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INTEGRATED ANNUAL REPORT
for the year ended 30 June 2018
CONTENTS
Pan African Resources at a glance
Contents
About this report
STRATEGIC REPORT:
BUSINESS AND STRATEGIC
OVERVIEW
Our purpose, vision and strategy
Key features
Who we are
Operating assets
Business model
Chairman’s statement
Chief executive officer’s statement
Strategic scorecard
Operating environment
Risk, opportunities and material issues
Stakeholder engagement, value creation and distribution
STRATEGIC REPORT:
PERFORMANCE REVIEW
Financial director’s review
Five-year review
Operational and performance review
Barberton Mines
Evander Mines
Elikhulu
Operational production
Abridged Mineral Resources and Mineral Reserves report
SUSTAINABILITY REVIEW
Human capital
Manufactured capital
Social and relationship capital
Intellectual capital
Natural capital
flap
flap
ifc
1
1
2
4
6
8
10
12
18
21
22
31
35
36
46
48
48
52
56
58
60
79
80
85
87
91
94
TRANSPARENCY AND
ACCOUNTABILITY
Board of directors
Executive and operations management
Corporate governance
Remuneration review
Part one: remuneration policy
Part two: remuneration implementation report
ANNUAL FINANCIAL STATEMENTS
Audit committee report
Directors’ statement of responsibility
Certificate of the company secretary
Directors’ report
Independent auditors’ report
United Kingdom
South Africa
Consolidated and separate statement of financial position
Consolidated and separate statement of profit or loss
and other comprehensive income
Consolidated and separate statement of changes in equity
Consolidated and separate statement of cash flows
Notes to the consolidated and separate annual
financial statements
SHAREHOLDERS’ AND
OTHER INFORMATION
Shareholders’ analysis
Notice of annual general meeting
Form of proxy – United Kingdom
Form of proxy – South Africa
Alternative performance measures
Glossary
Company information
Forward-looking statements
Shareholders’ diary
99
100
102
103
111
114
122
127
128
132
132
133
135
141
146
147
148
150
151
217
218
219
225
227
229
234
ibc
ibc
ibc
SUPPLEMENTARY INFORMATION
This report represents one of three elements of Pan African Resources’ 2018 financial year communication strategy with stakeholders, the other
two being:
Pan African Resources’ sustainable
development report
• Contains additional non-financial
disclosures referencing GRI
• The sustainable development report is
compiled based on a self-declared GRI
Application Level B
http://www.panafricanresources.com/sheqc/
gri-and-sustainability/
Pan African Resources’ Mineral
Resources and Mineral Reserves report
• Provides technical information on the
mineral assets of Pan African Resources in
compliance with the South African Code
for Reporting of Mineral Resources and
Mineral Reserves (the SAMREC Code)
H
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FITABLE • SUSTAINABLE • S TA K E H O L D E R S
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P
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FITABLE • SUSTAINABLE • S TA K E H O L D E R S
SUSTAINABLE DEVELOPMENT REPORT
for the year ended 30 June 2018
MINERAL RESOURCES AND MINERAL RESERVES REPORT
for the year ended 30 June 2018
http://www.panafricanresources.com/
mineral-resource-mineral-reserve/
The above documents, together with this 2018 integrated annual report, are available on the group’s website at
http://www.panafricanresources.com/investors/financial-reports/
ABOUT THIS REPORT
SCOPE AND BOUNDARY
We are pleased to present Pan African Resources’ integrated annual report
(the report) for the year ended 30 June 2018. This report provides an overview
of the group’s integrated approach to its financial and non-financial information
and is aimed at our shareholders and other interested stakeholders. The report
includes the activities of the holding company, Pan African Resources, and all its
operations and subsidiaries. The group’s subsidiaries are incorporated in South
Africa and their functional currency is the South African rand (ZAR). The group’s
business is conducted in ZAR and the accounting records are maintained in this
currency, except precious metal product sales, which are conducted in United
States dollars (USD) before conversion into ZAR. The ongoing review of the
results of the operations conducted by executive management and the board
is also performed in ZAR. For ease of reference, abbreviations and terms are
defined in the glossary on
page 234.
PROCESS FOR DEFINING REPORT CONTENT
The process for defining the report content was guided by the recommendations
contained in the International Integrated Reporting Council’s (IIRC) framework.
We continue to embed the guiding principles and content elements contained
in the IIRC’s framework. The report content focuses on those issues which
materially impact our ability to create and sustain value over the short term
(one year), medium term (two to three years) and long term (beyond three
years). Pan African Resources appreciates that its business operations use various
forms of capital, including financial capital, human capital, natural capital, intellectual
capital, manufactured capital and social and relationship capital. Consideration of
the six forms of capital is shown in our business model on
page 8.
Further, the report was prepared in line with both the AIM Market (AIM)
of the London Stock Exchange (LSE), the LSE’s international market for smaller
growth companies, and the Johannesburg Stock Exchange’s (JSE) Listings
Requirements. We have applied the principles of the King IVTM Report on
Corporate Governance for South Africa, 2016 (King IV TM) with a report
included on our website at
http://www.panafricanresources.com/wp-
content/uploads/KING-IV-REPORT-FINAL.pdf. Aspects of the UK Corporate
Governance Code (UK Code) were considered in the preparation of the
report. The sustainability information contained in this report and online
was prepared based on the Global Reporting Initiative (GRI) standard
disclosure guidelines. A separate GRI report is available on our website at
http://www.panafricanresources.com/sheqc/gri-and-sustainability/.
The abridged Mineral Resources and Mineral Reserves Report (MR&MR)
was based on the Mining and Metals Sector Disclosure Guidelines and the
South African Code for Reporting of Exploration Results, Mineral Resources
and Mineral Reserves, 2016 edition (the SAMREC Code). The annual
financial statements have been prepared in accordance with the International
Financial Reporting Standards (IFRS), the South African Institute of Chartered
Accountants Financial Reporting Guidelines, as issued by the Accounting
Practices Committee and Financial Pronouncements as issued by the Financial
Reporting Standards Council, and the requirements of the UK Companies
Act 2006 (UK Companies Act).
King IV TM
IIRC
IFRS
STRATEGIC REPORT
Our strategic report, including the investment case from
reviewed and approved by the board on 19 September 2018.
pages 1 to 97, was
ALTERNATIVE PERFORMANCE MEASURES
Throughout the strategic report we use a range of financial and non-financial
measures to assess our performance. Management uses these measures to
monitor the group’s financial performance, alongside IFRS measures, because
they assist in illustrating the underlying financial performance and position
of the group. We have defined and explained the purpose of each of these
measures on
pages 229 to 233, where we provide more detail, including
reconciliations to the closest equivalent measure under IFRS. These APMs
should be considered in addition to, and not as a substitute for, or as superior
to, measures of financial performance, financial position or cash flows reported
in accordance with IFRS. APMs are not uniformly defined by all companies,
including those in the group’s industry. Accordingly, APMs may not be
comparable with similarly titled measures and disclosures by other companies.
ASSURANCE
Pan African Resources’ external auditors, Deloitte LLP and Deloitte & Touche
(Deloitte) has independently audited the annual financial statements for
the year ended 30 June 2018. Its unmodified audit reports are set out on
pages 135 and 141.
FORWARD-LOOKING STATEMENTS
Refer to the forward-looking statements on the back cover of this report.
STATEMENT FROM THE BOARD OF DIRECTORS
The board acknowledges its responsibility to ensure the integrity of the
integrated annual report. The board has applied its collective mind in the
preparation and presentation of the report and is satisfied that the report
addresses all material matters and fairly presents the integrated performance
of Pan African Resources.
Keith Spencer
Chairman
19 September 2018
Cobus Loots
Chief executive officer
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 at
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.
The following tools will assist you throughout the report:
For further reading on our website at www.panafricanresources.com
For further reading in this report
Words with this symbol
are defined in the Alternative Performance Measures (APMs)
PAN AFRICAN RESOURCES AT A GLANCE
PAN AFRICAN RESOURCES IS A MID-TIER AFRICAN-FOCUSED PRECIOUS METALS PRODUCER.
THE KEY ENABLERS OF OUR STRATEGY ARE:
PEOPLE
ACTION
LEADERSHIP, PLANNING AND CONTROL
Preferred gold investment
◗ Profitable production growth from long-life assets
◗ Long-life quality gold mining operations: Barberton Mines
Proprietary Limited (Barberton Mines) – up to 20 years’ life-of-
mine, and Elikhulu Tailings Retreatment Plant (Elikhulu) –
13 years’ life-of-mine
◗ Significant resource and reserve base, with a focus on bringing
these ounces to account in the form of cash flows and earnings
◗ Capacity to grow organically and
acquisitively
◗ Strong track record of replenishing
Mineral Reserves through effective
exploration to increase the
life-of-mine
ACTION
ACTION
◗ Gold mining assets are
expected to provide a safe-
haven investment in volatile
global markets
FOSTERING RELATIONSHIPS THROUGH ACTION, INTEGRITY
AND HONESTY
Committed to sustainability
◗ Focused on achieving zero-harm
◗ Operational transformation trusts are actively involved in local
economic development (LED) projects
◗ Legacy of environmentally responsible mining with estimated
rehabilitation liabilities fully funded
◗ Strong, transparent relationships with labour, government
and communities
◗ People-focused ethos with a largely
stable workforce
Disciplined approach to capital management
◗ Management team drives
shareholder value through
judicious capital allocation
◗ Limited gearing with strong
statement of financial position
◗ Investments are required
to provide appropriate
shareholder returns
PEOPLE
OUR KEY
STRATEGIC
ENABLERS
RESULTS
RESULTS
RESULTS
DELIVERING ON OUR OBJECTIVES WITHOUT COMPROMISE | MAXIMISING SUSTAINABLE GOLD PRODUCTION | POSITIVE IMPACT ON EARNINGS
Proven business model committed to
low-cost production and successful organic
growth with value-accretive transactions
◗ Culture of delivery – Barberton Tailings
Retreatment Plant (BTRP) and Evander Tailings
Retreatment Plant (ETRP)
◗ Quality high-grade and low-cost assets delivering
strong cash flows and robust returns
◗ Elikhulu is scheduled to be producing at steady
state ahead of schedule
◗ Improved group sustainability following the
cessation of Evander Gold Mining Proprietary
Limited’s (Evander Mines’) large-scale
underground operations (which includes 7 Shaft,
8 Shaft and the run-of-mine circuit in the Kinross
metallurgical plant)
Delivering consistent and increasing returns
◗ Historically provided attractive dividend yield
with a track record of sector-leading dividends
◗ Continuing operations, such as Barberton
Mines and our surface assets at Evander Mines,
have demonstrated robust profitability and
cash flow generation
◗ Cash-flow-generative assets typically enable
consistent dividend payments to be made
◗ Dividends were curtailed in the current
financial year due to costs associated with
the cessation of Evander Mines’ large-scale
underground operations
◗ Project delivery and requisite shareholder
returns: BTRP payback within 18 months and
ETRP payback within three years
◗ Total Mineral Resources: Gold of 33.30Moz and
◗ The cessation of the high-cost Evander Mines’
an attractive project development pipeline
large-scale underground operations has
resulted in the group being repositioned as a
low-cost gold producer, although this resulted
in the recognition of an impairment charge
of R1.78 billion or GBP106.3 million in the
current reporting period
Cash flow generative
◗ Dividend policy linked to cash generation and
a track record of sector-leading dividends
◗ Following a challenging year, which included a
persistent low gold price, currency volatility
and losses incurred by Evander Mines’
underground operations and associated
retrenchment costs, the board has resolved
to forego proposing a dividend for the 2018
financial year
◗ A five-year historical average dividend yield
of more than 4%
◗ An appropriate level of gearing associated
with the construction of the R1.74 billion
Elikhulu plant
◗ Access to a revolving credit facility (RCF) of
R1 billion and a R1 billion term loan facility
(Elikhulu term loan facility) funding Elikhulu
OUR PURPOSE, VISION AND STRATEGY
OUR PURPOSE
is to exploit mineral deposits in a manner that creates
value for our stakeholders and for the betterment
of society in a sustainable manner.
OUR VISION
is to continue to build and grow a mid-tier precious
metals producer that delivers on this purpose.
PROFITABLE
OUR KEY STRATEGIC ENABLERS
GROWTH
SUSTAINABLE
1. PEOPLE Fostering relationships through
PEOPLE
action, integrity and trust
ACTION
2. ACTION Leadership, planning and control
3. RESULTS Delivering on all our objectives without
compromise, maximising sustainable gold
and positive impact on earnings
RESULTS
The strategic scorecard discusses the group’s strategic
progress in greater detail on
page 18.
STAKEHOLDERS
OUR FOUR
STRATEGIC
PILLARS
OUR STRATEGY
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 and cash flows in a margin-
accretive manner, and by capturing the full precious metals mining value chain by focusing on:
◗ low-cost base
◗ growth in Mineral Reserve base and profitable production
◗ positive impact on earnings in a sustainable manner
◗ maximising recovered grade and production tonnes
◗ high margins.
We encourage an entrepreneurial culture that fosters consistent value accretion for stakeholders by first identifying
and then executing into opportunities within our business and operations. This culture further contributes to
sourcing new investments, organically or acquisitively, thereby bolstering our portfolio of mining assets.
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018
1
KEY FEATURES
GOLD SOLD
160,444oz
(2017: 173,285oz)
REVENUE3
R1,873.9 million (2017: R2,158.2 million)4
GBP108.5 million
(2017: GBP125.1 million)4
EARNINGS PER SHARE CONTINUING
OPERATIONS4
11.16 cents per share
(2017: 44.78 cents per share)
0.63 pence per share
(2017: 2.60 pence per share)
EARNINGS PER SHARE2
(86.03) cents per share
(2017: 19.81 cents per share)
(5.15) pence per share
(2017: 1.14 pence per share)
HEADLINE EARNINGS2
R229.1 million
(2017: R315.6 million)
GBP13.3 million
(2017: GBP18.3 million)
HEADLINE EARNINGS CONTINUING
OPERATIONS4
R338.6 million
(2017: R605.7 million)
GBP19.6 million
(2017: GBP35.0 million)
ALL-IN COST PER KILOGRAM FOR
CONTINUING OPERATIONS1
R463,145/kg
(2017: R392,296/kg)4
1 The all-in cost per kilogram refers to the group’s continuing operations.
2 The group’s key features refer to continuing and discontinued operations collectively.
3 Revenue refers to revenue from continuing operations.
4 The prior reporting period figures were represented to
exclude the effect of discontinued operations. Refer to the financial statements earnings per
share (EPS) note 15 on
page 173.
2
GROUP REVENUE3
R millions
GBP millions
3,500
3,000
2,500
2,000
1,500
1,000
500
0
160
140
120
100
80
60
40
20
0
2014
2015
2016
2017
2018
R million GBP million
PROFIT/LOSS AFTER TAXATION
R millions
GBP millions
1,000
500
0
(500)
(1,000)
(1,500)
(2,000)
40
20
0
(20)
(40)
(60)
(80)
(100)
2014
2015
2016
2017
2018
R million GBP million
GOLD SOLD
Ounces
200,000
150,000
100,000
50,000
0
2014
2015
2016
2017
2018
Underground operations Surface operations
AVERAGE GOLD PRICE VS WORLD GOLD COUNCIL COST
R/kg
700,000
600,000
500,000
400,000
300,000
200,000
2014
2015
2016
2017
2018
Average spot price received Cash cost^ All-in sustaining cash costs^ All-in costs^
AVERAGE GOLD PRICE RECEIVED
USD/oz
1,400
1,300
1,200
1,100
1,000
900
2014
2015
2016
2017
2018
Gold price received
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018STRATEGIC REPORT:BUSINESS AND STRATEGIC OVERVIEW
BARBERTON MINES
A BRIEF HISTORY
The town of Barberton in the South African province of
Mpumalanga originated in the 1880s after Fred and Henry
Barber and their cousin, Graham, discovered gold in the region.
In July 1884, the gold commissioner, David Wilson, laid claim to
the reef and named the town Barberton.
In 1885, Edwin Bray discovered the Golden Quarry (also referred
to as the Edwin Bray tunnel), along with the first gold nugget. This
led to Barberton’s first gold production in 1886.
The mines that today make up the Barberton Mines complex
have been operating for over 100 years and include Sheba Mine,
Fairview Mine and New Consort Mine.
Considered one of the mining wonders of the world, the Edwin
Bray tunnel began the life of the Sheba Mine. This tunnel is still
currently in production, with Sheba Mine the oldest and richest
working mine in the world. Its first 13,000 tonnes of ore yielded
50,000 ounces of gold, making it one of the richest gold strikes ever.
Around 23 tonnes of gold were mined from the Golden Quarry
alone, with 120 tonnes, almost a third of all Barberton mountain
land’s gold, mined from Sheba Mine.
New Consort Mine was originally an
area of several small workings, which
were consolidated over time. In 1933,
the mine was acquired by Eastern Transvaal
Consolidated Mines Limited, which, in 1948,
became a member of the Anglovaal group.
Fairview Mine also started as a group of smaller
operations in 1886. In 1955, they were consolidated
under Federale Mynbou and later acquired by Eastern
Transvaal Consolidated Mines Limited in 1998.
The three mines – Sheba, Fairview and New Consort – were
purchased by Metorex Limited and Millenium Consolidated
Investments in 2003. Since 2007, Barberton Mines have been
owned and operated by Pan African Resources.
While the remaining life-of-mine for each of the mines has been
estimated at seven to 20 years, Barberton Mines have continually
defied these estimates and continue adding to Resources and
Reserves by opening new orebodies and extensions.
Sheba Mine operates
one of the oldest shafts
in the world – the
Zwartkoppie (ZK) Shaft
sunk in 1905.
During a flash flood
of the De Kaap River,
ten gold bars were lost
from Sheba Mine when
carriage and horses were
washed away.
For most of its early
mining life, Sheba Mine
was the richest gold
mine in the world.
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018
3
WHO WE ARE
STAKEHOLDERS
◗ We have a long track record
of providing a cash return
to shareholders through an
attractive dividend, when group
performance allows. We have an
integrated approach to operate
sustainably to the
benefit of all
shareholders
STAKEHOLDERS
SUSTAINABLE
◗ In the current year,
Pan African Resources
restructured our business,
with a focus on sustainable,
low-cost and safe gold
production
GROWTH
◗ We continually consider opportunities
to grow our business in a value-
accretive manner to benefit all
stakeholders
WHAT
WE DO
PROFITABLE
◗ The group’s strategic focus
is on the exploitation of
high-grade orebodies and
surface operations that yield
high margins with a relatively
low-cost base
GROWTH
◗ Our group produces
SUSTAINABLE
gold from underground
operations and from surface
tailings and is one of the
lowest cash-cost producers
of gold in southern Africa
PROFITABLE
OUR VALUES
HOW WE GET THINGS DONE
Continually
improving our
safety structures,
culture and
procedures
Integrity and
leading by
example
Respecting
the natural
environment
Delivering
consistent and
increasing returns
Responsibility
to the wider
employment
context
Challenging the
status quo
Relentless focus
on delivery
0
0
0
2
◗ Incorporated as
Viking Internet PLC
in February
◗ Admitted to AIM
in May
7
0
0
2
◗ Acquired 74% of
Barberton Mines from
Metorex
3
1
0
2
◗ Finalised the acquisition of
100% of the share capital of
Evander Mines for a total net
purchase consideration of
R1.3 billion
◗ Commissioned the BTRP
6
1
0
2
◗ Acquired Uitkomst Colliery
Proprietary Limited (Uitkomst
Colliery) on 31 March for a cash
price of R148.0 million
◗ Acquired shares in PAR Gold held
by Standard Bank of South Africa
Limited and Jadeite Limited for
R546.9 million
6
0
0
2
–
1
0
0
2
◗ Exploration phase
◗ Acquired the remaining 26% of Barberton
Mines from PAR Gold (previously known
as Shanduka Gold Proprietary Limited) 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
9
0
0
2
5
1
0
2
◗ Commissioned the
ETRP
4
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018STRATEGIC REPORT:BUSINESS AND STRATEGIC OVERVIEW ORGANISATIONAL STRUCTURE
77.89%
Pan African Resources
SA Holdings
Proprietary Limited
22.11%
100%
100%
Pan African Resources
Funding Company
Proprietary Limited
Pan African Resources
Management
Services Company
Proprietary Limited
95%
95%
100%
100%
Barberton
Mines
Proprietary
Limited
Evander
Gold Mining
Proprietary
Limited
Elikhulu Tailings
Retreatment
Proprietary
Limited
Evander
Gold Mines
Proprietary
Limited
5%
5%
ESOP
49.9%
PAR Gold
Proprietary
Limited
50.1%
K2015200726
(South Africa)
Proprietary
Limited
49.9%
Concrete Rose
Proprietary
Limited (New
strategic
BEE partner)
50.1%
24.75%
4.95%
10.5%
9.9%
Mabindu Trust
PAR Education
Trust
PAR Management
Trust
Alpha Investment
Group
Proprietary
Limited
8
1
0
2
◗ Group BEE restructure concluded during January,
resulting in an effective 26% BEE ownership of
South African mining operations
◗ Cessation of large-scale mining at Evander Mines’
underground operations on 31 May
◗ Elikhulu is scheduled to be producing at steady
state in October 2018 ahead of initial project
schedule
◗ Approval received for Elikhulu’s development at a cost of R1.74 billion –
venture to yield over 56,000 ounces of gold per annum over a
13-year project life, boosting group production
◗ Raised equity and secured debt financing to fund construction of Elikhulu
◗ Disposed of the Uitkomst Colliery effective 30 June to MC Mining
Limited (MC Mining, previously known as Coal of Africa Limited) for
R277.6 million
◗ Concluded a conditional agreement to dispose of Phoenix Platinum for
R89.0 million after year-end
7
1
0
2
DUAL LISTING
on London’s AIM and South Africa’s JSE
MARKET CAPITALISATION
at 30 June 2018 of R3.0 billion (2017: R5.3 billion)
DIVERSIFIED SHAREHOLDER
base of major South African and international
institutions
THE GROUP’S BLACK ECONOMIC
EMPOWERMENT (BEE) OWNERSHIP
for purposes of the Mineral and Petroleum
Resources Development Act (MPRDA) equates to
26% for Barberton Mines and Evander Mines
5
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018
OPERATING ASSETS
PAN AFRICAN RESOURCES IS A MID-TIER AFRICAN-FOCUSED PRECIOUS METALS PRODUCER
WITH A PRODUCTION CAPACITY OF MORE THAN 170,000oz GOLD PER ANNUM.
The group’s assets at the end of the financial year include:
BARBERTON MINES
Three underground gold mines and the BTRP in Mpumalanga
BARBERTON MINES
1,881
612
20 years
Located in a greenstone belt, this is a low-cost, high-grade operation comprising three underground
mines: Fairview, Sheba and New Consort.
Production (tonnes milled):
Produced (oz/annum):
Capacity (oz/annum):
Tonnage (capacity per annum):
Sustainable capital per annum:
Acquired:
237,831
73,125
95,000
300,000
R110.4 million
74% from Metorex in 2007 and then remaining
26% from PAR Gold Proprietary Limited
(PAR Gold) in 2009
Resources:
Reserves:
Head grade:
Cash cost:
14.9Mt @ 7.54g/t (3.6Moz)
8.4Mt @ 5.73g/t (1.5Moz)
10.30g/t
USD1,053/oz
BARBERTON TAILINGS
RETREATMENT PLANT
64
9
11 years
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.
Production (tonnes milled):
Produced (oz/annum):
Capacity (oz/annum):
Tonnage (capacity per annum):
Sustainable capital per annum:
Developed:
858,967
17,504
30,000
1.2 million
R0.5 million
Steady-state production commenced in 2013
Resources:
Reserves:
Head grade:
Cash cost:
23.3Mt @ 1.08g/t (0.8Moz)
12.6Mt @ 1.36g/t (0.6Moz)
1.40g/t
USD691/oz
6
Rustenburg
Zeerust
Potchefstroom
Klerksdorp
Vryburg
Kuruman
Taung
GROUP MINERAL RESOURCES (Moz)
Gold (331.2Mt at 3.13g/t)
2.95 Measured
20.10 Indicated
10.24 Inferred
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018STRATEGIC REPORT:BUSINESS AND STRATEGIC OVERVIEW Employees
Contractors
Life-of-mine
Description and location
Operational statistics
Resources and reserves
EVANDER MINES1
Situated in Mpumalanga, comprising Elikhulu, ETRP and several brownfield and greenfield projects
Kruger
National Park
Barberton
Mines
GAUTENG
Pretoria
Johannesburg
MPUMALANGA
Nelspruit
BTRP
Barberton
Middelburg
Witbank
Evander Mines
ETRP
Elikhulu
Secunda
Ermelo
GROUP MINERAL RESERVES (Moz)
Gold (239.1Mt at 1.46g/t)
EVANDER MINES1
72
259
0 years
Located in the Witwatersrand basin, comprising 8 Shaft (operations ceased in 2018) and several
potential development projects – Egoli, Poplar, Evander South and Rolspruit. Egoli’s revised feasibility
study to be completed during the first quarter of 2019.
Production (tonnes milled):
Produced (oz/annum):
Capacity (oz/annum):
Tonnage (capacity per annum):
Sustainable capital per annum:
Acquired:
272,124
48,565
95,000
480,000
R176.1 million
100% from Harmony in March 2013
Resources:
Reserves:
Head grade:
Cash cost:
82.7Mt @ 10.1g/t (26.8Moz)
27.5Mt @ 8.3g/t (7.3Moz)
5.7g/t
USD1,682/oz
EVANDER TAILINGS
RETREATMENT PLANT
5
122
13 years
A tailings retreatment project that will exploit historically generated gold tailings deposited in the
Kinross tailings storage facility (TSF) and surface sources.
Production (tonnes milled):
Produced (oz/annum):
Capacity (oz/annum):
Tonnage (capacity per annum):
Sustainable capital per annum:
Developed:
2,182,358
21,250
30,000
2.4 million
Nil
Steady-state production commenced in 2015
Resources:
Reserves:
Head grade:
Cash cost:
36.0Mt @ 0.29g/t (0.3Moz)
36.0Mt @ 0.29g/t (0.3Moz)
Tailings: 0.30g/t
Surface feedstock: 1.7g/t
USD738/oz
ELIKHULU TAILINGS
RETREATMENT PLANT2
30
1,769
13 years
A tailings retreatment project which will exploit historically generated gold tailings deposited in the
Kinross, Leslie/Bracken and Winkelhaak TSFs.
Production (tonnes milled):
Produced (oz/annum):
Capacity (oz/annum):
Tonnage (capacity per annum):
Project capital:
Developed:
12,000,000
56,000 initially
56,000
12,000,000
R1.74 billion
Steady-state production expected by October 2018
Inaugural gold pour achieved on 16 August 2018
Resources:
Reserves:
Head grade:
All-in sustaining cost:
173.7Mt @ 0.29g/t (1.7Moz)
154.6Mt @ 0.29g/t (1.5Moz)
Tailings: 0.29g/t
USD650/oz
0.98 Proved
10.23 Probable
1 Evander Mines’ large-scale underground operations ceased on 31 May 2018. Mineral Reserves
reported for Egoli and Rolspruit.
2 Figures in the table are based on definitive feasibility study (November 2016). USD1:ZAR13.50
utilised in conversion.
7
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018
BUSINESS MODEL
BUSINESS ACTIVITIES
We are committed to low-cost production and optimising extraction efficiency through
our mining activities, while ensuring we invest in the communities in which we operate
and maintain a legacy of environmentally responsible mining.
INPUTS
MINING ACTIVITIES
We use each of the six forms of capital in our business activities to
create and preserve shareholder value.
Evander Mines – large-scale underground operations closed in May 2018
◗ Barberton Mines and BTRP
◗
◗ ETRP
◗ Elikhulu – expected to be producing at steady state by October 2018
◗ Phoenix Platinum – effective disposal 7 November 2017
Financial capital
◗ Shareholder equity
◗
◗
Cash (utilised in)/generated from
operating activities before dividend
Debt facilities
Manufactured capital
◗
◗
◗
Reserves
Resources
Reinvestment in infrastructure
Human capital
◗
◗
Employees’ skills and experience
Skilled and experienced board
Intellectual capital
R2,016.7 million
(R53.2 million)
R1 billion RCF
R1 billion term loan
facility for the Elikhulu
plant
R140.0 million in
general banking
facilities (GBF)
Gold 11.22Moz
Gold 33.30Moz
R1.6 billion
2,069 employees
◗
◗
◗
◗
◗
Mining and prospecting licences
Key personnel for managing the Biological Oxidation (BIOX®)
process
Management and the board’s combined expertise
Networks and relationships
Leadership, planning and control
Social and relationship capital
◗
◗
Investing in our communities
Stakeholder relations – unions, regulators and communities
Natural capital
◗
◗
Energy consumption
Water consumption
8
OTHER ACTIVITIES
◗
◗
Growing the business through
organic and acquisitive
opportunities such as:
– Elikhulu
– Egoli
Stakeholder engagement with
shareholders, investors, employees,
unions, regulators, communities,
suppliers and customers
UPLIFTING
COMMUNITIES
◗ Through corporate social
investment (CSI) and local
economic development
◗ Embracing best practice
corporate governance
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018STRATEGIC REPORT:BUSINESS AND STRATEGIC OVERVIEW
OUTCOMES
OUTCOMES
Through our business activities and the use of capital inputs, we continue to
have a positive impact on the economy and the communities in which we
operate.
◗
◗
◗
◗
◗
◗
◗
◗
◗
◗
◗
◗
Supporting South Africa’s economy through the taxes paid and
employment provided for 2,069 people during the current financial
year
Supporting entrepreneurs, other sectors and industries through our
supply chain
Supporting 31 students with fulltime bursaries in the fields of geology,
mining engineering, mechanical engineering, actuarial science, finance,
economics and mine surveying in the current financial year
Investing in communities through the group’s transformation trusts
totalling R12.6 million for the current financial year – including gold
mining operations and suppliers’ contributions
Producing precious metals in support of increased investor demand as
they seek protection against economic and currency volatility
Creating employment and skills development opportunities to
communities through initiatives such as Umjindi Jewellery and the
Sinqobile Life Skills Centre, LED/CSI projects leave a sustaining long-
lasting impact on communities
Limiting environmental degradation
Minimising the occurrence of illegal mining
Creating shareholder value through dividend distributions
Benefiting communities through continually extending the
life-of-mine through exploration
Supporting South Africa’s transformation goals
Communities benefit from rehabilitation after mine closure
STAKEHOLDER VALUE
Using our financial, 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.
INVESTORS
R185 million
Total dividends paid
SUPPLIERS
R1.63 billion
Local procurement expenditure
GOVERNMENT
R226.6 million
Taxes paid (excluding VAT)
LOCAL COMMUNITIES
R13.6 million
CSI and local development
OUTPUTS
Our outputs support our vision to continue building a precious metals
business in Africa by remaining focused on our four strategic pillars:
profitable, sustainable, stakeholders and growth.
Financial capital
◗
Revenues generated from
continuing and discontinued
operations
– Gold
– Platinum group elements
(PGEs)
R2.69 billion
R24.7 million
◗
◗
◗
◗
◗
(R1.56 billion)
(R202.1 million)
(Loss)/profit after taxation
Cash (utilised in)/generated from
operating activities after dividend
Dividends paid to shareholders
(for 2017 financial year)
Interest payments to debt funders R90.2 million
Government taxes paid
R226.6 million
(excluding VAT)
R185 million
Manufactured capital
◗
Gold production
Human capital
Zero fatalities
◗
Skills development and training
◗
◗
Employee remuneration
Intellectual capital
◗
Mining and prospecting licences
◗
Maximised resource utilisation
Social and relationship capital
Corporate social investment
◗
and local development
Stakeholder relations – unions,
regulators and communities
◗
Natural capital
◗
◗
◗
Energy consumption
Water consumption
Carbon emissions
160,444oz per annum
R24.3 million
R1,035.0 million
R13.6 million
Regular union meetings,
appointment of a dedicated,
fulltime community liaison
officer at Barberton Mines
1,397,695GJ
16,675m3
0.12CO2 e/t milled
EMPLOYEES
R1,035.0 million
Salaries, wages and benefits paid
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018
9
STRATEGIC REPORT:
BUSINESS AND STRATEGIC OVERVIEW
CHAIRMAN’S STATEMENT
Keith Spencer
Chairman
THE GROUP FACED UNPRECEDENTED CHALLENGES, WHICH INCLUDED
FALLING GOLD PRICES, VOLATILE EXCHANGE RATES, OPERATIONAL
CHALLENGES AT BOTH OUR BARBERTON AND EVANDER OPERATIONS
AND A CAPRICIOUS MACRO AND POLITICAL CLIMATE FOR LABOUR AND
COMMUNITY RELATIONS IN SOUTH AFRICA.
10
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018
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The financial year under review saw Pan African Resources
further hone its stated strategy, which focuses on the four key
pillars: profitability, sustainability, stakeholder returns and growth.
The group faced unprecedented challenges, which included falling
gold prices, volatile exchange rates, operational challenges at both
our Barberton and Evander operations and a capricious macro
and political climate for labour and community relations in South
Africa. I am, however, pleased to report that your company has
acted proactively and successfully dealt with these challenges,
with the business restructured to deliver sustainable and profitable
gold ounces.
Following the implementation of several critical initiatives, all of
Pan African Resources’ producing assets are today generating
positive, free cash flows through the production of low-cost gold
ounces. This includes our most recent organic growth project,
Elikhulu, which was commissioned during September 2018, ahead
of schedule and within its projected budget. Though our gold
production for the 2018 financial year was lower than previous
years, the restructuring implemented during the year has significantly
decreased our cost base and improved efficiencies and stability
across all our operations. We further have attractive opportunities
to develop future projects within our existing portfolio, which will
take us back onto the path of profitable production growth and
expanded employment.
The remedial actions and cessation of Evander Mines’ large-scale
underground operations preoccupied a great deal of the board and
management’s attention during the year. With this exercise now
largely completed, further improving our ongoing operations, our
team can now employ even more leadership focus.
The Pan African Resources board must be continuously cognisant
of several variables outside of its control. These include incoming
mining regulations in the form of Mining Charter III, which will
materially affect the future direction of the South African mining
industry and groups that operate in this jurisdiction, as well as
the impact of macroeconomic variables such as the ZAR/USD
exchange rate and the US dollar price of gold. Given a great deal
of uncertainty and volatility, Pan African Resources can only achieve
sustainable growth by being competitive, not only in South African
terms, but also when compared to global peers. Our long-life and
low-cost tailings re-mining businesses are a testament to our ability
to produce gold ounces safely at an attractive margin. We will
continue our focus on lower-cost, higher-margin operations.
The board regularly reviews regulatory compliance and is satisfied
that the group is materially compliant with relevant legislation
and regulations. The board’s review is supported by updates from
its sub-committees and assessments from independent service
providers. Compliance monitoring is a priority of the audit and risk
committee and feedback is given to the board following each audit
committee meeting.
The board challenges the prevailing industry conventions to
ensure that Pan African Resources’ strategy, which lays the
foundation of our sustainability, is relevant and can be delivered
on. As a smaller mining company, we have the advantage of
having the ability to position ourselves more nimbly than
larger mining groups, when it is strategically prudent or critical
to do so.
We are pleased that Barberton Mines has concluded a multi-year
wage agreement post year-end, which will assist with stability at
the operation. This agreement demonstrates the constructive
relationship between our managers, the unions and employees
of group operations. Pan African Resources reaffirms its
commitment to paying dividends to its shareholders, with a
stated dividend policy of distributing 40% of free cash flow
to its shareholders. Following a challenging year, the persistent
low gold price, currency volatility, and considering the losses
incurred by Evander Mines’ underground operations and the
associated costs of retrenchments, the board has resolved to
forgo proposing a dividend for the 2018 financial year. Your
company, however, continues to invest significant capital into
its operations, to ensure future sustainability as a low-cost gold
producer.
With the repositioning of Pan African Resources’ business on
a more sustainable basis, the prospect of future dividends has
improved substantially, and the board aspires to reintroduce
its sector-leading dividend in the near future. Our past track
record should provide shareholders further comfort in this
regard.
I thank our fellow board members for their continued
dedication to our business and their insight during the
current financial year. Further, a warm thanks to the executive
management team and all employees, who continued to show
commitment, perseverance and determination in a particularly
challenging operating environment.
We look forward to the year ahead.
Keith Spencer
Chairman
19 September 2018
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018
11
STRATEGIC REPORT:
BUSINESS AND STRATEGIC OVERVIEW
CHIEF EXECUTIVE OFFICER’S STATEMENT
Cobus Loots
Chief executive officer
THE PAST FINANCIAL YEAR HAS BEEN THE MOST DIFFICULT AND CHALLENGING PERIOD
FOR OUR GROUP SINCE I BECAME A DIRECTOR OF PAN AFRICAN RESOURCES IN 2009. THE
IMPACT OF A DEPRECIATING ZAR GOLD PRICE WAS COMPOUNDED BY OPERATIONAL ISSUES
AT BARBERTON MINES AND EVANDER MINES, AND TOOK PLACE IN A MARKET THAT WAS
NEGATIVE ON MINING AND GOLD EQUITIES IN SOUTH AFRICA.
Pan African Resources was facing the makings of ‘a perfect storm’ in February 2018, with the rand having appreciated some 9.7% from
1 July 2017, and the ZAR gold price depreciating temporarily to almost R505,000/kg, a 7% fall from the R542,773/kg average prevailing during our
2017 financial year.
Over the past year, it became apparent that the headwinds affecting deep-level underground mining in South Africa could no longer be ignored.
Uncertain regulations and legislation, a hostile operating environment, escalating costs and weak commodity prices, inter alia, conspired to threaten
the existence of marginal operations and the groups operating these mines. Shareholders and other capital providers, disillusioned by past losses,
are no longer willing to fund continued loss-making operations.
When a management team is confronted with circumstances that demand action, I believe it is important to analyse the situation carefully and
honestly, and then work to identify, further develop and finally agree on remedial actions. It is critical that whatever actions are agreed on, are
implemented quickly and, as far as possible, faultlessly.
During the 2018 financial year, our team dealt decisively with those issues threatening the future sustainability of the group. Further, we have
positioned the group to be globally competitive, in terms of producing quality, low-cost and safe gold ounces going forward.
12
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The key challenges and matters that required management’s attention during the 2018 financial year are as follows:
Segment
Challenge/Opportunity
Management action
Status
Evander Mines’
underground
operations
Curtailment of the cash
burn at Evander Mines’
underground operations,
particularly given the
depressed ZAR gold price
environment
The curtailment of large-scale underground
mining operations at Evander Mines and the
resultant retrenchment of 1,635 employees
was difficult and regrettable, however, our
group had no viable alternative. More detail
on considerations in this regard and process
followed is included in the operational and
performance review on
page 53
The retrenchment process was successfully
concluded on 31 May 2018. The requirements
of S189A of South African Labour Relations
Act, 66 of 1995 were complied with
Elikhulu
BTRP
Opportunity to mine the
shaft pillar and perform
reclamation work
Construction of the Elikhulu
plant – ensuring the plant is
completed on schedule and
within budget
Unexpected coarse fraction
material encountered,
resulting in reduced plant
throughput and gold
recoveries from the BTRP
Fairview
underground
operations
Limited mining flexibility
within the Fairview Main Reef
Complex (MRC) orebody
Fairview mining operation
is restricted by the hoisting
capacity of its 3 Decline,
which is also used by
employees to access
workings below 42 Level and
the high-grade 11-block of
the MRC
Barberton Mines’ Royal
Sheba Project presents
an opportunity to expand
Barberton Mines’ production
profile and access low-cost
near-surface mineable ounces
over the short to medium
term. We did not previously
identify the opencast
opportunity at Royal Sheba
and are exploring similar
targets within our mining
right area
Barberton Mines’ wage
agreements expired at the
end of the current reporting
period
Further organic
growth
Labour
relations
The management team is currently reviewing
and assessing options to access and mine
Evander Mines’ 8 Shaft pillar
The outcome of the assessment to mine
the Evander Mines’ 8 Shaft pillar will be
communicated in the near future
Construction commenced in August 2017,
with detailed planning and coordination to
minimise potential delays and cost overruns
Installation of a regrind mill to assist with
material handling and improved recoveries
from the Harper dump coarse fraction
material. Process of design and construction
was fast tracked, and completed in less than
six months
Development of two high-grade mining
platforms in the MRC orebody to improve
mining flexibility. This development was
completed during January 2018
Barberton Mines has increased its ongoing
development rates in the 2019 financial year
with the objective of establishing a third high-
grade platform in the Fairview 11-block by the
end of June 2019
The Fairview sub-vertical shaft project
will improve ore handling efficiencies and
significantly reduce the time taken by
employees to access high-grade mining
platforms. The sub-vertical shaft project
is estimated to improve production by
approximately 7,000oz to 10,000oz per annum
Engaged in a surface drilling campaign and
appointed DRA Global to complete a
feasibility to mine the Royal Sheba orebody
as an opencast mining operation and then in
future an underground operation
Elikhulu’s inaugural gold pour was on
16 August 2018, within one year of inception
of the construction. The plant was fully
commissioned during September 2018.
Construction work on the enlarged Kinross
TSF continues
The regrind mill was successfully commissioned
in May 2018, and the BTRP is again performing
in line with expectations
The 358 and 272 high-grade mining
platforms are currently in production with a
commensurate increase in Barberton Mines’
head grade in the second half of the 2018
financial year. These platforms will be available
for the next two to three years, allowing
sufficient time for development into new
mining areas
The R105.0 million project is scheduled for
completion over the next two to three years
The drilling campaign has been completed
with excellent results confirming the extension
of the orebody to surface. We have updated
the market on the prospectivity of Royal
Sheba, and are now considering alternatives
to expedite ‘first gold’ and a large steady-state
operation
Engaged with representative unions in order to
agree a multi-year agreement to the benefit of
all stakeholders
Concluded a three-year wage agreement with
Barberton Mines’ representative unions
For further details of the group’s mining operations, refer to the operational and performance review on
page 48.
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PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018
13
CHIEF EXECUTIVE OFFICER’S STATEMENT continued
The performance of your company during the current reporting
period was credible under the circumstances, with 160,444oz
of gold produced and sold, generating
total revenues of
R2.69 billion (including discontinued operations). Profits from
continuing operations amounted
(2017:
R700.6 million) or GBP11.5 million (2017: GBP40.7 million). Clearly,
the challenges we faced during the period, which were well flagged to
the market, resulted in a loss during the 2018 financial year. However,
the company has a significantly more stable base from which to return
to growth and has reduced the risks from macro events through
sustainably producing low-cost and higher-margin gold ounces.
to R202.0 million
In terms of safety performances, significant progress was made
over the past year with on-mine safety improvement campaigns
contributing to these results. Further, Barberton Mines achieved a
milestone of one million fatality-free shifts during June 2018. After
the 2018 financial year-end, on 13 August 2018, Barberton Mines’
Fairview operation also went on to achieve its one-million fatality-
free shift target. To ensure continued safety improvements, the group
will engage independent safety experts to review each of the mining
operations’ safety systems and controls. We are, however, firmly of
the view that we cannot ‘outsource’ safety, and we work tirelessly to
instil a sense of ownership for safety in each of our employees and
managers.
The group experienced no fatalities in the 2018 financial year
(2017: three fatalities). The group’s lost-time injury frequency rate
(LTIFR) remained stable at 3.73 (2017: 3.51), while the reportable
injury frequency (RIFR) rate improved materially to 1.08 (2017: 1.53).
In the next year, the group will work to further improve safety rates.
The disposal of Phoenix Platinum in the current financial year
demonstrates the group’s future focus on gold.
Pan African Resources reaffirms its commitment to paying dividends
to its shareholders, with a stated dividend policy of distributing 40%
of free cash flow to its shareholders. Following a challenging year,
the persistent low gold price, currency volatility, and considering the
losses incurred by Evander Mines’ underground operations and the
associated costs of retrenchments, the board has resolved to forgo
proposing a dividend for the 2018 financial year.
During the current reporting period the group paid a dividend
of R185.0 million or GBP10.0 million (2016: R300.0 million or
GBP17.1 million) on 21 December 2017, relating to the 2017 financial
year. This dividend equated to R0.08279 per share or 0.44561 pence
per share (2016: R0.1544 per share or 0.87668 pence per share).
With Pan African Resources’ business being repositioned to secure
sustainable low-cost, higher-margin production, the group’s prospect
of reintroducing dividends will substantially improve in the next year.
STRATEGY
Our strategy is underpinned by four pillars: profitable, sustainable,
stakeholders and growth. Their key enablers are people, action and
results.
As a business seeking sustainable growth, we continually look for
value-accretive opportunities that meet our stringent investment
criteria. Our strategic focus areas for the next year are:
Increase Barberton Mines’ production
Ramping up development at Fairview is expected to restore
Barberton Mines’ production to approximately 100,000oz per annum
on a sustainable basis. The new development platforms, supported by
the sub-vertical shaft, will enhance mining flexibility and efficiencies
and result in mining a more constant head grade.
With the recently implemented initiatives already having stabilised
production output at the Fairview and the Barberton operations,
we are now looking to the development of Royal Sheba to further
reduce the cost of production from the Barberton Mines’ complex.
Barberton Mines’ Royal Sheba Project presents an opportunity to
expand Barberton Mines’ production profile on the short to medium
term. The drilling campaign conducted during the year increased the
Royal Sheba gold resource by 150%, 0.36Moz to 0.9Moz.
Limiting work stoppages is critical to ensuring stable production from
Barberton Mines. I am pleased to report that post the 2018 financial
year-end, the group entered into a three-year wage agreement with
the National Union and Mineworkers (NUM) and United Association
of South Africa (UASA), with a 6.5% and 5.5% increase, respectively.
Deliver Elikhulu to expectations and integrate
Elikhulu and ETRP
Elikhulu, which is expected to produce some of the lowest-cost
ounces in the South African gold mining industry, is critical to Evander
Mines’ return to profitability and delivering into the group’s strategic
repositioning. Tailings which were deposited over the past 70 years of
mining activity, will be re-mined in line with industry best practices and
consolidated into a single facility, which will mitigate environmental
risks and make substantial surface areas available for other land uses,
including housing and/or agriculture.
From December 2018, Elikhulu’s processing capacity should increase
to 1.2Mt per month by incorporating the existing ETRP throughput
into Elikhulu’s, thus leveraging plant efficiencies and benefiting from
economies of scale.
The Elikhulu plant is expected to produce 57,000oz to 60,000oz
during the 2019 financial year, at an all-in sustaining cost per ounce of
approximately USD650/oz at the prevailing exchange rates.
Further future growth in gold
As previously announced on 2 May 2018, the group undertook to
reassess the Egoli Project’s original feasibility study as a standalone
project, following cessation of the large-scale underground operations
at Evander Mines. The feasibility study remains attractive with a pre-
taxation net present value (NPV) of R1.04 billion and an internal rate
of return (IRR) of 34%.
Disciplined capital allocation remains a priority in assessing any
expansion programme or acquisition. We are a growth-orientated
company. However, we balance this objective with our shareholders’
aspiration for an attractive sector-leading dividend.
14
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018STRATEGIC REPORT:BUSINESS AND STRATEGIC OVERVIEW OUR OPERATING ENVIRONMENT
South Africa
Of the world’s major gold producers, South Africa continues to be
one of the most expensive countries in which to mine the metal as
confirmed by GFMS, a London-based metals consultancy firm, which
noted that the South African gold mining industry had the biggest rise
in production costs in 2017.
Lower ZAR gold price impact
Year-on-year, the average value of gold in rand terms fell from
R542,773/kg to R538,100/kg. The declining ZAR gold price amplified
the impact of rising cost inflation on the group’s margins and
bottom line.
Rising trend of civil unrest
In South Africa, strikes, unrest and service-delivery protests are
increasing due to a sense of disempowerment and lack of employment
opportunities, compounded by the lack of investment and economic
growth.
Frustrated with slow delivery from the public sector, protesters are
increasingly demanding employment and procurement opportunities
for local entrepreneurs from private sector operators. Although
Pan African Resources is materially compliant with our legislative,
social, labour and CSI obligations, mines are increasingly being
expected to fulfil the government’s responsibility of providing basic
services to communities in addition to being employers. Inter-union
rivalry is a compounding factor, with each competing for members
and influence.
During the reporting period, production was significantly impacted by
numerous community unrest stoppages, particularly in the Barberton
area and its surrounding communities. In April 2018, Sheba Siding
residents demanding jobs decided to block roads and stone the
vehicles entering the Sheba mining operation. Despite this, most
employees still made a concerted effort to report for work. Further
production shifts were lost due to protected and unprotected strikes
involving 1,900 workers who protested about living allowances
and the dismissal of two union leaders. Barberton Mines lost
58 production days across the three operations due to these civil and
labour disturbances.
Meanwhile, in October 2017, Elikhulu at Evander Mines experienced
unrest from a lobby group thought to be seeking tenders from the
project, but operating under the guise of a civic organisation. Following
assaults on Evander Mines’ employees, these protests disrupted
operations for several days.
Mining companies, employees and the surrounding communities
should ideally collaborate for the mutual benefit of all, and we have
established various project teams to engage with stakeholders and
establish more harmonious working relationships. We are seeing the
impact of our intensified engagement, with very limited interruptions
to operations since April 2018.
Shifting scenarios for mining
Across Africa we are seeing a political shift toward resource
nationalism, with governments imposing new obligations, penalties
and taxes on mining companies. At the same time, authorities are
shifting certain of their functions and responsibilities onto the mines,
resulting in further adverse cost consequences. Legislators across
the continent need to engage with mining companies pragmatically,
otherwise sorely required investment into the sector may be allocated
elsewhere. Considering the large capital investment and long lead
times typically associated with mining, regulatory certainty is key to
the future success of the mining industry.
Government bodies, mining companies, regional communities and
workforces need to agree on the significant value that gold mining
contributes to national and local economies. These stakeholders
should collaborate to extract optimum value from South African
mining for the benefit of all.
The incoming Mining Charter III, which is still being negotiated, has
prolonged regulatory uncertainty in South Africa’s mining industry
and delayed much-needed investment decisions. Other acts, such as
the National Environmental Management Act (NEMA), also impact
our mining operations and future expansions.
Illegal mining
Gold’s intrinsic value and the growing unemployment, poverty and
inequality in South Africa have contributed to an increase in illegal
gold mining. PricewaterhouseCoopers Inc. (PwC) South Africa’s Mine
Report 2017 estimated the value of illegal mining to be billions of
rand a year, or equivalent to about 430,000oz of gold per annum.
Organised crime syndicates are involved in illegal mining and it
appears that terror groupings may also be tapping into this financial
resource. Law enforcement authorities often lack the resources to
suppress these activities and mine operators have no choice but to
deploy security teams, with a concomitant increase in costs.
In the current reporting period, the group changed security
contractors and we continue to engage and work with all stakeholders
to minimise the impact of illegal mining.
OUR STRATEGY IS UNDERPINNED BY FOUR PILLARS: PROFITABLE,
SUSTAINABLE, STAKEHOLDERS AND GROWTH. THEIR KEY ENABLERS
ARE PEOPLE, ACTION AND RESULTS.
15
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018 CHIEF EXECUTIVE OFFICER’S STATEMENT continued
Global
The World Gold Council is optimistic about the gold sector’s
prospects in calendar year 2018 – particularly as the global economy
enters its tenth year of gradual recovery following the 2008 financial
crisis.
Positive factors expected to affect the gold industry in 2018 include
China’s more sustainable economic growth trajectory, returning
consumer demand and the Indian government’s restructuring of
its gold sector. Various initiatives around the world are bolstering
domestic gold markets. These include a spot gold exchange in India
and probable changes in Russia’s taxation rules relating to gold.
Increased demand depends on factors such as possible US dollar
weakness and falling share prices, as well as major demographic
shifts and income growth in gold’s largest markets – India and China.
Demand from Asia for physical gold is expected to grow as other
financial instruments lose their sparkle.
Political and economic risk levels across the world are intensifying,
with dominant countries jockeying for political and trade influence.
Political risk is historically positive for gold prices due to its safe-haven
status in unpredictable times.
SUSTAINABILITY
Long-term economic sustainability
Sustainability goes beyond CSI projects, environmental studies and
‘tick-box’ exercises. The cornerstone of sustainability is a profitable
long-term business. Without profits and cash flows, community or
environmental initiatives are unsustainable. If the underlying value
proposition of a business erodes to the extent that it is unsustainable,
all other objectives and stakeholder aspirations will fall by the wayside.
Further, we are dependent on domestic and internal debt and equity
markets for raising capital to invest in our operations. Unless we are
attractive to these markets as an investment proposition and generate
adequate cash flows with which to redeem debt, we will not be able
to sustain or grow our operations.
Risk management is critical in mining and we have worked diligently
at creating a culture of risk consciousness at all levels within our
operations. This has contributed to a commendable safety record for
the year under review. We continue to prioritise safety on a daily basis.
Operational risk management has also been emphasised, with a
review of Barberton Mines’ operations and the implementation of
risk management programmes to ensure mining and processing risk is
reduced to an acceptable level.
We are not aware of any legal proceedings or material conditions that
may impact the company’s ability to continue mining or exploration
activities.
Our competitive advantage
Our organisational culture prioritises a set of values atypical of the
hierarchical structure found in traditional mining companies. In this
way, internal politics and bureaucracy are curtailed by fostering a
unique mindset of frank, open debate and accountability. Decision-
making and execution is well informed and fleet-footed to ensure
optimal operational efficiency.
Operationally, a substantial portion of our production stems from
relatively low-risk, long-life surface sources. While our tailings
processing method is common, our execution is results-driven
and we delegate authority to specific teams to empower them to
achieve their operational objectives. Our BIOX® technology gives us
a competitive edge to treat and recover the high-grade gold pyrite
found in Barberton.
Geologically, our Barberton orebody is vastly distinct from any of the
Wits basin operations and the Fairview Mine is one of the highest-
grade orebodies in the world with a life-of-mine of approximately
20 years.
16
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018STRATEGIC REPORT:BUSINESS AND STRATEGIC OVERVIEW PAN AFRICAN RESOURCES HAS STARTED THE
2019 FINANCIAL YEAR WELL, AND WE ARE
ON TRACK TO ACHIEVING OUR PRODUCTION
GUIDANCE OF APPROXIMATELY 170,000oz
FOR THE 2019 FINANCIAL YEAR. WE WILL
CONTINUE TO FOCUS ON IMPROVING
AND EXPANDING OUR PORTFOLIO, ON A
SUSTAINABLE AND VALUE-ACCRETIVE BASIS,
TO THE BENEFIT OF ALL STAKEHOLDERS.
OUTLOOK AND PROSPECTS
Our priorities for the foreseeable future are linked to the four pillars
underpinning our strategy. Elikhulu was fully commissioned during
September 2018. Post commissioning, Pan African Resources is poised
to produce approximately 91,000oz of gold a year from all the tailings
operations at an all-in sustaining cost of below USD650/oz at the
current prevailing exchange rates. This forecast excludes further tailing
and surface sources processed in the old Kinross plant.
The stand-out highlight at financial year-end is that Pan African
Resources emerged more robust and better positioned for the future
from what was possibly our most challenging year. The emphasis is
now on delivering to market expectations and demonstrating the
group’s sustainability and profitability.
APPRECIATION
I would like to thank my fellow board members for their guidance,
support and insight during the past financial year. Further, a sincere
thanks to the executive management team and all employees, who
continued to show commitment and dedication during this challenging
period.
Finally, to our stakeholders, thank you for your ongoing support of
Pan African Resources. While times may be marked by turbulence and
volatility, we believe the group, with its current strategic direction, is
well positioned to flourish and maximise value for our shareholders
and our other stakeholders in the year ahead and well into the future.
Cobus Loots
Chief executive officer
19 September 2018
17
Positively impacting our communities
Our mines engage in a range of development projects and community
relations activities, which promote sustainable welfare within our local
communities.
school
special-needs
revamped a
In partnership with the Adopt-a-School Foundation, Barberton
Mines
the Emjindini
Township in August 2017. The Thembelihle Cerebral Palsy Care
Centre was originally a wooden shack accommodating 30 young
learners with severe disabilities. The centre was upgraded into a
state-of-the-art facility, with classrooms, dormitories, ablution facilities,
a dispensary, kitchen and dining facilities, offices and two flats for
on-site staff.
in
Following the success of this initiative, Pan African Resources
commenced a second Adopt-a-School initiative at Evander Mines.
Additional information regarding our community engagements is
disclosed in the sustainability review on
page 79.
Environmental
Rehabilitation, closure and liabilities are fully funded via a dedicated
trust and insurance products. Our mining operations are primarily
underground, and our tailings projects actively clean up land surfaces.
Elikhulu, for example, will free up significant portions of land for other
uses. We are also lining the new extension of the Kinross dam to
reduce the environmental impact of deposition.
Acid mine drainage doesn’t occur at our mines due to the lack of
sulphur in our orebodies and waterborne pollution is carefully
monitored to ensure minimum impact.
The BTRP commissioned a cyanide detoxification plant in Barberton
to reduce the long-term impact of the tailings deposition on the
environment.
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018 Strategic performance
Our self-assessment
as at 30 June 2018
STRATEGIC SCORECARD
Our strategic goals
Strategic initiatives
What we would
like to achieve
PROFITABLE
Attributable
profitability
Mining profit margin
from gold operations
How we will achieve our goals
To improve profitability, earnings and cash flow generation at our operations, we are focusing on
the following:
• Grade improvements and maintaining production levels through operational sustaining capital
of R289.4 million (2017: R330.0 million) and development capital of R1.36 billion
(2017: R283.1 million)
Improve cash flow generation with the commissioning of Elikhulu and recent cessation
of large-scale mining at the high-cost Evander Mines underground operations
Investment in infrastructure improvements, such as the refrigeration plant installed and
commissioned at Fairview in July 2017 for R39.4 million
•
•
• The group is currently developing and establishing the underground sections for the Fairview
sub-vertical shaft project
• New mining projects, such as Royal Sheba and Egoli, to maintain and increase future gold
production
• Maintaining an optimal capital structure to reduce interest and related expenditure
• Ongoing assessment of further internal growth and possible acquisitions
Cost containment
• Reducing unit costs of production via increased gold production
• Cost containment through securing a three-year wage deal at Barberton Mines (concluded
after year-end)
• Regular review of all material contracts and other expenses on a regular basis, with a
well-established procurement function
• Cessation of large-scale mining at Evander Mines’ high-cost underground operations
has assisted the group in repositioning as a low-cost producer
• Review and reduction of corporate and other overheads, as well as a general culture
of thriftiness
•
•
Increased development rates at our mining operations to sustain the replacement of Fairview’s
high-grade platforms at Barberton Mines
Increased exploration on our current mining areas and incurred R3.0 million
(2017: R14.2 million) on the Royal Sheba Project and infill drilling on the Fairview 11-block
• Well-established Mineral Resource and Mineral Reserve function, with annual review of all
resources and reserves. New technology and techniques employed to maximise the value
of Reserves and Resources
• New infrastructure and projects, such as the combination of Elikhulu and ETRP, to improve
gold production profile and reduce costs
•
Implement earnings and cash flow-accretive growth with the focus on organic projects, such
as Elikhulu and Royal Sheba
• Well-established Mineral Resource and Mineral Reserve function, with annual review of all
•
resources and reserves
Increased exploration and infill drilling to ensure longevity of our life-of-mines. The group
incurred R19.1 million (2017: R22.3 million) in exploration expenditure
• Operating margins have been impacted by the loss-making Evander Mines and the recent
cessation of large-scale underground operations. Looking forward, the group has been
repositioned as a low-cost gold producer following the commensurate improvement in
future operating profit margins
• New lower-cost projects, such as Elikhulu, to improve profit margins
Investments such as the BTRP regrind mill to improve margins
•
• The group limits cost inflation per kilogram at continuing operations. The continuing
operations’ all-in cost per kilogram was R463,145/kg (2017: R392,296/kg)
Optimal grade/tonnage
production profiles
for operations and
business plans
SUSTAINABLE
Optimising Mineral
Reserves for
sustainable life-of-mine
production profile
Operating profit
margins
All-in cash cost
of production per
kilogram
18
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018STRATEGIC REPORT:BUSINESS AND STRATEGIC OVERVIEW
Good progress
Moderate progress
No progress
Strategic performance
Our self-assessment
as at 30 June 2018
Our strategic goals
Strategic initiatives
What we would
like to achieve
Environmental
compliance
How we will achieve our goals
• We continue to strive for and ensure compliance and zero-harm
• Regular external reviews on closure liability provisions, with adequate funding to address
closure
• Operations work closely with regulators who conduct inspections and, when required, request
corrective measures to be implemented
• New projects, such as Elikhulu, to reduce environmental impact of operations
Safety record and drive
towards zero-harm
• Significant progress was made over the past year with on-mine safety improvement campaigns
contributing to these results. Further, Barberton Mines achieved its milestone of one million
fatality-free shifts during June 2018
Sufficient working
capital and liquidity
for maintenance and
growth
Enabling company
culture
Decentralised and
effective management
• The group experienced no fatalities in the 2018 financial year (2017: three fatalities).
The group’s LTIFR remained stable at 3.73 (2017: 3.51), while the RIFR improved materially
to1.08 (2017: 1.53)
• The group’s net debt increased in the current year, following the construction of Elikhulu and
the recent cessation of large-scale mining at Evander Mines’ underground operations
• Looking forward, the group is repositioned as a low-cost gold producer with a reducing debt
profile and headroom for growth
In the coming year, the group will seek to further optimise its capital structure
•
• Clear articulation of group values and culture, with management emphasising these values
• Decentralised management structures ensure improved decision-making and sustainability
of mining operations
• Consistent monitoring of performance of the operational teams, with emphasis on critical
areas
Engagement with local
communities
• Pan African Resources has been impacted by community unrest and the group continues
to engage with our mining communities
• New structures implemented to improve relations and intensified ongoing engagement
with communities
Skills development and
training
STAKEHOLDERS
Ongoing engagement
• The group’s mining operations continue to focus on skills and development training and
have spent R24.3 million (2017: R32.1 million)
The group continues to focus on improving and maintaining stakeholder communication and
relationships. The following have been implemented to improve stakeholder engagement:
•
Improved communication with employees through regular meetings, feedback and a new text
messaging system at Barberton Mines
• Communities are more actively engaged with the implementation and appointment of specific
structures and individuals at the operations, with the primary focus of working with our
communities, making a difference to the lives of community members and addressing their
expectations
• Shareholders are updated regularly with operational updates
• The group recently concluded a BEE restructure on 15 January 2018, resulting in a 21%
BEE ownership on the respective mining operations via Pan African Resources SA Holdings
Proprietary Limited (SA Holdco)
• The employees own 5% of the mining operations through their employee share ownership
schemes (ESOP)
• All mining operations are based on the above BEE structures, with a 26% BEE ownership
calculated for Barberton Mines and Evander Mines
• The mining operations’ social and labour plan (SLP) commitments are monitored and the
Department of Mineral Resources (DMR) regularly reviews compliance
• Mining Charter compliance is also regularly reviewed, with engagement around proposed
amendments to regulation closely monitored
19
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018 STRATEGIC REPORT:
BUSINESS AND STRATEGIC OVERVIEW
STRATEGIC SCORECARD continued
Good progress
Moderate progress
No progress
Strategic performance
Our self-assessment
as at 30 June 2018
Our strategic goals
Strategic initiatives
What we would
like to achieve
Return on shareholder
funds
How we will achieve our goals
• The group’s shareholder returns were impacted by a lower gold price environment and the
cessation of large-scale mining at Evander Mines’ underground operations
• Looking forward, an improved performance is expected following the repositioning of the
group as a low-cost gold producer
• The group has an established track record of attractive shareholder returns, with any new
project required to meet and exceed hurdle rates of return
Dividend track record
• The group has a history and strong track record of dividend payments and will endeavour
to reinstate the dividend, following the measures implemented to cease large-scale mining at
Evander Mines’ high-cost underground operation and the resultant retrenchment of
1,635 employees
• The group’s prospect of reintroducing dividends will substantially improve in the next year
Safety record
• The group had an improved safety performance across all operations, with zero fatalities
during the current reporting period
• Barberton Mines achieved one million fatality-free shifts in June 2018
• Barberton Mines’ Fairview operation achieved one million fatality-free shifts during
August 2018
Union engagement and
relationships
• The group continuously engages with its employees and, post the 2018 financial year-end,
concluded a three-year wage deal at Barberton Mines with no recent material industrial action
incidents
Wage increases
and appropriate
remuneration policies
Contributions to
revenue authorities
• The group ensures all employees are remunerated appropriately at the various levels. The
group further benchmarks remuneration relative to other mining houses
• The group contributed R222.6 million (2017: R338.9 million), excluding VAT, to revenue
authorities. The reduced contributions are predominantly due to income taxes which declined
to R11.8 million (2017: R105.7 million) and are linked to the group’s profitability, which was
impacted by the low ZAR gold price environment and the cessation of large-scale mining at
Evander Mines’ underground operations
CSI/LED spend
• The group maintains contributions to CSI/LED projects as required by legislation. The group
spent R13.6 million (2017: R24.3 million) on CSI/LED projects
• The group incurred R1.1 million on retraining Evander Mines’ employees, following the
retrenchment exercise on 31 May 2018
GROWTH
Organic growth
(achieved within
existing infrastructure)
Acquisitive growth
(achieved outside of
existing infrastructure)
Replacement of
Mineral Reserve
projects for depleted
projects
• The group is fortunate to have numerous organic growth projects. The group is currently
focusing on Elikhulu, Egoli and Royal Sheba to improve its production profile over the short
and medium term
• The board is conscious of the requirement of our stakeholders for value creation and all
capital allocation decisions are subject to rigorous analysis and predefined risk-adjusted return
parameters to ensure this objective is fulfilled. The group continuously assesses potential
opportunities to grow via value-accretive acquisitions
• The group continues to ensure the appropriate allocation of sustaining capital to replace
Mineral Reserves mined and sustain the life-of-mines of continuing operations
• The group has recently undertaken a surface drilling campaign at Royal Sheba, which is further
page 60
discussed in the abridged MR&MR on
MEDIUM-TERM
ASPIRATION
220,000oz
BY 2021
ANNUAL
TARGET
170,000oz
PER ANNUM
20
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018 OPERATING ENVIRONMENT
for the year ended 30 June 2018
GLOBAL MARKET CONDITIONS APPEAR
SOUNDER IN 2018
◗ A weaker US dollar and inflation reduced the gold price
over the period under review
◗ Political and economic risk levels have increased across the
world
◗ Gold’s safe-haven status supports its price in uncertain
times
◗ Prospects for gold demand are positive for 2018,
particularly in developing economies with young
investment markets
STRONG RAND ERODING SOUTH
AFRICAN GOLD MINES’ MARGINS
◗ While the strengthening of South Africa’s rand against
the dollar in recent months has been widely welcomed
by many, it has somewhat dampened the outlook for
exporters and mining firms reliant on a weakening
currency to offset inflationary pressures
◗ The resultant decline in the ZAR gold price, which has
exacerbated the impact of high production costs, is
expected to continue to hinder gold gains and erode
profitability in the short term
Global gold market
dynamics
So
m
uth
arket
Africa
dyn
a
mics
n
E
x
a
n
d
pectatio
extern
ns
al sta
m
of co
keh
olders
u
m
nities
Regulatory compliance,
changes and amendments
GOLD PRODUCTION IS CURRENTLY
CONSTRAINED BY SOCIO-POLITICAL
CHALLENGES
◗ South Africa has an unemployment rate in excess of 25%,
providing fertile ground for social unrest
◗ Strikes, unrest and protests are increasing due to general
dissatisfaction with service delivery, political manoeuvring
and chronic unemployment
◗ Mining groups are under pressure to meet community
demands for employment and infrastructure
◗ Illegal mining is on the rise
EVOLVING REGULATORY LANDSCAPE
CREATES UNCERTAINTY
◗ The mining industry in South Africa is subject to extensive
legislation and regulations
◗ Amendments to the MPRDA have introduced some
onerous requirements, with enhanced sanctions for
non-compliance
◗ A revised Mining Charter was published by the DMR on
15 June 2018
◗ Uncertainties around the legitimacy and feasibility of these
amendments run the risk of increased investor dissonance
Refer to chief executive officer’s statement on
page 12 for more detail.
21
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018
RISKS, OPPORTUNITIES
AND MATERIAL ISSUES
PAN AFRICAN RESOURCES PRESENTLY OPERATES IN SOUTH AFRICA’S MATURE AND HIGH-
RISK GOLD MINING SECTOR, WHICH IS CHARACTERISED BY DIMINISHING OREBODIES AND,
IN RECENT YEARS, HAS BEEN HEAVILY IMPACTED BY MACROECONOMIC AND SOCIETAL
PRESSURES.
To remain profitable and sustainable, Pan African Resources thoroughly
evaluates all actual and potential risks that may impact stakeholders
or threaten the group’s viability. Risks are prioritised, assessed for their
probability of occurring and their potential impacts. Simultaneously,
we also consider the opportunities that may arise for such risks. Risks
deemed serious enough are mitigated by contingency plans for swift
responses.
