545
(1,858,174)
888,498
118 Pan African Resources integrated annual report 2016
ANNUAL FINANCIAL
STATEMENTS
Notes to the consolidated and separate
Annual fi nancial statements
for the year ended 30 June 2016
1.
General information
Pan African Resources is a company
incorporated in England and Wales under
the UK Companies Act. The company has a
dual primary listing on the AIM of the LSE
and JSE. The nature of the group’s operations
and its principal activities relate to gold, PGE
and coal mining and exploration activities.
The fi nancial statements are presented in
pounds sterling. Foreign operations are
included in accordance with the policies set
out below. The individual fi nancial 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
fi nancial statements, the results and fi nancial
position of each group company are
expressed in pounds sterling. The fi nancial
statements have been prepared on the going
concern basis.
The fi nancial statements have also been
prepared in accordance with the IFRS
adopted by the EU and South Africa.
The accounting policies listed below apply
to both consolidated and separate annual
fi nancial statements.
Accounting policies
2.
Basis of preparation and general
information
The annual fi nancial statements have been
prepared under the historical cost basis,
except for certain fi nancial instruments
which are stated at fair value. The principal
accounting policies are set out below and are
consistent in all material respects with those
applied in the previous year, except where
otherwise indicated.
Historic reverse acquisition
On 31 July 2007 the company acquired
74% of Barberton Mines in a share-for-share
transaction.
IFRS3: Business Combinations defi nes the
acquirer in a business combination as the
entity that obtains control. Accordingly, the
combination was accounted for as a reverse
acquisition.
Going concern
The fi nancial position of the group, its cash
fl ows and liquidity position are described
in these fi nancial statements. In addition,
note 30 to the fi nancial statements includes
the group’s objectives, policies and processes
for managing its capital, its fi nancial risk
management objectives, details of its fi nancial
instruments and its exposure to credit,
foreign currency, commodity price, interest
rate and liquidity risk.
Management is not aware of any material
uncertainties which may cast signifi cant
doubt on the group’s ability to continue
as a going concern. Based on the current
status of the group’s fi nances, the directors
have formed a judgement, at the time of
approving the fi nancial statements, that
there is a reasonable expectation that the
group has, or will have, adequate resources
to enable the group to continue to meet its
fi nancial commitments for the foreseeable
future. Accordingly, the directors continue to
adopt the going concern basis in preparing
the fi nancial statements. Further details are
provided in the going concern section of
the directors’ report.
New and revised IFRS not yet
adopted
The group applies all applicable IFRS in
preparation of the fi nancial statements.
Consequently, all IFRS statements adopted by
the EU that were effective at 30 June 2016
and are relevant to its operations have
been applied.
At the date of authorisation of these fi nancial statements, the following standards and interpretations, which have been applied in these fi nancial
statements, for the fi rst time, were in issue and effective as at 30 June 2016.
Standard
Amendment
IFRS 7: Financial Instruments:
Disclosures
IAS 39: Financial Instruments:
Recognition and
Measurement
Deferral of mandatory effective date of IFRS 9 and amendments to transition
disclosures
Amendments for novations of derivatives
Effective date
Annual periods beginning
on or after 1 January 2015
Annual periods beginning
on or after 1 January 2014
Pan African Resources integrated annual report 2016
119
Notes to the consolidated and separate
Annual fi nancial statements continued
for the year ended 30 June 2016
At the date of authorisation of these fi nancial statements, the following standards and interpretations, which have not been applied in these
fi nancial statements, were in issue and not yet effective as at 30 June 2016.
Standard
Amendment
IFRS 5: Non-current
Assets Held for Sale and
Discontinued Operations
IFRS 7: Financial Instruments:
Disclosures
IFRS 9: Financial Instruments
IFRS 10: Consolidated
Financial Statements
IFRS 10: Consolidated
Financial Statements
IFRS 12: Disclosure of
Interests in Other Entities
IFRS 15: Revenue from
Contracts with Customers
IFRS 15: Revenue from
Contracts with Customers
IFRS 15: Revenue from
Contracts with Customers
IFRS 16: Leases
IAS 1: Presentation of
Financial Statements
IAS 7: Cash Flow Statement
Amendments resulting from 2012 – 2014 Annual Improvements Cycle
Amendments resulting from September 2014 Annual Improvements to IFRSs
Reissue of a complete standard with all the chapters incorporated
Amendments on sale or contribution of assets between an investor and its
associate or joint venture
Amendments related to the application of the investment entities exceptions
Amendments related to the application of the investment entities exceptions
Original issue
Amendment to defer the effective date to 1 January 2018
Clarifi cations to IFRS 15
Original issue
Amendments arising under the Disclosure Initiative
Amendments as result of the Disclosure Initiative
IAS 12: Income Taxes
IAS 16: Property, Plant and
Equipment
IAS 16: Property, Plant and
Equipment
IAS 19: Employee Benefi ts
Amendments regarding the recognition of deferred tax assets for
unrealised losses
Amendments resulting from clarifi cation of acceptable methods of
depreciation and amortisation (Amendments to IAS 16 and IAS 38)
Amendments to include 'bearer plants' within the scope of IAS 16 rather
than IAS 41
Amendments resulting from 2012 – 2014 Annual Improvements Cycle
IAS 27: Separate Financial
Statements
IAS 28: Investments in
Associates and Joint Ventures
IAS 28: Investments in
Associates and Joint Ventures
IAS 34: Interim Financial
Reporting
IAS 38: Intangible Assets
Amendments relating to equity method in separate fi nancial statements
Amendments on sale or contribution of assets between an investor and
its associate or joint venture
Amendments related to the application of the investment entities exceptions
Amendments resulting from 2012 – 2014 Annual Improvements Cycle
Amendments resulting from clarifi cation of acceptable methods of
depreciation and amortisation (Amendments to IAS 16 and IAS 38)
Effective date
Annual periods beginning
on or after 1 January 2016
Annual periods beginning
on or after 1 January 2016
Annual periods beginning
on or after 1 January 2018
Deferred indefi nitely
Annual periods beginning
on or after 1 January 2016
Annual periods beginning
on or after 1 January 2016
Annual periods beginning
on or after 1 January 2017
Annual periods beginning
on or after 1 January 2018
Annual periods beginning
on or after 1 January 2018
Annual periods beginning
on or after 1 January 2019
Annual periods beginning
on or after 1 January 2016
Annual periods beginning
on or after 1 January 2017
Annual periods beginning
on or after 1 January 2017
Annual periods beginning
on or after 1 January 2016
Annual periods beginning
on or after 1 January 2016
Annual periods beginning
on or after 1 January 2016
Annual periods beginning
on or after 1 January 2016
Deferred indefi nitely
Annual periods beginning
on or after 1 January 2016
Annual periods beginning
on or after 1 January 2016
Annual periods beginning
on or after 1 January 2016
The impact of the adoption of the above standards and interpretations still needs to be considered, but is not expected to have a material
impact on the fi nancial results.
120 Pan African Resources integrated annual report 2016
ANNUAL FINANCIAL
STATEMENTS
Basis of consolidation
The consolidated fi nancial statements
incorporate the fi nancial statements of
the company and entities controlled by
the company (its subsidiaries) to 30 June
each year. Control is achieved where the
company has the power to govern the
fi nancial and operating policies of an investee
enterprise so as to obtain benefi ts from
its activities. The results of the subsidiaries
acquired or disposed of during the year are
included in the consolidated statement of
comprehensive income from the effective
date of acquisition or up to the effective date
of disposal, as appropriate. Inter-company
transactions and balances between group
entities are eliminated on consolidation.
Business combinations
Acquisitions of subsidiaries and businesses
are accounted for using the purchase
method. The cost of a business combination
is measured as the aggregate of the fair
values (at the date of exchange) of assets
given, liabilities incurred or assumed, and
equity instruments issued by the group in
exchange for control of the acquiree. The
acquiree’s identifi able assets, liabilities and
contingent liabilities that meet the conditions
for recognition under IFRS 3: Business
Combinations are recognised at their fair
values at the acquisition date, except for
non-current assets (or disposal groups) that
are classifi ed as held-for-sale in accordance
with IFRS 5: Non-current Assets Held for
Sale and Discontinued Operations, which are
recognised and measured at fair value less
costs to sell.
Goodwill arising on acquisitions is recognised
as an asset, and initially measured at cost,
being the excess of the cost of the business
combination over the group’s interest in
the net fair value of the identifi able assets,
liabilities and contingent liabilities recognised.
If, after reassessment, the group’s interest
in the net fair value of the acquiree’s
identifi able assets, liabilities and contingent
liabilities exceeds the cost of the business
combination, the excess is recognised
immediately in profi t or loss. The interest
of minority shareholders in the acquiree
is initially measured at the minority’s
proportion of net fair value of the assets,
liabilities and contingent liabilities recognised.
Change in ownership interest
In terms of IAS 27: Separate Financial
Statements, 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.
Investment in associate
An associate is an entity over which the
group and the company have signifi cant
infl uence and that is neither a subsidiary nor
an interest in a joint venture.
In the company’s separate fi nancial statements,
an investment in associate is stated at fair
value less impairment losses, if any. An
investment in associate is accounted for in the
consolidated fi nancial statements using the
equity method of accounting. The investment
in associate in the consolidated balance sheet
is initially recognised at fair value and adjusted
thereafter for the post- acquisition change
in the group’s share of net assets of the
investment.
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 orebodies, to defi ne
mineralisation in existing orebodies, 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: Property, Plant and
Equipment.
Mineral and surface rights
Mineral and surface rights are recorded
at cost less provision for impairment and
accumulated depreciation.
Land
Land is shown at cost and is not depreciated.
Gain or loss on disposal or retirement of
assets
The gain or loss arising on the disposal or
retirement of an item of property, plant and
equipment is determined as the difference
between the sales proceeds and the carrying
amount of the asset and is recognised in
profi t or loss.
Depreciation
Mining assets, mineral and surface rights
mining assets, mine development costs,
mineral and surface rights and plant mine
facilities are depreciated over the estimated
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 life of mine or their
estimated useful lives.
Depreciation of non-mining assets
Buildings and other non-mining assets are
recorded at cost and depreciated on the
straight-line basis over their expected useful
lives, which vary between three to ten years.
Research, development, mineral
exploration and evaluation costs
Research, development, mineral exploration
and evaluation costs are expensed in the
year in which they are incurred until they
result in projects that the group:
• Evaluates as being technically or
commercially feasible
• Has suffi cient resources to complete
development
• Can demonstrate will generate future
economic benefi ts.
Once these criteria are met, all directly
attributable development costs and ongoing
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 fi nancial 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.
Pan African Resources integrated annual report 2016
121
Notes to the consolidated and separate
Annual fi nancial statements continued
for the year ended 30 June 2016
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 identifi able assets and liabilities of a
subsidiary, associate or jointly controlled
entity at the date of acquisition. Goodwill
is initially recognised as an asset at cost
and is subsequently measured at cost less
accumulated impairment losses.
For the purpose of impairment testing,
goodwill is allocated to each of the group’s
CGUs expected to benefi t from the synergies
of the combination. CGUs to which goodwill
has been allocated are tested for impairment
annually, or more frequently when there is
an indication that the CGU may be impaired.
If the recoverable amount of the CGU is less
than the carrying amount of the CGU, the
impairment loss is allocated fi rst to reduce
the carrying amount of any goodwill allocated
to the unit and then to the other assets
of the CGU, pro rata on the basis of the
carrying amount of each asset in the CGU.
An impairment loss recognised for goodwill
is not reversed in a subsequent period.
On disposal of a subsidiary, associate or jointly
controlled entity, the attributable amount of
goodwill is included in the determination of
the profi t or loss on disposal.
Taxation
The charge for current tax is based on the
results for the year as adjusted for items
which are non-deductible or disallowed. It
is calculated using tax rates that have been
enacted or substantively enacted by the
statement of fi nancial position date.
Deferred tax is accounted for using the
liability method in respect of temporary
differences arising from differences
between the carrying amount of assets and
liabilities in the fi nancial statements and
the corresponding tax basis used in the
computation of taxable profi t. In principle,
deferred tax liabilities are recognised for all
taxable temporary differences, and deferred
tax assets are recognised to the extent
that it is probable that taxable profi t will be
available against which deductible temporary
differences can be utilised. Such assets and
liabilities are not recognised if the temporary
difference arises from goodwill or from the
initial recognition (other than a business
combination) of other assets and liabilities in
a transaction, which affects neither tax nor
accounting profi t.
Deferred tax is calculated at the tax rates
that are expected to apply to the period
when the asset is realised or the liability is
settled, based on tax rates (and laws) that
have been enacted or substantively enacted
by the statement of fi nancial position date.
The measurement of deferred tax liabilities
and assets refl ects the tax consequences
that would follow from the manner in which
the group expects, at the reporting date,
to recover or settle the carrying amount
of its assets and liabilities. Deferred tax is
charged or credited to the statement of
comprehensive income, except when it
relates to items credited or charged directly
to equity, in which case the deferred tax is
also recorded within equity, or where they
arise from the initial accounting for a business
combination. In a business combination, the
tax effect is taken into account in calculating
goodwill or in determining the excess of
the acquirer’s interest in the net fair value
of the acquiree’s identifi able assets, liabilities
and contingent liabilities over the cost of the
business combination.
The carrying amount of deferred tax assets
is reviewed at each statement of fi nancial
position date and reduced to the extent that
it is no longer probable that suffi cient taxable
profi ts will be available to allow all or part of
the assets to be recovered.
Revenues, expenses and assets are recognised
net of the amount of associated VAT, unless
VAT incurred is not recoverable from the
taxation authority. In this case it is recognised
as part of the cost of acquisition of the asset
or as part of the expense. Receivables and
payables are stated inclusive of the amount of
VAT receivable or payable. The net amount of
VAT recoverable from, or payable to,
the taxation authority is included with other
receivables or payables in the consolidated
statement of fi nancial position.
Provisions
Provisions are recognised when the group
has a legal or constructive obligation
resulting from past events, it is probable
that an outfl ow of resources embodying
economic benefi ts will be required to settle
the obligation and a reliable estimate can be
made of the amount of the obligation.
The amount recognised as a provision is the
best estimate of the consideration required
to settle the present obligation at the
statement of fi nancial position date, taking
into account the risks and uncertainties
surrounding the obligation.
When some or all of the economic benefi ts
required to settle a provision are expected
to be received from a third party, the
receivable is recognised as an asset if it is
virtually certain that reimbursement will be
received and the amount of the receivable
can be measured reliably.
Lease assets
The group leases certain property, plant
and equipment. A lease is classifi ed as a
fi nance lease if it transfers substantially all the
risks and rewards incidental to ownership
to the group. Other leases are classifi ed as
operating leases.
Finance lease assets are capitalised at the
lease’s commencement at the lower of
the fair value of the leased property and
the present value of the minimum lease
payments.
Operating leases
Operating lease payments are recognised
as an expense on a straight-line basis over
the lease term. The difference between the
amounts recognised as an expense and the
contractual payments is recognised as an
operating lease liability.
Foreign currencies
The group’s subsidiaries are incorporated in
South Africa and their functional currency
is ZAR. The group’s business is conducted
in ZAR and the accounting records are
maintained in this same currency, with the
122 Pan African Resources integrated annual report 2016
ANNUAL FINANCIAL
STATEMENTS
exception of precious metal product sales,
which are conducted in USD, prior to
conversion into ZAR. The ongoing review
of the results of operations conducted by
executive management and the board is also
performed in ZAR.
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. On
consolidation, the group’s results are translated
into GBP, the presentational currency of the
group, at exchange rates prevailing on the
reporting date. Monetary assets and liabilities
denominated in such other currencies are
translated at the rates ruling at the statement
of fi nancial position date. Profi ts and losses
arising on exchange are recorded in the
statement of comprehensive income. In order
to hedge its exposure to foreign exchange
risks, the group may enter into forward
contracts. On consolidation, the assets and
liabilities of the group’s foreign operations are
translated into pounds sterling at exchange
rates ruling at the statement of fi nancial
position date. Income and expense items
are translated at the average exchange rates
for the period. Exchange differences arising
from the translation of foreign operations
are classifi ed as equity and are recognised as
income or expenses in the period in which
the operation is disposed of. Translation
differences on foreign loans to subsidiaries
which are classifi ed as equity loans are also
accounted for as equity.
Inventories
Inventories include the gold bullion on
hand, PGE concentrate, coal mined prior to
washing and post washing, gold, PGE or coal
in process and consumable stores.
Bullion, PGE concentrate and coal on hand
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, PGE and coal in process inventories
represent materials that are currently in the
process of being converted to saleable gold,
PGE or coal products. The gold, PGE and
coal in process inventories are valued only if
they are reliably measurable and are valued
at the lower of the average cost of the
material fed to process plus the in-process
conversion costs and net realisable value.
Consumable stores are valued at the lower
of cost, determined on a weighted average
basis, and estimated net realisable value.
Net realisable value represents the estimated
selling price less all estimated costs of
completion and costs to be incurred in
marketing, selling and distribution. Obsolete
and slow-moving consumable stores are
identifi ed and are written down to their
economic or realisable values.
Retirement and pension benefi ts
Payments to defi ned contribution retirement
benefi t plans are charged as an expense
as they fall due. Payments made to state-
managed schemes are dealt with as defi ned
contribution plans where the group’s
obligations under the schemes are equivalent
to those arising in a defi ned contribution
retirement benefi t plan and are charged as
an expense as they fall due.
Post-retirement benefi ts other than
pension
Historically Barberton Mines and Evander
Mines provided retirement benefi ts by way
of medical aid scheme contributions for
certain employees. The practice has been
discontinued for some years. The net present
value of estimated future costs of company
contributions towards medical aid schemes
for these retirees is recorded as a provision
on the group statement of fi nancial 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 fi nancial position
date, the group revises its estimate of the
number of equity instruments expected
to vest. The impact of the revision of the
original estimates, if any, is recognised in
the statement of comprehensive income
such that the cumulative expense refl ects
the revised estimate, with corresponding
adjustments to the equity-settled employee
benefi ts reserve.
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 fi nancial
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 refl ects
the revised estimate, with corresponding
adjustments to the cash-settled employee
benefi ts liability.
Provision for environmental
rehabilitation costs
Long-term environmental obligations are
based on Barberton Mines, Evander Mines,
Phoenix Platinum and the Uitkomst Colliery
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 fi nancial
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 fi nancial
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.
Pan African Resources integrated annual report 2016
123
Notes to the consolidated and separate
Annual fi nancial statements continued
for the year ended 30 June 2016
Provision for decommissioning costs
The group provides for decommissioning
costs other than rehabilitation costs, if
any, when the directors have prepared a
detailed plan for closure of the particular
operation, the remaining life of which is
such that signifi cant changes to the plan are
unlikely, and the directors have raised a valid
expectation in those affected that it will carry
out the closure by starting to implement that
plan or announcing its main features to those
affected by it.
Revenue recognition
Sales represents the value of gold, PGE and
coal sold, excluding value added tax, and is
recognised when goods are delivered and
risk and reward has passed, and is measured
at the fair value of the consideration received
or receivable.
Interest income is accrued on a time basis,
by reference to the principal outstanding and
at the interest rates applicable, which is the
rate that exactly discounts estimated future
cash receipts through the expected life of
the fi nancial asset to that asset’s net carrying
amount. Dividend income from investments
is recognised when the shareholders’ rights
to receive payment have been established.
Revenue is recognised when the buyer takes
title, provided that:
• It is probable that delivery will be made
• The item is on hand, identifi ed and ready
for delivery to the buyer at the time the
sale is recognised
• The buyer specifi cally acknowledges the
deferred delivery instructions
• The usual payment terms apply.
Loans and receivables
Trade receivables, loans and other receivables
that have fi xed or determinable payments
and that are not quoted in an active market
are classed as loans and receivables. Loans
and receivables are measured at amortised
cost using the effective interest method, less
impairment if necessary. Interest income is
recognised by applying the effective interest
rate, except for short-term receivables,
when the recognition of interest would be
immaterial.
Impairment of fi nancial assets
Financial assets, other than those at fair
value through profi t and loss (FVTPL), are
assessed for indicators of impairment at
each statement of fi nancial position date.
Financial assets are impaired where there is
objective evidence that, as a result of one
or more events that occurred after the
initial recognition of the fi nancial asset, the
estimated future cash fl ows of the fi nancial
asset have been negatively impacted.
Derecognition of fi nancial assets
The group derecognises a fi nancial asset
only when the contractual rights to the
cash fl ows from the asset expire, or when it
transfers the fi nancial asset and substantially
all the risks and rewards of ownership of the
asset to another entity. If the group neither
transfers nor retains substantially all the risks
and rewards of ownership and continues
to control the transferred asset, the group
recognises its retained interest in the asset
and an associated liability for amounts it may
have to pay. If the group retains substantially
all the risks and rewards of ownership
of a transferred fi nancial asset, the group
continues to recognise the fi nancial asset and
also recognises a collateralised borrowing for
the proceeds received.
Financial liabilities and equity
instruments issued by the group
Classifi cation as debt or equity
Debt and equity instruments are classifi ed
as either fi nancial liabilities or as equity
in accordance with the substance of the
contractual arrangement.
Equity instruments
An equity instrument is any contract that
evidences a residual interest in the assets of
an entity after deducting all of its liabilities.
Equity instruments issued by the group are
recorded at the proceeds received, net of
direct issue costs.
Financial liabilities
Financial liabilities are classifi ed as either
fi nancial liabilities at FVTPL or other fi nancial
liabilities.
Financial liabilities at FVTPL
Financial liabilities are classifi ed as at FVTPL
where the fi nancial liability is either held-for-
trading or it is designated as at FVTPL.
• It is part of an identifi ed portfolio of
fi nancial instruments that the group
manages together and has a recent actual
pattern of short-term profi t-taking
• It is a derivative that is not designated and
effective as a hedging instrument.
A fi nancial liability other than a fi nancial
liability held-for-trading may be designated as
at FVTPL upon initial recognition if:
• Such designation eliminates or signifi cantly
reduces a measurement or recognition
inconsistency that would otherwise arise
• The fi nancial liability forms part of a
group of fi nancial assets or fi nancial
liabilities or both, which is managed
and its performance is evaluated on a
fair value basis, in accordance with the
group’s documented risk management or
investment strategy, and information about
the grouping is provided internally on that
basis
• It forms part of a contract containing one
or more embedded derivatives, and
IAS 39: Financial Instruments: Recognition
and Measurement permits the entire
combined contract (asset or liability) to be
designated as at FVTPL.
Financial liabilities at FVTPL are stated at
fair value, with any resultant gain or loss
recognised in profi t or loss. The net gain or
loss recognised in profi t or loss incorporates
any interest paid on the fi nancial liability.
The group has no fi nancial liabilities classifi ed
as FVTPL.
Other fi nancial liabilities
Other fi nancial liabilities are 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 fi nancial
liability and of allocating interest expense
over the relevant period. The effective
interest rate is the rate that discounts the
estimated future cash payments through the
expected life of the fi nancial liability or, where
appropriate, a shorter period.
A fi nancial liability is classifi ed as held-for-
trading if:
• It has been incurred principally for the
purpose of repurchasing in the near future
Derecognition of fi nancial liabilities
The group derecognises fi nancial liabilities
only when the group’s obligations are
discharged, cancelled or they expire.
124 Pan African Resources integrated annual report 2016
ANNUAL FINANCIAL
STATEMENTS
Derivative fi nancial instruments
In the ordinary course of its operations, the
group may enter into a variety of derivative
fi nancial instruments to manage its exposure
to commodity prices, volatility of interest
rates and foreign exchange rate risk.
Derivatives are initially recognised at cost
at the date a derivative contract is entered
into and are subsequently re-measured
to their fair value at each statement of
fi nancial position date. The resulting gain
or loss is recognised in the 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 the 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 fl ow hedges, or hedges
of net investments in foreign operations.
Hedges of foreign exchange risk or fi rm
commitments are accounted for as cash
fl ow hedges. At the inception of the hedge
relationship, the entity documents the
relationship between the hedging instrument
and the hedged item, along with its risk
management objectives and its strategy for
undertaking various hedge transactions.
Furthermore, at the inception of the
hedge and on an ongoing basis, the group
documents whether the hedging instrument
that is used in a hedging relationship is
effective in offsetting changes in fair values or
cash fl ows of the hedged item.
Fair value hedge
Changes in the fair value of any derivatives
that are designated and qualify as fair
value hedges are recorded in profi t or loss
immediately, together with any changes in
the fair value of the hedged item that are
attributable to the hedged risk. The change in
the fair value of the hedging instrument and
the change in the hedged item attributable
to the hedged risk are recognised in the
line of the statement of comprehensive
income relating to the hedged item. Hedge
accounting is discontinued when the group
revokes the hedging relationship, the hedging
instrument expires or is sold, terminated, or
exercised, or no longer qualifi es for hedge
accounting. The adjustment to the carrying
amount of the hedged item arising from the
hedged risk is amortised to profi t or loss
from that date.
Cash fl ow hedge
The effective portion of changes in the fair
value of any derivatives that are designated
and qualify as cash fl ow hedges is deferred
in equity. The gain or loss relating to the
ineffective portion is recognised immediately
in profi t or loss, and is included in the ‘other
gains and losses’ line of the statement of
comprehensive income. Amounts deferred
in equity are recycled in profi t or loss in the
periods when the hedged item is recognised
in profi t or loss, in the same line of the
statement of comprehensive income as the
recognised hedged item. However, when
the forecast transaction that is hedged
results in the recognition of a non-fi nancial
asset or a non-fi nancial liability, the gains
and losses previously deferred in equity are
transferred from equity and included in the
initial measurement of the cost of the asset
or liability. Hedge accounting is discontinued
when the group revokes the hedging
relationships, the hedging instrument expires
or is sold, terminated, or exercised, or no
longer qualifi es for hedge accounting. Any
cumulative gain or loss deferred in equity at
that time remains in equity and is recognised
when the forecast transaction is ultimately
recognised in profi t or loss. When a forecast
transaction is no longer expected to occur,
the cumulative gain or loss that was deferred
in equity is recognised immediately in profi t
or loss.
Fair value measurement
The assessment of fair value is principally
used in accounting for business combinations,
impairment testing and the valuation of
certain fi nancial assets and liabilities. Fair
value is determined based on observable
market data (in the case of listed
investments, the market share price at
30 June of the respective investments is
utilised) or discounted cash fl ow models
(and other valuation techniques) using
assumptions considered to be reasonable
and consistent with those that would be
applied by a market participant. Where
discounted cash fl ows are used, the resulting
fair value measurements are considered to
be at level 3 in the fair value hierarchy as
defi ned in IFRS 13: Fair Value Measurement
as they depend to a signifi cant extent
on unobservable valuation inputs. The
determination of assumptions used in
assessing the fair value of identifi able assets
and liabilities is subjective and the use of
different valuation assumptions could have
a signifi cant impact on fi nancial results. In
particular, expected future cash fl ows, which
are used in discounted cash fl ow models,
are inherently uncertain and could materially
change over time. They are signifi cantly
affected by a number of factors including
ore reserves and resources, together with
economic factors such as commodity prices,
exchange rates, discount rates and estimates
of production costs and future capital
expenditure.
Cash and cash equivalents
Cash and cash equivalents comprise cash on
hand and demand deposits, and other short-
term highly liquid investments that are readily
convertible to a known amount of cash and
are subject to an insignifi cant risk of changes
in value.
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 asset is marketed at a price
reasonable to its fair value and the disposal is
expected to be completed within one year
from classifi cation. Non-current assets held-
for-sale are stated at the 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 classifi cation 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).
Pan African Resources integrated annual report 2016
125
Notes to the consolidated and separate
Annual fi nancial statements continued
for the year ended 30 June 2016
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
classifi ed as held-for-sale.
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 identifi ed
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, PGEs and coal.
3.
Critical accounting
estimates and judgements
In preparing the annual fi nancial statements
in terms of IFRS, the group’s management
is required to make certain judgements,
estimates and assumptions that may
materially affect reported amounts of assets
and liabilities at the date of the fi nancial
statements and the reported amounts of
revenue and expense during the reported
year and the related disclosures. The
estimates and judgements are based on
historical experience, current and expected
future economic conditions and other
factors. Actual results may differ from these
estimates.
Critical accounting estimates and
judgements made by management
The following judgements, that have the
most signifi cant effect on the amounts
recognised in the fi nancial statements, have
been made by management in the process of
applying the group’s accounting policies:
• Estimates made in determining the
present obligation of environmental
provisions including decommissioning and
rehabilitation (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 fl ows 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 outfl ow of economic benefi ts
to assess whether the provision should
be discounted
• Estimates of mineral resources and ore
reserves in accordance with the SAMREC
Code (2000) for South African properties.
Such estimates relate to the category
for the resource (measured, indicated or
inferred), the quantum and the grade
• Estimates of the 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
• Estimates involved in feasibility studies
related to exploration and growth projects
and hence the recoverability of any related
capital expenditure.
126 Pan African Resources integrated annual report 2016
4. Revenue
Gold sales
Platinum sales
Coal sales
Realisation costs
On-mine revenue
Finance income
5. Cost of production
Gold cost of production
Salaries and wages
Processing
Electricity
Mining
Engineering and technical services
Administration and other
Security
Inventory valuation adjustment
Platinum cost of production
Refi ning costs
Salaries and wages
Processing
Electricity
Other plant operation costs
Coal cost of production
Mining contractor
Plant operations
Inventory valuation adjustment
Salaries and wages
Transport costs
Administration and other
Electricity
Security and safety
Refi ning costs
ANNUAL FINANCIAL
STATEMENTS
Consolidated
Separate
Year ended
30 June 2016
GBP
Year ended
30 June 2015
GBP
Year ended
30 June 2016
GBP
Year ended
30 June 2015
GBP
161,312,220
3,480,338
4,567,974
(956,709)
168,403,823
442,616
168,846,439
135,611,436
5,465,447
–
(690,538)
140,386,345
348,959
140,735,304
–
–
–
–
–
79,755
79,755
–
–
–
–
–
53,290
53,290
Consolidated
Separate
Year ended
30 June 2016
GBP
Year ended
30 June 2015
GBP
Year ended
30 June 2016
GBP
Year ended
30 June 2015
GBP
(45,115,956)
(16,991,750)
(14,791,254)
(9,289,873)
(7,424,303)
(4,618,025)
(2,042,705)
(213,474)
(100,487,340)
(47,785,708)
(14,349,345)
(15,089,408)
(12,676,638)
(7,595,857)
(5,706,416)
(2,154,974)
(1,286,309)
(106,644,655)
(1,423,196)
(940,978)
(828,616)
(195,922)
(67,295)
(3,456,007)
(1,469,111)
(1,166,769)
(675,571)
(321,342)
(334,999)
(204,542)
(81,017)
(17,847)
(8,537)
(4,279,735)
(1,415,944)
(1,089,427)
(1,005,258)
(208,303)
(49,598)
(3,768,530)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Pan African Resources integrated annual report 2016
127
Notes to the consolidated and separate
Annual fi nancial statements continued
for the year ended 30 June 2016
6.
Segmental analysis
A segment is a distinguishable component of the group that is engaged in providing products or services in a particular business sector
or segment, which is subject to risks and rewards that are different to those of other segments. The group’s business activities were
conducted through six business segments which are separable by geographical locations and operational functions:
• Barberton Mines, located in Barberton South Africa, derives revenue from the sale of gold to South African fi nancial institutions
• Evander Gold Mining Proprietary Limited and Evander Gold Mines Limited (collectively known as Evander Mines), located in Evander
South Africa, derive revenue form the sale of gold to South African fi nancial institutions
• Phoenix Platinum, located in the North West province in South Africa, derives revenue from the sale of PGE concentrate to Western
Platinum Limited (a subsidiary of Lonmin PLC)
• Uitkomst Colliery, located in Newcastle, KwaZulu-Natal, derives revenue from the sale of coal to local and export markets. Uitkomst
Colliery was effectively consolidated into the group, from 1 April 2016
• Corporate offi ce and growth projects, which includes PAR Gold, derives revenue from management fees resulting from providing
management and administration services to other group companies. Management fee income is disclosed in other expenses
(refer to note 8)
• Funding Company provides treasury function activities for the group.
The executive committee reviews the operations in accordance with the disclosures presented below.
Year ended 30 June 2016
Barberton
Mines
GBP
Evander
Mines
GBP
Phoenix
Platinum
GBP
Uitkomst
Colliery
GBP
89,596,245
–
–
(398,937)
89,197,308
(45,461,824)
(3,562,121)
40,173,363
(7,253,912)
–
71,715,975
–
–
(557,772)
71,158,203
(55,025,516)
(6,433,405)
9,699,282
873,481
–
–
3,480,338
–
–
3,480,338
(3,456,007)
(311,870)
(287,539)
(249,773)
–
–
–
4,567,974
–
4,567,974
(4,279,735)
(148,733)
139,506
233,905
Corporate
offi ce and
growth
projects
GBP
–
–
–
–
–
–
–
–
(5,867,371)
–
Funding
Company
GBP
Consolidated
GBP
– 161,312,220
3,480,338
–
4,567,974
–
–
(956,709)
– 168,403,823
– (108,223,082)
– (10,456,129)
49,724,612
–
(12,182,895)
80,775
–
–
–
–
(2,450,505)
–
–
(332,918)
–
–
–
–
(16,524)
–
–
–
–
–
–
–
–
(2,799,947)
30,468,946
13,380
(6,048)
30,476,278
(8,492,721)
10,239,845
27,840
(7,383)
10,260,302
(757,683)
(537,312)
448
(489)
(537,353)
118,266
356,887
8,823
–
365,710
226,037
(5,867,371)
79,755
(7)
(5,787,623)
701,414
80,775
312,370
(1,434,811)
(1,041,666)
(29,144)
34,741,770
442,616
(1,448,738)
33,735,648
(8,233,831)
21,983,557
9,502,619
(419,087)
591,747
(5,086,209)
(1,070,810)
25,501,817
(1,439,394)
(331,029)
(1,137,529)
(750,800)
(107,226)
79,849
(65,734)
7,489
2,749,883
(135,868)
–
1,130,359
–
–
20,213,134
7,614,290
(446,464)
533,502
(2,472,194)
59,549
25,501,817
Revenue
Gold sales1
Platinum sales
Coal sales
Realisation costs
On-mine revenue
Cost of production
Depreciation
Mining profi t
Other (expenses)/income2
Loss from associate
Loss on disposal of associate/
asset held for sale
Impairment costs
Royalty costs
Net income/(loss) before
fi nance income and
fi nance costs
Finance income
Finance costs
Profi t/(loss) before taxation
Taxation
Profi t/(loss) after taxation
before inter-company charges
Inter-company transactions
Management fees
Inter-company interest charges
Profi t after taxation after
inter-company charges
1 All gold sales were made in the Republic of South Africa and the majority of revenue (more than 90%) was generated from South African fi nancial institutions through its
Funding Company.
2 Other expenses exclude inter-company management fees and dividends.
128 Pan African Resources integrated annual report 2016
ANNUAL FINANCIAL
STATEMENTS
6.
Segmental analysis continued
Year ended 30 June 2015
Barberton
Mines
GBP
Evander
Mines
GBP
Phoenix
Platinum
GBP
Corporate
offi ce and
growth
projects
GBP
Funding
Company
GBP
Consolidated
GBP
Revenue
Gold sales1
Platinum sales
Coal sales
Realisation costs
On-mine revenue
Cost of production
Depreciation
Mining profi t
Other (expenses)/income2
Loss from associate
Loss on disposal of associate/asset
held for sale
Impairment costs
Royalty costs
Net income/(loss) before fi nance
income and fi nance costs
Finance income
Finance costs
Profi t/(loss) before taxation
Taxation
Profi t/(loss) after taxation before
inter-company charges
Inter-company transactions
Management fees
Inter-company interest charges
Profi t after taxation after inter-
company charges
81,609,692
–
–
(534,421)
81,075,271
(50,434,360)
(4,008,467)
26,632,444
(966,703)
–
–
–
(1,595,802)
24,069,939
109,514
(246,094)
23,933,359
(5,956,861)
54,001,744
–
–
(156,117)
53,845,627
(56,210,295)
(5,963,752)
(8,328,420)
5,057,581
–
–
–
(51,495)
(3,322,334)
167,047
(918,923)
(4,074,210)
2,270,046
–
5,465,447
–
–
5,465,447
(3,768,530)
(364,992)
1,331,925
(163,390)
–
–
–
–
1,168,535
11,186
(1,136)
1,178,585
(336,438)
–
–
–
–
–
–
–
–
(3,676,779)
(127,950)
(139,970)
(58,424)
–
(4,003,123)
53,290
(13,164)
(3,962,997)
(89,033)
–
–
–
–
–
–
–
–
(933)
–
135,611,436
5,465,447
–
(690,538)
140,386,345
(110,413,185)
(10,337,211)
19,635,949
249,776
(127,950)
–
–
–
(139,970)
(58,424)
(1,647,297)
(933)
7,922
(1,278,970)
(1,271,981)
(20,503)
17,912,084
348,959
(2,458,287)
15,802,756
(4,132,789)
17,976,498
(1,804,164)
842,147
(4,052,030)
(1,292,484)
11,669,967
(1,666,667)
(57,776)
(1,248,661)
(1,230,251)
(152,777)
(4,605)
3,068,105
(16,450)
–
1,309,082
–
–
16,252,055
(4,283,076)
684,765
(1,000,375)
16,598
11,669,967
1 All gold sales were made in the Republic of South Africa and the majority of revenue (more than 90%) was generated from South African fi nancial institutions through its
Funding Company.
2 Other expenses exclude inter-company management fees and dividends.
Pan African Resources integrated annual report 2016
129
Notes to the consolidated and separate
Annual fi nancial statements continued
for the year ended 30 June 2016
6. Segmental analysis continued
Year ended 30 June 2016
Barberton
Mines
GBP
Evander
Mines
GBP
Phoenix
Platinum
GBP
Uitkomst
Colliery
GBP
Corporate
offi ce and
growth
projects
GBP
Funding
Company
GBP
Consolidated
GBP
Segmental assets
Total assets excluding goodwill
Segmental liabilities
Goodwill
Net assets (excluding goodwill)
Capital expenditure
56,651,503 146,201,423
48,372,120
27,035,796
–
21,000,714
97,829,303
29,615,707
7,179,831
6,513,408
9,991,120
883,249
–
9,107,871
316,726
15,034,211
4,545,415
–
10,488,796
40,251
3,180,048
5,154,888
–
632,954 231,691,259
15,725,303 101,716,771
21,000,714
(1,974,840) (15,092,349) 129,974,488
14,097,166
46,950
–
–
Year ended 30 June 2015
Barberton
Mines
GBP
Evander
Mines
GBP
Phoenix
Platinum
GBP
Corporate
offi ce and
growth
projects
GBP
Funding
Company
GBP
Consolidated
GBP
Segmental assets
Total assets excluding goodwill
Segmental liabilities
Goodwill
Net assets (excluding goodwill)
Capital expenditure
55,423,588
21,528,152
21,000,714
33,895,436
6,258,248
146,705,365
52,987,201
–
93,718,164
13,231,962
10,850,893
933,751
–
9,917,142
31,355
2,454,933
1,973,835
–
481,098
32,791
932,707
12,777,774
–
(11,845,067)
–
216,367,486
90,200,713
21,000,714
126,166,773
19,554,356
130 Pan African Resources integrated annual report 2016
ANNUAL FINANCIAL
STATEMENTS
7. Operating leases
At the fi nancial year-end, the group and company had outstanding commitments under non-cancellable operating leases, mainly in respect
of offi ce equipment, security cameras, building rentals and compressors, which fall due as follows:
Consolidated
Separate
Year ended
30 June 2016
GBP
Year ended
30 June 2015
GBP
Year ended
30 June 2016
GBP
Year ended
30 June 2015
GBP
175,799
400,054
575,853
195,374
536,793
732,167
123,307
100,947
–
–
–
–
–
–
–
82,639
Not later than one year
Later than one year and no later than fi ve years
Minimum lease payments under operating leases
recognised as an expense in the year
Leases are negotiated for an average term of three to fi ve years.
The majority of the group’s lease arrangements relate to the copier machines leased at the mining operations. The only material
operating lease relates to the corporate offi ce. During the prior year the existing lease agreement for the corporate offi ce was renewed
under a separate group entity and has the following terms as at 30 June 2016:
Duration of lease
Commencement of lease
Remaining lease term
Escalation rate
Tenant
Landlord
5 years
1 April 2015
45 months
8%
Pan African Resources Management Services Company Proprietary Limited
Investec Property Fund Limited
Monthly lease payments
GBP9,496
Pan African Resources integrated annual report 2016
131
Notes to the consolidated and separate
Annual fi nancial statements continued
for the year ended 30 June 2016
8. Other (expenses)/income
Dividends received – subsidiary
Dividends received – other investments
Management fees
Foreign exchange (loss)/gain
Operating leases
Non-mining depreciation
Non-executive directors’ emoluments
Executive directors’ emoluments
Equity-settled share option expense (refer to note 34)
Cash-settled share option expense (refer to note 28)
Auditors’ fees
Salaries corporate offi ce
Investor and public relations
New business
Legal fees
Community projects
(Losses)/profi ts arising from realised and unrealised
fi nancial instruments (refer to note 30)
Profi t/(loss) on disposal of assets
Rehabilitation trust fund fair value adjustments
Rehabilitation provision adjustment
Other net (expense)/income
Consolidated
Separate
Year ended
30 June 2016
GBP
Year ended
30 June 2015
GBP
Year ended
30 June 2016
GBP
Year ended
30 June 2015
GBP
–
45,370
41,042
(5,115)
(123,307)
(36,617)
(196,960)
(763,329)
–
(5,274,697)
(177,158)
(1,348,966)
(91,228)
(164,223)
(74,685)
(980,537)
(5,307,692)
2,767
414,955
1,780,288
77,197
(12,182,895)
–
34,969
–
(41,266)
(100,947)
(49,094)
(139,508)
(1,042,762)
(184,064)
(294,627)
(164,003)
(683,902)
(162,945)
(278,418)
(104,582)
(1,154,892)
2,486,608
(149)
1,827,253
–
302,105
249,776
13,892,774
45,370
–
(1,677)
–
–
(196,960)
–
–
–
(70,204)
–
(2,188)
12,358
(12,359)
–
–
–
–
–
(245,561)
13,421,553
54,709,384
34,969
–
(2,282)
(82,639)
–
(139,508)
–
–
–
(61,024)
–
(39,768)
(165,541)
(57,565)
–
–
–
–
–
(315,079)
53,880,947
132 Pan African Resources integrated annual report 2016
ANNUAL FINANCIAL
STATEMENTS
9.
Finance income/(costs)
Interest received – bank
Interest received – other
Interest income – rehabilitation trust fund
Interest expense – bank
Interest expense – SARS
Interest expense – rehabilitation provision
Interest expense – other
Net fi nance (expense)/income
10. Profi t before taxation
Management fee (income)/expense – Shanduka
(refer to note 35)
Equity-settled share option expense (refer to note 34)
Cash-settled share options expense (refer to note 28)
Mining depreciation
Impairment costs
Staff costs
Royalty costs
(Losses)/profi ts arising from realised and unrealised
fi nancial instruments (refer to note 30)
New business
Operating leases
Consolidated
Separate
Year ended
30 June 2016
GBP
Year ended
30 June 2015
GBP
Year ended
30 June 2016
GBP
Year ended
30 June 2015
GBP
423,004
6,260
13,352
442,616
(1,441,307)
(47)
–
(7,384)
(1,448,738)
(1,006,122)
205,249
87,222
56,488
348,959
(1,278,970)
(34,748)
(1,094,191)
(50,378)
(2,458,287)
(2,109,328)
76,396
3,359
–
79,755
(6)
–
–
–
(6)
79,749
53,290
–
–
53,290
(13,165)
–
–
–
(13,165)
40,125
Consolidated
Separate
Year ended
30 June 2016
GBP
Year ended
30 June 2015
GBP
Year ended
30 June 2016
GBP
Year ended
30 June 2015
GBP
–
–
5,274,697
10,456,129
–
48,490,571
2,799,947
(5,307,692)
164,223
123,307
240,480
184,064
294,627
10,337,211
58,424
50,601,799
1,647,297
2,486,608
278,418
100,947
–
–
–
–
–
–
–
–
(12,358)
–
–
–
–
–
58,424
–
–
–
165,541
82,639
Pan African Resources integrated annual report 2016
133
Notes to the consolidated and separate
Annual fi nancial statements continued
for the year ended 30 June 2016
11. Auditors’ remuneration
Fees payable to the company’s auditors for the audit of
the company’s annual fi nancial statements
Audit of the consolidated fi nancial statements
Audit of the company’s subsidiaries pursuant to legislation
Under provision of audit fee in the prior year
Total audit fees
Other services rendered by the auditors
External auditors
Internal auditors
Total non-audit fees
Consolidated
Separate
Year ended
30 June 2016
GBP
Year ended
30 June 2015
GBP
Year ended
30 June 2016
GBP
Year ended
30 June 2015
GBP
1,049
49,139
119,697
7,273
177,158
9,336
61,360
70,696
1,167
45,758
110,122
6,956
164,003
16,689
39,017
55,706
1,049
49,139
–
20,016
70,204
9,336
–
9,336
1,167
45,758
–
14,099
61,024
16,689
–
16,689
All audit fees were paid within South Africa with the exception of GBP50,300 (2015: GBP42,500) which was paid in the United Kingdom.
12. Staff costs
Consolidated
Separate
Year ended
30 June 2016
GBP
Year ended
30 June 2015
GBP
Year ended
30 June 2016
GBP
Year ended
30 June 2015
GBP
43,693,897
4,796,674
48,490,571
45,098,239
5,503,560
50,601,799
–
–
–
–
–
–
Consolidated
Year ended
30 June 2016
Average
Year ended
30 June 2016
Closing
Year ended
30 June 2015
Average
Year ended
30 June 2015
Closing
14
2,150
3
114
1,705
3,986
184
275
459
4,445
14
2,144
3
115
1,716
3,992
175
274
449
4,441
14
2,247
3
–
1,675
3,939
192
203
395
4,334
14
2,239
3
–
1,692
3,948
190
188
378
4,326
Their aggregate remuneration comprised:
Salaries and wages
Other retirement costs (refer to note 31)
Operating cost employees were:
Corporate
Evander Mines
Phoenix Platinum
Uitkomst Colliery
Barberton Mines
Capital employees
Barberton Mines
Evander Mines
Total number of employees
134 Pan African Resources integrated annual report 2016
ANNUAL FINANCIAL
STATEMENTS
13. Taxation
Income tax expense
South African normal taxation
– current year
– prior year
Deferred taxation
– current year
Total taxation charge
Profi t before taxation
Taxation at the domestic taxation rate of 28%
Taxation rate differential
Exempt income
Non-deductible expenses
(Overprovision)/underprovision – prior year
Tax effect of utilisation of tax losses
Taxation expense for the year
Effective taxation rates
South African statutory rate
Taxation rate differential
Exempt income
Non-deductible expenses/(exempt income)
(Overprovision)/underprovision – prior year
Tax effect of utilisation of tax losses
Effective taxation rate
Consolidated
Separate
Year ended
30 June 2016
GBP
Year ended
30 June 2015
GBP
Year ended
30 June 2016
GBP
Year ended
30 June 2015
GBP
9,723,940
(92,806)
5,456,327
(86,758)
(1,397,303)
8,233,831
33,735,648
9,445,982
(1,298,697)
–
179,352
(92,806)
–
8,233,831
%
28.00
(3.85)
–
0.53
(0.28)
–
24.4
(1,236,780)
4,132,789
15,802,756
4,424,772
122,889
–
(344,288)
(70,584)
–
4,132,789
%
28.00
0.78
–
(2.18)
(0.45)
–
26.15
33,810
–
–
33,810
13,501,302
3,780,365
–
(3,745,330)
–
–
(1,225)
33,810
%
28.00
–
(27.74)
–
–
(0.01)
0.25
24,306
–
–
24,306
53,594,728
15,006,524
–
(14,983,971)
–
–
1,753
24,306
%
28.00
–
(27.96)
–
–
–
0.04
There are no signifi cant unrecognised temporary differences associated with undistributed profi ts of overseas subsidiaries. South African
income tax on mining income is determined according to a formula which takes into account the profi t and revenue from mining
operations. South African mining taxable income is determined after the deduction of all mining capital expenditure, with the proviso that
these deductions 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. At year-end the group has the following unredeemed capital expenditure carried
forward and deductible against future profi ts, held within Phoenix Platinum and Evander Mines (due to the expenditure on the ETRP and
other projects).
Phoenix Platinum
Evander Mines
At year-end the group has the following assessed losses carried forward
Evander Mines
Phoenix Platinum
Total
Consolidated
30 June 2016
GBP
30 June 2015
GBP
5,008,780
13,515,292
18,524,072
4,967,775
16,684,726
21,652,501
–
75,348
75,348
4,565,108
77,222
4,642,330
Pan African Resources integrated annual report 2016
135
Notes to the consolidated and separate
Annual fi nancial statements continued
for the year ended 30 June 2016
14. Earnings per share
Basic and diluted earnings per share
Basic and diluted earnings per share are based on the group’s profi t for the year attributable to owners of the parent, divided by the
weighted average number of shares in issue during the year. Dilutive earnings per share is calculated by adjusting the weighted average
number of ordinary shares in issue on the assumptions of conversion of all potentially dilutive ordinary shares. Potential ordinary shares
shall be treated as dilutive when, and only when their conversion to ordinary shares would decrease earnings per share or increase loss
per share from continuing operations.