The nature and potential severity of the group’s risks – as re-evaluated
from year to year – also inform Pan African Resources’ ongoing
strategy. Though the group has a formal risk management function
that reports to the financial director, consistent with the group’s risk
management culture, managing risk is regarded as the responsibility of
everyone in the group.
RISK MANAGEMENT APPROACH
Pan African Resources’ risk management philosophy and appetite is
set and overseen by the board. Risk appetite levels are aligned with
board-approved strategic objectives, with risk appetite levels adjusted
according to changing internal and external scenarios.
Pan African Resources’ risk is managed with the objective of
optimising, within our risk appetites, our ability to create value in the
short, medium and long term. For ease of understanding, the group
aggregates its identified risks into four categories.
Macroeconomic
Financial
Operational
Strategic
Mainly beyond the group’s
control and is increasingly volatile,
though we manage or mitigate as
proactively as we can
Managed and monitored
proactively through a centralised
treasury, capital allocation
discipline, statement of financial
position, gearing levels, access to
funding and adherence to risk
management and internal control
policies
Hands-on management through
approved processes and ongoing
monitoring of performance against
targets and benchmarks
Impacting the group’s ability to
execute strategy and deliver against
strategic objectives
Factors impacting value creation Material issue
Macroeconomic
• Managing our evolving regulatory environment, alongside
volatile commodity and currency prices
Financial
• Financial sustainability in a challenging economy with political
and macroeconomic volatility
• Operating in a safe and healthy environment, supported
by continuous engagement with stakeholders affecting
operations
• Respecting the natural environment
• Extracting reserves and resources in a responsible manner
• Attracting and retaining key talent
• Operating in a challenging environment with increasing
domestic political risk
• Ensuring longevity of operations
Operational
Strategic
22
Principal risk
• Regulatory and legal
• Financial
• Financial
• Operational
• Regulatory and legal
• Safety
• Operational
• Environment
• Operational
• Financial
• Regulatory and legal
• Reputational – social licence to operate
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018STRATEGIC REPORT:BUSINESS AND STRATEGIC OVERVIEW RISK MANAGEMENT PROCESS
The group’s risk management process is guided and informed by
the external environment (macroeconomic), specific regulatory
requirements and its internal environment (financial, operational
and strategic), all of which continually enlighten the group’s strategy.
Day-to-day risk compliance and implementation is the responsibility
of operational management and the executive and operations
committees at the corporate office. The board and audit committee
provide oversight of the risk management process.
Summary of risk management procedure
Identified risks are benchmarked against its listed peers to ascertain
if these risks are industry-wide and to provide comfort to the board
that an industry-specific risk is not excluded.
The group’s risk management system is based on a systemic process
for reviewing Pan African Resources’ internal and external risks. This
risk management process consists of the following main elements:
COMMUNICATE
Provide regular reports
to the Financial officer
and audit and risk
committee at agreed
times
IDENTIFY
Identify risks (threats
or opportunities), which
are documented by
the risk register
owner
MONITOR
AND REVIEW
Monitor and review the
performance of the risk
management system and
changes to business
initiatives
RISK REGISTER
REVIEW
ASSESS
Document the net effect
of all identified threats and
opportunities by assessing:
• likelihood of threats and
opportunities
• impact of each risk
• proximity of threats
• prioritisation based
on scales
PLAN
Prepare management
responses to mitigate
threats and maximise
opportunities
IMPLEMENT
Risk responses
are actioned
Risk assessment
matrix
Update risk
register
QUARTERLY
board risk
governance
◗
◗
◗
◗
Board
Audit
SHEQC
Social and ethics
MONTHLY
management risk
governance
◗
Exco and Opsco
ONGOING
operations risk
management
◗
◗
◗
Operations management
committees
Risk coordinators
Risk matrix per operation
23
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018 RISK, OPPORTUNITIES AND MATERIAL ISSUES continued
Board risk governance
The board is responsible for oversight of the group’s risk management approach and is guided by the audit committee, its own internal risk
assessments and regular reviews of the risk reports from each operation. A formal safety, health, environment, quality and community (SHEQC)
committee informs the board on safety, health and environmental aspects. Each year the board reviews the group’s risk appetite to ensure it
remains relevant to the group’s strategy as circumstances change. The board also ensures the appropriate risk management programmes are in
place and monitors the implementation of risk-mitigating strategies against key risk indicators.
To ensure that risks are monitored daily and amended as necessary, each risk is assigned to a risk owner. Risks and their respective risk owners are
recorded in the group’s risk register.
High impact,
high
likelihood
2
Low impact,
high
likelihood
5
1
6
r
e
t
t
a
m
l
a
i
r
e
t
a
m
f
o
e
d
u
t
i
n
g
a
M
PRINCIPAL
IDENTIFIED RISKS
The heat map alongside depicts the
group’s top risks in order of priority,
along with their comparative risk
rankings. The table on
page 25
describes each principal risk, how it
is mitigated and how it is aligned to
the group’s strategic pillars.
Top 6 risks
1. Safety (2017: 1)
2. Regulatory and legal (2017: 3)
3. Operational (2017: 2)
4. Financial (2017: 4)
5. Reputational – social licence to
operate (2017: 5)
6. Environmental (2017: 6)
3
4
Low impact,
low
likelihood
Probability of occurrence
High impact,
low
likelihood
FAST FACTS
2017 MINING CONTRIBUTION SUMMARY:
◗ Direct contribution of mining to gross domestic product (GDP): R312 billion
◗ Mining GDP growth rate: 3.7%
◗ Mining contribution as % of total GDP: 6.8%
◗ Direct contribution of mining to fixed investment: R93.4 billion
◗ Total primary mineral sales: R424 billion
◗ Royalties paid: R5.8 billion
◗ Taxes paid: R16 billion
24
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018STRATEGIC REPORT:BUSINESS AND STRATEGIC OVERVIEW
PRINCIPAL RISKS AND MITIGATION
Substantially achieved
Moderate progress
Not achieved
Risk
rating Nature of risk
Principal risk
Macroeconomic
Regulatory
and legal
2
Uncertainty
surrounding mining
and environmental
legislation
Controls in place to mitigate the risk
Link to strategy
Self-
assessment
on progress
during 2018
• Profitable
• Sustainable
• Stakeholder
• Maintaining flexibility around empowerment
shareholding structures
• Strengthening the group’s empowerment
credentials through a BEE restructure concluded
on 15 January 2018
• Broad-based employee share ownership
programme in place at operational level
• Monitoring changing legislation to ensure
•
compliance
Incentives linked to the achievement of objectives
and value creation
• Enterprise development funding
• Community development spend
• Training and development of own candidates
through structured training plans
• Cultivating good working relationships with
regulators and with representatives of the national
or local government
Regulatory compliance
• Policies, standards and procedures in place to
ensure compliance
• Regular compliance review by advisers and
sponsors
• Register of all mining titles
• Compliance with water-use licence guidelines
• Outsourced legal, taxation and internal audit
functions
• Continuous engagement with and reviews by
•
regulators on compliance
Independent reviews on compliance undertaken
from time to time
• Regular meetings with municipalities, trade unions
and the DMR
• Anti-bribery and anti-corruption policies in place
• A culture of zero-tolerance towards corruption
• Ongoing training and awareness
• Focus on oversight and segregation of duties
• Specific internal controls to mitigate bribery risk
Independent internal and external audit functions
•
Not adhering to
anti-bribery and anti-
corruption legislation
Financial
Financial
4
Poor capital allocation
decisions
• Capital allocation is based on stringent investment
criteria and subject to board oversight
• Ensuring the required skills and experience in
place for decision-making
• Profitable
• Sustainable
• Growth
Weak cash flow
generation and
excessive debt levels
• Daily monitoring of working capital availability and
monthly review of capital expenditure, cash flow
generation and group debt levels
• Continuous focus on improvement of operational
margins in a low ZAR gold price environment
• Standby facilities to bridge working capital deficits
• RCF of R1 billion in place
• Elikhulu term loan facility of R1 billion in place
• GBFs of R140 million in place
25
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018 RISK, OPPORTUNITIES AND MATERIAL ISSUES continued
Risk
rating Nature of risk
Controls in place to mitigate the risk
Link to strategy
Self-
assessment
on progress
during 2018
4
Financial risk
• Selective hedging and monitoring of currency,
• Profitable
• Sustainable
• Growth
• Sustainable
• Stakeholder
liquidity, commodity and interest rate exposures
within board-approved risk limits and financial risk
management policy
• Strong financial position with US dollar gold
revenue resulting in a rand hedge in the event of a
ratings downgrade
• Rand-denominated debt
• Adherence to treasury and financial risk
management policies to ensure financial risk
remains within board-approved limits
• Strategic hedging of gold prices and exchange
rates
• Focus on production costs to maximise margins
and remain a low-cost producer
• Robust internal controls
• Fidelity insurance cover
•
Internal audit reviews with the use of additional
data analytic reviews to identify potential trends
and relationships
• Cybercrime insurance cover in place for 2019
• Legal compliance, standards and procedures in
place, plan task observation and regular audits
conducted
• Ongoing examination of workplace conditions
with independent audits planned for the 2019
financial year
• Monthly and quarterly inspections by safety
department and quarterly risk and rock
engineering reviews
• Fall-of-ground committee in place
• Senior and experienced safety managers at
•
•
•
operations
Independent oversight by regulators
Installation of a refrigeration plant at Fairview
Mine significantly reducing ambient temperatures
Improvement of ventilation conditions using
various methods
• Ongoing monitoring of working conditions
• Ventilation audits conducted
• Emergency service providers at operations and
emergency training in place
Principal risk
Financial continued
Financial
continued
Sovereign credit rating
downgrades
Volatile commodity
and currency prices
Financial cybercrime
Operational
Safety
1
Mine accidents
Ambient working
conditions
Onerous logistic
challenges in
responding to
emergency trauma
situations
26
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018STRATEGIC REPORT:BUSINESS AND STRATEGIC OVERVIEW Principal risk
Risk
rating Nature of risk
Controls in place to mitigate the risk
Link to strategy
Self-
assessment
on progress
during 2018
Substantially achieved
Moderate progress
Not achieved
Operational continued
Safety continued
1
Illegal miners pose a
risk to employees and
contractors above-
and underground and
on surface
• Strict access control into the respective areas of
the operations
• Sustainable
• Stakeholder
• Security actions, including proactive approach by
on-mine security
• Application of regular reviews of on-mine security
contractor’s performance
• Ongoing involvement of police and regulatory
bodies
• Proactively acting on verified informant
information to limit and impede the actions of
illegal miners
Risk of a safety
incident or DMR
Section 54 stoppages
due to regulatory
issues
• Continued emphasis on safety compliance and
implementation of risk management systems, such
as proximity detection systems
• Governance of SHEQC, which is decentralised
and subject to group standardisation and oversight
• Proactive relationship with regulator
Legislative breaches
• Ongoing training, audits, reviews and monitoring
of compliance, including independent reviews
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 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
antiretroviral treatment
Insurance and disability schemes in place
•
27
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018 RISK, OPPORTUNITIES AND MATERIAL ISSUES continued
Principal risk
Risk
rating Nature of risk
Operational continued
Controls in place to mitigate the risk
Link to strategy
Self-
assessment
on progress
during 2018
• Profitable
• Stakeholder
• Growth
• Profitable
• Stakeholder
• Growth
Operational
3
Strike actions
• Proactive, strong relationships with representative
Challenging operating
environment
with complicated
infrastructure
unions
• Recognition agreements
• Proactively negotiating for multi-year wage
agreements within the group
• 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
• Cessation of aged and loss-making mining
operations such as Evander Mines’ underground
operations
• Active management of engineering risk registers
for all operations
•
Independent audits to identify areas of risk
• Scheduling of operations to take account of
constraints
• Performance monitoring systems instituted
• Planned routine maintenance contracts
• Refurbishment, major overhaul and capital
investment
• Support generators for critical functions and
back-up generators provide limited power to
processing plants
• Energy-efficient programmes to reduce
consumption
• Engagement with Eskom on planned and
unplanned power interruptions and infrastructure
management
• Power management and load monitoring
• Production performance monitoring systems
implemented
FAST FACTS
◗ Mining is South Africa’s third largest business sector after
agriculture and manufacturing, contributing almost 10% to
the country’s GDP
◗ The South African mining industry underpins:
– approximately 500,000 direct jobs, supporting 4.5 million
dependants
– annual employee earnings of over R126 billion
28
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018STRATEGIC REPORT:BUSINESS AND STRATEGIC OVERVIEW Principal risk
Risk
rating Nature of risk
Operational continued
Environmental
6
Risk of environmental
damage
Strategic
Operational
3
Ventilation
requirements are
constrained with
limited capacity to
supply required
volumes
Declining resource
and reserve base
Geological reporting
of quality and quantity
of reserves
Inability to attract and
retain staff
Substantially achieved
Moderate progress
Not achieved
Controls in place to mitigate the risk
Link to strategy
Self-
assessment
on progress
during 2018
• Sustainable
• Stakeholder
• Environmental management plans in place
• Rehabilitation funds in place to minimise and
mitigate the environmental effects of mining
• Transfer of rehabilitation funds from a trust
structure to an insurance product for better
compliance with future environment and DMR
requirements
• Pollution control and water catchment dams
• Continuous training on and monitoring of
environmental damage detection systems, such as
scavenger boreholes and pumping
• Compliance with water-use licence guidelines and
requirements
• Control of arsenic in contained storage areas
• Specific action plans in place to deal with flooding
incidents
• Cyanide constraints dealt with by procuring
additional solid cyanide briquettes from alternative
sources and continued engagement with the
principal supplier to ensure a sustainable supply
• De-cyanidation plant installed at the BTRP
• The Kinross TSF extension has been lined with a
class C liner to reduce the impact of the reagents
on the environment when Elikhulu begins re-
mining and deposition
• Monitoring of ventilation systems and upgrading,
where necessary
• Ventilation audits conducted
• New refrigeration plant installed at Barberton
Mines to assist cooling and ventilation at Fairview
• Strategies in place to identify value-enhancing
organic and acquisitive growth opportunities, such
as Elikhulu, Egoli, Royal Sheba, New Consort and a
sub-vertical shaft at Fairview
• Continued investment in further exploration and
reserve generation in the Barberton area
• Conducted an independent geological review and
mine optimisation study
• Profitable
• Sustainable
• Stakeholders
• Growth
• 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
29
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018 RISK, OPPORTUNITIES AND MATERIAL ISSUES continued
Substantially achieved
Moderate progress
Not achieved
Self-
assessment
on progress
during 2018
Principal risk
Strategic continued
Operational
continued
Risk
rating Nature of risk
3
Skills shortage
Controls in place to mitigate the risk
Link to strategy
• Apprenticeships and learnerships in place
• Bursary programme in place for tertiary students
• Ongoing market research conducted on
availability of scarce category skills
• Comprehensive training, including job-based skills
• Profitable
• Sustainable
• Stakeholders
• Growth
training
Financial
Reputational –
social licence
to operate
4
5
Inability to integrate
project or acquisitions
• Extensive change management experience from
prior transactions
• Sustainable
• Growth
• Project management skills in place, complemented
with external expertise
• Elikhulu construction is managed through an
owners’ team and the Engineering Procurement
and Construction DRA team
Underperforming
market expectations
• Regular market communication
• Monitoring operational performance relative to
Stakeholder
expectations
analyst forecasts
• Ensuring the group’s production guidance is
communicated to the shareholders with regular
updates provided
• Ensuring the market is updated in relation to
Elikhulu’s construction schedule and budget
• Regular communication with unions
• Ongoing communication with communities
• CSI and LED programmes in place across
operations
• Compliance with listing and regulatory
requirements
• Sustainable
• Stakeholders
• Growth
• Sustainable
• Stakeholders
IDENTIFYING OPPORTUNITIES
Opportunities can arise because of a specific set of circumstances, as well as through various business activities driven by the group’s strategy.
A key differentiating factor of Pan African Resources is its ability to identify opportunities that may arise and swiftly assess whether the group is able
to capitalise on them and manage the associated risks. Examples of opportunities the group has identified and capitalised on include:
Opportunity
More information
Disposing of Phoenix Platinum
Discontinued operation, financial director’s review,
page 40
Initiating the construction of Elikhulu
Operational reviews, Elikhulu,
page 56
Fairview sub-vertical shaft
Operational reviews, Barberton Mines,
Royal Sheba
Operational reviews, Barberton Mines,
New Consort exploration
Operational reviews, Barberton Mines,
page 48
page 48
page 48
Egoli Project
Operational reviews, Evander Mines,
page 52
30
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018STRATEGIC REPORT:BUSINESS AND STRATEGIC OVERVIEW STAKEHOLDER ENGAGEMENT, VALUE
CREATION AND DISTRIBUTION
PAN AFRICAN RESOURCES’ STAKEHOLDERS ARE INTEGRAL TO THE GROUP’S GROWTH, VALUE
CREATION AND SUSTAINABILITY. THEY HAVE BEEN IDENTIFIED AS ONE OF OUR FOUR
KEY STRATEGIC PILLARS WHICH INCLUDE: PROFITABLE, SUSTAINABLE, STAKEHOLDERS AND
GROWTH. STAKEHOLDER FEEDBACK AND CONCERNS ARE CAREFULLY CONSIDERED WHEN
REVIEWING AND REFINING STRATEGY, WHICH FOSTERS REALISTIC PERCEPTIONS BY AND
EXPECTATIONS FROM OUR STAKEHOLDERS IN RELATION TO OUR BUSINESS, DECISIONS AND
PERFORMANCE.
OUR KEY STAKEHOLDERS
CONSTRUCTIVE
DIALOGUE AND
ENGAGEMENT
Employees
Permanent and
contractors
Providers of capital
Investors,
shareholders and
banks
ONGOING
ENGAGEMENT
INFORMING
STRATEGY
STAKEHOLDER
FEEDBACK
Suppliers
Unions
NUM and UASA
Communities
Government and
regulators
DMR and
municipalities
Customers
Refineries, banks
and communities
Listings
exchanges
STAKEHOLDER ENGAGEMENT APPROACH
Stakeholder engagement is important to the group as it fosters
transparent communication channels to share information and
proactively resolve concerns, while at the same time balancing the
expectations of shareholders and other stakeholders. It is essential in
shaping our strategy, better managing risks, identifying opportunities
and managing our reputation.
Stakeholder engagement takes place centrally at our corporate office
and at all operations. The chief executive officer assumes responsibility
at corporate office level and is supported by the financial director as
they engage with investors and analysts.
The executive: human resources engages with labour unions and
employees, and operational management engages with the DMR
on health and safety issues. At an operational level, stakeholder
engagement is the responsibility of the general and human resources
managers. The board also engages with shareholders at the annual
general meeting (AGM) and on an ad hoc basis, when required.
Concerns raised operationally are governed by the management
committee and at board level. The SHEQC committee oversees
stakeholder concerns.
31
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018 STAKEHOLDER ENGAGEMENT, VALUE CREATION AND DISTRIBUTION continued
DETERMINING AND PRIORITISING OUR KEY STAKEHOLDERS
The group’s operations impact various stakeholder groups, some more materially than others, depending on
the nature of the engagement.
In determining and prioritising our stakeholders we consider, inter alia, the following factors:
◗ How the stakeholder impacts our business from a strategic and reputational perspective
◗ The risk we are exposed to should the group not actively engage with the stakeholder
◗ The opportunities realised in actively engaging with the stakeholder
◗ What impact the stakeholder has on our operational performance
◗ How the stakeholder informs our material issues
◗ Corporate and social responsibility towards specific stakeholders.
STAKEHOLDERS’ KEY CONCERNS
The table below shows the key concerns raised by stakeholders during the year under review and how Pan African Resources responded to each
concern:
Key concern
Stakeholders impacted
Pan African Resources’ response
Meeting expectations on
Elikhulu
• Employees
• Providers of capital –
debt and equity
• DRA Global was appointed as the group’s construction partner,
with construction beginning in August 2017
• Elikhulu’s inaugural gold pour was on 16 August 2018, within one
Cessation of Evander
Mines’ high-cost, large-scale
underground operations
• Employees
• Unions
• Providers of capital –
debt and equity
year of construction beginning
• Elikhulu was fully commissioned during September 2018
• Cessation of large-scale underground operations at Evander Mines
Repositioning of the group
as a higher-margin and
lower-risk gold producer
• Employees
• Government and
regulatory body – DMR
Repositioning of the group included the following initiatives
undertaken:
• Construction of Elikhulu plant, which will produce some of the
• Providers of capital –
debt and equity
lowest-cost ounces in the South African mining industry
• From December 2018, Elikhulu’s processing capacity will
increase to 1.2Mt per month by incorporating the existing ETRP
throughput into Elikhulu’s
• Ramping up development at Fairview is expected to restore
Barberton Mines’ production to approximately 100,000oz per
annum on a sustainable basis
• Cessation of large-scale mining at Evander Mines’ underground
operations
• Commenced a drilling programme and feasibility study on Royal
Sheba, with a focus on increasing production from the Barberton
Mines complex
Investment in and successful installation of the BTRP regrind mill to
improve margins and production
•
• Retrenched employees were offered reskilling opportunities and a
number of these employees have been retrained and re-employed
at Elikhulu. Environmental rehabilitation of the mine will provide
further employment opportunities
• The group spent R1.1 million on retraining Evander Mines’
employees following the retrenchment exercise
1,635 employees were
retrenched at Evander
Mines
• Employees
• Unions
• Providers of capital –
debt and equity
32
Reference to
further input
page 56
page 53
page 48
page 56
page 80
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018STRATEGIC REPORT:BUSINESS AND STRATEGIC OVERVIEW The table below provides a high-level overview of the nature, frequency and responsibility for stakeholder engagement and what matters to
stakeholders:
Stakeholder
What matters to stakeholder
Nature of engagement
How feedback informs
strategy
• Poll results and feedback
from presentations and
one-on-one meetings
discussed at executive
management level
Responsibility
• Chief executive
officer
• Financial director
• Other senior
executives
• Safe mining
• Return on investment
• Financial performance
• Operational performance
• Union relationships
• Accreditations and
regulatory compliance
• Resources and reserves
reporting
• Sustainability of the business
• Environmental compliance
• 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
• 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
• Future Forum meetings
• Discussed at operational,
executive and board level
• Group financial
performance
• Payment track record
• Growth project pipeline
• Loyalty
Job creation
•
• CSI
• Environmental
conservation/protection
• One-on-one meetings
• Discussed at operational
and executive
management level
• Community meetings and
forums
• Media
• Discussed at the SHEQC
committee executive and
board level
Providers of capital
Employees
Suppliers
Communities
Unions
• Health and safety
• Transformation
•
Job security
• Fair remuneration and
reward
• Employee committees
• Branch committees
• Shaft committees
• Mine committees
Government and
regulators
• Transformation
• Mining Charter compliance
•
Job creation
• Safe mining
• Profitable mining
Customers
• Quality
• Timeous delivery
• Price
• Volume
• Regular and frequent
communication with
Departments: DMR, Labour,
Water Affairs, Education
and Public Works
• Local municipalities’
independent development
plans
• One-on-one meetings with
the refinery
• Discussions between union
and management occur
on the mines and the
outcomes are conveyed to
the corporate office
• Discussed at operational,
executive and board level
• Discussed at executive
management and board
level
• Discussed at executive
management and board
level
• General managers
• Metallurgical
managers
Listings exchanges
• Compliance with Listings
• Sponsor (JSE) and
Requirements
nominated advisor (AIM)
review and oversight
• Panel reviews of reported
information
• Discussed at board and
executive director level
• Chief executive
officer
• Financial director
• Other senior
executives
33
• Operational human
resource managers
• Group executive
human resources
• Group SHEQC
manager
• Other senior
executives
• General managers
and financial
managers
• Group procurement
manager
• General managers
• Community liaison
managers at each
operation
• CSI officers at each
operation
• Group executive:
human resources
• Shaft/mine/branch
committees
• General managers
• Chief executive
officer
• Other senior
executives
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018 PLACER MINING
GOLD PANNING | ALLUVIAL GOLD MINING
THE OLDEST METHOD OF GOLD MINING
Placer mining involves mining alluvial streambed deposits for minerals. It is used to sift out valuable metals from
sediments in rivers, beach sands and other environments. This method supplied most of the ancient world’s
gold, dating as far back as the Roman Empire.
An area well protected from the flow of water is an ideal location to find gold. Gold, often found in streambeds
owing to its density, is commonly deposited as one of the following:
1 RESIDUAL DEPOSIT
Residual deposits are pieces of the lode that have broken away from an outcrop (rock formation) due
to chemical and physical weathering. These deposits have not yet moved or been washed away from
the lode and usually lie directly at the site of the lode.
2 ELUVIAL DEPOSIT
Eluvial deposits are pieces of ore and gold that have eroded from a lode and have been moved away by
forces of nature, but have not yet been deposited into a streambed by running water. This is the most
common type of placer gold.
3 BENCH DEPOSIT
Bench deposits are created when accumulations of gold reach a streambed. Usually found on higher
slopes that drain into valleys, streambeds (benches) can be situated far from other water sources
and are sometimes found on mountaintops. Today, many placer miners focus their activities on bench
deposits.
Gold pans typically span
32cm to 43cm in diameter.
Among South Africa’s most famous gold nugget discoveries are:
Made from metal
or high-impact,
durable plastic.
214oz
The sides of the
pan sit at a 30° to
40° angle.
Breda nugget | 214oz | 2kg
Discovered in 1876 by Michael van
Breda, one of the pioneer diggers
on the New Caledonia goldfield, the
nugget was found on a steep hill within
the Columbia Reef, just above Blyde
River. He and his partner, Macauley, are
considered two of the luckiest diggers
in Pilgrim’s Rest. In two hours, they
uncovered gold weighing 3.6kg.
2kg
34
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018
STRATEGIC REPORT:
PERFORMANCE
REVIEW
World examples of alluvial placer mining
deposits:
• Witwatersrand Basin, South Africa
– A three-billion-year-old alluvial sedimentary
basin that contains at least 70 ore minerals
• Klondike, Yukon and Alaska (Klondike Gold Rush)
– Gold nuggets were found in running water,
making them alluvial placer mining deposits.
213oz
£750
Reward nugget | 213oz |
GBP750
This nugget was found by
George Russell and his
partner, Isaac Lilley. The
Reward nugget brought
these two lucky Pilgrim’s Rest
diggers GBP750 when sold.
123oz
Voortrekker nugget |
123oz
Alois Nellmapius, one of South
African commercial history’s
shadiest characters, discovered
the Voortrekker nugget in a
Pilgrim’s Rest valley claim in
May 1875.
GOLD
PANNING IS
NOW A
SPORT
Last year,
South Africa’s gold
panning team won
three bronze, six silver
and four gold medals at
the World Gold Panning
Championships in
Spain.
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018
35
STRATEGIC REPORT:
PERFORMANCE REVIEW
FINANCIAL DIRECTOR’S REVIEW
Deon Louw
Financial director
PAN AFRICAN RESOURCES IS COMMITTED TO CREATING VALUE FOR ALL STAKEHOLDERS
ON A SUSTAINABLE BASIS. FOR SHAREHOLDERS, VALUE IS DERIVED FROM CAPITAL
APPRECIATION IN THE COMPANY’S SHARE PRICE AND DISTRIBUTIONS IN THE FORM OF
DIVIDENDS AND SHARE BUYBACKS. VALUE IS CREATED BY SUPPORTING SOUTH AFRICA’S
ECONOMY THROUGH TAXES PAID, EMPLOYMENT AND INVESTMENT IN COMMUNITIES.
36
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018
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KEY FEATURES FOR THE GROUP
◗
CHALLENGES
◗
◗
◗
◗
◗
◗
◗
◗
◗
◗
loss
increased
from discontinued operations
The group paid a dividend of R185 million during December
2017 for the 2017 financial year
The group reclassified Evander Mines’ large-scale underground
operations as a discontinued operation in the current-year and
prior-year comparatives
The profit after taxation from the group’s continuing operations
was R202.0 million (2017: R700.6 million), resulting in the
continuing operations’ EPS decreasing to 11.16 cents per share
(2017: 44.78 cents per share)
The
to
R1.76 billion (2017: R390.7 million) following impairment
charges recognised upon cessation of large-scale mining at
Evander Mines’ underground operations
The group’s profit after taxation decreased significantly
following cessation of large-scale underground operations
at Evander Mines and the resultant retrenchment costs of
R161.0 million and impairments costs of R1.78 billion
Total all-in sustaining cost per kilogram
(continuing
and discontinued) increased in rand terms to R561,468/kg
(2017: R514,435/kg), largely due to the high costs associated
with the discontinued large-scale underground operations at
Evander Mines
Continuing all-in sustaining costs per kilogram increased in
rand terms to R434,572/kg (2017: R372,718/kg). The group
remains focused on reducing Barberton Mines’ underground
mining costs, by increasing ongoing development and exposing
additional platforms to mine
Elikhulu was commissioned during September 2018, ahead of
schedule and within its projected budget, with R1.43 billion
incurred on the construction of the plant at 30 June 2018
Net debt
increased to R1.62 billion (2017: R67.6 million),
as the group’s debt facilities were drawn on to fund Elikhulu’s
capital expenditure and the settlement of Evander Mines’
retrenchment costs
The group disposed of 130 million Pan African Resources
shares held by PAR Gold and raised R149.4 million in proceeds,
which was used for general corporate and liquidity purposes
and to fund the expansion of Elikhulu’s processing capacity to
1.2 million tonnes per month to provide capacity for the ETRP’s
throughput.
◗
◗
◗
◗
◗
◗
Volatile and low ZAR gold price environment during the second
half of the financial year
Cost pressures in excess of general inflation, compounded by
the retrenchment costs following the cessation of large-scale
underground operations at Evander Mines
Regulatory uncertainty pertaining to amended mining and
environmental legislation
Evolving political, labour and community landscape.
OPPORTUNITIES
◗
Expansion of Barberton Mines’ production profile through the
Royal Sheba Project to access relatively near-term production
ounces
Construction of the Elikhulu plant, which will produce some of
the lowest-cost ounces in the South African mining industry
Expansion of Elikhulu’s processing capacity by incorporating the
existing ETRP throughput, thus leveraging plant efficiencies and
benefiting from economies of scale
The cessation of the loss-making Evander Mines’ large-scale
underground operations.
OPERATING ENVIRONMENT
The South African gold mining environment experienced a
volatile and depressed gold price environment, with the ZAR/
USD exchange rate strengthening during the year under review
from ZAR13.59:1 to ZAR12.86:1, and only marginal relief from
the gold price increasing from USD1,242/oz to USD1,301/oz. The
movement in these drivers resulted in the ZAR gold price declining
from R542,773/kg at 30 June 2017 to R538,100/kg at 30 June 2018,
which resulted in margin compression, as the rand-denominated
cost base increased in line with South African mining inflation. Key
economic drivers that impact on production costs and the cost of
capital goods are tabled on the following
pages 38 to 43.
* Refer to
APMs on
pages 231 and 232.
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PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018
37
FINANCIAL DIRECTOR’S REVIEW continued
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 30 June 2018
Consolidated
Audited
June 2018
GBP million
Audited
June 2017
GBP million
ASSETS
Property, plant and equipment and mineral rights
224.7
0.1 Other intangible assets
0.8 Deferred taxation
0.7
2.5
21.0 Goodwill
Long-term inventory
Long-term receivables
7.5
Investments
18.9 Rehabilitation fund
276.2
Current assets
Inventories
5.1
1.1 Current taxation asset
13.7 Trade and other receivables
Financial instruments assets
9.4 Cash and cash equivalents
29.3
–
5.6 Assets held for sale
311.1 Total assets
EQUITY AND LIABILITIES
Capital and reserves
Share capital
Share premium
22.3
145.4
(36.8) Translation reserve
1.2
Share option reserve
131.3 Retained earnings
(10.7) Realisation of equity reserve
(25.4) Treasury capital reserve
(10.7) Merger reserve
– Other reserves
216.6
Equity attributable to owners of the parent
Non-current liabilities
Long-term provisions
Long-term liabilities
11.7
12.3
38.9 Deferred taxation
62.9
Current liabilities
27.1 Trade and other payables
4.1 Current portion of long-term liabilities
– Current taxation liability
31.2
0.4
Liabilities directly associated with assets held for sale
311.1 Total equity and liabilities
192.8
–
6.2
0.6
1.3
21.0
3.1
20.1
245.1
2.7
0.7
15.8
0.2
0.7
20.1
–
265.2
22.3
144.6
(42.8)
1.7
30.0
(10.7)
(15.6)
(10.7)
(3.0)
115.8
15.1
86.5
14.3
115.9
27.7
5.2
0.6
33.5
–
265.2
38
Consolidated
Unaudited
June 2017
R million
Unaudited
June 2018
R million
3,810.7
1.2
12.9
11.6
43.0
303.5
127.6
320.6
4,631.1
85.6
18.1
233.1
–
160.2
497.0
95.2
5,223.3
318.8
2,261.4
–
17.2
1,867.0
(140.6)
(548.6)
(154.7)
–
3,620.5
197.7
208.4
660.5
1,066.6
458.9
70.3
0.8
530.0
6.2
5,223.3
3,488.3
0.6
112.3
10.3
24.0
303.5
56.7
364.3
4,360.0
48.9
12.5
285.8
4.0
12.6
363.8
–
4,723.8
318.8
2,247.4
–
24.6
161.4
(140.6)
(385.2)
(154.7)
(55.0)
2,016.7
273.4
1,565.0
259.5
2,097.9
505.2
93.5
10.5
609.2
–
4,723.8
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018STRATEGIC REPORT:PERFORMANCE REVIEW
Assets
Property, plant and equipment and mineral rights
Capital expenditure for the year amounted to R1,650.2 million (2017: R613.1 million) less depreciation charge of R191.3 million
(2017: R181.0 million) less impairment charge of R1,781.1 million (2017: R100.9 million).
Deferred taxation asset has increased to R112.3 million (2017: R12.9 million) as a result of:
• an increase in assessed losses following the cessation of large-scale mining at Evander Mines’ underground operations
• an increase in unredeemed capital expenditure following the capital expenditure incurred on the Elikhulu plant.
Long-term receivables have decreased to R24.0 million (2017: R43.0 million) as a result of the deferred consideration receivable from
MC Mining being classified as a current asset at year-end.
Investments have decreased to R56.7 million (2017: R127.6 million) following a decline in the fair value of shares held in MC Mining.
Inventory has decreased to R48.9 million (2017: R85.6 million) predominantly due the cessation of large-scale mining at Evander Mines’
underground operations which has resulted in:
• a decline in gold inventory of R17.4 million
• an increase in the provision for obsolete stock of R16.6 million.
Trade and other receivables have increased to R285.8 million (2017: R233.1 million) as a result of:
• an increase in the VAT receivable year-on-year due to an increase in refunds resulting from Elikhulu’s construction
• reclassification of a portion of the deferred consideration, included in long-term receivables, to current receivables in the current reporting
period.
Cash has decreased to R12.6 million (2017: R160.2 million) as the group invested heavily in Elikhulu’s construction and the retrenchment
costs paid following the cessation of Evander Mines’ large-scale underground operations.
Equity
Equity has declined to R2,016.7 million (R3,620.5) as a result of:
• a decrease in the group’s retained earnings by R1,705.5 resulting from a loss after taxation of R1,556.7 million (2017: profit R309.9 million)
and a net dividend of R148.9 million (2017: R232.6 million)
• a fair value loss adjustment through other comprehensive income of R55.0 million (2017: R6.3 million).
Liabilities
Long-term provisions have increased to R273.4 million (2017: R197.7 million), primarily as a result of the rehabilitation obligations brought
forward following the cessation of large-scale mining at Evander Mines’ underground operations and a resultant increase in the rehabilitation
footprint associated with the Elikhulu plant’s construction.
Long-term liabilities increased to R1,565.0 million (2017: R208.4 million) as a result of:
• the non-current portion of the revolving credit facility increasing to R778.0 million (2017: R180.5 million)
• the non-current portion of the Elikhulu term loan facility increasing to R770.0 million (2017: nil).
The deferred taxation liability decreased to R259.5 million (2017: R660.5 million) due to the impairment of Evander Mines’ property, plant
and equipment, resulting in a reduced taxation base and commensurate reduced deferred taxation liability.
Trade and other payables increased to R505.0 million (2017: R458.9 million) due to an increase in accruals that relate to:
• the construction of the Elikhulu plant
• the construction of the regrind mill at Barberton Mines.
39
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018 FINANCIAL DIRECTOR’S REVIEW continued
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
for the year ended 30 June 2018
Consolidated
Re-presented1
Audited
June 2018
GBP million
Audited
June 2017
GBP million
108.5
(2.0)
106.5
(77.7)
(4.9)
23.9
(4.2)
–
–
(8.2)
(0.4)
11.1
1.5
(3.2)
9.4
2.1
11.5
(104.8)
(93.3)
(5.15)
(5.15)
1,809.7
1,809.7
Continuing operations
125.1 Gold sales
(1.0) Realisation costs
124.1 On-mine revenue
(75.4) Gold cost of production
(5.5) Mining depreciation and amortisation
43.2 Mining profit
(0.3) Other expenses
0.2
5.4
–
Profit on disposal of investment
Profit on disposal of subsidiary
Impairments
(1.1) Royalty costs
47.4 Net income before finance income and finance costs
Finance income
Finance costs
Profit before taxation
0.3
(2.8)
44.9
(4.3) Taxation
40.6
Profit after taxation from continuing operations
Discontinued operations
Loss from discontinued operations
(Loss)/profit after taxation
(22.7)
17.9
1.14
Earnings per share
1.14 Diluted earnings per share
1,564.3 Weighted average number of shares in issue
1,565.1 Diluted number of shares in issue
Consolidated
Unaudited
June 2017
R million
Re-presented1
Unaudited
June 2018
R million
2,158.2
(17.5)
2,140.7
(1,301.4)
(94.9)
744.4
(4.1)
4.6
91.3
–
(19.2)
817.0
4.4
(48.4)
773.0
(72.4)
700.6
(390.7)
309.9
19.81
19.80
1,564.3
1,565.1
1,873.9
(34.6)
1,839.3
(1,342.1)
(85.1)
412.1
(74.0)
–
–
(136.6)
(7.2)
194.3
25.7
(54.3)
165.7
36.3
202.0
(1,758.9)
(1,556.9)
(86.03)
(86.03)
1,809.7
1,809.7
1 The prior year figures have been re-presented to exclude discontinued operations (refer tonote 14).
Taxation charge
The taxation charge of the group’s continuing operations decreased to a credit of R36.3 million (2017: R72.5 million) due to an increase in the
deferred taxation credit of R63.6 million (2017: R7.9 million) because of the reduction in the long-term taxation rate to 19.2% from 23.1%
for the Evander Mines surface operations.
Discontinued operations
In the current reporting period the group’s discontinued operations comprised:
• Phoenix Platinum
• Evander Mines’ large-scale underground operations.
In the prior reporting period the group’s discontinued operations comprised:
• Phoenix Platinum
• Uitkomst Colliery.
Phoenix Platinum, under discontinued operations, recorded a loss of R6.9 million in the current reporting period, for the period 1 July 2017 to
6 November 2017. This loss comprised R2.0 million in operational losses and a R4.9 million loss on asset held for sale.
Due to the cessation of large-scale mining at Evander Mines’ underground operations, the financial results from this operation have been
classified as a discontinued operation in the current reporting period.
Losses from discontinued operations have increased to R1.76 billion (2017: R390.7 million), which include an impairment charge of
R1.78 billion and retrenchment costs of R161.0 million for the Evander Mines underground operations.
40
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018STRATEGIC REPORT:PERFORMANCE REVIEW
Gold sales
Gold sales from continuing operations declined year-on-year by 13.2%, as a result of a 0.9% decline in the average ZAR gold price received by
the group and a decline of 12.6% in gold sold by continuing operations to 111,879oz (2017: 127,981oz).
Revenue from Evander Mines’ large-scale underground operations of R811.4 million (2017: R767.2 million) has been disclosed in discontinued
operations due to the cessation of large-scale mining at this operation.
Gold cost of production
The group’s gold cost of production from continuing operations increased by 4.4% due to the following:
• Salaries and wages (represents 38.9% of the total gold cost of production) increased by 7.6% to R535.1 million (2017: R497.1 million)
• Mining and processing costs (represents 33.7% of the total gold cost of production) decreased by 6.7% to R463.3 million
(2017: R496.3 million)
• Electricity costs (represents 9.6% of the total gold cost of production) increased by 8.3% to R132.5 million (2017: R122.3 million).
The increase is higher than the National Energy Regulator of South Africa’s approved average national increase of 5.2% from 1 April 2018
because of higher electricity consumption associated with the surface re-mining operation and Barberton Mines’ new refrigeration plant
installed at Fairview during July 2017
• Engineering and technical costs (represents 6.7% of total gold cost of production) increased by 13.0% to R92.7 million (2017: R82.0 million).
Cash costs per kilogram for continuing operations have increased by 19.6% to R387,194/kg (2017: R323,692/kg) due to the 12.6% decrease
in gold sold and the 4.4% increase in production costs from continuing operations.
All-in sustaining costs per kilogram for continuing operations have increased by 16.6% to R434,572/kg (2017: R372,718/kg).
All-in costs per kilogram for continuing operations have increased by 18.1% to R463,145/kg (2017: R393,296/kg).
Mining depreciation and amortisation
The group’s mining depreciation and amortisation costs decreased by 10.2% to R85.1 million (2017: R94.9 million). The depreciation charge
is based on the available units of production over the life of the operations and the depreciation charge reduced proportionately with the
decrease in production.
Other expenses
Other expenses increased to R74.0 million (2017: R4.1 million). The increase in other expenses is due to the group realising a pre-taxation gain
of R94.7 million on the mark-to-market fair value adjustment of a derivative instrument concluded in the prior reporting period to mitigate
gold price risk.
Profit on disposal of investment
In the prior reporting period, the group recognised a profit of R4.6 million following the disposal of a listed investment.
Profit on disposal of subsidiary
In the prior reporting period, the group recognised a profit of R91.3 million following the disposal of Uitkomst Colliery.
Continuing operations – impairment
An impairment charge of R136.6 million for continuing operations (2017: nil) was recognised on the Kinross plant, following the cessation of
large-scale mining at Evander Mines’ underground operations and the consequential impact on the continuing surface operations (ETRP and
surface sources).
Royalty costs
Royalty costs decreased to R7.2 million (2017: R19.2 million), consistent with the decrease in revenue and gold production.
Finance income and costs
Finance income increased to R25.7 million (2017: R4.4 million), following an increase in interest earned on the group’s rehabilitation funds.
Finance costs increased to R54.3 million (2017: R48.4 million) due to an increase in group debt during the current reporting period.
Earnings per share
The combined operations’ EPS in ZAR decreased to a loss of 86.03 cents per share (2017: earnings 19.81 cents per share). The combined
operations’ HEPS
in rand decreased to 12.66 cents per share (2017: 20.17 cents per share).
are calculated by applying the group’s weighted average number of shares in issue to the attributable and headline
The EPS and HEPS
earnings
. The weighted average number of shares in issue increased by 15.7% to 1,809.7 million shares (2017: 1,564.3 million shares). The
increase in shares was attributed to the additional 291.5 million shares issued in the equity raise concluded on 12 April 2017 for the equity
tranche of Elikhulu, and the disposal of 130 million shares held by PAR Gold on 30 May 2018.
* Refer to
APMs on
page 232.
41
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018 FINANCIAL DIRECTOR’S REVIEW continued
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 30 June 2018
Consolidated
Audited
June 2018
GBP million
Audited
June 2017
GBP million Contributions
(3.3)
(8.2)
(11.5)
(92.7)
(1.5)
–
(0.4)
4.8
–
–
(89.8)
90.0
(5.8)
8.9
–
–
0.9
94.0
(7.3)
9.4
–
(1.4)
0.7
Net cash (utilised in)/generated from operations after taxation,
royalties and finance costs
16.5
(13.3) Dividends paid net of PAR Gold’s reciprocal dividend
3.2 Net cash (utilised in)/generated from operating activities
Investing activities
(35.5) Additions to property, plant and equipment and mineral rights
–
Rehabilitation fund contributions
(0.1) Additions to other intangible assets
(1.2)
1.4
0.4
6.6
Increase in long-term loans receivable
Proceeds from disposal of investment
Proceeds on disposals of property, plant and equipment
Proceeds from disposal of subsidiary, net of cash
(28.4) Net cash utilised in investing activities
Financing activities
Proceeds from borrowings
47.8
(54.0) Borrowings repaid
Proceeds from sale of treasury shares
Shares issued
Share issue costs
–
40.8
(1.4)
(1.4) Proceeds/(settlement) of financial instruments
31.8 Net cash generated from financing activities
6.6 Net (decrease)/increase in cash and cash equivalents
2.7 Cash and cash equivalents at the beginning of the year
(0.1) Cash and cash equivalents of discontinued operations
0.2
9.4 Cash and cash equivalents at the end of the year
Effect of foreign exchange rate changes
Consolidated
Unaudited
June 2017
R million
Re-presented1
Unaudited
June 2018
R million
281.0
(232.6)
48.4
(612.7)
–
(0.4)
(20.0)
23.4
7.0
111.7
(491.0)
817.0
(915.0)
–
696.0
(24.0)
(22.9)
551.1
108.5
52.6
(0.9)
–
160.2
(53.2)
(148.9)
(202.1)
(1,601.4)
(26.2)
(0.3)
(6.5)
89.0
–
–
(1,545.4)
1,535.0
(100.0)
149.4
–
–
15.5
1,599.9
(147.6)
160.2
–
–
12.6
1 The cash-settled share option costs have been re-presented in net cash (utilised in)/generated from operating activities from net cash generated from financing
activities in the current and prior reporting period.
OUR FOCUS FOR THE 2019 FINANCIAL YEAR IS CASH FLOW
GENERATION, COST CONTAINMENT FROM OUR EXISTING
OPERATIONS AND A REDUCTION IN OUR NET DEBT POSITION.
42
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018STRATEGIC REPORT:PERFORMANCE REVIEW Net cash (utilised in)/generated from operating activities
Cash (utilised in)/generated from operations decreased by R250.5 million to a deficit of R202.1 million (2017: R48.4 million) due to the
lower gold production, Evander Mines’ operational losses and retrenchment costs of R161.0 million.
The 2017 financial year dividend payment (net of PAR Gold reciprocal dividends) of R148.9 million (2016: R232.6 million) was paid on
21 December 2017.
Net cash used in investing activities
The cash outflows from investing activities increased to R1,545.4 million (2017: R491.0 million), largely due to:
• capital expenditure incurred of R1,601.4 million (2017: R612.7 million)
• contributions to the rehabilitation trust of R26.2 million (2017: nil)
• proceeds from the sale of Phoenix Platinum of R89.0 million (2017: R142.1 million proceeds from the disposal of investments,
subsidiaries and property, plant and equipment).
Net cash generated from financing activities
Net cash inflows from financing activities increased to R1,599.9 million (2017: R551.1 million), largely due to the utilisation of the group’s
debt facilities to fund operational and project capital expenditure, offset by proceeds of R149.8 million (2017: nil) on the disposal of
Pan African Resources shares held by PAR Gold.
Economic drivers
2018
2017
Gold price
USD gold price received
ZAR gold price received
Exchange rates
USD/ZAR exchange rate (average)
USD/ZAR exchange rate (closing)
GBP/ZAR exchange rate (average)
GBP/ZAR exchange rate (closing)
South African inflation and
interest rates
CPI (%)
PPI (%)
Interest rates
JIBAR (%)
USD1,301/oz USD1,242/oz
R542,773/kg
R538,100/kg
12.86:1
13.71:1
17.27:1
18.09:1
13.59:1
13.04:1
17.25:1
16.96:1
4.6
5.9
6.7
5.1
4.0
7.1
%
4.8
(0.9)
(5.4)
5.2
0.1
6.7
(9.8)
47.5
5.6
Gold price determines the price
received for gold sold.
Exchange rates determines the value
received in ZAR for gold and ultimately
the group’s revenue.
South African inflation and
interest rates impacts the rate of
increase in the group’s operating costs,
the most significant of which is employee
costs, followed by electricity costs.
Interest rates determines the cost of
debt finance and the return on surplus
cash.
43
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018 FINANCIAL DIRECTOR’S REVIEW continued
FINANCIAL RISK MANAGEMENT
The group manages its financial risk, liquidity and solvency 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 financial risk. The group’s philosophy is to hedge only specific exposures arising from specific operational risks, capital investments and
transactional flows and limits hedging to short-dated hedges and a maximum of 25% of the group’s annual production, unless additional exposure
is specifically approved by the board.
The group is exposed to a number of macroeconomic risks, of which the ZAR gold price is one of the major risks that impact directly on the
group’s financial results. To manage this risk during periods of peak debt, a number of zero-cost cost-collar derivative structures have been entered
into to reduce the negative cash flow impact of a declining ZAR gold price. At 30 June 2018, the group had the following four open derivative
positions:
Term
1 January 2018 – 31 December 2018
1 July 2018 – 31 December 2018
1 July 2018 – 31 December 2018
1 July 2018 – 31 December 2018
oz
Remaining oz
Put option
R/kg
Call option
R/kg
4,500
10,000
10,000
5,000
2,500
10,000
10,000
5,000
550,000
550,000
560,000
560,000
631,018
598,000
605,500
606,671
These derivatives underpin an average gold price of R555,455/kg and the group participates in gold price moves to an average price of
R605,305/kg.
Net debt
Total debt facilities utilised at 30 June 2018 increased to R1.64 billion (2017: R227.8 million), and cash holdings declined to R12.6 million
(2017: R160.2 million), resulting in an increase in net debt
was predominantly
as a result of the R1.26 billion capital expenditure incurred on Elikhulu and Evander Mines’ retrenchment costs of R161.0 million.
to R1.62 billion (2017: R67.6 million). The increase in net debt
Summary of long-term debt facilities:
RCF
Evander Mines gold loan
Elikhulu term loan facility
Total
30 June
2018
R million
30 June
2017
R million
30 June
2018
R million
30 June
2017
R million
30 June
2018
R million
30 June
2017
R million
30 June
2018
R million
30 June
2017
R million
Non-current portion
Current portion
Total
778.0
88.2
866.2
180.5
20.7
201.2
–
–
–
–
26.6
26.6
770.0
–
770.0
–
–
–
1,548.0
88.2
1,636.2
180.5
47.3
227.8
The covenants of the group’s term facilities (RCF and Elikhulu term loan facility) are summarised below:
Net debt
to equity ratio
Net-debt
EBITDA
to adjusted
ratio
Interest cover ratio1
Debt service cover ratio2
Measurement
Must be less
than 1:1
Must be less
than 2.5:1
Must be greater
than 4 times
Must be greater
than 1.3 times
30 June
2018
30 June
2017 Description
0.78
3.73
4.61
3.84
0.02
Increased due to Elikhulu’s capital expenditure
0.08 This covenant’s testing commences in December 2019
19.32 This covenant’s testing will commence in December 2018
at a level of 2.3 times, whereafter it will increase to
4 times
9.11 Decreased as a result of a higher interest expense
incurred relative to the adjusted EBITDA
the increased debt associated with Elikhulu
as a result of
1 Interest cover ratio (total finance costs from interest-bearing facilities to adjusted EBITDA
2 Debt service cover ratio (free cash flow, refer to
).
page 197, for total finance costs from interest bearing facilities).
44
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018STRATEGIC REPORT:PERFORMANCE REVIEW
As a consequence of costs associated with the cessation of Evander Mines’ large-scale underground operations, the weak ZAR gold price,
exacerbated by below-budget production at Barberton Mines, the group’s forecast cash flow was below that budgeted for covenant compliance,
resulting in the group renegotiating its covenants with the consortium of South African banks. The interest cover ratio was accordingly reduced to
2.3 times until December 2018 whereafter it will increase to 4 times and the net debt to adjusted EBITDA ratio has been deferred and testing
will commence in December 2019. Consequently, there has been an increase in the interest rate as noted below. The amortisation profile of the
RCF has been amended as follows:
Amortisation profile
Original
Revised
30 June 2018
R million
31 Dec 2018
R million
30 June 2019
R million
31 Dec 2019
R million
30 June 2020
R million
100
–
100
–
100
133
100
133
600
733
The group’s financial covenants exclude once-off and extraordinary
events and are calculated on the basis of the group’s continuing
operations only. At 30 June 2018, the group was compliant with all its
financial covenants.
Revolving credit facility
The group’s existing R1 billion RCF facility is provided by a consortium
of South African banks and has a tenure of five years, effective from
June 2015. The facility bears interest at JIBAR plus a margin of 3%
(2017: 2.5%) and provides Pan African Resources with access to a
long-term flexible debt facility to fund its working capital requirements.
The increased interest rate is as a result of the increased risk.
Working capital and debt management
The group manages its debt levels within prudent limits approved
by the board and based on the recommendations of the audit
committee, after taking into account the variability in group cash
flow generation, capital expenditure programmes and the board’s
aspiration to continue declaring a sector-leading dividend.
Capital allocation discipline
The board is conscious of the aspirations of our stakeholders for
value creation. As a result, all capital allocation decisions are subject to
rigorous analysis and predefined risk-adjusted return parameters to
ensure this objective is fulfilled. Of paramount importance in all such
capital allocation decisions is the group’s ability to successfully execute
on investment opportunities and realise the required risk-adjusted
return over the investment horizon. The attractive returns currently
being earned on the capital invested in the BTRP and the ETRP bear
testimony to our success in this regard.
Our investment criterion is to earn a minimum return of 15% per
annum, after adjusting for project-specific 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 where the
execution risk is within our capability.
of sustaining capital, contractual debt repayments and the cash flow
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 financial position, future prospects, satisfactory solvency
and liquidity assessments and other factors deemed relevant at the
time. The board also allows itself flexibility to deviate from the above
policy, when deemed appropriate.
Refer to the chief executive officer’s statement on
page 14.
DIVIDEND PAYMENT
R million
300
250
200
150
100
50
0
2014
2015
2016
2017
2018
GOING CONCERN
Refer to the directors’ report on
has been further discussed.
page 133 where going concern
LOOKING AHEAD
Our focus for the 2019 financial year is cash flow generation, cost
containment from our existing operations and a reduction in our
net debt position. Post the cessation of Evander Mines’ large-scale
underground operations, the group has been repositioned as a low-
cost operation with robust cash generation, which enables the group
to pursue organic growth opportunities in the short to medium term.
DIVIDEND POLICY
Pan African Resources aspires to pay a regular dividend to its
shareholders. In balancing this cash return to shareholders with
the group’s strategy of generic and acquisitive growth, Pan African
Resources believes a target payout ratio of 40% of net cash generated
from operating activities – after allowing for the cash flow impact
Deon Louw
Financial director
19 September 2018
45
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018
FIVE-YEAR REVIEW
Operating performance
Gold mining tonnes milled
Gold tailings processed
Gold head grade – mining operations
Gold head grade – tailings operations
Gold sold
Gold spot price received
Total gold mining cash costs
Coal sold
PGE sold
Unit
2018
2017
2016
2015
2014
(t)
(t)
(g/t)
(g/t)
(oz)
(USD/oz)
(USD/oz)
(t)
(oz)
509,955
3,551,280
507,699
3,143,414
676,664
2,801,021
908,958
1,618,794
7.7
0.6
7.8
0.9
7.7
0.9
160,444
173,285
204,928
1,301
1,162
–
2,5411
1,242
986
670,210
8,709
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
1 PGE sold up to the date of disposal of Phoenix Platinum (7 November 2017).
2018
2017
2016
2015
2014
R million
GBP
million
R million
GBP
million
R million
GBP
million
R million
GBP
million
R million
GBP
million
Statement of
comprehensive income
Continuing operations
Revenue
Cost of production
Mining profit
Total operations
Adjusted EBITDA
Impairment costs
(Loss)/profit after
taxation
Headline earnings
Dividends paid
Statement of financial
position
Non-current assets
Current assets1
Assets held for sale
Total equity
Non-current liabilities
Current liabilities
Liabilities directly
associated with assets
held for sale
Cash flows
Net cash (utilised by)/
generated from operating
activities
Capital expenditure
Net movement in cash
and cash equivalents
1,873.9
(1,342.1)
108.5
2,158.2
125.1
3,460.1
161.3
2,539.4
141.1
2,608.8
154.6
(77.7)
(1,301.4)
(75.4)
(2,155.5)
(100.5)
(1,987.4)
(110.4)
(1,795.9)
(106.4)
412.0
23.9
744.4
43.2
1,066.6
23.3
353.4
19.6
637.8
37.8
416.0
24.2
816.0
(1,781.1)
(106.3)
(100.9)
(1,556.9)
229.1
(185.0)
(93.3)
13.3
(10.0)
309.9
315.6
(300.0)
(17.1)
47.3
(6.0)
17.9
18.3
963.5
–
547.0
547.1
(210)
44.9
–
25.5
25.5
(9.7)
512.1
(1.0)
210.2
213.6
28.4
(0.1)
11.7
11.9
745.5
–
452.1
452.0
44.2
–
26.8
26.8
(258.0)
(14.9)
(240.3)
(14.7)
4,359.9
363.8
–
2,016.7
2,097.9
609.1
245.2
20.1
–
115.7
116.0
33.7
4,631.2
276.2
4,450.9
230.7
4,147.1
497.0
95.2
3,620.5
1,066.7
530.0
29.3
5.6
216.6
62.9
31.3
434.2
1.3
2,874.4
1,372.4
639.6
21.9
0.1
151.0
69.5
32.2
332.3
–
2,738.5
1,309.5
431.4
220.1
17.2
–
147.2
67.9
22.4
3,941.5
423.4
–
2,788.4
1,144.1
432.4
223.4
23.5
–
159.4
63.5
24.0
–
–
6.2
0.4
–
–
–
–
–
–
(202.1)
1,601.7
(11.4)
92.7
48.4
613.1
3.2
35.5
581.4
302.0
28.5
14.1
95.7
352.0
5.4
19.6
360.3
363.0
(147.6)
(7.3)
108.5
6.6
(11.7)
(1.5)
(36.9)
(1.7)
29.6
22.2
21.5
1.7
* Refer to
APMs on
page 231 and 232.
46
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018STRATEGIC REPORT:PERFORMANCE REVIEW 2018
2017
2016
2015
2014
Unit
ZAR
GBP
ZAR
GBP
ZAR
GBP
ZAR
GBP
ZAR
GBP
(%)
(77.2)
(80.6)
(Ratio)
0.81
0.78
8.6
0.02
8.3
0.02
(Ratio)
(Ratio)
(Ratio)
(Ratio)
3.90
3.73
0.08
0.08
(4.61)
(4.61)
(19.3)
(19.3)
3.84
0.6
3.84
0.6
9.11
0.9
9.11
0.9
19.0
0.11
0.38
26.0
–
0.7
16.9
0.10
0.34
24.8
–
0.7
7.7
0.12
7.9
0.11
0.63
0.58
7.3
–
0.8
7.2
–
0.8
16.2
0.04
0.14
38.9
–
1.0
16.8
0.04
0.13
37.9
–
1.0
Key ratios
Return on shareholders’
funds
Net debt
Net debt
EBITDA
:equity ratio
: adjusted
Interest cover
Debt service cover
Current ratio2
Statistics
Shares in issue (millions)
(Number)
2,234.7
2,234.7
1,943.2
1,831.5
1,830.0
Weighted average
number of shares in issue
(millions)
(Number)
1,809.7
1,564.3
1,811.4
1,830.4
1,827.2
Earnings per share
(Cents/pence)
(86.03)
(5.15)
19.81
1.14
30.20
1.41
11.48
0.64
24.74
1.47
Headline earnings per
share (HEPS)
Net asset value
(NAV)
Dividends per share
(DPS)
Dividend yield
Price earnings3
Volume of shares traded
(millions)
Volume traded as
percentage of number
issue
(Cents/pence)
12.66
0.73
20.17
1.17
30.20
1.41
11.67
0.65
24.74
1.47
(Cents/pence)
104.58
5.8
201.33
12.04
190.75
10.02
149.52
8.04
152.37
8.71
(Cents/pence)
(%)
(Ratio)
8.28
4.2
(1.6)
0.45
4.0
(1.4)
15.44
5.0
11.9
0.88
4.9
12.0
11.47
5.1
12.4
0.53
4.3
13.5
14.10
6.3
15.7
0.82
6.7
14.9
13.15
5.6
10.8
0.81
5.7
9.7
(Number)
952.1
639.1
623.7
932.6
650.7
461.6
573.2
527.9
435.5
199.8
(%)
42.6
28.6
32.1
46.6
33.5
25.5
31.3
28.8
23.8
10.9
Number of transactions
(Number)
5,824
19,082
16,217
34,020
35,926
20,784
29,855
21,221
28,498
11,496
Value of shares traded
(millions)
Traded prices
– last sale in year
– high
– low
– average price per share
(Number)
1,702.8
70.6
1,920.1
164.5
1,540.6
58.2
1,266.7
64.3
1,029.6
28.3
(Cents/pence)
(Cents/pence)
(Cents/pence)
135.0
285.0
105.0
7.1
15.8
6.6
236.0
469.0
224.0
13.7
24.3
13.8
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
294
186
14.3
16.8
11.8
traded
(Cents/pence)
197.0
11.2
308.3
17.8
224.6
12.4
222.3
12.2
236.0
14.2
1 Current assets at 30 June 2016 excluded non-current assets held for sale of R1.3 million (GBP0.1 million).
2 Current ratio (current assets to current liabilities).
3 Price earnings (dividend per share to average price per share traded).
47
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018
OPERATIONAL AND
PERFORMANCE REVIEW
BARBERTON MINES
SALIENT FEATURES
◗
◗
◗
◗
◗
◗
◗
Produced at an all-in sustaining cost of R464,690/kg (2017: R411,762/kg)
Proud to report a zero-fatality year and an excellent safety record
Developed a second high-grade platform at the Fairview Mine’s 11-block Main Reef Complex (MRC) orebody to assist with
consistent monthly grades and tonnage profiles
The life-of-mine of Fairview’s 11-block is 20 years with indications that the orebody extends even further at depth
In May 2018, completed the decline development between Fairview 64 Level and 66 Level, which reduced hauling distances and
shortened the travel time for miners to the working faces
In July 2017, commissioned a refrigeration plant to cool the working environment in Fairview Mine’s high-grade down-dip extension.
This plant pumps 62m2/s of refrigerated air to Fairview Mine’s lowest sections and significantly enhances working conditions for the
miners
In April 2018, commissioned the BTRP regrind mill, enabling the BTRP to deliver into its 11 year life-of-mine and maintain its status as
a long-life low-cost producer.
Fairview Mine
Sheba Mine
New Consort Mine
BTRP
BIOX® plant
Barberton Mines
Three underground mines, a tailings
operation and a BIOX® processing
plant
48
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018STRATEGIC REPORT:PERFORMANCE REVIEW THE BARBERTON GREENSTONE BELT IS ONE OF SOUTH AFRICA’S
ORIGINAL MAJOR GOLD DISCOVERIES AND IS STILL BEING MINED
AT EXCELLENT GRADES AFTER MORE THAN 130 YEARS OF GOLD
EXTRACTION.
OVERVIEW
The Barberton Greenstone Belt is one of South Africa’s original major
gold discoveries and is still being mined at excellent grades after more
than 130 years of gold extraction. These geological diverse operations
require careful management and astute allocation of intellectual,
financial and labour resources.
The Barberton Mines operation has various components, including
three working underground mines, the BIOX® gold processing plant
and the BTRP. Fairview Mine produces approximately 45% of the
combined gold, Sheba Mine and New Consort Mine produce 25%
and 10%, respectively, and the BTRP contributes 19% of Barberton
Mines’ gold production.
Barberton Mines’ underground mining operations utilise semi-
mechanised cut and fill
through up-dip or breast mining.
Approximately 15% of gold production is recovered annually by
sweeping and vamping worked-out areas and high-grade pillars.
As Barberton Mines is relatively distant from major urban centres and
resources, the operation has become adept at developing its own
engineering solutions for maintenance and equipment customisation.
This in-house problem-solving capacity is instrumental in enabling
continued efficient operations at Barberton Mines.
SALES AND PRODUCTION
Underground mining
Underground tonnes milled reduced to 237,831t (2017: 246,915t),
while the head grade increased to 10.3g/t (2017: 9.8g/t). As a
result of the increased head grade, gold sales increased to 73,125oz
(2017: 71,763oz).
Underground mining rand cash cost per kilogram increased by 4.6%
to R435,368/kg (2017: R416,356/kg), while underground mining
US dollar cash costs per ounce increased by 10.5% to USD1,053/oz
(2017: USD953/oz).
A second high-grade mining platform was established in the MRC
orebody during January 2018. This has dramatically improved mining
flexibility.
Barberton Mines has increased its ongoing development rates in the
2019 financial year with the objective of establishing a third high-grade
platform in the Fairview 11-block by the end of June 2019.
Jan Thirion
General manager
The Fairview sub-vertical shaft development is ongoing and excavation
of the shaft will commence as soon as sufficient mining flexibility has
been established to sustain production levels during the raise-boring
phase of the project. The sub-vertical shaft will become the primary
route for transporting miners and equipment to the working areas.
This will enable the Fairview Mine’s 3 Decline to be used exclusively
for rock hoisting, thereby increasing the productivity of the Fairview
mining operation.
BTRP
BTRP gold production reduced to 17,504oz (2017: 26,745oz) due
to the re-mining operation moving to the lower-grade and coarser
Harper dump, following depletion of the Bramber dump, and the head
grade reducing from 2.3g/t to 1.4g/t. Tonnes processed increased to
858,967t (2017: 821,691t).
The increase in tonnes processed and decline in gold sold to the
market from BTRP has resulted in a 73% increase in the BTRP’s rand
cash cost to R285,593/kg (2017: R165,088/kg). US dollar cash costs
per ounce increased to USD691/oz (2017: USD378/oz).
BTRP regrind mill was completed on schedule in May 2018. This
regrind mill was designed to reduce the coarseness of the tailings
material and ensures that the BTRP remains one of South Africa’s
lowest-cost gold producers.
BARBERTON MINES HAVE INCREASED
THEIR ONGOING DEVELOPMENT
RATES IN THE 2019 FINANCIAL YEAR.
49
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018 OPERATIONAL AND PERFORMANCE REVIEW continued
BARBERTON MINES continued
COST OF PRODUCTION
Barberton Mines’ cost of production increased by 7.4% to
R1,145.7 million (2017: R1,066.7 million). Major drivers of the
increased costs are a 12.3% increase in engineering and technical
costs due to unplanned repairs and maintenance, as well as a
14.2% increase in the BTRP processing costs, mainly related
to increased reagent consumption associated with cyanide
detoxification. Electricity costs increased by 9.1% due to the
commissioning of the Fairview Mine’s refrigeration plant.
CAPITAL EXPENDITURE
Total capital expenditure at Barberton Mines increased by
8.7% to R210.4 million (2017: R193.5 million). This total
included sustaining capital expenditure of R111.0 million
(2017: R16.5 million) and expansion capital expenditure of
R99.4 million (2017: R77.0 million). The majority of expansion
capital expenditure for the current year R69.1 million relates to
the installation of the BTRP regrind mill.
CHALLENGES
Gold sold from Barberton Mines decreased by 8.0% to 90,629oz
(2017: 98,508oz) due to surface sources gold production declining
to 17,504oz (2017: 26,745oz) per annum.
Gold production was adversely impacted by operational
disruptions from pressure groups, community unrest and
unprotected strike action at the mine, which resulted in 58 lost
production days. Barberton Mines have significantly increased
their community engagement efforts during the current
reporting period and operational disruptions have decreased as
a result of these efforts.
LOOKING AHEAD
Mining and BTRP production targets are planned to maintain
a constant monthly grade/tonnage profile and gold production.
Over the years, Barberton Mines have established a consistent
track record of delivery based on strict cost controls and cash
flow generation.
Increased development rates to establish an additional platform
in Fairview’s 11-block and commissioning the Fairview Mine’s sub-
vertical shaft is essential to further improve mining flexibility, and
increase productive time at working faces and hoisting capacity.
The BTRP regrind mill commissioned during May 2018 also
enables the BTRP to sustain its tailings production profile from the
Harper TSF.
A dynamic exploration drilling programme is underway at
Fairview Mine to increase minable areas. Various other possible
near-surface mining prospects within the Barberton Mines mining
right have been identified subsequent to the positive results of
the concept study on Royal Sheba Mine. Further exploration
within the Barberton Mines’ mining right is planned for the next
financial year.