Year ended 30 June 2016
Basic earnings per share
Dilutive potential ordinary shares
Diluted earnings per share
Year ended 30 June 2015
Basic earnings per share
Dilutive potential ordinary shares
Diluted earnings per share
Weighted
average
number
of shares3
Earnings
per share
Pence
Net profi t
GBP
25,501,817
–
25,501,817
1,811,427,377
489,558
1,811,916,935
11,669,967
–
11,669,967
1,830,422,160
545,106
1,830,967,266
1.41
–
1.41
0.64
(0.00)
0.64
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:
Year ended 30 June 2016
Earnings as reported
Adjustments1:
Impairment costs
(Profi t)/loss on sale of property, plant and equipment and mineral rights
Loss on disposal of associate/asset held for sale
Headline earnings per share2
Dilutive potential ordinary shares
Diluted headline earnings per share
Year ended 30 June 2015
Earnings as reported
Adjustments1:
Impairment costs
(Profi t)/loss on sale of property, plant and equipment and mineral rights
Loss on disposal of associate/asset held for sale
Headline earnings per share2
Dilutive potential ordinary shares
Diluted headline earnings per share
Weighted
average
number
of shares3
Earnings
per share
Pence
Net profi t
GBP
25,501,817
1,811,427,377
1.41
–
(2 767)
–
25 499 050
–
25 499 050
–
–
–
1,811,427,377
489,558
1,811,916,935
–
–
–
1.41
–
1.41
11,669,967
1,830,422,160
0.64
58,424
149
139,970
11,868,510
–
11,868,510
–
–
–
1,830,422,160
545,106
1,830,967,266
–
–
0.01
0.65
(0.00)
0.65
1 The adjustments accounted for did not have any taxation impact to the group.
2 Headline earnings per share is required to be disclosed in terms of the Listings Requirements of the JSE Limited.
3 The shares take into account a reduction of the treasury shares of 436,358,085 only for 24 days to 30 June 2016, in the weighted average calculation.
136 Pan African Resources integrated annual report 2016
ANNUAL FINANCIAL
STATEMENTS
14. Earnings per share continued
Net asset value per share
Tangible net asset value per share1
Consolidated
30 June 2016
Pence
30 June 2015
Pence
10.02
5.83
8.04
3.56
1 Total assets less goodwill, non-current assets held for sale, non-current liabilities, current liabilities and mineral rights and mining property.
15. Dividends
Historical dividends
The group paid a fi nal dividend of ZAR210 million or GBP9.7 million (2014: ZAR258 million or GBP15.8 million) on 24 December 2015
relating to the 2015 fi nancial year, equating to ZAR0.11466 or 0.53 pence (2014: ZAR0.14100 or 0.82 pence).
Proposed dividend for approval at the AGM
The board has proposed a dividend of ZAR300 million or GBP16 million, equating to ZAR0.15438 per share or 0.82338 pence per share.
This dividend is subject to approval at the AGM, which will take place on Friday, 25 November 2016.
Assuming the dividend is approved by the shareholders, the following salient dates would apply:
Currency conversion date
Wednesday, 11 October
Last date to trade on the exchanges Tuesday, 6 December
Ex-dividend date on the JSE
Wednesday, 7 December
Ex-dividend date on the LSE
Thursday, 8 December
Record date
Payment date
Friday, 9 December
Thursday, 22 December
• The GBP proposed fi nal dividend was calculated based on 1,943,206,554 total shares in issue and an illustrative exchange rate of
ZAR18.75:1. Shareholders on the London register should note that a revised exchange rate will be communicated prior to approval
at the AGM.
• No transfers between the Johannesburg and London registers between the commencement of trading on Monday, 5 December 2016
and close of business on Friday, 9 December 2016 will be permitted.
• No shares may be dematerialised or rematerialised between Wednesday, 7 December 2016 and Friday, 9 December 2016, both
days inclusive.
The South African dividend tax rate is fi fteen percent per ordinary share for shareholders who are liable to pay the dividends tax,
resulting in a net dividend of ZAR0.13122 per share for these shareholders. Foreign investors may qualify for a lower dividend tax rate,
subject to completing a dividend tax declaration and submitting it to Computershare Limited or Capita PLC who manage the SA and
UK register, respectively. The company’s South African income tax reference number is 9154588173 and it has 1,943,206,554 shares
currently in issue.
Following the approval of the fi nancial statements, the company released an announcement on 13 October 2016 confi rming that the
exchange rate for conversion of the ZAR dividend into GBP will be fi xed at a rate of ZAR17.5787.
Pan African Resources integrated annual report 2016
137
Notes to the consolidated and separate
Annual fi nancial statements continued
for the year ended 30 June 2016
16. Property, plant and equipment and mineral rights
Group
Cost
Balance at 30 June 2014
Transfer to intangibles
Transfer from exploration assets
Transfer from assets under construction
Additions
Disposal
Foreign currency translation reserve
Balance at 30 June 2015
Acquired from Uitkomst Colliery
Transfer to asset held for sale
Transfers
Additions
Disposal
Foreign currency translation reserve
Balance at 30 June 2016
Accumulated depreciation and impairment
Balance at 30 June 2014
Charge for the year2
Disposal
Transfers
Foreign currency translation reserve
Balance at 30 June 2015
Charge for the year2
Disposal
Transfers
Foreign currency translation reserve
Balance at 30 June 2016
Carrying amount
At 30 June 2015
At 30 June 2016
Mineral rights
and mining
property4
GBP
Land1
GBP
Exploration
assets3
GBP
1,969,970
–
–
–
–
–
(131,672)
1,838,298
–
–
85,745
–
–
(44,609)
1,879,434
–
–
–
–
–
–
–
–
–
–
–
41,192,425
–
6,758,500
–
–
–
(3,208,512)
44,742,413
7,675,739
–
–
–
–
(591,572)
51,826,580
(7,755,450)
(1,248,676)
–
–
602,478
(8,401,648)
(1,396,679)
–
–
85,962
(9,712,365)
32,899,922
–
(6,758,500)
–
–
–
(1,743,774)
24,397,648
–
–
–
–
–
(592,056)
23,805,592
–
–
–
–
–
–
–
–
–
–
–
1,838,298
1,879,434
36,340,765
42,114,215
24,397,648
23,805,592
1 Details of land are maintained in a register held at the offi ces of Barberton Mines, Evander Mines and Phoenix Platinum, 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.
2 A total depreciation and amortisation charge of GBP10,456,129 has been recognised in the statement of profi t or loss (2015: GBP10,337,211) and includes direct mining
depreciation of GBP10,384,476 (2015: GBP10,185,964) as per below:
3 Exploration assets comprise Evander South, Rolspruit and Poplar arising from the acquisition of Evander Mines for which the technical feasibility and commercial viability
of extracting a mineral resource are not yet demonstrable.
4 Surface tailings relate to long-term inventory tailings upon purchase of the Harper tailing storage facility located at Fairview in Barberton Mines. The surface tailings will be
amortised once remining occurs through the BTRP.
138 Pan African Resources integrated annual report 2016
ANNUAL FINANCIAL
STATEMENTS
Building
and
infrastructure
GBP
Plant and
machinery
GBP
Capital under
construction
GBP
Shafts and
exploration
GBP
Surface
tailings4
GBP
Other
GBP
Total
GBP
28,657,037
–
–
–
1,172,467
–
(1,994,393)
27,835,111
62,828
(66,873)
–
208,460
–
(653,827)
27,385,699
(2,629,295)
(1,647,040)
–
–
286,682
(3,989,653)
(1,551,111)
–
–
(34,142)
(5,574,906)
69,307,094
(141,946)
–
23,551,820
1,872,635
(1,389)
(6,335,389)
88,252,825
1,374,990
–
(85,745)
5,855,853
(28,860)
(1,562,568)
93,806,495
(14,110,617)
(5,940,068)
602
17,525
1,342,032
(18,690,526)
(6,104,087)
11,929
–
(59,361)
(24,842,045)
16,894,645
–
–
(23,588,815)
13,231,962
–
(431,615)
6,106,177
–
–
–
4,162,905
–
203,289
10,472,371
(181,173)
(280,229)
–
–
30,985
(430,417)
(422,681)
–
–
(25,242)
(878,340)
27,657,907
–
–
–
3,241,897
–
(2,067,003)
28,832,801
–
–
–
3,797,567
–
(379,060)
32,251,308
(9,162,258)
(1,065,115)
–
–
684,149
(9,543,224)
(907,139)
–
–
154,925
(10,295,438)
555,247
–
–
–
–
–
(37,112)
518,135
–
–
–
–
–
(12,574)
505,561
–
–
–
–
–
–
–
–
–
–
–
208,341
–
–
36,995
9,655
–
(17,068)
237,923
–
–
–
55,133
(456)
(1,158)
291,442
(127,827)
(40,076)
–
(17,525)
12,345
(173,083)
(25,252)
–
–
2,146
(196,189)
219,342,588
(141,946)
–
–
19,528,616
(1,389)
(15,966,538)
222,761,331
9,113,557
(66,873)
–
14,079,918
(29,316)
(3,634,135)
242,224,482
(33,966,620)
(10,221,204)
602
–
2,958,671
(41,228,551)
(10,406,949)
11,929
–
124,288
(51,499,283)
23,845,458
21,810,793
69,562,299
68,964,450
5,675,760
9,594,031
19,289,577
21,955,870
518,135
505,561
64,840
95,253
181,532,780
190,725,199
Pan African Resources integrated annual report 2016
139
Notes to the consolidated and separate
Annual fi nancial statements continued
for the year ended 30 June 2016
16. Property, plant and equipment and mineral rights continued
Company
Cost
Balance at 30 June 2014
Sale of assets and liabilities to subsidiary1
Foreign currency translation reserve
Balance at 30 June 2015
Accumulated depreciation and impairment
Balance at 30 June 2014
Sale of assets and liabilities to subsidiary1
Foreign currency translation reserve
Balance at 30 June 2015
Carrying amount
At 30 June 2015
At 30 June 2016
Mineral rights
and mining
property
GBP
Land
GBP
Exploration
assets
GBP
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1 At the beginning of the prior year the company sold its assets and liabilities at book value to PAR Management Services.
Depreciation on property, plant and equipment and mineral right
Amortisation on intangible assets
Non-mining depreciation
Total mining depreciation
Non-mining amortisation
Direct mining depreciation
17. Other intangible assets
Consolidated
30 June 2016
GBP
30 June 2015
GBP
10,406,949
85,797
(36,617)
10,456,129
(71,653)
10,384,476
10,221,204
165,101
(49,094)
10,337,211
(151,247)
10,185,964
Software costs
Balance at the beginning of the period
Reclassifi cation of software costs from property, plant
and equipment and mineral rights (refer to note 16)
Sale of assets and liabilities to subsidiary
Additions
Current year amortisation
Foreign currency translation reserve
Balance at the end of the period
Consolidated
Separate
30 June 2016
GBP
30 June 2015
GBP
30 June 2016
GBP
30 June 2015
GBP
202,488
214,330
–
–
17,248
(85,797)
(10,704)
123,235
141,946
–
25,740
(165,101)
(14,427)
202,488
–
–
–
–
–
–
–
23,108
–
(23,008)
–
–
(100)
–
140 Pan African Resources integrated annual report 2016
ANNUAL FINANCIAL
STATEMENTS
Building
and
infrastructure
GBP
Plant and
machinery
GBP
Capital under
construction
GBP
Shafts and
exploration
GBP
Surface
tailings
GBP
Other
GBP
Total
GBP
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
195,986
(195,160)
(826)
–
(125,036)
124,509
527
–
195,986
(195,160)
(826)
–
(125,036)
124,509
527
–
–
–
–
–
18. Goodwill
Goodwill acquired in a business combination is allocated at acquisition to the cash-generating units (CGUs) that are expected to benefi t
from that business combination. All the group’s goodwill has been allocated to Barberton Mines CGU.
Consolidated
Separate
30 June 2016
GBP
30 June 2015
GBP
30 June 2016
GBP
30 June 2015
GBP
Opening and closing balance
21,000,714
21,000,714
–
–
The group tests the Barberton Mines 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 year.
Management estimates the discount rate using post-tax rate of 10.7% (2015: 7.36%) for Barberton Mines, which refl ects the current
market assessments of the time value of money and the risks specifi c to the CGU to the extent not already refl ected in the cash fl ows
being discounted, an average gold price of ZAR580,000/kg (2015: ZAR460,000/kg over the life of projects. The life of mine was estimated
at 22 years (2015: 20 years) for Barberton Mines at the end of the fi nancial year. Changes in selling prices and direct costs are based on
past practices and expectations of future changes in the market.
The group prepares cash-fl ow forecasts derived from the most recent fi nancial budgets approved by management.
Pan African Resources integrated annual report 2016
141
Notes to the consolidated and separate
Annual fi nancial statements continued
for the year ended 30 June 2016
19. Investments in subsidiaries and investments in associate
At 30 June 2016 the company and group held the following shares in subsidiaries and associate:
Name of company
Barberton Mines8
Evander Gold Mining Proprietary Limited8
Evander Gold Mines Proprietary Limited (Evander Mines)
Phoenix Platinum
Funding Company1
Emerald Panther Investments 91 Proprietary Limited (Emerald Panther)2
Pan African Resources Management Services Company Proprietary Limited
(PAR Management Services)3
Nyambose Proprietary Limited
Pan African Resources Coal Holdings Proprietary Limited (PAR Coal Holdings)5
Uitkomst Colliery Proprietary Limited
PAR Gold Proprietary Limited (PAR Gold) previously known as Shanduka Gold
Proprietary Limited6
Listed investment7
Other investments
Country of
incorporation
Principal
activity
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
Gold mining
Gold mining
Gold mining
PGE remining
Treasury services
Holding company
Services company
Other
Holding company
Coal mining
BEE company
Other
Mining
Investment reconciliation
Opening balance
Loss in associate
Impairment of investment in Auroch Minerals NL
Loss on disposal of associate
Proceeds from sale of investment in Auroch Minerals NL4
Purchase of shares in the available for sale investment
Purchase of shares in Pan African Resources Coal Holdings
Proprietary Limited
Fair value adjustment on the available for sale investment
Foreign currency translation reserve
Closing balance
Consolidated
Separate
30 June 2016
GBP
30 June 2015
GBP
30 June 2016
GBP
30 June 2015
GBP
904,818
–
–
–
–
–
–
388,188
(23 778)
1,269,228
1,009,545
(127,950)
(58,424)
(139,970)
(277,732)
1,037,677
–
(70,679)
(467,649)
904,818
122,911,964
–
–
–
–
–
924,193
388,188
(23,670)
124,200,675
123,016,683
(127,950)
(58,424)
(139,970)
(277,732)
1,037,677
–
(70,679)
(467,641)
122,911,964
1 Funding Company was established for the purpose of providing funding and treasury services to the group.
2 Emerald Panther is a company acquired to facilitate the acquisition of Evander Mines from Harmony Gold Mining Company Limited, and therefore holds the investment
in Evander Mines. Emerald Panther holds 100% of Evander Gold Mines Limited and Evander Gold Mining Proprietary Limited, which are both incorporated in South Africa,
and operate in mining.
142 Pan African Resources integrated annual report 2016
ANNUAL FINANCIAL
STATEMENTS
Consolidated
Separate
Holding
effectively
held by
company for
consolidation
purposes
Economic
benefi t
derived by
the group
Carrying
amount
30 June 2016
GBP
Carrying
amount
30 June 2015
GBP
Carrying
amount
30 June 2016
GBP
Carrying
amount
30 June 2015
GBP
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
97.5%
3.4%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
3.4%
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
45,770,663
–
–
4,209,696
263
72,026,632
–
–
924,193
–
–
45,770,663
–
–
4,209,696
263
72,026,632
–
–
–
–
–
1,269,228
–
1,269,228
904,710
108
904,818
1,269,228
–
124,200,675
904,710
–
122,911,964
Statutory
holding
95%
100%
95%
100%
100%
100%
100%
100%
100%
100%
50.5%
3.4%
3 PAR Management Services, was internally transferred within the group. Ordinary shares previously held by Evander Gold Mining Proprietary Limited were
transferred to Pan African Resources. This company was acquired to function as a management and other services provider and administrator to the group.
At the beginning of the prior fi nancial year, Pan African Resources sold its assets and liabilities to PAR Management Services at book value, with the exception
of the investments in subsidiaries, current taxation assets and liabilities, and trade receivables and payables directly for the account of the company as a
group holding company. Refer below for assets and liabilities sold:
Summary of assets and liabilities sold
Property, plant and equipment
Other non-current assets
Deferred tax asset
Current assets
Trade and other receivables
Cash
Non-current liabilities
Long-term liabilities
Current liabilities
Trade and other payables
Net assets sold
See footnotes 4, 5, 6, 7 and 8 on next page.
30 June 2015
ZAR
30 June 2015
GBP
1,693,944
93,659
6,601,879
365,023
400,699
69,147
22,155
3,823
(12,870,005)
(711,592)
(13,034,623)
(17,138,959)
(720,694)
(947,626)
Pan African Resources integrated annual report 2016
143
Notes to the consolidated and separate
Annual fi nancial statements continued
for the year ended 30 June 2016
19. Investments in subsidiaries and investments in associate continued
4 Pursuant to a share sale and purchase agreement, dated 27 August 2012, relating to the sale of Manica Gold Projects, certain terms were amended between the contract
parties and as a result the company made a decision to sell its investment in Auroch Minerals (42% shareholding) for a total consideration of AUD2,000,000.
During the prior year, Pan African Resources concluded the sale of its investment in Auroch Minerals NL and derecognised the investment from the statement of fi nancial
position by recognising in the statement of profi t and loss an impairment of GBP58,424, a loss in associate of GBP127,950 and a loss on sale of investment of GBP139,970.
Impairment arose due to continued challenges experienced within the mining environment and reducing gold prices which led to Auroch’s share price dropping to AUD0.03
at the date of sale. Proceeds received during the current year and attributable to the sale of investment were as follows.
Proceeds received on 3 July 2014
Proceeds received on 21 November 2014
Opening balance 1 July 2014
Loss in associate
Carrying value before impairment
Impairment
Foreign currency reserve
Carrying value before sale
Proceeds
Loss on disposal of associate
Balance at year-end
Consolidated and separate
AUD
150,000
350,000
500,000
ZAR
1,513,623
3,307,797
4,821,420
Consolidated and separate
ZAR
GBP
10,556,778
(2,291,239)
8,265,539
(1,014,239)
–
7,251,300
(4,821,420)
(2,429,880)
–
1,009,429
(127,950)
881,479
(58,424)
(405,353)
417,702
(277,732)
(139,970)
–
5 PAR Coal Holdings was acquired during the current year with all its issued shares subscribed for by Pan African Resources. This company was acquired as a strategic
holding company to the group’s coal business. PAR Coal Holdings is the main shareholder in the Uitkomst Colliery (previously known as Emerald Panther Investments
107 Proprietary Limited). Refer to note 40 for the purchase price allocation of the Uitkomst Colliery acquisition.
6 Towards the end of the fi nancial year the group fi nalised a share buyback transaction in which 49.9% of the shares issued in PAR Gold were purchased through the group’s
wholly owned subsidiary, Funding Company. The transaction translated to a share buyback as PAR Gold has as its sole investment a 23.8% stake in Pan African Resources on
3 June 2016 (at 30 June 2016 the shareholding diluted to 22.46% following the share issue on 3 June 2016), and deriving only dividends linked to the shareholding as
income. Refer to note 41.
7 During the prior year, the company purchased 1,750,850 shares in a listed entity for an amount of ZAR18.9 million. The entity is an exploration, development and gold mining
company focused on Southern Africa.
At year-end the investment remains a 3.4% holding and therefore carried at fair value as per the applicable accounting standard.
Consolidated and separate
30 June 2016
ZAR
30 June 2016
GBP
30 June 2015
ZAR
30 June 2015
GBP
Dividends received from listed investment
973,179
45,371
629,448
34,969
8 A portion of shares in the investment was issued to employees via an ESOP transaction scheme described in note 39. The substance of the transaction renders Pan African
Resources retaining full control of the investment and therefore consolidating 100% of the investment.
144 Pan African Resources integrated annual report 2016
ANNUAL FINANCIAL
STATEMENTS
Barberton
Mines
GBP
2,106,866
41,770
252,537
(160,646)
2,240,527
1,849
57,454
(49,364)
2,250,466
Evander
Mines
GBP
13,351,425
14,718
1,574,716
(999,461)
13,941,398
11,503
357,501
(307,160)
14,003,242
Total
GBP
15,458,291
56,488
1,827,253
(1,160,107)
16,181,925
13,352
414,955
(356,524)
16,253,708
20. Rehabilitation trust fund
Funds held in trust fund (refer to note 27)
Opening balance as at 30 June 2014
Interest earned on the rehabilitation fund
Fair value adjustment
Foreign currency translation reserve
Closing balance as at 30 June 2015
Interest earned on the rehabilitation fund
Fair value adjustment
Foreign currency translation reserve
Closing balance as at 30 June 2016
The funds available from contributions are held within Pan African Resources Group Rehabilitation Trust.
The amounts are invested in a number of instruments, including interest-bearing short-term deposits, medium-term equity-linked notes
issued by commercial banks, equity share portfolios managed by asset managers.
The Evander Mines rehabilitation trust fund was transferred from Harmony Gold Mining Company Limited (Harmony).
Refer to note 27 for the associated rehabilitation provision disclosure.
21. Inventories
Consumable stores
Mineral stocks
Coal inventory
Short-term portion of long-term inventory
Provision for obsolete stock
Long-term Inventory1
Consolidated
Separate
30 June 2016
GBP
30 June 2015
GBP
30 June 2016
GBP
30 June 2015
GBP
3,060,766
934,306
456,620
31,850
(84,729)
4,398,813
186,861
4,585,674
3,102,272
483,044
–
–
(82,747)
3,502,569
–
3,502,569
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1 During the year tailings stock (Elandskraal) of approximately 1.28 million tonnes was purchased to increase Phoenix Platinum feed sources. Elandskraal was purchased for
ZAR4.5 million and the tailings were treated from September in the current year.
The nature of this inventory is long term as it is expected to be processed over a period in excess of 12 months from the reporting date.
Pan African Resources integrated annual report 2016
145
Notes to the consolidated and separate
Annual fi nancial statements continued
for the year ended 30 June 2016
22. Trade and other receivables
Trade receivables
Provision for doubtful debtors
Other receivables and prepayments
VAT receivable
Consolidated
Separate
30 June 2016
GBP
30 June 2015
GBP
30 June 2016
GBP
30 June 2015
GBP
10,233,634
(44,233)
1,247,281
2,605,675
14,042,357
5,731,102
(30,504)
1,519,648
2,338,764
9,559,010
–
–
23,949
33,990
57,939
–
–
21,557
19,974
41,531
The group’s credit risk is primarily attributable to its trade receivables. The amounts presented in the statement of fi nancial position
are net of allowances for doubtful debtors relating to other receivables, estimated by the group’s management based on the current
economic environment and individual debtor circumstances. The credit risk on liquid funds is limited because the counterparties are dealt
with in accordance with the group’s credit policy. Financial institutions are the major customer that represents more than 5% of the
trade receivables balance for the individual gold mining subsidiaries (Barberton Mines and Evander Mines), and Western Platinum Limited
(subsidiary of Lonmin PLC) is the one major customer that represents more than 5% of the trade receivables balance of
Phoenix Platinum. ArcelorMittal Newcastle is a major customer that represents more than 5% of the trade receivables balance
of Uitkomst Colliery.
The average credit period is:
Number of days
Trade receivables
Revenue
Consolidated
30 June 2016
30 June 2015
17.0
10,233,634
169,360,532
18.0
5,731,102
141,076,883
The ageing of trade receivables remained materially unchanged even with the introduction of Uitkomst Colliery into the group at a trade
receivables balance of GBP2.8 million. This was due to continued improved cash collections on gold sales from the treasury function.
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 creditworthy customers and large institutions within South Africa.
The fair value of trade receivables is not materially different from the carrying value presented. Receivables have been pledged as security,
in terms of the revolving credit facility.
146 Pan African Resources integrated annual report 2016
ANNUAL FINANCIAL
STATEMENTS
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
2,658,947
3,328,850
77,660
888,498
Consolidated
Separate
30 June 2016
GBP
30 June 2015
GBP
30 June 2016
GBP
30 June 2015
GBP
Included in cash and cash equivalents is restricted cash for
an amount of ZAR12.9 million. This amount represents
guarantees to Transnet SOC Limited and the Department
of Mineral Resources, and currently owed to Uitkomst
Colliery by Brandywine Valley Investments Proprietary Limited
(previous owner of Uitkomst Colliery).
Cash and cash equivalents also include an overdraft of
ZAR50 million drawn at Funding Company level at year-end.
Credit facilities
The group has the following credit facilities:
Nedbank Limited revolving credit facility1
Rand Merchant Bank revolving credit facility1
Absa Bank Limited revolving credit facility1
Absa Bank Limited overdraft facility1
Rand Merchant Bank overdraft facility1
Absa Bank Limited credit card facilities
Guarantee2
USD trading facility3
13,481,631
13,481,631
13,481,631
2,527,806
2,527,806
75,834
3,381,275
4,802,831
53,760,445
13,816,926
13,816,926
13,816,926
2,590,674
2,590,674
77,720
2,794,398
4,922,279
54,426,523
–
–
–
–
–
50,556
–
–
50,556
–
–
–
51,813
–
–
51,813
1 The group has secured a fi ve-year revolving credit facility with Nedbank Limited, Absa Bank Limited and Rand Merchant Bank (refer to note 28). The facility carries an interest
rate of the monthly JIBAR rate plus 2.5% margin, and is secured against Barberton Mines, Evander Mines and Phoenix Platinum’s property, plant and equipment. The revolving
credit facility was utilised during the current year, and at year-end, there was an outstanding amount of GBP15.7 million (2015: GBP12.7 million) payable in relation to the
facility and an unutilised amount of GBP24.8 million (2015: GBP29.0 million). The Absa Limited overdraft facility was fully utilised during the year and Rand Merchant Bank
overdraft facility remains unsecured and unutilised at year-end. The overdraft facilities attract interest that is linked to prime in South Africa.
2 The guarantees relate to GBP1,243,332 (2015: GBP1,274,254) for Eskom (electricity utility), GBP1,028,237 (2015: GBP724,809) for the Department of Mineral
Resources (DMR), other fi nancial guarantees GBP776,036 (2015: GBP795,336) and GBP333,670 relating to Transnet SOC Limited.
3 The USD trading facility relates to trading facilities held by Barberton Mines for the purposes of trading USD for ZAR on USD gold sales.
Pan African Resources integrated annual report 2016
147
Notes to the consolidated and separate
Annual fi nancial statements continued
for the year ended 30 June 2016
24. Share capital
Issued
Consolidated
Separate
30 June 2016
GBP
30 June 2015
GBP
30 June 2016
GBP
30 June 2015
GBP
Number of ordinary shares issued
1,943,206,554
1,831,494,763
1,943,206,554
1,831,494,763
Treasury shares
(436,358,058)
–
–
–
1,506,848,496
1,831,494,763
1,943,206,554
1,831,494,763
Ordinary shares issued of GBP0.01 each
19 432 065
18,314,947
19 432 065
18,314,947
The following cash issue of shares was made during the year:
• On 3 June 2016 111,711,791 shares were issued as part of the rights issue at 14.4 pence per share, in relation to the acquisition of the
Shanduka Gold share buyback transaction.
During the prior fi nancial year:
• On 19 March 2015 1,500,000 shares were issued at 5 pence per share to Mr KC Spencer’s family trust (Strode Trust) upon exercising
historical share options.
Current number of equity-settled share options outstanding at 30 June 2016 is 1,122,000 (2015: 1,122,000), excluding the new issue of
equity options disclosed in note 34.
25. Trade and other payables
Trade and other payables
Accruals and other payables
VAT payable
Total trade and other payables
The average credit period is:
Number of days
Consolidated
Separate
30 June 2016
GBP
30 June 2015
GBP
30 June 2016
GBP
30 June 2015
GBP
9,980,679
8,390,553
372,003
8,945,258
7,514,861
338,924
–
–
257,837
213,861
–
–
18,743,235
16,799,043
257,837
213,861
Consolidated
30 June 2016
30 June 2015
32
31
Creditors days have remained materially constant, remaining marginally in line with debtors days indicating improved collection from
debtors to settle short-term obligations.
The fair value of trade payables is not materially different from the carrying value presented.
148 Pan African Resources integrated annual report 2016
ANNUAL FINANCIAL
STATEMENTS
26. Current tax
Current tax asset
Current tax liability
Consolidated
Separate
30 June 2016
GBP
30 June 2015
GBP
30 June 2016
GBP
30 June 2015
GBP
848,946
541,794
827,298
503,784
8,469
141,574
–
–
Current taxes payable and receivable by the group relate to the South African Revenue Service (SARS).
27. Long-term provisions
Consolidated
Separate
Decom-
missioning
and
rehabilitation
GBP
12,033,167
1,094,191
(877,991)
12,249,367
386,580
(1,780,288)
(422,673)
10,432,986
Total
GBP
12,033,167
1,094,191
(877,991)
12,249,367
386,580
(1,780,288)
(422,673)
10,432,986
Decom-
missioning
and
rehabilitation
GBP
–
–
–
–
–
–
–
–
Total
GBP
–
–
–
–
–
–
–
–
Balance at 30 June 2014
Provided during the year
Foreign currency translation reserve
Balance at 30 June 2015
Acquired from Uitkomst Colliery
Net release during the year
Foreign currency translation reserve
Balance at 30 June 2016
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. Estimates 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 following life
of mine and rates.
The current year movement in the group’s rehabilitation liability has been largely infl uenced by the changes to the closure costs estimate.
Barberton Mines
BTRP
Evander Mines
ETRP
Phoenix Platinum1
Uitkomst Colliery
30 June 2016
30 June 2015
Life of mine
Years
Risk-free rate
%
Life of mine
Years
Risk-free rate
%
22
14
16
16
9
22
11.31
9.85
9.73
9.73
9.02
11.31
20
15
16
16
28
–
8.74
8.67
8.67
8.67
8.61
–
1 The change in the life of mine is attributed to the exclusion of the mineral reserves from the Lesedi Mine current arisings.
Pan African Resources integrated annual report 2016
149
Notes to the consolidated and separate
Annual fi nancial statements continued
for the year ended 30 June 2016
28. Long-term liabilities
Cash-settled share options
Opening balance
Sale of assets and liabilities to PAR Management Services
Expense for the year
Payments during the year
Foreign currency translation reserve
Closing balance
Current portion
Long-term portion
Post-retirement benefi ts
Opening balance
Utilised for the year
Foreign currency translation reserve
Closing balance
Revolving credit facility
Opening balance
Drawdowns
Finance costs incurred1
Repayments of capital
Repayments of fi nance costs
Foreign currency translation reserve
Closing balance
Current portion
Long-term portion
Consolidated
Separate
Year ended
30 June 2016
GBP
Year ended
30 June 2015
GBP
Year ended
30 June 2016
GBP
Year ended
30 June 2015
GBP
1,313,721
1,579,923
–
5,274,697
(1,324,924)
277,857
–
294,627
(428,512)
(132,317)
5,541,351
1,313,721
(2,738,123)
2,803,228
(933,152)
380,569
78,535
(11,009)
(2,835)
64,691
90,832
(6,677)
(5,620)
78,535
12,732,505
–
38,061,147
27,898,927
1,317,577
1,271,063
(36,807,033)
(14,299,642)
(1,074,513)
(1,337,774)
1,464,254
(800,069)
15,693,937
12,732,505
(1,452,109)
(1,118,559)
14,241,828
11,613,946
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
714,603
(711,592)
–
–
(3,011)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1 Finance costs incurred exclude GBP127,572 (2015: GBP7,907), relating to the new general banking facilities, which are separately disclosable from the RCF.
150 Pan African Resources integrated annual report 2016
ANNUAL FINANCIAL
STATEMENTS
28. Long-term liabilities continued
Gold loan
Opening balance
Gold loan repayments
Fair value adjustment
Foreign currency translation reserve
Closing balance
Current portion
Long-term portion
Total
Consolidated
Separate
Year ended
30 June 2016
GBP
Year ended
30 June 2015
GBP
Year ended
30 June 2016
GBP
Year ended
30 June 2015
GBP
7,235,699
11,225,365
(2,747,333)
(3,396,717)
–
(351,325)
(120,490)
(472,459)
4,137,041
7,235,699
(2,790,479)
(2,995,767)
1,346,562
4,239,932
18,451,276
16,312,982
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
The gold loan has been designated as an instrument to be measured at amortised cost.
Consolidated
Separate
Year ended
30 June 2016
GBP
Year ended
30 June 2015
GBP
Year ended
30 June 2016
GBP
Year ended
30 June 2015
GBP
Current and non-current portions of long-term liabilities
Current portion
6,980,711
5,047,478
Non-current portion – capital to be paid on maturity
18,456,309
16,312,982
25,437,020
21,360,460
–
–
–
–
–
–
Pan African Resources integrated annual report 2016
151
Notes to the consolidated and separate
Annual fi nancial statements continued
for the year ended 30 June 2016
28. Long-term liabilities continued
Terms of the revolving credit facility
Facility amount
ZAR800,000,000
Accordian option
ZAR300,000,000 exercisable with two years at the inception of the revolving credit facility
Lenders
Borrower
Interest rate
Rand Merchant Bank (a division of FirstRand Bank Limited), Absa Limited, Nedbank Limited
Pan African Resources Funding Company Proprietary Limited
JIBAR (quoted at 5.958% at year-end), at a monthly payment selection period
Interest rate margin
2.5%
Commitment fee
35% of the margin per annum, calculated on a day-to-day basis on the undrawn portion of the maximum
available commitment
Term of loan
Five years from (17 June 2015)
Repayment period
Full repayment of the outstanding amount at the end of fi ve years
Final repayment date
17 June 2020
Financial covenant limits
The ratio of the net debt to equity must be less than 1:1 (measured on a semi-annual basis)
The interest cover ratio (refer to note 30) must be greater than four times (measured on a
semi-annual basis)
The ratio of net debt to EBITDA (refer to note 30), as defi ned in the agreement, must be less than 2.5:1
(measured on a semi-annual basis)
Bonds as security for revolving credit facilities
The following bonds were entered into by the group:
Continuing covering mortgage bond B1534/2013 –Barberton Mines/Bowwood and Main No. 40 Proprietary Limited
Continuing covering mortgage bond B1740/2013 – Evander Mines/Bowwood and Main No. 40 Proprietary Limited
Special notarial bond BN6785/2013 – Barberton Mines/Bowwood and Main No. 40 Proprietary Limited
Special notarial bond BN6912/2013 – Evander Mines/Bowwood and Main No. 40 Proprietary Limited
General notarial bond BN7075/2013 – Barberton Mines/Bowwood and Main No. 40 Proprietary Limited
General notarial bond BN6592/2013 – Evander Mines/Bowwood and Main No. 40 Proprietary Limited
Ceded rights as security for the revolving credit facility
Bank accounts
Debts1
Insurance2
Insurance proceeds
The above listed rights are ceded whether actual, prospective or contingent, direct or indirect, whether a claim to payment of money or
to the performance of any other obligation, and whether or not the said rights and interest were within the contemplation of the parties
at signature date.
1 All claims which the cedent has or may in future have in respect of agreements entered into or to be entered into by the cedent pursuant to which goods and/or services are
provided (or to be provided) to or by the cedent, including but not limited to book debts against trade debtors from time to time.
2 All contracts and policies of insurance and reinsurance of any kind which are effected and maintained by or on behalf of the cedent.
152 Pan African Resources integrated annual report 2016
ANNUAL FINANCIAL
STATEMENTS
28. Long-term liabilities continued
Terms of the gold loan
In May 2014, a gold loan transaction of ZAR200 million was entered into with Absa Bank Limited as a counterparty. The purpose of this
gold loan was to provide funds for the ETRP constructed at Evander Mines. The gold loan is repaid quarterly in gold ounces produced
from the Evander Mines operation, with the repayments having commenced in July 2014 to end in October 2017. Refer to terms below.
Effective delivery price per ounce
Effective delivery price per kg
Repayment period
Final repayment date
Financial covenant limits
ZAR12,694
ZAR408,129
1.5 years
31 October 2017
The ratio of the net debt to equity must be less than 1:1 (measured on a semi-annual basis)
The interest cover ratio (refer to note 30) must be greater than four times
(measured on a semi-annual basis)
The ratio of net debt to EBITDA (refer to note 30), as defi ned in the agreement, must
be less than 2.5:1 (measured on a semi-annual basis)
Security of gold loan
Security of the gold loan is included in the revolving credit facility security package
Gold loan repayment schedule
Delivery date
29 July 2016
31 October 2016
31 January 2017
28 April 2017
31 July 2017
31 October 2017
Ounces
delivered
1,105,94
1,093,96
1,081,14
1,067,07
1,055,50
1,042,69
6,446,30
As repayment of the loan is made in physical ounces of gold, revenue is recognised on physical delivery to Absa Bank Limited.
Group cash-settled share options
On 9 May 2011, the company established a cash-settled share appreciation rights programme entitling selected executives and employees
of the group, as approved by the board of directors and the remuneration committee of the company, to be allocated notional shares in
the group. These notional shares confer the conditional right on the participant to be paid a cash settlement equal to the appreciation in
the company 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 is determined no later than the sixth anniversary of the date that the notional shares are allocated.
However the participant can elect, subject to approval by the company’s remuneration committee, 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 is regarded as remuneration for income tax purposes and thus subject to the deduction of pay-as-
you-earn (PAYE) and all other taxes and contributions via the payroll of the company or the relevant subsidiary. These taxes are for the
account of the participant.
Pan African Resources integrated annual report 2016
153
Notes to the consolidated and separate
Annual fi nancial statements continued
for the year ended 30 June 2016
28. Long-term liabilities continued
Group cash-settled share options continued
No share appreciation rights settlements can be made until after the period, calculated from the date the notional shares were allocated, of:
Initial issue
• Two years has elapsed, in which event not more than 25% of the total number of notional shares allocated can be surrendered
• Three years has elapsed, in which event not more than 50% of the total number of notional shares allocated can be surrendered
• Four years has elapsed, in which event all of the notional shares allocated can be surrendered.
Top-up issues
• One year has elapsed, in which event not more than 25% of the total number of notional shares allocated can be surrendered
• Two years has elapsed, in which event not more than 50% of the total number of notional shares allocated can be surrendered
• Three years has elapsed, in which event not more than 75% of the total number of notional shares allocated can be surrendered
• Four years has elapsed, in which event all of the notional shares allocated can be surrendered
• Or any lesser amount of notional shares may be surrendered. Notional shares which a participant is entitled to surrender are referred
to as “surrenderable notional shares”.
Remco may, by resolution, amend and postpone any of these vesting periods, with the consent of the participant concerned.
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.
Details of the share options outstanding during the year, in relation to this scheme, are as follows:
Group cash-settled share options
30 June 2016
30 June 2015
Weighted
average
exercise
price
ZAR
Number
of
options
1.61
1.67
1.53
–
58,439,090
50,509,449
(14,646,951)
–
1.65
94,301,588
Weighted
average
exercise
price
ZAR
1.92
1.18
2.20
2.37
1.61
Number
of
options
53,275,980
18,715,657
(10,456,992)
(3,095,555)
58,439,090
Outstanding at 1 July
Granted during the year
Exercised during the year
Forfeited in the year
Outstanding and exercisable at 30 June
Cash-settled share options are valued annually at fair value.
The weighted average share price on redemptions was ZAR2.93 (2015: no redemptions).
154 Pan African Resources integrated annual report 2016
ANNUAL FINANCIAL
STATEMENTS
28. Long-term liabilities continued
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
Exercise price
Expected volatility
Expected life
Weighted average remaining life
Risk-free rate
Expected dividend yield
30 June 2016
30 June 2015
R3.44
R2.12
R2.04
R2.15
R1.15 – R3.04
R1.15 – R2.67
30.00%
30.00%
3 – 6 years
3 – 6 years
3.5 years
4.2 years
7.56 – 8.48%
6.94 – 7.89%
4.00%
4.00%
Expected volatility includes the following factors:
• Implied volatility from traded share options on the entity’s shares, or other traded instruments of the entity that include option features
(such as convertible debt), if any
• The historical volatility of the share price over the most recent period that is generally commensurate with the expected term of the
option (taking into account the remaining contractual life of the option and the effects of expected early exercise)
• The length of time an entity’s shares have been publicly traded. A newly listed entity might have a high historical volatility, compared
with similar entities that have been listed longer.
Participation in share-based and other long-term incentive schemes is restricted to employees and directors as described above.
The group recognised an expense of GBP4,291,500 (income in 2015: GBP340,996) relating to cash-settled share-based payment
transactions during the year, as a result of the share price increasing.
During the prior year, the group entered into an employee share ownership scheme transaction at Barberton Mines level and during
the current year a similar scheme was entered into at Evander Mines level. The group recognised an expense of GBP586,305 in relation
to the employee share ownership scheme. Refer to note 39.
Chief Executive Offi cer long-term incentive
To incentivise the Chief Executive Offi cer and align the interests of the Chief Executive Offi cer with that of the group, and to ensure
retention during the three year contract term, the following long-term incentive was put in place on 28 February 2015. The Chief
Executive Offi cer no longer participates in the group share appreciation scheme other than historic holdings:
• Cash or equity-settled payment at the end of the three-year contract term of 4,000,000 Pan African Resources shares, issued for no
consideration, vesting only at the end of the Chief Executive Offi cer’s contract term
• Cash or equity-settled payment of a maximum number of a further 4,000,000 Pan African Resources shares, issued for no consideration,
vesting only at the end of the Chief Executive Offi cer’s contract term. These shares will only be issued upon meeting certain pre-
defi ned Remco criteria, which are determined annually
• The Chief Executive Offi cer will therefore be eligible for a minimum number of 4,000,000 Pan African Resources shares and maximum
number of 8,000,000 Pan African Resources shares at the end of his contract term.
At year-end this incentive scheme was treated as a cash-settled share option scheme and a liability of GBP396,892 (2015: GBP71,977)
was recognised in the statement of fi nancial position.
Subsequent to year-end, the incentive scheme for both the Chief Executive Offi cer and the Financial Director was amended, as detailed in
the remuneration policy.
Pan African Resources integrated annual report 2016
155
Notes to the consolidated and separate
Annual fi nancial statements continued
for the year ended 30 June 2016
28. Long-term liabilities continued
Vesting schedule 2016
Description
Grant date
Vesting
period
years
Vesting
period
days
Tranche 1
Tranche 2
Tranche 3
Tranche 1
Tranche 2
Tranche 3
Tranche 1
Tranche 2
Tranche 3
Tranche 1
Tranche 2
Tranche 3
Tranche 1
Tranche 2
Tranche 3
Tranche 1
Tranche 1
Tranche 2
Tranche 3
Tranche 1
Tranche 2
Tranche 3
Tranche 1
Tranche 2
Tranche 3
Tranche 1
Tranche 2
Tranche 3
Tranche 1
Tranche 2
Tranche 3
Tranche 4
Tranche 1
Tranche 2
Tranche 3
Tranche 1
Tranche 2
Tranche 3
Tranche 1
Tranche 2
Tranche 3
Tranche 1
Tranche 2
Tranche 3
Tranche 4
Tranche 1
Tranche 2
Tranche 3
Tranche 1
11 May 2011
11 May 2011
11 May 2011
1 March 2013
1 March 2013
1 March 2013
13 July 2012
13 July 2012
13 July 2012
1 April 2013
1 April 2013
1 April 2013
1 June 2013
1 June 2013
1 June 2013
1 August 2013
1 August 2013
1 August 2013
1 August 2013
27 September 2013
27 September 2013
27 September 2013
13 November 2013
13 November 2013
13 November 2013
1 April 2014
1 April 2014
1 April 2014
1 May 2014
1 May 2014
1 May 2014
1 May 2014
27 May 2014
27 May 2014
27 May 2014
1 March 2015
1 March 2015
1 March 2015
30 July 2015
30 July 2015
30 July 2015
30 July 2015
30 July 2015
30 July 2015
30 July 2015
16 May 2016
16 May 2016
16 May 2016
28 February 2015
2
3
4
2
3
4
2
3
4
2
3
4
2
3
4
2
2
3
4
2
3
4
2
3
4
2
3
4
1
2
3
4
2
3
4
1
2
3
2
3
4
1
2
3
4
2
3
4
3
731
1,096
1,461
731
1,096
1,461
731
1,096
1,461
731
1,096
1,461
731
1,096
1,461
549
731
1,096
1,461
731
1,096
1,461
731
1,096
1,461
731
1,096
1,461
366
731
1,096
1,461
731
1,096
1,461
366
731
1,096
731
1,096
1,461
366
731
1,096
1,461
731
1,096
1,461
1,096
156 Pan African Resources integrated annual report 2016
Vesting date
11 May 2013
11 May 2014
11 May 2015
1 March 2015
29 February 2016
28 February 2017
13 July 2014
13 July 2015
13 July 2016
1 April 2015
1 April 2016
1 April 2017
1 June 2015
1 June 2016
1 June 2017
1 February 2015
1 August 2015
1 August 2016
1 August 2017
27 September 2015
27 September 2016
27 September 2017
13 November 2015
13 November 2016
13 November 2017
1 April 2016
1 April 2017
1 April 2018
1 May 2015
1 May 2016
1 May 2017
1 May 2018
27 May 2016
27 May 2017
27 May 2018
1 March 2016
1 March 2017
1 March 2018
30 July 2017
30 July 2018
30 July 2019
30 July 2016
30 July 2017
30 July 2018
30 July 2019
16 May 2018
16 May 2019
16 May 2020
28 February 2018
Valuation
ZAR
Options
granted
Options
expected
to vest
2.07
2.07
2.07
1.12
1.12
1.12
1.36
1.36
1.36
1.25
1.25
1.25
1.24
1.24
1.24
1.35
1.35
1.35
1.35
1.21
1.21
1.21
1.09
1.09
1.09
1.30
1.30
1.30
1.39
1.39
1.39
1.39
1.06
1.06
1.06
1.41
1.41
1.41
1.70
1.70
1.70
1.70
1.70
1.70
1.70
1.06
1.06
1.06
1,281,784
1,281,784
2,563,561
733,057
733,057
1,466,114
570,195
570,195
1,140,390
728,111
728,111
1,456,222
555,284
555,284
1,110,568
1,000,000
1,000,000
1,000,000
2,000,000
166,136
166,136
332,272
126,845
126,845
253,691
545,709
545,709
1,091,418
1,525,170
1,525,170
1,525,170
1,525,170
312,000
312,000
624,000
1,538,173
1,538,173
1,538,634
2,119,207
2,119,207
4,238,415
10,277,892
10,277,892
10,277,892
10,277,892
230,263
230,263
460,527
8,000,000
94,301,588
1,281,784
1,281,784
2,563,561
733,057
733,057
1,466,114
570,195
570,195
1,140,390
728,111
728,111
1,456,222
555,284
555,284
1,110,568
1,000,000
1,000,000
1,000,000
2,000,000
166,136
166,136
332,272
126,845
126,845
253,691
545,709
545,709
1,091,418
1,525,170
1,525,170
1,525,170
1,525,170
312,000
312,000
624,000
1,538,173
1,538,173
1,538,634
2,119,207
2,119,207
4,238,415
10,277,892
10,277,892
10,277,892
10,277,892
230,263
230,263
460,527
8,000,000
94,301,588
28. Long-term liabilities continued
Vesting schedule 2015
Description
Grant date
Vesting
period
years
Vesting
period
days
Tranche 1
Tranche 2
Tranche 3
Tranche 1
Tranche 2
Tranche 3
Tranche 1
Tranche 2
Tranche 3
Tranche 1
Tranche 2
Tranche 3
Tranche 1
Tranche 2
Tranche 3
Tranche 1
Tranche 2
Tranche 3
Tranche 1
Tranche 2
Tranche 3
11 May 2011
11 May 2011
11 May 2011
1 March 2013
1 March 2013
1 March 2013
1 April 2013
1 April 2013
1 April 2013
1 May 2013
1 May 2013
1 May 2013
1 June 2013
1 June 2013
1 June 2013
1 July 2013
1 July 2013
1 July 2013
1 August 2013
1 August 2013
1 August 2013
Tranche 1
27 September 2013
Tranche 2
27 September 2013
Tranche 3
27 September 2013
Tranche 1
13 November 2013
Tranche 2
13 November 2013
Tranche 3
13 November 2013
Tranche 1
Tranche 2
Tranche 3
Tranche 1
Tranche 2
Tranche 3
Tranche 1
Tranche 2
Tranche 3
Tranche 1
Tranche 2
Tranche 3
Tranche 1
1 April 2014
1 April 2014
1 April 2014
27 May 2014
27 May 2014
27 May 2014
1 July 2014
1 July 2014
1 July 2014
1 March 2015
1 March 2015
1 March 2015
28 February 2015
2
3
4
2
3
4
2
3
4
2
3
4
2
3
4
2
3
4
2
3
4
2
3
4
2
3
4
2
3
4
2
3
4
2
3
4
1
2
3
3
Vesting date
10 May 2013
10 May 2014
10 May 2015
1 March 2015
29 February 2016
28 February 2017
1 April 2015
31 March 2016
31 March 2017
1 May 2015
30 April 2016
30 April 2017
1 June 2015
31 May 2016
31 May 2017
1 July 2015
30 June 2016
30 June 2017
1 August 2015
31 July 2016
31 July 2017
731
1,096
1,461
731
1,096
1,461
731
1,096
1,461
731
1,096
1,461
731
1,096
1,461
731
1,096
1,461
731
1,096
1,461
731
27 September 2015
1,096
26 September 2016
1,461
26 September 2017
731
13 November 2015
1,096
12 November 2016
1,461
12 November 2017
731
1,096
1,461
731
1,096
1,461
731
1,096
1,461
366
731
1,096
1,096
31 March 2016
31 March 2017
31 March 2018
26 May 2016
26 May 2017
26 May 2018
30 June 2016
30 June 2017
30 June 2018
29 February 2016
28 February 2017
28 February 2018
28 February 2018
ANNUAL FINANCIAL
STATEMENTS
Valuation
ZAR
Options
granted
Options
expected
to vest
3,572,511
3,572,511
7,145,023
859,828
859,828
3,572,511
3,572,511
7,145,023
859,828
859,828
1,719,653
1,719,653
850,121
850,121
850,121
850,121
1,700,241
1,700,241
871,859
871,859
871,859
871,859
1,743,713
1,743,713
563,864
563,864
563,864
563,864
1,127,727
1,127,727
245,455
245,455
490,909
1,500,000
1,500,000
3,000,000
221,515
221,515
443,030
126,845
126,845
253,691
727,612
727,612
245,455
245,455
490,909
1,500,000
1,500,000
3,000,000
221,515
221,515
443,030
126,845
126,845
253,691
727,612
727,612
1,455,224
1,455,224
391,250
391,250
782,500
1,525,170
1,525,170
3,050,339
1,538,173
1,538,173
1,538,634
8,000,000
391,250
391,250
782,500
1,525,170
1,525,170
3,050,339
1,538,173
1,538,173
1,538,634
8,000,000
58,439,090
58,439,090
0.91
0.91
0.91
0.39
0.39
0.39
0.46
0.46
0.46
0.54
0.54
0.54
0.46
0.46
0.46
0.46
0.46
0.46
0.52
0.52
0.52
0.45
0.45
0.45
0.39
0.39
0.39
0.51
0.51
0.51
0.39
0.39
0.39
0.57
0.57
0.57
0.59
0.59
0.59
–
Pan African Resources integrated annual report 2016
157
Notes to the consolidated and separate
Annual fi nancial statements continued
for the year ended 30 June 2016
29. Deferred taxation
Consolidated
Separate
30 June 2016
GBP
30 June 2015
GBP
30 June 2016
GBP
30 June 2015
GBP
Note
Arising from temporary differences relating to:
Property, plant and equipment
Provisions
Investment in rehabilitation trust
Other
Net deferred tax liabilities
Reconciliation of deferred tax liabilities:
Net deferred liabilities at the beginning of the year
Acquired from Uitkomst Colliery
Deferred tax charge for the year
Foreign currency translation reserve
Net deferred liabilities at the end of the year
Arising from temporary differences relating to:
Provisions
Other
Reconciliation of deferred tax assets:
Net deferred assets at the beginning of the year
Sale of assets and liabilities to subsidiary
Deferred tax credit for the year
Foreign currency translation reserve
Net deferred assets at the end of the year
47,689,097
(4,555,564)
2,726,840
(5,244,036)
40,616,337
39,288,059
2,818,212
(662,080)
(827,854)
40,616,337
1,143,692
(26,600)
1,117,092
327,748
–
735,223
54,121
1,117,092
46,253,745
(4,407,102)
3,283,461
(5,842,045)
39,288,059
43,353,577
–
(1,252,133)
(2,813,385)
39,288,059
328,127
(379)
327,748
366,567
–
(15,353)
(23,466)
327,748
40
13
13
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
366,567
(365,023)
–
(1,544)
–
Assessed loss
carried forward
Unredeemed capital
carried forward
Total
30 June 2016
GBP
30 June 2015
GBP
30 June 2016
GBP
30 June 2015
GBP
30 June 2016
GBP
30 June 2015
GBP
Phoenix Platinum
Evander Mines
75,348
–
75,348
77,222
4,565,108
4,642,330
5,008,780
13,515,292
18,524,072
4,967,775
16,684,726
21,652,501
5,084,128
13,515,292
18,599,420
5,044,997
21,249,834
26,294,831
Deferred tax assets have been raised on the basis that the individual group companies will, in the future be able to generate taxable
economic benefi ts to utilise current deductible temporary differences.