50
GOLD SOLD
Ounces
120000
100000
80000
60000
40000
20000
0
2014
2015
2016
2017
2018
Underground Surface BTRP
PRODUCTION STATISTICS – MINING AND SURFACE
Tonnes
350,000
300,000
250,000
200,000
150,000
100,000
50,000
0
2014
2015
2016
2017
2018
Fairview
Sheba
Consort
Vamping
Head grade
PRODUCTION STATISTICS – BTRP
Tonnes
1,000,000
925,000
850,000
775,000
700,000
2014
2015
2016
2017
2018
BTRP BTRP head grade
g/t
13
12
11
10
9
8
7
6
g/t
4
3
2
1
0
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018STRATEGIC REPORT:PERFORMANCE REVIEW
CASH COST BREAKDOWN (INCLUDING BTRP) – OPERATING COSTS
OPERATING COSTS
OPERATING COSTS
2018
46% Salaries and wages
11% Mining costs
16% Processing costs
8%
Engineering and technical
services costs
11% Electricity costs
4% Security costs
3% Administration and other costs
1% Off-mine costs
2017
46% Salaries and wages
12% Mining costs
16% Processing costs
8%
Engineering and technical
services costs
10% Electricity costs
3% Security costs
4% Administration and other costs
1% Off-mine costs
CASH COST BREAKDOWN (EXCLUDING BTRP) – UNDERGROUND OPERATING COSTS
UNDERGROUND OPERATING COSTS
UNDERGROUND OPERATING COSTS
2018
51% Salaries and wages
13% Mining costs
6% Processing costs
9%
Engineering and technical
services costs
11% Electricity costs
5% Security costs
4% Administration and other costs
1% Off-mine costs
2017
51% Salaries and wages
14% Mining costs
7% Processing costs
9% Engineering and technical
services costs
11% Electricity costs
4% Security costs
3% Administration and other costs
1% Off-mine costs
CAPITAL EXPENDITURE
R million
120
100
80
60
40
20
0
2014
2015
2016
2017
2018
Sustaining capital Expansion capital
51
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018
OPERATIONAL AND PERFORMANCE REVIEW continued
EVANDER MINES
SALIENT FEATURES
◗
◗
◗
◗
The Evander mining complex recorded another zero-
fatality year
Gold sold from surface tailings decreased to 21,250oz
(2017: 29,473oz)
Gold sold from underground mining increased to
48,565oz (2017: 45,304oz)
The curtailment of large-scale underground mining
operations at Evander Mines, and resultant retrenchment
of 1,635 of our employees, was difficult and regrettable,
however, our group had no viable alternative.
Evander Mines
(discontinued
operation effective
31 May 2018)
Underground mining was suspended
in May 2018 due to uneconomic
operational and infrastructure costs
Evander Mines
ETRP
Extracting gold from the historical
CIL plant tailings that were stored in
three tailings storage facilities in the
vicinity
Elikhulu
This considerably larger tailings plant
will combine with the current ETRP
to process higher tonnages per
annum
52
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018STRATEGIC REPORT:PERFORMANCE REVIEW EVANDER MINES’ UNDERGROUND OPERATIONS EXPLOITED THE
KIMBERLEY REEF TYPICAL OF THE AREA, USING CONVENTIONAL
SCRAPER-MINING AND RAIL-BOUND EQUIPMENT.
OVERVIEW
Evander Mines’ underground operations exploited the Kimberley Reef
typical of the area, using conventional scraper-mining and rail-bound
equipment with some trackless mechanised development. With
8 Shaft extending to a depth of 2.5km, travel time to the mining face
was in excess of an hour via underground infrastructure comprising
a lift, locomotive and two chairlifts. Run-of-mine ore and waste was
transported from the rock face along a series of locomotive haulages,
11 conveyors and a vertical shaft to the bottom of 7 Shaft, from
where it was hoisted to surface. The gold is extracted at the Kinross
plant using a carbon-in-leach (CIL) process.
reduce costs,
CESSATION OF EVANDER MINES’ LARGE-SCALE
UNDERGROUND OPERATIONS
Despite various interventions to increase Evander Mines’ current
the
underground operations production and
underground operations continued to be financially unsustainable. An
internal and external review of the existing Evander Mines underground
operations concluded that there was no realistic prospect of mining
on a sustainable basis from this operation in the current weak ZAR
gold price environment and also when other internal and external
factors were considered. Besides the volatile ZAR gold price, the
decision to cease mining was impacted by the persistent and material
infrastructure failures, which adversely impacted the sustainability
of underground mining. The outcome of the appraisal process was
regrettably the cessation of large-scale underground operations
at Evander Mines and the retrenchment of affected employees
with effect from 31 May 2018. The decision to cease large-scale
underground operations at 8 Shaft was difficult, given South Africa’s
socio-economic realities and the impact on the miners and their
families. Retrenched employees were offered reskilling opportunities,
which is continuing, and we have retrained and re-employed a number
of these employees into Elikhulu. Environmental rehabilitation of the
mine will provide further employment opportunities.
Lazarus Motshwaiwa
General manager
SALES AND PRODUCTION
Evander Mines’ gold sold in the year under review decreased by 6.6%
to 69,815oz (2017: 74,777oz) due to a reduction in surface feed stock
tonnages available for treatment.
Underground mining
The head grade remained constant at 5.7g/t (2017: 5.7g/t), and gold
sold from underground operations increased by 7.2% to 48,565oz
(2017: 45,304oz). Underground tonnes milled increased by 4.3% to
272,124t (2017: 260,784t).
Underground mining rand cash cost per kilogram decreased by 5.2%
to R695,246/kg (2017: R733,664/kg), while US dollar cash costs per
ounce increased by 0.1% to USD1,682/oz (2017: USD1,679/oz).
ETRP
ETRP and associated surface production decreased by 27.9% to
21,250oz (2017: 29,473oz), predominantly due to a 30.1% reduction
in surface feed stock tonnages available for treatment. The 2017
financial year also benefited from additional throughput capacity
during the 55-day stoppage of underground mining.
The ETRP’s rand cash cost per kilogram amounted to R305,108/kg
(2017: R242,049/kg), equating to a US dollar cash cost per ounce of
USD738/oz (2017: USD554/oz).
COST OF PRODUCTION
The total cost of production (including off-mine costs) decreased by
0.3% to R1,251.9 million (2017: R1,255.7 million). Primary cost drivers
were:
• 7.4% decline in labour cost due to the reduction in the labour
complement
• 24.8% decline in mining cost due to the cessation of mining
• 41.6% increase in engineering and technical cost due to the
increased maintenance on shaft infrastructure.
53
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018 OPERATIONAL AND PERFORMANCE REVIEW continued
EVANDER MINES continued
CAPITAL EXPENDITURE
In this reporting period, Pan African Resources invested capital
of R1,437.6 million (2017: R397.7 million) into the Evander
mining complex, of which maintenance capital expenditure was
R127.8 million (2017: R118.6 million) and development capital
expenditure cost was R53.7 million (2017: R103.6 million).
The group had invested R1,256.1 million on the development
of Elikhulu. For the current reporting period, with a total of
1,431.6 million invested at the end of 30 June 2018.
LOOKING AHEAD
• Continue with the consolidation of ETRP’s throughput into
Elikhulu’s processing capacity and full ramp-up of production
at Elikhulu
• Continue to process third-party surface sources through the
Kinross plant
GOLD SOLD – UNDERGROUND AND SURFACE SOURCES
Ounces
100,000
80,000
60,000
40,000
20,000
0
2014
2015
2016
2017
2018
• Assess the merits of the Egoli Project as a future mining
Underground Surface ETRP
development
• Assess the viability of mining Evander Mines’ 8 Shaft pillar.
PRODUCTION STATISTICS – UNDERGROUND AND SURFACE
Tonnes
g/t
800,000
700,000
600,000
500,000
400,000
300,000
200,000
100,000
0
6
5
4
3
2
1
0
2014
2015
2016
2017
2018
Underground Surface Head grade – underground and suface
54
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018STRATEGIC REPORT:PERFORMANCE REVIEW
PRODUCTION STATISTICS – ETRP
Tonnes
2,500,000
2,000,000
1,500,000
1,000,000
500,000
0
2015
2016
2017
2018
CAPITAL EXPENDITURE
R million
1,500
1,200
900
600
300
0
g/t
0,75
0,50
0,25
0,00
2014
2015
2016
2017
2018
ETRP ETRP head grade
Development capital Maintenance capital ETRP Elikhulu
CASH COST BREAKDOWN (INCLUDING ETRP) – OPERATING COSTS
OPERATING COSTS
OPERATING COSTS
2018
Engineering and technical services
39% Salaries and wages
7% Mining costs
17% Processing costs
8%
18% Electricity costs
1% Security costs
6% Administration and other costs
3% Off-mine costs
1% Inventory adjustment
2017
Engineering and technical services
41% Salaries and wages
7% Mining costs
21% Processing costs
7%
16% Electricity costs
1% Security costs
4% Administration and other costs
2% Off-mine costs
1% Inventory adjustment
CASH COST BREAKDOWN (EXCLUDING ETRP) – UNDERGROUND OPERATING COSTS
UNDERGROUND OPERATING COSTS
UNDERGROUND OPERATING COSTS
2018
Engineering and technical services
47% Salaries and wages
8% Mining costs
5% Processing costs
10%
21% Electricity costs
1% Security costs
5% Administration and other costs
1% Off-mine costs
2% Inventory adjustment
2017
Engineering and technical services
49% Salaries and wages
9% Mining costs
7% Processing costs
8%
19% Electricity costs
2% Security costs
4% Administration and other costs
1% Off-mine costs
1% Inventory adjustment
55
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018
OPERATIONAL AND PERFORMANCE REVIEW continued
ELIKHULU
SALIENT FEATURES
◗
◗
◗
◗
◗
Construction of the R1.74 billion Elikhulu tailings
retreatment plant commenced in August 2017
Elikhulu’s inaugural gold pour occurred on 16 August 2018
The plant is scheduled to be producing at steady state by
October 2018
Elikhulu has been awarded a 20-year water-use licence
and environmental authorisation as per the National
Environmental Management Act
Elikhulu will produce approximately 70,000oz per annum
once the ETRP is incorporated into the plant.
OVERVIEW
The enlarged Elikhulu plant is projected to produce more than
70,000oz of gold per annum. Cost of production is forecast at
below USD650/oz at prevailing exchange rates. The plant is scheduled
to be producing at steady state by October 2018.
SAFETY
Elikhulu construction recorded 291,153 working man hours, with an
LTIFR of 4.38.
CAPITAL EXPENDITURE
Pan African Resources approved expenditure of R1.74 billion on
Elikhulu, financed through a share capital raise and a dedicated term
facility provided by a consortium of South African banks. The group
has invested R1,431.6 million on the development of Elikhulu up to
30 June 2018.
56
COMMUNITY ENGAGEMENTS
The community steering committee, established by the project
team to represent Evander Mines and all the relevant community
stakeholders, continues to engage with the Evander community to
address grievances and concerns. Community protests from time to
time resulted in the loss of several construction days at Elikhulu.
Management and the project team managed to timeously defuse
all issues with stakeholders to prevent material delays on the
project’s timeline. The team is also focused on maintaining regular
communication with the community on the project’s progress and
how the community can continue to remain involved.
At the peak of construction, Elikhulu had 1,769 construction personnel
on site and R162.0 million was spent on preferential procurement
in favour of community contractors for services rendered to
30 June 2018. Elikhulu is expected to create approximately
350 fulltime jobs at steady-state production.
The Evander Mines Transformation Trust (EMTT) has collected
R4.7 million from suppliers involved in the construction of Elikhulu
and will begin engaging with the community to invest these proceeds
in beneficial LED projects in the new financial year.
LOOKING AHEAD
Elikhulu had its inaugural gold pour on 16 August 2018 and it is
planned to produce approximately 56,000oz per annum for the
initial eight years, and 45,000oz per annum in the remaining years,
at an average all-in sustaining cost of less than USD650/oz at the
prevailing exchange rates. Elikhulu’s processing capacity will increase
to 1.2 million tonnes per month by incorporating the existing ETRP
throughput into Elikhulu’s processing capacity.
The Kinross tailings will be processed initially, followed by the
Leslie/Bracken and Winkelhaak tailings, with the processed tailings
consolidated into a single enlarged Kinross facility which reduces
Evander Mines’ environmental footprint.
With the cessation of Evander Mines’ large-scale underground
operations, the Elikhulu tailings project should generate low-cost and
cash-flow-positive gold production from this operation.
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018STRATEGIC REPORT:PERFORMANCE REVIEW THE GEOLOGY OF THE BARBERTON
MAKHONJWA MOUNTAIN LAND
BARBERTON GREENSTONE BELT
The Barberton Makhonjwa Mountains represent the best-preserved
succession of volcanic and sedimentary rock dating back 3.5 billion years
to the earliest continent formations and primitive life conditions on
earth. Scientists refer to this volcanic crust as the Barberton Greenstone
Belt.
Greenstone belts are characterised by deformed volcanic and sedimentary strata,
acquiring their name from the presence of green metamorphic minerals contained
in the rock. The Barberton Greenstone Belt is known in particular for its gold
mineralisation and komatiites, an unusual kind of ultramafic rock named after the
Komati River that runs through the belt.
In 1967, one of earth’s first life forms was discovered here. The bacterial microfossil,
Archaeosphaeroides barbertonensis, is believed to be 3.1 billion years old. This area
is the only place on earth where the early development of the earth’s crust and
evolution of life can be studied.
The Makhonjwa mountain range is also referred to as the ‘Genesis of Life’ for its
remarkable geological phenomenae, stretching from Jeppe’s Reef to Oshoek and from
Shiyalongubo Dam to Queen’s River.
Evidence of the first colossal meteor impact on record is shown in these magnificent
mountains.
Barberton Mines are hosted within the rocks of the Barberton Supergroup.
The Barberton Supergroup comprises:
Onverwacht Group – ultramafic and
•
mafic submarine volcanics
Fig Tree Group – turbiditic grewacke
sandstones and shales
Moodies group – shallow-water
clastics.
•
•
Mountain altitudes range from
600 to 1,800 metres (2,000 to
5,900 feet) above sea level.
Gold was discovered in the region more than
120 years ago. These gold deposits are the
oldest recognised gold ores on earth.
The Barberton
Greenstone Belt covers
an area of 120km by
60km, with 80% in
Mpumalanga and the
rest of the mountain
land in Swaziland.
Despite scientists travelling from all around
the world to regularly test and study this
area, the tectonic evolution of the Barberton
Greenstone Belt causes much debate in
geological circles.
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018
57
OPERATIONAL PRODUCTION
GOLD OPERATIONS
Underground operations
Tailings operations
Total operations
Year
ended
30 June
Barberton
Mines
Evander
Mines
Units
Total
BTRP
ETRP
Elikhulu
Tonnes milled
– underground
Tonnes processed – tailings
Tonnes processed –
surface feedstock
Tonnes processed – total
tailings and surface
feedstock
Tonnes milled and
processed – total
Head grade
– underground
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 – tailings
operations
Gold production
– surface feedstock
Gold sold
Average ZAR gold
price received
Average USD gold
price received
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
(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)
(%)
(%)
(%)
(%)
(oz)
(oz)
(oz)
(oz)
(oz)
(oz)
(oz)
(oz)
237,831
272,124
509,955
246,915
260,784
507,699
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
858,967
1,855,249
821,691
1,854,113
–
–
327,109
467,610
858,967
2,182,358
821,691
2,321,723
237,831
272,124
509,955
858,967
2,182,358
246,915
260,784
507,699
821,691
2,321,723
10.3
9.8
10.3
9.8
–
–
–
–
–
–
10.3
9.8
9.6
9.0
93
92
–
–
5.7
5.7
5.7
5.7
–
–
–
–
–
–
5.7
5.7
5.6
5.4
98
94
–
–
7.8
7.7
7.8
7.7
–
–
–
–
–
–
7.8
7.7
7.4
7.2
95
93
–
–
73,125
48,565
121,690
71,763
45,304
117,067
–
–
–
–
1.4
2.3
–
–
1.4
2.3
1.4
2.3
0.6
1.0
–
–
46
44
–
–
–
–
–
–
0.3
0.3
1.7
1.9
0.5
0.6
0.5
0.6
0.3
0.4
–
–
39
41
–
–
–
–
–
–
–
–
–
–
–
–
–
–
17,504
26,745
–
–
7,128
8,113
14,122
21,360
73,125
48,565
121,690
17,504
21,250
71,763
45,304
117,067
26,745
29,473
(ZAR/kg)
534,288
537,161
535,434
535,055
555,870
(ZAR/kg)
550,028
544,433
544,495
542,761
522,418
(USD/oz)
(USD/oz)
1,292
1,259
1,299
1,226
1,295
1,246
1,294
1,242
1,344
1,227
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Barberton
Mines
total
Evander
Mines
total
Tailings
total
Group
total
–
–
237,831
272,124
509,955
246,915
260,784
507,699
2,714,216
858,967
1,855,249
2,714,216
2,675,804
821,691
1,854,113
2,675,804
327,109
467,610
–
–
327,109
327,109
467,610
467,610
3,041,325
858,967
2,182,358
3,041,325
3,143,414
821,691
2,321,723
3,143,414
3,041,325
1,096,798
2,454,482
3,551,280
3,143,414
1,068,606
2,582,507
3,651,113
–
–
–
–
0.6
0.9
1.7
1.9
0.8
1.1
0.8
1.1
0.4
0.6
–
–
44
44
–
–
10.3
9.8
10.3
9.8
1.4
2.3
–
–
1.4
2.3
3.3
4.0
2.6
2.9
93
92
46
44
5.7
5.7
5.7
5.7
0.3
0.3
1.7
1.9
0.5
0.6
1.1
1.2
0.9
0.9
98
94
39
41
7.8
7.7
7.8
7.7
0.6
0.9
1.7
1.9
0.8
1.1
1.8
2.0
1.4
1.5
95
93
44
44
73,125
48,565
121,690
71,763
45,304
117,067
24,632
17,504
7,128
24,632
34,858
26,745
8,113
34,858
14,122
21,360
–
–
14,122
14,122
21,360
21,360
38,754
90,629
69,815
160,444
56,218
98,508
74,777
173,285
546,469
534,436
542,856
538,100
532,096
548,055
535,815
542,773
1,322
1,218
1,293
1,254
1,299
1,226
1,301
1,242
58
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018STRATEGIC REPORT:PERFORMANCE REVIEW
Underground operations
Tailings operations
Total operations
Year
ended
30 June
Barberton
Mines
Evander
Mines
Units
Total
BTRP
ETRP
Elikhulu
ZAR cash cost
ZAR all-in sustaining
costs
ZAR all-in cost1
USD cash cost
USD all-in sustaining cost
USD all-in cost1
ZAR cash cost per tonne2
Capital expenditure
Revenue
Cost of production
All-in sustainable cost
of production
All-in cost of production
Adjusted EBITDA3
Average exchange rate
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
(ZAR/kg)
435,368
695,246
539,082
285,593
305,108
(ZAR/kg)
416,356
733,664
539,148
165,088
242,049
(ZAR/kg)
507,130
853,797
645,481
287,390
306,120
(ZAR/kg)
501,330
914,841
661,351
171,480
242,260
(ZAR/kg)
513,553
963,882
693,274
443,188
306,120
(ZAR/kg)
526,053
959,976
693,974
198,830
242,260
(USD/oz)
1,053
(USD/oz)
(USD/oz)
(USD/oz)
(USD/oz)
(USD/oz)
(ZAR/t)
(ZAR/t)
(R million)
(R million)
953
1,227
1,147
1,242
1,204
4,163
3,764
125.0
167.1
1,682
1,679
2,065
2,094
2,331
2,197
3,859
3,964
181.5
222.2
1,304
1,234
1,561
1,514
1,677
1,588
4,001
3,866
306.5
389.3
(R million)
1,215.2
811.4
2,026.6
(R million)
1,227.7
767.2
1,994.9
(R million)
990.2
1,050.2
2,040.4
(R million)
929.3
1,033.7
1,963.0
(R million)
1,153.4
1,289.7
2,443.1
(R million)
1,119.0
1,289.0
2,408.0
(R million)
1,168.0
1,456.0
2,624.0
(R million)
1,174.2
1,352.6
2,526.8
(R million)
247.0
(270.0)
(23.0)
(R million)
408.6
(334.0)
ZAR/USD)
(ZAR/USD)
12.86
13.59
12.86
13.59
74.6
12.86
13.59
691
378
695
392
1,072
455
181
167
85.4
26.4
291.3
451.5
155.5
137.4
156.5
142.7
241.3
165.4
94.6
267.6
12.86
13.59
738
554
740
554
740
554
92
96
–
–
367.4
478.9
201.7
222.0
202.3
222.2
202.3
222.2
150.6
276.4
12.86
13.59
Barberton
Mines
total
Evander
Mines
total
Tailings
total
Group
total
296,294
406,441
576,497
480,439
205,439
348,127
539,850
430,863
297,661
464,690
687,098
561,468
208,590
411,762
649,683
514,435
368,029
499,963
763,675
614,713
221,600
437,199
677,024
540,693
717
470
720
477
890
507
117
114
983
797
1,124
942
1,209
1,001
1,045
998
1,394
1,236
1,662
1,487
1,847
1,549
510
486
1,162
986
1,358
1,177
1,487
1,237
675
636
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,256.1
1,341.5
210.4
1,437.6
1,648.0
175.5
201.9
193.5
397.7
591.2
–
–
–
–
–
–
–
–
–
–
12.86
13.59
658.7
1,506.5
1,178.8
2,685.3
930.4
1,679.2
1,246.1
2,925.3
357.2
1,145.7
1,251.9
2,397.6
359.4
1,066.7
1,255.7
2,322.4
358.8
1,309.9
1,492.0
2,801.9
364.9
1,261.7
1,511.2
2,772.9
443.6
1,409.3
1,658.3
3,067.6
387.6
1,339.6
1,574.8
2,914.4
245.2
544.0
12.86
13.59
341.6
(119.4)
676.2
12.86
13.6
(57.6)
12.86
13.59
222.2
618.6
12.86
13.59
1 Excludes Elikhulu capital expenditure.
2 Split between ETRP and surface feedstock cost per tonne is R41.21/t and R382.77/t respectively, averaging at R92.40/t.
3 Adjusted EBITDA is represented by earnings before interest, taxation, depreciation and amortisation, impairments, discontinued operations and profit/(loss)
on disposal of investments.
59
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018 ABRIDGED MINERAL RESOURCES AND
MINERAL RESERVES REPORT
SCOPE OF REPORT
This abridged version of the Pan African Resources MR&MR
conforms to the standards determined by the SAMREC
Code and forms part of Pan African Resources’ integrated
annual report, including the annual financial statements
for the year ended 30 June 2018. The MR&MR should be
read in conjunction with the unabridged Mineral Resource
and Mineral Reserves report available on our website at
http://www.panafricanresources.com/mineral-resource-
mineral-reserve/.
The Mineral Resource component is inclusive of Mineral
Reserves, unless otherwise stated. Information in this
report is presented by operation, mine or project. The
tables and graphs utilised to illustrate developments across
the operations of Pan African Resources include:
◗ Mineral Resource tables
◗ Mineral Reserve modifying factors
◗ Mineral Reserve tables
◗ an annual comparison of the Mineral Resource and
Mineral Reserve estimates
◗ development sampling results and Mineral Reserve
projects
◗ appointed competent persons.
MATTERS DISCUSSED IN DETAIL IN
THIS ABRIDGED VERSION INCLUDE
REGIONAL GEOLOGY, LOCATION,
EXPLORATION DRILLING AND ORGANIC
MINERAL RESERVE PROJECTS.
Rounding of numbers in this report may result in minor
computational discrepancies.
Royal Sheba surface drillhole RSPE012 (July 2018)
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
(2016 edition), which sets out internationally recognised procedures and
standards for the reporting of 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, Oil and Gas Companies of the LSE.
PAN AFRICAN RESOURCES’ REPORTING IN
COMPLIANCE WITH THE SAMREC CODE
To meet the requirement of the 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
quantified mineralised orebody. In determining the Mineral Resource cut-
off grade, Pan African Resources uses a gold price of R600,000/kg. At our
underground mines, the optimal cut-off is defined as the lowest grade
at which an orebody can be mined, such that the total profits, under a
specified set of mining parameters, are maximised. The Mineral Resources
optimiser tool that was accordingly developed in-house was applied to
the Mineral Resource inventory and evaluates each block of the orebody
based on its financial viability.
The optimiser programme requires the following inputs to convert Mineral
Resources to Mineral Reserves and optimise the economic cut-off grade:
• the database inventory of all Mineral Resource blocks
• an assumed gold price – R525,000/kg
• planned production rates for each mine
• mine call factor (MCF)
• plant recovery factors
• planned cash operating costs.
The Mineral Reserve represents that portion of the Measured and
Indicated Mineral Resource above an economic cut-off in the life-of-mine
plan and has been estimated after considering all 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
design and engineering, rock engineering, metallurgy, financial management,
human resources management and environmental management.
60
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018STRATEGIC REPORT:PERFORMANCE REVIEW PAN AFRICAN RESOURCES USES THE INTERNATIONALLY RECOGNISED
PROCEDURES AND STANDARDS OF THE SAMREC CODE.
Hendrik Pretorius
Group project geologist
The competent person for Pan African Resources, Hendrik Pretorius, the group project geologist, signs off the MR&MR for the group. He is a
member of the South African Council for Scientific Professions (400051/11), as well as a member in good standing of the Geological Society of
South Africa. Hendrik has 15 years of experience in economic geology and mineral resource management (MRM). He holds a BSc (Hons) degree
in Geology from the University of Johannesburg as well as a Graduate Diploma in Engineering from the University of the Witwatersrand. He is
based at The Firs Office Building, 2nd Floor, Office 204, corner Cradock and Biermann Avenues, Rosebank, Johannesburg, South Africa.
Hendrik is supported by key personnel and task experts for each discipline. Key personnel and their relevant experience are listed in the
table below:
Relevant
experience
>15 years
>17 years
>30 years
Name
Designation
Bert van den Berg
Group mining engineer
Operation
Group
Professional registration
and affiliations
Mine Managers Association of South
Africa, The South African Institute of
Mining and Metallurgy
Barry Naicker
Roelf le Roux
Ronnie Fraser
Group mineral resource and
reserve manager
Group
SACNASP (400234/10)
Mineral resource manager
Barberton Mines
Not registered
Chief surveyor
Barberton Mines
Institute of Mine Surveyors South Africa
>45 years
Walter Seymore
Ore reserve manager
Evander Mines
Not registered
Thomas Obiri-Yeboah Consulting senior mining engineer DRA Global
ECSA (20100340)
>20 years
>26 years
Mineral Resources and Mineral Reserves risks include:
Low
Medium
High
Type of risk
Risk
Mitigating action
Financial
Volatile commodity
and currency prices
• A conservative ZAR gold price was utilised to calculate the modifying factors in
comparison to the current prevailing ZAR gold prices
Cost inflation
• Successfully concluded a three-year wage deal at Barberton Mines
Level
of risk
• Cessation of the Evander Mines’ underground operations will result in a reduction in
the group’s all-in sustaining cost per kilogram, while the low-cost and low-risk tailings
operations such as the BTRP, ETRP and Elikhulu will further assist the group in reducing
the all-in sustaining cost per kilogram
Legal
Mining right legal
tenure
• Barberton Mines have submitted their mining right renewal applications on
23 August 2018. The mining right renewal application is for a period of 30 years
61
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018 STRATEGIC REPORT:
PERFORMANCE REVIEW
ABRIDGED MINERAL RESOURCES AND MINERAL RESERVES REPORT continued
Type of risk
Risk
Mitigating action
Low
Medium
High
Level
of risk
Operational Modifying factors
• Modifying factors as defined in the Mineral Reserve Conversion are based on actual
modifying factors over the preceding three years
• The group’s mining operations have consistently exploited the same orebodies with
the same infrastructure over the past three years
Limited mining
flexibility within
the Fairview MRC
orebody
• Development of two high-grade mining platforms in the MRC orebody to improve
mining flexibility. This development was completed during January 2018
• Barberton Mines has increased its ongoing development rates in the 2019 financial
year with the objective of establishing a third high-grade platform in the Fairview
11-block by the end of June 2019
• The Fairview sub-vertical shaft project will improve ore handling efficiencies and
significantly reduce the time taken by employees to access high-grade mining platforms.
The sub-vertical shaft project is estimated to improve production by approximately
7,000oz to 10,000oz per annum
GOLD
The relationship between Mineral Resources and Mineral Reserves presenting Pan African Resources’ attributable gold resources and reserves as
at 30 June 2018 is tabled below:
Mineral inventory
RESOURCES
Total
Inferred
Indicated
Measured
33.3Moz Au
10.2Moz Au
20.1Moz Au
10.2Moz Au
The company divested of its PGE business during 2017. The
sale of Phoenix Platinum was finalised on 7 November 2017,
therefore no PGE resources and reserves were reported in
the current year.
During the reporting period, Pan African Resources’ Mineral
Reserve remained consistent at 11.2Moz. This realisation
is post the depletion of 0.16Moz as mined in 2017/2018
and Evander Mines’ 8 Shaft underground Mineral Reserve
exclusion of 1.09Moz.
Relative to the mined ounces and the exclusion of Mineral
Reserves from Evander’s 8 Shaft, the group demonstrated
its capacity for replacing mined ounces. Apart from replacing
RESERVES
Total
Probable
Proved
11.2Moz Au
0.9Moz Au
10.2Moz Au
mined ounces, Pan African Resources is also actively developing sustainable
projects, namely Royal Sheba and Egoli, which are all presently at advanced
project status. The Elikhulu plant was commissioned after year-end,
in September 2018, with its inaugural gold pour having occurred on
16 August 2018.
In order to better align Barberton Mines’ life-of-mine to the term of its
mining rights we submitted to the South African Department of Mineral
Resources, on 23 August 2018, a renewal application to extend the
operation’s mining rights for a further 30 years to August 2048.
62
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018
HIGHLIGHTS
In the context of achieving our vision, the MR&MR encompasses our four strategic pillars as shown below:
STAKEHOLDERS
◗ Mineral tenure
◗ Longevity in operations
◗ Organised labour
◗ Stakeholder engagement
◗ Communities
2018
HIGHLIGHTS
AS AT 30 JUNE
STAKEHOLDERS
GROWTH
Mineral Reserves
◗ Gold consistent – 11.2Moz
◗ Elikhulu 2.0Moz
Life-of-mine
◗ Barberton Mines – 20 years
◗ BTRP – 11 years
◗ ETRP – 13 years
◗ Elikhulu – 13 years
SUSTAINABLE
GROWTH
SUSTAINABLE
Mineral Resources
◗ Gold 33.3Moz – down 3.2%
◗ Elikhulu resource declared at 2.0Moz
Organic growth projects
Barberton Mines
◗ Fairview sub-vertical shaft project – MRC orebody
◗ Royal Sheba orebody
PROFITABLE
Evander Mines
◗ Egoli Project
◗ Elikhulu soil resource
Brownfield projects
Barberton Mines
◗ New Consort near surface
◗ Sheba ZK orebody extension
◗ Sheba Hills
◗ Ulundi Syncline
Evander Mines
◗ Rolspruit
◗ Poplar
◗ Evander South
PROFITABLE
High-grade/low-cost producer
◗ Barberton Mines – 10.3g/t
◗ BTRP – 1.4g/t
◗ ETRP – 0.3g/t
◗ Elikhulu – 0.3g/t
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018
63
ABRIDGED MINERAL RESOURCES AND MINERAL RESERVES REPORT continued
OUR STRATEGY
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 and cash flows in a margin-
accretive manner, and by capturing the full precious metals mining value chain by focusing on:
◗ low-cost base
◗ growth in Mineral Reserve base and profitable production
◗ positive impact on earnings in a sustainable manner
◗ maximising recovered grade and production tonnes
◗ high margins.
We encourage an entrepreneurial culture that fosters consistent value accretion for stakeholders by first identifying
and then executing into opportunities within our business and operations. This culture further contributes to
sourcing new investments, organically or acquisitively, thereby bolstering our portfolio of mining assets.
The group’s position on Mineral Resources and Mineral Reserves, which underpins the enterprise value of Pan African Resources, is
presented below.
GOLD
GROUP MINERAL RESOURCES
The total Mineral Resources for the group decreased from 34.4Moz in June 2017 to 33.3Moz in June 2018 – a gross annual decline of 1.1Moz, or 3.2%.
As at 30 June 2018
Category
Mineral Resources
Total
Measured
Indicated
Inferred
Mt
55.5
219.0
56.6
331.2
Resource reconciliation – Gold ounce
Contained gold
Grade
g/t
1.65
2.86
5.62
3.13
Tonnes
gold
91.8
625.5
318.2
1,035.5
Moz
2.95
20.10
10.24
33.30
3.2%
0.54
1.51
0.16
0.18
3.17
40
35
30
25
20
z
o
M
34.40
15
10
5
0
33.30
Mineral Resource at reporting date
Decrease in Mineral Resource
Increase in Mineral Resource
30 June 2017
Mined during
2017/2018
Royal Sheba
Egoli
Cut-off grade
and estimation
Additions
30 June 2018
64
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018STRATEGIC REPORT:PERFORMANCE REVIEW VALUE CREATION
The group strategy is based on global best practice in MRM to dynamically explore and develop projects that will become the next generation’s
long-term businesses.
The evolution of a project from initial sample testing to commissioning involves a series of study stages commencing with exploratory work and
terminating with feasibility studies, in order to obtain investment approval followed by project implementation. The graph below demonstrates the
group’s mineral assets within the value chain and how value is created through projects such as the BTRP, ETRP, Elikhulu and now Royal Sheba.
EXPLORATION
DEVELOPMENT
PROJECT
MINE CONSTRUCTION
Mineral
Resources
Inferred
Measured
Indicated
Proved
Probable
Evander 8 Shaft Pillars
Fairview sub-vertical shaft
Royal Sheba
MINE
PRODUCTION
Mineral
Reserves
Springs surface sources
Royal Sheba
east extension
Egoli Project
Rolspruit
Poplar
Evander 9 Shaft
A Block
Evander South
Elikhulu
ETRP
BTRP
Barberton Mines
E
U
L
A
V
T
C
E
J
O
R
P
New Consort
near surface
exploration
Sheba Hills
exploration
Barberton
Mines
near-mine
exploration
DISCOVERY
Evander
Mines
near-mine
exploration
DESKTOP STUDY
FEASIBILITY
STUDY
PROJECT
COMMISSIONING
CONFIDENCE
GROUP MINERAL RESERVES
Pan African Resources’ Mineral Reserves remained constant at 11.2Moz over the reporting period.
As at 30 June 2018
Category
Mineral Reserves
Proved
Probable
Total
Mt
48.4
190.7
239.1
Contained gold
Grade
g/t
0.63
1.67
1.46
Tonnes
gold
30.5
317.9
348.4
Moz
0.98
10.23
11.22
0%
Reserve reconciliation – Gold ounce
14.0
12.0
10.0
8.0
z
o
M
6.0
4.0
2.0
0
0.88
0.56
0.16
1.09
0.24
0.06
11.20
11.22
30 June 2017
Mined during
2017/2018
Royal Sheba
Egoli
Evander Mines’
8 Shaft
Cut-off grade
and estimation
Additions
30 June 2018
Mineral Reserves remained
constant due to the conversion
of Egoli and Royal Sheba which
was offset by the exclusion of
Evander Mines’ 8 Shaft Mineral
Reserves and mined ore.
Mineral Reserve at reporting date
Decrease in Mineral Reserve
Increase in Mineral Reserve
65
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018
ABRIDGED MINERAL RESOURCES AND MINERAL RESERVES REPORT continued
GROUP MINERAL
RESERVE TABULATION
At 30 June 2018
Proved
Probable
Total
Mt
48.4
190.1
239.1
g/t
0.63
1.67
1.46
Moz
0.98
10.23
11.22
METRES DEVELOPED
◗ Barberton Mines 1,532 metres @ 4.89g/t
◗ Evander Mines 298 metres @ 28.86g/t
SAFETY
◗ TRIFR = 12.71
◗ LTIFR = 3.73
◗ RIFR = 1.08
◗ FIFR = 0
HEALTH
◗ HIV/Aids – VCT = 4.59
◗ NIHL cases reported = 12
MINING VALUE CHAIN
GROUP MINERAL
RESOURCE TABULATION
At 30 June 2018
Measured
Indicated
Inferred
Total
Mt
55.5
219.0
56.6
331.2
g/t
1.65
2.86
5.62
3.13
Moz
2.95
20.10
10.24
33.30
METRES DRILLED
◗ Barberton Mines 11,651 metres @ R8.9 million
◗ Evander Mines 1,832 metres @ R2.0 million
Gold
66
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018STRATEGIC REPORT:PERFORMANCE REVIEW GROUP
PRODUCTION
COMPANY
RAND REFINERY
GROUP
SOCIAL DEVELOPMENT EXPENDITURE
◗ CSI = R2.6 million
◗ LED = R7.6 million
◗ Bursaries = R3.4 million
BARBERTON MINES
U/G à 237,831t milled @ 10.30g/t for 73,125oz
BTRP
à 858,967t processed @ 1.40g/t for 17,504oz
EVANDER MINES
U/G à 272,124t milled @ 5.70g/t for 48,565oz
ETRP
à 2,182,358t processed @ 0.5g/t for 21,250oz
GROUP
à 3,551,280t processed @ 1.8g/t for 160,444oz
Mined out
67
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018 ABRIDGED MINERAL RESOURCES AND MINERAL RESERVES REPORT continued
GROUP ORGANIC GROWTH
The operations’ robust life-of-mine plans support the group’s business. Current exploration drilling and initiatives to access and develop our
orebodies were aggressively pursued during the year. The strategy of converting Mineral Resources to Mineral Reserves was progressed by moving
organic projects further up the mining value chain closer towards feasibility or production stages. The tables below reflect the progress of near-mine
growth projects that have contributed ounces to Mineral Resources for the year.
EXPLORING THE OREBODY: EXPLORATION DRILLING
Operation
Barberton Mines
Evander Mines1
Total
metres
11,651
1,832
Number
of
boreholes
196
63
Average
channel
width
cm
207
2,908
Number
of
intersections
above
cut-off
Average
grade
g/t
Total
expenditure
R million
83
63
13
0.29
8.9
2.0
1 Excludes any underground drillholes from Evander Mines’ 8 Shaft.
ACCESSING THE OREBODY: ON-REEF DEVELOPMENT
Operation
Barberton Mines
Evander Mines
Total
on-reef
development
metres
1,532
298
Average
grade
g/t
4.89
28.86
DEVELOPING THE OREBODY: CAPITAL ORE RESERVE PROJECTS – BARBERTON MINES
Project
Sheba – pillar development
Sheba – Edwin Bray to Thomas and Joe’s Luck area
Fairview – 11 Level Royal Reef
Fairview – 1 Shaft one reserve opening
Fairview – 3 Shaft deepening
Fairview – (64 – 68) Level
New Consort – (33 – 45) PC
New Consort – Main Maiden Reef (MMR) pillar development
New Consort – 3 Shaft
Royal Sheba
Sheba Western Cross
2018
metres
2017
metres
488.1
7.6
–
–
177.7
531.9
74.8
–
–
373.1
–
450
8
–
71
171
451
265
8
–
143
4
Ounces in
current
resources
targeted
oz
10,101
18,701
826
16,547
96,922
1,065,736
10,000
66,309
5,969
719,189
26,752
2016
metres
540
27
Equipping
131
64
581
387
–
17
189
133
68
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018STRATEGIC REPORT:PERFORMANCE REVIEW GROWTH PROJECTS
ELIKHULU
North
Kinross TSF
Elikhulu Process Plant
Evander
Kinross Extension TSF
Leslie TSF
Winkelhaak TSF
2km
Elikhulu entails establishing tailings retreatment facilities and infrastructure at Evander Mines, owned and operated by Pan African Resources, to
retreat gold plant tailings at a rate of 1Mt per month. This is in addition to the existing production from the ETRP which will continue to operate
independently of Elikhulu until December 2018, whereafter the ETRP will be incorporated into Elikhulu, which will ensure more efficient recoveries
of gold for the next 13 years. The three existing TSFs will be reclaimed in the following order: Kinross, Leslie/Bracken and Winkelhaak. Post their
processing, these TSFs will be consolidated into a single enlarged Kinross facility, thus reducing Evander Mines’ environmental footprint and
associated environmental impact.
Elikhulu is expected to yield approximately 56,000oz of gold per annum for its initial eight years of production while treating the Kinross
and Leslie TSFs. Thereafter, while processing the Winkelhaak TSF, production is expected to be approximately 45,000oz a year for the plant’s
remaining five years. These production figures exclude an Inferred Resource of 150,000oz of gold delineated in the soil material beneath the existing
tailings dumps.
From December 2018, Elikhulu’s processing capacity will increase to 1.2Mt per month through the incorporation of the existing ETRP throughput
into Elikhulu’s processing capacity.
Mineral Resource estimate
as at 30 June 2018
Resource category
Measured
Total
Indicated
Total
Inferred
Total
Total Mineral Resource1
1 Inclusive of ETRP.
Tailings storage facility
Kinross
Winkelhaak
Leslie
Kinross
Winkelhaak
Leslie
Kinross
Winkelhaak
Leslie
Mt
46.24
–
–
46.24
4.63
76.21
70.07
150.91
–
8.00
4.57
12.57
209.72
Contained gold
Grade
g/t
Ounces
Moz
0.32
–
–
0.32
0.34
0.24
0.32
0.28
–
0.27
0.45
0.34
0.29
0.48
–
–
0.48
0.05
0.59
0.71
1.35
–
0.07
0.08
0.15
1.98
69
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018
ABRIDGED MINERAL RESOURCES AND MINERAL RESERVES REPORT continued
Mineral Reserve estimate
as at 30 June 2018
Reserve category
Proved
Total
Probable
Total
Total Mineral Reserve1
1 Inclusive of ETRP.
Tailings storage facility
Kinross
Leslie
Winkelhaak
Kinross
Leslie
Winkelhaak
Contained gold
Grade
g/t
Ounces
Moz
0.32
–
–
0.32
0.35
0.31
0.24
0.28
0.29
0.48
–
–
0.48
0.05
0.71
0.54
1.30
1.78
Mt
46.04
–
–
46.04
4.48
70.07
70.02
144.57
190.61
The Mineral Reserve estimate is a total 190.61Mt (Proved and Probable), comprised of the Kinross (50.52Mt, of which 46.04Mt are Proved
Reserves), Leslie (70.07Mt) and Winkelhaak (70.02Mt) TSFs at Evander Mines. The combined 190.61Mt will provide feed material to the existing
ETRP at 200,000 tonnes per month and to Elikhulu at a rate of 1Mt per month.
The combined Mineral Reserve contains 1.78Moz, of which an estimated 783,000oz will be recovered over the life of the plant. This estimate
excludes the 152,000oz (mainly Inferred Resources at 150,000oz) of gold leached and contained in the soil beneath the existing tailings dumps,
which could potentially increase Elikhulu’s life.
The Mineral Reserve estimate assumes a non-selective mining method whereby the whole mineral deposit is mined in a predetermined sequence.
The mining method allows for 100% extraction of the targeted mineral deposit. Hydraulic mining is the selected mining method as it is a proven
technology, cost effective and technically and operationally well understood.
The overall average gold recovery over the life of Elikhulu is forecast at 47.74%.
Elikhulu’s construction is progressing according to plan with its first gold poured on 16 August 2018.
In 2018, an additional 63 sonic drillholes were drilled (1,832m) in the Kinross dam on a 100m by 100m grid. This grid yields a sampled grade, particle
density and geometallurgical value in each bench being mined per month. The Kinross dam will be mined in the first three years of the life of Elikhulu.
All the data collected from the infill drilling programme has been employed in the updated Mineral Resource and Mineral Reserve for Kinross dam.
This resulted in the upgrade of the initial Probable Reserve to a Proved Reserve for the Kinross dam.
Kinross tailings composite grade (g/t)
6 August 2018
70
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018STRATEGIC REPORT:PERFORMANCE REVIEW ROYAL SHEBA PROJECT
The Royal Sheba orebody was mined until 1996,
producing 3,000 tonnes per month of ore from
the central high-grade zone of the deposit.
A compound shaft sunk to 12 Level, approximately
340m below surface, was utilised to access the
orebody. The ore was treated at the Sheba
metallurgical plant. A
total of approximately
280,000 tonnes of ore was mined at a grade more
than 4g/t, resulting in just over 37,000oz gold
being produced from this orebody. Due to the
prevailing economic conditions in the 1990s,
mining at the Royal Sheba section was suspended.
The company embarked on a review of the
Mineral Resources of the Royal Sheba orebody. The
review focused on the geology and mineralisation
of the deposit, incorporating a full 3D geological
modelling exercise on the structural, lithological
and mineralisation components of the deposit. The
combination of the three components resulted
in a robust and fit-for-purpose 3D geological
model adjacent to and below the current Royal
Sheba Mine infrastructure. This modelling practice
has never before been applied to the Barberton
deposits.
Royal Sheba geological structures.
Royal Sheba 3D geological model.
71
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018
ABRIDGED MINERAL RESOURCES AND MINERAL RESERVES REPORT continued
Mineral Resources
as at 30 June 2018
Opencast Mineral Resource
(0.5g/t cut-off)
Total
Underground Mineral Resource
(1.87g/t cut-off)
Total
Total Mineral Resources
Category
Measured
Indicated
Inferred
Measured
Indicated
Inferred
Contained gold
Grade
g/t
Tonnes
gold
Ounces
Moz
3.88
3.73
–
3.81
2.97
2.89
3.22
3.00
3.27
5.66
5.14
–
10.80
7.87
5.08
4.20
17.15
27.96
0.18
0.17
–
0.35
0.25
0.16
0.14
0.55
0.90
Mt
1.46
1.38
–
2.84
2.65
1.76
1.31
5.72
8.56
Mineral Resources are reported in accordance with the SAMREC Code. Mineral Resources would be the same if reported according to the
guidelines of the Canadian Institute of Mining’s (CIM) National Instrument 43-101. Cut-off values are calculated at 0.5g/t for opencast and 1.87g/t
for underground, applying a gold price of R600,000/kg (USD1,435/oz and ZAR13.00/1USD). Mineral Resources are reported inclusive of Mineral
Reserves. All Mineral Resources reported exclude geological structures. Mineral Resources are reported as in-situ tonnes. Any discrepancies in
totals are due to rounding.
The following tonnage discount factors have been applied to the Mineral Resource:
• Geological loss of 5% for the Measured category
• Geological loss of 10% for the Indicated category
• Geological loss of 15% for the Inferred category.
Additional effects of mining and recovery losses have been considered in the cut-off grade calculations.
Mineral Reserves
as at 30 June 2018
Opencast Mineral Resource
(0.7g/t cut-off)
Total
Underground Mineral Resource
(1.87g/t cut-off)
Total
Total Mineral Reserves
Category
Proved
Probable
Proved
Probable
Contained gold
Grade
g/t
Tonnes
gold
Ounces
Moz
–
3.98
3.98
–
3.10
3.10
3.38
–
6.43
6.43
–
10.94
10.94
17.37
–
0.21
0.21
–
0.35
0.35
0.56
Mt
–
1.61
1.61
–
3.52
3.52
5.14
Mineral Reserves are reported in accordance with the SAMREC Code. Mineral Reserves would be the same if reported according to the
guidelines of the CIM’s National Instrument 43-101. Cut-off values are calculated at 0.7g/t for opencast and 1.87g/t for underground, applying a
gold price of ZAR525,000/kg (USD1,256/oz and ZAR13.00/1USD). All Mineral Reserves reported exclude geological structures. Mineral Reserves
are reported as in-situ tonnes. Any discrepancies in totals are due to rounding.
The following tonnage discount factors have been applied to the Mineral Reserve:
• Loss of 10%
• Dilution of 10%.
Additional effects of mining and recovery losses have been considered in the cut-off grade calculations.
72
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018STRATEGIC REPORT:PERFORMANCE REVIEW Following the successful conclusion of the concept study, 20 diamond drillholes are being drilled in the surface expression of the orebody.
The results of the drilling presented below will be incorporated in an updated Mineral Resource statement to be released by November 2018.
A definitive feasibility study will be undertaken by DRA Global incorporating this updated Mineral Resource model and is expected to be
completed in February 2019.
Full composite
Significant intersection
Intersection
depth
downhole
m
Intersection
depth below
collar
m
Corrected
intersected
width
m
Average
grade
intersected
g/t
Corrected
intersected
width
m
Average
grade
intersected
g/t
34.75
56.63
24.34
47.32
26.34
35.02
26.73
6.97
69.56
25.54
38.70
24.05
Awaiting results
42.88
60.23
Awaiting results
Awaiting results
Awaiting results
56.96
92.54
31.49
51.32
22.06
42.89
23.87
31.74
24.23
6.32
63.04
23.15
35.07
19.70
35.13
13.55
11.50
9.89
12.94
6.28
15.59
8.77
14.17
13.60
11.48
8.01
8.33
24.05
7.83
8.51
3.38
2.53
0.91
1.36
1.91
1.41
1.38
3.17
6.10
0.63
0.72
1.53
1.50
0.62
0.65
3.28
1.36
0.62
0.34
3.5
2.13
1.81
1.73
1.00
1.05
2.42
3.8
1.6
19.16
5.10
2.31
5.96
9.96
2.98
5.45
12.79
30.43
2.12
1.83
6.35
2.51
2.32
18.54
67.68
18.60
8.84
0.47
0.33
0.30
1.23
4.97
1.71
Drillhole number
RSPE001
RSPE002
RSPE003
RSPE004
RSPE005
RSPE006
RSPE007
RSPE008
RSPE009
RSPE010
RSPE011
RSPE012
RSPE013
RSPE014
RSPE015
RSPE016
RSPE017
RSPE0181
RSPE0191
RSPE0201
1 Drillholes drilled to test the westerly extent of the mineralisation. Results indicate zones of economical grade within the overall altered zone.
Royal Sheba surface drilling.
73
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018 ABRIDGED MINERAL RESOURCES AND MINERAL RESERVES REPORT continued
BARBERTON MINES’ SUB-VERTICAL SHAFT PROJECT AT FAIRVIEW MINE
Category
Measured
Indicated
Inferred
Category
Proved
Probable
Contained gold
Tonnes
gold
16.38
14.08
34.36
64.83
Ounces
Moz
0.53
0.45
1.10
2.08
Contained gold
Tonnes
gold
8.43
15.16
23.58
Ounces
Moz
0.27
0.49
0.76
Grade
g/t
10.12
13.51
19.66
14.70
Grade
g/t
9.07
14.25
11.84
Mt
1.62
1.04
1.75
4.41
Mt
0.93
1.06
1.99
Mineral Resources
as at 30 June 2018
Mineral Resources
Total
Mineral Reserves
as at 30 June 2018
Mineral Reserves
Total
74
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018STRATEGIC REPORT:PERFORMANCE REVIEW The Fairview mining operation is currently restricted by the hoisting capacity of its 3 Decline, which is utilised to access workings below
42 Level. This decline is currently employed to transport employees and material, and for rock hoisting. The 11-block, or MRC, orebody has an
average grade of 31.3g/t and current life-of-mine of 20 years. With no intervention, future mining at depth will result in increased travelling distance,
reduce employee face time and cause a lack of capacity with which to ensure both ore replacement and exploration development.
Pan African Resources, with the assistance of DRA Global, has completed a feasibility study on the construction of a raise-bored, sub-vertical shaft
from Fairview’s 42 Level to 64 Level, with the potential of continuing the vertical shaft to 68 Level in the future. This sub-vertical shaft will be utilised
to transport employees and material to the working areas, which will allow the 3 Decline to be used exclusively for rock hoisting, increasing overall
capacity and production from the 11-block mining area.
DRA Global has reviewed the technical and commercial aspects of the project and the supporting feasibility study has yielded highly attractive
results. The estimated capital expenditure for the project, including contingencies, is approximately R105 million, to be incurred over a two-year
period. The productivity improvements for Fairview are estimated to yield an additional 7,000oz of gold per annum, which can be further optimised
to more than 10,000oz per annum.
Pan African Resources has also commenced an infill drilling programme on the 11-block orebody of 10 diamond drillholes. This is to enhance the
Proved Reserve ahead of the mining face by up to 60m. This is equivalent to more than 10 years life-of-mine on the 11-block. The results of the
drillholes are considered in the reported Mineral Resource and Mineral Reserve estimates.
EVANDER MINES’ 7 SHAFT 3 DECLINE AND EGOLI PAY CHANNEL RESOURCES
Inferred Egoli Payshoot Extension
Kinross Payshoot Extension
Current Mining Position
Egoli Payshoot
Evander Gold Mines boundary
Taung Gold boundary
Stoping and development
Kimberley Reef ore blocks
75
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018
ABRIDGED MINERAL RESOURCES AND MINERAL RESERVES REPORT continued
The Egoli Project resource is adjacent to the 7 Shaft infrastructure and extends from the boundary of Taung Gold International Limited’s 6 Shaft
project and mining rights. As previously reported, Evander Mines embarked on an exploration programme to drill a further exploration borehole
from surface to increase geological confidence in the Egoli Project orebody. These resources are summarised in the following table:
Mineral Resources
as at 30 June 2018
Mineral Resources
Total
Category
Measured
Indicated
Inferred
Contained gold
Tonnes
gold
Ounces
Moz
3.6
28.9
60.4
92.9
0.11
0.93
1.94
2.99
Grade
g/t
8.76
9.86
9.70
9.71
Mt
0.41
2.93
6.23
9.57
The following Mineral Reserves are based on a successful feasibility study conducted by DRA Global, dated 31 January 2018. This feasibility study
assumed the ongoing mining at Evander Mines’ 8 Shaft. The conclusion of the feasibility study indicated a life-of-mine of 15 years at a NPV of
R1.04 billion and an IRR of 34%.
Mineral Reserves
as at 30 June 2018
Mineral Reserves
Total
Category
Proved
Probable
Contained gold
Grade
g/t
4.21
7.06
6.64
Tonnes
gold
2.6
24.8
27.4
Ounces
Moz
0.08
0.80
0.88
Mt
0.62
3.51
4.13
On 6 July 2017, the exploration borehole successfully intersected the Kimberley Reef at a depth of approximately 2km, highlighting a reef
intersection with a 6cm width at 36.8g/t. Additional drilling deflections were drilled to further delineate and increase the confidence in the orebody.
The previous borehole into the Egoli Project yielded a reef intersection with a 49cm width at 36.04g/t. The results from all historical sampling and
drilling, along with the latest drillhole information, were employed to model and estimate the Mineral Resource and Mineral Reserve as reported
in this document.
76
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018STRATEGIC REPORT:PERFORMANCE REVIEW Egoli Project exploration borehole results
Borehole
2245
EGM PAR 1
EGM PAR 1 – Deflection 1
EGM PAR 1 – Deflection 2
EGM PAR 1 – Deflection 3
EGM PAR 1 – Deflection 4
EGM PAR 1 – Deflection 5
Depth
m
Core width
cm
2,059.3
2,014.6
2,014.9
2,014.8
2,015.3
2,014.1
2,014.2
49.0
5.7
5.7
4.8
7.5
4.8
5.7
Grades
Grade
g/t
36.0
36.8
33.2
144.7
19.4
28.6
54.5
Grade
cmg/t
1,766
210
189
694
146
137
311
Harmony Gold Mining Company Limited previously developed Evander Mines’ 7 Shaft workings towards the Egoli Project. However, due
to financial constraints and a reassessment of capital expenditure priorities, it halted all development on Evander Mines’ shafts, other than
8 Shaft, in 2009. This resulted in the controlled flooding of the development ends and 7 Shaft’s 3 Decline from 22 Level up to
18 Level. Following the dewatering, only standard footwall and on-reef development would need to be completed, with the associated engineering
infrastructure, before mining can commence.
The Egoli Project is approximately 4.5km in tramming distance from 7 Shaft, which was utilised by Evander Mines for hoisting run-of-mine material
to the Kinross metallurgical plant. This compares favourably with the 8 Shaft mining area, which is approximately 12km in tramming distance from
7 Shaft.
Following the discontinuation of Evander Mines’ large-scale underground operations, a revised mining feasibility study related to 7 Shaft’s 3 Decline
and Egoli Project Resources as a standalone operation has commenced and will address the following critical issues:
• Collation of geological data from the drillhole intersection and deflections
• The cost and timing of dewatering and re-equipping 7 Shaft’s 3 Decline from 18 Level
• The development cost and timing to access the Egoli Project
• The economic viability of the project as a standalone operation, including the construction of a new metallurgical plant during the life-of-mine.
The Egoli Project can potentially increase Evander Mines’ underground gold production materially at a relatively low capital cost, using Evander
Mines’ established shaft and metallurgical facilities. The revised feasibility study for the project is expected to be completed during the first quarter
of 2019.
77
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018 SUBSURFACE MINING
UNDERGROUND MINING FOR DEPOSITS LOCATED 50m OR
MORE BELOW EARTH’S SURFACE
When an orebody lies well below the earth’s surface, horizontal and vertical
tunnels and shafts are dug to access these precious ore deposits.
Various subsurface mining methods are used, including:
1 BLOCK CAVING
Block cave mining is typically used to access steeply dipping, low-grade
orebodies, involving the undercutting of large rock segments to create
artificial hollows. These hollows fill with their own waste rock as they cave
in, with the ore transported by gravity through a series of preconstructed
funnels and access tunnels to a bunker-like structure, where the ore is
prepared for processing. The collapse progresses upwards through the
orebody, eventually causing sinkholes on the ground surface.
2 SUBLEVEL CAVING
This productive and large-scale mining method is
used for sizeable orebodies with a steep dip and rock
mass. Sublevel caving employs explosives to blast the
surrounding host rock of the orebody. Mining begins
at the top of the orebody and continues downwards,
with ore being mined from sublevels spaced at
regular intervals throughout the deposit. A sequence
of ring patterns are drilled and blasted from each
sublevel and the fragmented ore is extracted after
each blast.
3 LONGWALL MINING
Characteristically a coal mining technique, longwall
mining is a highly mechanised process of multiple
coal shearers mounted on a series of self-advancing
ceiling supports. The giant shearers cut coal from
a wall face, which drops onto a conveyor belt for
removal. This method allows for around 80% deposit
recovery.
Subsurface mining is considered
less environmentally destructive,
as it disturbs only a fraction as
much land as surface mining and
produces less waste. However, it is
more dangerous for miners due
to risks such as wall collapses,
gas explosions and mining dust
inhalation.
78
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018
2/3
of the world’s present
gold supply originates
in South Africa.
STRATEGIC REPORT:
SUSTAINABILITY
REVIEW
4 ROOM AND PILLAR MINING
This is the oldest method of underground
mining, also typically used in coal mining. This
method involves the development of a set of
underground rooms cut into ore deposits,
leaving rock pillars to support the roof. Mined
material is extracted across a horizontal plane.
Once the area is mined, pillars are partially
extracted or removed completely, allowing the
roof to collapse. This must be done in a precise
manner to reduce risks to miners.
The world’s largest gold
bar weighs 250kg.
250kg
After 120 years of gold mining operations, depths of up to
4,000 metres have been reached, making gold mines some of the
deepest mines in the world. At this depth, rock temperatures
are around 50°C, with vertical rock pressures of about 100MPa.
AU
The chemical
symbol for gold is Au,
derived from the Latin
word ‘aurum’.
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018
79
HUMAN CAPITAL
EMPLOYEE REVIEW
OUR EMPLOYEES ENABLE THE GROUP TO EXECUTE INTO ITS STRATEGY AND ARE
FUNDAMENTAL TO OUR BUSINESS SUSTAINABILITY. WHERE POSSIBLE, WE EMPLOY
FROM AND UPSKILL THE COMMUNITIES NEAR OUR OPERATIONS.
Major events
Challenges
Looking ahead
• Pan African Resources concluded a
• Employee industrial action and
retrenchment exercise at Evander Mines
as per S189A of the South African
Labour Relations Act, 66 of 1995
• The Elikhulu plant at Evander Mines
has created 1,769 jobs during the
construction phase and is expected to
create approximately 350 fulltime jobs
at steady state-production
community unrest in surrounding areas
• The cessation of large-scale mining at
Evander Mines’ underground operations
led to the retrenchment of 1,635
employees at a cost of R161.0 million
• General social unrest being experienced
across South Africa requires intensified
and continuous stakeholder engagement
• Ensuring that we implement all elements
of the SLPs and LEDs linked to our
operations
• Ongoing succession planning and training
of employees in specialised positions
WHY EMPLOYEES ARE MATERIAL TO PAN AFRICAN RESOURCES
Mining is a physically and mentally challenging industry. Therefore, we are responsible for ensuring that our employees operate in a safe, stable and
healthy working environment.
Material issue
Principal risk
Strategic business pillar
• Attracting and retaining key talent
• Operating in safe and healthy environments
• Proactive employee communications
• Safety
• Reputational – social licence to operate
• Sustainable
• Stakeholders
• Profitable
• Growth
KEY PERFORMANCE INDICATORS
Employee statistics
Employees
– Permanent
– Contractors
Employee turnover
Human resources development spend
Total number of permanent employees by age group
20 – 30 years
30 – 40 years
40 – 50 years
50+ years
Total operations
1 The employee turnover excludes retrenched employees.
80
Unit
(Number)
(Number)
(Number)
(%)
(R million)
(Number)
(Number)
(Number)
(Number)
2018
4,840
2,069
2,771
8.61
22.8
384
748
438
499
2,069
2017
5,284
3,932
1,352
6.41
28.4
503
1,001
1,059
1,369
3,932
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018SUSTAINABILITY REVIEW
EMPLOYEE STATISTICS PER OPERATION
Barberton Mines
Evander Mines
Phoenix Platinum
Elikhulu
Corporate office
Group
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
2018
2017
Employees
Contractors
Total
% of workforce
South African
1,945
621
2,566
2,006
644
2,650
77
381
458
1,907
625
2,532
98
98
97
80
–
–
–
–
3
82
85
30
1,769
1,799
100
93
–
–
–
–
17
–
17
16
1
17
2,069
2,771
4,840
3,932
1,352
5,284
100
100
96
90
GROUP OVERVIEW OF PROGRESS
Substantially achieved
Moderate progress
Not achieved
Our focus for 2018
What we achieved
Self-assessment
Continuous employee engagement to
ensure alignment with the company’s
vision and strategic objectives
• New NUM branch committee elected at Barberton Mines. Management
actively engaged the new branch committee to foster a mutually
prosperous relationship
Adherence to approved SLP
requirements
• Ongoing implementation of SLP commitments
Improving community relations
• Established a community forum representing the various communities
in and around our operations
• Appointment of a dedicated fulltime community liaison officer at
Barberton Mines
Conclude wage agreement at
Barberton Mines
• Successful conclusion (after year-end) of wage agreement with both our
unions at Barberton Mines
MANAGEMENT APPROACH
Our employees are a key enabler of business growth and for creating
stakeholder value. The group’s remuneration policy is calculated to
attract, retain and motivate employees through fair remuneration.
All our policies and procedures, which are reviewed by on-site human
resources managers and at our corporate office, align to South Africa’s
labour legislations, with any changes reported to the board through
the SHEQC sub-committee.
In terms of mining regulations, each operation has developed an
SLP that must be approved by the DMR. Before finalisation, each
SLP is discussed with material stakeholders, such as trade unions,
municipalities, mine management and representatives for women,
disabled employees and staff personnel. Every year, each operation
submits an SLP progress report to the DMR. We also submit annual
workplace skills plans and training reports, and an employment
equity plan to the Mining Qualifications Authority (MQA) and the
Department of Labour respectively. Development plans for individuals
within the group are regularly monitored and updated.
Pan African Resources abides by the human rights conventions of
the International Labour Organisation (ILO) and South Africa’s
Constitution. Each operation and the executive committee (Exco)
reports to the board.
concluded with all affected employees and authorised representatives
at Evander Mines following the cessation of Evander Mines’ large-scale
underground operations.
During the year under review, the group staff turnover was 8.6%
(2017: 6.4%), excluding retrenchments.
Employee relations
We align our employees with the group’s vision and values by engaging
them on how:
• their individual roles influence operational performance
• each individual prioritises safety in the workplace
• socio-economic factors, such as the gold price and forex rates
impact our operations.
We interact with our employees through one-on-one, staff and
production meetings, supported by other channels, such as text
messaging, emails, print (internal newsletters and posters) and digital
(intranet, corporate website and social media).
Pan African Resources’ workforce is represented by recognised trade
unions and the group complies with all applicable legislation and
bargaining arrangements. Each operation has dedicated personnel in
place to maintain relationships with unions and employees.
Employee profile
Following the unavoidable retrenchments at Evander Mines, the
group’s total staff complement, including contractors, reduced to
4,840 people (2017: 5,284). An S189A retrenchment agreement was
As announced on 7 September 2018, Barberton Mines successfully
concluded a three-year wage agreement with NUM and UASA. NUM
and UASA represent the majority of employees at Barberton Mines.
The agreement provides for an average annual wage increase of 6.5%
81
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018
HUMAN CAPITAL continued
and 5.5% for NUM and UASA members, respectively, over the three
years. The negotiations were successfully concluded with no industrial
action or work stoppages. The agreement should assist in providing
certainty and sustainability to all stakeholders in the coming years.
Skills development and training
Pan African Resources spent R24.3 million (2017: R32.1 million)
on skills development in the current year. Our Barberton Mines
and Evander Mines sites have accredited training centres offering
occupational skills training, learnerships and bursary programmes.
Performance management
Key performance indicators (KPIs) aligned to group strategic objectives
are in place for senior and executive managers. Performance is
assessed annually and remuneration linked to KPI scores achieved.
During the 2018 financial year, following the cessation of large-scale
mining at Evander Mines’ underground operations, the resultant
retrenchment of 1,635 group employees and lower year-on-year
group production performance, the executive directors and senior
management agreed to forfeit all short-term incentives for the year
under review.
Remuneration
We regularly interrogate mining industry remuneration practices to
ensure our offerings remain market related. Employment packages
typically comprise a basic salary and short-term benefits linked to
individual job gradings. Remuneration outcomes are measured
objectively against predetermined targets. Incentives and share
appreciation bonus schemes are designed to retain critical skills and
align management focus with shareholder and material stakeholder
interests.
Employees from a Paterson Grading C level and below are also
entitled to a profit share of 1% of the mining operations’ cash flows.
Disabled employees
Pan African Resources equally considers job applications from
disabled South Africans who can fulfil roles being advertised. Should
existing employees become disabled, the group will – if practical –
provide continuing employment under similar terms and conditions,
supported by appropriate skills and development.
82
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018SUSTAINABILITY REVIEW SAFETY AND HEALTH REVIEW
OUR BOARD-APPROVED SHEQC POLICY PERMEATES OUR ORGANISATION AND PERFORMANCE
IS DRIVEN BY THE GROUP’S CREDO OF CONTINUOUS IMPROVEMENT.
Highlights
Challenges
Looking ahead
Y
T
E
F
A
S
H
T
L
A
E
H
• Zero fatalities across all operations
• Significant reduction in reportable
accidents
• One million fatality-free shifts achieved
at Barberton Mines
•
Improved voluntary counselling and
testing (VCT) for HIV/Aids
• Reduction in noise-induced hearing
loss (NIHL) cases
• Effectively managing lifestyle diseases
through awareness programmes
• Employee behaviour and culture
directed towards safety
• High risk associated with congested
Elikhulu construction site
(1,769 contractors)
Illegal mining on the increase and
posing a safety threat to employees
•
• Managing employees with pulmonary
TB cases
• Maintain zero fatalities at operations
• Continue safety culture behavioural
programmes to further reduce safety-
related injury rates
• Continue developing group health
strategy and raising the numbers
of employees tested for HIV/Aids
WHY SAFETY AND HEALTH IS MATERIAL TO PAN AFRICAN RESOURCES
A safe and healthy mining culture is a business imperative that underpins the group’s four key strategic pillars – profitable, sustainable, stakeholders
and growth. The group allocates significant time and resources into promoting a zero-harm work environment.
KEY PERFORMANCE INDICATORS
Safety
Rate/million man hours
TRIFR
LTIFR
RIFR
FIFR
Number of fatal injuries
Number of LTIs
Number of reportable injuries
Number of medical and first aid treatment cases
Health
Number of HIV/Aids – VCT
Number of NIHL cases reported
2018
2017
12.71
3.73
1.08
–
–
52
15
177
4,579
12
13.68
3.51
1.53
0.21
3
48
21
188
3,102
34
83
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018 HUMAN CAPITAL continued
MANAGEMENT APPROACH
Prioritising health and safety is a way of life at Pan African Resources.
and buy-in through training, written communications and regular face-
to-face meetings.
The board assumes ultimate responsibility for the group’s SHEQC
performance and has allocated its direct management to the
SHEQC sub-committee. This sub-committee informs the board on
matters relating to SHEQC compliance, discipline and action plans
required for incidents and accidents. The mine general managers are
primarily accountable for SHEQC at their sites. We are developing
and supporting a culture of consistent zero-harm and minimal
environmental impacts.
At least four SHEQC meetings must be held annually, with more
scheduled as needed. Health and safety committees are selected from
the entire workforce and are based at all operations.
The group’s SHEQC policy contains specific guidelines to integrate
safety, human resources, health and occupational hygiene, so that
production processes support sustainable growth of the business.
Pan African Resources complies strictly with the mining licence
conditions set by the DMR, the Mine Health and Safety Act, 29 of 1996
(as amended from time to time) and other relevant legal requirements.
The group SHEQC manager, as well as safety, health and environmental
officials, guide and advise each operation in terms of our philosophy.
Legal requirements are treated as starting points for improvement and
are regularly audited by group SHEQC officials. These are supported by
monthly SHEQC performance reviews. We continually work towards
and monitor DMR milestones to ensure we achieve zero-harm by
2020, with our results reported to the DMR regularly.
Besides our employees, contractors and suppliers are pivotal to
achieving our SHEQC objectives. We encourage their involvement
We have forged strong relationships with adjacent communities and,
where possible, assist with health and wellness programmes.
Training
Each mining operation has its own in-house training programmes
aligned to the group’s strategic objective of zero-harm. Safety, health
and environmental training, including job-specific training, is included in
employee inductions and when employees return from leave.
Major health-related diseases
Our occupational health and employee wellness programmes include
the management of the ‘big six’ diseases: HIV/Aids, TB, diabetes,
hypertension, silicosis and NIHL.
Illegal mining
Illegal mining continues to be a risk that requires ongoing management
and proactive security intervention. During the period under review,
the group security contract was reviewed and a new service provider
was appointed.
Product responsibility
Barberton Mines and Evander Mines produce gold in the form of
bars and by-products. Gold is a benign product with no significant
environmental, health or safety impacts. All gold products generated
by the group are refined by Rand Refinery, an accredited London
Bullion Market Association refinery, and sold to South African financial
institutions.
GROUP OVERVIEW OF PROGRESS
Substantially achieved
Moderate progress
Not achieved
Our focus for 2018
What we achieved
Self-assessment
Focus on behavioural safety
• One-on-one safety interaction sessions between management and
employees during the period under review
Reduction in safety rates
• Successful reduction in serious injuries with no fatalities
Introduction of new safety campaigns
• Successfully implemented new safety campaigns at both operations
The group safety trend experienced an encouraging improvement in its TRIFR and RIFR. The LTIFR remained stable at levels well below industry
averages. No fatalities were reported for the year under review. We work continuously to embed a culture of uncompromising safety at all
operations.
84
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018SUSTAINABILITY REVIEW MANUFACTURED CAPITAL
OUR SUBSTANTIAL FINANCIAL INVESTMENT IN THE PURCHASE, DEVELOPMENT AND
MAINTENANCE OF INFRASTRUCTURE, PLANT AND EQUIPMENT HAS PROVIDED THE CAPACITY
TO GENERATE LONGER-TERM RETURNS.
Highlights
Challenges
Looking ahead
• Elikhulu construction was completed
ahead of schedule, with its inaugural gold
pour on 16 August 2018
• Elikhulu was fully commissioned during
•
September 2018
Installation of BTRP’s regrind circuit to
ramp up gold production at Barberton
Mines
• Additional high-grade platforms
development at Barberton Mines
• Ageing infrastructure
• Evander Mines deterioration, ageing
infrastructure and high operating costs
• Winder and stage pump breakdowns at
Evander Mines
• Eskom power interruptions
• Theft of equipment
• Cessation of Evander Mines’ large-scale
underground operations and subsequent
mine rehabilitation
• Planned sub-vertical shaft at Fairview
Mine to improve face time and hoisting
capabilities
WHY MANUFACTURED CAPITAL IS ESSENTIAL TO PAN AFRICAN RESOURCES
Infrastructure and equipment are essential to extracting resources, processing the ore and transporting the concentrate.
Property, plant and equipment
Material issue
Principal risk
Strategic business pillar
• Unlocking full infrastructure potential
• Key infrastructure requires significant
upgrade and/or maintenance
• Operational
• Safety
• Financial
• Reputational – social licence to operate
• Sustainable
• Stakeholders
• Profitable
• Growth
KEY PERFORMANCE INDICATORS
Total capital expenditure
Barberton Mines
Evander Mines
Elikhulu
Corporate
Phoenix Platinum
Uitkomst Colliery
Production
Barberton Mines
Evander Mines
2018
R million
2017
R million
1,650.2
210.4
181.5
1,256.1
2.2
–
–
90,629
69,815
613.1
193.5
222.2
175.5
1.4
5.4
15.1
98,508
74,777
85
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018 MANUFACTURED CAPITAL continued
GROUP OVERVIEW
Our focus for 2018
Organic growth
Maintaining mining flexibility and
improving face time
Improving productivity
What we achieved
Self-assessment
Substantially achieved
Moderate progress
Not achieved
• Feasibility study for Royal Sheba expected in February 2019
• Following the cessation of Evander Mines’ large-scale underground
operations, a revised mining feasibility study related to the Egoli Project
as a standalone operation has commenced
• Fairview sub-vertical shaft: development initiated on 42 Level and on
base 66 Level
Installation of BTRP’s regrind circuit
•
• Opened a second high-grade platform at Fairview during the third quarter
• Elikhulu was fully commissioned during September 2018
MANAGEMENT APPROACH
At both group and operational levels, management regularly inspects
all tangible assets for any evidence of deterioration. We regularly
undertake improvement and upgrade initiatives to drive capital
productivity and cost efficiency. Our manufactured capital comprises:
• underground mining operations
• surface mining operations
• buildings, plants and milling stations
• equipment
• vehicles
•
infrastructure, pipelines and storage facilities.
Ageing infrastructure at our underground operations requires consistent
maintenance and refurbishment, which forms part of operational
planning and scheduling. Pan African Resources has prioritised
addressing our most pressing operational challenges, which are:
• maintaining mining flexibility
•
improving face time, thus enhancing productivity
• providing safe environmental working conditions.
Barberton Mines
During 2018 financial year, Fairview experienced flexibility challenges.
To improve gold targets, a second high-grade platform was developed in
2018 and Barberton Mines is set to meet its annual production guidance
of approximately 100,000oz for the 2019 financial year.
To improve environmental conditions at Fairview Mine, a refrigeration
plant was successfully commissioned in July 2017 for the high-grade
down-dip extension. In total, 622m2/s of refrigerated air is pumped to the
lowest section of the mine, which has considerably improved the working
conditions of the miners.
In May 2018, the decline development between Fairview 64 Level and the
66 Level was completed, which reduced hauling distances and shortened
the travel time for miners to the working faces.
The construction of the BTRP regrind mill was completed on schedule in
May 2018. This 1.7 megawatt regrind mill reduces the coarseness of the
tailings material being treated, thus increasing production and recoveries
on the BTRP.
Evander Mines
During the financial year, the group spent R47.8 million on refurbishing
underground shafts, as the mine relies on kilometres of conveyor belts to
move ore and waste rock to a single shaft. Breakdowns caused frequent
delays, with repairs and upgrades to the conveyor section continuing until
the end of April 2018.
Despite ongoing upgrades, a comprehensive review of Evander Mines’
underground operations by in-house and independent experts concluded
that continued mining was unsustainable and Evander Mines’ large-scale
underground operations were consequently ceased.
Currently, limited high-grade stopes are being mined at Evander Mines’
8 Shaft underground operations by a contractor. Management is also
evaluating the merits of mining Evander Mines’ 8 Shaft pillar. Eventually,
a rehabilitation programme will manage the environmental risks of the
discontinued shaft, including hazardous materials, open and underground
pits, and care of idle plant and machinery. Management will seek to
maintain the existing Kinross plant to process feed from surface sources.
Equipment maintenance
All engineering and equipment standards comply with original equipment
manufacturer (OEM) guidelines and the Health and Safety Act, as well as
our own standard operating procedures (SOPs) and codes of practice
(COPs).
As equipment reaches its expiration date, it is generally replaced with
higher-technology equipment to keep in line with our internal equipment
standards.
Organic growth
Group growth strategies are supported by robust life-of-mine plans.
Current exploration drilling as well as activities to access and develop
our orebodies were aggressively pursued during the year. To enhance our
conversion strategy of Mineral Resources to Mineral Reserves, we prioritise
organic-growth projects within the mining value chain. Those projects that
are most feasible and will enhance production are placed at the forefront.
GROWTH PROJECTS
Evander Mines
Elikhulu
Egoli Project
86
Barberton Mines
Fairview sub-vertical shaft
Royal Sheba
New Consort exploration
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018SUSTAINABILITY REVIEW SOCIAL AND RELATIONSHIP CAPITAL
COMMUNITY REVIEW
PAN AFRICAN RESOURCES ENDEAVOURS TO BOOST OPPORTUNITIES FOR LOCAL COMMUNITIES
WHILE CURTAILING ADVERSE SOCIAL IMPACTS OUR MINING OPERATIONS MAY TRIGGER. WE
MONITOR, MEASURE AND MANAGE THE SOCIAL AND ECONOMIC IMPACTS CREATED BY OUR
OPERATIONS IN LINE WITH OUR APPROVED SOCIAL AND LABOUR PLANS.
Highlights
Challenges
Looking ahead
• Group spend on CSI, bursaries and
• Addressing issues over local
• Continuing to implement all operations’
LED initiatives totalled R13.6 million
(2017: R24.3 million)
• Appointment of a dedicated, fulltime
•
community liaison officer at
Barberton Mines
unemployment, procurement and skills
development
Job competition has added to divisions
in communities already angered by a lack
of service delivery
SLPs
• Continuing to engage with the
communities surrounding mining
operations
• Continued engagement with government
• With the commencement of
• Uncertainty regarding Mining
on legislation
Elikhulu’s construction, various jobs
and entrepreneurship opportunities
have become available for the local
community
Charter III implementation and other
legislation, including NEMA
WHY COMMUNITIES ARE MATERIAL TO PAN AFRICAN RESOURCES
Our operations are situated in various communities (see
pages 6 and 7) from which our workforce originates. As part of our social licence
to operate, we establish and maintain constructive and transparent relationships with these communities to ensure that the group is aware of the
needs of its workforce and the population in the surrounding operating environment.
Communities
Material issue
Principal risk
Strategic business pillar
Operating in a safe and healthy environment
with continuous stakeholder engagement
• Safety
• Reputational – social licence to operate
• Sustainable
• Stakeholders
• Growth
KEY PERFORMANCE INDICATORS
Barberton Mines
Evander Mines
Phoenix Platinum
Elikhulu
Corporate office
Group1
2018
R million
2017
R million
2018
R million
2017
R million
2018
R million
2017
R million
2018
R million
2017
R million
2018
R million
2017
R million
2018
R million
2017
R million
CSI
LED
Bursaries
Total
2.5
4.7
3.1
10.4
4.7
12.2
1.8
18.7
0.1
2.9
0.3
3.3
–
3.4
0.3
3.7
–
–
–
–
0.3
–
–
0.3
–
–
–
–
1.0
–
0.6
1.6
–
–
–
–
–
–
–
–
2.6
7.6
3.4
13.6
6.0
15.6
2.7
24.3
1 The commensurate decrease in the group’s profitability resulted in the decrease in CSI and LED expenditure.
87
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018 SOCIAL AND RELATIONSHIP CAPITAL continued
GROUP OVERVIEW OF PROGRESS
Substantially achieved
Moderate progress
Not achieved
Our focus for 2018
What we achieved
Self-assessment
Continue to uplift the communities in
which we operate
Adopt-a-School Foundation:
• Barberton Mines revamped a special-needs school in the Emjindini
Township in August 2017
• Evander Mines has adopted four schools in the Govan Mbeki area to assist
with the repair of infrastructure
Involved in the construction of a community clinic in the City of Mbombela
Local Municipality area
Thirty-one students have been supported with fulltime bursaries in the fields
of geology, mining engineering, mechanical engineering, actuarial science,
finance, economics and mine surveying in the current financial year
Social and labour plans
To minimise any negative social impacts from our mining operations,
we monitor, measure and manage our social and economic impact in
line with approved SLPs.
SLPs cover:
• employment equity
• human resources development
•
local economic development
• preferential procurement
• housing and living conditions
• nutrition and health
• adult education.
MANAGEMENT APPROACH
We support the communities around our operations by:
• driving local development projects for sustainable welfare
• encouraging our suppliers to source local labour
• proactively building relationships with local leaders and ward
councillors at the mines.
(See stakeholder engagement on
pages 9 and 31 to 33).
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. We annually submit these
progress reports to the DMR.
Positively impacting our communities
We continue to drive various community-focused development
projects in the areas around our operations. The group also promotes
responsible supply-chain management by encouraging our suppliers
to support LED where possible.
FAST FACT
◗ George Harrison discovered the main gold reef on Langlaagte farm in 1886, leading
to the Witwatersrand Gold Rush
◗ After 120 years of operations, gold mining has reached depths of up to 4,000 metres,
making these among the deepest mines in the world. At this depth, rock temperatures
reach about 50°C and vertical rock pressures around 100MPa
◗ It is speculated that South Africa still retains at least 50% of global gold reserves
88
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018SUSTAINABILITY REVIEW TRANSFORMATION REVIEW
PAN AFRICAN RESOURCES ACKNOWLEDGES THAT INTEGRATING GENUINE TRANSFORMATION
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 MPRDA, Mining Charter and SLPs. The
group does not currently rank its BEE 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
THE INCOMING MINING CHARTER III, WHICH IS STILL BEING NEGOTIATED, REMAINS TOPICAL
YET, ONCE FINALISED, IT MAY ADDRESS THE PROLONGED REGULATORY UNCERTAINTY IN
SOUTH AFRICA’S MINING INDUSTRY.
OWNERSHIP
Pan African Resources has successfully concluded restructuring
agreements, replacing the current BEE equity shareholdings in the
company held via interests in Concrete Rose Proprietary Limited
(Concrete Rose) with BEE shareholdings in SA Holdco, a subsidiary
of the company. SA Holdco will house all Pan African Resources’
South African mining operations, following implementation of the
transaction. Where the previous BEE ownership structure terminates
during December 2018, the new BEE structure will only terminate on
31 December 2021, which is a three-year extension of the term of
the original BEE transaction.
The rationale and benefits of the transaction are as follows:
• Extension of the BEE ownership structure for a three-year period
with limited IFRS charges, due to the extended structure terms,
to the group
• The transaction provides flexibility to further restructure the BEE
ownership of the South African operations, dependent on the
outcome of the proposed third South African Mining Charter and
other relevant regulations
• The transaction will avoid BEE ownership dilution, should Pan
African Resources raise equity capital in the future
• The transaction will have limited dilution of group earnings.
Following implementation of the transaction, Pan African Resources’
BEE ownership is calculated at 26%, comprising 21% in SA Holdco
and 5% from its on-mine employee ownership schemes.
Refer to our website for further information. (website link:
http://
www.panafricanresources.com/about-overview/company-structure/)
EMPLOYEE SHARE OWNERSHIP PROGRAMMES
The group’s employee share ownership programmes at our gold
operations aim to align the aspirations of employees, management
and shareholders. Value is created for beneficiaries based on the
profitability of each operation’s performance. If these operations
declare regular dividends, beneficiaries will receive dividends from the
scheme from year one. Details of each operation’s share ownership
programme are included in the additional sustainability information
online.
OPERATIONAL OWNERSHIP
Share ownership programmes at Barberton Mines and Evander Mines
are in place and distributing dividends to employees. Employees,
through an employee ownership trust, effectively own 5% of the
issued share capital of the gold mining operations.
A portion of the dividends disbursed is retained to repay the
notional financing structure. The portion retained ranges from 50%
to 80% over the period of the scheme. The total BEE ownership of
Barberton Mines and Evander Mines equates to 26% by combining
the Pan African Resources’ BEE ownership and the employee share
ownership programme per operation respectively.
MANAGEMENT AND CONTROL
The board has set the following target for its non-executive director
representation:
• 25% female
• 40% historically disadvantaged South Africans (HDSA).
Our board includes one black male and one female board director, as
at 30 June 2018. The board is currently in the process of interviewing
possible candidates to enhance the skills and experience of the board
and to improve board representation. The group has also approved a
diversity policy to promote race and gender diversity at board level.
89
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018 SOCIAL AND RELATIONSHIP CAPITAL continued
EMPLOYMENT EQUITY
Historically disadvantaged South Africans
The Mining Charter requires that 40% of specialised functions be filled by HDSAs. Our operations made progress in achieving this goal, especially
at management level.
Pan African Resources strives to ensure it has a workforce that is representative of the South African demographics.
Representation of historically disadvantaged South Africans
Barberton Mines
Evander Mines
Corporate office
Unit
2018
2017
2018
2017
2018
2017
Senior management
Middle management
Junior management
Women employed at mine
Women in mining (core business)
Percentage of women in mining/core positions
(%)
(%)
(%)
(Number)
(Number)
(%)
50
60
52
177
125
7.1
40
60
50.2
175
122
6.1
43
50
95
14
10
13
40
52
80.5
202
143
7.5
40
100
100
–
–
–
40
100
100
–
–
–
HUMAN RESOURCES DEVELOPMENT SPEND
Detail on this pillar is provided on
page 82.
PREFERENTIAL PROCUREMENT
Supply chain management
Our primary procurement objective is to control costs, initiate savings and manage inventory across operations through decentralised sourcing,
where material group contracts are monitored. In addition, we are committed to increasing spend from black-owned and black women-owned
businesses. We are also looking to uplift the communities where we operate, through proactive projects and strategic sourcing.
The table below shows the allocation of procurement spend, relative to the Mining Charter targets, for the group’s operations.
Capital goods
Services
Consumables
Mining
Charter
target
%
40
70
50
Barberton Mines
Evander Mines
2018
%
91.2
88.6
85.3
2017
%
53.5
90.2
90.9
2018
%
80.5
68.0
60.1
2017
%
75.0
80.9
50.2
Procurement governance
Pan African Resources’ procurement governance process strives to
ensure maximum efficiency and ethical conduct when procuring
goods and services within operations. A group procurement policy is
in place, and relevant employees at each operation are trained in its
procedures and practices. Tender processes are governed by a tender
committee at each operation to ensure Pan African Resources and
its operations comply fully with all relevant regulations, including the
UK Bribery Act 2010.
Contract management
The group’s procurement process is decentralised to operations,
however, high-value contracts and the procurement of goods and
services common to all operations are negotiated and/or overseen
by head office.
Transformation trusts
Wherever possible, the group promotes responsible and ethical supply
chain management by encouraging suppliers to support local economic
development. Transformation trusts for Barberton Mines and Evander
Mines generate additional funds to invest back into the community by
encouraging their 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, create jobs and promote socio-economic
development. A total of R1.2 million (2017: R1.5 million) was collected
from suppliers on behalf of Barberton Mines’ Transformation Trust
(BMTT) during the 2018 financial year. The EMTT has collected
R0.06 million from suppliers during the 2018 financial year, with
an additional R4.7 million collected from suppliers involved in the
construction of Elikhulu, to be used for local economic development
projects.
SOCIO-ECONOMIC DEVELOPMENT
Detail on this pillar is provided on the group’s website at
www.panafricanresources.com.
HOUSING AND LIVING CONDITIONS
In line with the Mining Charter’s requirements, the gold mining
operations continue to invest in upgrading and converting old hostels
into single and family accommodation units at Barberton Mines and
Evander Mines, respectively. Employees who do not live in company
accommodation receive a housing allowance.
90
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018SUSTAINABILITY REVIEW INTELLECTUAL CAPITAL
PROCESSES, SYSTEMS AND TECHNOLOGY
improving safety levels as we strive for a zero-harm target
Introducing appropriate technologies and processes to our operations supports:
•
• cost containment and raising efficiencies
• maximising our current and future use of resources.
Highlights
Challenges
Looking ahead
•
Improved throughput and recoveries
from tailings by introducing a regrind mill
at Barberton Mines
• The professional manner in which
Elikhulu’s construction was executed
again demonstrates our team’s ability
to conceptualise, plan and complete
• Upgraded IT infrastructure
• Geological knowledge of Barberton
Mines’ greenstone orebodies
• Critical safety considerations
•
Identifying and executing digital
opportunities to enhance business
processes
• Mining flexibility at Barberton Mines
• Continue improving resource utilisation
and lowering costs
• The group will invest in people, systems
and technologies that make operations
more efficient and cost effective
• Exploration of potential targets with our
mining rights at Barberton Mines
WHY PROCESSES, SYSTEMS AND TECHNOLOGY ARE MATERIAL TO PAN AFRICAN RESOURCES
Processes, systems and technology
Material issue
Principal risk
Strategic business pillar
Improving productivity and efficiencies
•
• Maximise resource utilisation
• Operational
• Regulatory and legal
• Financial
• Sustainable
• Stakeholders
• Profitable
• Growth
GROUP OVERVIEW OF PROGRESS
Substantially achieved
Moderate progress
Not achieved
Our focus for 2018
What we achieved
Self-assessment
Increasing gold production
•
Installation of a regrind mill to assist with material handling and improved
recoveries from treating the Harper dump coarse fraction material
Construction of the Elikhulu plant
• Elikhulu’s inaugural gold pour took place on 16 August 2018, within
one year of the commencement of construction. The plant was fully
commissioned during September 2018
Combining the current ETRP processing
throughput with the Elikhulu plant’s
processing capacity
• From December 2018, Elikhulu’s processing capacity will increase to
1.2Mt per month by incorporating the existing ETRP throughput into
Elikhulu’s to benefit from the plant’s efficiencies and economies of scale
MANAGEMENT APPROACH
In the South African gold mining industry, mining operators face the combined challenges of declining ore grades and operating efficiency.
Responding effectively can be difficult due to the significant grade variances in orebodies. Other factors are costly infrastructure requirements,
distant planning horizons and lengthy implementation timelines. Mining is also intrinsically a high-risk operating environment and significant resources
must be allocated to creating safe working environments.
91
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018 INTELLECTUAL CAPITAL continued
Risk management is integral to achieving safe mining systems and
operations. Potential new technologies are scrutinised through a risk
assessment process and, if adopted, are applied in terms of risk-based
management plans.
Ongoing skills development and training is fundamental to enabling
our people to fulfil their own and the group’s objectives. A lack of
training can be the cause of a fatality and mining disasters.
Innovation
As underground mining becomes less profitable and riskier, Pan
African Resources has focused more intently on low-risk efficient
gold tailings processing and the BIOX® gold-recovery process, with
feedstock from Barberton Mines’ high-grade underground operations.
Tailings retreatment
Gold mine tailings are the milled remnants of gold-bearing ore mined
from underground shafts over decades of mining. The current weak
ZAR gold price environment, and the requirement to rehabilitate
tailings dams, has made tailings retreatment to extract the remaining
gold a compelling strategic action.
Pan African Resources has built two gold tailings retreatment plants:
the first at Barberton Mines, treating the high-grade dumps from the
country’s oldest gold-mining area, and the second at Evander Mines
as a large-scale pilot plant to demonstrate the merits of a larger plant.
The success of the ETRP proved that the tailings dumps at Evander
Mines could yield some of the most profitable ounces in the
Pan African Resources portfolio and led to the decision to invest
in Elikhulu.
The group intends obtaining more than 50% of its annual gold
production from low-cost, low-risk tailings operations, which have
years of production potential locked up in on-site tailings dumps.
BIOX®
Originally developed at Barberton Mines by Gencor, the BIOX®
process exposes the gold in sulphide minerals for subsequent
cyanidation and raises the overall recovery of gold ounces.
The BIOX® process only works with specific ores, such as those
found in Barberton, and offers numerous advantages, such as:
• environmentally friendly
• higher gold-recovery rates
• significantly lower capital costs to develop and operate
• robust technology well suited to remote locations
• relatively low skill levels required to operate
• continuous improvement through ongoing process development.
Aster™ water treatment technology
Fairview Mine has invested in patented biotechnology to destroy
thyocianate and cyanide in water used in the gold-extraction process.
This water can then be piped to the BIOX® processes.
The Aster™ process delivers considerable cost savings and reduces
cyanide levels, which lessens environmental impacts.
Research, development and mineral exploration
Our growth strategy is based on identifying and exploiting mining
opportunities that feature:
•
low-cost operations
• sufficient Mineral Resources and Reserves
• economically viable grades
• sufficient margins for profitability.
Geological expansion
The range of disciplines required at mines and in mine planning
includes geology, surveying, planning, and mining engineering, rock
engineering, metallurgy, financial management, human resources
management and environmental management.
Geological knowledge
The group has over 130 years of consecutive mining experience
on the Barberton Greenstone Belt orebodies. The Barberton
Greenstone Belt is the only Greenstone complex actively being mined
for gold, on a large scale, within South Africa. It is differentiated from
the Witwatersrand gold deposit through extreme metamorphism
and high variability in gold mineralisation. Currently, Pan African
Resources is the only mining operator active within the Barberton
Greenstone Belt.
FAST FACT
◗ Barberton Mines is the birthplace of BIOX® and is still used as the training facility for all
BIOX® plants globally
◗ The BIOX® process destroys the sulphide minerals and exposes the gold for subsequent
cyanidation, thereby increasing the overall gold recovery that can be achieved
92
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018SUSTAINABILITY REVIEW INFORMATION AND TECHNOLOGY
THE RAPID EVOLUTION OF TECHNOLOGICAL INNOVATION OVER THE LAST DECADE HAS
BROUGHT NEW CHALLENGES AND OPPORTUNITIES TO THE MINING INDUSTRY. PAN AFRICAN
RESOURCES IS RESPONDING TO THIS CHANGE THROUGH TARGETED INVESTMENTS IN
PEOPLE THROUGH NEW TECHNOLOGIES.
Highlights
Challenges
Looking ahead
• Maximising uptime through
implementation of increased virtual
server network capacity
• Ensuring continuous connectivity at our
operations due to their remote locations
•
Improving user awareness to combat
cybercrime
• A programme is underway to review the
group’s compliance with the Protection
of Personal Information Act (POPI) in
terms of storage of both electronic and
hard copy information records
• Continuous cybercrime prevention
through detailed internal and external
penetration testing of our networks by
specialist third-party consultants
MANAGEMENT APPROACH
There is increased exposure to cyber-attacks
following with the integration of technology
platforms and the increased use of technology.
Cyber-attacks have become more frequent and
sophisticated throughout the world.
The board is responsible for technology and
is governed
information governance, which
by an IT charter. The framework consists of an
information technology (IT) steering committee
that includes the financial director, the chief
information officer, and the 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 regularly updated on the group’s
technology and information performance.
Each operation has formal business continuity
and disaster management plans, which are directly
overseen by mine general managers.
93
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018 NATURAL CAPITAL
ENVIRONMENT REVIEW
PAN AFRICAN RESOURCES IS COMMITTED TO MONITORING, MEASURING AND MANAGING OUR
ENVIRONMENTAL IMPACT – A RESPONSIBILITY OF THE EXTRACTIVE INDUSTRY.
Highlights
Challenges
Looking ahead
• No environmental fines across all
operations
• Continue to systematically monitor
environmental data using the group
SHEQC system
• Behaviour and culture towards
environmental compliance and
awareness
• Achieving zero environmental fines
• Commencement of Evander Mines’
rehabilitation programme
WHY NATURAL RESOURCES ARE MATERIAL TO PAN AFRICAN RESOURCES
Our business depends on the environment and its natural resources – land, water and air. We are committed to stewarding these resources
responsibly by eliminating or minimising our environmental impact and improving our environmental performance.
Environment
Material issue
Principal risk
Strategic business pillar
• Respecting the environment
• Operating in a safe and healthy environment
with continuous stakeholder engagement
• Environmental
• Regulatory and legal
• Reputational – social licence to operate
• Sustainable
• Stakeholders
• Profitable
• Growth
KEY PERFORMANCE INDICATORS
Total water consumption
Total electricity consumption
Total GHG emissions
Environmental fines and penalties
Barberton Mines
Evander Mines
Unit
2018
2017
2018
2017
(000m3)
(GJ)
(tCO²e/t milled)
(Number)
14,587
933,744
0.12
–
2,088
463,951
0.12
–
16,675
1,397,695
0.12
–
25,395
1,521,811
0.09
–
94
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018SUSTAINABILITY REVIEW GROUP OVERVIEW OF PROGRESS
Substantially achieved
Moderate progress
Not achieved
Our focus for 2018
What we achieved
Self-assessment
Maintaining zero environmental fines
• No environmental fines
Ensuring all operations have zero
significant environmental incidents
• Two reported environmental incidents occurred at Barberton Mines as
a result of residue flowing into Snyman’s Creek
• Five reported environmental incidents occurred at Evander Mines as a
result of water overflows and pipeline failures
Continuing to monitor and review the
SHEQC dashboard
• All operations’ environmental information has been captured into the
SHEQC system and ongoing monitoring takes place
Ensuring compliance with water-use
licence conditions to prevent pollution
• All operations comply with water-use licence conditions
• There was an amendment to the water-use licence at Evander Mines
to incorporate Elikhulu in August 2017
• Rehabilitation of Evander Mines’ Kariba dam is in progress
Ensuring compliance with approved
mining rights, prospecting rights and
environmental management programmes
MANAGEMENT APPROACH
Environmental legal compliance
• Achieving zero penalties for environmental breaches, ensuring compliance with water-use
licence conditions and environmental management plans, and that air quality remains within
legal limits
Environmental risk management
• Evaluating environmental risks associated with activities, products and services, and taking
appropriate action to minimise potential risks
Water management
• Reducing water incidents and incidental overflow to minimise the impact on surrounding
communities and the environment
Energy management
Waste management
• Achieving our internal environmental targets to reduce the group’s carbon footprint
• Reducing, reusing and recycling waste to minimise the impact on surrounding communities
and the environment
Biodiversity management
• Ensuring the tailings and pollution control dams are continuously monitored to avert potential
negative biodiversity impacts
Environmental governance and legislation
The group monitors adherence to mining-related legislation (see
below) through a robust SHEQC governance framework, which
contains specific environmental guidelines. All operations have closure
plans in place.
We are aware of the pending carbon taxation legislation and
have taken steps to enhance environmental monitoring through
the SHEQC dashboard. This dashboard collates environmental
information to calculate the group’s carbon emissions.
The Waste Management Act, promulgated in November 2015,
requires mines to line new tailings dams. We will ensure compliance
with any new tailings activities.
The group is mindful of climate change, as set out in the group
SHEQC policy. All indicators impacted by climate change are regularly
monitored. Waste dump design and management, and the pumping of
underground water, are part of the day-to-day activities of the mines.
None of these risks are deemed to have a significant financial or
environmental impact on the group due to the controls in place.
Key environmental legislation regulating the mining industry:
• Mineral and Petroleum Resources Royalty (Administration)
Act, 2008
• National Environmental Management Act, 1998
• National Water Act, 1998
• National Nuclear Regulator Act, 1999
• National Environmental Waste Act, 59 of 2008
• Air Quality Amendment Act, 20 of 2014.
Radiation
The group’s operations have been assessed and classified as low risk
due to the low levels of radiological exposure, with radiation levels
monitored quarterly by a radiation protection officer. Radiological
clearances are conducted at decommissioned sites to ensure the
future classification of these areas. Evander Mines is the holder of
a Certificate of Registration (COR 046) issued by the National
Nuclear Regulator.
95
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018
NATURAL CAPITAL continued
The group’s operations have implemented a group environmental
management system, which aligns to ISO14001. Environmental impact
assessments are conducted at all operations with impact and aspect
registers available for each operation. These are reviewed annually to
ensure legislative compliance. Risk registers are reviewed quarterly
and reported to the group SHEQC manager, who elevates any
material issues to the SHEQC sub-committee.
All operations have assessed the environmental risk associated
with the transport of goods and materials and found no significant
environmental impact. Any cyanide transported to Barberton Mines
and Evander Mines is delivered by a supplier-approved transporter.
Emergency response trailers are stationed on site at Barberton Mines,
BTRP and Evander Mines to deal with spillages.
Water management
All operations hold approved water-use licences issued by the
Department of Water and Sanitation Affairs. Contamination of water
sources is our most significant risk in terms of negatively impacting
on local communities. Drilling and blasting underground releases
groundwater, which is pumped to the surface where it is recycled for
use in the mining or metallurgical processes in a closed circuit. Any
excess water evaporates in approved ponds. Rainwater collected on
tailings dams and in pollution control dams is part of the mine water
system.
Water quality in the areas surrounding operations is monitored
and managed rigorously. Surrounding surface and groundwater are
monitored to prevent polluted water being discharged. The discharge
of water by our operations, through controlled releases into the
environment, is predetermined through regulatory requirements and
is in line with our water-use licences.
Environmental legislation: Fines and incidents
No environmental fines were issued. Two environmental incidents
were reported at Barberton Mines and five environmental incidents
were reported at Evander Mines during the year under review.
Barberton Mines’ amended Environmental Management Plan (EMP)
was approved by the DMR in August 2017. The DMR approved
Evander Mines’ amended EMP in September 2013 and its water-use
licence (including Elikhulu) in August 2017.
Training and awareness
Environmental awareness training is conducted at group operations
during induction, and refresher training is provided when employees
return from leave. In addition, monthly awareness training focuses on
specific environmental topics.
Due to behaviour and culture challenges experienced across
operations, the group will focus on reinforcing an employee culture
shift towards environmental awareness and accountability.
Energy and greenhouse gas emissions
management
Energy management is based on energy efficiency and climate change,
which aligns to the group SHEQC policy. This is driven by the need
96
to reduce energy consumption and greenhouse gas (GHG) emissions
and includes promoting energy efficiencies at the group’s operations.
Emissions at all operations are closely monitored and tracked.
The group applied the GHG Protocol and emissions factors published
by Eskom to establish direct and indirect emissions.
Waste management
Waste at operations is managed in line with the group SHEQC
policy and the legal requirements of the National Environmental
Waste Act, 59 of 2008 and the National Waste Management Strategy.
All operations apply the 3Rs principle – reduce, reuse and recycle –
to minimise the impact of waste production on community health
and the environment.
Internal audits ensure compliance with internal procedures. All waste
is disposed of responsibly and sent for recycling where applicable.
Waste disposal suppliers are appropriately certified.
Operational waste includes mineral and non-mineral waste. Mineral
waste, e.g. waste rock, is mostly waste generated from gold production,
while non-mineral waste is generated from processing operations and
produced in smaller volumes than mineral waste. This non-mineral
waste, e.g. plastics, steel, paper and timber, is managed by recycling,
reuse, offsite treatments, and disposal or on-site landfills. The group’s
operations ensure responsible storage, treatments and disposal of
non-mineral waste in an environmentally responsible way.
The group uses material safety data sheets to identify and manage
potentially hazardous materials and waste. There were no significant
spills at any of the operations during the year.
FAST FACT
◗ The low-technical-risk
nature of tailings retreatment
projects sets them apart
from traditional underground
operations. They are certainly
not as labour intensive
and, with the reduced risk,
present an opportunity to
achieve benchmark safety
statistics. In addition, these
operations are socially and
environmentally responsible
routes to pursue
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018SUSTAINABILITY REVIEW ENVIRONMENTAL PROTECTION
Expenditure on environmental protection
Barberton Mines
Evander Mines
Phoenix Platinum Uitkomst Colliery
Group
2018
R million
2017
R million
2018
R million
2017
R million
2018
R million
2017
R million
2018
R million
2017
R million
2018
R million
2017
R million
Pollution control and prevention
Rehabilitation
Environmental – operational
Total
1.4
0.5
1.1
3.0
0.9
1.2
0.9
3.0
0.7
23.1
0.9
24.7
0.6
0.5
0.5
1.6
–
–
–
–
–
–
0.5
0.5
–
–
–
–
1.6
–
2.4
4.0
2.1
23.6
2.0
27.7
3.1
1.7
4.3
9.1
The group’s expenditure on environmental protection was R5.1 million (2017: R9.1 million) for the year under review. Barberton Mines’ expenditure
remained consistent for the year under review, however, Evander Mines’ operational and rehabilitation expenditure increased for the year under
review. Evander Mines’ increase was largely due to the Kariba dam rehabilitation expenditure of R22.6 million. Uitkomst Colliery was disposed of
in the prior year, thus resulting in a decline in the group’s environmental protection spend.
Land rehabilitation funds
Barberton Mines
Evander Mines
Corporate office
2018
R million
2017
R million
2018
R million
2017
R million
2018
R million
2017
R million
Total
50.6
44.4
313.7
276.2
364.3
320.6
Land rehabilitation minimises and mitigates the environmental effects of mining. Rehabilitation management of the group’s operations is an ongoing
process. The rehabilitation fund had a balance of R364.3 million (2017: R320.6 million) at year-end, which increased by R43.7 million due to
contributions of R26.2 million and interest earned of R16.9 million. The funds available from contributions are held within Pan African Resources
Group Rehabilitation Trust and a Cenviro insurance investment product, underwritten by Centriq Insurance Company Limited. The funds are
invested in interest-bearing accounts and equity investments within the insurance investment product.
97
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018 TAILINGS AND THE BIOX® PROCESS
TAILINGS | MINE DUMPS | SLIMES | LEACH RESIDUE | SLICKENS
Tailings are the leftover, mud-like materials of mining processes
that separate valuable gold from surrounding host rock. The BIOX®
process is a pre-cyanidation treatment of refractory gold ores
or concentrates that allows further gold recoveries from mine tailings.
Waste materials from metal mining often contain substantial amounts of precious metals not
easily accessed through historic mining operations. With modern mining technologies and
processes, tailings are more efficiently retreated.
The mining process partly processes a portion of the tailings, making the cost of extracting
residual metals more economically attractive than mining a deeply buried primary orebody.
The BIOX® process involves using naturally occurring bacteria to extract gold and other
precious metals from ores. It concentrates the metal through biological oxidation.
The bacterial culture is made up of the Acidithiobacillus ferrooxidans, Acidithiobacillus thiooxidans
and Leptospirillum ferrooxidans bacteria. These destroy sulphide minerals occurring in the tailings
to expose the gold for subsequent cyanidation. This process significantly increases the overall
gold recovery.
The BIOX® bacteria are placed into giant steel reactors that mimic ideal living conditions
through the addition of air and nutrients, allowing the bacteria to extract metals much faster
than in their natural environment. Maintaining a stable diet and environment will ensure they
continue to thrive.
Tailings are finely ground rock
particles produced during ore
processing and base metal
separation. They are highly
reactive due to their small
particle size and reactive mineral
content – such as pyrite – and
contain precious metals not yet
separated by flotation processes.
Millions of tonnes of
ore are processed
every year through
mining, with
>95%
disposed of as waste
rock and tailings.
98
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018
TRANSPARENCY
AND
ACCOUNTABILITY
Benefits of pursuing tailings operations:
•
Less labour intensive and lower costs, technical
and safety risks
• Socially and environmentally responsible
Increased working life of existing mines
•
• Revival of abandoned mine sites
• Removes environmental toxins.
Gold is the only naturally
occurring yellow metal. It
requires no oxidation or reaction
to other chemicals to attain its
golden colour.
According to a Mintek database, over 446 gold tailings dumps span more
than 18,000ha across Johannesburg.
AU
Gold is the most
malleable and ductile
element. One ounce of
gold can be hammered
into a transparent sheet
0.18 microns thick.
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018
99
BOARD OF DIRECTORS
COMMITTEE LEGEND
Audit
Remuneration
SHEQC
Social and ethics
NON-EXECUTIVE DIRECTORS
EXECUTIVE DIRECTORS
1
2
KEITH SPENCER (68)
Qualifications: BSc Eng (mining)
Designation: Independent non-executive director
– Chairman
Appointed: 8 October 2007
Committee member:
(Chairman)
HESTER HICKEY (64)
Qualifications: CA(SA), BCompt (Hons)
Designation: Independent non-executive
director
Appointed: 12 April 2012
Committee member:
(Chairman)
3
4
5
6
COBUS LOOTS (40)
Qualifications: CA(SA), CFA® Charterholder
Designation: Executive director –
Chief Executive Officer
Appointed: 26 August 2009
Committee member:
THABO MOSOLOLI (48)
Qualifications: BCom (Hons), CA(SA)
Designation: Independent non-executive director
Appointed: 9 December 2013
Committee member:
(Chairman)
ROWAN SMITH (54)
Qualifications: BSc (Hons), BCom (Hons)
Designation: Independent non-executive
director
Appointed: 8 September 2014
Committee member:
(Chairman)
DEON LOUW (56)
Qualifications: CA(SA), CFA® Charterholder,
H-Dip (Tax Law), AMCT (UK)
Designation: Executive director –
Financial director
Appointed: 1 March 2015
Committee member:
BALANCE OF BOARD
AGES OF BOARD
TENURE OF BOARD
67% Independent directors
33% Executive directors
17% 30 to 40 years
17% 40 to 50 years
33% 50 to 60 years
33% Above 60 years
50% Three to six years
33% Six to nine years
17% Above nine years
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TRANSPARENCY AND ACCOUNTABILITY
1
KEITH SPENCER (68)
Qualifications: BSc Eng (mining)
Designation: Independent non-executive
director – Chairman
Appointed: 8 October 2007
Committee member: Audit, remuneration,
SHEQC (Chairman)
Skills and experience
Keith is a qualified 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 as a 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, first as a private consultant and
later as a permanent member of the executive,
managing the Wakefield Coal operations,
O’Okiep Copper Company, Barberton Mines
and Metmin Manganese Mine. In 2001, Keith
became operations director for Metorex.
2
HESTER HICKEY (64)
Qualifications: CA(SA), BCompt (Hons)
Designation: Independent non-executive
director
Appointed: 12 April 2012
Committee member: Audit (Chairman),
SHEQC
Skills and experience
Hester worked at AngloGold Ashanti, initially
as group internal audit manager and later as
executive officer: 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 chairman of SAICA. She currently serves
on the following boards: Northam Platinum
Limited, Cashbuild Limited, Barloworld Limited
and African Dawn Capital Limited.
3
THABO MOSOLOLI (48)
Qualifications: BCom (Hons), CA(SA)
Designation: Independent non-executive
director
Appointed: 9 December 2013
Committee member: Audit, remuneration,
and social and ethics (Chairman)
Skills and experience
Thabo brings a wealth of experience in financial
management, corporate governance and audit,
having qualified 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
chief operating officer of Sun International,
responsible for the South African operations,
and continues to operate MFT Investment
Holdings, a family-owned investment company
to capitalise on BEE
strategically placed
investment opportunities.
4
ROWAN SMITH (54)
Qualifications: BSc (Hons), BCom (Hons)
Designation: Independent non-executive
director
Appointed: 8 September 2014
Committee member: Remuneration
(Chairman)
Skills and experience
Rowan has nearly three decades of collective
experience in the resources and investment
banking
founding
industries. He was a
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 significant 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 several
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 an
adviser to Athena Capital and a director of
Hlanganani Capital.
5
COBUS LOOTS (40)
Qualifications: CA(SA), CFA® Charterholder
Designation: Executive director –
Chief executive officer
Appointed: 26 August 2009
Committee member: SHEQC
Skills and experience
Cobus qualified as a chartered accountant
with Deloitte & Touche in South Africa. Prior
to joining Pan African Resources on a fulltime
basis, he held the title of managing director
of Shanduka Resources. Shanduka Resources
was a mining investment business and part of
the Shanduka Group, which was headed by
Cyril Ramaphosa, prior to his move into
South African government. During his time
at Shanduka, Cobus oversaw and managed
investments in a number of large South African
mining concerns, and successfully grew a
multi-commodity South African mining group.
Cobus has also managed transactions and
mining investments in other Southern African
jurisdictions. He has been a director of Pan
African Resources since 2009. Cobus served as
financial director of Pan African Resources from
2013 until his appointment as chief executive
officer on 1 March 2015. He has almost
15 years of management and investment
experience in the African mining environment
and has successfully executed several value-
accretive projects and transactions during his
time at Pan African Resources, while also driving
the group’s current production strategy of safe,
low-cost and sustainable gold ounces.
6
DEON LOUW (56)
Qualifications: CA(SA), CFA® Charterholder,
H-Dip (Tax Law), AMCT (UK)
Designation: Executive director –
Financial director
Appointed: 1 March 2015
Committee member: Social and ethics
Skills and experience:
Deon has extensive finance and business
experience, which includes investment banking,
advisory and business administration in the
finance and mining sectors. He articled at Ernst
& Young, gaining extensive exposure to the
gold mining sector and manufacturing enterprises.
Post articles, he joined Finansbank, a subsidiary
of the Nedcor Group, and was involved in the
administration of project finance transactions
in the domestic market. He was a founding
member of Investec Bank’s Emerging Market
Finance team and was involved in the financing
of mining transactions in sub-Saharan Africa for
more than a decade. He has fulfilled the roles of
chief financial officer of Shanduka Coal, financial
director of Sentula Mining Limited, director of
Resource Finance Advisers and head of Resource
Structured Finance at Investec Bank. Deon was
appointed as financial director on 1 March 2015.
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PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018
101
EXECUTIVE AND OPERATIONS
MANAGEMENT
EXECUTIVE MANAGEMENT
(EXCO)
OPERATIONS COMMITTEE
(OPSCO)
COBUS LOOTS (40)
Chief executive officer
Qualifications: CA(SA), CFA®
Charterholder
15 years’ mining-related experience
NEAL REYNOLDS (35)
Group financial controller
Qualifications: BCom Accounting
(Hons), CA(SA)
10 years’ mining-related experience
LAZARUS MOTSHWAIWA (41)
General manager: Evander Mines
Qualifications: Diploma in Mining
Engineering, BTec Mining Engineering
19 years’ mining-related experience
MTHANDAZO DLAMINI (31)
Financial controller
Qualifications: BCom Honours
Accounting, CA(SA)
5 years’ mining-related experience
DEON LOUW (56)
Financial director
Qualifications: CA(SA), CFA®
Charterholder, H-Dip
(Tax Law), AMCT (UK)
27 years’ mining finance-related
BERT VAN DEN BERG (34)
Group mining engineer
Qualifications: BSc Mining Engineering,
Mine Managers Certificate of
Competency
15 years’ mining-related experience
JONATHAN IRONS (52)
Metallurgy manager
Qualifications: NHD Extractive
metallurgy, MDP Business Administration
and Management
38 years’ mining industry experience
JAN THIRION (57)
General manager: Barberton Mines
Qualifications: National and Higher
National diplomas in Metalliferous Mining,
B Tech Mining
36 years’ mining-related experience
ANDRÉ VAN DEN BERGH (62)
Executive: Operations and human
resources
Qualifications: Diploma in Human
Resources Management, diploma in
Labour Relations Management
Committee member: SHEQC, social
and ethics
43 years’ mining-related experience
BARRY NAICKER (45)
Group mineral resource manager
Qualifications: MEng Mineral Resource
Management (Wits), Grad Dip
Engineering (MRM), BSc (Hons) Geology
and Economic Geology
17 years’ mining-related experience
NIEL SYMINGTON (37)
Group management accounting and
IT manager
Qualifications: BCom Accounting,
AGA (SA), Professional Accountant (SA)
10 years’ mining-related experience
MANDLA NDLOZI (47)
Group SHEQC manager
Qualifications: NADSM (Unisa),
EIA (PU for CHE), MDP (GIBS),
SAMTRAC (NOSA), Integrated SHEQ
Management (NWU)
19 years’ mining-related experience
Committee member: SHEQC
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CORPORATE GOVERNANCE
THE BOARD IS COMMITTED TO RESPONSIBILITY, ACCOUNTABILITY, FAIRNESS AND
TRANSPARENCY THROUGH ITS ETHICAL LEADERSHIP. THE BOARD ALSO INTEGRATES
RESPONSIBLE CORPORATE CITIZENSHIP INTO THE GROUP’S BUSINESS STRATEGY, AUDITS
AND ASSESSMENTS AND EMBEDS SOUND CORPORATE GOVERNANCE PRACTICES INTO DAILY
OPERATIONS AND PROCESSES THROUGHOUT THE GROUP.
BOARD1
The board meets quarterly with
additional meetings as and when
necessary.
◗ Thabo Mosololi (Chairman)
◗ Deon Louw
◗ André van den Bergh
For more information on the
social and ethics committee
see
page 107.
◗ Rowan Smith (Chairman)
◗ Thabo Mosololi
◗ Keith Spencer
For more information on the
remuneration committee
see
page 107.
REMUNERATION
COMMITTEE
SOCIAL
AND ETHICS
COMMITTEE
SHECQ
COMMITTEE
◗ Hester Hickey
(Chairman)
◗ Thabo Mosololi
◗ Keith Spencer
For more information
on the audit committee
see
page 107.
AUDIT
COMMITTEE
◗ Keith Spencer (Chairman)
◗ Hester Hickey
◗ Cobus Loots
◗ Bert van den Berg
◗ Mandla Ndlozi
◗ André van den Bergh
◗ Naka Hlagala (representative
from Phembani)
For more information on
SHECQ see
page 107.
EXECUTIVE
MANAGEMENT
OPERATIONS
MANAGEMENT
1 Non-executive directors on the board perform the function and responsibility of the nominations committee.
103
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018TRANSPARENCY AND ACCOUNTABILITY CORPORATE GOVERNANCE continued
GOVERNANCE FRAMEWORK
The board is ultimately responsible for the group’s governance structure
and framework and is supported by its four sub-committees, as
depicted in the framework on
page 103. This framework includes
a delegation of authority process where the daily management of the
group is delegated to the chief executive officer and Exco, without
abdicating the board’s responsibility. Operationally, Exco is supported
by Opsco, which incorporates the general managers at all mining
operations and key corporate office employees.
The standards of disclosure relating to corporate governance at the
group are regulated by the UK Companies Act, the SA Companies
Act1, AIM Rules, the JSE Listings Requirements and King IV™.
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.
1 SA Companies Act applicable to the South African entities.
THE BOARD
The 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, corporate
governance. In doing so, it ensures the group remains a responsible
corporate citizen, cognisant of the impact its operations may have on
the environment and society in which the group operates, while acting
in accordance with its own code of conduct.
Chairman’s responsibilities include:
• setting the ethical tone for the board and the group
• providing effective leadership based on sound ethical principles
formulating the board’s annual agenda together with the chief
•
executive officer to align with the group’s strategic direction
• presiding over board meetings and encouraging robust debates
• continually engaging with the chief executive officer
• monitoring the board’s effectiveness and assessing the
•
performance of individual directors
fostering positive relationships with shareholders and strategic
stakeholders to build trust and confidence in the group
• presiding over annual general meetings
At the reporting date, Pan African Resources’ unitary board comprised
six directors. The chairman, Keith Spencer, is an independent non-
executive director and the responsibilities of the chairman and the
chief executive officer are separate. Executive directors are the chief
executive officer and the financial director. Brief CVs of all directors
page 101. Exco and Opsco are invited to attend
are provided on
for ad hoc presentations to the board.
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 efficiently and
collectively.
The chief executive officer and financial director, supported by Exco
and Opsco, 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. The board satisfied its responsibilities during the year in
compliance with its charter. A copy of the board charter is available
from the company secretary on request.
There were no changes to the board during the year under review.
Chief executive officer’s responsibilities include:
• developing the group’s long-term strategy for board consideration
and approval, monitoring and managing execution of group
strategy and critical deliverables
• creating a positive and constructive working environment
conducive to attracting and retaining employees
• ensuring adequate succession planning for the executive
management team
• developing annual budgets that support the group’s strategy
• monitoring and reporting to the board on the group’s
performance
• establishing an organisational structure that enables execution
of the group’s strategy
• ensuring that the group complies with all relevant laws and
corporate governance principles
• ensuring constructive relationships with critical stakeholders
104
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018 BOARD ACTIVITIES
The key focus areas and issues discussed during the financial year are tabled below:
Focus areas
Key issues discussed in 2018
Strategy and
operational
execution
Risk management
Governance
Stakeholder
engagement
• Approved the disposal of Phoenix Platinum
• Approved the investment in Elikhulu and material contracts associated with the construction
• Monitored operational challenges and remedial actions implemented at Barberton Mines
• Approved the cessation of large-scale mining at Evander Mines’ underground operations and related activities
• Reviewed and approved the group’s general growth strategy
• Approved the surface drilling programme at Royal Sheba and approved the feasibility study process
• Reviewed the Egoli Project feasibility as a source of future production at Evander Mines
• Reviewed and considered potential acquisitions during the course of the year
• Reviewed group capital spend and new initiatives
• Review of the proposed Mining Charter’s impact on future mining investment in South Africa and on the group
• Monitoring safety performance and improvement measures implemented at operations
• Monitoring progress on Elikhulu construction
• Monitoring group cash flow performance, projections and debt covenant compliance
• Monitoring group mining licence and related regulatory compliance
• Considering the impact of South Africa’s sovereign credit rating downgrade on the group’s operations
• Considering the impact of the cessation of large-scale mining at Evander Mines’ underground operations on the group
• Approval of a risk policy for the group
• Oversight of group’s hedging activities
• Considered the King IV™ Report and Listings Requirements (JSE and AIM)
• Considered other relevant regulations and requirements applicable to the group
• Monitoring engagement with unions and the workforce during wage negotiations and other employee-related matters
• Approval of strategy related to engagement with communities of the mining operations to avoid future disruptions
• Obtained all requisite approvals from the AGM and general meetings held during the financial year
The board ensures 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.
BOARD COMPOSITION
The board reflects a balance of executive and non-executive directors,
the majority of whom are independent. More importantly, it reflects
considerable experience in mining, business and related activities and
collectively has a wealth of industry knowledge, adding depth to board
discussions. No single director is positioned to exercise unfettered
decision-making, which protects against the influence of possible
personal interests and ensures that the interests of all stakeholders
are represented and considered.
at each AGM on a rotation basis. The directors to retire are those
who have been longest in office since their last election or re-election.
Retiring directors may make themselves available for re-election if
they remain eligible as required by the constitutional documents and
in compliance with the AIM Rules and JSE Listings Requirements.
Accordingly, Cobus Loots and Deon Louw 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
page 101.
DIRECTOR INDEPENDENCE
Independence is determined through criteria set out in King IV™,
which includes an assessment of the individual directors’ character and
judgement, as well as any relationships or circumstances that could
appear to affect their independence. The board also continuously
assesses each director’s performance and tenure if it exceeds
nine years. Based on this assessment, the board is satisfied that its
independent non-executive directors are independent.
ROTATION AND RE-ELECTION OF DIRECTORS
In terms of the JSE Listings Requirements and the group’s
constitutional documents, one-third of the directors, excluding any
director appointed since the previous AGM, must retire from office
BOARD EVALUATION
An annual effectiveness self-evaluation is undertaken in respect of
the board and its sub-committees and, for the year under review, the
board is satisfied that it and its sub-committees operated effectively.
The board is satisfied that the evaluation process is improving its
performance and effectiveness.
In addition, the chairman also ensures the board operates effectively
by regularly engaging with the non-executive directors on their
performance and other matters that may need to be raised with Exco.
Any pertinent matters of concern are conveyed by the chairman to
the chief executive officer and filtered down to Exco.
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PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018TRANSPARENCY AND ACCOUNTABILITY CORPORATE GOVERNANCE continued
ETHICAL LEADERSHIP
Pan African Resources is committed to the highest standards of
personal and professional ethical behaviour and its leadership
endeavours to instil a culture of ethical behaviour that permeates
throughout the group. The group’s code of conduct sets out the
group’s values and practices over and above requirements of formal
governance codes and legal requirements. It is designed to provide
guidance on ethical conduct in all areas and across all activities.
Pan African Resources has a zero-tolerance approach to bribery and
corruption. Furthermore, to ensure compliance with the UK anti-
bribery act, a separate anti-bribery and anti-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. Employees
working in areas identified as being particularly high risk will receive
additional training and support in identifying and preventing corrupt
activities. 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. The board is notified if there
are any material ethical breaches. No breaches by senior group
employees were reported during the year.
SHARE DEALINGS
All group employees at Paterson Grading D and above (which
includes Exco and Opsco) with access to financial and any other
price-sensitive information are prohibited from dealing in Pan African
Resources shares during closed periods, as defined by AIM and
JSE Listings Requirements, or while the company is trading under
a cautionary announcement. In the event employees have access
to price-sensitive information during open periods, employees
are restricted from dealing in Pan African Resources shares.
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
officer or financial director and, where applicable, regulatory approval
is obtained. There were no contraventions of this policy during
the year.
NEW APPOINTMENTS
The board1 identifies, interviews and proposes potential candidates
to the board. The board evaluates individuals in the context of the
board’s skill set and experience as a whole. The objective remains
to have a board that can best perpetuate our success and represent
shareholder interests through the exercise of sound judgement,
using its diverse experience. The group ensures all new directors are
informed of 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 fiduciary duties expected of them. New
appointees are provided with an introductory pack which includes the
latest annual and interim results, integrated annual report and minutes
of previous board meetings to assist in their understanding of the
group’s business.
1 Non-executive directors on the board perform the function and responsibility
of the nominations committee.
ONGOING DEVELOPMENT
Directors who are chartered accountants comply with SAICA’s
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 JSE
Listings Requirements. The company secretary and the chairman of
the audit committee are responsible for keeping the board abreast of
new legislation, recommendations and best practice.
KING IV™
Following the launch of the King IV™ Report in November 2016, the
board has familiarised itself with the requirements of the report. Pan
African Resources benchmarked its governance practices against the
principles of King IV™ and has included its 2018 King IV™ checklist
http://www.panafricanresources.com/
on the group’s website at
wp-content/uploads/KING-IV-REPORT-FINAL.pdf.
BOARD COMMITTEES
Pan African Resources has an audit committee, remuneration
committee (Remco), SHEQC committee, and a social and ethics
committee to assist the board in discharging its collective responsibility
of corporate governance. The non-executive directors perform
the function and responsibility of the nominations committee.
All committees have satisfied their responsibilities during the year in
compliance with formal charters. A copy of these charters is available
from the company secretary on request.
Ethical culture
Effective control
Good performance
Legitimacy
106
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018 The table below details the key issues discussed during the year under review:
Committee
Members
Key issues discussed in 2018
Audit committee
• Hester Hickey (Chairman)
• Thabo Mosololi
• Keith Spencer
Invitees
• Cobus Loots (Chief executive officer)
• Deon Louw (Financial director)
• External auditors, internal auditors and financial
executives
Remuneration
committee
• Rowan Smith (Chairman)
• Thabo Mosololi
• Keith Spencer
Invitees
• Cobus Loots (Chief executive officer)
• Deon Louw (Financial director)
• Andre van den Bergh
(Group executive: HR and operations)
SHEQC committee
• Keith Spencer (Chairman)
• Hester Hickey
• Cobus Loots
• Bert van den Berg
• Mandla Ndlozi
• André van den Bergh
• Naka Hlagala
Invitees
• General managers
– Barberton Mines and Evander Mines
Social and ethics
committee
• Thabo Mosololi (Chairman)
• Deon Louw
• André van den Bergh
• Approved the group’s integrated annual report for
30 June 2018
• Approved interim report for 31 December 2017
• Reviewed internal and external audit reports
• Monitored the group’s risk appetite and tolerance levels
• Reviewed financial implications of the Elikhulu funding
and the Phoenix Platinum disposal
• Approved internal and external audit fees
• Monitored auditor independence
• Monitored internal audit programme
• Evaluated the financial director and the finance
department
• Ensuring an effective process for the cessation of large-
scale mining at Evander Mines’ underground operations
before financial year-end, in compliance with all applicable
legislation
• Ensuring that salary adjustments were in line with the
group’s remuneration philosophy and within the industry
peer benchmarks provided by PwC Remchannel market
analysis and other sources
• The group regularly reviews, monitors and ensures
compliance in terms of stipulated employment equity
targets and other requirements
• Review and implementation of corporate overheads
restructuring to appropriately align corporate resources
with operational requirements, following the cessation
of large-scale mining at Evander Mines’ underground
operations and Elikhulu’s commissioning
• Review and replacement of the senior executives’ share
option scheme with a new scheme incorporating clear
and objective targets and aligning with the interests of
shareholders
• Monitored safety performance challenges and
improvements at all operations
• Reviewed quantification of specific performance measures
that are required to be reported for the sustainability
report
• Monitored environmental management and adherence to
relevant legislation
• Monitored health indicators at all operations
• Approved independent safety contractors to review our
safety controls at the mining operations
• Monitored community and SLP activities
• Reviewed and approved the social and ethics charter
• Monitor that employees are appropriately trained and
informed of the group’s policies and code of conduct
107
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018TRANSPARENCY AND ACCOUNTABILITY CORPORATE GOVERNANCE continued
Board and committee meetings attendance
The board meets quarterly with additional meetings, as and when, required. 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 these interactions are recorded in the table below:
Focus areas
Keith Spencer1 Hester Hickey
Cobus Loots
Thabo Mosololi
Rowan Smith
Deon Louw
PAR board meetings
12 September 2017
18 September 2017
20 November 2017
24 November 2017
5 December 2017
7 February 2018
19 March 2018
Audit committee meetings
12 September 2017
7 February 2018
Remuneration committee meetings
2 August 2017
20 April 2018
27 June 2018
SHEQC committee meetings
11 September 2017
4 December 2017
19 March 2018
27 June 2018
Social and ethics committee meetings2
23 August 2018
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1 Keith Spencer was appointed to the Remco during the current reporting period.
2 The social and ethics committee had its inaugural meeting on 23 August 2018.
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 JSE sponsor, Nomad, and other relevant experts are
involved in ensuring that the directors have adequate information to
sufficiently discharge their responsibilities in the best interests of the
company.
The appointment and removal of the company secretary is a matter
for the board. The audit committee reviews the company secretary’s
qualifications and competence and provides recommendations to
the board. The board is comfortable that the company secretary,
St James’s Corporate Services Limited, always maintains an arm’s
length relationship with the board and is sufficiently qualified and
skilled to act in accordance with and update directors in terms of the
UK and international regulations and legislation.
108
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018
ADVISERS
The group has several advisers including Numis Securities, One
Capital, Peel Hunt LLP and BMO Capital Markets who provide
advice regarding legislative requirements. One Capital is the group’s
South African appointed sponsor in accordance with the JSE Listings
Requirements and is responsible for ensuring the company is guided
and advised as to the application of the JSE Listings Requirements.
The other advisers are UK based and provide guidance on UK-related
legislative requirements. SA and UK law firms are also regularly used
to provide advice on specialised matters.
TECHNOLOGY AND INFORMATION GOVERNANCE
The board is responsible for technology and information governance,
which is governed by an IT charter. The framework consists of an
IT steering committee which includes the financial director, the chief
information officer, 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 technology and information 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.
STAKEHOLDER ENGAGEMENT
The board oversees stakeholder relations and executive management
keeps the board apprised of any material stakeholder concerns.
The board also engages with shareholders at the AGM held in London
and ongoing stakeholder engagement takes place at a corporate and
operational level as detailed on
page 31.
COMPLIANCE
The group complies with all applicable legal acts and regulations and
certain of the main acts and regulations are shown below. Compliance
management and monitoring takes place at various levels within the
group, including at an operational level where safety officers ensure
health and safety compliance and external audits are conducted
by the DMR. At a corporate office level, the company secretary
and external advisers provide updates on any new legislation that
may impact the group. The internal and external audit functions
provide a further layer of compliance, as detailed on
page 110.
Management regularly updates the board and its sub-committees
through its governance processes.
In accordance with the Payments to Governments Regulations 2014,
the group is obliged to disclose payments to governments during the
year under review. The table below is a record of these payments.
Royalties payments/(refunds)
Income taxation payments/(refunds)
Value added taxation payment/(refunds)1
Withholding taxation
PAYE
SDL
UIF
Capital gains taxation
Barberton
Mines
R million
Evander
R million
Phoenix
Platinum
R million
Corporate
R million
Total
R million
7.4
11.2
(65.0)
1.0
85.3
5.2
6.5
–
51.6
(15.7)
(0.5)
(292.4)
–
74.4
4.2
4.9
–
(225.1)
–
–
0.8
–
0.4
–
–
–
1.2
–
1.1
6.0
9.0
10.5
0.5
0.1
21.1
48.3
(8.3)
11.8
(350.6)
10.0
170.6
9.9
11.5
21.1
(124.0)
1 The group received VAT refunds as a result of the large capital expenditure during the year under review and the output of gold mining operations being zero rated.
SOUTH AFRICA
• South African Companies Act, 71 of 2008
– applicable to South African entities
JSE Listings Requirements
•
• King IV™
• Labour Relations Act of 1995
UNITED KINGDOM
• UK Companies Act 2006
• LSE AIM rules for companies
• UK Bribery Act 2010
MINERALS AND ENERGY
• Minerals and Petroleum Resources
Act of 2008
• National Energy Act of 2008
• Precious Metals Act of 2005
SAFETY, HEALTH AND ENVIRONMENT
• Mine Health and Safety Act of 1996
• Occupational Health and Safety Act of 1993
• Compensation for Occupational Injuries and Diseases Act of 1993
• National Environmental Management Act, 1998 and amendments
• National Water Act of 1998
• National Nuclear Regulator Act of 1999
• National Environmental Waste Act, 59 of 2008
• Air Quality Amendment Act, 20 of 2004
109
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018TRANSPARENCY AND ACCOUNTABILITY CORPORATE GOVERNANCE continued
RISK GOVERNANCE
The board is ultimately responsible for the management of risk and a formal risk governance process is in place ensuring 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 and management
approach are set out on
page 22.
BOARD
AUDIT COMMITTEE
EXECUTIVE MANAGEMENT
OPERATIONS MANAGEMENT
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 and makes recommendations
to the board, which retains ultimate
responsibility regarding risk tolerance
levels. It also works closely with the
internal audit function and approves and
reviews the internal audit plan and its
execution
Implements operational controls
to ensure the validity, accuracy and
completeness of financial 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 efficiencies
Initiatives to mitigate risks at operational
level are designed to ensure continuous,
safe and responsible production of gold.
Risks are identified at risk workshops
and in an annual strategy session. Each
of the group’s operations maintains
a risk register, which includes risk
identification, risk-mitigating factors and
responsibilities
INTERNAL AUDIT FUNCTION
This function is outsourced to BDO, which evaluates the
effectiveness and general compliance of controls aimed at
addressing risks within the group
EXTERNAL AUDIT FUNCTION
External audit reports on the fair presentation of financial
information on a statutory reporting level in compliance with
IFRS, as well as IFRS as adopted by the European Union (EU),
and Article 4 of the IAS Regulation, the UK and SA Companies
Acts. The board, assisted by the audit committee, evaluates the
effectiveness and independence of the external auditors – the
South African and UK firm of Deloitte
110
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018 REMUNERATION
REVIEW
THE GROUP’S REMUNERATION
FRAMEWORK IS STRUCTURED TO
PROVIDE REMUNERATION THAT IS
FAIR, RESPONSIBLE AND TRANSPARENT.
THE FRAMEWORK IS ALSO ALIGNED TO
THE ACHIEVEMENT OF OUR STRATEGIC
OBJECTIVES OVER THE SHORT, MEDIUM
AND LONG TERM.
Remuneration objectives
Facilitating the
delivery of superior
long-term results
for the business and
shareholders and
promoting sound
risk management
principles
Supporting the
corporate values and
desired culture
Reinforcing
leadership,
accountability,
teamwork and
innovation
Supporting the
attraction, retention,
motivation and
alignment of the
talent we require
to achieve our
business goals
BACKGROUND STATEMENT
MESSAGE FROM THE CHAIRMAN OF THE
REMUNERATION COMMITTEE
Dear Pan African Resources’ stakeholders
I am pleased to present the 2018 financial year’s Remco report on
behalf of our Remco and board. This report presents a high-level
review of the activities of Remco during the past year.
The year proved financially and operationally arduous, with Pan African
Resources’ share price performance reflecting the numerous external
and group-specific challenges experienced during the reporting
period. In addition to a very weak ZAR gold price environment,
the downward revision of the group’s gold production for the
year from 190,000oz to between 156,000oz and 168,000oz, and
the cessation of large-scale mining at Evander Mines’ underground
operations materially impacted group performance.
Management reacted swiftly and decisively in dealing with loss-
making operations. This very difficult decision resulted in the cessation
of large-scale underground operations at Evander Mines and the
retrenchment of 1,635 employees at a cost of R161.0 million.
This once-off cost was over and above the cash outflow of almost
R1.29 billion in recent years to keep Evander Mines’ underground
operations functional. The decision to retrench so many employees
and lease such a large operation was not taken lightly, and the Pan
African Resources board and management is acutely aware of the
social, financial and other impacts on all our stakeholders. However,
in analysing options available to the group, it was clear that we had no
viable alternative.
Pan African Resources has set a gold production target of
approximately 170,000oz (excluding any production from Evander
Mines’ underground operations) for the 2019 financial year. Although
our expected gold production is lower in volume than previous years,
the group has been repositioned to produce more sustainably at a
lower cost and higher margin. The R1.74 billion Elikhulu plant made
its inaugural gold pour on 16 August 2018 and is expected to add
more than 70,000oz per annum of safe and low-cost gold ounces
to the group’s production profile. Elikhulu will employ approximately
350 permanent workers, which contributes to a certain extent
in compensating for job losses at Evander Mines’ underground
operations. Elikhulu would not have been delivered without the vision
and driven involvement of our senior management team.
Although our 2018 results were disappointing, the impact from
these setbacks would have been far more severe if the board and
management had not reacted decisively to challenges that would
have otherwise placed the sustainability of other operations and our
group at risk. The well-executed manner in which Evander Mines’
large-scale underground operations were curtailed is commendable,
with all requirements of S189A of the Labour Relations Act and the
S52 MPRDA processes being adhered to. The result of this exacting
process, together with Elikhulu, will improve our cash flow and
profitability from the group’s ongoing operations.
111
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018TRANSPARENCY AND ACCOUNTABILITY REVISIONS TO OUR LONG-TERM INCENTIVE
SCHEME – PAN AFRICAN SHARE APPRECIATION
BONUS PLAN
The current Pan African Share Appreciation Bonus Plan (PASABP)
scheme has been in place since May 2011. The PASABP scheme has
generally been successful in achieving its stated objectives. However,
the PASABP scheme has a number of shortcomings, which include
the following:
• No performance requirements (from an individual or group
perspective) required for vesting – only passage of time
• The six-year exercise period available to participants, post final
vesting tranche, resulted in large financial liabilities for the group
due the extended option period (10-year term from initial issue)
• The formula used to determine ‘top-up allocations’ to participants
resulted, in the view of Remco, in excessively high option
allocations with associated large financial liabilities in years when
the Pan African Resources’ share price is particularly depressed.