Deferred taxation rates applied within the group:
The deferred tax rate used to calculate deferred tax is based on the current estimate of future profi tability when temporary differences
will reverse.
Deferred taxation rates applied within the group:
Barberton Mines
Evander Mines
Phoenix Platinum
Uitkomst Colliery
Other companies
158 Pan African Resources integrated annual report 2016
Consolidated
30 June 2016
%
30 June 2015
%
28
25.5
28
28
28
28
26.5
28
28
28
ANNUAL FINANCIAL
STATEMENTS
30. Financial instruments
The group manages its capital to ensure that it will be able to continue as a going concern while maximising the sustainable return to
shareholders through the optimisation of the debt and equity ratios. The group’s overall strategy remains unchanged from the prior year.
Components of capital and fi nancial covenants:
Cash and cash equivalents
Interest-bearing debt/Gold loan
Net interest-bearing liabilities/(assets)
Equity
Consolidated
Separate
30 June 2016
GBP
30 June 2015
GBP
30 June 2016
GBP
30 June 2015
GBP
(2,658,947)
(3,328,850)
77,660
888,498
19,830,978
17,172,031
19,968,204
16,639,354
–
–
77,660
888,498
150,975,202
147,167,487
168,765,155
147,925,939
Net debt to equity ratio (ratio)1
0.11
0.11
Finance costs of the revolving credit facilities
1,317,577
1,271,063
0.00
–
0.01
–
Earnings before interest and taxation
34,741,770
17,912,084
13,421,553
53,554,603
Interest cover ratio
Adjusted EBITDA is represented by earnings before interest,
taxation, depreciation and amortisation, loss on disposal of
associate, impairments and loss on disposal of assets held
for sale
26
14
–
–
45,197,899
28,447,689
13,421,553
53,752,997
Net debt to adjusted EBITDA
0.38
0.58
0.01
0.02
Financial covenant limits:
The ratio of the net debt to equity must be less than 1:1
(measured semi-annually).
The interest cover ratio must be greater than four times
(measured semi-annually).
The ratio of net debt to adjusted EBITDA must be less than
2.5:1 (measured semi-annually).
Categories of fi nancial instruments:
Financial assets2:
Cash and cash equivalents
Listed available-for-sale investment
Rehabilitation trust fund
Receivables
Financial liabilities:
Trade and other payables
Long-term liabilities
Financial instrument liabilities
Current portion of long-term liabilities
2,658,947
3,328,850
77,660
1,269,228
904,710
1,269,228
16,253,708
16,181,925
10,233,634
5,731,102
–
–
888,498
904,710
–
–
18,371,232
16,460,119
257,837
213,861
25,437,020
21,360,460
5,945,399
6,980,711
–
5,047,478
–
–
–
–
–
–
1 Net debt is calculated on cash and cash equivalents less interest-bearing debt.
2 At year-end the group did not have trade receivables that are past overdue and not impaired.
Pan African Resources integrated annual report 2016
159
Notes to the consolidated and separate
Annual fi nancial statements continued
for the year ended 30 June 2016
30. Financial instruments continued
Financial risk management objectives
The group seeks to minimise the effects of fi nancial risks by using derivative fi nancial instruments to hedge risk exposures where
appropriate. The use of any fi nancial derivatives is approved by the board of directors, who also on a continuous basis provide guidance
on managing foreign exchange risk, interest rate risk, credit risk, the use of fi nancial derivatives and non-derivative fi nancial instruments,
and the investment of excess liquidity. Exposure limits are reviewed on a continuous basis. The group does not enter into or trade
fi nancial instruments, including derivative fi nancial instruments, for speculative use.
Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in fi nancial loss to the group. The
group has adopted a policy of only dealing with creditworthy counterparties and obtaining suffi cient collateral where appropriate, as a
means of mitigating the risk.
The group’s credit risk is primarily attributable to its trade receivables. The amounts presented in the statement of fi nancial position
are net of allowances for doubtful receivables of GBP44,233 (2015: GBP30,504) relating to other receivables, estimated by the group’s
management based on the current economic environment and individual debtor circumstances. The credit risk on liquid funds is limited
because the counterparties are dealt with in accordance with the group’s credit policy. Financial institutions are a major customer that
represents more than 5% of the trade receivables balance for the individual gold mining subsidiaries (Barberton Mines and Evander
Mines), and Western Platinum Limited (subsidiary of Lonmin PLC) is the one major customer that represents more than 5% of the trade
receivables balance of Phoenix Platinum. ArcelorMittal, Calcial is a major customer that represents more than 5% of the trade receivables
balance of Uitkomst Colliery.
Customers above 5%
Financial institutions
Western Platinum Limited (subsidiary of Lonmin PLC)
ArcelorMittal
Provision for doubtful debtors
Consolidated
30 June 2016
GBP
30 June 2015
GBP
6,332,277
896,151
843,476
4,233,646
1,497,456
–
8,071,904
5,731,102
44,233
30,502
Market risk
The group’s activities expose it primarily to the fi nancial risks of changes in foreign currency exchange rates, commodity prices and
investments . Where appropriate, the group enters into a variety of derivative fi nancial instruments to manage its exposure to foreign
currency risk and the commodity price risk. Investment risk is managed by reviewing the portfolio’s constitution, risk profi le and returns
on an annual basis.
Foreign currency risk
The group undertakes certain transactions in foreign currencies. Hence, exposures to exchange rate fl uctuation arise. Exchange rate
exposures are managed within approved policy parameters. The group specifi cally ensures USD receipts are converted into ZAR as
effi ciently as possible.
Commodity price and foreign exchange rate risk
The group may enter into forward contracts to hedge its exposure to fl uctuations in commodity prices and exchange rates on specifi c
transactions. The contracts are matched with anticipated future cash fl ows from sales receipts.
Interest rate and liquidity risk
Fluctuations in interest rates impact on short-term investment and fi nancing activities, giving rise to interest rate risk. In the ordinary
course of business, the group receives cash proceeds from its operations and is required to fund working capital and capital expenditure
requirements. Cash is managed to ensure that surplus funds are invested to maximise returns whilst ensuring that capital is safeguarded to
the maximum extent by only investing with reputable fi nancial institutions. Contractual arrangements for committed borrowing facilities
are maintained to meet the group’s normal and contingent funding needs.
160 Pan African Resources integrated annual report 2016
ANNUAL FINANCIAL
STATEMENTS
30. Financial instruments continued
Currency and commodity price risk
Currency and gold spot price
GBP/ZAR exchange rate
USD/ZAR exchange rate
USD gold spot price (USD/oz) received
Foreign currency/gold price sensitivity
2016
2015
30 June 2016
30 June 2015
Closing rate
Average rate
Closing rate
Average rate
19.78
14.78
21.45
14.51
19.30
12.28
18.00
11.45
Consolidated
30 June 2016
30 June 2015
1,164
1,212
Impact of 10%
currency or
gold price
movement
on profi t
GBP
11,983,681
9,936,378
The pound sterling carrying amount of the group’s foreign currency denominated monetary assets and liabilities at statement of fi nancial
position date is as follows:
2016
Assets
Liabilities
2015
Assets
Liabilities
Impact of
10% currency
movement on
translation
reserve
GBP1
21,949,063
32,211,139
19,953,694
29,282,854
17,217,727
22,350,305
15,652,479
20,318,459
1 The functional currency within the group is ZAR therefore the sensitivity details the effect of the ZAR/GBP exchange rate on the foreign currency translation reserve.
Pan African Resources integrated annual report 2016
161
Notes to the consolidated and separate
Annual fi nancial statements continued
for the year ended 30 June 2016
30. Financial instruments continued
Commodity zero cost collar
The group entered into two zero cost collar gold transactions during the year, similar to transactions that were undertaken in the prior
year. During the current fi nancial year, the group realised a loss of GBP5,307,692 upon agreeing to realise one contract and measuring the
other contract as fi nancial liability at year-end.
Financial instruments (derivatives)
Opening balance
Financial instruments during the year
Fair valuing of fi nancial instruments
Financial instruments realised during the year
Foreign currency translation reserve
Closing balance
Cost collar derivative profi ts
Losses unrealised from fair value measurement
Cash profi ts realised on the statement of comprehensive income
Consolidated
Separate
30 June 2016
GBP
30 June 2015
GBP
30 June 2016
GBP
30 June 2015
GBP
–
(5,307,692)
–
(180,996)
(456,711)
(5,945,399)
–
2,486,608
–
(2,486,608)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Consolidated
30 June 2016
30 June 2015
(5,482,517)
174,825
(5,307,692)
–
2,486,608
2,486,608
162 Pan African Resources integrated annual report 2016
ANNUAL FINANCIAL
STATEMENTS
30. Financial instruments continued
Commodity zero cost collar continued
Terms of the zero cost collar gold transaction:
30 June 2016
30 June 2015
Contract one
Contract two
Contract one
Contract two
Contract three
28 July 2015
4 March 2016
30 September 2014
30 September 2014
1 July 2014
Gold
Gold
Gold
Gold
Gold
25,000 ounces
(776 kilograms)
Asian
10,000 ounces
(311 kilograms)
Asian
22,500 ounces
(700 kilograms)
Asian
40,000 ounces
(1,244 kilograms)
Asian
70,000 ounces
(2,177 kilograms)
Asian
Call
Call
Call
Call
Call
FirstRand Bank
Limited
From and including
1 October 2016,
to and including
30 September 2017
(1 year)
ZAR505,000
per kilogram
Nedbank Limited
Absa Bank Limited
From and including
7 March 2016,
to and including
30 June 2016
(4 months)
ZAR694,000
per kilogram
From and including
1 October 2015,
to and including
30 September 2016
(1 year)
ZAR435,000
per kilogram
FirstRand Bank
Limited
From and including
1 October 2014,
to and including
30 September 2015
(1 year)
ZAR484,000
per kilogram
FirstRand Bank
Limited
From and including
1 July 2014,
to and including
30 June 2016
(2 years)
ZAR529,008
per kilogram
28 July 2015
4 March 2016
30 September 2014
30 September 2014
1 July 2014
Gold
Gold
Gold
Gold
Gold
50,000 ounces
(1,555 kilograms)
Asian
10,000 ounces
(311 kilograms)
Asian
45,000 ounces
(1,400 kilograms)
Asian
40,000 ounces
(1,244 kilograms)
Asian
70,000 ounces
(2,177 kilograms)
Asian
Put
Put
Put
Put
Put
FirstRand Bank
Limited
From and including
1 October 2016,
to and including
30 September 2017
(1 year)
ZAR450,000
per kilogram
(5,482,517)
Nedbank Limited
Absa Bank Limited
From and including
7 March 2016,
to and including
30 June 2016
(4 months)
ZAR600,000
per kilogram
174,825
From and including
1 October 2015,
to and including
30 September 2016
(1 year)
ZAR435,000
per kilogram
922,719
FirstRand Bank
Limited
From and including
1 October 2014,
to and including
30 September 2015
(1 year)
ZAR425,000
per kilogram
966,667
FirstRand Bank
Limited
From and including
1 July 2014,
to and including
30 June 2016
(2 years)
ZAR440,015
per kilogram
597,222
Call option terms:
Trade date
Commodity
Total notional
quantity
Option style
Option type
Commodity option
buyer
Option term
Strike price per unit
Put option terms:
Trade date
Commodity
Total notional
quantity
Option style
Option type
Commodity option
buyer
Option term
Strike price per unit
Realised and
unrealised
(losses)/profi ts1
1 Financial losses incurred during the year were not settled by year-end. Settlements will commence from October 2016. Profi ts realised during the year were redeemed during
the year.
Interest rate risk
The group is exposed to interest rate risk as entities within the group borrow and invest funds at both fi xed and fl oating interest rates.
Pan African Resources integrated annual report 2016
163
Notes to the consolidated and separate
Annual fi nancial statements continued
for the year ended 30 June 2016
30. Financial instruments continued
Interest rate sensitivity
The group has, at year-end, drawn down on its revolving credit facility, which is quoted on JIBAR rates (refer to note 28). Refer below for
revolving credit facility loan sensitivity on interest rate variations.
Interest rate variation impact on the revolving credit facility loan
10% decrease
in interest
rates
5% decrease
in interest
rates
Revolving
credit
facility
5% increase
in interest
rates
10% increase
in interest
rates
ZAR
GBP
310,383,474
310,404,778
310,426,082
310,447,386
310,468,690
15,691,783
15,692,860
15,693,937
15,695,014
15,696,092
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. This framework
involves constant weekly monitoring of the group’s cash position, cash fl ow forecast, and matching maturity profi les of fi nancial assets and
liabilities to enable management of the liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowings facilities.
The group has access to fi nancing facilities from the revolving credit facility and the general banking facilities, through the Funding
Company, of which GBP15,672,396 (2015: GBP12,694,301) relating to the revolving credit facility was drawn down and
GBP2,527,806 (2015: nil) relating to the general banking facility was drawn down as at year-end. A gold loan of GBP4,137,041
(30 June 2015: GBP7,235,699) was outstanding at year-end (refer to note 28). The group expects to meet its other obligations from
operating cash fl ows and proceeds of maturing fi nancial assets.
Liquidity risk analysis
The following table indicates the group’s remaining contractual maturity from its fi nancial liabilities:
Group
2016
Trade and other payables
Long-term liabilities (non-interest bearing)
Long-term liabilities (interest-bearing)
Financial instrument liabilities
Other short-term liabilities
2015
Trade and other payables
Long-term liabilities (non-interest bearing)
Long-term liabilities (interest-bearing)
Other short-term liabilities
Separate
2016
Trade and other payables
Long-term liabilities
Other short-term liabilities
2015
Trade and other payables
Long-term liabilities
Other short-term liabilities
164 Pan African Resources integrated annual report 2016
Weighted
average
interest
rate
%
Less than
12 months
GBP
1 – 5 years
GBP
Total
GBP
–
–
9.60
–
–
–
–
8.46
–
–
–
–
–
–
–
18,371,232
5,528,602
1,452,109
5,945,399
–
16,460,119
3,928,919
1,118,559
–
–
4,214,481
14,241,828
–
–
–
4,699,036
11,613,946
–
18,371,232
9,743,083
15,693,937
–
–
16,460,119
8,627,955
12,732,505
–
257,837
–
–
213,861
–
–
–
–
–
–
–
257,837
–
–
213,861
–
–
ANNUAL FINANCIAL
STATEMENTS
30. Financial instruments continued
Fair value of fi nancial instruments
The directors consider that the carrying amounts of fi nancial assets and liabilities recorded approximate their fair values.
Fair value hierarchy
The following is an analysis of the fi nancial instruments that are measured at fair value.
They are grouped into levels I to 3 based on the extent to which fair value is observable.
The levels are classifi ed as follows:
Level 1 – fair value is based on quoted prices in active markets for identical fi nancial assets or liabilities
Level 2 – fair value is determined using inputs other than quoted prices included within level 1 that are observable for the asset or
liability, either directly (i.e. prices) or indirectly (i.e. derived from prices)
Level 3 – fair value is determined on inputs not based on observable market data.
30 June 2016
Financial assets1
Rehabilitation trust fund2
Cash-settled share option liability3
ESOP transactions liabilities4
Derivative fi nancial liabilities5
30 June 2015
Financial assets1
Rehabilitation trust fund
Cash-settled share option liability3
ESOP transactions liabilities4
Level 1
GBP
Level 2
GBP
Level 3
GBP
Total
GBP
1,269,228
16,253,708
–
–
(5,945,399)
904,710
16,181,925
–
–
–
(5,260,208)
–
–
–
(1,304,343)
–
–
–
–
(281,143)
–
–
–
(9,378)
1,269,228
16,253,708
(5,260,208)
(281,143)
(5,945,399)
904,710
16,181,925
(1,304,343)
(9,378)
1 The fair value of the listed investment is treated as level 1 of the fair value hierarchy, as its market share price is quoted on a stock exchange.
2 The rehabilitation trust fund is treated as level 1 of the fair value hierarchy as the contributions are invested in a number of market-related instruments, including market-
related interest-bearing short-term deposits, medium-term equity-linked notes issued by commercial banks, equity share portfolios managed by asset managers.
3 Cash-settled share option liability is valued on a mark-to-market basis according to the company’s quoted share price. Refer to note 28 for further inputs.
4 The group’s ESOP liability is accounted on a cash-settled share option basis (refer to note 39 for further description and terms of the transactions). The valuation of the liability
relates to the group’s gold operations, Evander Mines and Barberton Mines, and was performed by ZAQ consultants and actuaries. The liability was valued as a European call
option with the following assumptions used:
Loan amount at issue
Barberton Mines
ZAR99,500,000
Evander Mines
ZAR146,000,000
Spot price (model provided by management)
Determined using discounted cash fl ow model
Determined using discounted cash fl ow model
Strike price
Remaining option life
Volatility
Risk-free interest rate
Annual dividend yield (continuously compounding)
Final valuation (refer to note 39 for complete reconciliation)
preference share + preference dividend – dividends
preference share + preference dividend – dividends
8 years
40%
Swap curve based
12%
GBP123,812
9 years
40%
Swap curve based
12%
GBP16,127
At year-end Evander Mines ESOP liability includes a trickle dividend to the employees which was accrued but not paid.
Management determines fair value based on observable market data (in case of listed assets and liabilities) or discounted cash fl ows (and other valuation methods) using
assumptions considered to be reasonable and consistent with those that would be applied by a market participant for unquoted assets and liabilities. Where discounted cash
fl ows are used and other valuation techniques, the determination of the assumptions used in assessing the fair value of identifi able assets and liabilities is subjective and the
use of different valuation could have a signifi cant impact on fi nancial results. Therefore management follows a particular process in determining reasonable assumptions for
the valuation of identifi able assets and liabilities.
Pan African Resources integrated annual report 2016
165
Notes to the consolidated and separate
Annual fi nancial statements continued
for the year ended 30 June 2016
30. Financial instruments continued
Fair value hierarchy continued
4 Note 4 continued:
Sensitivity on changes in volatility
Volatility at 10%
Volatility at 20%
Volatility at 30%
Volatility at 40%
Sensitivity on changes in risk-free rate
Risk-free rate -1%
Risk-free rate +1%
Sensitivity on discount to share price
0% discount
10% discount
20% discount
Barberton Mines
GBP
Evander Mines
GBP
3,539
34,580
78,261
123,812
115,420
132,457
123,812
101,517
80,738
–
113
3,640
16,127
280,000
362,000
319,000
246,000
183,000
30 June 2016
1,318.40
625,251.64
Zero-coupon
bond 3-months
19.272%
5 The derivative fi nancial liability is treated as a level 1 of the fair value hierarchy due to the following market-related inputs used in the valuation:
USD gold price
ZAR gold price
Risk-free rate
Historical volatility
31. Post-retirement benefi t information
The majority of employees are required to be members of either the Barberton Pension Umbrella Fund, Sentinel Retirement Fund,
Mine Workers Provident Fund or the Shanduka Group Provident Fund. These are defi ned contribution funds and are registered under
and governed by the South African Pension Act, 1956 as amended. The assets of the scheme are held separately from those of the
group in funds and they are in the control of the trustees. The total costs charged to the statement of comprehensive income of
GBP4,796,674 (2015: GBP5,503,560) at group level and nil (2015: nil) at company level represent employer contributions payable to the
schemes by the group and company at rates specifi ed in the rules of the scheme. The calculation of the provision for post-retirement
medical benefi ts is performed internally by management using the South African Revenue Services life expectancy tables as the benefi ts
payable are a fi xed amount per pensioner. The balance of post-retirement medical benefi ts were GBP64,690 (2015: GBP78,535).
32. Commitments, contingent liabilities and guarantees
Commitments
The group had outstanding open orders contracted for at year-end of GBP641,876 (2015: GBP1,182,823).
Authorised commitments for the new fi nancial year not yet contracted for totalled GBP17,489,848 (2015: GBP14,046,896).
Contingent liabilities
The group had no contingent liabilities in the current fi nancial year or prior year.