To overcome these deficiencies, Remco revised the PASABP scheme
applicable to senior group executives and implemented the Pan African
Corporate Option Scheme (PACOS). PACOS replaced the PASABP
option scheme on 1 July 2018 for select corporate executives
and supplemented long-term incentives for executive directors.
The primary objective of PACOS is to motivate its participants to
achieve specific predetermined deliverables and objectives and retain
the key skills required to guide the group’s profitability and growth.
The PASABP and PACOS are both cash-settled schemes.
Details of the PACOS scheme and its effect in reducing the PASABP
liability can be found under the detailed remuneration review
contained in this report.
ANNUAL ASSESSMENT
Remco reviewed general remuneration across the group and is
satisfied that current procedures adequately ensure that employees’
performance objectives are defined, their performance progress is
tracked and training and development opportunities are identified.
Remco is satisfied that it acts objectively and independently to pursue
a remuneration policy and philosophy that underpins the group’s
objectives and stakeholder aspirations. It is also satisfied that to the
extent it makes use of external consultants, these consultants are
independent and objective.
Remco believes that the current remuneration policy is achieving its
stated objectives, however, it will continue to consider amendments to
the current policies and practices to further enhance the effectiveness
of group remuneration.
REMUNERATION REVIEW continued
In the second half of the financial year, management addressed key
deliverables that were critical to the future sustainability of Pan
African Resources and required to deliver into our revised production
guidance. Commendably, Barberton Mines achieved its updated
production guidance of 50,000oz during this half-year period.
Despite admirable efforts, shareholder returns were negative during
the year as a result of low gold prices and the retrenchment and
impairment costs associated with the Evander Mines’ underground
operations.
Executive directors and corporate executives are committed
to creating value for all Pan African Resources’ stakeholders.
These executives should be rewarded when wealth is created for
shareholders on their Pan African Resources investment and other
stakeholders on their involvement with the group. However, alignment
with shareholders also requires our senior executives to ‘share the
financial pain’ in difficult times. As a result, no short-term incentive
(STI) bonuses will be paid to the executive directors and the corporate
executives for the year under review. Morally, we believe this to
be the responsible course of action, which clearly demonstrates
Pan African Resources’ commitment to sustainable and defendable
remuneration.
Despite the setbacks during the year under review, Remco remains
satisfied that the executive directors, guided by the Pan African
Resources board, continue to provide exemplary leadership and
remain committed to achieving the group’s objectives. We are
confident that our restructured group will restore Pan African
Resources to its enviable reputation as a sector-leading gold producer.
ALIGNING REMUNERATION TO STRATEGY
Remco assists the board to align remuneration with the group’s
overall business strategy, cognisant that Pan African Resources needs
to attract, incentivise and retain personnel who will create long-term
value for all stakeholders. Remco reviews compensation levels and
incentive schemes regularly to ensure these remain market related
and will continue to incentivise key personnel. In this regard, Remco
utilises PwC’s Remchannel market analysis to remain up to date
with best practice in executive compensation. The current PwC
Remchannel market analysis shows that Pan African Resources
remunerates between the 25th and 50th percentile in the mining
industry. Despite the PWC Remchannel market analysis indicating
that senior executives’ remuneration is lagging peers, only inflationary
increases were granted, effective 1 July 2018.
SHORT-TERM INCENTIVE SCHEME
The group’s annual bonus scheme based on STIs remains in place, with
its senior management participants (other than executive directors
and corporate executives, who received no bonuses) receiving up
to 50% of their total annual remuneration should they meet criteria
based on:
• ounces of gold produced within cost and safety parameters
•
individual KPIs.
112
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018 OTHER AREAS OF REMCO’S FOCUS
Internal and external matters considered by Remco during the
reporting period include:
• cessation of large-scale underground mining and the S189A
restructuring programme at Evander Mines
• means to reducing group leave liabilities
• wage negotiations with NUM and UASA bargaining units
• ratification of salary increases for operations
• approval of the salary increases for corporate non-managerial staff
and certain managerial staff
• amendments to selected executives’ contracts
• reviewing corporate office staffing and corporate costs
• setting STI parameters for the 2018/2019 financial year
• revising long-term share option scheme for senior corporate
executives and introducing PACOS schemes
• reviewing non-executive directors’ remuneration.
LOOKING FORWARD
In the following year, areas of focus for Remco will include a further
review of operational production incentives and bonuses and group
regulatory compliance.
IN CLOSING
Remuneration is evolving into an increasingly complex and high-profile
field, and Remco is responsive thereto by continually enhancing our
practices and policies to entrench a high-performance culture across
the group that drives sustainable growth, aligned with our business
strategies and shareholder aspirations.
Remco appreciates feedback from our stakeholders. Our previous
financial year’s remuneration report was endorsed by an 82.7% vote
at the AGM. Our incoming remuneration policy is aimed at complying
with King IV™ requirements, while tightening the alignment between
key personnel income, group objectives and shareholder expectations.
We will again engage with shareholders on issues of remuneration
prior to and following the forthcoming AGM and Remco undertakes
to respond in writing to any queries from individual shareholders.
We can assure our stakeholders that we will continue to shape the
remuneration policy to ensure that it fairly rewards and helps to drive
Pan African Resources into a sustainably golden future.
Yours faithfully
Rowan Smith
Chairman, Remco
19 September 2018
DESPITE THE SETBACKS DURING
THE YEAR UNDER REVIEW,
REMCO REMAINS SATISFIED THAT
THE EXECUTIVE DIRECTORS,
GUIDED BY THE PAN AFRICAN
RESOURCES BOARD, CONTINUE TO
PROVIDE EXEMPLARY LEADERSHIP
AND REMAIN COMMITTED TO
ACHIEVING THE GROUP’S
OBJECTIVES. WE ARE CONFIDENT
THAT OUR RESTRUCTURED GROUP
WILL RESTORE PAN AFRICAN
RESOURCES TO ITS ENVIABLE
REPUTATION AS A SECTOR-
LEADING GOLD PRODUCER.
113
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018TRANSPARENCY AND ACCOUNTABILITY PART ONE: REMUNERATION POLICY
OBJECTIVES OF THIS REPORT
Part one provides an overview of the group’s remuneration policy
highlighting the remuneration philosophy, governance and other
key elements. Part two details the remuneration implementation
report highlighting the executive directors’ and prescribed officers’
remuneration for the 2018 financial and comparative year, as well
as their contractual arrangements. Directors’ and prescribed officers’
emoluments and incentives are shown in the annual financial
statements section on
pages 205 to 209.
REMUNERATION PHILOSOPHY
Pan African Resources’ remuneration philosophy seeks to reward
executive directors, senior management and various employee levels
for performance. It recognises that these individuals have the ability
The remuneration framework recognises the following principles:
to significantly impact the performance of the group over the short,
medium and long term. Executive directors and senior executives
carry significant responsibility, statutory and otherwise, and appropriate
skills are difficult to attract and retain in what is an increasingly
challenging environment. It is, therefore, critical that remuneration
aligns to the contribution and performance of Pan African Resources,
its operating units and also, importantly, the contribution of key
individuals. The group’s key remuneration objectives are shown
on
page 111.
The group’s remuneration policy provides a
for
remuneration to attract, retain and motivate employees to achieve
the strategic objectives of the organisation within its risk appetite and
risk management framework.
framework
Objectivity in short-term
incentives
Objectivity in long-term
incentives
Alignment to
shareholders
Application of
discretion
Comprising an annual bonus
which rewards management
for matters under their
control or influence, but not
matters outside their control,
specifically commodity prices
and exchange rates
To align the long-term interest
of the group’s management
and employees with that of the
group’s shareholders through
incentives that are directly
linked to the increase in the
Pan African Resources’ share
price. These awards generally
vest over a period of three to
four years
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
shareholders’ aspirations
Remco has the authority to
apply its discretion in the event
where specific circumstances
are outside the control of the
operations or executives and
these circumstances would be
prejudicial to employees or
management of the group
To achieve its remuneration objectives, Remco, in consultation with and oversight from the board, retains flexibility in terms of how it incentivises
and rewards performance. Remco may therefore, in the event of exceptional performance (which can be reliably measured) of specific members
of senior management or others, approve additional incentives if this is deemed justified. In the event of any such payments, the motivation and
details are disclosed in this remuneration report and in the group financial statements.
REMUNERATION GOVERNANCE
Remco, comprising only independent non-executive directors, monitors and strengthens the credibility of the group’s executive remuneration
system through its charter. It reviews the performance of the chief executive officer, financial director and other executive and senior management
and sets the scale, structure and basis of their remuneration, as well as the terms of their employment contracts. The committee also considers
and makes recommendations to the board on remuneration packages and policies in this regard. The Remco chairman is Rowan Smith and the
membership and attendance of Remco is shown on
page 108.
Remco meetings are attended by the chief executive officer, financial director and the executive: operations and human resources. None of these
individuals are present when their remuneration is discussed. Some of the key focus areas discussed during the financial year are tabled below:
Focus area
Discussion
Cessation of large-scale mining at Evander
Mines’ underground operations and the
S189A process
Ensuring an effective process for the cessation of large-scale mining at Evander Mines’
underground operation before financial year-end, in compliance with all applicable
legislation
Salary adjustments and benchmarking
Compliance with Mining Charter and
employment-equity requirements related
to management and employees
Ensuring that salary adjustments were in line with the group’s remuneration philosophy and
within the industry peer benchmarks provided by PwC Remchannel market analysis and
other sources
The group regularly reviews, monitors and ensures compliance in terms of stipulated
employment-equity targets and other requirements
114
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018 Focus area
Discussion
Corporate office staff complement and costs
Review and implementation of corporate overheads restructuring to appropriately align
corporate resources with operational requirements, following the cessation of large-scale
mining at Evander Mines’ underground operations and Elikhulu’s commissioning
Revising share option scheme for senior
executives
Review and replacement of the senior executives’ share option scheme with a new scheme
incorporating clear objectives aligned with shareholders’ interests
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 and, in the current year, was measured against competitive industry-specific peer market data and analyses
supplied by PwC Remchannel reports. The board approves remuneration proposals from Remco and submits them to shareholders for
endorsement at the AGM.
REMUNERATION FRAMEWORK
Basic salary and benefits
Short-term incentives
Long-term incentives
Key features
Reviewed annually against
competitive industry peer
market data supplied by
PwC Remchannel
Criteria for eligibility
Employment at
the group
• Paid annually at corporate level
• Paid annually at operations
• PACOS (effective 1 July 2018) for senior
group executives/executive directors
• Measured objectively against the group’s performance and
• PASABP
personal contributions
• Employee share ownership programme
(Barberton Mines and Evander Mines)
• Share incentive scheme for executive
directors
Exco (excluding chief executive officer and financial director)
Production and safety KPIs account for 60% of assessment based on:
The main objectives of the long-term
incentives are to:
• group’s gold ounces sold
• cost of production
• safety targets (objective measurement based on group’s actual
achievements against set business plans for the financial year)
Personal KPIs account for 40% of assessment and are specific to
the employee concerned. These personal KPIs are clearly defined
and are intended to contribute specific positive outcomes to
group results
Opsco
Production and safety KPIs account for 60% of assessment based on:
• group’s gold ounces sold
• cost of production
• 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 profitable
performance and growth
• align management interests with those
of shareholders
• safety targets (objective measurement based on group’s actual achievements against set business plans for the
financial year)
Personal KPIs account for 40% of assessment and are specific to the employee concerned. These KPIs are clearly
defined and are intended to contribute specific positive outcomes to group results
Management committee on operations (Manco)
Production and safety KPIs account for 100% of assessment based on:
• operational specific gold ounces sold
• cost of production
• safety targets (objective measurement based on group’s actual achievements against set business plans for the
financial year)
115
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018TRANSPARENCY AND ACCOUNTABILITY PART ONE: REMUNERATION POLICY continued
EMPLOYEE REMUNERATION COMPONENTS
Guaranteed package (including benefits)
Short-term incentives
Performance management
PAN AFRICAN RESOURCES HAS
ADOPTED A HOLISTIC APPROACH
TO ITS REMUNERATION PHILOSOPHY
FOR SENIOR EXECUTIVES AND GENERAL
STAFF AND HAS IMPLEMENTED A WELL-
DESIGNED STRUCTURE WHICH CONSISTS
OF THE FOLLOWING MONETARY AND
NON-MONETARY COMPONENTS:
Employee growth and development
Retention and attraction
Long-term incentives
Remuneration is currently disclosed and presented in GBP in the annual financial statements on
page 167, however all non-executive directors,
executive directors and employees are remunerated in ZAR and no payments are made in other currencies or linked to other currencies.
The detailed remuneration of the group’s independent non-executive directors, executive directors and prescribed officers is disclosed in the
financial statements on
pages 205 to 207.
Element
Key features
Purpose
Eligibility
Factors considered
Guaranteed pay
Exco, Opsco,
Manco and heads
of departments
(HODs) of
operations
Collective
bargaining
employees
• Pensionable salary
• Leave
• Pension/provident
fund contributions
• Medical contributions
• Travel allowance
These items are included
in the total cost to
company of an employee
• Pensionable salary
• Leave
• Medical contributions
• Overtime/housing or
living-out allowance
• Other fixed
allowances –
underground
allowances, rock drill
operator allowances
and meal allowances
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
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
• Exco
• Opsco
• Manco
• HODs
• Group performance
• Outlook for the next financial year
•
•
Individual performance
Inflation
• Collective
bargaining
employees
• All relevant factors in the industry
such as annual or multi-year wage
agreements
116
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018 Element
Key features
Purpose
Eligibility
Factors considered
• Group financial and strategic
performance
• Business unit (team) financial and
•
•
strategic performance
Individual contribution to team
performance
Individual performance, including
alignment with corporate values and
meeting performance objectives
• Notwithstanding financial
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
• Eligibility to participate in the scheme
• The maximum variable remuneration
as a percentage of total cost to
company (CTC) of an individual
• The parameters for production
targets to be achieved
• Seniority and level of responsibility
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 short- and
medium-term results,
reflecting the level and
time horizon of risk.
This includes financial
and non-financial results
and metrics at an
organisational, division
and individual
(and team) level
• Exco, Opsco
and Manco
are paid
annually
• HODs
are paid
quarterly
Long-term
incentives
• Alignment to
shareholders’
investment horizon
and aspirations
• Equity linked
• Measured objectively
against the group’s
performance and/or
personal contribution
• Collective
bargaining
employees
• Exco and
others
approved by
the board
• Discretionary
remuneration designed
to drive and reward
long-term growth and
sustained company value
and align the interests
of shareholders and
participants. These
include share options,
share appreciation
retention schemes or
the like. It is 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 and promotes
appropriate actions and
behaviour
Long-term
incentives – equity
participation
in operational
ownership
• Alignment of the
aspirations of Pan
African Resources’
employees at its
operations with that
of management and
shareholders
• To align the interests
of employees with
those of shareholders
through providing direct
participation in the
benefits of company
performance
• Collective
bargaining
employees
up to 5%
ownership
in gold
operations
• Discretionary
Special remuneration
benefits – sign-on,
retention and
termination benefits
• Designed to retain and
attract certain scarce
skills, especially at HOD
and senior management
levels
• Exco
• Opsco
• Manco
• Paterson Grading C level and below
on operations
• Experience and relevant
qualifications
117
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018TRANSPARENCY AND ACCOUNTABILITY PART ONE: REMUNERATION POLICY continued
RISK MANAGEMENT AND REMUNERATION
Pan African Resources recognises the need to fairly remunerate
employees to attract, incentivise and retain talent. However, it is
cognisant of the need to ensure that effective risk management is
part of its remuneration criteria to motivate the desired behaviour
and avoid exposing the group to risks beyond its tolerance levels.
The group’s remuneration philosophy reinforces the need for the
delivery of superior long-term results, while promoting sound risk
management principles. Therefore, all employees’ KPIs include specific
performance elements that are aligned to the group’s strategic long-
term objectives.
These performance elements incorporate production and personal
parameters which are weighted, based on the relevant seniority
level, to drive the desired behaviour. Safety is imperative to the
mining operations and is included in the group’s production incentive
parameters.
For executive directors, a substantial portion (30% for both the
financial director and the chief executive officer) of their short-term
incentive is deferred for a 24-month period.
their
fees, Remco considers
NON-EXECUTIVE DIRECTOR REMUNERATION
fees.
Remco advises the board on non-executive directors’
In determining
the directors’
responsibilities throughout the year, scarcity of skills, the group’s
performance, market-related conditions and local and international
comparative remuneration. King IV™ recommends that fees should
comprise a base fee and an attendance fee per meeting. The board
agreed that a fixed fee for directors’ services on the board and sub-
committees was more appropriate as the board’s input extends
beyond the attendance of meetings. When non-executive directors
are required to spend significantly more time and effort than is
normally expected in preparing for and attending board meetings,
Remco considers additional fees to compensate non-executive
directors for their additional time and effort. There are no contractual
arrangements for compensation for loss of office for non-executive
directors. Regulatory requirements considered when determining
non-executive directors’ remuneration include the SA Companies
Act, the UK Companies Act, JSE Listings Requirements, King IV™ and
the UK Code.
EXCO, OPSCO AND MANCO REMUNERATION
Remco is responsible for making recommendations to the board
on the remuneration of the chief executive officer. Remuneration of
executive and senior management is reviewed on an annual basis in
relation to the group’s operational, financial, strategic performance and
individual contribution thereto, alignment with the group’s values and
the contribution to risk management and compliance requirements.
Where the individual, team or group does not meet or only partially
meets performance requirements, all awards are forfeited. An annual
benchmarking exercise, through the PwC Remchannel market analysis
(supplemented with other benchmarking information and sources),
is used to determine a fair market-related remuneration package.
Individual KPIs are agreed upon annually and contain the elements
disclosed on
page 119.
Remuneration comprises fixed, variable, short-term and long-term
remuneration components. STIs have certain parameters, disclosed
on
page 119 to ensure a performance-based culture.
The board and Exco retain a level of discretion to determine which
parameters apply and their respective weighting to take cognisance of
immediate priorities and align behaviour to shareholder aspirations.
118
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018 VARIABLE REMUNERATION CONDITIONS
Position
2018 maximum variable
remuneration as a %
of total remuneration
Chief executive officer
Up to 110%
Financial director
Up to 80%
Executive level
Up to 60%
Senior managers at
corporate level
Up to 50%
Senior managers at
operational level
Up to 50%
Qualification criteria at 100% achievement
60% based on the following production parameters:
• Total group gold sold – weight 50%
• Total group cost per kilogram of gold produced – weight 30%
• Group safety record – weight 20%
40% based on personal KPIs determined by Remco. KPIs relate to predetermined
outcomes which are aligned to shareholder value creation
The approved annual incentive is subject to 30% retention payable after the expiry
of a two-year period
60% based on the following production parameters:
• Total group gold sold – weight 50%
• Total group cost per kilogram of gold produced – weight 30%
• Group safety record – weight 20%
40% based on personal KPIs determined by the Remco. KPIs relate to
predetermined outcomes which are aligned to shareholder value creation
The approved annual incentive is subject to 30% retention payable after the expiry
of a two-year period
60% based on the following production parameters:
• Total group gold – weight 50%
• Total group cost per kilogram of gold produced – weight 30%
• Group safety record – weight 20%
40% based on personal KPIs determined by the chief executive officer in
consultation with Remco. KPIs relate to specific predetermined outcomes which are
aligned to shareholder value creation
60% based on the following production parameters:
• Total group gold sold – weight 50%
• Total group cost per kilogram of gold produced – weight 30%
• Group safety record – weight 20%
40% based on personal KPIs which relate to predetermined outcomes set by the
chief executive officer and which are aligned to shareholder value creation
80% based on the following production parameters per individual operation:
• Total operational gold sold – weight 50%
• Total cost per kilogram of gold produced – weight 30%
• Operational safety record – weight 20%
20% based on personal KPIs which relate to specific predetermined outcomes set
by the chief operating officer and general manager and which are aligned to the
operation’s performance
During the 2018 financial year, following the cessation of large-scale mining at Evander Mines’ underground operations, the resultant retrenchment
of 1,635 group employees and the regressive production performance from Barberton Mines during the first half of the 2018 financial year, the
executive directors and senior management agreed to forfeit all STI payments for the year under review.
119
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018TRANSPARENCY AND ACCOUNTABILITY PART ONE: REMUNERATION POLICY continued
EXECUTIVE DIRECTOR SERVICE CONTRACTS
The chief executive officer and financial director are remunerated
in ZAR for services performed, according to their employment
contracts. The current contracts terminate on 28 February 2021.
In terms of these contracts, no amounts are payable at inception or
termination of the contract term and there is no limitation on the
number of times an executive director may stand for re-election.
The objectives of these contracts include:
•
incentivising tangible performance in a clear and transparent
manner
• ensuring alignment with shareholders’ and other stakeholders’
aspirations
• ensuring continuity and stability of senior management
• continuity in executive management to achieve group strategic
initiatives.
incentives
linked to operational and personal
Key elements considered by Remco in the executive directors’
contracts include:
• basic remuneration
• short-term
performance
long-term cash-settled performance incentives to ensure individual
and group performance is aligned with shareholders’ interests.
Such long-term incentives are linked to Pan African Resources’
shareholder returns relative to the sector and achieving specific
medium- and long-term tangible deliverables which will enhance
group financial and operational performance.
•
PRESCRIBED OFFICERS
The group’s prescribed officers are those individuals who exercise
general executive control over and manage a significant portion of
the group’s business activities or regularly participate, to a material
degree, in the exercise of general executive control over a significant
portion of the group’s business activities.
In accordance with these requirements, Pan African Resources’
prescribed officers include:
• André van den Bergh, executive: operations and human resources,
corporate office
• Neal Reynolds, group financial controller, corporate office
• Bert van den Berg, group mining engineer, corporate office
• Mandla Ndlozi, group SHEQC manager, Barberton Mines and
corporate office
• Niel Symington, group management accounting and IT manager,
corporate office
• Barry Naicker, group mineral resource manager, corporate office
• Mthandazo Dlamini, group financial reporting accountant,
corporate office
• Lazarus Motshwaiwa, general manager, Evander Mines
•
Jan Thirion, general manager, Barberton Mines.
SHORT- AND LONG-TERM INCENTIVES
Pan African Resources provides both short- and long-term incentives
to executives, senior management and other employees approved by
120
the board. The short-term incentives are largely used to incentivise
eligible employees, based on operational outcomes that are mainly
under management’s control. The long-term incentive is intended
to drive performance over the longer term (three to five years) to
ensure alignment with the group’s strategic objectives and long-term
sustainability.
REVISIONS TO GROUP LONG-TERM INCENTIVE
SCHEMES
Previous incentive scheme: Pan African Share
Appreciation Bonus Plan
The main objective of the PASABP is to provide appropriate incentives
to select employees who are employed at a managerial level within
the group. The scheme ensures retention of key skills required for the
ongoing profitable performance and growth of the group and to align
management’s interests with those of shareholders. In terms of the
PASABP, select senior employees of the group are 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 PASABP
vests in four tranches of 25% per annum and will lapse on the sixth
anniversary of the date on which the final tranche vested. In the event
of a change of control at a group or operational level, all outstanding
unvested notional shares would automatically vest.
However, the participant can elect, at a date prior to the sixth
anniversary and subject to approval by Remco, to exercise the vested
notional shares and be paid the proceeds as a cash bonus.
This cash bonus is regarded as remuneration for income taxation
purposes and will be subject to the deduction of employee taxes.
New revised senior corporate executive scheme:
Pan African Corporate Option Scheme
During the reporting period, Remco revised the long-term incentives
and implemented PACOS as the committee was of the opinion
that the PASABP scheme excessively rewarded senior corporate
management for the following reasons:
• The top-up formula multiples reward senior management
excessively in periods where the group’s share price is depressed,
as was experienced for the period under review
• The scheme has no specific performance-linked criteria attached
to the vesting conditions and accordingly it was deemed to be
misaligned to shareholder value creation
• The PASABP scheme has a vesting period of four years from the
original issue date and an exercise period of a further six years which
had an onerous cost associated with the high optionality period.
The senior corporate executives’ PASABP scheme options had a
liability of R1.6 million (2017: R13.6 million), and on 1 July 2018,
these share options were forfeited for the PACOS scheme
• Under the scheme, participants would have been issued with
approximately 34 million new notional options for the 2018
financial year during which the group incurred losses and
retrenched a number of employees.
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018 PACOS replaced the PASABP scheme on 1 July 2018 for corporate
senior managers, with the primary purpose being the retention of key
skills for delivering into the following objectives:
• Barberton Mines’ overall production being
stabilised at
approximately 100,000oz per annum
• Elikhulu being commissioned on schedule, within budget and
with the plant’s performance being materially consistent with the
bankable feasibility study and market guidance
• Cessation of large-scale underground operations at Evander
Mines being concluded through an efficient retrenchment process
• At least one board-approved internal or external growth project
must be in production or the construction of the approved project
must have commenced. This project must be substantial enough to
contribute an incremental 15% to the group’s guided production
ounces for the 2019 financial year. Alternatively, a value-enhancing
return must be realised through a disposal, joint venture or any
other similar arrangement.
The rules of PACOS are the following:
• Notional options vest over a two-year period with each of the
above-mentioned qualifying criteria carrying a 25% weighting
• Subject to the vesting conditions being fulfilled, the PACOS
options will vest on 30 June 2020 and will be exercisable by the
participants during the following 24 months
• Should deliverables only be partially achieved by the vesting date,
Remco will determine an appropriate percentage of the options
to vest and may, at its discretion, impose further conditions for the
vesting of the residual options
• PACOS includes a clawback provision, which states the following:
“If any participant, wrongfully or unlawfully, influences or
attempts to influence the achievement of the deliverables or the
measurement by Remco of the achievement of the deliverables,
Remco may, in its sole and absolute discretion:
– revoke all options not yet exercised by the participant; and/or
– claim back all amounts already paid to the participant in terms
of any options already exercised”.
• Participants are incentivised to outperform the FTSE/JSE gold
index, with cash rewards linked to the outperformance of this
index over a two-year period ending on 30 June 2020. In the event
that Pan African Resources’ share price outperforms the index by
5% and 10%, 50% and 100%, respectively, of the cash incentive
will vest
• Executives are required to re-invest 25% of the post-taxation
proceeds arising from such exercise in Pan African Resources
shares, which are to be held for the period from the exercise date
to expiry of the 12 months following the vesting date
• As is typical for schemes of this nature, in the event of a change
of control of Pan African Resources, all unvested PACOS options
will automatically vest.
Position
Chief executive officer
Exco
Opsco
Multiples applied in determining the number of options to be issued
3 times annual CTC
2.5 times annual CTC
2.0 times (Paterson E Upper) and 1.0 times (Paterson E Lower) annual CTC
121
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018TRANSPARENCY AND ACCOUNTABILITY
PART TWO: REMUNERATION
IMPLEMENTATION REPORT
EXECUTIVE DIRECTORS’ OPERATIONAL AND PERSONAL KPI PERFORMANCE ANALYSIS
Chief executive officer
Name: Cobus Loots
Designation: Chief executive officer
Operational and personal KPI performance analysis
Measure
CTC (R)
Production parameters (%) (max 66)
Personal KPIs (%) (max 44)
Total qualifying incentive (%) (max 110)
Qualifying incentive1
Approved incentive accrued (R)
Transaction incentive accrued (R)
Total incentive accrued (R)
Total incentive accrued (including deferred consideration) (R)
1 The qualifying incentive was forfeited.
Chief executive officer’s performance for incentive purposes
2018
2017
2018
2017
5,012,500
26.99
–
26.99
1,352,874
–
–
–
–
4,012,500
22.5
44
66.5
–
1,601,469
3,000,000
4,601,469
5,669,115
Production parameters per operation are
weighted on budgeted profit contribution:
• Barberton Mines’ production and safety
group weighting of 70% was 18.55%
(max 45.92%)
• Evander Mines’ production and safety group
weighting of 30% was 8.44% (max 20.08%)
Production parameters per operation are weighted on budgeted profit contribution:
• Barberton Mines’ production and safety group weighting of 67% was 17.7% (max 44.2%)
• Evander Mines’ production and safety group weighting of 28% was 1.8% (max 18.2%)
• Phoenix Platinum’s production and safety group weighting of 1% was 0.1% (max 0.4%)
• Uitkomst Colliery’s production and safety group weighting of 5% was 2.9% (max 3.2%)
Chief executive officer’s personal KPIs
2018
2017
No personal KPI incentive was awarded by
Remco for the 2018 financial year as the short-
term incentives were forfeited. Remco, however,
noted the following achievements during the
financial year:
• Successful completion of the Evander Mines
S189A process
• Successful conclusion of a value-accretive transaction for the group: Percentage
achieved
• The chief executive officer conceived and implemented the successful and profitable
extraction of gold through a third-party refining contract for secondary gold resources
obtained from the Kinross CIL plant (example: gold recovered from mill floor etc.).
This initiative contributed 193.5 kilograms of gold to Evander Mines’ production during
the 2017 financial year
• Successful conclusion of a one-year wage
• The successful conclusion of the Uitkomst Colliery sale to Coal of Africa on
agreement at Barberton Mines
• Successful completion and commissioning of
30 June 2017 for an effective consideration of R277.6 million, resulting in a shareholder
return of 107.5% over the 15-month ownership period
the regrind mill at the BTRP
• Securing the necessary funding for Elikhulu: Percentage achieved
• Barberton Mines achieving production
– completion of the definitive feasibility study which was approved by the board as
announced on 5 December 2016
– the group completed the equity tranche of the Elikhulu funding, raising R696 million
in gross proceeds upon issuance of 291.5 million shares on 12 April 2017
– the group successfully secured a R1 billion term debt facility for Elikhulu at a
competitive interest rate of JIBAR plus 3.5% with the syndication of the debt
funding being over-subscribed by 50%
guidance for the second half of the financial
year, despite a number of community
disruptions
Initiatives implemented to improve future
production performance of Barberton Mines
•
• Successful permitting and ground-breaking
at Elikhulu
• A number of value-accretive initiatives
successfully implemented, such as a tailings
deposition agreement with Taung Gold
Financial director
122
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018
Name: Deon Louw
Designation: Financial director
Operational and personal KPI performance analysis
Measure
CTC (R)
Production parameters (%) (max 48)
Personal KPIs (%) (max 32)
Total qualifying incentive (%) (max 80)
Qualifying incentive1
Approved incentive accrued (R)
Transaction incentive accrued (R)
Total incentive accrued (R)
Total incentive accrued (including deferred consideration) (R)
1 The qualifying incentive was forfeited.
Financial director’s performance for incentive purposes
2018
2017
2018
2017
4,206,250
19.63
–
19.63
825,687
–
–
–
–
3,206,250
16.4
32
48.4
–
1,086,053
2,000,000
3,086,053
3,551,504
Production parameters per operation are
weighted on budgeted profit contribution:
• Barberton Mines’ production and safety
group weighting of 70% was 13.50%
(max 33.40%)
• Evander Mines’ production and safety group
weighting of 30% was 6.13% (max 14.60%)
Production parameters per operation are weighted on budgeted profit contribution:
• Barberton Mines’ production and safety group weighting of 67% was 12.9% (max 32%)
• Evander Mines’ production and safety group weighting of 28% was 1.3% (max 13.2%)
• Phoenix Platinum’s production and safety group weighting of 1% was 0.1% (max 0.5%)
• Uitkomst Colliery’s production and safety group weighting of 5% was 2.1% (max 2.3%)
Financial director’s personal KPIs
2018
2017
No personal KPI incentive was awarded by
Remco for the 2018 financial year as the short-
term incentives were forfeited. Remco, however,
noted the following achievements during the
financial year:
• Successful completion of the Evander Mines
S189A process, with expenditure in line with
budget
• Successful drawdown on banking facilities
required for Elikhulu construction
• Banking facility covenants renegotiated to
provide for the impact of the discontinued
operations and closure costs incurred during
the year
• A number of value-accretive initiatives
successfully implemented, such as a tailings
deposition agreement with Taung Gold and
Uitkomst/MC Mining loan repayment
Successful conclusion of a value-accretive transaction for the group: Percentage achieved.
• Refer to the chief executive officer’s summary of KPIs for additional information
Securing the necessary funding for Elikhulu: Percentage achieved.
• Refer to the chief executive officer’s summary of KPIs for additional information
In addition to the initial KPIs agreed for the 2017 financial year, Remco also noted the
following achievements when assessing executive director performance for the 2017
financial year:
• Evander Mines’ underground refurbishment and restructuring completed on time and
within budget
• Successful securing of additional third-party coal blended by the Uitkomst Colliery
contributed materially to the operation’s earnings
123
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018TRANSPARENCY AND ACCOUNTABILITY PART TWO: REMUNERATION IMPLEMENTATION REPORT continued
EXECUTIVE DIRECTORS’ LONG-TERM INCENTIVES ANALYSIS
The executive directors’ long-term incentives are cash settled and the cost of these options is accrued annually based on independent actuarial
valuations. Payment occurs when vested options are exercised, subject to Remco approval.
2018 financial year
Executive director
Cobus Loots
Notional share options
Cobus Loots
Share incentive
Deon Louw
Notional share options
Deon Louw
Share incentive
Opening
balance
Issued
Exercised
Forfeited2
Weighted
average
strike price
R
Closing
balance
Value of
options
accrued at
year-end
R
Value of
options
paid during
the year
R1
2,500,000
–
(2,500,000)
–
4,500,000
5,000,000
(2,966,666)
6,533,334
2,114,979
–
(2,114,979)
–
–
3,100,000
–
3,100,000
–
–
–
–
–
–
1,330,356
5,639,077
–
249,667
–
–
1 The share options exercised and paid of R5.6 million to the chief executive officer during the 2018 financial year were accrued at a value of R9.9 million as part
of the share option scheme at 30 June 2017. The share option payments may be different to the share option accrual due to movements in the share price of Pan
African Resources from the accrual date to the redemption date.
2 Forfeited at 1 July 2018, and replaced by the new PACOS scheme.
2017 financial year
Executive director
Cobus Loots
Notional share options
Cobus Loots
Share incentive
Deon Louw
Notional share options
Weighted
average
strike price
R
Closing
balance
Value of
options
accrued at
year-end
R
Value of
options
paid during
the year
R1
Issued
Exercised
–
–
–
(1,500,000)
2,500,000
2.05
1,726,842
2,490,000
(3,500,000)
4,500,000
–
9,906,000
13,176,310
(2,500,000)
2,114,979
2.09
1,994,568
4,036,000
Opening
balance
4,000,000
8,000,000
4,614,979
1 The share options exercised during the 2017 financial year were valued at R23 million at 30 June 2016. The payment of R15.7 million to the chief executive officer
and R4.0 million to the financial director during September 2016 relates to the values accrued in the 2016 financial year’s accrued share option remuneration.
Although paid in the 2017 financial year, the cost of these options was accounted for in full during the 2016 financial year. The share option payments may be
different to the share option accrual due to movements in the share price of Pan African Resources from the accrual date to the redemption date.
SUMMARY OF CONTRACTUAL ARRANGEMENTS FOR CHIEF EXECUTIVE OFFICER AND FINANCIAL DIRECTOR
Term
Chief executive officer
Financial director
Contract duration
Three-year contract, terminating on 28 February 2021
Three-year contract, terminating on 28 February 2021
Short-term annual
incentive
A maximum of 110% of annual CTC, however, 30% of this
bonus is deferred and only payable after 24 months (in shares
or cash at Remco’s election, acting reasonably), subject to
confirmation that original KPIs resulted in the anticipated
benefits to the group being realised for this period
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’s election, acting
reasonably), subject to confirmation that original KPIs
resulted in the anticipated benefits to the group being
realised for this period
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
Participation in the
corporate option
scheme
To participate in the new corporate option scheme,
effective from 1 July 2018, subject to forfeiting all vested
but unexercised share options. Details of this scheme are
disclosed on
page 120
To participate in the new corporate option scheme,
effective from 1 July 2018, subject to forfeiting all vested
but unexercised share options. Details of this scheme are
disclosed on
page 120
124
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018 Term
Chief executive officer
Financial director
Minimum shareholding in
Pan African
Resources
Initial requirement of a minimum shareholding of
R2 million, which is to be held for a minimum of two years
Initial requirement of a minimum shareholding of
R0.5 million, which is to be held for a minimum of
two years
Long-term share
incentive
Further alignment with
shareholders
Subsequent to the 30 June 2017 financial year-end, Remco
required that additional shares to the value of R250,000 be
acquired by 31 December 2017. The Chief executive officer
entered into a contract for difference (CFD) derivative
on 29 September 2017 for 200,000 shares at average of
GBP12.747p per share. In addition, the Chief executive officer
also entered into a CFD derivative on 22 February 2018 for
200,000 shares at a price of GBP0.08 per share
At year-end, under the original allotment, the share incentive
had 1,533,334 shares which are allocated but not yet vested.
These shares should contractually have vested on 1 March
2018. However, given group performance during the past
year, Remco, in consultation with the Chief executive officer,
deferred the vesting. Any future vesting will be conditional
on the group achieving production, cost budgets and safety
targets during the 2019 financial year
Allocation of 5,000,000 Pan African Resources shares
effective on 1 March 2018, vesting over a three-year period
(1 March 2018 to 28 February 2021). Vesting will occur
subject to total shareholder return (defined as share price
performance and dividends distributed to shareholders)
exceeding that of a set of gold sector peers on an annual
basis for each of the three years to 2021. These shares only
vest when Pan African Resources’ total shareholder return
outperforms that of the peer group, with a pro-rata vesting
for superior performance up to 8%, whereafter all shares vest
The new issuance of long-term incentives, therefore, vest
in approximately three 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 significant outperformance of the market (in excess
of 8%), Remco may also allocate additional shares
In the event that a bonus is paid for a significant acquisition
or growth project, Remco may determine that a portion of
the annual short-term bonus is ‘at risk’ to clawback should
any act of malfeasance be proven against the executive
director. Under these circumstances, a portion, at the Remco’s
discretion, of the after-taxation bonus is to be refunded by the
executive director to the company
Conversely, if the initiative outperforms expectations, an
additional bonus may be payable to the executive director
Subsequent to the 2017 financial year-end, Remco
required that additional shares to the value of R150,000
be acquired by 31 December 2017
These shares were acquired on 28 September 2017
Allocation of 3,100,000 Pan African Resources shares,
effective on 1 March 2018, vesting over a three-year
period (1 March 2018 to 28 February 2021). Vesting
will occur subject to total shareholder return (defined
as share price performance and dividends distributed
to shareholders) exceeding that of a set of gold sector
peers on an annual basis for each of the three years to
2021. These shares only vest when Pan African Resources’
total shareholder return outperforms that of the peer
group, with a pro-rata vesting for superior performance
up to 8%, whereafter all shares vest
The new issuance of long-term incentives, therefore, vest
in approximately three years from the 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 significant outperformance of
the market (in excess of 8%), Remco may also allocate
additional shares
In the event that a bonus is paid for a significant
acquisition or growth project, Remco may determine
that a portion of the annual short-term bonus is ‘at risk’
to clawback should any act of malfeasance be proven
against the executive director. Under these circumstances,
a portion, at the Remco’s discretion, of the after-taxation
bonus is to be refunded by the executive director to the
company
Conversely, if the initiative outperforms expectations,
an additional bonus may be payable to the executive
director
PRESCRIBED OFFICER REMUNERATION
The prescribed officers’ remuneration is disclosed in the annual financial statements on
page 207.
ELIKHULU INCENTIVE
Remco considered the merits of incentivising executive directors and key personnel involved in bringing Elikhulu into production. Acknowledging
the progress to date, Remco resolved to again review the merits of such a bonus payment post successful commissioning of the project.
Remco, however, acknowledged the following project achievements to date:
• Commencement of construction during August 2017
• Disciplined cost management resulting in the project remaining within budget and on schedule with hot commissioning initiated during July 2018
Inaugural gold pour successfully accomplished on 16 August 2018 – approximately two months ahead of the original construction schedule
•
Identified an opportunity to incorporate the current ETRP processing throughput capacity into the Elikhulu plant, thereby increasing production
•
of Elikhulu to approximately 70,000oz per annum, while realising cost savings and processing efficiencies from economies of scale.
125
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018TRANSPARENCY AND ACCOUNTABILITY SURFACE MINING
OPEN-PIT MINING | OPENCAST MINING | STRIP MINING |
MOUNTAINTOP REMOVAL
Surface mining involves removing the rock and earth overlying mineral deposits found near
the surface of the land . Most surface mining operations are exposed to natural elements
and require no roof support. They use earthmovers and extractors to strip surface
vegetation, soil and layers of bedrock to access the orebody.
Surface mining methods include:
1 OPEN-PIT MINING
This is a mining technique that removes rocks and minerals through open or
borrow pits. Open-pit mining is similar to quarrying, though quarrying produces
building materials such as sand, stone and clay.
2 STRIP MINING
Strip mining involves stripping one or more surface layers to reveal near-surface
ore seams. This type of mining is ideally applied when the ground and the orebody
are reasonably horizontal, with a wide area available to be mined in a series of
strips.
Strip mining pits are shallower than opencast pits. This is a low-cost and highly
productive mining method used more commonly in coal mining operations.
There are two methods of strip mining:
• Area stripping – used on flat terrain to extract mineral deposits over a large area
• Contour stripping – removes the overlying rock and soil above the mineral seam
in hilly terrain where the orebody follows the contour of the land, leaving behind
mountainside terraces.
3 MOUNTAINTOP REMOVAL MINING
This is a form of coal mining that uses explosives to remove a mountaintop sitting
above a coal seam at depth.
> 20,000 tonnes per
day can be mined
with surface mining.
A good life-of-mine =
20 years life at
4 to 14Mt
per annum
126
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018
ANNUAL
FINANCIAL
STATEMENTS
Design factors when considering surface
mining:
• Stripping overburden
• Location of haul roads
• Equipment requirements, such as
truck size
• Pit slope angle and stability
While surface mining initially requires a substantial
capital injection, returns are gained through high
productivity, low operating costs and better safety
conditions.
Strip mining uses some of the biggest machines on earth,
such as bucket-wheel excavators with capabilities of moving
12,000 cubic metres of earth per hour.
Gold has been
discovered on each of
earth’s continents.
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018
127
AUDIT COMMITTEE REPORT
INTRODUCTION
The principal purpose of the audit committee is to assist the board to
fulfil its corporate governance and oversight responsibilities to ensure
the integrity of the group’s financial and corporate reporting, while
ensuring adequate systems of internal control and risk management
are in place and are operating effectively. The functions of a risk
committee at a group level also fall within the ambit of the audit
committee.
The committee has reporting responsibilities to both the shareholders
and the board 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 (for the AIM
market) and South Africa, these include King IV™.
The performance of the audit committee is evaluated against the
charter on an annual basis and a self-evaluation of the committee’s
effectiveness is performed by the members and reviewed by
the board.
The committee was appointed at the AGM on 21 November 2017.
All the directors are considered by the board to have an independent
and objective mindset. In terms of King IV™, all three members of
the audit committee are independent directors. The audit committee
comprises three independent directors including the chairman of the
board. 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 independent non-executive directors of the audit committee are:
• HH Hickey (chairman of the audit committee)
• TF Mosololi
• KC Spencer (board chairman).
AUDIT COMMITTEE RESPONSIBILITIES AND DUTIES
The audit committee fulfils its responsibilities and duties as set out in
its charter. The functions of the audit committee include:
• reviewing the interim and year-end financial statements and
integrated annual report, where necessary, challenging the
consistency and appropriateness of accounting principles, policies
and practices which have been applied in the preparation,
measurement and disclosures in the financial reports, culminating
with a recommendation to the board
• considering significant judgements and estimates applied in
preparation of interim results and year-end financial statements
• oversight of whistleblowing procedures
• monitoring the integrity of formal announcements relating to the
group’s financial performance and reviewing significant financial
and other reporting judgements
• reviewing the external audit reports, after the review of interim
and audit of year-end consolidated financial results
• assessing the external auditor’s independence and performance
• determining the audit fees in respect of the interim review
and making
year-end external
the appointment,
to
procedures
and
recommendations
reappointment or change of the group’s external auditor
the board on
audit,
• specifying guidelines and authorising the award of non-audit
services to the external auditor
128
• reviewing the internal audit management reports with, when
relevant, recommendations being made to the board
• approving the internal audit plan and reviewing regular reports
from the head of internal audit on the effectiveness of the internal
control system
• ensuring that a coordinated approach to all assurance activities
is in place
• monitoring the group’s compliance with legal and regulatory
requirements including ensuring that effective procedures are in
place relating to the group’s whistleblowing and anti-corruption
policies
• evaluating
the appropriateness and effectiveness of
management, internal controls and the governance processes
• dealing with concerns relating to accounting practices, internal
audit, the audit or content of annual financial statements and
internal financial controls.
risk
MEETING ATTENDANCE AND COMMITTEE
EXPERTISE AND INDEPENDENCE
The committee performs its duties by maintaining effective working
relationships with the board, other board committees, management,
and internal and external auditors. Under the stewardship of the
chairman of the audit committee, the audit committee met twice the
year under review to discharge its duties and responsibilities.
Attendance of the audit committee members is shown in the
corporate governance review on
page 108.
The members of the audit committee are all individually independent
and non-executive directors. The board has satisfied itself that the
audit committee, as a functioning unit, is competent and possesses
relevant knowledge of the industry in which the group operates and
that members of the committee, individually, have the relevant and
recent accounting and auditing competence. The audit committee
members’ skills and experiences are detailed in the board of directors’
profiles on
page 101.
In cases where circumstances and issues arise which are deemed
outside of the scope of expertise of the audit committee members,
independent services and advice from professional bodies and service
providers is always sourced.
COMMITTEES’ REMUNERATION
Audit committee members are remunerated in the same way as
members of other board sub-committees. The fees are approved
annually by the Remco. No retirement fund contributions are
made by the group on behalf of non-executive directors. Refer to
page 206 of the consolidated annual financial statements for
remuneration to audit committee members.
FINANCIAL REPORTING
The principal role of the audit committee in relation to financial
reporting is reviewing, with key management and the external auditor,
the integrated annual report, financial results announcements and
other publications to ensure statutory and regulatory compliance.
The committee has evaluated the consolidated and separate
financial statements for the year ended 30 June 2018 and, based
on the information provided to the committee, considers that the
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018 consolidated and separate financial statements comply, in all material
respects, with the requirements of the UK Companies Act 2006 and
IFRS. The consolidated and separate financial statements were then
recommended to the board for approval. The audit committee makes
its recommendation based on a comprehensive review conducted by
the executive directors and other senior management. The King IV™
requirements are continuously being assessed and improved on.
The committee reviewed the annual financial statements and the non-
financial information in the integrated annual report and web-based
information and concluded that the key risks have been appropriately
reported on.
The company has established appropriate financial reporting
procedures and the committee confirms that such procedures are
operating sufficiently.
KEY AND SIGNIFICANT ISSUES CONSIDERED BY
THE COMMITTEE
During the planning of the financial year-end audit and at the
conclusion thereof, the committee, together with management and
the external auditor, considered key focus areas for the financial year.
The key focus areas considered by the audit committee during the
year were:
Significant financial reporting matters
How the audit committee addressed the issue
Going concern
Directors are required by the UK Companies Act 2006
and the JSE/AIM rules to make an annual statement
in relation to the ability of the group to continue as a
going concern for a period of no less than 12 months
from the date of approval of the financial statements.
Under guidelines set out by the UK Financial Reporting
Council (FRC) the directors of each UK company
are required to consider whether the going concern
basis is the appropriate basis of preparation of the
financial statements, and furthermore, are required
to include appropriate disclosure as to any significant
considerations or uncertainties relevant to the going
concern assumption.
A capex commitment of R1.74 billion for the
construction of Elikhulu is unconditional. Management
secured additional funding of R1 billion to fund the
capex requirements of Elikhulu. Net debt at
30 June 2018 was R1.62 billion.
Significant judgement is required in assessing the ability
of the company and the group to continue as a
going concern.
In assessing whether the going concern assumption is appropriate, management
takes into account all available information for the foreseeable future, which should
be at least, but not limited to, 12 months from the date of the approval of the
financial statements. These inputs are carefully scrutinised by the audit committee
for reasonability.
The appropriateness of the going concern assumption for the group is driven
by the strength of its operations delivering into its budgeted cash flows in the
foreseeable future. A rigorous budgeting process is undergone and facilitated by
management over all operations. The following inputs are considered and translate
to positive cash flows:
• Life-of-mines and production expectations over the forecast period
• Anticipated rise in inflation rates and other factors influencing cost of
production
• Reasonable commodity prices, based on a gold forward price, to be achieved
over the forecast period
• Ability to retain debt facilities and service debt to an acceptable level and
meeting all the covenant requirements.
The operations’ continued ability to meet budgeted targets is regularly monitored
and any deviations are given due attention by management.
At year-end the budgeted future cash flows are stressed for reasonable sensitivities
to understand where the pinch points are and how to strategically address them.
Management at group level monitors cash flows on a regular basis to understand
cash constraints that will impact debt commitments.
The audit committee, together with the board, reviews and challenges the
consolidated budget. Once satisfied with the assumptions made and inputs used
the audit committee, together with the board, approves the model.
The audit committee, together with the board, reviews that the going concern
disclosures are appropriate, balanced and clear.
The going concern assumption was assessed to be appropriate at the end of the
financial year.
The audit committee considered going concern forecasts and reasonably possible
downside scenarios, including a ZAR gold price of R525,000/kg (USD1,270/oz at a
prevailing ZAR:USD average exchange rate ZAR12.86:1), and reduced production
volumes.
The key assumptions underpinning management’s base case and reasonable
downside scenarios were considered reasonable, including mitigating actions
identified.
129
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018ANNUAL FINANCIAL STATEMENTS AUDIT COMMITTEE REPORT continued
Significant financial reporting matters
How the audit committee addressed the issue
Impairment assessment
IAS 36: Impairment of Assets requires goodwill to
be tested for impairment annually or earlier where
indicators of impairment become apparent. IAS 36
requires that management evaluate whether there
are any indicators of impairment for significant items
of property, plant, machinery, equipment and mineral
rights, and where indicators are present these should be
tested for impairment.
Furthermore, IAS 36 requires that if the recoverability of
goodwill is sensitive to a reasonably possible change, this
be disclosed in the financial statements.
The recoverable amount of the group’s cash-generating
units (CGUs) is assessed principally with reference
to fair value less cost of disposal, using value-in-use
discounted cash flow models.
Cash flow projections are based on financial budgets
and life-of-mine plans incorporating key assumptions as
detailed below:
• Mineral Reserves and Mineral Resources
• Commodity prices
• Discount rates
• Operating costs, and capital expenditure
• Depreciation
• Life-of-mine and expected production profile.
Classification of Evander Mines as a discontinued
operation
The Evander Mines’ underground mining operation
ceased large-scale mining on 31 May 2018.
At the end of the financial period, and for the
comparative period, the financial results from the
Evander Mines’ large-scale underground operation
has been classified and disclosed as a discontinued
operation for accounting purposes under IFRS 5:
Non-current Assets Held for Sale and Discontinued
Operations.
An impairment charge of R1.78 billion has been
recognised by the group.
Rehabilitation and decommissioning provision
The group’s operations hold material rehabilitation and
decommissioning provisions. The provisions at year-end
relate to Evander Mines and Barberton Mines.
The judgements used to set or revise the provisions
in respect of these obligations can be complex with a
degree of estimation involved.
Management assesses goodwill annually for impairment and at each statement of
financial position date, management reviews all assets (property, plant, machinery
and equipment and mineral rights and investments) for any indication of
impairment.
The group’s continuity as a viable business lies in the strength of the operations
delivering positive cash flows over the respective life-of-mines. With the average
life-of-mine per operation well over 10 years, the recoverability of the mining
operations is in their value in use, unless there is a clear indication of a sale of an
operation in the near future.
Management prepares a detailed impairment assessment using value-in-use,
discounted cash flow models. Key judgements and estimates undergo extensive
internal review and challenge prior to submission to the audit committee.
The audit committee, together with the board, reviews and challenges the
impairment assessment. Once satisfied with the assumptions made and inputs used,
the audit committee and board approve management’s impairment assessment.
The Evander Mines’ underground mining operation ceased large-scale mining on
31 May 2018, and as a result the CGU was impaired, based on the impairment
assessment performed and impairment of R1.78 billion was recognised.
See note 17 on
page 176 for disclosure.
The audit committee considered impairment assessment and reasonably possible
downside scenarios, including a ZAR gold price of R525,000/kg (USD1,270/oz at a
prevailing ZAR:USD average exchange rate of ZAR12.86:1).
The audit committee considered the impairment assessment, key assumptions and
disclosure to be reasonable and appropriate.
Management has performed an assessment to ensure that the Evander Mines’
underground mining operation meets the requirements to be classified as a
discontinued operation at year-end.
As such the criteria required by IFRS 5 to classify the operation as a discontinued
operation have been met and Evander Mines’ large-scale underground operations
have been disclosed as such. Refer to note 14 on
page 169.
The group’s policy is for an external review to be performed within a two-year
cycle. Independent reviews are conducted on the mines by an expert. For the
current year, reliance was placed on the independent assessments performed in the
current year.
The audit committee is aware of the policy and reviews the rotation period
annually for applicability.
Inputs used include the inflation rate, which has been adjusted for a long-term
view, and the risk-free rate compounded annually and linked to the life-of-mine.
The audit committee considered the judgements made reasonable.
130
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018 SUBSIDIARY COMPANIES
The functions of the audit committee are also performed for each
subsidiary company of the Pan African Resources group that has not
appointed an audit committee.
FINANCIAL DIRECTOR
The board considered the functioning of the company’s finance
department and believes that it functions effectively, with the required
controls and systems in place.
EXTERNAL AUDITOR
The committee nominated Deloitte LLP, with Tim Biggs FC as the
designated audit partner, as the statutory auditor and Deloitte &
Touche, with Patrick Ndlovu as the designated audit partner, for
JSE reporting requirement purposes, for reappointment as external
auditors of Pan African Resources. In assessing the suitability for
their reappointment, the committee considered and executed its
responsibilities pursuant to paragraph 22.15(h) of the JSE Listings
Requirements.
The audit committee is satisfied with the accreditation of Deloitte LLP
and Deloitte & Touche.
The committee has assessed and is satisfied that Deon Louw has the
appropriate skill, expertise and experience, for the role of financial
director, as required by the JSE and AIM Listings Requirements.
INTERNAL AUDITOR
The committee plays an oversight role of internal audit by approval
of the internal audit plan and review of the reporting of any findings
on a regular basis. The committee satisfied itself that the internal audit
function is independent and has the necessary resources, standing and
authority to discharge its duties. The head of internal audit has direct
access to the chairman of the audit committee and internal auditors
are invited to attend each audit committee meeting.
The committee satisfied itself through enquiry that the external
auditors are independent as defined by the UK Companies Act 2006
and the standards stipulated by the auditing profession.
The focus for the year under review has been on obtaining assurance
on key risk areas within the control environment and investigations
where this was necessary at the specific operations.
There have been changes in the management of Pan African
Resources during the external audit firm’s tenure which mitigate
the attendant risk of familiarity between the external auditor and
management.
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 2018 financial year-
end, taking into consideration such factors as the timing of the audit,
the extent of the work required, and the scope.
The committee approved a non-audit services policy which
determines the nature and extent of any non-audit services which
Deloitte may provide to the company.
The policy allows for limited taxation and corporate governance
advice, as well as the provision of reporting accountant services in
relation to capital market transactions.
The committee monitors the external auditor’s performance and
the effectiveness of the audit process as provided with the terms of
engagement and agreed audit scope and approach.
Through review of external audit reports, and interactions with the
external audit team, the audit committee is satisfied with the quality
of the external audit performed for the financial year.
Subsidiaries within the group have been audited by Deloitte LLP and
Deloitte & Touche.
Deloitte LLP and Deloitte & Touche have been the auditors of
Pan African Resources for 10 and nine years respectively.
Patrick Ndlovu (external audit partner for Deloitte & Touche) will
rotate after the June 2021 financial year.
Tim Biggs (external audit partner for Deloitte LLP) will rotate after
the June 2018 financial year.
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 business units produce and
evaluate their risks on a quarterly basis. Continued effort to improve
the risk management process is ongoing.
Based on the group’s integrated approach to communicated
information, together with discussions with the independent external
auditor, the committee is satisfied that there was no material
breakdown in the internal accounting controls during the financial
year under review. The committee reviewed the auditor’s report to
those charged with governance and can report that there were no
material issues requiring immediate additional attention. The value-
added issues raised are receiving the appropriate attention to ensure
increased effectiveness in all areas of financial and business systems
and controls.
On behalf of the audit committee
HH Hickey
Chairman, audit committee
19 September 2018
131
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018ANNUAL FINANCIAL STATEMENTS DIRECTORS’ STATEMENT OF RESPONSIBILITY
The directors are responsible for preparing the integrated annual
report and the annual financial statements in accordance with
applicable laws and regulations.
The UK Companies Act 2006 requires the directors to prepare such
annual financial statements for each financial year. In accordance
with the AIM rules, the directors are required to prepare the group
annual financial statements in accordance with IFRS as adopted by
South Africa and the European Union (EU) (and article 4 of the IAS
regulation) and have also chosen to prepare the parent company
financial statements under IFRS as adopted by South Africa and the
EU. In terms of the UK Companies Act 2006, the directors must
not approve the accounts unless they are satisfied that they give a
true and fair view of the state of affairs and of the profit or loss of the
group and the company for that period.
In preparing these annual financial statements, the SA Companies Act
requires that directors:
• properly select and apply accounting policies
• present information, including accounting policies, in a manner
that provides relevant, reliable, comparable and understandable
information
• provide additional disclosures when compliance with the specific
requirements in IFRS is insufficient to enable users to understand
the impact of particular transactions, other events or conditions on
the entity’s financial position and financial performance
• make an assessment of the group’s ability to continue as a going
concern.
The directors confirm that to the best of our knowledge:
• the annual financial statements, prepared in accordance with IFRS
as adopted by the EU and South Africa, give a true and fair view
of the assets, liabilities, financial position and profit or loss of the
company and the undertakings included in the consolidation taken
as a whole
• the strategic report includes a fair review of the development and
performance of the business and the position of the company and
the undertakings included in the consolidation taken as a whole,
together with a description of the principal risks and uncertainties
that they face
• the integrated annual report and annual financial statements, taken
as a whole, are fair, balanced and understandable and provide the
information necessary for shareholders to assess the company’s
position and performance, business model and strategy.
The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the group’s transactions,
disclose with reasonable accuracy at any time the financial position of
the group, and ensure that the annual financial statements comply
with the UK Companies Act 2006. 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 financial information included on the company’s
website. Legislation in the UK governing the preparation and
dissemination of annual financial statements may differ from legislation
in other jurisdictions.
CERTIFICATE 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 2006. All such returns are true, correct and up to date.
St James’s Corporate Services Limited
Company secretary
19 September 2018
132
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018 DIRECTORS’ REPORT
The directors present their integrated annual report and the audited
annual financial statements for the year ended 30 June 2018.
• review of monthly financial reports and monitoring performance
• review of internal audit reports and follow-up action of weaknesses
PRINCIPAL ACTIVITIES
The group’s principal activity during the year was gold mining.
A full review of the activities of the business and of its prospects is
contained in the chief executive officer’s statement that accompanies
these annual financial statements on
page 12.
RESULTS AND HISTORICAL DIVIDENDS
The results for the 2018 financial year are disclosed in the consolidated
statement of profit and loss and other comprehensive income on
page 147. The key features of these results can be found
on
page 37.
The group paid a final dividend of ZAR185 million or GBP10.0 million
(2016: R300 million or GBP17.1 million) on 21 December 2017,
relating to the 2017 financial year. This dividend equated to
R0.08279 per share or 0.44561 pence per share (2016: R0.15438
per share or 0.87668 pence per share).
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 is to settle
credit in less than 60 days from statement date.
RISK MANAGEMENT
A separate risk committee is not considered necessary, as this role is
fulfilled by the board, its sub-committees and executive management.
The identification and management of critical risks is a strategic focus
area for executive management, reviewed monthly and, together with
action plans, reported regularly to the board. Executive management
and other board members can call for emergency board meetings,
should the need arise. The group’s risk management and key business
risks are documented within the risk section on
page 22.
INTERNAL CONTROL
The board is responsible for maintaining a sound system of internal
controls to safeguard shareholders’ investments and group assets.
The directors monitor the operation of internal controls. The objective
of the system is to safeguard group assets, ensure proper accounting
records are maintained and that the financial information used within
the business and for publication is reliable. Any such system of internal
control can only provide reasonable, but not absolute, assurance
against material misstatement or loss.
Internal financial control procedures undertaken by the board include:
identified by these reports
• review of competency and experience of senior management staff
• prior approval of all significant 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 2018 financial year and the
period up to the date of approval of the annual financial statements.
GOING CONCERN
The group closely monitors and manages its liquidity risk by means of
a centralised treasury function. Cash forecasts are regularly produced
and sensitivities run for different scenarios including, but not limited
to, changes in commodity prices and different production profiles
from the group’s producing assets. The group had R485 million of
available debt facilities and R12.5 million of cash and cash equivalents
at 30 June 2018. Based on the current status of the group’s finances,
having considered going concern forecasts and reasonably possible
downside scenarios, including a ZAR gold price of R525,000/kg
(USD1,270/oz at a prevailing ZAR:USD average exchange rate
ZAR12.86:1), and reduced production volumes, the group’s forecasts
demonstrate it will have sufficient liquidity headroom to meet its
obligations in the ordinary course of business, and will comply with
financial covenants for the 12 months from the date of approval of
the financial statements.
The board has a reasonable expectation that the company has
adequate resources to continue in operational existence for the
foreseeable future. Accordingly, the group continues to adopt the
going concern basis of accounting in preparation of the 30 June 2018
financial statements.
EVENTS AFTER THE REPORTING PERIOD
No material events occurred after the reporting period.
DIRECTORS
The following were directors during the year under review:
KC Spencer
JAJ Loots
GP Louw
HH Hickey
TF Mosololi
RM Smith
Independent non-executive chairman
Chief executive officer
Financial director
Independent non-executive director
Independent non-executive director
Independent non-executive director.
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PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018ANNUAL FINANCIAL STATEMENTS DIRECTORS’ REPORT continued
AUDITOR
Deloitte LLP has been appointed as the statutory auditor and
Deloitte & Touche 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
annual report confirms 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 to make themselves aware of any relevant audit
information and to establish that the group’s auditors are aware
of that information.
This confirmation is given and should be interpreted in accordance
with S418 of the UK Companies Act 2006.
Deloitte has expressed its willingness to continue in office as
auditor, and a resolution to reappoint it will be proposed at the
forthcoming AGM.
APPROVAL OF FINANCIAL STATEMENTS
The board of directors therefore approves the integrated annual
report, strategic report and associated annual financial statements.
By order of the board
Cobus Loots
Chief executive officer
19 September 2018
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PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018 UNITED KINGDOM
INDEPENDENT AUDITORS’ REPORT
To the members of Pan African Resources Plc
• the consolidated and separate statements of cash flows; and
OPINION
In our opinion
• the financial statements of Pan African Resources plc (the parent
company) and its subsidiaries (the group) give a true and fair view
of the state of the group’s and of the parent company’s affairs as
at 30 June 2018 and of the group’s profit for the year then ended;
• the group financial statements have been properly prepared in
accordance with International Financial Reporting Standards
(IFRSs) as adopted by the European Union;
• the parent company financial statements have been properly
prepared in accordance with IFRSs as adopted by the European
Union and as applied in accordance with the provisions of the
Companies Act 2006; and
• the financial statements have been prepared in accordance with
the requirements of the Companies Act 2006.
We have audited the financial statements which comprise:
• the consolidated and separate statements of profit or loss and
other comprehensive income
• the consolidated and separate statements of financial position
• the consolidated and separate statements of changes in equity;
SUMMARY OF OUR AUDIT APPROACH
• the related notes 1 to 41.
The financial reporting framework that has been applied in their
preparation is applicable law and IFRSs as adopted by the European
Union and, as regards the parent company financial statements, as
applied in accordance with the provisions of the Companies Act 2006.
BASIS FOR OPINION
We conducted our audit in accordance with International Standards
on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities
under those standards are further described in the auditor’s
responsibilities for the audit of the financial statements section of our
report.
We are independent of the group and the parent company in
accordance with the ethical requirements that are relevant to our
audit of the financial statements in the UK, including the Financial
Reporting Council’s (the ‘FRC’s’) Ethical Standard as applied to
listed entities, and we have fulfilled our other ethical responsibilities
in accordance with these requirements. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide
a basis for our opinion.
Key audit matters
The key audit matters that we identified in the current year were:
• Going concern
•
• Classification of Evander underground operations as discontinued operations
• Rehabilitation and decommissioning provision
Impairment assessment of property, plant and equipment and goodwill
Materiality
Scoping
Within this report, any new key audit matters are identified with
the prior year identified with
.
and any key audit matters which are the same as
The materiality that we used for the group financial statements was GBP1.1 million which was determined on the basis
of 6% of normalised three-year average pre-tax profit.
Full scope audits have been performed on Barberton, Evander, Management Services and Pan African Resources
components. PAR Funding is subject to an audit of specific account balances.
These account for 99% of the group’s profit before taxation, 100% of the group’s revenue and 98% of the group’s net
assets.
Significant changes
in our approach
The Evander Mining underground operations were discontinued in the current year, though the surface tailing
operations continue. These circumstances gave rise to a new key audit matter in the current year as discussed below.
CONCLUSIONS RELATING TO GOING CONCERN
We are required by ISAs (UK) to report in respect of the following matters where:
• the directors’ use of the going concern basis of accounting in preparation of the financial statements is not
appropriate; or
We have nothing to
report in respect
of these matters.
• the directors have not disclosed in the financial statements any identified material uncertainties that may cast
significant doubt about the group’s or the parent company’s ability to continue to adopt the going concern basis
of accounting for a period of at least twelve months from the date when the financial statements are authorised
for issue.
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PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018ANNUAL FINANCIAL STATEMENTS UNITED KINGDOM
INDEPENDENT AUDITORS’ REPORT continued
KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of
the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified.
These matters included those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the
efforts of the engagement team.
These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do
not provide a separate opinion on these matters.
Going concern
Key audit matter
description
The group is dependent on generating sufficient cash flows to maintain sufficient liquidity to continue operating under
the normal course of business, meet covenant requirements, and hence operate within the parameters of its debt
facilities.
The directors have concluded that the going concern basis of accounting remains appropriate after performing a
detailed forecast of liquidity and covenant compliance for a period of 12 months from the date of approval of the
2018 integrated annual report and has not identified any material uncertainties related to going concern (note 2 and
audit committee report on
pages 128 to 131 ).
Pressure on the group’s cash flow and available headroom on financial covenants arises from the volatility in the gold
price, the Rand to US Dollar exchange rate and gold production due to operational challenges.
Over the next 12 months, the increase in the group’s borrowings due to the Elikhulu construction is forecast to
constrain the group’s liquidity headroom and the interest cover ratio remains the most sensitive financial covenant.
There is therefore a risk that the going concern basis of accounting will be adopted inappropriately or that the
disclosures are not adequate.
How the scope
of our audit
responded to the
key audit matter
We challenged the key assumptions in the directors’ forecast cash flows for the next 12 months, within both base case
and downside scenarios, by:
• reviewing the directors’ going concern paper and the accompanying cash flow and covenant compliance forecasts
for the going concern period. This paper included stress tests for a range of reasonably possible scenarios including
reduced production and lower than expected gold prices;
• comparing cash flow forecasts for 2019 with the board-approved budget for that period, and obtaining explanations
for any significant differences;
• comparing the forecast gold price assumption with the latest set of broker forecasts;
• using our mining specialists, Deloitte Technical Mining Advisors, to assess the life-of-mine and challenge the
reasonableness of the production profile and recovery rates;
• assessing the historical accuracy of budgeted production;
• agreeing the group’s committed debt facilities and hedging arrangements to supporting documentation;
• testing the mechanical accuracy of the cash flow models and the related covenant compliance forecasts; and
• assessing whether the disclosures relating to going concern included in the financial statements are balanced,
proportionate and clear.
Key observations
Based on our procedures performed we are satisfied that the going concern assumption remains appropriate given
the headroom available in the directors’ base case and downside sensitivities and that the disclosures provided are
proportionate, balanced and clear.
136
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018
Impairment of plant, property and equipment and goodwill
Key audit matter
description
The carrying value of property, plant and equipment on the statement of financial position at 30 June 2018 was
GBP193 million (note 17) and goodwill associated with the Barberton mine had a carrying value of GBP21 million
(note 19) at 30 June 2018.
In line with IAS 36: Impairment of Assets, the directors are required to perform an impairment assessment on the
carrying value of goodwill and assess whether any internal or external indicators of impairment exist in relation to its
property, plant and equipment. The directors identified impairment indicators with regard to the mining assets related
to the Evander underground operations
This requires significant judgement to be exercised, primarily in regard to the assumed forecast gold price, discount
rates and the group’s production and cost profiles at each of its mines. As referenced in note 3 of the financial
statements, the recoverable value of property, plant and equipment and goodwill is considered by the directors to be a
significant source of estimation uncertainty.
The directors have performed an impairment assessment on all of its cash-generating units (CGUs) and concluded that:
• an impairment of GBP98.1 million should be recognised in respect of the Evander underground CGU as a result of
no future forecasted cash flows being available on discontinuing the Evander underground operation; and
• an impairment of GBP8.1 million should be recognised in respect of the Evander surface mining operation CGU due
to the directors’ intention to merge ETRP (Evander Tailings Retreatment Plant) tonnage throughput into the Elikhulu
plant from the second half of the next financial year.
Further detail is disclosed in note 17, 19 and the audit committee report on
pages 128 to 131.
How the scope
of our audit
responded to the
key audit matter
We challenged the directors’ significant assumptions used in the impairment testing for property, plant and equipment,
and goodwill and specifically the cash flow projections, by:
• reviewing the directors’ accounting paper on impairments with consideration of all of the assumptions supporting
their conclusions;
• working with Deloitte Technical Mining Advisors to analyse the directors’ long-term mining plans which form the
basis of their recoverable value;
• comparing the forecast gold price assumption with the latest set of broker forecasts;
• comparing the discount rates calculated by the directors’ experts with Deloitte’s internal specialists’ valuation; and
• evaluating the directors’ assessment of the different CGUs in accordance with IAS 36.
We reviewed the adequacy and accuracy of disclosures. We have assessed the sensitivity analysis performed and
disclosed by the directors relating to the impairment review.
Key observations
Based on our procedures performed, we are satisfied that the recoverability of the assets has been assessed
in accordance with the requirements of IAS 36: Impairment of Assets and the related disclosures provided are
appropriate.
Classification of Evander underground operations as discontinued operations
Key audit matter
description
During the current year, the group discontinued the Evander underground operations comprising Shaft 7 and 8 and the
run-of-mine circuit Kinross plant.
In line with IFRS 5: Non-Current assets held for sale and Discontinued operations, the directors are required to
determine whether the classification criteria for a discontinued operation have been met. The remaining surface sources
and tailings operations at Evander comprising Elikhulu and ETRP, both tailings retreatment plants, are considered to be a
part of the Evander continuing operations.
This determination requires significant judgement to be exercised in regard to the IFRS 5 criteria, recognition of any
related impairments, determination of the split between continuing and discontinued operations and related disclosure.
As disclosed in note 3 and 17, an impairment of GBP106 million has been identified in respect of the underground
mining assets as a result of the discontinuing the underground operations.
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PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018ANNUAL FINANCIAL STATEMENTS
UNITED KINGDOM
INDEPENDENT AUDITORS’ REPORT continued
Classification of Evander underground operations as discontinued operations
continued
How the scope
of our audit
responded to the
key audit matter
We challenged the directors’ significant assumptions used in the classification of Evander as a discontinued operation by:
• challenging the reasonability of Evander’s underground operations classification as a discontinued operation against
the requirements of IFRS 5 Non-Current assets held for sale and Discontinued operations (IFRS 5);
• reviewing the directors’ paper and the accompanying judgements applied to distinguish between Evander
underground discontinued and Evander surface continuing operations and determine the impairment charge;
• challenging the directors’ calculation of the impairment by testing its mathematical accuracy and assessing the
underlying assumptions; and
• assessing whether the disclosures relating to IFRS 5 included in the financial statements are balanced, proportionate
and clear.
Key observations
Based on our procedures performed, we are satisfied that Evander underground qualifies as a discontinued operation
and the related disclosures provided are appropriate.
Rehabilitation provision
Key audit matter
description
How the scope
of our audit
responded to the
key audit matter
The provision for rehabilitation and decommissioning at 30 June 2018 was GBP 15 million (note 29).
The measurement of this provision requires judgement to determine the forecast estimated cost of rehabilitation
activity, the life of each mine, the forecast inflation rate and an appropriate discount rate.
We have challenged the directors’ key assumptions used in their determination of the rehabilitation provision by:
• assessing the work of the directors’ experts in producing the mine closure costs and assessing their competence,
experience and qualifications;
• working with Deloitte Technical Mining Advisors to analyse the directors’ long-term mining plans which form the
•
basis for determining the expected timing of future cash flows;
interviewing mining engineers to understand the extent of any additional damage requiring rehabilitation and
agreeing that this has been included in the forecast cash flows; and
• agreeing the inflation and discount rate assumptions to independent sources
Key observations We are satisfied that the judgements made by the directors are reasonable and that the risk adjustments to the forecast
cash flows are reasonable and consistent with industry practice.
OUR APPLICATION OF MATERIALITY
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions of a
reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scope of our audit work and in
evaluating the results of our work.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Group financial statements
Parent company financial statements
Materiality
GBP1.1 million/ZAR20 million (2017: GBP1.5 million/ZAR26 million).
GBP0.4 million/ZAR8 million
The applied materiality is approximately 6% of normalised three-year average
pre-tax profit (2017: 6%). These normalising items are outlined in note 15 to
the financial statements.
1% of net assets
PAR PLC is the holding company
and a reflection of its operations are
indicated by the total assets held by
the entity.
The pre-tax profits for the 2016 to 2018 years have been normalised in
determining materiality to exclude items which, due to their nature and/or
expected infrequency of the underlying events, are not considered indicative
of continuing operations of the group and so do not form part of the group’s
internally or externally monitored primary KPIs, and which if included, would
distort materiality year-on-year.
We consider this approach to be more appropriate than using a single period
given the nature of the mining industry which is exposed to cyclical commodity
price fluctuations.
A three-year average provides a more stable base reflective of the group’s size
and operations.
The materiality determined equates to less than 1% (2017: 1%) of equity.
Basis for
determining
materiality
Rationale for
the benchmark
applied
138
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018
PBT GBP20.0 million
PBT
Group materiality
Group materiality
GBP1.1 million
Component materiality upper limit
GBP0.8 million
Audit committee reporting threshold
GBP0.02 million
We agreed with the audit committee that we would report to the
committee all audit differences in excess of GBP0.02 million (2017:
GBP0.03 million), as well as differences below that threshold that, in
our view, warranted reporting on qualitative grounds. We also report
to the audit committee on disclosure matters that we identify when
assessing the overall presentation of the financial statements.
AN OVERVIEW OF THE SCOPE OF OUR AUDIT
The group’s operations are located in South Africa. Our group audit
was scoped by obtaining an understanding of the group and its
environment, including group-wide controls, and assessing the risks
of material misstatement at the group level. Based on our continuing
assessment, we focused our group audit scope primarily on the audit
work at five components, representing the group’s most material
operations, and utilised two component audit teams in South Africa.
Four of these were subject to a full scope audit and one was subject
to specified audit procedures where the extent of our testing was
based on our assessment of the risk of material misstatement and of
the size of the group’s operations at that location.
These five components account for 99% of the group’s profit before
taxation, 100% of the group’s revenue and 98% of the group’s net
assets.
For all full scope components the group audit team was involved
in the audit work performed by the component auditors through
a combination of our planning conference call meetings, in-country
review and challenge of related component detailed working papers
and of findings from their work (which included the audit procedures
performed to respond to risks of material misstatement) and regular
interaction on any related audit and accounting matters which arose.
The group audit partner and senior members of the group audit team
travelled to South Africa as part of the audit and periodically met with
local management and the component audit team.
At the parent entity level we also tested the consolidation process
and carried out analytical procedures to confirm our conclusion
that there were no significant risks of material misstatement of the
aggregated financial information of the remaining components not
subject to audit or specified audit procedures performed.
OTHER INFORMATION
The directors are responsible for the other information. The other information comprises the information included in
the annual report, other than the financial statements and our auditor’s report thereon.
Our opinion on the financial statements does not cover the other information and, except to the extent otherwise
explicitly stated in our report, we do not express any form of assurance conclusion thereon.
We have nothing to
report in respect of
these matters.
In connection with our audit of the financial statements, our responsibility is to read the other information and,
in doing so, consider whether the other information is materially inconsistent with the financial statements or our
knowledge obtained in the audit or otherwise appears to be materially misstated.
If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether
there is a material misstatement in the financial statements or a material misstatement of the other information.
If, based on the work we have performed, we conclude that there is a material misstatement of this other information,
we are required to report that fact.
139
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018ANNUAL FINANCIAL STATEMENTS
UNITED KINGDOM
INDEPENDENT AUDITORS’ REPORT continued
RESPONSIBILITIES OF DIRECTORS
As explained more fully in the directors’ responsibilities statement,
the directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair view,
and for such internal control as the directors determine is necessary
to enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible
for assessing the group’s and the parent company’s ability to continue
as a going concern, disclosing as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the group or the parent company
or to cease operations, or have no realistic alternative but to do so.
AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF
THE FINANCIAL STATEMENTS
Our objectives are to obtain reasonable assurance about whether the
financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with
ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the
basis of these financial statements.
further description of our responsibilities
A
the audit
of the financial statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part
for
of our auditor’s report.
REPORT ON OTHER LEGAL AND REGULATORY
REQUIREMENTS
Opinions on other matters prescribed by the
Companies Act 2006
In our opinion, based on the work undertaken in the course of the
audit:
• the information given in the strategic report and the directors’
report for the financial year for which the financial statements are
prepared is consistent with the financial statements; and
• the strategic report and the directors’ report have been prepared
in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the group and or
the parent company and their environment obtained in the course
of the audit, we have not identified any material misstatements in the
strategic report or the directors’ report.
MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION
Adequacy of explanations received and accounting records
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• we have not received all the information and explanations we require for our audit; or
• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have
We have nothing to
report in respect of
these matters.
not been received from branches not visited by us; or
• the parent company financial statements are not in agreement with the accounting records and returns.
Directors’ remuneration
Under the Companies Act 2006 we are also required to report if in our opinion certain disclosures of directors’
remuneration have not been made.
We have nothing to
report in respect of
this matter
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.
Timothy Biggs FCA
Senior statutory auditor
For and on behalf of Deloitte LLP
Statutory Auditor
London, United Kingdom
18 September 2018
140
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018 SOUTH AFRICA
INDEPENDENT AUDITORS’ REPORT
To the Shareholders of Pan African Resources plc
OPINION
We have audited the consolidated and separate financial statements
pages 146
of Pan African Resources plc (the Group) set out on
to 215, which comprise the statements of financial position as at
30 June 2018, and the statements of profit or loss and other
comprehensive income, the statements of changes in equity and the
statements of cash flows for the year then ended, and notes to the
financial statements, including a summary of significant accounting
policies.
In our opinion, the consolidated and separate financial statements
present fairly, in all material respects, the consolidated and separate
financial position of the Group as at 30 June 2018, and its consolidated
and separate financial performance and consolidated and separate
cash flows for the year then ended in accordance with International
Financial Reporting.
BASIS FOR OPINION
We conducted our audit in accordance with International Standards
on Auditing (ISAs). Our responsibilities under those standards are
further described in the Auditor’s Responsibilities for the Audit
of the Consolidated and Separate Financial Statements section
of our report. We are independent of the Group in accordance
with the Independent Regulatory Board for Auditors Code of
Professional Conduct for Registered Auditors (IRBA Code) and
other independence requirements applicable to performing audits of
financial statements in South Africa. We have fulfilled our other ethical
responsibilities in accordance with the IRBA Code and in accordance
with other ethical requirements applicable to performing audits in
South Africa. The IRBA Code is consistent with the International Ethics
Standards Board for Accountants Code of Ethics for Professional
Accountants (Parts A and B). We believe that the audit evidence we
have obtained is sufficient and appropriate to provide a basis for our
opinion.
KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional
judgement, were of most significance in our audit of the consolidated
and separate financial statements of the current period. These matters
were addressed in the context of our audit of the consolidated and
separate financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters.
Going concern
Key audit matter
description
See note 2 and the
audit committee
report on
pages 125 to
131 for further
details
The group is dependent on generating sufficient cash flows to maintain sufficient liquidity to continue operating under
the normal course of business, meet loan covenant requirements, and hence operate within the parameters of its
debt facilities.
The directors have concluded that the going concern basis of accounting remains appropriate after performing a
detailed forecast of liquidity and covenant compliance for a period of 12 months from the date of approval of the 2018
integrated annual report and has not identified any material uncertainties related to going concern.
Pressure on the group’s cash flow and available headroom on financial covenants arises from the volatility in the gold
price, the Rand to US Dollar exchange rate and gold production due to operational challenges.
Over the next 12 months, the increase in the group’s borrowings due to the Elikhulu construction is forecast to
constrain the group’s liquidity headroom and the interest cover ratio remains the most sensitive financial covenant.
There is therefore inherent uncertainty in forecasting and a degree of judgement involved in evaluating whether the
going concern basis of accounting will be adopted appropriately, as such we identified the assessment of the Company
and the Group to continue as a going concern as a key audit matter.
How the scope
of our audit
responded to the
key audit matter
We challenged the key assumptions in the directors’ forecast cash flows for the next 12 months, within both base case
and downside scenarios, by:
• reviewing the directors’ going concern paper and the accompanying cash flow and covenant compliance forecasts
for the going concern period. This paper included stress tests for a range of reasonably possible scenarios including
reduced production and lower than expected gold prices;
• comparing cash flow forecasts for 2019 with the board-approved budget for that period, and obtaining explanations
for any significant differences;
• comparing the forecast gold price assumption with the latest set of broker forecasts;
• using our mining specialists, Deloitte Technical Mining Advisors, to challenge the reasonableness of the production
profile and recovery rates;
• assessing the historical accuracy of budgeted production;
• agreeing the group’s committed debt facilities and hedging arrangements to supporting documentation;
• testing the mechanical accuracy of the cash flow models and the related covenant compliance forecasts; and
• assessing whether the disclosures relating to going concern included in the financial statements are balanced,
proportionate and clear.
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PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018ANNUAL FINANCIAL STATEMENTS SOUTH AFRICA
INDEPENDENT AUDITORS’ REPORT continued
Going concern continued
Key observations
Based on our procedures performed we are satisfied that the going concern assumption remains appropriate given
the headroom available in the directors’ base case and downside sensitivities and that the disclosures provided are
proportionate, balanced and clear.
Impairment of property, plant and equipment and goodwill (consolidated financial statements)
Key audit matter
description
See notes 3, 17
and 19 and the
Audit Committee
Report
pages
128 to 131 for
further details.
The carrying value of property, plant and equipment on the statement of financial position at 30 June 2018 was
GBP193 million (note 17) and goodwill associated with the Barberton mine had a carrying value of GBP21 million
(note 19) at 30 June 2018.
In line with IAS 36: Impairment of Assets, the directors are required to perform an impairment assessment on the
carrying value of goodwill and assess whether any internal or external indicators of impairment exist in relation to its
property, plant and equipment. The directors identified impairment indicators with regard to the mining assets related
to the Evander underground operations, including a decline in the forecast long-term gold price and production
shortfalls, and therefore carried out an impairment assessment.
How the scope
of our audit
responded to the
key audit matter
This requires significant judgement to be exercised, primarily in regard to the assumed forecast gold price, discount
rates and the group’s production and cost profiles at each of its mines. As referenced in note 3 of the financial
statements, the recoverable value of property, plant and equipment and goodwill is considered by the directors to be a
significant source of estimation uncertainty.
The directors have performed an impairment assessment on all of its cash-generating units (CGUs) and concluded that:
• an impairment of GBP98.1 million should be recognised in respect of the Evander underground CGU as a result of
no future forecasted cash flows being available on discontinuing the Evander underground operation; and
• an impairment of GBP8.1 million should be recognised in respect of the Evander surface mining operation CGU due
to the directors intention to merge ETRP tonnage throughput into the Elikhulu plant from the second half of the
next financial year.
We challenged the directors’ significant assumptions used in the impairment testing for property, plant and equipment,
goodwill, and specifically the cash flow projections, by:
• reviewing the directors’ accounting paper on impairments with consideration of all of the assumptions supporting
their conclusions
• working with Deloitte Technical Mining Advisors to analyse the directors’ long-term mining plans which form the
basis of their recoverable value;
• comparing the forecast gold price assumption with the latest set of broker forecasts;
• comparing the discount rates calculated by the directors’ experts with Deloitte’s internal Corporate Finance
specialists’ calculations; and
• evaluating the directors’ assessment of the different CGUs in accordance with IAS 36.
We reviewed the adequacy and accuracy of disclosures. We also evaluated the sensitivity analysis performed and
disclosed by the directors relating to the impairment review.
Key observations
Based on our procedures performed, we are satisfied that the recoverability of the assets has been assessed in
accordance with the requirements of IAS 36: Impairment of Assets and related disclosures provided are appropriate.
142
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018 Classification of Evander underground operations as discontinued operations
Key audit matter
description
During the current year, the group discontinued the Evander underground operations comprising Shaft 7 and 8 and the
run-of-mine circuit Kinross plant.
See notes 3, 14
and 17 and the
Audit Committee
Report on
pages 128 to 131
for further details.
In line with IFRS 5: Non-Current assets held for sale and Discontinued operations, the directors are required to
determine whether the classification criteria for a discontinued operation has been met. The remaining surface sources
and tailings operations at Evander comprising Elikhulu and ETRP are considered to be a part of the Evander continued
operations.
This determination requires significant judgement to be exercised in regard to the IFRS 5 criteria, recognition of any
related impairments, determination of the split between continuing and discontinued operations and related disclosure.
As disclosed in note 17, an impairment of GBP106 million has been identified as a result of the discontinuing the
underground operations
How the scope
of our audit
responded to the
key audit matter
We challenged the directors’ significant assumptions used in the classification of Evander as a discontinued operation by:
• to challenge the reasonability of Evander’s underground operations classification as a discontinued operation in
accordance with the requirements of IFRS5: Non-Current assets held for sale and Discontinued operations
(“IFRS 5”);
• reviewing the directors’ paper and the accompanying judgements applied to distinguish between Evander
underground discontinued and Evander surface continuing operations and determine the impairment charge;
• assessing the reasonability of management’s distinction of the Evander discontinued and continuing operations;
• challenging the directors’ calculation of the impairment by testing its mathematical accuracy and assessing the
underlying assumptions; and
• assessing whether the disclosures relating to IFRS5 included in the financial statements are balanced, proportionate
and clear.
Key observations
Based on our procedures performed, we are satisfied that Evander underground qualifies as a discontinued operation
and the related disclosures provided are appropriate.
Rehabilitation provision
Key audit matter
description
See notes 29
and the Audit
Committee Report
pages 128
on
to 131 for further
details.
How the scope
of our audit
responded to the
key audit matter
The provision for rehabilitation and decommissioning at 30 June 2018 was GBP 15 million.
The measurement of this provision requires judgement to determine the forecast estimated cost of rehabilitation
activity, the life of each mine, the forecast inflation rate and an appropriate discount rate.
We have challenged the directors’ key assumptions used in their determination of the rehabilitation provision by:
• assessing the work of the directors’ experts in producing the mine closure costs and assessing their competence,
experience and qualifications;
• working with Deloitte Technical Mining Advisors to analyse the directors’ life-of-mine plans;
•
interviewing mining engineers to understand the extent of any additional damage requiring rehabilitation and
agreeing that this has been included in the forecast cash flows; and
• agreeing the inflation and discount rate assumptions to independent sources.
Key observations We are satisfied that the judgements made by the directors are reasonable and the risk adjustments to the forecast
cash flows are reasonable and consistent with practice industry.
143
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018ANNUAL FINANCIAL STATEMENTS
SOUTH AFRICA
INDEPENDENT AUDITORS’ REPORT continued
OTHER INFORMATION
The directors are responsible for the other information. The other
information comprises the Directors’ Report, the Audit Committee’s
Report and the Company Secretary’s Certificate which we obtained
prior to the date of this report, and the integrated annual Report,
which is expected to be made available to us after that date.
The other information does not include the consolidated and separate
financial statements and our auditor’s report thereon.
Our opinion on the consolidated and separate financial statements
does not cover the other information and we do not express an audit
opinion or any form of assurance conclusion thereon.
In connection with our audit of the consolidated and separate
financial statements, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially
inconsistent with the consolidated and separate financial statements
or our knowledge obtained in the audit, or otherwise appears to be
materially misstated.
If, based on the work we have performed on the other information
obtained prior to the date of this auditor’s report, we conclude that
there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report in this regard.
RESPONSIBILITIES OF THE DIRECTORS FOR
THE CONSOLIDATED AND SEPARATE FINANCIAL
STATEMENTS
The directors are responsible for the preparation and fair presentation
of the consolidated and separate financial statements in accordance
with International Financial Reporting Standards, and for such internal
control as the directors determine is necessary to enable the
preparation of consolidated and separate financial statements that
are free from material misstatement, whether due to fraud or error.
In preparing the consolidated and separate financial statements, the
directors are responsible for assessing the Group’s and the Company’s
ability to continue as a going concern, disclosing, as applicable, matters
related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the Group
and / or the Company or to cease operations, or have no realistic
alternative but to do so.
AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF
THE CONSOLIDATED AND SEPARATE FINANCIAL
STATEMENTS
Our objectives are to obtain reasonable assurance about whether
the consolidated and separate financial statements as a whole are
free from material misstatement, whether due to fraud or error, and
to issue an auditor’s report that includes our opinion. Reasonable
assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with ISAs will always detect a material
misstatement when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic
decisions of users taken on the basis of these consolidated and
separate financial statements.
As part of an audit in accordance with ISAs, we exercise professional
judgement and maintain professional scepticism throughout the audit.
We also:
•
Identify and assess the risks of material misstatement of the
consolidated and separate financial statements, whether due to
fraud or error, design and perform audit procedures responsive
to those risks, and obtain audit evidence that is sufficient and
appropriate to provide a basis for our opinion. The risk of not
detecting a material misstatement resulting from fraud is higher
than for one resulting from error, as fraud may involve collusion,
forgery, intentional omissions, misrepresentations, or the override
of internal control.
• Obtain an understanding of internal control relevant to the audit
in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the Group’s and the Company’s internal
control.
• Evaluate the appropriateness of accounting policies used and the
reasonableness of accounting estimates and related disclosures
made by the directors.
• Conclude on the appropriateness of the directors’ use of
the going concern basis of accounting and based on the audit
evidence obtained, whether a material uncertainty exists related
to events or conditions that may cast significant doubt on the
Group’s and the Company’s ability to continue as a going concern.
If we conclude that a material uncertainty exists, we are required
to draw attention in our auditor’s report to the related disclosures
in the consolidated and separate financial statements or, if such
disclosures are inadequate, to modify our opinion. Our conclusions
are based on the audit evidence obtained up to the date of our
auditor’s report. However, future events or conditions may cause
the Group and / or the Company to cease to continue as a going
concern.
• Evaluate the overall presentation, structure and content of the
consolidated and separate financial statements, including the
disclosures, and whether the consolidated and separate financial
statements represent the underlying transactions and events in a
manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the
financial information of the entities or business activities within
the Group to express an opinion on the consolidated financial
statements. We are responsible for the direction, supervision and
performance of the group audit. We remain solely responsible for
our audit opinion.
We communicate with the directors regarding, among other matters,
the planned scope and timing of the audit and significant audit findings,
including any significant deficiencies in internal control that we identify
during our audit.
We also provide the directors with a statement that we have
complied with relevant ethical requirements regarding independence,
and to communicate with them all relationships and other matters
that may reasonably be thought to bear on our independence, and
where applicable, related safeguards.
144
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018 From the matters communicated with the directors, we determine
those matters that were of most significance in the audit of the
consolidated and separate financial statements of the current period
and are therefore the key audit matters. We describe these matters
in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances,
we determine that a matter should not be communicated in our
report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of
such communication.
REPORT ON OTHER LEGAL AND REGULATORY
REQUIREMENTS
In terms of the IRBA Rule published in Government Gazette Number
39475 dated 4 December 2015, we report that Deloitte & Touche
has been the auditor of Pan African Resources Plc for 9 years.
Deloitte & Touche
Registered auditor
Per: P Ndlovu
Partner
18 September 2018
145
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018ANNUAL FINANCIAL STATEMENTS CONSOLIDATED AND SEPARATE
STATEMENT OF FINANCIAL POSITION
as at 30 June 2018
ASSETS
Non-current assets
Property, plant and equipment and mineral rights
Other intangible assets
Deferred taxation
Long-term inventory
Long-term receivables
Goodwill
Investments
Rehabilitation funds
Current assets
Inventories
Receivables from other group companies
Current taxation asset
Trade and other receivables
Current portion of long-term receivables
Financial instruments asset
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
Payable to other group companies
Current taxation liability
Consolidated
Separate
Audited
30 June 2018
GBP
Audited
30 June 2017
GBP
Audited
30 June 2018
GBP
Audited
30 June 2017
GBP
Notes
17
18
31
23
20
19
21
22
23
36
28
24
20
32
25
14
26
40
29
30
31
27
30
36
28
192,828,307
31,620
6,208,839
567,491
1,324,643
21,000,714
3,135,244
20,136,315
245,233,173
2,701,013
–
690,657
14,848,870
949,681
219,598
699,116
20,108,935
–
265,342,108
22,346,875
144,558,953
(42,839,669)
1,661,780
30,011,893
(10,701,093)
(15,589,715)
(10,705,308)
(3,039,968)
115,703,748
115,703,748
15,115,113
86,510,226
14,342,852
115,968,191
27,921,848
5,170,433
–
577,888
33,670,169
224,687,447
72,426
762,503
684,432
2,535,378
21,000,714
7,522,632
18,904,554
276,170,086
5,047,416
–
1,068,496
13,744,108
–
–
9,447,144
29,307,164
5,610,475
311,087,725
22,346,875
145,400,890
(36,902,740)
1,221,395
131,297,799
(10,701,093)
(25,376,743)
(10,705,308)
–
216,581,075
216,581,075
11,655,325
12,290,302
38,947,226
62,892,853
27,056,598
4,145,679
–
48,686
31,250,963
–
–
1,529,395
–
–
–
111,051,385
–
112,580,780
–
72,546,560
75,136
4,849
779,425
–
203,991
73,609,961
–
186,190,741
22,346,875
145,400,890
(16,237,497)
897,658
34,703,733
–
–
1,560,000
(3,039,968)
185,631,691
185,631,691
–
36,062
–
36,062
353,675
169,313
–
–
522,988
–
–
415,692
–
1,474,057
–
126,527,682
–
128,417,431
–
90,816,537
66,479
5,563
–
–
8,009,500
98,898,079
5,247,642
232,563,152
22,346,875
145,400,890
1,159,959
897,658
45,448,827
–
–
1,560,000
–
216,814,209
216,814,209
–
544,680
–
544,680
1,123,317
207,055
13,873,891
–
15,204,263
Liabilities directly associated with non-current assets
held for sale
Total equity and liabilities
–
265,342,108
362,834
311,087,725
–
186,190,741
–
232,563,152
The financial statements of Pan African Resources PLC, registered number 3937466, were approved by the board of directors on 19 September 2018
and signed on its behalf by:
Cobus Loots
Chief executive officer
146
Deon Louw
Financial director
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018
CONSOLIDATED AND SEPARATE
STATEMENT OF PROFIT OR LOSS
AND OTHER COMPREHENSIVE INCOME
for the year ended 30 June 2018
Consolidated
Separate
Audited
30 June 2018
GBP
Re-presented1
Audited
30 June 2017
GBP
Audited
30 June 2018
GBP
Audited
30 June 2017
GBP
108,506,068
–
(2,005,962)
106,500,106
(77,713,040)
(4,929,817)
23,857,249
(4,283,551)
–
–
(8,153,312)
–
(415,010)
11,005,376
1,490,836
(3,143,883)
9,352,329
2,102,761
11,455,090
125,111,338
–
(1,015,504)
124,095,834
(75,443,545)
(5,498,795)
43,153,494
(239,960)
222,571
5,385,915
–
–
(1,112,665)
47,409,355
256,496
(2,802,979)
44,862,872
(4,203,148)
40,659,724
–
579,039
–
579,039
–
–
579,039
(2,378,069)
–
–
–
474,998
–
(1,324,032)
268,206
(5,929)
(1,061,755)
274,600
(787,155)
–
–
–
–
–
–
–
18,348,538
222,571
6,343,387
(6,352,320)
–
–
18,562,176
51,496
(2,575)
18,611,097
408,704
19,019,801
(104,727,605)
(93,272,515)
(22,749,688)
17,910,036
–
(787,155)
–
19,019,801
Notes
4
4
4
5
17, 18
8
21
14
14
14
4, 9
9
10
13
14
21
(3,917,484)
(94,938)
(3,917,484)
(94,938)
877,516
–
–
(222,571)
877,516
–
–
(222,571)
(5,936,929)
(102,249,412)
21,681,108
39,273,635
(17,397,456)
(21,224,579)
7,035,097
25,737,389
(93,272,515)
17,910,036
(787,155)
19,019,801
(102,249,412)
39,273,635
(21,224,579)
25,737,389
15
15
15
15
(5.15)
(5.15)
0.63
0.63
1.14
1.14
2.60
2.60
Continuing operations
Gold revenue
Other revenue
Realisation costs
Net revenue
Gold cost of production
Mining depreciation and amortisation
Mining profit
Other (expenses)/income
Profit on disposal of investment
Profit on disposal of subsidiary
Continuing operations – impairments
Fair value movement on asset held for sale
Royalty costs
Net income/(loss) before finance income
and finance costs
Finance income
Finance costs
Profit/(loss) for the year from continuing operations
Taxation
Profit/(loss) after taxation
Discontinued operations
Loss from discontinued operations
(Loss)/profit for the year
Other comprehensive income (net of taxes)
Items that have been or may subsequently be reclassified
to the statement of profit or loss (net of taxes)
Fair value movement on available-for-sale investment
Taxation on fair value movement on available-for-sale
investment
Profit on disposal of available-for-sale investment
Items that will not be reclassified to the statement
of profit or loss (net of taxes):
Foreign currency translation differences
Total comprehensive (loss)/income for the year
(Loss)/profit attributable to:
Owners of the parent
Total comprehensive (loss)/income attributable to:
Owners of the parent
Earnings per share (pence)
Diluted earnings per share (pence)
Earnings per share for continuing operations (pence)
Diluted earnings per share for continuing operations
(pence)
1 The prior year figures have been re-presented to exclude discontinued operations (refer to note 14).
147
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018ANNUAL FINANCIAL STATEMENTS CONSOLIDATED AND SEPARATE
STATEMENT OF CHANGES IN EQUITY
for the year ended 30 June 2018
Consolidated
Consolidated
Balance at 1 July 2016
Issue of shares
Share issue costs
Profit for the year
Other comprehensive income/(loss)
Dividends paid
Reciprocal dividends – PAR Gold
Share-based payment – charge for the year
Balance at 30 June 2017
Disposal of treasury shares
Loss for the year
Other comprehensive loss
Dividends paid
Reciprocal dividends – PAR Gold
Share-based payment – charge for the year
Balance at 30 June 2018
Balance at 1 July 2016
Issue of shares
Share issue costs
Profit for the year
Other comprehensive income/(loss)
Dividends paid
Balance at 30 June 2017
Loss for the year
Other comprehensive loss
Dividends paid
Balance at 30 June 2018
Share
capital
GBP
19,432,065
2,914,810
–
–
–
–
–
–
22,346,875
–
–
–
–
–
–
22,346,875
Share
capital
GBP
19,432,065
2,914,810
–
–
–
–
22,346,875
–
–
–
22,346,875
Share
premium
GBP
108,936,082
37,892,528
(1,427,720)
–
–
–
–
–
145,400,890
(841,937)
–
–
–
–
–
144,558,953
Translation
reserve1
GBP
(58,583,848)
–
–
–
21,681,108
–
–
–
(36,902,740)
–
–
(5,936,929)
–
–
–
(42,839,669)
Company
Share
premium
GBP
108,936,082
37,892,528
(1,427,720)
–
–
–
145,400,890
–
–
–
145,400,890
Translation
reserve1
GBP
(5,875,138)
–
–
–
7,035,097
–
1,159,959
–
(17,397,456)
–
(16,237,497)
Share
option
reserve
GBP
1,035,888
–
–
–
–
–
–
185,507
1,221,395
–
–
–
–
–
440,385
1,661,780
Share
option
reserve
GBP
897,658
–
–
–
–
–
897,658
–
–
–
897,658
1 Translation reserve comprises all foreign exchange differences arising from the translation of the financial results from the group’s functional currency (ZAR) to the
group’s presentational currency (GBP).
2 Merger reserve was created through the historical reverse acquisition of Barberton Mines in July 2007.
3 Other reserves comprises unrealised gains or losses recognised in other comprehensive income/(loss) when available-for-sale financial assets are subsequently
measured at fair value.
4 Realisation of equity reserve was created in June 2009 through the acquisition of PAR Gold’s 26% shareholding in Barberton Mines in exchange for the issue of
new ordinary shares in Pan African Resources PLC to PAR Gold.
5 Treasury capital reserve was created on 6 June 2016 and comprises Funding Company’s investment in PAR Gold. PAR Gold’s investment in Pan African Resources’
shares eliminates on consolidation therefore reducing the group equity and the weighted average number of shares in issue (refer to note 40).
148
Retained
earnings
GBP
Realisation
of equity
reserve4
GBP
Treasury
capital
reserve5
GBP
Merger
reserve2
GBP
Other
reserves3
GBP
126,620,650
(10,701,093)
(25,376,743)
(10,705,308)
317,509
150,975,202
131,297,799
(10,701,093)
(25,376,743)
(10,705,308)
9,787,028
30,011,893
(10,701,093)
(15,589,715)
(10,705,308)
(3,039,968)
115,703,748
Company
Realisation
of equity
reserve
GBP
Treasury
capital
reserve
GBP
Merger
reserve2
GBP
Other
reserves3
GBP
Total
GBP
40,807,338
(1,427,720)
17,910,036
21,363,599
(17,067,953)
3,835,066
185,507
216,581,075
8,945,091
(93,272,515)
(8,976,897)
(9,957,939)
1,944,548
440,385
Total
GBP
40,807,338
(1,427,720)
19,019,801
6,717,588
(317,509)
(3,039,968)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,560,000
317,509
168,765,155
1,560,000
(317,509)
–
(17,067,953)
216,814,209
(787,155)
(3,039,968)
(20,437,424)
–
(9,957,939)
1,560,000
(3,039,968)
185,631,691
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
17,910,036
(17,067,953)
3,835,066
(93,272,515)
(9,957,939)
1,944,548
Retained
earnings
GBP
43,496,979
–
19,019,801
(17,067,953)
45,448,827
(787,155)
(9,957,939)
34,703,733
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018 Consolidated
Consolidated
Balance at 1 July 2016
Issue of shares
Share issue costs
Profit for the year
Other comprehensive income/(loss)
Dividends paid
Reciprocal dividends – PAR Gold
Share-based payment – charge for the year
Balance at 30 June 2017
Disposal of treasury shares
Loss for the year
Other comprehensive loss
Dividends paid
Reciprocal dividends – PAR Gold
Share-based payment – charge for the year
Balance at 30 June 2018
Other comprehensive income/(loss)
Balance at 1 July 2016
Issue of shares
Share issue costs
Profit for the year
Dividends paid
Balance at 30 June 2017
Loss for the year
Other comprehensive loss
Dividends paid
Balance at 30 June 2018
Share
capital
GBP
Share
premium
GBP
Translation
reserve1
GBP
19,432,065
108,936,082
(58,583,848)
1,035,888
2,914,810
37,892,528
(1,427,720)
21,681,108
(5,936,929)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
7,035,097
(17,397,456)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
22,346,875
145,400,890
(36,902,740)
1,221,395
(841,937)
22,346,875
144,558,953
(42,839,669)
Company
Share
capital
GBP
Share
premium
GBP
Translation
reserve1
GBP
19,432,065
108,936,082
(5,875,138)
897,658
2,914,810
37,892,528
(1,427,720)
22,346,875
145,400,890
1,159,959
897,658
Share
option
reserve
GBP
185,507
440,385
1,661,780
Share
option
reserve
GBP
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
22,346,875
145,400,890
(16,237,497)
897,658
1 Translation reserve comprises all foreign exchange differences arising from the translation of the financial results from the group’s functional currency (ZAR) to the
group’s presentational currency (GBP).
2 Merger reserve was created through the historical reverse acquisition of Barberton Mines in July 2007.
3 Other reserves comprises unrealised gains or losses recognised in other comprehensive income/(loss) when available-for-sale financial assets are subsequently
measured at fair value.
4 Realisation of equity reserve was created in June 2009 through the acquisition of PAR Gold’s 26% shareholding in Barberton Mines in exchange for the issue of
new ordinary shares in Pan African Resources PLC to PAR Gold.
5 Treasury capital reserve was created on 6 June 2016 and comprises Funding Company’s investment in PAR Gold. PAR Gold’s investment in Pan African Resources’
shares eliminates on consolidation therefore reducing the group equity and the weighted average number of shares in issue (refer to note 40).
Retained
earnings
GBP
126,620,650
–
–
17,910,036
–
(17,067,953)
3,835,066
–
131,297,799
–
(93,272,515)
–
(9,957,939)
1,944,548
–
30,011,893
Retained
earnings
GBP
43,496,979
–
–
19,019,801
–
(17,067,953)
45,448,827
(787,155)
–
(9,957,939)
34,703,733
Realisation
of equity
reserve4
GBP
(10,701,093)
–
–
–
–
–
–
–
(10,701,093)
–
–
–
–
–
–
(10,701,093)
Treasury
capital
reserve5
GBP
(25,376,743)
–
–
–
–
–
–
–
(25,376,743)
9,787,028
–
–
–
–
–
(15,589,715)
Merger
reserve2
GBP
(10,705,308)
–
–
–
–
–
–
–
(10,705,308)
–
–
–
–
–
–
(10,705,308)
Company
Realisation
of equity
reserve
GBP
Treasury
capital
reserve
GBP
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Merger
reserve2
GBP
1,560,000
–
–
–
–
–
1,560,000
–
–
–
1,560,000
Other
reserves3
GBP
317,509
–
–
–
(317,509)
–
–
–
–
–
–
(3,039,968)
–
–
–
(3,039,968)
Other
reserves3
GBP
317,509
–
–
–
(317,509)
–
–
–
(3,039,968)
–
(3,039,968)
Total
GBP
150,975,202
40,807,338
(1,427,720)
17,910,036
21,363,599
(17,067,953)
3,835,066
185,507
216,581,075
8,945,091
(93,272,515)
(8,976,897)
(9,957,939)
1,944,548
440,385
115,703,748
Total
GBP
168,765,155
40,807,338
(1,427,720)
19,019,801
6,717,588
(17,067,953)
216,814,209
(787,155)
(20,437,424)
(9,957,939)
185,631,691
149
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018ANNUAL FINANCIAL STATEMENTS CONSOLIDATED AND SEPARATE
STATEMENT OF CASH FLOWS
for the year ended 30 June 2018
Net cash (used in)/generated from operating activities
before dividends
Dividends paid net of PAR Gold reciprocal dividend
Net cash (used in)/generated from operating activities
Investing activities
Additions to property, plant and equipment and
mineral rights
Additions to other intangible assets
Increase in long-term loans receivable
Rehabilitation funds contributions
Increase in loans to subsidiaries
Proceeds from disposal of investment
Proceeds from disposals of property, plant and equipment
and mineral rights
Proceeds from disposal of subsidiary, net of cash
Net cash (used in)/generated from investing activities
Financing activities
Proceeds from borrowings
Borrowings repaid
Proceeds/(settlement) of financial instruments
(Decrease)/increase in loans from subsidiaries
Proceeds from diposal of treasury shares
Shares issued
Share issue costs
Net cash generated from/(used in) financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents of discontinued operations
Effect of foreign exchange rate changes
Cash and cash equivalents at the end of the year
Notes
38
18
22
14, 21
30
30
32
25
Consolidated
Separate
Audited
30 June 2018
GBP
Re-presented1
Audited
30 June 2017
GBP
Audited
30 June 2018
GBP
Audited
30 June 2017
GBP
(3,200,375)
(8,231,456)
(11,431,831)
16,501,184
(13,290,429)
3,210,755
(1,071,302)
(10,228,822)
(11,300,124)
21,092,958
(17,142,171)
3,950,787
(92,730,150)
(17,318)
(385,160)
(1,542,526)
–
4,788,036
880
–
(89,886,238)
89,986,064
(5,836,226)
924,712
–
8,945,091
–
–
94,019,641
(7,298,428)
9,447,144
–
(1,449,600)
699,116
(35,518,177)
(22,817)
(1,207,492)
–
–
1,381,005
396,604
6,586,262
(28,384,615)
47,750,265
(53,964,004)
(1,389,720)
–
–
40,807,338
(1,427,720)
31,776,159
6,602,299
2,658,947
(51,903)
237,801
9,447,144
–
–
–
–
–
4,788,036
–
–
4,788,036
–
–
–
(652,082)
–
–
–
(652,082)
(7,164,170)
8,009,500
–
(641,339)
203,991
–
–
–
–
(46,741,979)
1,381,005
–
6,586,262
(38,774,712)
–
(1,111,484)
–
4,410,628
–
40,807,338
(1,427,720)
42,678,762
7,854,837
77,660
–
77,003
8,009,500
1 The cash-settled share option costs have been re-presented in net cash (used in)/generated from operating activities from net cash generated from/(used in)
financing activities in the current and prior reporting period.
150
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018 NOTES TO THE CONSOLIDATED AND SEPARATE
ANNUAL FINANCIAL STATEMENTS
for the year ended 30 June 2018
in England and Wales under
1. GENERAL INFORMATION
Pan African Resources is a company incorporated in the United
Kingdom and registered
the
UK Companies Act 2006. The company’s functional currency is ZAR.
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 commodity mining and exploration activities. The consolidated and
separate financial statements are presented in pounds sterling as the
company is incorporated in the United Kingdom and registered in
England and Wales. Foreign operations are included in accordance
with the policies set out below. The individual financial results of each
group company are maintained in their functional currencies, which
are determined by reference to the primary economic environment
in which it operates.
For the consolidated financial statements, the results and financial
position of each group company is expressed in pounds sterling.
The consolidated and separate financial statements have been
prepared on the going concern basis.
The consolidated and separate financial 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 financial statements.
2. ACCOUNTING POLICIES
Basis of preparation and general information
The consolidated and separate financial statements have been
prepared under the historical cost basis, except for certain financial
instruments which are stated at fair value. The principal accounting
policies are set out below and are consistent in all material respects
with those applied in the previous year, except where otherwise
indicated.
Going concern
The group closely monitors and manages its liquidity risk by means of
a centralised treasury function. Cash forecasts are regularly produced
and sensitivities run for different scenarios including, but not limited
to, changes in commodity prices and different production profiles
from the group’s producing assets. The group had R485 million of
available debt facilities and R12.5 million of cash and cash equivalents
at 30 June 2018. Based on the current status of the group’s finances,
having considered going concern forecasts and reasonably possible
downside scenarios, including a ZAR gold price of R525,000/kg
(USD1,270/oz at a prevailing ZAR:USD average exchange rate
ZAR12.86:1), and reduced production volumes, the group’s forecasts
demonstrate it will have sufficient liquidity headroom to meet its
obligations in the ordinary course of business, and will comply with
financial covenants for the 12 months from the date of approval of
the financial statements.
The board has a reasonable expectation that the company has
adequate resources to continue in operational existence for the
foreseeable future. Accordingly, the group continues to adopt the
going concern basis of accounting in preparation of the 30 June 2018
financial statements.
New and revised IFRS not yet adopted
The group applies all applicable IFRS in preparation of the
consolidated and separate financial statements. Consequently, all IFRS
statements adopted by the EU and South Africa that were effective
at 30 June 2018 and are relevant to its operations have been applied.
At the date of authorisation of these consolidated and separate financial statements, the following standards, which have been applied in these
consolidated and separate financial statements for the first time, were in issue and effective as at 30 June 2018.
Standard
Amendment
Effective date
IFRS 12: Disclosure of Interests in Other Entities
Amendments resulting from 2014 – 2016 Annual
Improvements Cycle
Annual periods beginning on
or after 1 January 2017
IAS 7: Cash Flow Statement
Amendments as result of the Disclosure initiative
Annual periods beginning on
or after 1 January 2017
IAS 12: Income Taxes
IFRS 4: Insurance Contracts
Amendments regarding the recognition of deferred
taxation assets for unrealised losses
Annual periods beginning on
or after 1 January 2017
Amendment applying IFRS 9: Financial Instruments with
IFRS 4: Insurance Contracts
Annual periods beginning on
or after 1 January 2017
151
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018ANNUAL FINANCIAL STATEMENTS At the date of authorisation of these consolidated and separate financial statements the following standards and interpretations, which have not
been applicable in these consolidated and separate financial statements, were in issue and not yet effective at 30 June 2018.
Effective date
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 2018
Standard
Amendment
IFRS 1: First-time Adoption of International
Financial Reporting Standards
Amendments resulting from 2014 – 2016 Annual
Improvements Cycle
IFRS 2: Share-based Payment
IFRS 9: Financial Instruments
IFRS 9: Financial Instruments
IFRS 10: Consolidated Financial Statements
IFRS 15: Revenue from Contracts with
Customers
IFRS 15: Revenue from Contracts with
Customers
IFRS 16: Leases
IFRIC 22: Foreign Currency Transactions and
Advance Consideration
IFRIC 23: Uncertainty over Income Tax
Treatment
Amendment classification and measurement of share-
based payment transactions
Re-issue of a complete standard with all the chapters
incorporated
Amendments regarding prepayment features with negative
compensation and modifications of financial liabilities
Annual periods beginning
on or after 1 January 2019
Amendments on sale or contribution of assets between an
investor and its associate or joint venture
Deferred indefinitely
Amendment to defer the effective date to 1 January 2018
Clarifications to IFRS 15
Original issue
Original issue
Original issue
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 2018
Annual periods beginning
on or after 1 January 2019
The impact of the adoption of IFRS 9: Financial Instruments and
IFRS 15: Revenue from Contracts with Customers, both of which
become effective for the group for the year ended June 2019, have
been assessed. The effect of applying these standards will not have an
impact on the financial results of the group.
IFRS 16: Leases was published in January 2016 and will be effective
for the group for the year ended June 2020, replacing IAS 17: Leases.
The principal impact of IFRS 16 will be to change the accounting
treatment by lessees of leases currently classified as operating leases.
Lease arrangements will give rise to the recognition by the lessee of
an asset, representing the right to use the leased item, and a related
liability for future lease payments. Lease costs will be recognised in
the statement of profit and loss in the form of depreciation of the
right-of-use asset over the lease term, and finance charges which
represents the unwinding of the discount on the lease liability.
During 2018, the group has embarked on an IFRS 16 implementation
project, focusing on the review of contracts and the aggregation of
data to support the evaluation of the accounting impacts of applying
the new standard.
Consequently, on adoption of IFRS 16 it is expected that there will be
a material increase in lease liabilities representing the present value of
future payments under arrangements currently classified as operating
leases, along with a corresponding increase in property, plant and
equipment right-of-use asset. Information on the group’s operating
lease commitments is disclosed in note 7 Operating leases.
The impact of other standards and interpretations, in issue and not yet
effective still needs to be considered.
Basis of consolidation
The consolidated financial statements incorporate the financial
statements of the company and entities controlled by the company
(its subsidiaries) to 30 June each year. Control is achieved where
the company has the power to govern the financial and operating
policies of an investee enterprise to obtain benefits from its activities.
The results of the subsidiaries acquired or disposed of during the
year are included in the consolidated statement of profit and loss and
other comprehensive income from the effective date of acquisition
or up to the effective date of disposal, as appropriate. Inter-company
transactions and balances between group entities are eliminated on
consolidation.
Business combinations
Acquisitions of subsidiaries and businesses are accounted for using the
purchase method. The cost of a business combination is measured as
the aggregate of the fair values (at the date of exchange) of assets
given, liabilities incurred or assumed, and equity instruments issued
by the group in exchange for control of the acquiree. The acquiree’s
identifiable assets, liabilities and contingent liabilities that meet the
conditions for recognition under IFRS 3: Business Combinations are
recognised at their fair values at the acquisition date, except for non-
current assets (or disposal groups) that are classified as held for sale
in accordance with IFRS 5: Non-current Assets Held for Sale and
Discontinued Operations, which are recognised and measured at fair
value less costs to sell.
Goodwill arising on acquisitions is recognised as an asset, and initially
measured at cost, being the excess of the cost of the business
combination over the group’s interest in the net fair value of the
152
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018NOTES TO THE CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS continuedfor the year ended 30 June 2018 identifiable assets, liabilities and contingent liabilities recognised. If, after
reassessment, the group’s interest in the net fair value of the acquiree’s
identifiable assets, liabilities and contingent liabilities exceeds the cost
of the business combination, the excess is recognised immediately in
profit or loss.
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.
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 define 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 amortisation.
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 profit or loss.
Depreciation
Mining assets, mineral and surface rights mining assets, mine
development costs, mineral and surface rights and plant mine facilities
are depreciated over the estimated life-of-mine to their residual values
using the units-of-production method based on estimated, proven and
probable Mineral Reserves.
Other mining plant and equipment are depreciated on the straight-
line basis to their residual values 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 sufficient resources to complete development
• can demonstrate will generate future economic benefits.
Capitalised pre-production expenditure is assessed for impairment in
accordance with the group accounting policy stated below.
Impairment (except for goodwill)
At each statement of financial position date, the group reviews the
carrying amounts of its tangible and intangible assets to determine
whether there is any indication that those assets have suffered an
impairment loss. If any such indication exists, the recoverable amount
of the asset, being the higher of fair value less costs to sell or value
in use, is estimated 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 CGU to which the asset belongs. Impairment losses are
immediately recognised as an expense. A reversal of an impairment
loss is recognised in the statement of comprehensive income.
Goodwill
Goodwill arising on consolidation represents the excess of the cost of
acquisition over the group’s interest in the fair value of the identifiable
assets and liabilities of a subsidiary, associate or jointly controlled
entity at the date of acquisition. Goodwill is initially recognised as an
asset at cost and is subsequently measured at cost less accumulated
impairment losses.
For impairment testing, goodwill is allocated to each of the group’s
CGUs expected to benefit from the synergies of the combination.
CGUs to which goodwill has been allocated are tested for impairment
annually, or more frequently when there is an indication that the CGU
may be impaired. If the recoverable amount of the CGU is less than
the carrying amount of the CGU, the impairment loss is allocated
first to reduce the carrying amount of any goodwill allocated to
the unit and then to the other assets of the CGU, pro rata based
on 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, the attributable amount of goodwill is
included in the determination of the profit or loss on disposal.
Taxation
The charge for current taxation is based on the results for the year
as adjusted for items which are non-deductible or disallowed. It is
calculated using taxation rates that have been enacted or substantively
enacted by the statement of financial position date.
Deferred taxation is accounted for using the liability method in
respect of temporary differences arising from differences between
the carrying amount of assets and liabilities in the financial statements
and the corresponding taxation basis used in the computation of
taxable profit. In principle, deferred taxation liabilities are recognised
for all taxable temporary differences, and deferred taxation assets
are recognised to the extent that it is probable that taxable profit
will be available against which deductible temporary differences can
be utilised.
153
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018ANNUAL FINANCIAL STATEMENTS 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 taxation nor accounting profit.
Deferred taxation is calculated at the taxation rates that are expected
to apply to the period when the asset is realised, or the liability is
settled, based on taxation rates (and laws) that have been enacted
or substantively enacted by the statement of financial position date.
The measurement of deferred taxation liabilities and assets reflects
the taxation 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 taxation
is charged or credited to the statement of profit or loss and other
comprehensive income, except when it relates to items credited or
charged directly to equity, in which case the deferred taxation is also
recorded within equity, or where they arise from the initial accounting
for a business combination. In a business combination, the taxation
effect is considered in calculating goodwill or in determining the
excess of the acquirer’s interest in the net fair value of the acquiree’s
identifiable assets, liabilities and contingent liabilities over the cost of
the business combination.
The carrying amounts of deferred taxation assets are reviewed at
each statement of financial position date and reduced to the extent
that it is no longer probable that sufficient taxable profits will be
available to allow all or parts of the assets to be recovered.
Revenues, expenses and assets are recognised net of the amount
of associated VAT, unless VAT incurred is not recoverable from the
taxation authority. In this case it is recognised as part of the cost
of acquisition of the asset or as part of the expense. Receivables
and payables are stated inclusive of the amount of VAT receivable
or payable. The net amount of VAT recoverable from, or payable to,
the taxation authority is included with other receivables or payables
in the consolidated statement of financial position.
Provisions
Provisions are recognised when the group has a legal or constructive
obligation resulting from past events, it is probable that an outflow
of resources embodying economic benefits will be required to settle
the obligation and a reliable estimate can be made of the amount of
the obligation.
The amount recognised as a provision is the best estimate of the
consideration required to settle the present obligation at the
statement of financial position date, considering the risks and
uncertainties surrounding the obligation.
When some or all of the economic benefits required to settle a
provision are expected to be received from a third party, the receivable
is recognised as an asset if it is virtually certain that reimbursement
will be received, and the amount of the receivable can be measured
reliably.
Provision for environmental rehabilitation costs
Long-term environmental obligations are based on the mining
operations’ environmental plans,
in compliance with current
environmental and regulatory requirements. The provision is based
on the net present value of the estimated cost of restoring the
environmental disturbance that has occurred up to the statement
of financial position date. Increases due to additional environmental
disturbances are capitalised and amortised over the remaining lives
of the mines. The estimated cost of rehabilitation is reviewed annually
and adjusted as appropriate for changes in legislation or technology.
Cost estimates are not reduced by the potential proceeds from the
sale of assets or from plant clean-up at closure.
Provision for decommissioning costs
The group provides for the present value of 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 significant changes to the plan are
unlikely, and the directors have raised a valid expectation in those
affected that it will carry out the closure by starting to implement that
plan or announcing its main features to those affected by it.
These estimates are reviewed at least annually and changes in the
measurement of the provision that result from subsequent changes
in the estimated timing or amount of cash flows, or change in
discount rate, are added back to, or deducted from the cost of the
related asset in the current period. Movements in the provision for
decommissioning costs are recognised immediately in the income
statement through profit and loss.
Leased assets
The group leases certain property, plant and equipment. A lease is
classified as a finance lease if it transfers to the group substantially all
the risks and rewards incidental to ownership to the group. Other
leases are classified as operating leases.
Finance lease assets are capitalised at the lease’s commencement at
the lower of the fair value of the leased property and the present
value of the minimum lease payments.
Operating leases
Operating lease payments are recognised as an expense on a straight-
line basis over the lease term. The difference between the amounts
recognised as an expense and the contractual payments 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,
except for 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.
Monetary assets and liabilities denominated in such other currencies
are translated at the functional currency spot rates of exchange ruling
at reporting date. Differences arising on settlement or translation of
monetary items are recognised in profit or loss.
154
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018NOTES TO THE CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS continuedfor the year ended 30 June 2018 Non-monetary items are measured in terms of historical cost in a
foreign currency and are translated using the exchange rates at the
dates of the initial transactions.
On consolidation, the group’s assets and liabilities are translated
into GBP, the presentational currency of the group, at the rate of
exchange prevailing at the reporting date. The statement of profit or
loss and other comprehensive income is translated at the exchange
rate prevailing at the date of the significant transaction or the average
rate for the period. The exchange differences arising on translation
for consolidation are recognised in other comprehensive income
(OCI) as income or expenses in the period in which the operation
is disposed of.
To hedge its exposure to foreign exchange risks, the group may
enter into forward contracts. Translation differences on foreign loans
to subsidiaries are recognised in other comprehensive income and
accumulated equity.
Inventories
Inventories include the commodities in their produced or concentrate
form on hand and consumable stores.
The commodities 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.
Commodities in process inventories represent materials that are
currently in the process of being converted to saleable commodities
products. The commodities 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
identified and are written down to their economic or realisable values.
Retirement and pension benefits
Payments to defined contribution retirement benefit plans are
charged as an expense as they fall due. Payments made to state-
managed schemes are dealt with as defined contribution plans where
the group’s obligations under the schemes are equivalent to those
arising in a defined contribution retirement benefit plan and are
charged as an expense as they fall due.
Post-retirement benefits other than pension
Historically Barberton Mines and Evander Mines provided retirement
benefits by way of medical aid scheme contributions for certain
employees. The practice has been discontinued for some years. The
net present value of estimated future costs of company contributions
towards medical aid schemes for these retirees is recorded as a
provision on the group statement of financial position. The provision
is reviewed annually with movements in the provision recorded in the
statement of comprehensive income.
Equity participation plan
Equity-settled share-based payments to employees are measured at
the fair value of the equity instruments at the grant date. The fair
value determined at the grant date of the equity-settled share-
based payments is expensed on a straight-line basis over the vesting
period, based on the group’s estimate of equity instruments that will
eventually vest. At each statement of financial position date, the group
revises its estimate of the number of equity instruments expected
to vest. The impact of the revision of the original estimates, if any, is
recognised in the statement of comprehensive income such that the
cumulative expense reflects the revised estimate, with corresponding
adjustments to the equity-settled employee benefits reserve.
Cash participation plan
Cash-settled share-based payments to employees are measured at
the fair value of the cash instruments at the grant date. The fair value
determined at the grant date of the cash-settled share-based payments
is expensed on a straight-line basis over the vesting period, based on
the company’s estimate of cash instruments that will eventually vest.
At each statement of financial position date, the company revises
its estimate of the number of cash instruments expected to vest.
The impact of the revision of the original estimates, if any, is recognised
in the statement of comprehensive income such that the cumulative
expense reflects the revised estimate, with corresponding adjustments
to the cash-settled employee benefits liability.
Contributions to rehabilitation fund
Contributions are made to a dedicated environmental rehabilitation
fund to provide for the estimated cost of rehabilitation during and
at the end of the life of the group’s mines. The fund’s assets are
recognised separately on the statement of financial position as non-
current assets at fair value. Interest earned on the rehabilitation fund
is accrued on a time proportion basis and credited to the provision
for environmental rehabilitation costs. Movements, other than cash
contributions or deductions, in the rehabilitation fund are recognised
immediately in the income statement through profit and loss.
Revenue recognition
Sales represents the value of commodities sold, excluding value added
taxation, and is recognised when the significant risks and rewards of
ownership have passed to the buyer, usually on delivery of goods.
Revenue from the sale of commodities is measured at the fair value of
the consideration received or receivable.
Interest income is accrued on a time basis, by reference to the principal
outstanding and at the interest rates applicable, which is the rate that
exactly discounts estimated future cash receipts through the expected
life of the financial asset to that asset’s net carrying amount. Dividend
income from investments is recognised when the shareholders’ rights
to receive payment have been established. Revenue is recognised
when the buyer takes title, provided that:
•
• the item is on hand, identified and ready for delivery to the buyer
it is probable that delivery will be made
at the time the sale is recognised
• the buyer specifically acknowledges the deferred delivery
instructions
• the usual payment terms apply.
155
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018ANNUAL FINANCIAL STATEMENTS Loans and receivables
Trade receivables, loans and other receivables that have fixed or
determinable payments and that are not quoted in an active market
are classed as loans and receivables. Loans and receivables are
measured at amortised cost using the effective interest method, less
impairment if necessary. Interest income is recognised by applying the
effective interest rate, except for short-term receivables, when the
recognition of interest would be immaterial.
Available-for-sale financial assets
Available-for-sale financial assets include equity investments. Equity
investments classified as available-for-sale are those that are neither
classified as held for trading nor designated at fair value through profit
and loss.
After initial measurement available-for-sale financial assets are
subsequently measured at fair value with unrealised gains or losses
recognised in other comprehensive income and credited in the
other reserve until the investment is derecognised, at which time the
cumulative gain or loss is recognised in the statement of profit or loss
or the investment is determined to be impaired, when the cumulative
loss is reclassified from the other reserve to the statement of profit
or loss.
Impairment of financial assets
Financial assets, other than those at fair value through profit and loss
(FVTPL), are assessed for indicators of impairment at each statement
of financial position date. Financial assets are impaired where there is
objective evidence that, because of one or more events that occurred
after the initial recognition of the financial asset, the estimated future
cash flows of the financial asset have been negatively impacted.
Derecognition of financial assets
The group derecognises a financial asset only when the contractual
rights to the cash flows from the asset expire, or when it transfers the
financial asset and substantially all the risks and rewards of 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 financial asset, the group continues to recognise
the financial asset and recognises a collateralised borrowing for the
proceeds received.
Financial liabilities and equity instruments
issued by the group
Classification as debt or equity
Debt and equity instruments are classified as either financial liabilities
or as equity in accordance with the substance of the contractual
arrangement.
Financial liabilities
Financial liabilities are classified as either financial liabilities at FVTPL or
‘other financial liabilities’.
Financial liabilities at fair value through profit and loss
Financial liabilities are classified as at FVTPL where the financial liability
is either held for trading or it is designated as at FVTPL.
A financial liability is classified as held for trading if:
•
•
it has been incurred principally for repurchasing in the near future
it is part of an identified portfolio of financial instruments that the
group manages together and has a recent actual pattern of short-
term profit-taking
it is a derivative that is not designated and effective as a hedging
instrument.
•
A financial liability other than a financial liability held for trading may
be designated as at FVTPL upon initial recognition if:
• such designation eliminates or significantly reduces a measurement
or recognition inconsistency that would otherwise arise
• the financial liability forms part of a group of financial assets or
financial liabilities or both, which is managed, and its performance
is evaluated on a fair value basis, in accordance with the group’s
documented risk management or investment strategy, and
information about the grouping is provided internally on that basis
it forms part of a contract containing one or more embedded
derivatives, and IAS 39: Financial Instruments: Recognition and
Measurement permits the entire combined contract (asset or
liability) to be designated as at FVTPL.
•
Financial liabilities at FVTPL are stated at fair value, with any resultant
gain or loss recognised in profit or loss. The net gain or loss recognised
in profit or loss incorporates any interest paid on the financial liability.
Other financial liabilities
Other financial liabilities are initially valued at fair value and
subsequently measured at amortised cost using the effective interest
method, with interest recognised on an effective yield basis.
The effective interest method is a method of calculating the amortised
cost of a financial liability and of allocating interest expense over the
relevant period. The effective interest rate is the rate that discounts
the estimated future cash payments through the expected life of the
financial liability or, where appropriate, a shorter period.
Derecognition of financial liabilities
The group derecognises financial liabilities only when the group’s
obligations are discharged, cancelled or they expire.
Derivative financial instruments
In the ordinary course of its operations, the group may enter into
a variety of derivative financial instruments to manage its exposure
to commodity prices, volatility of interest rates and foreign exchange
rate risk.
Equity instruments
An equity instrument is any contract that evidences a residual
interest in the assets of an entity after deducting all its liabilities.
Equity instruments issued by the group are recorded at the proceeds
received, net of direct issue costs.
Derivatives are initially recognised at cost at the date a derivative
contract is entered into and are subsequently remeasured to their
fair value at each statement of financial position date. The resulting
gain or loss is recognised in the statement of profit and loss and
other comprehensive income immediately unless the derivative
156
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018NOTES TO THE CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS continuedfor the year ended 30 June 2018 is designated and effective as a hedging instrument, in which event
the timing of the recognition in the statement of profit and loss and
other 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.
Fair value measurement
The assessment of fair value is principally used in accounting for
business combinations, impairment testing and the valuation of
certain financial 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 flow 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
flows are used, the resulting fair value measurements are considered to
be at level 3 in the fair value hierarchy as defined in IFRS 13: Fair Value
Measurement as they depend to a significant extent on unobservable
valuation inputs. The determination of assumptions used in assessing
the fair value of identifiable assets and liabilities is subjective and the
use of different valuation assumptions could have a significant impact
on financial results. In particular, expected future cash flows, which are
used in discounted cash flow models, are inherently uncertain and
could materially change over time. They are significantly affected by
several factors including Mineral 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
insignificant risk of changes in value.
Segment reporting
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision-maker.
The chief operating decision-maker, who is responsible for allocating
resources and assessing performance of the operating segments, has
been identified as the Pan African Resources’ Exco. Management
has determined the operating segments of the group based on
the reports reviewed by the Exco 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 commodities.
Non-current assets held for sale and
discontinued operations
The group classifies assets and disposal groups as held for sale if the
carrying amount will be recovered principally through a sale rather
than continuing use. Such assets and disposal groups classified as
held for sale are measured at the lower of their carrying amount
and fair value less cost to sell. Cost to sell are incremental costs
directly attributable to the sale excluding finance costs and income
taxation expense.
The criteria for held for sale classification are regarded as met only
when the sale is highly probable, and the asset or disposal group is
available for immediate sale in its present condition. Actions required
to complete the sale should indicate that it is unlikely that significant
changes to the sale will be made. Management must be committed
to the sale, expected to be finalised within one year from the date of
classification.
Property, plant and equipment and intangible assets are not
depreciated or amortised once classified as held for sale.
Assets and liabilities classified as held for sale are presented separately
as current items in the statement of financial position.
A disposal group qualifies as a discontinued operation if it is a
component of an entity that either has been disposed of, or is
classified as held for sale and:
• represents a separate major line of business or geographical area
of operations
is part of a single coordinated plan to dispose of a separate major
line of business or geographical area of operations
is a subsidiary acquired exclusively with a view of resale.
•
•
Discontinued operations are excluded from the results of continuing
operations and are presented as a single amount as profit or loss after
taxation from discontinued operations in the statement of profit or
loss and other comprehensive income.
Additional disclosures are provided in note 14. All other notes to
the financial statements include amounts from continuing operations,
unless otherwise mentioned.
3. CRITICAL ACCOUNTING ESTIMATES AND
JUDGEMENTS
In the application of the group’s accounting policies, which are
described in note 2, the directors are required to make certain
judgements, estimates and assumptions that are not readily apparent
from other sources that may materially affect the carrying amounts
of assets and liabilities, the reported 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.
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in the
period in which the estimate is revised if the revision affects only
that period, or in the period of the revision and future periods if the
revision affects both current and future periods.
Critical accounting judgements in applying the
group’s accounting policies
The following are the critical judgements, apart from those involving
estimations (which are dealt with separately below), that the directors
have made in the process of applying the group’s accounting policies
and that have the most significant effect on the amounts recognised
in financial statements.
157
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018ANNUAL FINANCIAL STATEMENTS Impairment of assets
The allocation of CGUs within the group for the purpose of the
impairment assessment requires judgement.
In the 2018 financial year the CGUs were allocated as follows:
• Barberton Mines’ underground operations: Underground
operations (Fairview, Sheba and Consort) are reliant on the
Fairview BIOX® plant for processing; these operations have been
classified as a single CGU
• BTRP: The BTRP has the ability to treat and smelt gold
independently of the Fairview BIOX® plant and is independent of
the underground operations resulting in the BTRP being classified
as a single CGU
• Egoli Project: A drilling programme and a feasibility study were
completed in September and November 2017 respectively.
This project is independent of Evander Mines’ 8 Shaft and Kinross
plant infrastructure resulting in the Egoli Project being classified as
a single CGU
• Elikhulu: Has been constructed in a manner such that it is
independent of Evander Mines’ underground operations resulting
in the Elikhulu being classified as a single CGU
• Evander Mines’ large-scale underground operations: Includes
7 Shaft, 8 Shaft and the run-of-mine circuit in the Kinross
metallurgical plant, which are independent of Elikhulu and the Egoli
Project resulting in being classified as a single CGU.
Discontinued operation
Due to the cessation of mining at Evander Mines’ large-scale
underground operations, which includes 8 Shaft, 7 Shaft and the run-
of-mine circuit in the Kinross metallurgical plant, the financial results
from the Evander Mines’ large-scale underground operations were
classified as a discontinued operation in the current and prior year
comparatives. Judgement was required in determining the allocation
of the financial results between Evander Mines’ continuing and
discontinued operations.
Management has performed an assessment to ensure that the Evander
Mines’ large-scale underground operations meet the requirements to
be classified as a discontinued operation and the financial results have
been appropriately allocated at year-end.
Please refer to note 14 for disclosure in relation to discontinued
operations.
Other significant sources of estimation
uncertainty
There are no assumptions concerning the future, or other key sources
of estimation uncertainty at the reporting period, that have a significant
risk of causing a material adjustment to the carrying amounts of assets
and liabilities within the next financial year, however the following are
areas of significant estimation:
Impairment of assets
Mining operations require significant technical and financial resources
to operate. Their value may be sensitive to a range of characteristics
unique to each asset and key sources of estimation uncertainty include
Ore Reserve estimates and cash flow projections.
In performing impairment reviews, the group assesses the recoverable
amount of its operating assets principally with reference to fair value
less costs of disposal, assessed using value-in-use discounted cash
flow models. Management estimates the expected cash flows and the
discount rates (including future production levels, commodity price
and costs) associated to the assets or CGU. There is judgement in
determining the assumptions that are considered to be reasonable and
consistent with those that would be applied by market participants
as outlined above.