Guarantees
The group had guarantees of GBP1,243,332 (2015: GBP1,274,254) in favour of Eskom, GBP1,028,237 (2015: GBP724,809) in favour
of the Department of Mineral Resources, other fi nancial guarantees of GBP776,036 (2015: GBP795,336) and GBP333,670 relating to
Transnet SOC Limited at year-end.
Company
There were no commitments, contingent liabilities and guarantees for the company for the year ended 30 June 2016 (2015: nil), except
for the operating lease commitments disclosed in note 7.
166 Pan African Resources integrated annual report 2016
ANNUAL FINANCIAL
STATEMENTS
33. Directors’ emoluments
The key management personnel for which remuneration has been disclosed below are considered to be the executive directors,
non-executive directors, RA Holding and prescribed offi cers:
Executive directors
Emoluments
Share options exercised
Total
Non-executive directors
Emoluments
Share options exercised
Total
Total remuneration
Consolidated
Separate
Year ended
30 June 2016
GBP
Year ended
30 June 2015
GBP
Year ended
30 June 2016
GBP
Year ended
30 June 2015
GBP
724,634
38,695
763,329
196,960
–
196,960
960,289
747,100
295,662
1,042,762
139,508
110,845
250,353
1,293,115
–
–
–
–
–
–
196,960
–
196,960
196,960
139,508
110,845
250,353
250,353
Share
option
taxable
benefi t
GBP
Basic
remune-
ration
GBP
Retire-
ment
fund
GBP
Life and
disability
plan
GBP
Allow-
ances
GBP
Other
remune-
ration
GBP
Bonuses6
GBP
Total
30 June
2016
GBP
Total
30 June
2015
GBP
38,695
–
–
38,695
144,428
128,205
–
272,633
8,978
–
–
8,978
1,372
–
–
1,372
10,767
1,204
–
11,971
–
–
–
–
250,769
178,911
–
429,680
455,009
308,320
–
763,329
421,961
51,869
568,932
1,042,762
Share
option
taxable
benefi t
GBP
–
–
–
–
–
–
Basic
remune-
ration
GBP
Retire-
ment
fund
GBP
Life and
disability
plan
GBP
Directors’
fee7
GBP
Other
remune-
ration
GBP
Bonuses
GBP
Total
30 June
2016
GBP
Total
30 June
2015
GBP
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
59,697
47,455
45,754
44,054
196,960
–
–
–
–
–
–
–
–
–
–
–
–
–
59,697
47,455
45,754
44,054
196,960
27,788
152,554
27,676
24,607
17,728
250,353
Executive
Mr JAJ Loots3
Mr GP Louw4
Mr RA Holding2
Total
Non-executive
Mrs P Mahanyele1
Mr KC Spencer8
Mrs HH Hickey
Mr T Mosololi
Mr RM Smith5
Total
1 Directors’ fees accruing are paid by the company to Shanduka Group Proprietary Limited.
2 Mr RA Holding resigned as Chief Executive Offi cer with effect from 1 March 2015.
3 Mr JAJ Loots was appointed Chief Executive Offi cer with effect from 1 March 2015.
4 Mr GP Louw was appointed as Financial Director with effect from 1 March 2015.
5 Mr RM Smith was appointed as a non-executive director from 8 September 2014.
See notes 6, 7 and 8 on next page.
Pan African Resources integrated annual report 2016
167
Notes to the consolidated and separate
Annual fi nancial statements continued
for the year ended 30 June 2016
33. Directors’ emoluments continued
Share
option
taxable
benefi t
GBP
Basic
remune-
ration
GBP
Retire-
ment
fund
GBP
Life and
disability
plan
GBP
Allow-
ances
GBP
Other
remune-
ration
GBP
Bonuses
GBP
Total
30 June
2016
GBP
Total
30 June
2015
GBP
Prescribed offi cers
Mr A van den Bergh
Mr A Karigeni
Mr C Strydom
Mr M da Silva
(resigned on
23 April 2015)
Mr BFM Malunga
Mr B McLeod
143,655
27,137
187,529
117,831
109,258
106,917
4,874
17,826
12,359
–
2,226
–
2,738
4,459
3,848
–
–
20,140
–
101,536
65,397
–
12,418
10,205
–
–
1,274
–
8,392
2,485
–
–
–
–
–
–
103,026
108,728
74,176
372,124
269,634
384,829
189,816
170,180
154,225
–
62,354
78,977
–
184,700
178,478
129,978
15,046
102,169
6 At the end of the fi nancial year executive directors had the following bonuses accruing but not yet paid:
Executive
Mr JAJ Loots
Mr GP Louw
Transactional
bonus
GBP
186,480
93,240
279,720
These bonuses arose a result of executive directors’ stewardship in fi nalising and concluding the Shanduka Gold
transaction (refer to note 41).
7 At the end of the fi nancial year non-executive directors had the following additional fees accruing but not year paid:
Non-executive
Mr KC Spencer
Mrs HH Hickey
Mr T Mosololi
Mr RM Smith
Additional
fees
GBP
20,979
20,979
20,979
20,979
83,916
The additional fees arose as a result of extra time and detailed consideration required from the non-executive
directors, during the negotiation and fi nalisation of the Shanduka Gold transaction deal (refer to note 41).
8 Mr KC Spencer’s remuneration in the prior year includes GBP110,845 relating to taxable share option benefi t for
the exercise of equity-settled share options.
168 Pan African Resources integrated annual report 2016
ANNUAL FINANCIAL
STATEMENTS
33. Directors’ emoluments continued
No changes occurred during the year in respect of director appointments and resignations.
No retirement fund contributions are currently made by the company on behalf of non-executive 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 2016
Board of directors
Remuneration committee
Audit committee (Mrs HH Hickey as Chairperson)
SHEC committee
Nominations committee
Retainer
Additional director fees (refer to note above)
Mr
KC Spencer
(Chairman)
GBP
28,906
–
–
5,101
2,380
2,331
20,979
59,697
Mrs
HH Hickey
GBP
Mr
T Mosololi
GBP
Mr
RM Smith
GBP
13,263
–
5,101
3,401
2,380
2,331
20,979
47,455
13,263
3,401
3,400
–
2,380
2,331
20,979
45,754
13,263
5,101
–
–
2,380
2,331
20,979
44,054
Mr
KC Spencer
(Chairman)
GBP
Ms
P Mahanyele
(Deputy
Chairperson)
GBP
Mrs
HH Hickey
GBP
Mr
T Mosololi
GBP
Mr
JAJ Loots
GBP
35,506
21,999
17,754
17,754
13,692
–
5,789
–
3,859
3,859
30 June 2015
Board of directors
Remuneration committee
(Deputy Chairperson as Chairperson)
Audit committee
(Mrs HH Hickey as Chairperson)
SHEC committee
Nominations committee
–
5,789
–
41,295
–
–
–
27,788
Options
granted/
(exercised)
during the
period
5,789
3,859
–
27,402
3,859
–
–
25,472
Grant/
(exercise)
date
Grant/
(exercise)
price
pence
Trans-
ferred
out
Total
options
outstanding
1 July
2014
Grant
date
Strike
price
pence
Mr KC Spencer
1,500,000
21 July 2008
5,2
(1,500,000)
Mr RA Holding
Mr JAJ Loots
1,500,000 1 September
2013
1,150,000 1 September
2013
–
–
(1,500,000)
(1,150,000)
Total
4,150,000
(4,150,000)
19 March
2015
28 February
2015
28 February
2015
–
–
–
–
–
–
–
–
–
–
17,551
Total
options
30 June
2015
–
–
–
–
Pan African Resources integrated annual report 2016
169
Notes to the consolidated and separate
Annual fi nancial statements continued
for the year ended 30 June 2016
33. Directors’ emoluments continued
Directors’ dealings in shares
Financial year 30 June 2016
There were no director dealings in securities during the year.
Financial year 30 June 2015
On 19 March 2015 1,500,000 shares were issued at 5 pence per share to Mr KC Spencer’s Strode Trust, upon exercising historical
share options.
At 30 June 2015 the Strode Trust held a total of 3,000,000 shares (2014: 1,500,000).
During the year under review Mr T Mosololi participated in the following transactions in the company’s shares:
• On 6 March 2015, purchased 2,000 shares at ZAR2.04 per share
• On 9 March 2015, purchased 28,000 shares at ZAR2.07 per share.
At 30 June 2015 Mr T Mosololi held a total of 30,000 shares (2014: nil).
Cash-settled options
Total
options
outstanding
1 July
2015
Grant
date
Strike
price
pence
Options
granted/
(exercised)
during the
period
Grant/
(exercise)
date
Grant/
(exercise)
price
pence
Options
forfeited
Total
options
30 June
2016
Listed per grant/
exercise
Mr JAJ Loots
Mr GP Louw
Mr C Strydom1
Mr C Strydom1
Mr C Strydom1
Mr A van den Bergh1
Mr A van den Bergh1
Mr A van den Bergh1
Mr A Karigeni1
Mr A Karigeni1
Mr B Malunga1
Mr P Human1
Mr P Human1
Mr RA Holding
Mr RA Holding
9 May 2011
1 May 2014
5,000,000 29 August 2013
1 March 2015
4,614,979
9 May 2011
2,325,000
1 May 2014
1,268,206
–
1,812,590
2,460,399
–
2,910,448
–
–
–
9 May 2011
1,935,000
9 May 2011
5,127,134
1,000,000 29 August 2013
28,453,756
1 April 2014
0.13
0.12
0.11
0.12
–
0.11
0.12
–
0.13
–
–
0.11
0.11
0.13
0.12
(1,000,000)
–
(2,325,000)
–
3,764,929
(1,812,590)
–
3,762,889
(727,612)
3,007,647
4,801,829
2,501,368
(1,935,000)
–
–
10,038,460
18 March 2016
30 July 2015
18 March 2016
30 July 2015
18 April 2016
30 July 2015
30 July 2015
30 July 2015
18 March 2016
0.13
–
0.11
0.08
0.11
–
0.08
0.13
0.08
0.08
0.08
0.11
–
–
0.10
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
4,000,000
4,614,979
–
1,268,206
3,764,929
–
2,460,399
3,762,889
2,182,836
3,007,647
4,801,829
2,501,368
–
5,127,134
1,000,000
38,492,216
1 Highest paid non-directors.
170 Pan African Resources integrated annual report 2016
ANNUAL FINANCIAL
STATEMENTS
34. Equity-settled share options
On 1 September 2005, the company established a share option programme relating to equity-settled share options entitling specifi c
employees, offi cers, directors and qualifying consultants as approved by the board of directors of the company and its subsidiaries to
purchase shares in the company. The share option exercise price is determined using the closing price at which shares are traded on
the JSE or AIM (as determined by the board of directors), on the trading date immediately preceding the date upon which the board
authorised the grant of the opportunity to acquire the relevant share options, as the case may be to a participant. Pursuant to resolutions
of the board passed in accordance with the rules of the share option programme, share options may be released from the share option
programme to participants, share options may be exercised by participants and allocation shares may be delivered to participants as
follows for allocations prior to 21 July 2008:
• 33.33% of the total number of shares allocated after one year has elapsed from the grant date by the participant of the grant
• 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
• The balance of the shares allocated after three years have elapsed from the grant date by the participant of the grant
• 25% of the total number of shares allocated after one year has elapsed from the grant date by the participant of the grant
• 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
• 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
• The balance of the shares after four years have elapsed from the grant date by the participant of the grant; provided that the board may,
at its discretion, anticipate or postpone such dates.
An option holder may not exercise a share option under the share option programme by later than the end of the year preceding the
tenth anniversary of the grant date. Upon death of an option holder the estate would be entitled to exercise the options vested to date
within twelve months of the date of death, if the options are not exercised the total available share options would lapse. The directors
have the discretion to approve the vesting of the deceased’s total number of unvested share options.
The number of vested share options to which an option holder is entitled expires after a period of six months due to resignation,
retirement, redundancy or disability of the option holder.
During the 2014 fi nancial year, an equity-linked incentive was implemented for the then newly appointed executive directors. The terms
of the scheme are as follows:
Total number of potential shares
Grant date
Vesting date
Vesting period
Exercise price
2,650,000
1 September 2013
28 February 2015
18 months
nil
Market conditions to be met
In the event that the 30-day volume weighted average price (VWAP) JSE share price of Pan African Resources has outperformed the JSE
gold index by 10% or more during the 18-month period starting 1 September 2013, 1,750,000 ordinary shares of Pan African Resources
will be issued by the vesting date, or alternatively cash settled.
In the event that the 30-day VWAP JSE share price of Pan African Resources has outperformed the JSE gold index by 25% or more
during the 18-month period starting 1 September 2013, further 900,000 ordinary shares of Pan African Resources will be issued by the
vesting date, or alternatively cash settled.
The remuneration committee may elect to settle the obligation in cash, should it be unable to issue shares, provided that the benefi ciary
is in a net neutral position, after taking account of taxes and other costs.
During the prior year, the above mentioned equity-linked incentives vested and were redeemed through a cash consideration by the
respective directors.
Pan African Resources integrated annual report 2016
171
Notes to the consolidated and separate
Annual fi nancial statements continued
for the year ended 30 June 2016
34. Equity-settled share options continued
The transaction was treated as an equity-based share option transaction by the group, throughout the vesting period and settled by cash
on exercise date. Refer below:
Opening balance equity reserve 30 June 2013
Equity expense for the year
Closing balance 30 June 2014
Equity expense for the year
Cash settlement on redemption
Closing balance 30 June 2015
The number and weighted average exercise price of share options is as follows:
ZAR
–
2,008,779
2,008,779
3,313,149
(5,321,928)
–
GBP
–
119,003
119,003
184,064
(303,067)
–
Outstanding at 1 July
Granted during the year
Forfeited
Exercised during the year
Outstanding 30 June
30 June 2016
30 June 2015
Weighted
average
exercise price
Number
of
options
Weighted
average
exercise price
1.9p
–
–
–
1.9p
1,122,000
–
–
–
1,122,000
5.3p
–
–
1.7p
1.9p
Number
of
options
5,272,000
–
–
(4,150,000)
1,122,000
30 June 2016
30 June 2015
Vested
Unvested
Vested
Unvested
Total number share options at year-end
1,122,000
–
1,122,000
–
172 Pan African Resources integrated annual report 2016
ANNUAL FINANCIAL
STATEMENTS
34. Equity-settled share options continued
The fair value of services rendered for share options granted is based on the fair value of share options granted, measured by using a
Black Scholes model for all issues prior to 20 March 2010 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
FTSE/JSE SA Gold Mining Index at grant date
Risk-free interest rate
Last fair value measurements
30 June 2014
30 June 2010
30 June 2008
2.06
Nil
30%
18 months
1,304,10
6.03%
ZAR0.68
ZAR0,.68
58.61%
3 – 6 years
n/a
8.15%
ZAR0.62
ZAR0.70
72.39%
1 – 3 years
n/a
5.31%
A company dividend rate has not 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 except the share options issued during the 2014 fi nancial year.
The group recognised total expenses of nil (2015: GBP184,064) 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 integrated annual report 2016
173
Notes to the consolidated and separate
Annual fi nancial statements continued
for the year ended 30 June 2016
35. Related party transactions
The group entered into the following transactions and held year-end balances with related parties:
30 June 2016
Statement of comprehensive income transactions
Dividends received from Barberton Mines
Management fee
Finance charges – inter-company
Gold purchases from Evander Gold Mines Limited
Cost of gold production income invoiced to Evander Gold Mines Limited
Statement of fi nancial position
Pan African Resources receivables
Pan African Resources payables
Funding Company receivables
Funding Company payables
PAR Management Services receivables
PAR Management Services payables
Payables to Shanduka
Pan African Resources Coal Holding receivables
Barberton Mines receivables
Evander Gold Mining Proprietary Limited payable
30 June 2015
Statement of comprehensive income transactions
Dividends received from Barberton Mines
Management fee
Management fee – Shanduka
Directors’ fees expense to Shanduka
Finance charges – inter-company
Gold purchases from Evander Gold Mines Limited
Cost of gold production income invoiced to Evander Gold Mines Limited
Statement of fi nancial position
Pan African Resources receivables
Pan African Resources payables
Funding Company receivables
Funding Company payables
PAR Management Services receivables
PAR Management Services payables
Payables to Shanduka
Pan African Resources Coal Holding receivables
Barberton Mines receivables
Evander Gold Mines Limited receivables
Evander Gold Mines Limited payable
Evander Gold Mining Proprietary Limited payable
Pan African
Resources
GBP
Funding
Company
GBP
PAR
Management
Services
GBP
13,892,774
–
–
–
–
51,716,563
(7,038,314)
–
–
–
–
–
–
–
–
54,709,384
–
–
(27,788)
–
–
–
31,369,774
(7,213,541)
(181)
–
–
1,060,195
–
–
–
–
–
–
–
–
1,130,359
–
–
(19,019,040)
–
8,926,860
(2,373,966)
–
–
–
–
–
–
–
–
–
1,309,082
–
–
–
181
12,029,355
(155,440)
–
243,782
–
–
–
–
–
–
–
2,749,883
(135,868)
–
–
(87,504)
–
(2,782,018)
3,820,393
–
111,862
–
–
–
–
3,068,106
(177,778)
(16,450)
–
–
(1,060,195)
–
(243,782)
2,712,694
(1,303,977)
(170,831)
–
–
–
–
–
1 Evander Gold Mines Limited and Evander Gold Mining Proprietary Limited are collectively referred to as Evander Mines due to an interim-mining arrangement in place since
1 March 2013, until such time that the inter-company mining right transfer occurs.
Refer to investment in subsidiaries and investment in associate (note 19) for the nature of relationships of the related parties to the company.
Refer to directors’ emoluments (note 33), for key management remuneration under related parties.
In addition to the related party transactions identifi ed above, the acquisition of Uitkomst Colliery and PAR Gold were identifi ed as
related party transactions. Refer to notes 40 and 41.
174 Pan African Resources integrated annual report 2016
ANNUAL FINANCIAL
STATEMENTS
Pan African
Resources
Coal Holding
GBP
Phoenix
Platinum
GBP
Uitkomst
Colliery
GBP
Barberton
Mines
GBP
Evander
Gold Mining
Proprietary
Limited1
GBP
Evander
Gold Mines
Limited1
GBP
Emerald
Panther
GBP
Evander
subsidiaries
GBP
–
–
–
–
–
(3,033,367)
–
(13)
–
–
–
(4,853,387)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(107,226)
79,849
–
–
(7,027,516)
–
2,373,966
(137,550)
–
–
–
–
–
–
(152,778)
–
(4,605)
–
–
(7,202,293)
–
155,440
(162,435)
–
–
–
–
–
–
2,212,476
–
(65,734)
7,490
–
–
(13,892,774)
(1,439,394)
(331,029)
–
–
–
(1,137,529)
(750,800)
(54,211,073)
53,674,330
–
–
–
54,211,073
(53,674,330)
–
–
(775,498)
–
(236,876)
–
–
–
–
–
–
2,499,505
(4,288,073)
–
(1,917,383)
–
–
4,853,387
25,634
(48,128,871)
(22,549,136)
–
(1,081,258)
–
(1,528,584)
–
–
–
(25,634)
48,128,871
–
4,531,387
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(54,709,384)
(1,666,667)
(62,702)
–
(1,248,661)
–
–
–
–
(57,776)
–
–
(1,230,251)
(54,916,954)
54,373,221
–
54,916,954
(54,373,221)
–
2,561,669
(699,055)
–
(865,285)
–
–
–
–
–
–
(23,107,286)
–
(11,080,476)
–
(1,684,974)
–
–
–
–
–
–
(50,032,949)
–
4,644,085
(5,861)
–
–
–
–
–
–
153,566
6,596,733
47,820,473
–
–
–
–
–
–
7,422
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
7,606
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(153,566)
6,596,733
–
Pan African Resources integrated annual report 2016
175
Notes to the consolidated and separate
Annual fi nancial statements continued
for the year ended 30 June 2016
36. Non-current asset held for sale
The carrying value of non-current assets held for sale on 30 June 2016 is as follows:
Opening balance
Building and infrastructure
Closing balance
Consolidated
Separate
30 June 2016
GBP
30 June 2015
GBP
30 June 2016
GBP
30 June 2015
GBP
–
66,873
66,873
–
–
–
–
–
–
–
–
–
An offer to purchase was signed on 28 June 2016 with a third party for the purchase of the building property, situated at 36 Gemsbok
Avenue, Newcastle. The purchase price agreed upon is ZAR1.3 million. The building property came with the acquisition of Uitkomst
Colliery, and is currently used an administrative offi ce for the coal operation.
37. Events after the reporting period
No material subsequent events were noted after the reporting period.
38. Reconciliation of profi t before taxation to cash generated by/(used in) operations
Profi t before taxation
Adjusted for:
Impairment
Equity and cash-settled share options costs
Net fi nance income – bank
Net fi nance income – rehabilitation trust fund
Net fi nance income – other
Net fi nance income – provision for rehabilitation
Net fi nance income – SARS
Loss/(profi t) on disposal of assets
Royalty costs
Loss on disposal of associate/sale of asset held for sale
Loss on associate
Financial instruments
Decrease in provision for environmental rehabilitation
Fair value adjustment on gold loan
Fair value adjustment on rehabilitation trust fund
Non-mining depreciation
Mining depreciation
Gold loan amortisation
Non-cash items
Other
Operating cash fl ows before working capital changes
Working capital changes
Decrease/(increase) in inventories
(Increase)/decrease in trade and other receivables
(Decrease)/increase in trade and other payables
Non-cash items
Consolidated
Separate
30 June 2016
GBP
30 June 2015
GBP
30 June 2016
GBP
30 June 2015
GBP
33,735,648
21,521,444
–
5,274,697
1,018,303
(13,352)
1,124
–
47
2,767
2,799,947
–
–
5,482,517
(1,780,288)
–
(414,955)
36,617
10,456,129
(2,747,333)
1,424,824
(19,600)
55,257,092
(4,200,122)
134,804
(3,847,888)
(117,539)
(369,499)
15,802,756
9,765,769
58,424
478,691
1,073,721
(56,488)
(36,844)
1,094,191
34,748
149
1,647,297
139,970
127,950
–
–
(120,490)
(1,827,253)
49,094
10,337,211
(3,352,833)
–
118,231
25,568,525
3,285,395
1,838,559
2,137,370
(420,706)
(269,828)
13,501,302
(79,749)
–
–
(79,749)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
13,421,553
25,860
–
(16,408)
43,976
(1,708)
53,594,728
286,219
58,424
–
(40,125)
–
–
–
–
–
–
139,970
127,950
–
–
–
–
–
–
–
–
–
53,880,947
112,308
–
(3,260)
130,948
(15,380)
Cash generated by operations
51,056,970
28,853,920
13,447,413
53,993,255
Income taxes paid
Royalties paid
Net fi nance costs/income
Dividend paid
(9,998,969)
(2,916,283)
(652,680)
(9,024,833)
(6,129,666)
(1,945,421)
(1,130,429)
(14,283,924)
101,573
–
76,390
(9,024,833)
(26,218)
–
40,125
(14,283,924)
Net cash from operating activities
28,464,205
5,364,480
4,600,543
39,723,238
176 Pan African Resources integrated annual report 2016
ANNUAL FINANCIAL
STATEMENTS
38. Reconciliation of profi t before taxation to cash generated by/(used in) operations continued
Consolidated
Separate
30 June 2016
GBP
30 June 2015
GBP
30 June 2016
GBP
30 June 2015
GBP
Taxation paid during the year:
Taxation charge per the statement of comprehensive income
Less: Deferred taxation
Taxation payable/(receivable) at the beginning of the year
Taxation (payable)/receivable at the end of the year
Foreign currency translation
Taxation paid during the year
Royalty paid during the year:
Royalty costs (receivable)/payable at the beginning of the year
Royalty costs receivable at the end of the year
Royalty costs charge for the year
Foreign currency translation
Royalty paid during the year
8,233,831
1,397,303
9,631,134
215,072
(205,941)
358,704
9,998,969
(538,586)
594,498
2,799,947
60,424
2,916,283
4,132,789
1,236,780
5,369,569
891,435
(215,072)
83,734
6,129,666
(291,089)
538,586
1,647,297
50,627
1,945,421
33,810
–
33,810
(141,574)
8,469
(2,278)
(101,573)
24,306
–
24,306
(147,911)
141,574
8,249
26,218
39. ESOP transactions
Barberton Mines ESOP Transaction
On 1 June 2015 Barberton Mines entered into an agreement with the Barberton Mines BEE Company Proprietary Limited and
Barberton Mines BEE Trust.
The agreement concluded Barberton Mines would issue 5% of its authorised share capital for ZAR99.5 million to Barberton Mines
BEE Company Proprietary Limited which is 100% held by the Barberton Mines BEE Trust.
The benefi ciaries of the Barberton Mines BEE Trust are all the Barberton Mines employees of a Paterson Grading C level and below.