Cash flow projections are based on financial budgets and life-of-mine
plans incorporating key assumptions as detailed below:
• Mineral Reserves and Mineral Resources: Mineral Reserves
and, where considered appropriate, Mineral Resources are
incorporated in projected cash flows, based on Mineral Reserve
and Mineral Resource statements in accordance with the SAMREC
Code for South African properties and exploration and evaluation
work undertaken by appropriately qualified persons. Mineral
Resources are included where management has a high degree
of confidence in their economic extraction, despite additional
evaluation still being required prior to meeting the required
confidence to convert to Mineral Reserves
• Commodity and product prices: Commodity and product prices
are based on latest internal forecasts, benchmarked with external
sources of information, to ensure they are within the range of
available analyst forecasts. Where existing sales contracts are in
place, the effects of such contracts are considered in determining
future cash flows
• Discount rates: Value in use and fair value less cost of disposal
cash flow projections used in impairment models are discounted
based on a real post-tax discount rate, assessed annually
Post-tax
real WACC
%
Pre-tax
real WACC
%
10.2
7.5
10.4
11.1
9.2
13.7
Barberton Mines
Elikhulu
Egoli
• Operating costs, capital expenditure and other operating factors:
Operating costs and capital expenditure are based on financial
budgets. Cash flow projections are based on life-of-mine plans
and internal management forecasts. Cost assumptions incorporate
management experience and expectations, as well as the nature
and location of the operation and the risks associated therewith
Refer to note 19 for disclosure of the carrying amount of goodwill
and its sensitivity to potential impairment based on a range of
forecast gold prices and to note 17 for disclosure of the carrying
amount of property, plant and equipment and each CGU’s
sensitivity to potential impairment based on a range of forecast
gold prices
• Rehabilitation and decommissioning provision: At each reporting
date the group estimates the rehabilitation and decommissioning
provision. There is judgement in the input assumptions used in
determining the estimated rehabilitation and decommissioning
provision. Inputs used which require judgement include:
– closure costs which are determined in accordance with
regulatory requirements
– inflation rate, which has been adjusted for a long-term view
– risk-free rate, which is compounded annually and linked to the
life-of-mine.
Refer to note 29 for further details.
158
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018NOTES TO THE CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS continuedfor the year ended 30 June 2018 4. REVENUE
Gold sales
Management fee income1
Realisation costs
Net revenue
Finance income
Consolidated
Separate
Year ended
30 June 2018
GBP
Year ended
30 June 2017
GBP
Year ended
30 June 2018
GBP
Year ended
30 June 2017
GBP
108,506,068
–
(2,005,962)
106,500,106
1,490,836
107,990,942
125,111,338
–
(1,015,504)
124,095,834
256,496
124,352,330
–
579,039
–
579,039
268,206
847,245
–
–
–
–
51,496
51,496
1 Management fee income was reclassified from other (expenses)/income to revenue in the current year. Refer to note 8 for prior year disclosure.
5. COST OF PRODUCTION
Gold cost of production
Salaries and wages
Electricity
Mining
Processing
Engineering and technical services
Administration and other
Security
Consolidated
Separate
Year ended
30 June 2018
GBP
Year ended
30 June 2017
GBP
Year ended
30 June 2018
GBP
Year ended
30 June 2017
GBP
(30,985,400)
(7,670,139)
(7,467,939)
(19,354,712)
(5,369,510)
(3,742,277)
(3,123,063)
(77,713,040)
(28,820,162)
(6,537,359)
(6,486,998)
(22,471,096)
(5,930,040)
(2,943,651)
(2,254,239)
(75,443,545)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
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 the following business segments which are separable by geographical locations and operational functions:
Continuing operations
• Barberton Mines, located in Barberton South Africa, derives revenue from the sale of gold
• Evander Mines’ tailings and surface operations, located in Evander South Africa, derives revenue from the sale of gold
• Funding Company provides treasury function activities for the group
• Corporate, 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 revenue (refer to note 4) (2017: (expenses)/income
(refer to note 8)).
Discontinued operations
• Evander Mines’ underground operations has in the current year been discontinued (refer to note 14)
• Phoenix Platinum, located in the North West province in South Africa. Phoenix Platinum was sold in the current financial year
(refer to note 14)
• Uitkomst Colliery, located in KwaZulu-Natal, Newcastle. Uitkomst Colliery was sold in the prior reporting period (refer to note 14).
159
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018ANNUAL FINANCIAL STATEMENTS
6.
SEGMENTAL ANALYSIS continued
The Exco reviews the operations in accordance with the disclosures presented below.
Year ended 30 June 2018
Continuing operations
Year ended 30 June 2018
Discontinued operations
Continuing operations
Revenue
Gold sales1
Platinum sales
Coal sales
Realisation costs
On-mine revenue
Cost of production
Depreciation and amortisation
Mining profit
Other (expenses)/income2
Profit on disposal of investment
Profit on disposal of subsidiary
Continuing operations – Impairment costs6
Adjustment on sale of asset held for sale
Royalty costs
Net income/(loss) before finance income and finance costs
Finance income
Finance costs
Profit/(loss) before taxation
Taxation
Profit/(loss) after taxation before inter-company charges
from continuing operations
Loss after taxation from discontinued operations
Profit/(loss) for the year
Inter-company transactions
Management fees
Inter-company interest charges
Profit/(loss) after taxation
after inter-company charges
Segmental assets (total assets excluding goodwill)
Segmental liabilities
Goodwill
Net assets (excluding goodwill)7
Capital expenditure8
Adjusted EBITDA9
Barberton
Mines
GBP
Evander
Mines3
GBP
87,230,416
87,230,416
–
–
(446,722)
86,783,694
(65,893,778)
(4,218,055)
16,671,861
(735,525)
–
–
–
–
(376,263)
15,560,073
189,647
(1,202)
15,748,518
(2,327,935)
13,420,583
–
13,420,583
21,275,652
21,275,652
–
–
(1,559,240)
19,716,412
(11,819,262)
(711,762)
7,185,388
863,278
–
–
(8,153,312)
–
(38,747)
(143,393)
768,141
–
624,748
5,554,108
6,178,856
–
6,178,856
Corporate
office and
growth
projects
GBP
–
–
–
–
–
–
–
–
–
(3,995,361)
–
–
–
–
–
(3,995,361)
367,349
(5,931)
(3,633,943)
(1,092,564)
(4,726,507)
–
(4,726,507)
Funding
Company
GBP
–
–
–
–
–
–
–
–
–
(415,943)
–
–
–
–
–
(415,943)
165,699
(3,136,750)
(3,386,994)
(30,848)
(3,417,842)
–
(3,417,842)
(1,968,732)
(299,060)
(88,122)
–
2,374,059
(362,688)
(115,808)
3,607,147
(201,397)
(2,945,399)
11,152,791
79,271,943
26,908,513
21,000,714
52,363,430
12,184,359
19,778,128
6,090,734
(2,715,136)
73,497
(107,499,513)
(374,888)
156,902,042
30,697,182
–
126,204,860
72,733,483
8,721,681
7,457,577
1,570,061
–
5,887,516
128,199
(3,995,361)
709,832
90,462,604
–
(89,752,772)
–
(415,943)
Evander
Mines3
GBP
Phoenix
Platinum4
GBP
Reclassi-
fication
GBP
Consoli-
dated
GBP
46,981,251
46,981,251
(725,057)
46,256,194
(59,512,431)
(6,146,443)
(19,402,680)
(11,466,820)
1,429,375
1,429,375
(48,410,626)
(46,981,251)
(1,429,375)
108,506,068
108,506,068
1,429,375
(1,631,240)
(201,865)
43,343
725,057
(2,005,962)
(47,685,569)
106,500,106
61,143,671
6,146,443
19,604,545
11,423,477
(77,713,040)
(4,929,817)
23,857,249
(4,283,551)
(98,124,786)
98,124,786
(8,153,312)
(234,906)
(262,205)
262,205
234,906
(129,229,192)
(420,727)
129,649,919
497,240
2,861
(500,101)
(128,731,952)
24,379,235
(417,866)
129,149,818
42,978
(24,422,213)
(415,010)
11,005,376
1,490,836
(3,143,883)
9,352,329
2,102,761
(104,352,717)
(374,888)
104,727,605
11,455,090
(104,352,717)
(374,888)
(93,272,515)
(104,727,605)
(104,727,605)
–
–
–
–
–
–
–
10,508,262
(15,638,107)
(158,522)
15,796,629
(93,272,515)
244,341,394
149,638,360
21,000,714
94,703,034
95,554,303
24,088,505
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1 All gold sales were made in the Republic of South Africa and the revenue was generated from South African financial institutions.
2 Other (expenses)/income exclude inter-company management fees and dividends.
3 During the current reporting period, Evander Mines’ underground mining operations ceased mining on 31 May 2018. The ETRP buy-in operations remain
as continuing operations (refer to note 14).
4 Phoenix Platinum was classified as held for sale and as a discontinued operation at 30 June 2017. Phoenix Platinum’s disposal was concluded on
6 November 2017 (refer to note 14).
5 The disposal of Pan African Resources Coal Holdings Proprietary Limited and Uitkomst Colliery was completed on 30 June 2017 and this business was
classified as a discontinued operation.
6 Impairment costs associated with the continuing operations represent the carrying value of the Kinross and ETRP metallurgical plant infrastructure.
7 All assets are held within South Africa. The segmental assets and liabilities above exclude inter-company balances.
8 Capital expenditure comprises additions to property, plant and equipment and mineral rights and intangible assets (refer to notes 17 and 18).
9 Adjusted EBITDA is represented by earnings before interest, taxation, depreciation and amortisation, impairments, discontinued operations and profit/(loss)
on disposal of investments.
160
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018NOTES TO THE CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS continuedfor the year ended 30 June 2018
6.
SEGMENTAL ANALYSIS continued
The Exco reviews the operations in accordance with the disclosures presented below.
Continuing operations
Revenue
Gold sales1
Platinum sales
Coal sales
Realisation costs
On-mine revenue
Cost of production
Depreciation and amortisation
Mining profit
Other (expenses)/income2
Profit on disposal of investment
Profit on disposal of subsidiary
Continuing operations – Impairment costs6
Adjustment on sale of asset held for sale
Royalty costs
Finance income
Finance costs
Profit/(loss) before taxation
Taxation
Net income/(loss) before finance income and finance costs
Year ended 30 June 2018
Continuing operations
Corporate
office and
growth
projects
GBP
Funding
Company
GBP
Barberton
Mines
GBP
Evander
Mines3
GBP
87,230,416
87,230,416
21,275,652
21,275,652
(446,722)
86,783,694
(1,559,240)
19,716,412
(65,893,778)
(11,819,262)
(4,218,055)
16,671,861
(735,525)
(711,762)
7,185,388
863,278
(8,153,312)
(38,747)
(143,393)
768,141
624,748
5,554,108
(376,263)
15,560,073
189,647
(1,202)
15,748,518
(2,327,935)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(3,995,361)
(415,943)
(3,995,361)
367,349
(5,931)
(3,633,943)
(1,092,564)
(415,943)
165,699
(3,136,750)
(3,386,994)
(30,848)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Profit/(loss) after taxation before inter-company charges
from continuing operations
Loss after taxation from discontinued operations
Profit/(loss) for the year
Inter-company transactions
Management fees
Inter-company interest charges
Profit/(loss) after taxation
after inter-company charges
Net assets (excluding goodwill)7
Segmental liabilities
Goodwill
Capital expenditure8
Adjusted EBITDA9
Segmental assets (total assets excluding goodwill)
13,420,583
6,178,856
(4,726,507)
(3,417,842)
13,420,583
6,178,856
(4,726,507)
(3,417,842)
(1,968,732)
(299,060)
11,152,791
79,271,943
26,908,513
21,000,714
52,363,430
12,184,359
19,778,128
(88,122)
2,374,059
(362,688)
(115,808)
3,607,147
6,090,734
(2,715,136)
156,902,042
30,697,182
126,204,860
72,733,483
8,721,681
7,457,577
1,570,061
–
5,887,516
128,199
(3,995,361)
73,497
709,832
90,462,604
(89,752,772)
(415,943)
as continuing operations (refer to note 14).
6 November 2017 (refer to note 14).
classified as a discontinued operation.
1 All gold sales were made in the Republic of South Africa and the revenue was generated from South African financial institutions.
2 Other (expenses)/income exclude inter-company management fees and dividends.
3 During the current reporting period, Evander Mines’ underground mining operations ceased mining on 31 May 2018. The ETRP buy-in operations remain
4 Phoenix Platinum was classified as held for sale and as a discontinued operation at 30 June 2017. Phoenix Platinum’s disposal was concluded on
5 The disposal of Pan African Resources Coal Holdings Proprietary Limited and Uitkomst Colliery was completed on 30 June 2017 and this business was
6 Impairment costs associated with the continuing operations represent the carrying value of the Kinross and ETRP metallurgical plant infrastructure.
7 All assets are held within South Africa. The segmental assets and liabilities above exclude inter-company balances.
8 Capital expenditure comprises additions to property, plant and equipment and mineral rights and intangible assets (refer to notes 17 and 18).
9 Adjusted EBITDA is represented by earnings before interest, taxation, depreciation and amortisation, impairments, discontinued operations and profit/(loss)
on disposal of investments.
Year ended 30 June 2018
Discontinued operations
Evander
Mines3
GBP
Phoenix
Platinum4
GBP
Reclassi-
fication
GBP
Consoli-
dated
GBP
46,981,251
46,981,251
–
–
(725,057)
46,256,194
(59,512,431)
(6,146,443)
(19,402,680)
(11,466,820)
–
–
(98,124,786)
–
(234,906)
(129,229,192)
497,240
–
(128,731,952)
24,379,235
(104,352,717)
–
(104,352,717)
(201,397)
(2,945,399)
(107,499,513)
–
–
–
–
10,508,262
(15,638,107)
1,429,375
–
1,429,375
–
–
1,429,375
(1,631,240)
–
(201,865)
43,343
–
–
–
(262,205)
–
(420,727)
2,861
–
(417,866)
42,978
(48,410,626)
(46,981,251)
(1,429,375)
–
725,057
(47,685,569)
61,143,671
6,146,443
19,604,545
11,423,477
–
–
98,124,786
262,205
234,906
129,649,919
(500,101)
–
129,149,818
(24,422,213)
108,506,068
108,506,068
–
–
(2,005,962)
106,500,106
(77,713,040)
(4,929,817)
23,857,249
(4,283,551)
–
–
(8,153,312)
–
(415,010)
11,005,376
1,490,836
(3,143,883)
9,352,329
2,102,761
(374,888)
–
(374,888)
104,727,605
(104,727,605)
–
11,455,090
(104,727,605)
(93,272,515)
–
–
(374,888)
–
–
–
–
–
(158,522)
–
–
–
–
–
–
–
–
15,796,629
–
–
(93,272,515)
244,341,394
149,638,360
21,000,714
94,703,034
95,554,303
24,088,505
161
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018ANNUAL FINANCIAL STATEMENTS
6.
SEGMENTAL ANALYSIS continued
The Exco reviews the operations in accordance with the disclosures presented below.
Year ended 30 June 2017
Continuing operations
Year ended 30 June 2017
Discontinued operations
Continuing operations
Revenue
Gold sales1
Platinum sales
Coal sales
Realisation costs
On-mine revenue
Cost of production
Depreciation and amortisation
Mining profit
Other (expenses)/income2
Profit on disposal of investment
Profit on disposal of subsidiary
Continuing operations – Impairment costs6
Adjustment on sale of asset held for sale
Royalty costs
Net income/(loss) before finance income and finance costs
Finance income
Finance costs
Profit/(loss) before taxation
Taxation
Profit/(loss) after taxation before inter-company charges
from continuing operations
Loss after taxation from discontinued operations
Profit/(loss) for the year
Inter-company transactions
Management fees
Inter-company interest charges
Profit/(loss) after taxation after inter-company charges
Segmental assets (total assets excluding goodwill)
Segmental liabilities
Goodwill
Net assets (excluding goodwill)7
Capital expenditure8
Adjusted EBITDA9
Barberton
Mines
GBP
Evander
Mines3
GBP
97,343,927
97,343,927
–
–
(606,367)
96,737,560
(61,229,000)
(4,749,422)
30,759,138
4,705,042
–
–
–
–
(1,015,352)
34,448,828
9,949
(18,652)
34,440,125
(5,654,821)
28,785,304
–
28,785,304
27,767,411
27,767,411
–
–
(409,137)
27,358,274
(14,214,545)
(749,373)
12,394,356
506,896
–
–
–
–
(97,313)
12,803,939
16,395
–
12,820,334
2,045,881
14,866,215
–
14,866,215
(2,805,797)
(760,141)
25,219,366
(817,956)
–
14,048,259
73,762,949
25,157,858
21,000,714
48,605,091
11,216,853
39,198,250
190,009,717
52,481,513
–
137,528,204
10,173,896
13,553,312
Corporate
office and
growth
projects
GBP
–
–
–
–
–
–
–
–
–
(5,542,295)
222,571
5,385,915
–
–
–
66,191
51,496
(14,202)
103,485
(531,248)
(427,763)
–
(427,763)
5,673,540
(654,122)
4,591,655
19,611,819
4,589,589
–
15,022,230
79,285
(5,542,295)
Funding
Company
GBP
–
–
–
–
–
–
–
–
–
90,397
–
–
–
–
–
90,397
178,656
(2,770,125)
(2,501,072)
(62,960)
(2,564,032)
–
(2,564,032)
(92,522)
2,778,372
121,818
1,092,051
11,914,856
–
(10,822,805)
–
90,397
1 All gold sales were made in the Republic of South Africa and the revenue was generated from South African financial institutions.
2 Other (expenses)/income exclude inter-company management fees and dividends.
3 During the current reporting period, Evander Mines’ underground mining operations ceased mining on 31 May 2018. The ETRP buy-in operations remain
as continuing operations (refer to note 14).
4 Phoenix Platinum was classified as held for sale and as a discontinued operation at 30 June 2017. Phoenix Platinum’s disposal was concluded on
6 November 2017 (refer to note 14).
5 The disposal of Pan African Resources Coal Holdings Proprietary Limited and Uitkomst Colliery was completed on 30 June 2017 and this business was
classified as a discontinued operation.
6 Impairment costs associated with the continuing operations represent the carrying value of the Kinross and ETRP metallurgical plant infrastructure.
7 All assets are held within South Africa. The segmental assets and liabilities above exclude inter-company balances.
8 Capital expenditure comprises of additions to property, plant and equipment and mineral rights and intangible assets (refer to notes 17 and 18).
9 Adjusted EBITDA is represented by earnings before interest, taxation, depreciation and amortisation, impairments, discontinued operations and profit/(loss)
on disposal of investments.
162
Uitkomst
Colliery5
Phoenix
Platinum4
Evander
Mines3
Reclas-
sification
GBP
Consoli-
dated
GBP
25,089,705
4,766,689
44,473,248
44,473,248
125,111,338
125,111,338
4,766,689
(74,329,642)
(44,473,248)
(4,766,689)
(25,089,705)
(810,539)
810,539
(1,015,504)
4,766,689
43,662,709
(73,519,103)
124,095,834
(5,007,705)
(58,563,038)
(870,020)
(4,994,269)
(1,111,036)
(19,894,598)
(117,318)
(1,762,585)
85,312,227
6,570,696
18,363,820
1,723,570
25,089,705
25,089,705
(21,741,484)
(706,407)
2,641,814
156,333
(5,950,757)
5,950,757
(70,218)
2,727,929
102,850
(222,366)
292,584
(7,179,111)
(21,879,549)
26,330,731
180
–
35,416
(12,244)
2,830,779
(782,022)
(7,178,931)
(21,856,377)
276,657
3,960,206
(138,446)
12,244
26,204,529
(3,454,841)
2,048,757
(6,902,274)
(17,896,171)
22,749,688
40,659,724
–
(22,749,688)
(22,749,688)
2,048,757
(6,902,274)
(17,896,171)
17,910,036
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(75,443,545)
(5,498,795)
43,153,494
(239,960)
222,571
5,385,915
(1,112,665)
47,409,355
256,496
(2,802,979)
44,862,872
(4,203,148)
17,910,036
290,087,011
94,506,650
21,000,714
195,580,361
35,540,994
47,299,664
–
–
–
–
–
–
–
–
–
–
–
–
(438,989)
28,225
1,637,993
(260,870)
121,604
(1,257,406)
(1,513,938)
(7,041,540)
(20,667,515)
5,610,475
362,834
–
5,247,641
314,802
(358,334)
875,298
3,434,336
12,880,860
(16,885,280)
13,809,278
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018NOTES TO THE CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS continuedfor the year ended 30 June 2018
6.
SEGMENTAL ANALYSIS continued
The Exco reviews the operations in accordance with the disclosures presented below.
Year ended 30 June 2017
Continuing operations
Corporate
office and
growth
projects
GBP
Funding
Company
GBP
–
–
–
–
–
–
–
–
–
–
–
–
–
Barberton
Mines
GBP
Evander
Mines3
GBP
97,343,927
97,343,927
27,767,411
27,767,411
(606,367)
(409,137)
96,737,560
27,358,274
(61,229,000)
(14,214,545)
(4,749,422)
30,759,138
4,705,042
(749,373)
12,394,356
506,896
–
–
–
–
–
–
–
(5,542,295)
222,571
5,385,915
90,397
(1,015,352)
34,448,828
9,949
(18,652)
34,440,125
(5,654,821)
(97,313)
12,803,939
16,395
12,820,334
2,045,881
66,191
51,496
(14,202)
103,485
(531,248)
90,397
178,656
(2,770,125)
(2,501,072)
(62,960)
28,785,304
14,866,215
(427,763)
(2,564,032)
28,785,304
14,866,215
(427,763)
(2,564,032)
(2,805,797)
(760,141)
25,219,366
(817,956)
14,048,259
5,673,540
(654,122)
4,591,655
(92,522)
2,778,372
121,818
73,762,949
25,157,858
21,000,714
48,605,091
11,216,853
39,198,250
190,009,717
52,481,513
19,611,819
4,589,589
–
1,092,051
11,914,856
137,528,204
15,022,230
(10,822,805)
10,173,896
13,553,312
79,285
(5,542,295)
90,397
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Continuing operations
Revenue
Gold sales1
Platinum sales
Coal sales
Realisation costs
On-mine revenue
Cost of production
Depreciation and amortisation
Mining profit
Other (expenses)/income2
Profit on disposal of investment
Profit on disposal of subsidiary
Continuing operations – Impairment costs6
Adjustment on sale of asset held for sale
Royalty costs
Finance income
Finance costs
Profit/(loss) before taxation
Taxation
Net income/(loss) before finance income and finance costs
Profit/(loss) after taxation before inter-company charges
from continuing operations
Loss after taxation from discontinued operations
Profit/(loss) after taxation after inter-company charges
Segmental assets (total assets excluding goodwill)
Profit/(loss) for the year
Inter-company transactions
Management fees
Inter-company interest charges
Net assets (excluding goodwill)7
Segmental liabilities
Goodwill
Capital expenditure8
Adjusted EBITDA9
1 All gold sales were made in the Republic of South Africa and the revenue was generated from South African financial institutions.
2 Other (expenses)/income exclude inter-company management fees and dividends.
3 During the current reporting period, Evander Mines’ underground mining operations ceased mining on 31 May 2018. The ETRP buy-in operations remain
4 Phoenix Platinum was classified as held for sale and as a discontinued operation at 30 June 2017. Phoenix Platinum’s disposal was concluded on
5 The disposal of Pan African Resources Coal Holdings Proprietary Limited and Uitkomst Colliery was completed on 30 June 2017 and this business was
as continuing operations (refer to note 14).
6 November 2017 (refer to note 14).
classified as a discontinued operation.
6 Impairment costs associated with the continuing operations represent the carrying value of the Kinross and ETRP metallurgical plant infrastructure.
7 All assets are held within South Africa. The segmental assets and liabilities above exclude inter-company balances.
8 Capital expenditure comprises of additions to property, plant and equipment and mineral rights and intangible assets (refer to notes 17 and 18).
9 Adjusted EBITDA is represented by earnings before interest, taxation, depreciation and amortisation, impairments, discontinued operations and profit/(loss)
on disposal of investments.
Year ended 30 June 2017
Discontinued operations
Uitkomst
Colliery5
Phoenix
Platinum4
Evander
Mines3
Reclas-
sification
GBP
Consoli-
dated
GBP
25,089,705
–
–
25,089,705
–
25,089,705
(21,741,484)
(706,407)
2,641,814
156,333
–
–
–
–
(70,218)
2,727,929
102,850
–
2,830,779
(782,022)
2,048,757
–
2,048,757
(438,989)
28,225
1,637,993
–
–
–
–
875,298
3,434,336
4,766,689
–
4,766,689
–
–
4,766,689
(5,007,705)
(870,020)
(1,111,036)
(117,318)
–
–
(5,950,757)
–
–
(7,179,111)
180
–
(7,178,931)
276,657
(6,902,274)
–
(6,902,274)
44,473,248
44,473,248
–
–
(810,539)
43,662,709
(58,563,038)
(4,994,269)
(19,894,598)
(1,762,585)
–
–
–
–
(222,366)
(21,879,549)
35,416
(12,244)
(21,856,377)
3,960,206
(17,896,171)
–
(17,896,171)
(74,329,642)
(44,473,248)
(4,766,689)
(25,089,705)
810,539
(73,519,103)
85,312,227
6,570,696
18,363,820
1,723,570
–
–
5,950,757
–
292,584
26,330,731
(138,446)
12,244
26,204,529
(3,454,841)
22,749,688
(22,749,688)
–
125,111,338
125,111,338
–
–
(1,015,504)
124,095,834
(75,443,545)
(5,498,795)
43,153,494
(239,960)
222,571
5,385,915
–
–
(1,112,665)
47,409,355
256,496
(2,802,979)
44,862,872
(4,203,148)
40,659,724
(22,749,688)
17,910,036
(260,870)
121,604
(7,041,540)
(1,257,406)
(1,513,938)
(20,667,515)
–
–
–
–
–
17,910,036
5,610,475
362,834
–
5,247,641
314,802
(358,334)
–
–
–
–
12,880,860
(16,885,280)
–
–
–
–
–
13,809,278
290,087,011
94,506,650
21,000,714
195,580,361
35,540,994
47,299,664
163
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018ANNUAL FINANCIAL STATEMENTS
7. OPERATING LEASES
At the financial year-end, the group and company had outstanding commitments under operating leases, mainly in respect of office
equipment, security cameras, building rentals and plant equipment, which fall due as follows:
Consolidated
Separate
Year ended
30 June 2018
GBP
Year ended
30 June 2017
GBP
Year ended
30 June 2018
GBP
Year ended
30 June 2017
GBP
Not later than one year
Later than one year and no later than five years
899,979
2,920,478
3,820,457
160,175
18,862
179,037
Minimum lease payments under operating leases recognised
as an expense in the year:
206,243
179,669
–
–
–
–
–
–
–
–
Leases are negotiated for an average term of three to five years.
The majority of the group’s lease arrangements relate to equipment leased on the mining operations. The material operating leases at
year-end relate to the corporate office and metallurgical plant equipment leased on the mining operations, with the following terms
at 30 June 2018.
Corporate office lease
Aachen reactor equipment
Duration of lease
Commencement of lease
Remaining lease term
Escalation rate
Tenant/lessee
Landlord/lessor
3 years
April 2018
33 months
8%
Pan African Resources Management
Services Company Proprietary Limited
Investec Property Fund Limited
Monthly lease payments in GBP terms
12,785
5 years
August 2018
60 months
Consumer price index
Evander Gold Mining Proprietary Limited
Mealgwyn Mineral Services Africa
Proprietary Limited
44,286
164
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018NOTES TO THE CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS continuedfor the year ended 30 June 2018 8. OTHER (EXPENSES)/INCOME
Dividends received – subsidiary
Dividends received – other investments
Management fees
Foreign exchange (loss)/gain
Operating leases (refer to note 7)
Non-mining depreciation
Non-mining amortisation
Non-executive directors' emoluments
Executive directors' emoluments
Equity-settled share option expense (refer to note 41)
Cash-settled share option income/(expense)
(refer to note 30)
Auditors' fees
Salaries corporate office
Investor and public relations
Business development costs
Legal fees
Community projects
Profit arising from unrealised financial instruments
(refer to note 32)
Profit arising from realised financial instruments
(refer to note 32)
Profit on disposal of property, plant and equipment and
mineral right
Rehabilitation funds fair value adjustments (refer to note 22)
Rehabilitation provision adjustment (refer to note 29)
Non-refundable deposition fee
Deferred consideration provision
Other income/(expense)
Consolidated
Separate
Year ended
30 June 2018
GBP
Year ended
30 June 2017
GBP
Year ended
30 June 2018
GBP
Year ended
30 June 2017
GBP
–
–
(496,495)
(206,243)
(32,761)
(19,769)
(179,550)
(551,380)
(440,385)
680,887
(343,202)
(1,430,423)
(170,257)
(820,748)
(52,841)
(608,383)
–
–
874
18,537
(236,275)
579,039
(778,611)
804,435
(4,283,551)
37,477
(16,659)
194,841
(179,669)
(31,072)
(27,827)
(167,997)
(1,789,955)
(185,507)
117,948
(271,954)
(1,838,641)
(125,795)
(593,552)
(83,264)
(217,826)
4,796,832
698,615
–
(40,195)
258,815
–
–
(774,575)
(239,960)
–
–
(6,039)
–
–
–
(179,550)
(551,380)
–
196,591
(84,346)
–
(70,253)
(543,817)
(43,436)
–
–
–
–
–
–
–
(778,611)
(317,228)
(2,378,069)
21,930,492
37,477
637,681
157,821
–
–
–
(167,997)
(1,789,955)
–
(1,792,385)
(95,213)
–
(35,179)
(593,552)
(65,794)
–
–
–
–
–
–
–
–
125,142
18,348,538
165
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018ANNUAL FINANCIAL STATEMENTS 9.
FINANCE INCOME/(COSTS)
Interest received – bank
Interest received – other
Interest income – rehabilitation funds
Interest expense – bank
Interest expense – SARS
Interest expense – other
Net finance (expense)/income1
Consolidated
Separate
Year ended
30 June 2018
GBP
Year ended
30 June 2017
GBP
Year ended
30 June 2018
GBP
Year ended
30 June 2017
GBP
581,688
424,839
484,309
1,490,836
(3,142,044)
(1,682)
(157)
(3,143,883)
(1,653,047)
244,985
–
11,511
256,496
(2,784,929)
(18,050)
–
(2,802,979)
(2,546,483)
89,883
178,323
–
268,206
(5,929)
–
–
(5,929)
262,277
51,496
–
–
51,496
(2,575)
–
–
(2,575)
48,921
1 Derived from financial assets and liabilities that are not measured at fair value through profit or loss except for interest income from rehabilitations funds.
10. PROFIT/(LOSS) BEFORE TAXATION
Profit/(loss) before taxation has been arrived at after charging:
Equity-settled share option (expense)/income
(refer to note 41)
Cash-settled share options (expense)/income
(refer to note 30)
Mining depreciation
Continuing operations – Impairment costs
Fair value movement on asset held for sale
Staff costs
Royalty costs
Profits arising from realised and unrealised financial
instruments
Business development costs
Non-refundable deposition fee
Deferred consideration provision
Operating leases
Consolidated
Separate
Year ended
30 June 2018
GBP
Year ended
30 June 2017
GBP
Year ended
30 June 2018
GBP
Year ended
30 June 2017
GBP
(440,385)
185,507
–
–
680,887
(4,929,817)
(8,153,312)
–
(32,967,203)
(415,010)
–
(820,748)
579,039
(778,611)
(206,243)
117,948
(5,498,795)
–
–
(32,448,758)
(1,112,665)
4,796,832
(593,552)
–
–
(179,669)
196,391
–
–
(474,998)
(551,380)
–
–
(543,817)
–
(778,611)
–
(1,792,385)
–
(6,352,320)
–
(1,789,955)
–
–
(593,552)
–
–
–
166
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018NOTES TO THE CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS continuedfor the year ended 30 June 2018
11. AUDITORS’ REMUNERATION
Fees payable to the company’s auditors
Audit of the consolidated financial statements
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 2018
GBP
Year ended
30 June 2017
GBP
Year ended
30 June 2018
GBP
Year ended
30 June 2017
GBP
1,687
287,562
53,953
343,202
13,114
42,456
55,570
1,145
223,756
47,053
271,954
–
36,888
36,888
1,687
82,659
–
84,346
–
–
–
1,145
53,655
40,413
95,213
–
–
–
All audit fees are paid locally in South Africa with the exception of the Deloitte UK fee of GBP84,346 (2017: GBP54,800 paid).
Details of the company’s policy on the use of the statutory auditor’s non-audit services and the safeguards to ensure their independence
and objectivity are disclosed in the audit committee report on
page 131. No services were provided pursuant to contingent fee
arrangements.
12. STAFF COSTS
Their aggregate remuneration comprised:
Salaries and wages from continuing operations
Salaries and wages from discontinued operations
Retrenchment costs
Consolidated
Separate
Year ended
30 June 2018
GBP
Year ended
30 June 2017
GBP
Year ended
30 June 2018
GBP
Year ended
30 June 2017
GBP
(32,967,203)
(26,962,283)
(9,319,856)
(69,249,342)
(32,448,758)
(26,346,315)
(2,307,083)
(61,102,156)
(551,380)
–
–
(551,380)
(1,789,955)
–
–
(1,789,955)
Included in staff costs above is other retirement costs
(refer to note 33)
(5,171,970)
(6,255,465)
–
–
Operating cost employees
Corporate
Evander Mines
Phoenix Platinum
Uitkomst Colliery
Barberton Mines
Capital employees
Barberton Mines
Evander Mines
Phoenix Platinum
Total number of employees
Consolidated
Year ended
30 June 2018
Average
Year ended
30 June 2018
Closing
Year ended
30 June 2017
Average
Year ended
30 June 2017
Closing
16
1,596
–
–
1,762
3,374
206
98
–
304
3,678
17
106
–
–
1,742
1,865
203
1
–
204
2,069
16
2,119
3
125
1,738
4,001
193
257
1
451
4,452
16
1,717
3
–
1,781
3,517
225
190
–
415
3,932
167
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018ANNUAL FINANCIAL STATEMENTS 13. TAXATION
Income taxation expense
South African normal taxation
– current year
– prior year
Deferred taxation1
– current year
Total taxation (income)/expense
Profit/(loss) before taxation
Taxation at the domestic taxation rate of 28%
Taxation rate differential2
Exempt income
Dividend income
Profit on sale of investment in subsidiary
Other exempt income
Rate change3
Non-deductible expenses
Impairment
Other non-deductible expenses
(Over)/under provision – prior year
Capital gains taxation
Capital redemption
Taxation effect of utilisation of taxation losses
Taxation for the year
Effective taxation rates
South African statutory rate
Taxation rate differential2
Exempt income
Dividend income
Profit on sale of investment in subsidiary
Other exempt income
Rate change3
Non-deductible expenses
Impairment
Other non-deductible expenses
(Over)/under provision – prior year
Capital gains taxation
Capital redemption
Taxation effect of utilisation of taxation losses
Effective taxation rate
Consolidated
Separate
Year ended
30 June 2018
GBP
Year ended
30 June 2017
GBP
Year ended
30 June 2018
GBP
Year ended
30 June 2017
GBP
1,749,009
(171,114)
4,372,157
287,471
–
–
–
–
(3,680,656)
(2,102,761)
9,352,329
2,618,653
(1,299,515)
–
–
(20,683)
(5,883,465)
2,215,384
–
(171,113)
1,222,226
(784,248)
–
(2,102,761)
%
28.00
(13.90)
–
–
(0.22)
(62.91)
23.69
–
(1.83)
13.07
(8.39)
–
(22.49)
(456,480)
4,203,148
44,862,872
12,561,605
(2,920,911)
–
(1,482,703)
(248,811)
(3,527,710)
–
984,823
287,471
(14,878)
(1,435,738)
–
4,203,148
%
28.00
(6.51)
–
(3.30)
(0.55)
(7.86)
–
2.20
0.64
(0.03)
(3.20)
–
9.39
(274,600)
(274,600)
(1,061,755)
(297,291)
–
–
–
–
–
–
–
–
–
–
22,691
(274,600)
%
28.00
–
–
–
–
–
–
–
–
–
(2.14)
25.86
(408,704)
(408,704)
18,611,097
5,211,107
12,110
(6,140,538)
(1,746,288)
–
–
1,748,748
521,035
–
(14,878)
–
–
(408,704)
%
28.00
0.07
(32.99)
(9.38)
–
9.40
2.80
–
(0.08)
–
–
(2.18)
1 Deferred taxation components are disclosed in note 31.
2 Taxation rate differential is the difference between the statutory company’s taxation rate of 28% and effective gold mining taxation rate calculated in terms
of the gold mining formula.
3 The rate change is as a result of a decrease in the deferred taxation rates applied to the taxable and deductible temporary differences prevailing at
year-end within the group’s entities (refer to note 31).
South African income taxation on mining income is determined according to a formula which takes into account the profit and revenue
from mining operations. South African mining taxable income is determined after the deduction of all mining capital expenditure, on
condition that these deductions cannot result in an assessed loss.
168
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018NOTES TO THE CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS continuedfor the year ended 30 June 2018
13. TAXATION continued
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 profits:
Phoenix Platinum2
Evander Mines
At year-end the group has the following assessed losses carried forward:
Phoenix Platinum2
Evander Mines
Pan African Resources PLC
Pan African Resources Management Services Company Proprietary Limited
Total
Unredeemed capital
expenditure1
30 June 2018
GBP
30 June 2017
GBP
–
109,303,562
109,303,562
6,231,044
34,591,790
40,822,834
Assessed losses
30 June 2018
GBP
30 June 2017
GBP
–
31,298,590
1,339,697
114,849
32,753,136
502,789
10,825,723
236,090
95,924
11,660,526
1 Deferred taxation assets have been recognised in respect of all assessed losses and unredeemed capital expenditure.
2 Phoenix Platinum was sold on 6 November 2017 to Sylvania Platinum Limited, resulting in the derecognition of the unredeemed capital expenditure and
assessed loss balances relating to this entity.
14. DISCONTINUED OPERATIONS
Discontinued operations comprised the following at year-end:
• Evander Mines’ underground operations, which includes 8 Shaft, 7 Shaft and the run-of-mine circuit in the Kinross metallurgical plant
• Phoenix Platinum
• Uitkomst Colliery.
Evander Mines’ underground operations
Due to the cessation of mining at Evander Mines’ underground operations, the financial result from this operation has been classified as a
discontinued operation in the current reporting period. Evander Mines’ continuing operations include the ETRP tailings operations and the
treatment of other surface sources.
Phoenix Platinum
Pan African Resources PLC concluded the disposal of Phoenix Platinum to Sylvania Platinum Limited on 6 November 2017. Phoenix
Platinum has been disclosed as a discontinued operation in the current and prior reporting period.
Uitkomst Colliery
Pan African Resources PLC concluded the disposal of the Uitkomst Colliery to MC Mining Limited on 30 June 2017. The Uitkomst Colliery
has been disclosed as a discontinued operation in the prior reporting period.
169
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018ANNUAL FINANCIAL STATEMENTS
14. DISCONTINUED OPERATIONS continued
Discontinued operations
Year ended 30 June 2018
Year ended 30 June 2017
Evander
Mines
(underground
operations)
GBP
Phoenix
Platinum
GBP
Evander
Mines
(underground
operations)
GBP
Total
GBP
Phoenix
Platinum
GBP
Uitkomst
Colliery
GBP
Total
GBP
(Loss)/profit after
taxation before inter-
company charges from
discontinued
operations1
Earnings per share
(pence)
Basic earnings per share
from discontinued
operations (pence)
Diluted earnings per
share from discontinued
operations (pence)
Net cash flows by
discontinued
operations2
Operating activities
Investing activities
Financing activities
Net change 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
(104,352,717)
(374,888)
(104,727,605)
(17,896,171)
(6,902,274)
2,048,757
(22,749,688)
(5.77)
(0.02)
(5.79)
(1.14)
(0.44)
0.13
(1.45)
(5.77)
(0.02)
(5.79)
(1.14)
(0.44)
0.13
(1.45)
Year ended 30 June 2018
Year ended 30 June 2017
GBP
GBP
GBP
GBP
GBP
GBP
GBP
(12,324,599)
(84,551,940)
97,047,030
(155,660)
–
103,757
(12,480,259)
(84,551,940)
97,150,787
(14,526,450)
(23,054,783)
37,820,870
(1,080,899)
1,177,223
76,737
(224,251)
(478,695)
(446,756)
(15,831,600)
(22,356,255)
37,450,851
170,491
(51,903)
118,588
239,637
173,061
(1,149,702)
(737,004)
319,037
51,903
370,940
64,567
14,846
1,922,574
2,001,987
(37,181)
452,347
–
–
(37,181)
14,833
(136,004)
11,149
(110,022)
452,347
319,037
51,903
784,021
1,154,961
1 Refer to the segment report note 6 for additional disclosure regarding the discontinued operations.
2 Cash flows disclosed for Evander Mines relate to continuing and discontinued operations. The separation of Evander Mines; continuing and discontinued
operations cash flows could not be reliably quantified and have been collectively disclosed.
170
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018NOTES TO THE CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS continuedfor the year ended 30 June 2018
14. DISCONTINUED OPERATIONS continued
Impairment costs continuing and discontinued operations
Evander Mines
The carrying value of the Evander Mines’ continuing and discontinued operations was impaired, and the impairment costs have been
summarised as follows:
Mineral rights and mining property
Buildings and infrastructure
Plant and machinery1
Intangible assets
Capital under construction
Continuing
operations
GBP
Discontinued
operations
GBP
–
–
8,153,312
–
–
8,153,312
12,654,647
9,357,299
58,897,691
24,039
17,191,110
98,124,786
Total
GBP
12,654,647
9,357,299
67,051,003
24,039
17,191,110
106,278,098
1 The impairment costs recognised in the continuing operations relate to the plant and machinery of the ETRP and surface operations within the Evander
Mines’ Kinross metallurgical plant.
Phoenix Platinum
During the prior reporting period an impairment charge of GBP5,950,757 (Separate: GBP6,352,320) was recognised against the plant and
machinery of Phoenix Platinum. The carrying amount of GBP11,198,399 was impaired to its recoverable amount of GBP5,247,642, being the
fair value less cost to sell to Sylvania Platinum Limited. The transaction was concluded on 6 November 2017 resulting in the derecognition
of the asset held for sale as follows:
Investment in Phoenix Platinum
Phoenix Platinum net asset value
Payables to company
Provision for impairment
Adjustment on sale of asset held for sale
Proceeds on sale of investment
Foreign currency translation reserve
Consolidated
Separate
GBP
GBP
–
(8,595,355)
13,645,596
–
(262,205)
(4,788,036)
–
4,209,696
–
13,645,596
(12,438,384)
474,998
(4,788,036)
(1,103,870)
171
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018ANNUAL FINANCIAL STATEMENTS
14. DISCONTINUED OPERATIONS continued
Impairment costs continuing and discontinued operations continued
At 30 June 2018 there were no major classes of assets and liabilities classified as held for sale. In the prior reporting period, Phoenix Platinum
and Uitkomst Colliery major assets and liabilities were presented as held for sale as follows:
ASSETS
Non-current assets
Property, plant and equipment and mineral rights
Long-term inventory
Current assets
Inventories
Current taxation asset
Trade and other receivables
Cash and cash equivalents
LIABILITIES
Non-current liabilities
Long-term provisions
Long-term liabilities
Deferred taxation
Current liabilities
Trade and other payables
Payable to Pan African Resources
Net asset value
Reconciliation of proceeds received for the sale of Uitkomst Colliery
Share proceeds through assets for share transaction
Cash proceeds received upon loan ceding
Deferred consideration proceeds received upon loan ceding (refer to note 20)
Net proceeds received
Loan ceded to MC Mining Limited (Previously Coal of Africa Limited) on sale
Profit on disposal of Uitkomst Colliery
Year ended
30 June 2018
Uitkomst
Colliery
GBP
Year ended
30 June 2017
Phoenix
Platinum
GBP
10,955,704
–
1,071,606
221,535
3,736,665
784,021
476,998
–
3,014,280
2,297,196
8,844,340
2,136,717
7,522,632
7,370,283
1,474,057
16,366,972
(8,844,340)
5,385,915
3,531,545
142,600
321,135
–
1,563,292
51,903
58,249
54,446
53,933
195,508
698
5,247,641
–
–
–
–
–
–
172
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018NOTES TO THE CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS continuedfor the year ended 30 June 2018
15. EARNINGS PER SHARE
Basic and diluted earnings per share continuing and discontinued operations
Basic and diluted earnings per share is based on the group’s profit for the year attributable to owners of the parent, divided by the weighted
average number of shares in issue during the year. Dilutive earnings per share is calculated by adjusting the weighted average number of
ordinary shares in issue on the assumption of conversion of all potentially dilutive ordinary shares. Potential ordinary shares shall be treated
as dilutive when their conversion to ordinary shares would decrease earnings per share or increase loss per share from total operations.
Year ended 30 June 2018
Year ended 30 June 2017
Net
profit
GBP
Weighted
average
number of
shares2
Earnings
per share
Pence
Net
profit
GBP
Weighted
average
number
of shares
(93,272,515)
1,809,726,739
(5.15)
17 910 036
1,564,346,115
–
–
–
–
729,319
(93,272,515)
1,809,726,739
(5.15)
17 910 036
1,565,075,434
Earnings
per share
Pence
1.14
–
1.14
Basic earnings per share
Dilutive potential
ordinary shares
Diluted earnings
per share
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 the continuing and discontinued operations (combined operations):
Year ended 30 June 2018
Year ended 30 June 2017
Net
profit
GBP
Weighted
average
number of
shares2
Earnings
per share
Pence
Net
profit
GBP
Weighted
average
number
of shares
Earnings
per share
Pence
(93,272,515)
1,809,726,739
(5.15)
17,910,036
1,564,346,115
1.14
–
–
–
(874)
245
262,205
106,278,099
–
–
–
–
–
–
–
–
–
–
–
–
(222,571)
49,856
(5,385,915)
(22,251)
6,230
0.01
5.87
–
5,950,757
–
–
–
–
–
–
–
13,267,160
1,809,726,739
0.73
18,286,142
1,564,346,115
–
–
–
–
729,319
13,267,160
1,809,726,739
0.73
18,286,142
1,565,075,434
(0.01)
–
(0.34)
–
–
–
0.38
1.17
–
1.17
Earnings as reported
Adjustments
Profit on disposal
of investments
Taxation on profit on
disposal of Investment
Profit on disposal
of subsidiary
Profit on sale of
property, plant and
equipment and
mineral rights
Tax on profit on disposal
of property, plant and
equipment
Fair value movement
on asset held for sale
Impairment costs
Headline earnings
per share1
Dilutive potential
ordinary shares
Diluted headline
earnings per share
1 Headline earnings per share is required in terms of the Listings Requirements of the JSE Limited.
2 The weighted average number of shares in issue factor in the elimination of the 306.4 million PAR Gold shares. On 30 May 2018, 130 million
Pan African Resources shares held by PAR Gold s were disposed of at a price per share of R1.15 (refer to note 40).
173
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018ANNUAL FINANCIAL STATEMENTS
15. EARNINGS PER SHARE continued
Headline earnings per share continued
Net asset value per share
Tangible net asset value per share1
Consolidated
30 June 2018
Pence
30 June 2017
Pence
6.00
3.89
12.04
10.70
Basic and diluted earnings per share for continuing operations
Year ended 30 June 2018
Year ended 30 June 2017
Net
profit
GBP
Weighted
average
number of
shares1
Earnings
per share
Pence
Net
profit
GBP
Weighted
average
number
of shares
11,455,090
1,809,726,739
0.63
40,659,724
1,564,346,115
–
–
–
–
729,319
11,455,090
1,809,726,739
0.63
40,659,724
1,565,075,434
Earnings
per share
Pence
2.60
–
2.60
Basic earnings per share
Dilutive potential
ordinary shares
Diluted earnings
per share
1 Total assets less goodwill, non-current assets held for sale, non-current liabilities, current liabilities and mineral rights and mining property.
174
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018NOTES TO THE CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS continuedfor the year ended 30 June 2018
15. EARNINGS PER SHARE continued
Headline earnings per share for continuing operations
Reconciliation between earnings and headline earnings from continuing operations:
Year ended 30 June 2018
Year ended 30 June 2017
Net
profit
GBP
Weighted
average
number of
shares1
Earnings
per share
Pence
Net
profit
GBP
Weighted
average
number
of shares
Earnings
per share
Pence
11,455,090
1,809,726,739
0.63
40,659,724
1,564,346,115
2.60
–
–
–
(874)
245
8,153,312
–
–
–
–
–
–
–
–
–
–
–
0.45
(222,571)
49,856
(5,385,915)
–
–
–
–
–
–
–
–
–
19,607,773
1,809,726,739
1.08
35,101,094
1,564,346,115
–
–
–
–
729 319
19,607,773
1,809,726,739
1.08
35,101,094
1,565,075,434
(0.01)
–
(0.34)
–
–
–
2.24
–
2.24
Earnings as reported
Adjustments:
Profit on disposal
of investments
Taxation on profit on
disposal of Investment
Profit on disposal
of subsidiary
Profit on sale of
property, plant and
equipment and
mineral rights
Taxation on profit on
disposal of property,
plant and equipment
and mineral rights
Impairment costs
Headline earnings
per share
Dilutive potential
ordinary shares
Diluted headline
earnings per share
16. DIVIDENDS
During the current reporting period the group paid a dividend of R185 million or GBP10.0 million (2016: R300 million or GBP17.1 million)
on 21 December 2017, relating to the 2017 financial year. This dividend equated to R0.08279 per share or 0.44561 pence per share
(2016: R0.15438 per share or 0.87668 pence per share). The group received a reciprocal dividend from PAR Gold of R36.1 million
(2016: R67.4 million of the R300 million dividend), resulting in a net dividend of R148.9 million (2016: R232.6 million) paid to external shareholders.
175
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018ANNUAL FINANCIAL STATEMENTS
17. PROPERTY, PLANT AND EQUIPMENT AND MINERAL RIGHTS
Group
Cost
Balance at 1 July 2016
Transfers
Additions
Disposal of subsidiary
Disposal
Classified to long-term inventory
Transfer to asset held for sale
Foreign currency translation reserve
Balance at 30 June 2017
Transfer to intangibles
Additions
Disposal
Foreign currency translation reserve
Balance at 30 June 2018
Accumulated depreciation and impairment
Balance at 1 July 2016
Transfers
Charge for the year
Disposal of subsidiary
Disposal
Impairment
Transfers to asset held for sale
Foreign currency translation reserve
Balance at 30 June 2017
Transfer to intangibles
Charge for the year
Disposal
Impairment
Foreign currency translation reserve
Balance at 30 June 2018
Carrying amount
At 30 June 2017
At 30 June 2018
Mineral rights
and mining
property
GBP
Land1
GBP
Exploration
assets2
GBP
1,879,434
–
–
–
–
–
(14,417)
312,500
2,177,517
–
–
–
(136,020)
2,041,497
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
51,826,580
–
24,340
(9,553,127)
–
–
(4,973,866)
8,617,807
45,941,734
–
–
–
(2,869,771)
43,071,963
(9,712,365)
–
(2,014,143)
679,770
–
–
1,247,206
(1,649,351)
(11,448,883)
–
(1,044,341)
–
(12,654,647)
1,693,550
(23,454,321)
23,805,592
–
–
–
–
–
–
3,958,241
27,763,833
–
–
–
(1,734,281)
26,029,552
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2,177,517
2,041,497
34,492,851
19,617,642
27,763,833
26,029,552
27,783,229
16,183,346
78,178,493
19,241,121
25,870,818
79,909,969
28,379,565
29,694,209
Building and
infrastructure
GBP
Plant and
machinery
GBP
Capital under
construction
GBP
Shafts and
exploration
GBP
Surface
tailings3
GBP
Other
GBP
Total
GBP
27,385,699
93,806,495
10,472,371
32,251,308
505,561
291,442
242,224,482
4,052,810
(326,131)
238,613
10,759,147
(1,564,749)
(434,203)
(239,501)
15,412,825
4,688,625
289,855
290,575
35,518,177
(288,778)
(11,732,785)
4,622,817
(9,492,928)
15,774,090
(116,615)
2,004,824
5,442,711
74,149
35,735,195
109,086,465
27,533,904
42,382,644
(869,565)
183,133
14,559,996
75,843,109
4,839,865
(2,240,516)
(7,474,123)
(5,157,803)
(2,866,836)
33,677,812
116,172,338
98,219,210
44,355,673
(5,574,906)
(24,842,045)
(878,340)
(10,295,438)
(196,189)
(51,499,283)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
888
154,249
50,657
(5,850,715)
9,854,933
–
–
–
–
–
–
–
–
–
–
–
–
(1,433,520)
(5,944,542)
(627,964)
(1,962,229)
7,932
(951,472)
(4,331,397)
(156,782)
(1,745,412)
(7,951,966)
(30,907,972)
(1,663,086)
(14,003,079)
(1,435,444)
(6,113,229)
(862,858)
(1,605,887)
(9,357,299)
(67,051,003)
(17,191,110)
1,250,243
7,140,987
1,407,813
947,502
(17,494,466)
(96,931,217)
(18,309,241)
(14,661,464)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(75,322)
53,427
271,344
(14,149)
110,882
(4,295)
(21,140)
342,642
(53,072)
13,122
39,464
(33,528)
(888)
(434,203)
(869,565)
(14,673,148)
40,860,566
290,892,636
(14,149)
95,536,985
(4,295)
(22,500,490)
363,910,687
888
(12,035,470)
855,073
50,657
(5,850,715)
11,141,603
(8,867,942)
(230,203)
(66,205,189)
11,871
11,871
(32,760)
(11,094,519)
4,289
4,289
–
(106,254,059)
15,132
12,455,227
(231,671)
(171,082,380)
41,141
110,971
224,687,447
192,828,307
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1 A land register is maintained at the offices of Barberton Mines and Evander Mines, which may be inspected by a member or their duly authorised agents.
The group reviews the residual values used for purposes of depreciation calculations annually.
² Exploration assets comprise Evander South, Rolspruit and Poplar recognised on 1 March 2013 at the respective fair values in terms of IFRS 3: Business
Combinations.
3 Surface tailings relate to the Barberton Mines Harper tailings, which were reclassified to long-term inventory in the prior reporting period (refer to note 23).
Refer to note 30 for property, plant and equipment pledged as security for revolving credit facilities.
176
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018NOTES TO THE CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS continuedfor the year ended 30 June 2018
17. PROPERTY, PLANT AND EQUIPMENT AND MINERAL RIGHTS
Mineral rights
and mining
property
GBP
Land1
GBP
Exploration
assets2
GBP
Building and
infrastructure
GBP
Plant and
machinery
GBP
Capital under
construction
GBP
Shafts and
exploration
GBP
Surface
tailings3
GBP
Other
GBP
Total
GBP
Group
Cost
Transfers
Additions
Disposal
Disposal of subsidiary
Classified to long-term inventory
Transfer to asset held for sale
Foreign currency translation reserve
Balance at 30 June 2017
Transfer to intangibles
Additions
Disposal
Foreign currency translation reserve
Balance at 30 June 2018
Accumulated depreciation and impairment
Balance at 1 July 2016
Transfers
Charge for the year
Disposal of subsidiary
Disposal
Impairment
Transfers to asset held for sale
Foreign currency translation reserve
Balance at 30 June 2017
Transfer to intangibles
Charge for the year
Disposal
Impairment
Foreign currency translation reserve
Balance at 30 June 2018
Carrying amount
At 30 June 2017
At 30 June 2018
Combinations.
Balance at 1 July 2016
1,879,434
51,826,580
23,805,592
(14,417)
312,500
(4,973,866)
8,617,807
3,958,241
2,177,517
45,941,734
27,763,833
(136,020)
(2,869,771)
(1,734,281)
2,041,497
43,071,963
26,029,552
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
24,340
(9,553,127)
–
–
–
–
–
–
–
–
–
–
–
(9,712,365)
(2,014,143)
679,770
1,247,206
(1,649,351)
(11,448,883)
(1,044,341)
(12,654,647)
1,693,550
(23,454,321)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
27,385,699
–
4,052,810
(326,131)
–
–
–
4,622,817
35,735,195
–
183,133
–
(2,240,516)
33,677,812
(5,574,906)
–
(1,433,520)
7,932
–
–
–
(951,472)
(7,951,966)
–
(1,435,444)
–
(9,357,299)
1,250,243
(17,494,466)
93,806,495
238,613
10,759,147
(1,564,749)
(434,203)
–
(9,492,928)
15,774,090
109,086,465
–
14,559,996
–
(7,474,123)
116,172,338
(24,842,045)
888
(5,944,542)
154,249
50,657
(5,850,715)
9,854,933
(4,331,397)
(30,907,972)
–
(6,113,229)
–
(67,051,003)
7,140,987
(96,931,217)
10,472,371
(239,501)
15,412,825
–
–
–
(116,615)
2,004,824
27,533,904
–
75,843,109
–
(5,157,803)
98,219,210
(878,340)
–
(627,964)
–
–
–
–
(156,782)
(1,663,086)
–
(862,858)
–
(17,191,110)
1,407,813
(18,309,241)
32,251,308
–
4,688,625
–
–
–
–
5,442,711
42,382,644
–
4,839,865
–
(2,866,836)
44,355,673
(10,295,438)
–
(1,962,229)
–
–
–
–
(1,745,412)
(14,003,079)
–
(1,605,887)
–
–
947,502
(14,661,464)
2,177,517
2,041,497
34,492,851
19,617,642
27,763,833
26,029,552
27,783,229
16,183,346
78,178,493
19,241,121
25,870,818
79,909,969
28,379,565
29,694,209
1 A land register is maintained at the offices of Barberton Mines and Evander Mines, which may be inspected by a member or their duly authorised agents.
The group reviews the residual values used for purposes of depreciation calculations annually.
² Exploration assets comprise Evander South, Rolspruit and Poplar recognised on 1 March 2013 at the respective fair values in terms of IFRS 3: Business
3 Surface tailings relate to the Barberton Mines Harper tailings, which were reclassified to long-term inventory in the prior reporting period (refer to note 23).
Refer to note 30 for property, plant and equipment pledged as security for revolving credit facilities.
505,561
–
289,855
–
–
(869,565)
–
74,149
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
291,442
–
290,575
(288,778)
–
–
(75,322)
53,427
271,344
(14,149)
110,882
(4,295)
(21,140)
342,642
(196,189)
–
(53,072)
13,122
–
–
39,464
(33,528)
(230,203)
11,871
(32,760)
4,289
–
15,132
(231,671)
242,224,482
(888)
35,518,177
(11,732,785)
(434,203)
(869,565)
(14,673,148)
40,860,566
290,892,636
(14,149)
95,536,985
(4,295)
(22,500,490)
363,910,687
(51,499,283)
888
(12,035,470)
855,073
50,657
(5,850,715)
11,141,603
(8,867,942)
(66,205,189)
11,871
(11,094,519)
4,289
(106,254,059)
12,455,227
(171,082,380)
41,141
110,971
224,687,447
192,828,307
177
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018ANNUAL FINANCIAL STATEMENTS
17. PROPERTY, PLANT AND EQUIPMENT AND MINERAL RIGHTS continued
Depreciation reconciliation to the statement of comprehensive income
Depreciation on property, plant and equipment and mineral right
Amortisation of intangible assets
Non-mining depreciation and amortisation
Depreciation and amortisation arising from discontinued operations
Total mining depreciation
Year ended
30 June 2018
GBP
Year ended
30 June 2017
GBP
11,094,519
34,271
(52,530)
(6,146,443)
4,929,817
12,035,470
92,920
(58,899)
(6,570,696)
5,498,795
Change in estimate in the prior reporting period
During the prior reporting period the group revised its method of depreciation on its mining operations’ property, plant, equipment and
mineral rights. The change in method was effectively a change in estimate on the depreciation rate calculations, comprised of a revision in
residual values for property, plant and equipment that is expected to be recovered at the end of its useful life. Residual values are assessed
on an annual basis and had the following impact on depreciation:
Depreciation calculated before the reassessment
of residual values
Reassessment of residual values
Depreciation recognised per the income statement
Year ended 30 June 2018
Year ended 30 June 2017
Barberton
Mines
GBP
Evander
Mines
GBP
Barberton
Mines
GBP
Evander
Mines
GBP
–
–
–
–
–
–
6,481,289
(737,647)
5,743,642
5,457,262
(707,840)
4,749,422
Impairment considerations
During the current year there was a change in the composition of the group’s CGUs resulting in a more granular disclosure of asset balances
and performance per asset group. In prior periods BTRP and Barberton underground mining operations were considered a collective
CGU under Barberton Mines’ and ETRP and Evander underground mining operations were considered a collective CGU under 'Evander
Mines'. These classifications were viewed as appropriate as at the relevant reporting dates these CGUs were concluded to be the smallest
identifiable group of assets that could generate cash inflows that were largely independent of the cash inflows from other assets of the
group.
During the current year, following the discontinuation of Evander Mines’ underground operations, management has reassessed the
composition of CGUs in line with IAS 36: Impairment of Assets driven by the crystallisation of smaller asset groups’ ability to generate cash
independently from other assets in the group. The reassessment resulted in both the Barberton Mines’ and Evander Mines’ CGUs being
split between 'Underground' and 'Tailings Retreatment Plant'. With the recognition of Evander underground as discontinued, management
consequently believes the operational CGUs are as follows:
Barberton Mines
• Mining operations (Fairview, Sheba, Consort, BIOX®)
• Surface mining operations (BTRP).
During the prior financial year, Barberton Mines’ BTRP and underground operations were considered as a collective CGU. In the current
year the CGUs were split for the following reasons:
• The Barberton Mines’ underground operations (which includes the Fairview, Sheba and Consort and the BIOX® plant) are reliant on a
central BIOX® processing at the Fairview BIOX® plant. Therefore collectively all the mining operations’ property, plant and equipment
and the BIOX® plant are dependent on each other to generate cash flows as a CGU
• BTRP can continue independently of the Barberton Mines’ underground operations assets, as the BTRP re-mines the remnant tailings,
and has the ability to treat and smelt its own gold separately from the Barberton Mines’ underground operations.
Evander Mines
• Underground operations (7 and 8 Shaft and run-of-mine circuit in the Kinross metallurgical plant)
• Elikhulu surface mining operation
• Egoli mining project.
178
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018NOTES TO THE CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS continuedfor the year ended 30 June 2018
17. PROPERTY, PLANT AND EQUIPMENT AND MINERAL RIGHTS continued
Impairment considerations continued
Evander Mines continued
In the prior reporting period Evander Mines’ underground operations, Egoli Project and the Elikhulu Project were treated as a collective
CGU. During the current reporting period an independent feasibility study was completed on the Egoli Project. As a result of the positive
findings of this study, the Egoli Project was treated as a separate CGU from the rest of the Evander Mines’ operations. Although the Egoli
Project is reliant on the 7 Shaft infrastructure, which is currently categorised as a discontinued operation, it will be re-categorised to
continuing operations and included in the Egoli CGU, should the Egoli Project be developed.
The Elikhulu Project commenced construction during August 2017 and will be constructed in a manner that will generate cash flows
independently of the rest of the Evander Mines’ operations. In the prior year, the Elikhulu Project was classified as a development project
undergoing technical and financial evaluation and was not categorized as its own CGU but included in the Evander Mines CGU.
The group derives the recoverable amounts by calculating the value in use for the respective CGUs. The value in use is determined by
discounting the real future cash flows of the CGUs using the following key assumptions.
Year ended 30 June 2018
Year ended 30 June 2017
Barberton Mines CGUs
Evander Mines CGUs
Barberton
Mines
CGUs
Evander
Mines
CGUs
BTRP
surface
mining
operations
Mining
operations
Elikhulu
surface
mining
operations
Mining
operations
Egoli
Mining
Project
Mining
and surface
operations
Mining
and surface
operations
Real discount rate
(post-tax) (%)
Real discount rate
(pre-tax) (%)
Long-term real gold
price (ZAR/kg)
Life-of-mine (years)
10.25
11.05
10.25
11.05
550,000
20
550,000
11
–
–
–
–
7.50
9.24
12.40
13.17
10.6
11.3
9.4
10.0
550,000
13
550,000
11
550,000
20
550,000
15
During the year, Evander Mines’ underground operations were discontinued, resulting in an impairment charge recognised for operations
categorised as discontinued and certain continuing operations (refer to note 14). Other than these impairments no other impairment
indicators for the balance of the group’s CGUs were identified
There is a degree of uncertainty associated with estimation of the long-term gold price forecast, and to provide for this risk management
has considered a reasonable downside scenario by providing for a possible decline in the long-term real gold price from R550,000/kg to
R525,000/kg, assuming all other variables remain constant. The result from this sensitivity analysis does not give rise to an impairment of
goodwill for the rest of the group’s CGUs.
179
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018ANNUAL FINANCIAL STATEMENTS
18. OTHER INTANGIBLE ASSETS
Software costs
Balance at the beginning of the period
Transfer from property plant, equipment and mineral rights
(refer to note 17)
Additions
Current year amortisation
Impairment1
Foreign currency translation reserve
Balance at the end of the period
Consolidated
Separate
Year ended
30 June 2018
GBP
Year ended
30 June 2017
GBP
Year ended
30 June 2018
GBP
Year ended
30 June 2017
GBP
72,426
123,235
2,278
17,318
(34,271)
(24,039)
(2,092)
31,620
–
22,817
(92,920)
–
19,294
72,426
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1 Resulted from an impairment consideration of Evander Mines, described in notes 14 and 17.
19. GOODWILL
Goodwill acquired in a business combination is allocated at acquisition. The group’s goodwill was historically created upon the acquisition
of Barberton Mines during July 2007, and was allocated to the Barberton Mines’ mining operation CGU from which the expected benefit
from the business combination will arise.
Consolidated
Separate
Year ended
30 June 2018
GBP
Year ended
30 June 2017
GBP
Year ended
30 June 2018
GBP
Year ended
30 June 2017
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 review which was performed in accordance to the group’s accounting policies did not indicate that the
goodwill carrying amount is impaired.
The recoverable amounts of the CGUs are determined from value-in-use calculations. The key assumptions for the value-in-use calculation
include the discount rate, and changes to the gold price and direct costs expected over the life-of-mine. Management estimated the discount
rate using a post-tax real discount rate of 10.3% (2017: 10.6%) for Barberton Mines, which reflects the current market assessments of the
time value of money and the risks specific to the CGU, to the extent not already reflected in the cash flows being discounted. A real gold
price of R550,000/kg (2017: R550,000/kg) was applied over the life of the Barberton Mines’ underground operation’s CGU. The Barberton
Mines underground operation’s life-of-mine was 20 years (2017: 20 years) at the end of the financial year.
There is a degree of uncertainty associated with estimation of the long-term gold price forecast, and to provide for this risk management
has considered a reasonable downside scenario by providing for a possible decline in the long-term real gold price from R550,000/kg to
R525,000/kg, assuming all other variables remain constant. The result from this sensitivity analysis does not give rise to an impairment of
goodwill or the rest of the group’s CGUs.
The group prepares cash flow forecasts derived from the most recent financial budgets approved by management and forecast future cash
flows on a real basis.
180
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018NOTES TO THE CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS continuedfor the year ended 30 June 2018
20. LONG-TERM RECEIVABLES
Deferred consideration receivable1
Other long-term loans receivable2
Current portion of long-term receivables
Deferred consideration receivable1
Deferred consideration receivable provision3
Current portion of other long-term receivables
Consolidated
Separate
30 June 2018
GBP
30 June 2017
GBP
30 June 2018
GBP
30 June 2017
GBP
–
1,324,643
1,324,643
949,681
1,522,742
(743,317)
170,256
1,474,057
1,061,321
2,535,378
–
–
–
1,474,057
–
1,474,057
–
–
–
–
779,425
1,522,742
(743,317)
–
–
–
–
–
1 The MC Mining Limited deferred consideration accrues interest at the prime rate, and is repayable in full on 30 June 2019. At year-end, the balance of the
loan was classified as a current asset due to its recoverability expected within the next 12 months.
2 Other long-term loans receivable accrue interest at the prime rate with repayment terms of up to 24 months . The current portion of these loans has been
disclosed in current assets (refer to note 24).
3 The deferred consideration receivable was assessed at year-end in relation to the deferred consideration conditions and amended to GBP779,425
(2017: GBP1,474,057).
The carrying value of long-term receivables approximates its fair value.