The share issue was vendor fi nanced by Barberton Mines against preference share capital issued by Barberton Mines BEE Company
for ZAR99.5 million.
Evander Mines ESOP Transaction
On 1 June 2015 Evander Gold Mining Proprietary Limited entered into an agreement with the Evander Gold Mining BEE Company and
the Evander Gold Mining BEE Trust.
The agreement concluded Evander Gold Mining Proprietary Limited would issue 5% of its authorised share capital for ZAR146 million
to Evander Gold Mining BEE Company which is 100% held by the Evander Gold Mining BEE Trust.
The benefi ciaries of the BEE Trust are all the Evander Gold Mining Proprietary Limited employees of a Paterson Grading C level
and below.
The issue was vendor fi nanced by Evander Gold Mining Proprietary Limited against preference share capital issued by Evander Gold
Mining BEE Company for ZAR146 million.
Preference share capital funding arrangement terms:
Real interest rate:
Two percent per annum
Vesting period of the BEE scheme:
10 years
The payment terms of the funding arrangement allow for a portion of the dividends issued by the gold operations to be retained for
settlement of the funding arrangement.
Pan African Resources integrated annual report 2016
177
Notes to the consolidated and separate
Annual fi nancial statements continued
for the year ended 30 June 2016
39. ESOP transactions continued
The retention percentage applied to dividends for repayment is summarised as follows:
Year 1
%
Year 2
%
Year 3
%
Year 4
%
Year 5 to 10
%
Percentage of dividends withheld for payment of funding
arrangement
Percentage of dividends accruing to the BEE Trust
Total dividends
50
50
100
50
50
100
60
40
100
70
30
100
80
20
100
The dividends are calculated based on 80% of the mines’ net cash generated during the year subject to compliance with the Companies
Act requirements of liquidity and solvency.
The transaction is classifi ed under IFRS 2 as a cash-settled share option scheme (refer to note 28) and has been summarised as follows:
The ESOP cash-settled share option liability for the gold operation was valued by independent actuaries at 30 June 2016.
Barberton Mines
Evander Mines
Barberton Mines
Evander Mines
30 June
2016
ZAR
30 June
2015
ZAR
30 June
2016
ZAR
30 June
2015
ZAR
30 June
2016
GBP
30 June
2015
GBP
30 June
2016
GBP
30 June
2015
GBP
Statement of
fi nancial position
ESOP cash-settled share
options liability
Opening balance
Dividend accrued
Dividend paid
IFRS 2 revaluation expense
FCTR
Closing balance
Statement of
comprehensive income
ESOP IFRS 2 expense
181,000
–
7,196,232
6,504,337
(7,196,232) (6,504,337)
2,268,000
181,000
–
–
2,449,000
181,000
–
3,112,000
–
–
–
3,112,000
–
–
–
–
–
–
9,378
335,489
(319,061)
105,734
(7,728)
123,812
–
361,352
(368,568)
10,056
6,538
9,378
–
145,082
–
–
12,249
157,331
(9,464,232) (6,685,337) (3,112,000)
–
(441,223)
(371,408)
(145,082)
–
–
–
–
–
–
–
178 Pan African Resources integrated annual report 2016
ANNUAL FINANCIAL
STATEMENTS
40. Acquisition of Uitkomst Colliery
The group completed the acquisition of the Uitkomst Colliery by acquiring it from Oakleaf and Shanduka Resources Proprietary Limited
for a fi nal net cash consideration of ZAR148 million on 31 March 2016. Uitkomst Colliery is located close to the town of Utrecht in
KwaZulu-Natal, South Africa, and is a high grade thermal export quality coal deposit with metallurgical applications. Uitkomst is an existing
operation containing a coal resource of 25.7 million tonnes, of which 22.1 million tonnes can be classed as measured or indicated, in
accordance with the South African code for the reporting of exploration results, mineral resources and mineral reserves. Uitkomst
Colliery also has additional exploration and expansion potential.
The ultimate effect of the transaction effectively resulted in the group purchasing the assets and liabilities from Blue Falcon 232 Trading
Proprietary Limited (Blue Falcon) through a wholly owned subsidiary, Emerald Panther Investments 107 Proprietary Limited (renamed
to Uitkomst Colliery Proprietary Limited). Therefore Blue Falcon remained a statutory company still belonging to its previous owners
outside of the group.
The transaction was settled on revised terms as per below:
Original agreed upon cash consideration
Revised cash consideration
Effective cash distribution to shareholders
Net purchase consideration
Cash acquired with the acquisition
Net cash consideration
Net purchase consideration outfl ow
Shanduka Resources Proprietary Limited
Oakleaf Investments Holdings 109 Proprietary Limited
ZAR
GBP
200,000,000
176,000,000
(28,054,944)
147,945,056
(27,931,627)
120,013,429
88,000,000
59,945,056
147,945,056
9,499,608
8,359,655
(1,332,555)
7,027,100
(1,326,698)
5,700,402
4,179,828
2,847,272
7,027,100
In accordance with the acquisition method of accounting, the acquisition cost has been allocated to the underlying assets acquired and
liabilities assumed, based on their estimated fair values at the date of acquisition. BDO Corporate Finance was used to assist the group in
determining the fair value of the mining rights and property, plant and equipment acquired.
Pan African Resources integrated annual report 2016
179
Notes to the consolidated and separate
Annual fi nancial statements continued
for the year ended 30 June 2016
40. Acquisition of Uitkomst Colliery continued
Non-current assets
Property, plant and equipment
Building and infrastructure
Mining right
Other fi nancial assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total assets
Liabilities
Non-current liabilities
Deferred tax
Provisions
Current liabilities
Current tax payable
Trade and other payables
Total liabilities
Net asset at fair value
Purchase price
Fair value
at acquisition
ZAR
Fair value
at acquisition
GBP
191,872,281
28,948,352
1,322,750
161,601,179
66,951,519
25,641,259
13,378,633
27,931,627
9,113,557
1,374,990
62,828
7,675,739
3,180,066
1,217,909
635,459
1,326,698
258,823,800
12,293,623
(67,472,079)
(59,333,216)
(8,138,863)
(43,406,665)
(4,086,467)
(39,320,198)
(3,204,792)
(2,818,212)
(386,580)
(2,061,731)
(194,099)
(1,867,632)
(110,878,744)
(5,266,523)
147,945,056
(147,945,056)
7,027,100
(7,027,100)
180 Pan African Resources integrated annual report 2016
ANNUAL FINANCIAL
STATEMENTS
41. Shanduka Gold transaction
On 7 June 2016, the group concluded the purchase of shares in Shanduka Gold Proprietary Limited (Shanduka Gold) renamed to
PAR Gold Proprietary Limited.
Shanduka Gold is Pan African Resources’ primary BEE shareholder, with its sole assets being a 22.5% interest in Pan African Resources’
issued share capital (post conclusion of the Shanduka Gold transaction) and a notional vendor loan of R558 million to its BEE shareholder,
the Mabindu Business Development Trust, as at 30 June 2016. Following a merger between Shanduka Group Proprietary Limited and the
Pembani Group Proprietary Limited in December 2015, Pan African Resources engaged with Shanduka Gold shareholders and concluded
an agreement to assist in preserving the group’s BEE ownership in a meaningful and mutually benefi cial manner by means of an acquisition
of a material interest in Shanduka Gold. Prior to the transaction with Pan African Resources, Shanduka Gold’s shareholders were Standard
Bank of South Africa Limited (16.9%), Jadeite Limited (33.6%) and the Mabindu Trust (49.5%). Pan African Resources acquired Standard
Bank’s 16.9% and Jadeite Limited’s 33.6% interest in Shanduka Gold. Approximately 0.6% of the Shanduka Gold shares acquired from
Jadeite Limited have been retained by Jadeite Limited for sale, at a future date, to an independent third party nominated by Pan African
Resources. Pursuant to the transactions, Pan African Resources acquired a 49.9% direct interest in Shanduka Gold but consolidates the full
interest in Shanduka Gold for accounting purposes.
Prior to the purchase of shares, the direct shareholding in Shanduka Gold was held by the following entities:
Jadeite Limited (an investment vehicle of the China Investment Corporation) (Jadeite)
The Standard Bank of South Africa Limited (Standard Bank)
The Mabindu Business Development Trust (Mabindu)1
Shareholding
%
Issued
shares
33,6
16,9
49,5
100,0
104,424,000
52,487,000
153,778,000
310,689,000
The effect of the transaction was therefore a share buyback as the group acquired shares in a company that holds a 23.83% (22.46% as at
30 June 2016) investment in the group’s parent company as its only asset.
The acquisition of the Shanduka Gold shares was conducted through one of the group’s wholly owned subsidiaries, Funding Company,
and was funded as follows:
Share issue of Pan African Resources ordinary shares (UK Shareholders)2
Share issue of Pan African Resources ordinary shares (SA Shareholders)2
Internally generated cash resources/funding facilities
Funding company investment in Shanduka Gold Resources
Costs capitalised to the Shanduka Gold investment in Pan African Resources3
Treasury capital reserve
Effective shares acquired on a share buyback
Effective price paid for the share acquired
ZAR
GBP
10,053,407
6,579,975
8,665,713
25,299,095
77,648
25,376,743
217,344,600
142,252,500
187,344,045
546,941,145
1,678,657
548,619,802
436,358,058
1,25
1 Mabindu’s 49.5% interest in Shanduka Gold was acquired through the creation of a notional loan, to be settled by Mabindu, with a notional value of ZAR536,039,493 as at
11 December 2015. The notional loan accrues notional interest linked to prime interest rate plus 5% and is required to be notionally settled on 11 December 2018. Whilst
the notional loan is outstanding, 95% of the dividends payable to Mabindu are waived by Mabindu and the notional loan is notionally reduced by the aggregate value of all
dividends paid and payable to Mabindu. Therefore from an accounting perspective Mabindu holds an option in Shanduka Gold, which results in Pan African Resource Funding
Company receiving 97.5% of the economic benefi ts derived by Shanduka Gold.
The implementation of the transactions will result in Pan African Resources consolidating all the Pan African Resources shares (436,358,059 shares) held by Shanduka Gold
for accounting purposes. This will also mean that Pan African Resources will receive the benefi t of indirectly participating in dividends it declares to shareholders.
2 The group issued 111,711,791 ordinary shares in Pan African Resources to assist in raising funds for the Shanduka Gold transaction.
3 On consolidation the Shanduka Gold investment in Pan African Resources is eliminated to the group treasury capital reserve. Certain costs were capitalised into the investment,
mostly relating to the taxation paid for the transfer of shares to the group.
Pan African Resources integrated annual report 2016
181
SHAREHOLDERS’ INFORMATION
Gold as an INVESTMENT
Of all the precious metals, gold is the most popular as an investment as investors
generally buy gold as a way of diversifying risk, hedging against infl ation, defl ation
or currency devaluation. The gold market is subject to speculation and volatility
as are other markets; however compared to other precious metals used for
investment, gold has the most effective safe haven and hedging properties across
a number of asset classes. Gold has been used throughout history as money
and like most commodities, the price of gold is driven by supply and demand
including demand from speculation. Given the huge quantity of gold stored
above-ground compared to the annual production, the price of gold is mainly
affected by changes in demand from speculators, through investment demand,
rather than changes in annual production (supply).
Central banks and the International Monetary Fund play an important role in the
gold price. At the end of 2004 central banks and offi cial organisations held
19 percent of all above-ground gold as offi cial gold reserves. It is generally accepted
that the price of gold is closely related to interest rates. As interest rates rise
the general tendency is for the gold price, which earns no interest, to fall, and
as interest rates dip, for the gold price to rise. As a result, the gold price can be
closely correlated to central banks through the monetary policy decisions made
by them related to interest rates. The price of gold can be infl uenced by a number
of macro-economic variables which include the price of oil, the use of quantitative
easing, currency exchange rate movements and returns on equity markets.
The most traditional way of investing in gold is by buying bullion gold bars.
In some countries, like Canada, Austria, Liechtenstein and Switzerland, these
can easily be bought or sold at the major banks. Alternatively, there are
bullion dealers that provide the same service. Bars generally carry lower price
premiums than gold bullion coins. However larger bars carry an increased risk
of forgery due to their less stringent parameters for appearance.
Gold coins are a common way of owning gold. Bullion coins are priced
according to their fi ne weight, plus a small premium based on supply and
demand, The sizes of bullion coins range from one-tenth of an ounce to two
ounces, with the one-ounce size being most popular and readily available.
South Africa’s Krugerrand is the most widely held gold bullion coin, with
46 million troy ounces (1,400 tonnes) in circulation.
http://www.randrefi nery.com/brochures/Rand%20Refi nery%20-%20The%20Story%20of%20Gold.pdf
+1
+3
79
Au
Gold
196.97
2-8-18-32-18-1
Shareholders’ analysis
Register date:
Issued share capital: 1,943,206,554 shares
30 June 2016
Shareholder spread
1 –
1,001 –
1,000 shares
10,000 shares
10,001 – 100,000 shares
100,001 – 1,000,000 shares
1,000,001 shares and over
Total
Distribution of shareholders
Banks
Brokers
Close corporations
Endowment funds
Hedge 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 shareholders
Non-public shareholders
Director
Strategic holder (more than 10%)
Public shareholders
Total
Number of
shareholders
718
1,914
1,836
504
202
5,174
Number of
shareholders
309
18
46
21
2
3,915
42
1
6
160
331
56
165
88
14
5,174
Number of
shareholdings
4
3
1
5,170
5,174
%
13.88
36.99
35.49
9.74
3.90
100.00
Number of
shares
295,594
9,094,133
61,088,701
168,044,981
1,704,683,145
1,943,206,554
%
5.97
0.35
0.89
0.41
0.04
75.67
0.81
0.02
0.12
3.09
6.40
1.08
3.19
1.70
0.27
100,00
%
0.08
0.06
0.02
99.92
100.00
Number of
shares
526,783,469
17,247,239
2,999,772
11,361,724
6,446,816
98,072,723
32,972,024
600,000
5,764,405
454,441,275
31,690,068
2,797,397
298,722,037
449,623,779
3,683,826
1,943,206,554
Number of
shares
439,469,633
3,261,575
436,358,058
1,503,736,921
1,943,206,554
Benefi cial shareholders holding of 3% or more
Number of
shareholders
Number of
shares
%
PAR Gold Proprietary Limited
Allan Gray Investment
Fidelity Worldwide Investment
Truffl e Asset Management
Prudential Investment managers
Old Mutual Group
184 Pan African Resources integrated annual report 2016
436,358,058
381,214,546
128,728,403
117,511,805
91,085,743
86,116,983
%
0.02
0.47
3.14
8.65
87.73
100.00
%
27.11
0.89
0.15
0.58
0.33
5.05
1.70
0.03
0.30
23.39
1.63
0.14
15.37
23.00
0.19
100.00
%
22.62
0.17
22.46
77.37
100.00
%
22.46
19.62
6.62
6.05
4.69
4.43
SHAREHOLDERS’
INFORMATION
Notice of annual general meeting
(Incorporated and registered in England and Wales under Companies Act 1985 with registration number 3937466 on 25 February 2000)
Share code on AIM: PAF • ISIN: GB0004300496 • Share code JSE: PAN
Notice is hereby given that the 2016 annual general meeting (AGM) of Pan African Resources (the company) will be held at the offi ces of
Numis Securities Limited, The London Stock Exchange Building, 10 Paternoster Square, London EC4M 7LT* on Friday, 25 November 2016 at
11:00 (all times stated are United Kingdom times unless otherwise stated) to consider and, if thought fi t, transact the following business:
Ordinary business
1.
To receive and adopt the directors’ report, the audited statement of accounts and auditors’ report for the year ended 30 June 2016.
2.
3.
4.
5.
6.
7.
8.
9.
To approve the payment of a fi nal dividend for the year ended 30 June 2016 of ZAR0.15438 per share.
To re-elect Mrs HH Hickey as a director of the company (director), who retires by rotation pursuant to the articles of association
of the company (Articles of Association).
To re-elect Mr T Mosololi as a director of the company, who retires by rotation pursuant to the Articles of Association.
To re-elect Mrs HH Hickey as a member of the audit committee.
To re-elect Mr KC Spencer as a member of the audit committee.
To re-elect Mr T Mosololi as a member of the audit committee.
To endorse the company’s remuneration policy for the year ended 30 June 2016.
To re-appoint Deloitte LLP as auditors of the company and to authorise the directors to determine their remuneration.
Brief CVs of the directors mentioned in resolutions 3 and 4 above are contained on
page 84 of this integrated annual report.
Special business
As special business, to consider and if thought fi t, to pass the following resolutions of which resolution 10 will be proposed as an ordinary
resolution and resolution 11 will be proposed as a special resolution:
10.
That the directors be and are hereby authorised generally and unconditionally to exercise all the powers of the company to allot relevant
securities (as defi ned in section 551 of the Companies Act 2006):
(a) up to a nominal amount of GBP6,477,355.18 (being one-third of the nominal value of the current issued share capital of
GBP19,432,065.54)
(b) comprising equity securities (as defi ned in section 560(1) of the Companies Act 2006) up to a nominal amount of GBP12,954,710.36
(being two-thirds of the nominal value of the current issued share capital of GBP19,432,065.54) such amount to be reduced by any
allotments made under paragraph (a) above in connection with an offer by way of a rights issue:
• to ordinary shareholders in proportion (as nearly as may be practicable) to their existing holdings
• to holders of other equity securities as required by the rights of those securities or as the directors otherwise consider necessary
and so that the directors may impose any limits or restrictions and make any arrangements which they consider necessary or
appropriate to deal with any treasury shares, fractional entitlements, record dates, legal, regulatory or practical problems in, or laws
of, any territory or any matter.
The authorities conferred on the directors to allot securities under paragraph (a) and (b) will expire on the date of the AGM of the company
to be held in 2017 or on 31 December 2017 whichever is sooner, unless previously revoked or varied by the company and such authority
shall extend to the making before such expiry of an offer or an agreement that would or might require relevant securities to be allotted after
such expiry and the directors may allot relevant securities in pursuance of that offer or agreement as if the authority conferred hereby had
not expired.
11.
That the company be generally and unconditionally authorised for purposes of section 701 of the Act to make market purchases (as
defi ned in section 693(4) of the Act) of ordinary shares of the company on such terms and in such a manner as the directors shall
determine, provided that:
• the maximum aggregate number of ordinary shares which may be purchased is GBP971,603.27 (representing approximately 5 percent
of the issued share capital of the company at the date of this notice)
• the minimum price (excluding expenses) which may be paid for such ordinary share is 1pence
• the maximum price (excluding expenses) which may be paid for such ordinary share (i) does not exceed 5 percent above the average
closing price of such shares for the 5 business days on the London Stock Exchange prior to the date of purchase and (ii) that stipulated by
Commission-adopted Regulatory Technical Standards pursuant to article 5(6) of the Market Abuse Regulation
* Please note that as the AGM will be held at The London Stock Exchange all attendees will be required to show ID in order to gain entry.
Pan African Resources integrated annual report 2016
185
Notice of annual general meeting continued
• this authority shall expire at the conclusion of the next AGM of the company or on 31 December 2017, whichever is the earlier, unless
such authority is renewed prior to that time (except in relation to the purchase of ordinary shares the contract for which was concluded
before the expiry of such authority and which might be executed wholly or partly after such expiry)
• any market purchases by the company of ordinary shares in the company as contemplated in this resolution shall comply, to the extent
required, with the provisions of the Listings Requirements of the JSE Limited (JSE) (the Listings Requirements) pertaining to the general
authority to repurchase securities for cash, which in summary provide as follows:
– such repurchases are effected through the order book operated by the JSE trading system and done without any prior understanding
or arrangement between the company and a counterparty, unless the JSE otherwise permits
– the company and its subsidiaries are enabled by their Articles of Association to acquire such shares
– such repurchases are made at a price no greater than 10 percent above the weighted average market price at which the company’s
shares traded on the JSE over the fi ve business days immediately preceding the date on which the transaction is effected
– at any point in time, the company appoints only one agent to effect any repurchase on the company’s behalf
– the directors will ensure that a resolution by the board of directors (the board) was taken authorising such repurchases, confi rming
that the company and its subsidiaries engaged in such repurchases have passed solvency and liquidity tests and confi rming that since
such tests were performed there have been no material adverse changes to the fi nancial position of the group
– such repurchases are not conducted during prohibited periods as defi ned by the JSE Listings Requirements, unless the company has
complied with the conditions set out in paragraph 5.72(h) of the JSE Listings Requirements.
The other general information referred to in paragraph 11.26(b) of the JSE Listings Requirements regarding the company is contained elsewhere
in this notice of AGM, as follows:
• major shareholders on
page 184
• company’s share capital, on
page 148.
Directors’ responsibility statement
pages 84 and 85 of the group’s integrated annual report in which this notice is
The directors of the company, whose names are given on
incorporated, collectively and individually accept full responsibility for the accuracy of the information given in this notice, and certify that to
the best of their knowledge and belief there are no facts that have been omitted which would make any statement false or misleading, and
that all reasonable enquiries to ascertain such facts have been made and that this notice contains all information required by the JSE Listings
Requirements.
Material change
The directors of the company confi rm that there has not been any material change in the fi nancial or trading position of the company and its
subsidiaries that has occurred since the end of the last fi nancial period.
The intention of the directors is that the repurchase of the company’s shares will be effected within the parameters laid down by resolution 11
as well as by the Act, the JSE Listings Requirements and the board, as and when the directors of the company deem such repurchases to be
appropriate, having regard for prevailing market and business conditions. The directors will ensure that the requisite prior resolution of the board
has been taken authorising such repurchases, confi rming that the company and its subsidiaries engaged in such repurchases have passed the
solvency and liquidity test and confi rming that since such tests were performed there have been no material adverse changes to the fi nancial
position of the group.
After considering the effect of a general repurchase within the parameters set out above, the directors are of the view that for a period of at
least 12 months after the date of the AGM referred to in this notice:
• the company and the group would in the ordinary course of their business be able to pay their debts
• the consolidated assets of the company and the group would exceed the consolidated liabilities of the company and the group respectively,
such assets and liabilities being fairly valued and recognised and measured in accordance with the accounting policies used in the 2014 audited
annual fi nancial statements of the company and the group
• the issued capital and reserves of the company and the group would be adequate for the purposes of the company and the group’s ordinary
business
• the company and the group’s working capital would be adequate for ordinary business purposes.
Note
The company will publish an announcement complying with the JSE Listings Requirements if and when an initial and successive 3 percent
tranche(s) of its shares have been repurchased in terms of the aforementioned general authority.
186 Pan African Resources integrated annual report 2016
SHAREHOLDERS’
INFORMATION
Approvals required for resolutions
The ordinary resolutions contained in this notice of AGM require the approval of more than fi fty percent (50%) of the total votes cast on the
resolution by shareholders present or represented by proxy at the AGM. The special resolutions contained in this notice of AGM require the
approval of at least seventy-fi ve percent (75%) of the total votes cast on the resolutions by the shareholders present or represented by proxy at
the AGM.
By order of the board
St James’s Corporate Services Limited
Company Secretary
20 September 2016
Suite 31, Second Floor
107 Cheapside
London
England
EC2V 6DN
Explanatory notes to the notice of AGM
1.
2.
3.
4.
5.
6.
Directors’ report and accounts (resolution 1)
This resolution will be proposed as an ordinary resolution. The directors of the company (the directors) are required by the Act to present
to the meeting, the directors’ and auditors’ reports and the audited accounts for the year ended 30 June 2016. The report of the directors
and the audited accounts have been approved by the directors and the report of the auditors has been approved by the auditors, and a
copy of each of these documents may be found in the integrated annual report and accounts of the company.
Approval of fi nal dividend (resolution 2)
A fi nal dividend can only be paid after it has been approved by the shareholders. A fi nal dividend of ZAR0.15438 per share or
approximately 0.82338 pence per share in respect of the year ended 30 June 2016 is recommended by the directors.
Director re-election (resolutions 3 and 4)
These resolutions will be proposed as ordinary resolutions. Article 123 of the Articles of Association states that at each AGM one-third
of the directors (or, if their number is not a multiple of three, the number of directors nearest to but not greater than one-third, unless
their number is fewer than three, in which case one director) shall retire from offi ce by rotation. Accordingly, Mrs HH Hickey and
Mr T Mosololi retire by rotation and offer themselves for re-election under this provision.
Biographical details of all of the directors are set out on
pages 84 and 85 of the integrated annual report and accounts of the company.
Audit committee members’ re-election (resolutions 5, 6 and 7)
These resolutions will be proposed as ordinary resolutions. In accordance with good corporate governance practice, subject where it
is necessary to their re-appointment as directors of the company in terms of the resolutions proposed in resolutions 3 and 4 above, to
confi rm by separate resolutions the appointment of the stated directors to the company’s audit committee for the period until the next
AGM of the company.
Endorsement of the remuneration policy (resolution 8)
This resolution will be proposed as an ordinary resolution. This resolution will approve, by way of an advisory non-binding vote, the
company’s remuneration policy as set out on
of the King III principles.
pages 94 to 103 of the integrated annual report for the year ended 30 June 2016, in terms
Appointment and remuneration of auditors (resolution 9)
This resolution will be proposed as an ordinary resolution. This resolution proposes the appointment of Deloitte LLP as the auditors of the
company and, in accordance with standard practice, gives authority to the directors to determine their remuneration.
Pan African Resources integrated annual report 2016
187
Notice of annual general meeting continued
Explanatory notes to the notice of AGM continued
7.
Authority to allot shares (resolution 10)
This resolution will be proposed as an ordinary resolution. Resolution 10 enables the directors to allot equity securities (including new
ordinary shares). The total nominal amounts are specifi ed rather than the total number of shares in order that the resolution does not
need to be amended if the company consolidates or sub-divides its shares. The nominal amount specifi ed in part (a) of this resolution
is one-third of the company’s issued ordinary share capital. Part (b) of this resolution allows the directors to allot ordinary shares in
connection with a rights issue up to an aggregate nominal amount of two-thirds of the issued ordinary share capital. The resolution also
gives authority to the directors to deal with practical issues that may arise from the allotment or take account of requirements relating to
overseas shareholders due to local laws or regulations.
8.
Authority to repurchase shares (resolution 11)
This resolution will be proposed as a special resolution. The company’s Articles of Association contain a provision allowing the company
to purchase its own shares subject to the prior authority of the members having been obtained. In accordance with the board’s previous
practice, resolution 11 is for the purpose of seeking general authority to effect such purchases within the limits set out in the resolution.
Purchases pursuant to the proposed authority would only be made after the most careful consideration, where the directors believed
purchases were in the best interests of the company and its shareholders. The directors consider that it is prudent to obtain the proposed
authority, although the board has no present intention of exercising this authority.
The UK Companies Act permits companies to hold in treasury any shares acquired by way of market purchases, rather than having to
cancel them. Treasury shares continue to exist as shares, but are owned by the company itself, and can only be sold by the company for
cash as an alternative to listing new shares. Section 727 of the UK Companies Act permits a company at any time to sell shares from
treasury for cash (subject to statutory pre-emption provisions), to transfer shares from treasury for the purposes of an employee share
scheme, or to cancel them. If the company were to repurchase any of its own shares pursuant to the authority conferred by resolution 11,
the company would consider at that time whether to hold those shares as treasury shares or to cancel them. However, the company
would be likely to hold them as treasury shares unless there were some exceptional and unforeseen reasons at the time of purchase which
meant that it would not be in the interests of the company to do so. This would give the company the ability to sell treasury shares quickly,
with the proceeds of the sale (up to the amount which was initially paid for them by the company) being credited back to the company’s
distributable reserves, and would provide the company with additional fl exibility in the management of its capital base. Where considered
appropriate, treasury shares may be issued or transferred for the purpose of the company’s employee share plans rather than issuing new
shares or purchasing shares on the open market.
No dividends will be paid on shares whilst held in treasury and no voting rights will be exercised in respect of treasury shares.
The authority sought under resolutions 10 and 11 will expire at the earlier of the conclusion of the AGM of the company in 2017
or 31 December 2017.
188 Pan African Resources integrated annual report 2016
SHAREHOLDERS’
INFORMATION
Notes
Entitlement to attend and vote
1.
In accordance with Regulation 41 of the Uncertifi cated Securities Regulations 2001 (Uncertifi cated Securities Regulations), only those
members entered in the register of members of the company as at close of business on 23 November 2016, and in the case of an adjourned
meeting, two days before such adjourned meeting, shall be entitled to attend, speak and vote at the AGM in respect of the number of shares
registered in their name at that time. Changes to the register of members after the close of business on 23 November 2016, or if the AGM
is adjourned, after close of business on the day two days before the adjourned meeting shall be disregarded in determining the rights of any
person to attend, speak and vote at the AGM.
Appointment of proxies
2.
If you are a member of the company at the time set out in note 1 above, you are entitled to appoint a proxy to exercise all or any of your
rights to attend, speak and vote at the AGM and you should have received a proxy form with this notice of meeting.
You can only appoint a proxy using the procedures set out in these notes and the notes to the proxy form.
3.
A proxy does not need to be a member of the company but must attend the AGM to represent you. Details of how to appoint the
Chairman of the AGM or another person as your proxy using the proxy form are set out in the notes to the proxy form.
If you wish your proxy to speak on your behalf at the AGM you will need to appoint your own choice of proxy (not the Chairman) and
give your instructions directly to them.
You may appoint more than one proxy provided each proxy is appointed to exercise rights attached to different shares. You may not appoint
more than one proxy to exercise rights attached to any one share. To appoint more than one proxy, you may photocopy this form.
A vote withheld is not a vote in law, which means that the vote will not be counted in the calculation of votes for or against the resolution.
If you either select the “Discretionary” option or if no voting indication is given, your proxy will vote or abstain from voting at his or her
discretion. Your proxy will vote (or abstain from voting) as he or she thinks fi t in relation to any other matter which is put before the AGM.
Any corporation which is a member of the company can appoint one or more corporate representative(s) who may exercise on its behalf
all of its powers as a member provided that they do not do so in relation to the same shares.
A member of the company may not use any electronic address provided either in this notice of meeting or any related documents
(including the proxy form) to communicate with the company for any purpose other than those expressly stated.
4.
5.
6.
7.
Appointment of proxy using hard-copy proxy form
8.
The notes to the proxy form explain how to direct your proxy how to vote on each resolution or withhold their vote.
To appoint a proxy using the proxy form, the form must be:
• completed and signed; and
• sent or delivered to Capita Asset Services, PXS, 34 Beckenham Road, Beckenham, BR3 4TU or Computershare Investor Services
Proprietary Limited, Ground Floor, 70 Marshall Street, Johannesburg 2001, South Africa (PO Box 61051, Marshalltown 2107, Johannesburg,
South Africa); no later than 11:00 on 23 November 2016.
In the case of a member which is a company, the proxy form must be executed under its common seal or signed on its behalf by an offi cer
of the company or an attorney for the company.
Any power of attorney or any other authority under which the proxy form is signed (or a duly certifi ed copy of such power or authority)
must be included with the proxy form.
Appointment of proxy by joint members
9.
In the case of joint holders, where more than one of the joint holders purports to appoint a proxy, only the appointment submitted by the
most senior holder will be accepted. Seniority is determined by the order in which the names of the joint holders appear in the company’s
register of members in respect of the joint holding (the fi rst-named being the most senior).
Changing proxy instructions
10.
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 Asset Services, PXS, 34 Beckenham Road, Beckenham, BR3 4TU or Computershare Investor Services
Proprietary Limited, Ground Floor, 70 Marshall Street, Johannesburg 2001, South Africa (PO Box 61051, Marshalltown 2107, Johannesburg,
South Africa).
Pan African Resources integrated annual report 2016
189
Notice of annual general meeting continued
Notes continued
Changing proxy instructions continued
If you submit more than one valid proxy appointment, the appointment received last before the latest time for the receipt of proxies will
take precedence.
Termination of proxy appointments
11.
In order to revoke a proxy instruction you will need to inform the Registrar by sending a signed hard-copy notice clearly stating your
intention to revoke your proxy appointment as above. In the case of a member which is a company, the revocation notice must be
executed under its common seal or signed on its behalf by an offi cer of the company or an attorney for the company.
Any power of attorney or any other authority under which the revocation notice is signed (or a duly certifi ed copy of such power or
authority) must be included with the revocation notice.
The revocation notice must be received by Capita Asset Services or Computershare Investor Services Proprietary Limited no later than
11:00 on 23 November 2016. If you attempt to revoke your proxy appointment but the revocation is received after the time specifi ed
then, subject to the paragraph directly below, your proxy appointment will remain valid.
Appointment of a proxy does not preclude you from attending the AGM and voting in person. If you have appointed a proxy and attend
the AGM in person, your proxy appointment will automatically be terminated.
Issued shares and total voting rights
12.
As at close of business on 19 September 2016, the company’s issued share capital comprised ordinary shares of 1p each. Each ordinary
share carries the right to one vote at an AGM of the company and, therefore, the total number of voting rights in the company as at close
of business on 19 September 2016 was 1,943,206,554.
Directors’ interests and documents on display
13.
A statement or summary of transactions of directors (and their family interests) in the share capital of the company and copies of their
service contracts will be available for inspection at the company’s registered offi ce during normal business hours (Saturdays, Sundays and
public holidays excepted) from the date of this notice until the conclusion of the AGM and will also be available for inspection at the place
of the AGM for at least 15 minutes prior to and during the meeting.
CREST
14.
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 (available via
www.euroclear.com). 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.
15.
16.
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 the specifi cations of Euroclear UK & Ireland Limited (EUI) 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 11:00 on 23 November 2016 (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.
CREST members and, where applicable, their CREST sponsors or voting service providers should note that EUI does not make available
special procedures in EUI 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. The company may treat as invalid a CREST
Proxy Instruction in the circumstances set out in Regulation 35(5)(a) of the Uncertifi cated Securities Regulations.
190 Pan African Resources integrated annual report 2016
Form of proxy
United Kingdom
(Incorporated and registered in England and Wales under Companies Act 1985 with registration number 3937466 on 25 February 2000)
Share code on AIM: PAF • ISIN: GB0004300496 • Share code JSE: PAN
This form of proxy is for use by all non-South African shareholders and for South African certifi cated shareholders and South African own name dematerialised
shareholders only.
I/We, the undersigned, being a member of the above-named company, hereby appoint the Chairman of the meeting or (see notes 1 and 3)
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 (AGM) of Pan African Resources (the company) to be held at the
offi ces of Numis Securities Limited, The London Stock Exchange Building, 10 Paternoster Square, London EC4M 7LT at 11:00 on 25 November 2016 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
Voting withheld*
Discretionary**
1.
To receive the accounts and the reports of the directors of the company
(the directors) and auditors thereon
2. To approve the payment of a fi nal dividend for the year ended 30 June 2016
3. To re-elect Mrs HH Hickey as a director of the company
4. To re-elect Mr T Mosololi as a director of the company
5. To re-elect Mrs HH Hickey as a member of the audit committee
6. To re-elect Mr KC Spencer as a member of the audit committee
7. To re-elect Mr T Mosololi as a member of the audit committee
8. To endorse the company’s remuneration policy
9.
To re-appoint Deloitte LLP as auditors of the company and to authorise the
directors to determine their remuneration
Special business:
10. To authorise the directors to allot equity securities
11. To approve market purchases of ordinary shares
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 ‘Voting withheld’ option is to enable you to abstain on the specifi ed resolution.
Please note a ‘Vote withheld’ has no legal effect and will not be counted in the votes
‘For’ and ‘Against’.
** If you select ‘Discretionary’ or fail to select any of the given options, the proxy is
authorised to vote (or abstain from voting) at his or her discretion on the specifi ed
resolution. The proxy is also authorised to vote (or abstain from voting) on any other
business, which may properly come before the meeting.
Print name:
(BLOCK CAPITALS)
Signature:
Address:
Dated this
day of
2016
Notes
1.
2.
3.
4.
5.
6.
7.
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.
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
Asset Services, PXS, 34 Beckenham Road, Beckenham, BR3 4TU or Computershare
Investor Services Proprietary 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 offi cer or attorney duly authorised in writing.
In the case of joint holders, the signature of any of them will suffi ce but the names of
all joint holders should be shown. The vote of the senior joint holder who tenders a
vote whether in person or by proxy, shall be accepted to the exclusion of the votes of
the other joint holders and for this purpose seniority shall be determined by the order
in which the names stand in the Register of Members in respect of the joint holding.
Dematerialised shareholders in South Africa who are not own name dematerialised
shareholders and who wish to attend the AGM should instruct their CSDP or broker
to issue them with the necessary authority to attend the meeting in person, in the
manner stipulated in the custody agreement governing the relationship between
such shareholders and their CSDP or broker. These instructions must be provided
to the CSDP or broker by the cut-off time and date advised by the CSDP or broker
for instructions of this nature. Dematerialised shareholders in South Africa who are
not own name dematerialised shareholders and who cannot attend but who wish to
vote at the AGM should provide their CSDP or broker with their voting instructions,
in the manner stipulated in the custody agreement governing the relationship
between such shareholders and their CSDP or broker. These instructions must be
provided to the CSDP or broker by the cut-off time and date advised by the CSDP
or broker for instructions of this nature.
8.
Shares held in uncertifi cated form (i.e. in CREST) may be voted through the CREST
Proxy Voting Service in accordance with the procedures set out in the CREST Manual.
Pan African Resources integrated annual report 2016
191
Business Reply Plus
Licence Number
RLUB-TBUX-EGUC
FDFDTTFATDDATADTTDFDFTDATADFAADFTADF
Second fold
PXS 1
34 Beckenham Road
BECKENHAM
BR3 4ZF
Third fold and tuck in fl ap
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s
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i
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Form of proxy
South Africa
(Incorporated and registered in England and Wales under Companies Act 1985 with registration number 3937466 on 25 February 2000)
Share code on AIM: PAF • ISIN: GB0004300496 • Share code JSE: PAN
This form of proxy is for use by all non-South African shareholders and for South African certifi cated shareholders and South African own name dematerialised
shareholders only.
I/We, the undersigned, being a member of the above-named company, hereby appoint the Chairman of the meeting or (see notes 1 and 3)
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 (AGM) of Pan African Resources (the company) to be held at the
offi ces of Numis Securities Limited, The London Stock Exchange Building, 10 Paternoster Square, London EC4M 7LT at 11:00 on 25 November 2016 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
Voting withheld*
Discretionary**
1.
To receive the accounts and the reports of the directors of the company
(the directors) and auditors thereon
2.
To approve the payment of a fi nal dividend for the year ended 30 June 2016
3. To re-elect Mrs HH Hickey as a director of the company
4. To re-elect Mr T Mosololi as a director of the company
5. To re-elect Mrs HH Hickey as a member of the audit committee
6. To re-elect Mr KC Spencer as a member of the audit committee
7. To re-elect Mr T Mosololi as a member of the audit committee
8.
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
10. To approve market purchases of ordinary shares
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 ‘Voting withheld’ option is to enable you to abstain on the specifi ed resolution.
Please note a ‘Vote withheld’ has no legal effect and will not be counted in the votes
‘For’ and ‘Against’.
** If you select ‘Discretionary’ or fail to select any of the given options, the proxy is
authorised to vote (or abstain from voting) at his or her discretion on the specifi ed
resolution. The proxy is also authorised to vote (or abstain from voting) on any other
business, which may properly come before the meeting.
Print name:
(BLOCK CAPITALS)
Signature:
Address:
Dated this
day of
2016
Notes
1.
2.
3.
4.
5.
6.
7.
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.
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
Asset Services, PXS, 34 Beckenham Road, Beckenham, BR3 4TU or Computershare
Investor Services Proprietary 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 offi cer or attorney duly authorised in writing.
In the case of joint holders, the signature of any of them will suffi ce but the names of
all joint holders should be shown. The vote of the senior joint holder who tenders a
vote whether in person or by proxy, shall be accepted to the exclusion of the votes of
the other joint holders and for this purpose seniority shall be determined by the order
in which the names stand in the Register of Members in respect of the joint holding.
Dematerialised shareholders in South Africa who are not own name dematerialised
shareholders and who wish to attend the AGM should instruct their CSDP or broker
to issue them with the necessary authority to attend the meeting in person, in the
manner stipulated in the custody agreement governing the relationship between
such shareholders and their CSDP or broker. These instructions must be provided
to the CSDP or broker by the cut-off time and date advised by the CSDP or broker
for instructions of this nature. Dematerialised shareholders in South Africa who are
not own name dematerialised shareholders and who cannot attend but who wish to
vote at the AGM should provide their CSDP or broker with their voting instructions,
in the manner stipulated in the custody agreement governing the relationship
between such shareholders and their CSDP or broker. These instructions must be
provided to the CSDP or broker by the cut-off time and date advised by the CSDP
or broker for instructions of this nature.
8.
Shares held in uncertifi cated form (i.e. in CREST) may be voted through the CREST
Proxy Voting Service in accordance with the procedures set out in the CREST Manual.
Pan African Resources integrated annual report 2016
193
Second fold
POSTAGE WILL
BE PAID BY THE
ADDRESSEE
NO POSTAGE
NECESSARY
IF POSTED IN
SOUTH AFRICA
BUSINESS REPLY SERVICE
LICENCE NO. J 5563
2107 MARSHALLTOWN
Third fold and tuck in fl ap
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SHAREHOLDERS’
INFORMATION
Glossary
AGM
Aids
AIM
Auroch
B-BBEE
Barberton Mines
BIOX®
the board
Brownfi eld project
BTRP
Business rescue
CEO
CIL
the Companies Act
COO
CSI
CTRP
the current year
DMR
Earnings-accretive acquisition
Eskom
ETRP
Evander Mines
Exco
FD
g/t
GRI
Harmony
HDSA
HIV
HR
IAS
IBC
IFL
IFMSA
IFRS
IIRC
IoDSA
ISO
JSE
King III Report or King III
km
KPIs
LSE
LTIFR
MCF
Metanza
Mining Charter
MOI
Annual general meeting
Acquired Immune Defi ciency Syndrome
Alternative Investment Market, the London Stock Exchange’s international market for smaller growing
companies
Auroch Minerals NL, an Australian-listed company in which Pan African Resources had an investment
Broad-based black economic empowerment
Barberton Mines Proprietary Limited
The Biological Oxidation (BIOX®) gold extraction process was developed at Barberton Mines. It is an
environmentally friendly process of releasing gold from the sulphide that surrounds it by using bacteria
pages 84 and 85
The board of directors of Pan African Resources, as set out on
Project based on prior work or rebuilt from a previous one
Barberton Tailings Retreatment Plant, a gold recovery tailing plant owned by Barberton Mines, which
commenced production in FY2014
A process which gives a company in fi nancial distress the opportunity to restructure and reorganise its
affairs under the supervision of a business rescue practitioner
Chief Executive Offi cer. Pan African Resources’ CEO is Cobus Loots (appointed 1 March 2015)
Carbon-in-leach
South African Companies Act 71 of 2008 (SA Companies Act)
Chief Operating Offi cer
Corporate social investment
Chrome tailings retreatment plant
The year ended 30 June 2016
Department of Mineral Resources
An acquisition which increases earnings per share
Electricity Supply Commission, South African electricity supplier
Evander Tailings Retreatment Plant, commissioned in October 2015
Evander Gold Mines Limited and Evander Gold Mining Proprietary Limited
Executive committee of Pan African Resources
Financial Director
Grams/tonne
Global Reporting Initiatives
Harmony Gold Mining Company Limited
Historically disadvantaged South African
Human Immunodefi ciency Virus
Human Resources
International Accounting Standards
Inside back cover (of this integrated annual report)
International Ferro Metals (SA) Proprietary Limited, Phoenix Platinum concluded a formal CTRP agreement
with IFL and operates from its Lesedi Mine
South African subsidiary, International Ferro Metals (SA) Proprietary Limited
International Financial Reporting Standards
International Integrated Reporting Council
Institute of Directors South Africa
International Standards Organisation
JSE Limited incorporating the Johannesburg Securities Exchange, the main bourse in South Africa
King Report on Corporate Governance for South Africa, 2009
Kilometres
Key performance indicators – a set of quantifi able measures that a company or industry uses to gauge or
compare performance in terms of meeting their strategic and operational goals
London Stock Exchange
Lost time injury frequency rate
Mine call factor
Metanza Mineral Processors, a BEE company which operates the CTRP at Phoenix Platinum plant under
contract to Pan African Resources
Charter to facilitate the sustainable transformation and development of the South African mining industry
Memorandum of incorporation
Pan African Resources integrated annual report 2016
195
Glossary continued
Moz
MPRDA
MR&MR
MRM
Mt
NIHL
Nomad
NUM
Opsco
PGE
Phoenix Platinum
Prescribed offi cers
RCF
Remchannel
Remco
RIFR
ROM
SA
SAICA
SAMREC
Section 54 safety stoppages
Shanduka or Shanduka group
SHEQC
SLP
Sporotrichosis
t
TB
the group or the company or
Pan African Resources
the previous year
The UK Code
the year or the year under
review
TIFR
TMM
UASA
UK
The UK Companies Act 2006
Financial terms
AUD
CPI
EBITDA
EPS
FVTPL
GBP
HEPS
JIBAR
PPI
ROI
USD
VWAP
ZAR
Million ounces
Mineral and Petroleum Resources Development Act
Mineral Resources and Mineral Reserves Report
Mineral resource management
Million tonnes
Noise-induced hearing loss
Nominated Adviser appointed in accordance with the London Stock Exchange’s AIM Rules for Companies
National Union of Mineworkers
Operations committee
Platinum group elements, namely platinum, palladium, rhodium and gold
Phoenix Platinum Mining Proprietary Limited, a subsidiary of Pan African Resources
Anyone who fulfi ls the role of a director but is operating under a different designation
Revolving credit facility
Internet based remuneration survey providing data across a wide variety of industries in South Africa
Remuneration committee of Pan African Resources
Reportable injury frequency rate
Run-of-mine
South Africa
South African Institute of Chartered Accountants
South African Code for Reporting of Mineral Resources and Mineral Reserves
In terms of section 54 of the Mine Health and Safety Act 29 of 1996, if an inspector of mines believes that an
occurrence, practice or condition at a mine endangers or may endanger the health or safety of people at the
mine, the inspector may give any instruction necessary to protect the health or safety of people at the mine,
including instructing that operations at the mine or a part of the mine be halted
Shanduka Group Proprietary Limited. Pan African Resources’ black empowerment partner, which has a
22.46% stake in the group
Safety, health, environment, quality and community
Social and labour plan
A disease caused by a fungus infection
Tonnes
Tuberculosis
Pan African Resources PLC, listed on the LSE’s AIM and on the JSE in the ‘Gold Mining’ sector
The year ended 30 June 2015
UK Corporate Governance Code which sets out standards of good practice in relation to board leadership
and effectiveness, remuneration, accountability and relationships with shareholders
The year ended 30 June 2016
Total injury frequency rate
Trackless mobile machinery
United Association of South Africa
United Kingdom
An Act of the Parliament of the United Kingdom which forms the primary source of UK company law
Australian Dollar
The consumer price index of South Africa, a primary indicator of South Africa’s infl ation
Earnings before interest, taxes, depreciation and amortisation
Earnings per share
Fair value through profi t and loss
Pounds sterling
Headline earnings per share
Johannesburg Inter-Bank Acceptance Rate
Producer price infl ation
Return on investment
US Dollar
Volume weighted average price
South African rand
196 Pan African Resources integrated annual report 2016
Company information
Corporate offi ce
The Firs Offi ce Building
1st Floor, Offi ce 101
Cnr. Cradock and Biermann Avenues
Rosebank, Johannesburg
South Africa
Offi ce: + 27 (0) 11 243 2900
Facsimile: + 27 (0) 11 880 1240
Registered offi ce
Suite 31 Second Floor
107 Cheapside
London, EC2V 6DN
United Kingdom
Offi ce: + 44 (0) 20 7796 8644
Facsimile: + 44 (0) 20 7796 8645
Directors
Cobus Loots
Pan African Resources
Chief Executive Offi cer
Offi ce: + 27 (0) 11 243 2900
Deon Louw
Pan African Resources
Financial Director
Offi ce: + 27 (0) 11 243 2900
Company secretary
Phil Dexter/Jane Kirton
St James’s Corporate Services Limited
Offi ce: + 44 (0) 20 7796 8644
JSE sponsor
Sholto Simpson
One Capital
Offi ce: + 27 (0) 11 550 5009
Nominated adviser
and joint broker
John Prior/Paul Gillam/James Black
Numis Securities Limited
Offi ce: +44 (0) 20 7260 1000
Joint brokers
Matthew Armitt/Ross Allister
Peel Hunt LLP
Offi ce: +44 (0) 20 7418 8900
Jeffrey Couch/Neil Haycock/Thomas Rider
BMO Capital Markets Limited
Offi ce: +44 (0) 20 7236 1010
Public and investor relations SA
Julian Gwillim
Aprio Strategic Communications
Offi ce: +27 (0)11 880 0037
Public and investor relations UK
Daniel Thöle
Bell Pottinger PR
Offi ce: + 44 (0) 20 3772 2500
www.panafricanresources.com
Shareholders’ diary
Financial year-end
Preliminary annual results announcement
Annual report posted
Annual general meeting
Interim results announcement
30 June 2016
21 September 2016
28 October 2016
25 November 2016
22 February 2017
www.panafricanresources.com