181
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018ANNUAL FINANCIAL STATEMENTS
Consolidated
Separate
Holding
effectively
held by
30 June 2018
30 June 2017
company for
statutory
consolidation
statutory
holding
holding
purposes
Accounting method
30 June 2018
30 June 2017
30 June 2018
30 June 2017
%
in separate company
GBP
GBP
GBP
GBP
Carrying
amount
Carrying
amount
Carrying
amount
Carrying
amount
%
95
95
100
100
89
100
49.9
49.9
9.3
%
95
95
100
100
100
100
–
50.1
9.3
100
Investment in subsidiary
100 No investment
100 No investment
100
100
Investment in subsidiary
Investment in subsidiary
–
–
–
45,770,663
–
–
263
263
106,708,386
72,026,632
100
Investment in subsidiary
1,207,492
1,207,492
100 No investment
100 No investment
investment
9.3 Available-for-sale
3,135,244
7,522,632
3,135,244
7,522,632
3,135,244
7,522,632
111,051,385
126,527,682
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
21. INVESTMENTS IN SUBSIDIARIES AND INVESTMENTS IN ASSOCIATE
At 30 June 2018 the company and group held the following shares in subsidiaries and available-for-sale investment:
Barberton Mines1
Evander Gold Mining Proprietary Limited1
Evander Gold Mines Proprietary Limited
(Evander Mines)
Funding Company2
Pan African Resources SA Holding Company
Proprietary Limited (PAR SA Holdings)3
Pan African Resources Management Services
Company Proprietary Limited
(PAR Management Services)4
Concrete Rose Proprietary Limited5
PAR Gold Proprietary Limited (PAR Gold)6
MC Mining Limited (MC Mining)7
Country of
incorporation
Principal
activity
South Africa
South Africa
South Africa
Gold mining
Gold mining
Gold mining
Registered address
South Africa
South Africa
Treasury services
Holding company
South Africa
Services company
The Firs, corner Biermann and
Cradock Avenue, Rosebank,
Johannesburg, 2196
South Africa
South Africa
Australia
BEE company
Holding company
Coal mining
Suite 8, 7 The Esplanade, Mt Pleasant
WA 6153, Australia
Investments reconciliation
Opening balance
Investment in MC Mining
Subscription of shares in Pan African Resources Management
Services Company Proprietary Limited
Investment in Phoenix Platinum classified as held for sale
Fair value adjustment on the available-for-sale investment
Proceeds from sale of available-for-sale investment
Subscription of shares in Emerald Panther Investments 91
Proprietary Limited
Disposal of investment
Foreign currency translation reserve
Closing balance
Consolidated
Separate
Year ended
30 June 2018
GBP
Year ended
30 June 2017
GBP
Year ended
30 June 2018
GBP
Year ended
30 June 2017
GBP
7,522,632
–
1,269,228
7,522,632
126,527,682
–
124,200,675
7,522,632
–
–
(3,917,484)
–
–
–
(469,904)
3,135,244
–
–
(94,938)
(1,381,005)
–
–
206,715
7,522,632
–
–
(3,917,484)
–
1,207,492
(3,403,955)
(94,938)
(1,381,005)
34,681,754
(45,770,663)
(469,904)
111,051,385
–
(924,193)
(599,026)
126,527,682
1 The employees own 5% of the issued shares of Barberton Mines and Evander Mines, through an ESOP. During the current reporting period the group’s
South African investments were restructured, resulting in Barberton Mines and Elikhulu being transferred to PAR SA Holdings.
2 Funding Company was established to centrally provide treasury services to the group entities.
3 PAR SA Holdings is the group’s South African holding company for the South African mining investments.
4 PAR Management Services’ purpose is to provide management services to the mining operations.
182
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018NOTES TO THE CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS continuedfor the year ended 30 June 2018
21. INVESTMENTS IN SUBSIDIARIES AND INVESTMENTS IN ASSOCIATE
At 30 June 2018 the company and group held the following shares in subsidiaries and available-for-sale investment:
Country of
Principal
incorporation
activity
South Africa
South Africa
South Africa
Gold mining
Gold mining
Gold mining
South Africa
South Africa
Treasury services
Holding company
Registered address
The Firs, corner Biermann and
Cradock Avenue, Rosebank,
Johannesburg, 2196
Barberton Mines1
Evander Gold Mining Proprietary Limited1
Evander Gold Mines Proprietary Limited
(Evander Mines)
Funding Company2
Pan African Resources SA Holding Company
Proprietary Limited (PAR SA Holdings)3
Company Proprietary Limited
(PAR Management Services)4
Pan African Resources Management Services
South Africa
Services company
Concrete Rose Proprietary Limited5
PAR Gold Proprietary Limited (PAR Gold)6
MC Mining Limited (MC Mining)7
South Africa
South Africa
Australia
BEE company
Holding company
Coal mining
Suite 8, 7 The Esplanade, Mt Pleasant
WA 6153, Australia
Consolidated
Separate
30 June 2018
statutory
holding
%
30 June 2017
statutory
holding
%
Holding
effectively
held by
company for
consolidation
purposes
%
Accounting method
in separate company
Carrying
amount
30 June 2018
GBP
Carrying
amount
30 June 2017
GBP
Carrying
amount
30 June 2018
GBP
Carrying
amount
30 June 2017
GBP
95
95
100
100
89
100
49.9
49.9
9.3
95
95
100
100
100
100
–
50.1
9.3
Investment in subsidiary
100
100 No investment
100 No investment
100
100
Investment in subsidiary
Investment in subsidiary
100
Investment in subsidiary
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
45,770,663
–
–
263
106,708,386
263
72,026,632
1,207,492
1,207,492
100 No investment
100 No investment
9.3 Available-for-sale
investment
–
–
3,135,244
–
–
7,522,632
–
–
3,135,244
–
–
7,522,632
3,135,244
7,522,632
111,051,385
126,527,682
5 Concrete Rose is the group’s new BEE entity following the BEE restructure concluded on 15 January 2018 (refer to
pages 5 and 215). Concrete Rose
is held 49.9% by Funding Company and 50.1% by the following strategic BEE partners though notional vendor financing:
Alpha Investment Group Proprietary Limited
Mabindu Development Trust
Pan African Resources Management Trust
Pan African Resources Education Trust
Shareholding
%
9.90
24.75
10.50
4.95
50.10
6 During the 2016 financial year, the group finalised a share buyback transaction in which 49.9% of PAR Gold’s issued share capital was acquired with the
notional vendor financed 50.1% BEE shareholding (Mabindu Development Trust). The transaction translated to a share buyback for accounting purposes
due to Funding Company receiving the majority of the economic benefits of PAR Gold. Following the conclusion of the BEE restructure on 15 January
2018, PAR Gold’s shareholders now reflects 49.9% Funding Company and 50.1% K2015200726 Proprietary Limited (K Company), of which 49.5% of the
shares held by K Company derive no economic benefit although all the shares are entitled to a voting right. During the current reporting period PAR Gold
disposed of 130 million shares in Pan African Resources PLC on 30 May 2018, resulting in their shareholding in Pan African Resources reducing to 13.7%
(refer to note 40).
7 As a result of the disposal of Pan African Resources Coal Holdings Proprietary Limited and Uitkomst Colliery on 30 June 2017, the company acquired
261,287,625 new ordinary shares in MC Mining or 13,064,381 shares following their recent share consolidation. The entity is an emerging coal exploration,
development and mining company operating in South Africa. At year-end the company held 9.3% of MC Mining.
183
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018ANNUAL FINANCIAL STATEMENTS
22. REHABILITATION FUNDS
Funds held in trust fund
Opening balance as at 1 July 2016
Interest earned on rehabilitation funds
Interest earned on the rehabilitation funds arising from discontinued operations
Fair value adjustment
Fair value adjustment arising from discontinued operations
Foreign currency translation reserve
Closing balance as at 30 June 2017
Capital fund contribution
Transfer to a rehabilitation fund insurance investment1
Interest earned on the rehabilitation fund
Interest earned on the rehabilitation fund arising from discontinued operations
Fair value adjustment
Fair value adjustment arising from discontinued operations
Foreign currency translation reserve
Closing balance as at 30 June 2018
Funds held in insurance investment product
Opening balance as at 30 June 2017
Investment contribution1
Fair value adjustments
Foreign currency translation reserve
Closing balance as at 30 June 2018
Total rehabilitation funds at year-end
(trust funds and insurance investment product)
Barberton
Mines
GBP
Evander
Mines
GBP
2,250,466
6,497
–
(13,539)
–
374,075
2,617,499
213,576
–
135,904
–
12,860
–
(183,292)
14,003,242
5,014
35,416
(26,656)
(57,580)
2,327,619
16,287,055
1,328,950
(7,105,528)
348,405
497,240
69,988
10,030
(914,141)
Total
GBP
16,253,708
11,511
35,416
(40,195)
(57,580)
2,701,694
18,904,554
1,542,526
(7,105,528)
484,309
497,240
82,848
10,030
(1,097,433)
2,796,547
10,521,999
13,318,546
–
–
–
–
–
–
7,105,528
(64,311)
(223,448)
6,817,769
–
7,105,528
(64,311)
(223,448)
6,817,769
2,796,547
17,339,768
20,136,315
1 The funds available from contributions are held within Pan African Resources Group Rehabilitation Trust and a Cenviro insurance investment product.
The funds are invested in interest-bearing accounts and equity investments within the insurance investment product.
The group has initiated the systematic transfer of rehabilitation funds invested within the group’s rehabilitation trust to an insurance investment product.
The funds upon transfer will be invested in an insurance investment product held by Cenviro Solution underwritten by Centriq Insurance Company Limited.
The investments are in the respective names of the mining operations, Evander Mines and Barberton Mines. At year-end a portion of the Evander Mines
funds was transferred to the insurance investment product as disclosed above.
Refer to note 29 for the associated rehabilitation provision disclosure.
184
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018NOTES TO THE CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS continuedfor the year ended 30 June 2018
23. INVENTORIES
Consumable stores
Mineral stocks
Short-term portion of long-term inventory1
Provision for obsolete stock
Long-term inventory1
Inventory recognised as cost of production
Consolidated
Separate
Year ended
30 June 2018
GBP
Year ended
30 June 2017
GBP
Year ended
30 June 2018
GBP
Year ended
30 June 2017
GBP
3,519,350
–
204,160
(1,022,497)
2,701,013
567,491
3,268,504
15,287,439
3,950,752
1,028,291
182,256
(113,883)
5,047,416
684,432
5,731,848
16,740,872
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1 The long-term inventory relates to the Harper TSF located at Fairview in Barberton Mines. These surface tailings were transferred from property, plant and
equipment and mineral rights to long-term inventory following the commencement of remining activity on the TSF in the prior reporting period (refer to
note 17).
24. TRADE AND OTHER RECEIVABLES
Trade receivables
Provision for doubtful debtors
Other receivables and prepayments
Current portion of long-term receivables
VAT receivable
Consolidated
Separate
Year ended
30 June 2018
GBP
Year ended
30 June 2017
GBP
Year ended
30 June 2018
GBP
Year ended
30 June 2017
GBP
6,596,308
(76,046)
1,900,488
–
6,428,120
14,848,870
7,734,977
(94,694)
748,719
117,925
5,237,181
13,744,108
–
–
4,849
–
–
4,849
–
–
5,563
–
–
5,563
The group’s credit risk is deemed to be minimal as it only sells gold to rated South African financial institutions after having being processed
by Rand Refinery Limited. Given the creditworthiness of these institutions, no provision is made for doubtful debts pertaining to trade
receivables. These financial institutions are the major customers, that represents more than 5%, of the gold mining subsidiaries. The amounts
presented in the statement of financial position are net of allowances for doubtful debtors pertaining to other receivables. These are
estimated by the group’s management based on the current economic environment and the individual debtor circumstances.
The average credit period is:
Number of days
Trade receivables
Gold revenue
Gold revenue from discontinued operations
Consolidated
Year ended
30 June 2018
GBP
Year ended
30 June 2017
GBP
17
6,596,308
108,506,068
46,981,251
155,487,319
19
7,734,977
125,111,338
44,473,248
169,584,586
The ageing of trade receivables remained consistent year-on-year and no interest is charged on trade receivables.
It is group policy to only sell gold, and transact its foreign exchange to rated South African financial institutions. The sale of gold and foreign
exchange is executed on behalf of the group by Treasury One, an independent treasury consultancy firm.
The fair value of trade and other receivables is not materially different from the carrying value presented. Receivables have been pledged
as security, in terms of the revolving credit facility and the term loan facility to the group’s consortium of funding banks (refer to note 30).
185
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018ANNUAL FINANCIAL STATEMENTS 25. 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 amounts of these assets approximate their fair value.
Consolidated
Separate
Year ended
30 June 2018
GBP
Year ended
30 June 2017
GBP
Year ended
30 June 2018
GBP
Year ended
30 June 2017
GBP
Cash and cash equivalents
699 116
9 447 144
203 991
8 009 500
Cash and cash equivalents also include an overdraft of GBP0.07 million utilised within Funding Company 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
Rand Merchant Bank term loan facility2
Ashburton Investments term loan facility2
Nedbank Limited term loan facility2
Absa Bank Limited term loan facility2
Nedbank Limited general banking facility4
Absa Bank Limited general banking facility4
Rand Merchant Bank general banking facility4
Absa Bank Limited credit card facilities
Guarantee3
Gold hedging facility (held with Rand Merchant Bank)
Precious metals hedging facility
(held with Rand Merchant Bank)
Derivative settlement (held with Absa Bank and Rand
Merchant Bank)
USD trading facility5
Consolidated
Separate
Year ended
30 June 2018
GBP
Year ended
30 June 2017
GBP
Year ended
30 June 2018
GBP
Year ended
30 June 2017
GBP
18,426,387
18,426,387
18,426,387
29,021,559
4,145,937
11,055,832
11,055,832
2,211,166
2,763,958
2,763,958
82,919
2,409,172
14,925,373
19,654,088
19,654,088
19,654,088
–
–
–
–
–
2,948,113
2,948,113
16,215
2,835,019
–
–
–
–
–
–
–
–
–
–
–
55,279
276,396
–
6,191,266
–
–
26,107,131
20,176,893
188,190,157
27,846,580
21,521,226
117,077,531
–
–
331,675
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1 The group has a GBP55.3 million or R1 billion five-year revolving credit facility with Nedbank Limited, Absa Bank Limited and Rand Merchant Bank
(a division of FirstRand Bank Limited), (refer to note 30).
2 During the year the group secured a GBP55.3 million or R1 billion term loan facility with Rand Merchant Bank, Ashburton Investments, Absa Bank Limited
and Nedbank Limited (refer to note 30).
3 The guarantees relate to GBP1,359,486 (2017: GBP1,450,065) for Eskom Holdings SOC Limited (Electricity utility), GBP773,290 (2017: GBP824,812)
for the DMR.
4 The Absa Bank Limited, Nedbank Limited and Rand Merchant Bank general banking facilities are unsecured and GBP0.07 million utilised (2017: unutilised)
at year-end. These facilities attract interest linked to prime.
5 The USD trading facility relates to trading facilities held in the group for the purposes of trading gold and subsequent translation of USD gold sales into ZAR.
The facility is held with the following financial institutions:
• Absa Bank Limited
• Nedbank Limited
• Rand Merchant Bank.
186
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018NOTES TO THE CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS continuedfor the year ended 30 June 2018
26. SHARE CAPITAL
Issued
Number of ordinary shares issued1
Treasury shares2
Ordinary shares issued of GBP0.01 each
Consolidated
Separate
Year ended
30 June 2018
GBP
Year ended
30 June 2017
GBP
Year ended
30 June 2018
GBP
Year ended
30 June 2017
GBP
2,234,687,537
(306,358,058)
1,928,329,479
22,346,875
2,234,687,537
(436,358,058)
1,798,329,479
22,346,875
2,234,687,537
–
2,234,687,537
22,346,875
2,234,687,537
–
2,234,687,537
22,346,875
1 No additional ordinary shares were issued during the current reporting period (2017: 291.5 million shares issued at 14 pence per share).
2 On 30 May 2018, PAR Gold disposed of 130 million Pan African Resources shares at GBP0.07 per share, resulting in a decrease in the treasury shares held
(refer to note 40).
27. TRADE AND OTHER PAYABLES
Trade and other payables
Accruals and other payables
VAT payable
Total trade and other payables1
Consolidated
Separate
Year ended
30 June 2018
GBP
Year ended
30 June 2017
GBP
Year ended
30 June 2018
GBP
Year ended
30 June 2017
GBP
15,865,388
11,650,031
406,429
27,921,848
15,859,875
10,362,959
833,764
27,056,598
–
295,123
58,552
353,675
–
1,000,773
122,544
1,123,317
The average credit period is:
Number of days2
Trade and other payables
Cost of production
Cost of production from discontinued operations
Consolidated
Year ended
30 June 2018
GBP
Year ended
30 June 2017
GBP
42
15,865,388
(77,713,040)
(59,512,431)
(137,225,471)
35
15,859,875
(75,443,545)
(58,563,038)
(134,006,583)
1 The fair value of trade and other payables is not materially different from the carrying value presented.
2 Creditors’ days have increased from the prior year, due to the additional trade payables associated with the construction of the Elikhulu Project.
28. CURRENT TAXATION
Current taxation asset
Current taxation liability
Consolidated
Separate
Year ended
30 June 2018
GBP
Year ended
30 June 2017
GBP
Year ended
30 June 2018
GBP
Year ended
30 June 2017
GBP
690,657
577,888
1,068,496
48,686
75,136
–
66,479
–
Current taxes payable and receivable by the group relate to the South African Revenue Service (SARS).
187
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018ANNUAL FINANCIAL STATEMENTS
29. LONG-TERM PROVISIONS
Balance at 1 July 2016
Disposal of Uitkomst Colliery
Classified as held for sale
Unwinding of rehabilitation provision
Rehabilitation cost incurred for continuing operations in the current year
Unwinding of rehabilitation provision for discontinued operations
Foreign currency translation reserve
Balance at 30 June 2017
Rehabilitation cost incurred for continuing operations in the current year
Rehabilitation provision capitalised
Charge for the year arising from discontinued operations
Charge for the year
Foreign currency translation reserve
Balance at 30 June 2018
Consolidated
Separate
Decommissioning and rehabilitation
GBP
GBP
10,432,986
(476,999)
(58,249)
92,721
(57,117)
(13,131)
1,735,114
11,655,325
(29,925)
665,582
–
3,757,587
(933,456)
15,115,113
–
–
–
–
–
–
–
–
–
–
–
–
–
–
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 any deficit is funded by means of payments to a fund required by South African law. The provision represents
the net present value of the best estimate of the expenditure to be incurred to decommission and rehabilitate environmental disturbances
caused by mining operations. These costs are expected to be incurred over the respective lives of the mines.
The current year’s movement in the group’s rehabilitation liability has been impacted by the changes in the following assumptions relative
to the prior year:
Barberton Mines (Fairview)
Barberton Mines (Sheba)
Barberton Mines (Consort)
Barberton Mines (BTRP)
Evander Mines (8 Shaft and Kinross Plant)
Evander Mines (Elikhulu)
Phoenix Platinum
Uitkomst Colliery
Year ended 30 June 2018
Year ended 30 June 2017
Period to
rehabilitation
Risk-free rate
%
Period to
rehabilitation
Risk-free rate
%
20
17
7
11
2
13
–
–
10.9
10.0
9.0
9.7
7.7
9.9
–
–
20
20
7
14
15
–
7
17
11.6
11.6
8.7
10.1
9.9
–
8.7
8.9
188
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018NOTES TO THE CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS continuedfor the year ended 30 June 2018
30. LONG-TERM LIABILITIES
Cash-settled share options
Opening balance
(Income)/expense for the year for continuing operations
Income for the year from discontinued operations
Payments during the year
Classified as held for sale
Foreign currency translation reserve
Closing balance
Current portion
Long-term portion
Post-retirement benefits
Opening balance
Utilised for the year from continuing operations
Utilised for the year from discontinued operations
Foreign currency translation reserve
Closing balance
Revolving credit facility
Opening balance
Drawdowns
Finance costs incurred
Finance costs capitalised1
Repayments of capital
Repayments of finance costs
Foreign currency translation reserve
Closing balance
Current portion
Long-term portion
Term loan facility
Opening balance
Drawdowns
Finance costs incurred
Finance costs incurred and capitalised
Repayments of finance costs
Foreign currency translation reserve
Closing balance
Current portion
Long-term portion
Consolidated
Separate
Year ended
30 June 2018
GBP
Year ended
30 June 2017
GBP
Year ended
30 June 2018
GBP
Year ended
30 June 2017
GBP
2,850,525
(680,887)
–
(955,405)
–
(112,000)
1,102,233
(211,851)
890,382
62,846
(5,649)
(5,660)
(3,413)
48,124
11,861,752
44,422,738
2,640,943
885,929
(5,836,226)
(3,540,798)
(2,553,737)
47,880,601
(4,873,834)
43,006,767
–
45,563,326
336,207
1,255,325
(1,574,528)
(3,015,377)
42,564,953
–
42,564,953
5,541,351
(117,948)
(16,879)
(3,299,545)
(45,413)
788,959
2,850,525
(1,353,914)
1,496,611
64,691
(6,139)
(6,250)
10,544
62,846
15,693,937
47,036,166
2,448,752
–
(53,964,004)
(2,402,769)
3,049,670
11,861,752
(1,221,303)
10,640,449
–
–
–
–
–
–
–
–
–
661,340
(196,591)
–
(326,524)
–
(17,599)
120,626
(84,564)
36,062
–
1,792,385
–
(1,111,484)
–
(19,561)
661,340
(207,055)
454,285
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1 Finance costs capitalised, in terms of accounting standard IAS 23, relate to the portion of this facility utilised to fund the Elikhulu Project’s construction costs.
On 15 September 2017, the group concluded a term loan facility with a consortium of South African banks led by Rand Merchant Bank
(a division of FirstRand Bank Limited). The term loan facility is used to fund the debt component of the Elikhulu Project’s construction
costs. Utilisation of the facility commenced during November 2017 and the facility has similar contractual terms to that of the revolving
credit facility, which are disclosed below. The interest incurred on this facility during the financial year was capitalised in terms of accounting
standard, IAS 23.
189
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018ANNUAL FINANCIAL STATEMENTS
30. LONG-TERM LIABILITIES continued
Gold loan
Opening balance
Gold loan repayments
Foreign currency translation reserve
Closing balance
Current portion
Long-term portion
Consolidated
Separate
Year ended
30 June 2018
GBP
Year ended
30 June 2017
GBP
Year ended
30 June 2018
GBP
Year ended
30 June 2017
GBP
1,570,462
(1,542,272)
(28,190)
–
–
–
4,137,041
(3,191,991)
625,412
1,570,462
(1,570,462)
–
–
–
–
–
–
–
–
–
–
–
–
–
The gold loan has been designated as an instrument to be measured at amortised cost.
Deferred executive incentive payments
Opening balance
Expense for the current year
Foreign currency translation reserve
Closing balance
Chief executive officer retention at 40%
Chief financial officer retention at 30%
Total accrued at 30 June 2018
Current portion
Long-term portion
Consolidated
Separate
Year ended
30 June 2018
GBP
Year ended
30 June 2017
GBP
Year ended
30 June 2018
GBP
Year ended
30 June 2017
GBP
90,396
–
(5,648)
84,748
59,018
25,730
84,748
(84,748)
–
–
88,876
1,520
90,396
62,952
27,444
90,396
–
90,396
90,396
–
(5,648)
84,748
59,018
25,730
84,748
(84,748)
–
88,876
1,520
90,396
62,952
27,444
90,396
–
90,396
The chief executive officer’s and financial director’s annual incentive is subject to a 40% and 30%, respectively, two-year retention period.
Payment is subject to the Remco’s approval of the fulfilment of the conditions to the incentive.
Summary of current and non-current portions
of long-term liabilities
Current portion
Non-current portion
Consolidated
Separate
Year ended
30 June 2018
GBP
Year ended
30 June 2017
GBP
Year ended
30 June 2018
GBP
Year ended
30 June 2017
GBP
5,170,433
86,510,226
91,680,659
4,145,679
12,290,302
16,435,981
169,312
36,062
205,374
207,055
544,681
751,736
190
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018NOTES TO THE CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS continuedfor the year ended 30 June 2018 30. LONG-TERM LIABILITIES continued
Terms of the revolving credit and term loan facilities
Revolving credit facility
Facility amount
R1 billion
Term loan facility
R1 billion
Lenders
Borrower
Interest rate
Rand Merchant Bank (a division of FirstRand Bank
Limited), Absa Bank Limited, Nedbank Limited
Rand Merchant Bank (a division of First RandBank
Limited), Absa Bank Limited, Nedbank Limited,
Ashburton Investments
Pan African Resources Funding Company Proprietary
Limited
Pan African Resources Funding Company Proprietary
Limited
One-month JIBAR at 6.73%, linked to a monthly
payment period
Three-month JIBAR rate at 6.96%, linked to a
quarterly payment period
Interest rate margin
2.5% (3% from 1 July 2018)
3.3% (3.8% from 1 July 2018)
Commitment fee
35% of the margin per annum, calculated on a
day-to-day basis on the undrawn portion of the
maximum available commitment. Payable semi-
annually
0.95% calculated on a day-to-day basis on the
undrawn portion of the maximum available
commitment. Payable quarterly
Term of loan
Five years effective from 17 June 2015
Seven years effective from 15 September 2017
Repayment period
Full repayment of the outstanding balance at the end
of the facility term with the following interim facility
reductions:
• R133.3 million on 17 June 2019
• R133.3 million on 17 December 2019
• R133.3 million on 17 June 2020
The above reductions in the facility capacity were
re-negotiated from the original R80 million semi-
annual instalment redemption profile, commencing
on 17 June 2018
Fully payable in seven years from financial close
being 15 September 2017. The facility has a two-year
availability period from financial close after which
the capital is repaid in equal quarterly instalments
for five years
Final repayment date
17 June 2020
15 September 2024
Financial covenant
The following covenants must be complied to by the
group at each semi-annual reporting period:
• The ratio of the net debt to equity must be less
The following covenants must be complied to by the
group at each semi-annual reporting period:
• The ratio of the net debt to equity must be less
than 1:1 (refer to note 32)
than 1:1 (refer to note 32)
• The interest cover ratio must be greater than
• The interest cover ratio must be greater than four
four times (refer to note 32)
times (refer to note 32)
• The ratio of net debt to adjusted EBITDA must
• The ratio of net debt to adjusted EBITDA must
be less than 2.5:1 (refer to note 32). This covenant
will be tested from 31 December 2019, catering
for the construction of the Elikhulu Project
be less than 2.5:1 (refer to note 32). This covenant
will be tested from 31 December 2019, catering
for the construction of the Elikhulu Project
• The debt service cover ratio must be greater than
• The debt service cover ratio must be greater than
1.3 times (refer to note 32)
1.3 times (refer to note 32)
The group re-negotiated these covenants, resulting
in a waiver of all breaches at 30 June 2018.
All anticipated covenant breaches on 31 December
2018 were also waived subject to the interest cover
ratio being in excess of 2.3 times at that date
The group re-negotiated these covenants, resulting in
a waiver of all breaches at 30 June 2018.
All anticipated covenant breaches on 31 December
2018 were also waived subject to the interest cover
ratio being in excess of 2.3 times at that date
191
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018ANNUAL FINANCIAL STATEMENTS
30. LONG-TERM LIABILITIES continued
Bonds as security for the facilities
The following bonds were registered in favour of the lenders:
• Mortgage bond B3644/2015 – Barberton Mines/Bowwood and Main No 40 (RF) Proprietary Limited
• Mortgage bond B3701/2015 – Evander Township Limited/Bowwood and Main No 40 (RF) Proprietary Limited
• Mortgage bond B6665/2015 – Evander Township Limited/Bowwood and Main No 40 (RF) Proprietary Limited
• General notarial bond BN15110/2015 – Barberton Mines/Bowwood and Main No 40 (RF) Proprietary Limited
• General notarial bond BN15357/2015 – Evander Mines/Bowwood and Main No 40 (RF) Proprietary Limited.
Ceded rights to the lenders as security for the facilities
• Bank accounts
• Debts
•
Insurance proceeds.
Terms of the gold loan
In May 2014, a gold loan transaction of R200 million was entered into with Absa Bank Limited as a counterparty. The purpose of this gold
loan was to provide funds for the ETRP construction at Evander Mines. The gold loan was repaid quarterly in gold ounces produced from
the Evander Mines ETRP operation, with the repayments having commenced on 31 July 2014 and ending on 31 October 2017. Refer to
terms below:
Effective delivery price per ounce
Effective delivery price per kilogram
Final repayment date
Gold loan repayment schedule during the current reporting period:
12,694
408,129
31 October 2017 (repaid in full)
Delivery date
31 July 2017
31 October 2017
Ounces
delivered
1,055.50
1,042.69
2,098.19
As repayment of the loan is made in the delivery of physical ounces of gold, revenue is recognised on 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 Remco 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
rights programme is subject to the agreement of a selected participant and acceptance by said participant of the rules and regulations
governing the share appreciation rights programme.
The share appreciation rights 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 Remco, to surrender his/her notional shares and receive the share
appreciation rights settlement at a date prior to the sixth anniversary date.
The share appreciation rights settlement is regarded as remuneration for income taxation 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.
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 have elapsed, in which event not more than 25% of the total number of notional shares allocated can be surrendered
• Three years have elapsed, in which event not more than 50% of the total number of notional shares allocated can be surrendered
• Four years have elapsed, in which event all of the notional shares allocated can be surrendered.
192
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018NOTES TO THE CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS continuedfor the year ended 30 June 2018
30. LONG-TERM LIABILITIES continued
Group cash-settled share options continued
Top-up issues
• One year have elapsed, in which event not more than 25% of the total number of notional shares allocated can be surrendered
• Two years have elapsed, in which event not more than 50% of the total number of notional shares allocated can be surrendered
• Three years have elapsed, in which event not more than 75% of the total number of notional shares allocated can be surrendered
• Four years have elapsed, in which event all of the notional shares allocated can be surrendered
• 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 rights settlement in respect thereof.
Details of the share options outstanding during the year, in relation to this scheme, are as follows:
Year ended 30 June 2018
Year ended 30 June 2017
Weighted
average
exercise
price
R
1.86
1.70
1.09
2.02
2.80
1.78
Number
of options
62,628,144
28,170,871
(10,913,826)
(2,601,994)
(9,341,279)
67,941,916
Weighted
average
exercise
price
R
1.65
3.17
1.56
1.81
3.41
1.86
Number
of options
94,301,588
11,990,381
(25,250,473)
(15,391,459)
(3,021,893)
62,628,144
Outstanding at the beginning of the year
Granted during the year
Exercised during the year
Forfeited in the year
Share options discontinued
Outstanding and exercisable at the end of the year
Cash-settled share options are valued annually at fair value.
The weighted average share price on redemptions was R2.39 (2017: R3.52).
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 (years)
Weighted average remaining life (years)
Risk-free rate (%)
Expected dividend yield (%)
Year ended
30 June 2018
Year ended
30 June 2017
1.21
2.07
1.15 – 3.93
47.0
3 – 6
3.35
7.37 – 7.74
4.0
2.49
2.00
1.15 – 3.93
40.0
6
4.43
7.04 – 8.37
4.0
193
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018ANNUAL FINANCIAL STATEMENTS
30. LONG-TERM LIABILITIES continued
Group cash-settled share options continued
Expected volatility impacted by the following factors
• The historical volatility of the share price over the most recent period that is commensurate with the expected term of the option
(taking into account the remaining contractual life of the option and the effect of expected early exercise)
• The length of time an entity’s shares have been publicly traded. A newly listed entity may have a high historical volatility, compared with
that of similar entities that have been listed for longer.
Participation in share-based and other long-term incentive schemes is restricted to employees and directors as described above.
The group recognised an income of GBP1,404,201 (expense in 2017: GBP117,948) relating to cash-settled share-based payment
transactions during the year, as a result of the share price decreasing.
During the prior years, the group entered into an employee share ownership scheme transaction at Barberton Mines and Evander
Mines. The group recognised an expense of GBP723,313 (2017: GBP250,250) in relation to the employee share ownership scheme.
Refer to note 39.
Executive director share incentive scheme
To incentivise the executive directors and align their interests with that of the group, and to ensure retention during the three-year contract
term, the following long-term incentive were in issue at 30 June 2018.
Chief executive officer
Financial director
Allocation of 3,100,000 Pan African Resources shares,
effective on 1 March 2018, vesting over a three-year period
(1 March 2018 to 28 February 2021). Vesting will occur subject
to total shareholder return (defined as share price performance
and dividends distributed to shareholders) exceeding that of
a set of gold sector peers on an annual basis for each of the
three years to 2021. These shares only vest when Pan African
Resources’ total shareholder return outperforms that of the
peer group, with a pro-rata vesting for superior performance
up to 8%, whereafter all shares vest
The new issuance of long-term incentives, therefore, vest in
approximately three years from the date of original issue
At year-end, under the original allotment, the share incentive
scheme had 1,533,334 shares which are allocated but not yet
vested. These shares should contractually have vested on 1 March
2018. However, given group performance during the past year,
Remco, in consultation with the chief executive officer, deferred
the vesting. Any future vesting will be conditional on the group
achieving production, cost budgets and safety targets during the
2019 financial year
Allocation of 5,000,000 Pan African Resources’ shares effective on
1 March 2018, vesting over a three-year period (1 March 2018 to
28 February 2021). Vesting will occur subject to total shareholder
return (defined as share price performance and dividends
distributed to shareholders) exceeding that of a set of gold sector
peers on an annual basis for each of the three years to 2021. These
shares only vest when Pan African Resources’ total shareholder
return outperforms that of the peer group, with a pro-rata vesting
for superior performance up to 8%, whereafter all shares vest
The new issuance of long-term incentives, therefore, vest in
approximately three 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 significant outperformance of the market (in excess of 8%),
Remco may also allocate additional shares
Remco may elect, at its discretion, in circumstances deemed
reasonable/equitable, to apply amended vesting criteria. In the
event of a significant outperformance of the market (in excess
of 8%), Remco may also allocate additional shares
At year-end the incentive scheme was treated as a cash-settled share option scheme and a liability of GBP87,342 (2017: GBP454,285) was
recognised in the statement of financial position.
194
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018NOTES TO THE CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS continuedfor the year ended 30 June 2018
31. DEFERRED TAXATION
Consolidated
Separate
Year ended
30 June 2018
GBP
Year ended
30 June 2017
GBP
Year ended
30 June 2018
GBP
Year ended
30 June 2017
GBP
Note
Deferred taxation liabilities
Arising from temporary differences relating to:
Property, plant and equipment
Provisions
Investment in rehabilitation fund
Prepayments
Assessed loss
Other
Net deferred taxation liabilities
Reconciliation of deferred taxation liabilities
Net deferred taxation liabilities at the beginning
of the year
Deferred taxation charge for the year from
continuing operations
Deferred taxation charge for the year from
discontinued operations
Classified as discontinued operation
Classified as held for sale
Transfer to deferred taxation asset
Foreign currency translation reserve
Net deferred taxation liabilities at the
end of the year
Deferred taxation assets
Arising from temporary differences relating to:
Property, plant and equipment
Provisions
Assessed loss
Investment in rehabilitation fund
Prepayment
Other
Net deferred taxation assets
Reconciliation of deferred taxation assets
Net deferred assets at the beginning of the year
Transfer from deferred taxes liabilities
Deferred taxation credit for the year
Deferred taxation credit for the year raised in equity
Foreign currency translation reserve
Net deferred taxation assets at the end of the year
13
13
13
14,913,959
(571,107)
–
–
–
–
14,342,852
43,521,603
(2,015,142)
604,642
10,770
(3,031,202)
(143,445)
38,947,226
38,947,226
40,616,337
(3,642,309)
(8,908,141)
(24,379,234)
–
–
4,579,840
(1,162,671)
3,643,835
(3,014,280)
(53,933)
–
6,663,408
14,342,852
38,947,226
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(1,736,278)
2,442,291
6,428,244
(1,785,767)
–
860,349
6,208,839
762,503
4,579,840
38,347
919,181
(91,032)
6,208,839
–
709,425
92,964
–
(39,886)
–
762,503
1,117,092
–
(531,249)
–
176,660
762,503
–
276,764
375,115
–
–
877,516
1,529,395
415,692
–
274,599
919,181
(80,077)
1,529,395
–
349,587
66,105
–
–
–
415,692
–
–
408,704
–
6,988
415,692
195
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018ANNUAL FINANCIAL STATEMENTS 31. DEFERRED TAXATION continued
Assessed loss carried forward
Unredeemed capital
carried forward
Total
Year ended
30 June 2018
GBP
Year ended
30 June 2017
GBP
Year ended
30 June 2018
GBP
Year ended
30 June 2017
GBP
Year ended
30 June 2018
GBP
Year ended
30 June 2017
GBP
–
31,298,590
1,339,697
502,789
10,825,723
236,090
–
109,303,562
–
6,231,044
34,591,790
–
–
140,602,152
1,339,697
6,733,833
45,417,513
236,090
114,849
32,753,136
95,924
11,660,526
–
109,303,562
–
40,822,834
114,849
142,056,698
95,924
52,483,360
Phoenix Platinum
Evander Mines
Pan African Resources PLC
Pan African Resources
Management Services
Company Proprietary Limited
Deferred taxation assets have been raised on the basis that the individual group companies will in the future be able to generate taxable
economic benefits to utilise current deductible temporary differences.
Deferred taxation rates applied within the group:
The rates used to calculate deferred taxation are based on the current estimate of future profitability when temporary differences will be
recognised in the statement of comprehensive income. The respective rates are calculated based on management’s best estimate through
which the temporary difference will be realised over the life of the mining operations.
Deferred taxation rates applied within the group:
Barberton Mines
Evander Mines (Elikhulu)
Evander Mines (Other and mining rights)
Phoenix Platinum
Uitkomst Colliery
Other companies
The effect of the rate change on the effective taxation rate has been disclosed in note 13.
Consolidated
Year ended
30 June 2018
%
Year ended
30 June 2017
%
23.1
19.2
15.6
–
–
28.0
23.1
–
23.1
28.0
28.0
28.0
196
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018NOTES TO THE CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS continuedfor the year ended 30 June 2018
32. 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 financial covenants:
Cash and cash equivalents
Interest-bearing debt/gold loan
Net debt
Equity
Net debt to equity ratio1
Finance costs of the revolving credit facility
Finance costs of the term loan facility
Finance costs of the general banking facilities
Total finance costs for Interest-bearing facilities
Adjusted EBITDA2
Interest cover ratio
Net debt
Adjusted EBITDA
Net debt to adjusted EBITDA
Adjusted EBITDA
Net working capital change
Add: Non-cash flow items
Total capital expenditure less capital funded through
permitted indebtedness
Less: Dividends paid
Less: Taxation paid
Free cash flow
Finance costs from interest-bearing facilities
Debt service cover ratio
Consolidated
Separate
Year ended
30 June 2018
GBP
Year ended
30 June 2017
GBP
Year ended
30 June 2018
GBP
Year ended
30 June 2017
GBP
(699,116)
90,445,554
89,746,438
115,703,748
0.78
3,526,872
1,591,532
106,155
5,224,559
24,088,505
4.61
89,746,438
24,088,505
3.73
24,088,505
1,592,923
3,916,836
–
(8,231,456)
(1,281,351)
20,085,457
5,224,559
3.84
(9,447,144)
13,432,214
3,985,070
216,581,075
0.02
2,448,752
–
–
2,448,752
47,299,664
19.3
3,985,070
47,299,664
0.08
47,299,664
3,341,368
(7,042,215)
–
(13,290,429)
(8,003,338)
22,305,050
2,448,752
9.1
(203,991)
–
(203,991)
185,631,691
–
–
–
–
–
(1,799,030)
–
(203,991)
(1,799,030)
0.11
(1,799,030)
(805,554)
975,202
–
(8,231,456)
(12,729)
(9,873,567)
–
–
(8,009,500)
–
(8,009,500)
216,814,209
0.04
–
–
–
–
18,348,538
–
(8,009,500)
18,348,538
0.44
18,348,538
869,747
1,882,781
–
(13,290,429)
(57,232)
7,753,405
–
–
1 Net debt is calculated on cash and cash equivalents less interest-bearing debt.
2 Adjusted EBITDA is represented by earnings before interest, taxation, depreciation and amortisation, impairments, discontinued operations and loss on
disposal of investments.
Financial covenant limits
The ratio of the net debt to equity must be less than 1:1 (measured semi-annually).
The interest cover ratio was revised to be greater than 2.3 times at 31 December 2018 and greater than 4 times from 30 June 2019
onwards (measured semi-annually).
The ratio of net debt to adjusted EBITDA must be less than 2.5:1 (measured semi-annually). This ratio is considered by the lenders effective
31 December 2019.
The debt service cover ratio must be more than 1.3 times (measured semi-annually).
197
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018ANNUAL FINANCIAL STATEMENTS
32. FINANCIAL INSTRUMENTS continued
Categories of financial instruments
Financial assets1
Loans and receivables
Cash and cash equivalents
Long-term receivables
Receivables
Available-for-sale financial assets
Listed available-for-sale Investment
Financial assets at fair value through profit and loss
Designated as fair value through profit and loss
Rehabilitation trust fund
Financial instruments asset
Financial liabilities
Financial liabilities measured at amortised cost
Trade and other payables
Gold loan
Revolving credit facility
Term loan facility
Financial liabilities at fair value through profit and loss
Cash-settled share options
Consolidated
Separate
Year ended
30 June 2018
GBP
Year ended
30 June 2017
GBP
Year ended
30 June 2018
GBP
Year ended
30 June 2017
GBP
699,116
2,274,324
6,596,308
9,447,144
2,535,378
7,734,977
203,991
–
–
8,009,500
1,474,057
–
3,135,244
7,522,632
3,135,244
7,522,632
20,136,315
219,598
18,904,554
–
–
–
–
–
27,515,419
–
47,880,601
42,564,953
26,222,834
1,570,462
11,861,752
–
295,123
–
–
–
1,000,773
–
–
–
1,102,233
2,850,525
120,626
661,340
1 At year-end the group did not have trade receivables that are past overdue and not impaired.
Financial risk management objectives
The group seeks to minimise the effects of financial risks by using derivative financial instruments to hedge risk exposures where appropriate.
The use of any financial derivatives is approved by the board, who also on a continuous basis provide guidance on managing foreign
exchange risk, interest rate risk, credit risk, the use of financial derivatives and non-derivative financial instruments, and the investment of
excess liquidity. Exposure limits are reviewed on a continuous basis. The group does not enter into or trade financial instruments, including
derivative financial instruments, for speculative use.
Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the group. The group
has adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral where appropriate, as a means of
mitigating the risk.
The group’s credit risk is primarily attributable to its trade receivables. The amounts presented in the statement of financial position are net
of allowances for doubtful receivables of GBP76,046 (2017: GBP94,694) relating to trade 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).
Customers above 5%
Financial institutions (trade receivables)
Provision for doubtful debtors (trade receivables)
198
Consolidated
30 June 2018
GBP
30 June 2017
GBP
6,202,701
76,046
6,928,566
94,694
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018NOTES TO THE CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS continuedfor the year ended 30 June 2018
32. FINANCIAL INSTRUMENTS continued
Credit risk continued
The group trades with reputable South African financial institutions and the trade receivable balances are neither past due nor impaired.
Included in long-term receivables is a deferred consideration receivable from MC Mining (a listed company). At year-end the deferred
consideration was assessed based on the deferred consideration agreement conditions and amended to a recoverable amount
of GBP779,425.
Market risk
The risk is that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. The group’s
activities expose it primarily to the financial risks of changes in foreign currency exchange rates, commodity prices and interest rate risk.
Foreign currency risk
The group undertakes certain transactions in foreign currencies. Hence, exposures to exchange rate fluctuation arise. Exchange rate
exposures are managed within approved policy parameters. The group specifically ensures USD receipts are converted into ZAR as
efficiently as possible.
Interest rate risk
The group is exposed to interest rate risk as entities within the group borrow and invest funds at both fixed and floating interest rates.
Fluctuations in interest rates impact on short-term investment and financing activities, giving rise to interest rate risk. In the ordinary
course of business, the group receives cash proceeds from its operations and is required to fund working capital and capital expenditure
requirements. Cash is managed to ensure that surplus funds are invested to maximise returns whilst ensuring that capital is safeguarded to
the maximum extent by only investing with reputable financial institutions. Contractual arrangements for committed borrowing facilities
are maintained to meet the group’s normal and contingent funding needs. Please refer below where an interest rate sensitivity analysis has
been performed.
Commodity price risk
The group is affected by the price volatility of certain commodities. The group may enter into forward contracts to hedge its exposure to
fluctuations in commodity prices and exchange rates on specific transactions. The contracts are matched with anticipated future cash flows
from sales receipts.
Currency and gold spot price
GBP/ZAR exchange rate
USD/ZAR exchange rate
Average gold spot price received (USD/oz)
Average gold spot price received (R/kg)
Foreign currency/gold price sensitivity
2018
2017
Year ended 30 June 2018
Year ended 30 June 2017
Closing rate
Average rate
Closing rate
Average rate
18.09
13.71
17.27
12.86
16.96
13.60
17.25
13.04
Year ended
30 June 2018
Year ended
30 June 2017
1,301
538,100
1,242
542,773
Impact of 10%
currency or
gold price
movement
on profit
GBP
13,239,406
14,509,143
199
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018ANNUAL FINANCIAL STATEMENTS
32. FINANCIAL INSTRUMENTS continued
Commodity price risk continued
The pound sterling carrying amount of the group’s foreign currency denominated monetary assets and liabilities at statement of financial
position date is as follows:
2018
Current assets
Current liabilities
2017
Current assets
Current liabilities
Impact of
10% currency
movement
on translation
reserve
GBP
GBP1
20,108,935
33,670,169
18,280,850
30,609,245
29,307,164
31,250,963
26,642,876
28,409,966
1 The group's functional currency is ZAR, therefore the sensitivity details the effect of the ZAR/GBP exchange rate on the foreign currency translation reserve.
The sensitivity assumptions used above represent a reasonable approximation of possible changes.
Commodity zero cost collar
The group entered into multiple zero cost collar gold transactions during the year, similar to transactions that were undertaken in the prior
year. During the current financial year, the group realised a gain of GBP902,349 (2017: GBP698,615).
Financial instruments (derivatives)
Opening balance
Financial instruments (receipts)/settlements during the year
Profit arising from unrealised financial instruments
Profit arising from unrealised financial instruments from
discontinued operations
Profit arising from realised financial instruments
Profit arising from realised financial instruments from
discontinued operations
Foreign currency translation reserve
Closing balance
Cost collar derivative profits
Gains from fair value measurement
Profits/(losses) realised on the statement of comprehensive
income
Consolidated
Separate
Year ended
30 June 2018
GBP
Year ended
30 June 2017
GBP
Year ended
30 June 2018
GBP
Year ended
30 June 2017
GBP
–
(924,712)
–
(5,945,399)
691,105
5,488,407
230,025
–
902,349
11,936
219,598
–
698,615
–
(932,728)
–
230,025
5,488,407
902,349
1,132,374
698,615
6,187,022
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
200
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018NOTES TO THE CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS continuedfor the year ended 30 June 2018
32. FINANCIAL INSTRUMENTS continued
Commodity zero cost collar continued
Cost collar derivative transactions entered into during the year:
Bank
Entity
Original term
Volume
oz
Remaining
term
Status
Put
option
price
R/kg
Call
option
price
R/kg
Valuation
at
year-end
R
Valuation
at
year-end
GBP
Unrealised
cost collars
29 August 2017 Absa
Evander
Mines
18 June 2018
Nedbank Evander
19 June 2018
RMB
Mines
Evander
Mines
19 June 2018
Nedbank Evander
Mines
1 January 2018
– 31 December
2018
1 July 2018 –
31 December
2018
1 July 2018 –
31 December
2018
1 July 2018 –
31 December
2018
2,500
10,000
10,000
5,000
1 July 2018 –
31 December
2018
1 July 2018 –
31 December
2018
1 July 2018 –
31 December
2018
1 July 2018 –
31 December
2018
Open
550,000
631,018
(1,360,225)
(75,192)
Open
550,000
598,000
1,327,775
73,398
Open
560,000
605,500
2,377,128
131,406
Open
560,000
606,671
1,627,846
89,986
Bank
Entity
Original term
Volume
oz
Remaining
term
Status
3,972,524
219,598
Put
option
price
R/kg
Call
option
price
R/kg
Receipt at
year-end
R
Receipt at
year-end
GBP
Realised
cost collars
11 August 2017 Nedbank Evander
Mines
19 December
2017
Nedbank Evander
Mines
29 August 2017 Absa
10 August 2017 RMB
Evander
Mines
Evander
Mines
1 January 2018 –
31 December
2018
1 July 2018 –
31 December
2018
1 January 2018
– 31 December
2018
1 January 2018
– 31 December
2018
8,000
19 December
2017
4,500
19 December
2017
2,500
8,000
1 January
2018 –
30 June 2018
21 December
2017
Closed 550,000
640,428
4,895,000
293,666
Closed 550,000
631,000
2,505,000
150,283
Open
550,000
631,018
1,983,559
116,400
Closed 550,000
612,014
6,200,000
364,363
15,583,559
924,712
Cost collar derivative transactions entered into during the prior year:
Bank
Entity
Original term
Volume
oz
Remaining
term
Status
Put
option
price
R/kg
Call
option
price
R/kg
Receipt at
year-end
R
Receipt at
year-end
GBP
Realised
cost collars
1 April 2017
Absa
14 April 2017
RMB
Evander
Mines
Evander
Mines
1 April 2017 –
30 September
2017
1 October 2017
– 31 March
2018
9,645
9,645
1 April 2017 –
30 September
2017
1 October
2017 –
30 June 2018
Closed 550,000
591,881
3,900,000
226,087
Closed 550,000
640,000
8,039,123
466,036
201
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018ANNUAL FINANCIAL STATEMENTS
32. FINANCIAL INSTRUMENTS continued
Interest rate risk
The group is exposed to interest rate risk as entities within the group borrow and invest funds at both fixed and floating interest rates.
Interest rate sensitivity
The group’s revolving credit and term loan facility incur interest based on the JIBAR rates (refer to note 30). Refer below to the interest
rate sensitivity:
Historical interest variation impact on the interest expense recognised
for the revolving credit and term loan facilities
Interest
incurred on
facilities on a
10% decrease
in interest
rates
Interest
incurred on
facilities on a
5% decrease
in interest
rates
Interest
incurred on
facilities on a
5% increase
in interest
rates
Interest
incurred on
facilities on a
10% increase
in interest
rates
Interest
incurred on
facilities for
the year
GBP
4,606,564
4,862,484
5,118,404
5,374,324
5,630,244
Interest variation impact on the revolving credit and term loan facilities
for the next 12 months
Interest
incurred on
facilities on a
10% decrease
in interest
rates
Interest
incurred on
facilities on a
5% decrease
in interest
rates
Interest
incurred on
facilities on a
5% increase
in interest
rates
Interest
incurred on
facilities on a
10% increase
in interest
rates
Interest
at year-end
base rate
GBP
7,922,759
8,362,912
8,803,066
9,243,219
9,683,372
Liquidity risk
Ultimate responsibility for liquidity risk management rests with the board, but is delegated to the executive management, which has
established a liquidity risk management framework for the management of the group’s short-term funding and liquidity requirements.
This framework involves daily monitoring of the group's cash position, regular review of cash flow forecasts and maturity profiles of financial
assets and liabilities. Liquidity risk is managed by maintaining adequate working capital reserves and borrowing capacity on banking facilities.
The group has access to financing facilities from the revolving credit facility, term loan facility and the general banking facilities, of which
GBP47,816,473 (2017: GBP11,792,453) of revolving credit facility was utilised, and GBP42,564,953 (2017: nil) was utilised on the term
loan facility. The general banking facility was utilised by GBP72,817 (2017: nil) at year-end. In the prior reporting period the gold loan had
an amount outstanding of GBP1,570,462 and has subsequently been settled in full during the current reporting period (refer to note 30).
The group expects to meet its obligations from its operating cash flows and the borrowing capacity on its existing banking facilities.
202
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018NOTES TO THE CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS continuedfor the year ended 30 June 2018
32. FINANCIAL INSTRUMENTS continued
Liquidity risk analysis
The following table discloses the group’s maturity profile from its financial liabilities:
Group
2018
Trade and other payables
Long-term liabilities (non-interest-bearing)
Long-term liabilities (interest-bearing)
Financial instrument liabilities
Other short-term liabilities
2017
Trade and other payables
Long-term liabilities (non-interest-bearing)
Long-term liabilities (interest-bearing)
Other short-term liabilities
Separate
2018
Trade and other payables
Long-term liabilities
Other short-term liabilities
2017
Trade and other payables
Long-term liabilities
Other short-term liabilities
Weighted
average
interest rate
%
Less than
12 months
GBP
1 – 5 years
GBP
Total
GBP
–
–
9.73
–
–
–
–
9.84
–
–
–
–
–
–
–
27,515,419
211,851
16,213,080
–
–
26,222,834
2,924,376
1,152,864
–
295,123
169,312
–
1,000,773
207,055
–
–
938,506
87,456,677
–
–
–
1,649,853
13,231,620
–
–
36,062
–
–
544,681
–
27,515,419
1,150,357
103,669,758
–
–
26,222,834
4,574,229
14,384,484
–
295,123
205,374
–
1,000,773
751,736
–
Fair value of financial instruments
The directors consider the carrying amounts of financial assets and liabilities approximate their fair values.
Fair value hierarchy
Financial instruments are measured at fair value and are grouped into levels 1 to 3 based on the extent to which fair value is observable.
The levels are classified as follows:
Level 1 – fair value is based on quoted prices in active markets for identical financial 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.
203
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018ANNUAL FINANCIAL STATEMENTS
32. FINANCIAL INSTRUMENTS continued
Fair value hierarchy continued
30 June 2018
Financial assets1
Rehabilitation fund2
Cash-settled share option liability3
ESOP transactions liabilities4
Derivative financial assets5
30 June 2017
Financial assets1
Rehabilitation trust fund
Cash-settled share option liability3
ESOP transactions liabilities4
Level 1
GBP
Level 2
GBP
Level 3
GBP
Level 4
GBP
3,135,244
20,136,315
–
–
–
7,522,632
18,904,554
–
–
–
–
(532,471)
–
219,598
–
–
(2,737,458)
–
–
–
–
(569,762)
–
–
–
–
(113,067)
3,135,244
20,136,315
(532,471)
(569,762)
219,598
7,522,632
18,904,554
(2,737,458)
(113,067)
1 The fair value of the listed investment is treated as level 1 per the fair value hierarchy, as its market share price is quoted on a stock exchange.
2 The rehabilitation fund is treated as level 1 per the fair value hierarchy as the contributions are invested in an interest-bearing short-term deposits and
equity share portfolios held in insurance investment products managed by fund 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 30 for further inputs.
4 The group’s ESOP liability is accounted for on a cash-settled 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, and was performed by ZAQFinance, independent consulting actuaries. The liability was valued as a European
call option on the following assumptions used:
Notional vendor loan amount at issue
Fair value
Strike price
Remaining option life (years)
Volatility (%)
Risk-free interest rate
Annual dividend yield (continuously compounding) (%)
Final valuation (refer to note 39 for complete reconciliation)
Barberton Mines
Evander Mines
99,500,000
Determined using discounted cash flow model
Preference share + preference dividend – dividends
6
44
Swap curve based
–
569,762
Nil
Nil
Nil
Nil
Nil
Nil
Nil
–
At year-end Evander Mines’ ESOP liability was valued at nil, following the cessation of underground mining at this operation. The recognised unions requested
closure of the ESOP entities and scheme following the conclusion of the retrenchment process.
Management determines fair value based on observable market data (in case of listed assets and liabilities) or discounted cash flows (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 flows are used and other valuation techniques, the determination of the assumptions used in assessing the fair value of
identifiable assets and liabilities is subjective and the use of different valuation could have a significant impact on financial results. Therefore management
follows a particular process in determining reasonable assumptions for the valuation of identifiable assets and liabilities.
Sensitivity on changes in volatility
Volatility at 34%
Volatility at 44%
Volatility at 54%
Sensitivity on changes in risk-free rate
Risk-free rate -1%
Risk-free rate +1%
Sensitivity on discount to share price
35% discount
45% discount
55% discount
Barberton Mines
Evander Mines
535,876
569,762
606,473
601,216
540,354
716,307
569,762
427,861
–
–
–
–
–
–
–
–
5 The derivative financial asset is treated as a level 2 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
204
Evander Mines
1,251
551,346
Zero coupon bond 3 months
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018NOTES TO THE CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS continuedfor the year ended 30 June 2018
33. POST-RETIREMENT BENEFIT 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 Alexander Forbes Group Provident Fund. These are defined contribution funds and are
registered under and governed by the South African Pensions Act, 1956 as amended. The assets of the schemes are held separately
from those of the group in funds and they are in the control of the trustees. A total cost of GBP5,171,970 (2017: GBP6,255,465) was
recognised in the statement of comprehensive income at a consolidated level and nil (2017: nil) at company level. This cost represents
the employer’s contributions payable to the schemes by the group and company at rates specified in the rules of the scheme. The
calculation of the provision for post-retirement medical benefits is performed internally by management using the SARS life expectancy
tables as the benefits payable are a fixed amount per pensioner. The balance of post-retirement medical benefits was GBP48,124
(2017: GBP62,846).
34. COMMITMENTS, CONTINGENT LIABILITIES AND GUARANTEES
Group
Commitments
The group had contracted outstanding open orders at year-end of GBP24,009,876 (2017: GBP71,956,155). Outstanding orders in the
current reporting period related primarily to the Elikhulu Project.
Authorised commitments for the new financial year, not yet contracted for, totalled GBP14,067,972 (2017: GBP19,379,781).
Contingent liabilities
The group identified no material contingent liabilities in the current or prior reporting period.
Guarantees
At 30 June 2018, the group had guarantees in place of GBP1,359,486 (2017: GBP1,450,065) in favour of Eskom Holdings SOC Limited and
GBP773,290 (2017: GBP824,812) in favour of the DMR.
Separate
There were no commitments, contingent liabilities and guarantees for the company for the year ended 30 June 2018 (2017: nil), except for
the operating lease commitments disclosed in note 7.
35. DIRECTORS' EMOLUMENTS
The key management personnel for which remuneration has been disclosed below are executive directors, non-executive directors and
prescribed officers:
Executive directors
Emoluments
Share options exercised
Total
Non-executive directors
Emoluments
Total
Total remuneration
Consolidated
Separate
Year ended
30 June 2018
GBP
Year ended
30 June 2017
GBP
Year ended
30 June 2018
GBP
Year ended
30 June 2017
GBP
996,517
326,524
1,323,041
179,550
179,550
1,502,591
647,792
1,142,163
1,789,955
167,997
167,997
1,957,952
996,517
326,524
1,323,041
179,550
179,550
1,502,591
647,792
1,142,163
1,789,955
167,997
167,997
1,957,952
205
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018ANNUAL FINANCIAL STATEMENTS
35. DIRECTORS' EMOLUMENTS continued
Share
option
taxable
benefit
GBP
Basic
remune-
ration
GBP
Retirement
fund
GBP
Life and
disability
plan
GBP
Allowances
GBP
Leave
payout
GBP
Total
GBP
Incentives1
GBP
30 June 2018
Executive directors
JAJ Loots
GP Louw
Total
326,524
–
326,524
279,820
243,558
523,378
–
–
–
–
–
–
11,399
974
12,373
15,629
–
15,629
633,372
244,532
877,904
266,443
178,694
445,137
1 These incentives were paid early in the current financial year, but were related to and accrued for in the 30 June 2017 financial year.
Share
option
taxable
benefit
GBP
Basic
remune-
ration
GBP
Retirement
fund
GBP
Life and
disability
plan
GBP
Allowances
GBP
Leave
pay out
GBP
Total
GBP
Incentives
GBP
30 June 2017
Executive directors
JAJ Loots
GP Louw
Total
908,192
233,971
1,142,163
222,174
185,870
408,044
–
–
–
–
–
–
14,097
826
14,923
–
–
–
1,144,463
420,667
1,565,130
147,507
77,318
224,825
During the 2018 financial year the executive directors and senior management, in consultation with the Remco, agreed to forgo any
qualifying short-term incentives, as a result of the financial impact on the group following the cessation of underground mining at Evander
Mines.
Non-executive directors are entitled to the following fees as approved annually by the Remco for services rendered, based on their
appointment to the respective board sub-committees:
Total
30 June 2018
GBP
Total
30 June 2017
GBP
67,694
40,110
37,285
34,461
179,550
63,339
37,529
34,886
32,243
167,997
KC Spencer
(Chairman)
GBP
HH Hickey
GBP
TF Mosololi
GBP
RM Smith
GBP
55,266
–
–
8,474
3,954
67,694
22,032
–
8,475
5,649
3,954
40,110
22,032
5,650
5,649
–
3,954
37,285
22,032
8,475
–
–
3,954
34,461
Non-executive
KC Spencer
HH Hickey
TF Mosololi
RM Smith
Total
30 June 2018
Board of directors
Remuneration committee
Audit committee (HH Hickey as chairman)
SHEQC committee
Nominations committee
206
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018NOTES TO THE CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS continuedfor the year ended 30 June 2018
35. DIRECTORS' EMOLUMENTS continued
30 June 2017
Board of directors
Remuneration committee
Audit committee (HH Hickey as chairman)
SHEQC committee
Nominations committee
KC Spencer
(Chairman)
GBP
HH Hickey
GBP
TF Mosololi
GBP
RM Smith
GBP
51,710
–
–
7,929
3,700
63,339
20,615
–
7,929
5,285
3,700
37,529
20,615
5,286
5,285
–
3,700
34,886
20,615
7,928
–
–
3,700
32,243
No changes occurred during the year in respect of director appointments and resignations.
No fees were paid during the year for the board social and ethics sub-committees.
No retirement fund contributions are currently made by the company on behalf of non-executive directors.
Share
option
taxable
benefit
GBP
–
–
–
134,440
–
–
19,290
12,093
–
–
–
Basic
remune-
ration
GBP
Retire-
ment
fund
GBP
Life and
disability
plan
GBP
Allowances
GBP
Other
remune-
ration
GBP
227,272
120,116
117,715
139,494
39,835
98,956
79,318
90,208
75,562
101,509
–
–
19,335
15,523
14,426
1,446
12,363
8,368
11,758
9,797
20,089
–
–
2,413
2,373
–
–
–
–
1,797
1,497
–
–
1,856
5,000
6,919
3,578
113,689
20,548
7,322
7,942
1,734
3,207
–
–
–
5,455
–
–
–
–
–
4,008
–
–
Total
30 June
2018
GBP
Total
30 June
2017
GBP
348,495
173,112
242,204
333,823
154,970
140,914
114,298
148,296
110,097
157,690
–
477,572
122,088
303,834
333,184
–
–
188,561
179,801
87,942
150,141
92,503
Bonuses
GBP
119,367
26,248
94,219
41,885
–
9,047
–
24,498
17,499
32,885
–
–
97,727
9,575
–
517
51,840
7,026
166,685
76,064
Prescribed officers
AD van den Bergh
AA van den Berg
NA Reynolds
CA Strydom
JdV Thirion (Appointed
12 March 2018)
L Motshwaiwa
MS Ndlozi
JD Symington
MM Dlamini
P Naicker
BFM Malunga
P Tendaupenyu
(Retrenched
9 March 2018)
207
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018ANNUAL FINANCIAL STATEMENTS 35. DIRECTORS' EMOLUMENTS continued
Directors' dealings in shares
Financial year 30 June 2018
JAJ Loots participated in the following company shares transactions:
• On 22 February 2018, JAJ Loots entered into a contract for difference derivative (CFD) for 200,000 shares at a price of GBP0.08
per share
• On 27 September 2017, JAJ Loots purchased 108,000 shares at an average price of R2.35 per share
• On 29 September 2017, JAJ Loots entered into a CFD for 200,000 shares at an average of GBP12.747p per share.
JAJ Loots had 668,675 shares and 400,000 CFDs at period-end, representing 0.05% of the total issued shares.
GP Louw participated in the following company shares transactions:
• On 28 September 2017, GP Louw purchased 45,000 shares at an average price of R2.35 per share
• On 23 February 2018, GP Louw purchased 75,000 shares at R1.30 per share.
GP Louw had 257,450 shares at period-end, representing 0.01% of the total issued shares.
TF Mosololi, on 6 October 2017, purchased 20,000 shares at R2.30. TF Mosololi had 50,000 shares outstanding at period-end, representing
0.01% of total issued shares.
KC Spencer had 3,000,000 shares at period-end, representing 0.13% of the total issued shares.
No dealings in the securities by the directors of the company took place between the period-end and the date of approval of the annual
financial statements.
Financial year 30 June 2017
During the prior reporting period JAJ Loots participated in the following company shares transactions:
• On 27 September 2016, purchased 20,000 shares and 200,000 shares at R3.57 per share and R3.58 per share, respectively
• On 28 September 2016, purchased 28,609 shares at R3.48 per share
• On 29 September 2016, purchased 491 shares at R3.59 per share
• On 30 September 2016, purchased 25,000 shares at R3.70 per share
• On 3 October 2016, purchased 25,000 shares at R3.78 per share
• On 5 October 2016, purchased 30,000 shares at R3.55 per share.
JAJ Loots had 560,675 shares outstanding at period-end, representing 0.03% of the total issued shares.
During the prior year GP Louw participated in the following company shares transactions.
On 27 September 2016, purchased the following shares:
• 4,300 shares at R3.57 per share
• 3,150 shares at R3.58 per share
• 35,000 shares at R3.62 per share
• 40,000 shares at R3.64 per share
• 12,836 shares at R3.66 per share
42,164 shares at R3.67 per share.
•
GP Louw had 137,450 shares outstanding at period-end, representing 0.01% of the total issued shares.
TF Mosololi had 30,000 shares outstanding at period-end, representing 0.01% of total issued shares.
KC Spencer had 3,000,000 shares at period-end, representing 0.13% of the total issued shares.
208
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018NOTES TO THE CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS continuedfor the year ended 30 June 2018
35. DIRECTORS' EMOLUMENTS continued
Cash-settled share options
Total
options
1 July
2017
Exercise
price
pence
Grant date
Options
granted/
(exercised)
during the
period
Grant/
exercise
price
pence
Options
forfeited/
discontinued
Total
options
30 June
2018
Grant/
exercise date
Listed per grant/
exercise
JAJ Loots
JAJ Loots
JAJ Loots
GP Louw
GP Louw
AD van den Bergh
AD van den Bergh
AD van den Bergh
CA Strydom
CA Strydom
CA Strydom
P Human
P Human
P Naicker
P Naicker
P Naicker
JD Symington
JD Symington
MM Dlamini
MM Dlamini
MM Dlamini
AA van den Berg
AA van den Berg
MS Ndlozi
MS Ndlozi
P Tendaupenyu
NA Reynolds
NA Reynolds
NA Reynolds
2,500,000
4,500,000
–
2,114,979
–
1,230,199
2,822,167
–
–
317,051
2,823,697
1,876,026
–
1,074,126
2,490,692
–
813,706
–
100,000
167,012
–
1,671,309
–
1,297,954
–
29 August 2013
28 February 2015
–
1 March 2015
–
1 May 2014
30 July 2015
–
–
1 May 2014
30 July 2015
30 July 2015
–
13 July 2012
30 July 2015
–
30 July 2015
–
27 May 2014
30 July 2015
–
1 October 2016
–
30 July 2015
–
2,468,354 13 December 2016
1 May 2014
–
750,442
–
0.13
–
–
0.12
–
0.12
0.08
–
–
0.12
0.08
0.08
–
0.15
0.08
–
0.08
–
0.09
0.08
–
0.20
–
0.08
–
0.18
0.12
–
–
28 February 2018
1 March 2018
–
1 March 2018
–
–
2 August 2017
2 August 2017
–
2 October 2017
–
2 August 2017
–
(2,966,666)
5,000,000
–
3,100,000
–
–
3,268,219
1,533,789
–
(941,232)
–
823,719
–
–
517,138
2 August 2017
(271,235) 29 September 2017
1,052,158
2 August 2017
–
–
1,097,576
–
1,671,309
(432,651)
571,542
–
–
1,591,318
2 August 2017
2 August 2017
2 August 2017
6 October 2017
2 August 2017
–
–
2 August 2017
1,676,713
30,694,427
30 July 2015
0.08
–
0.10 15,614,984
–
–
0.10
–
–
–
–
–
0.14
0.14
–
0.13
–
0.14
–
–
0.14
0.13
0.14
–
–
0.14
0.20
0.14
0.13
0.14
–
–
0.14
–
0.08
–
–
–
–
–
–
–
–
(1,533,789)
–
–
–
–
–
–
–
–
–
–
–
–
(1,671,309)
–
–
–
(2,468,354)
–
2,500,000
1,533,334
5,000,000
2,114,979
3,100,000
1,230,199
2,822,167
3,268,219
–
317,051
1,882,465
1,876,026
823,719
1,074,126
2,490,692
517,138
542,471
1,052,158
100,000
167,012
1,097,576
–
1,671,309
865,303
571,542
–
750,442
1,591,318
–
1,676,713
(5,673,452) 40,635,959
209
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018ANNUAL FINANCIAL STATEMENTS
36. RELATED PARTY TRANSACTIONS
The group entered into the following inter-group transactions and held the following year-end balances:
Pan African
Resources PLC
GBP
Funding
Company
GBP
PAR
Management
Services
GBP
Pan African
Resources
Coal Holding
GBP
Evander Gold
Mining
Evander
Phoenix
Platinum
GBP
Uitkomst
Barberton
Proprietary
Gold Mines
Colliery
GBP
Mines
GBP
Limited1
GBP
Limited1
GBP
Emerald
Panther
GBP
PAR Gold
K Company
GBP
GBP
Concrete
Rose
GBP
30 June 2018
Statement of comprehensive income transactions
Dividends received from subsidiaries
Management fee
Inter-company finance charges
Gold purchases from Evander Gold Mines Limited
Cost of gold production income invoiced to
Evander Gold Mines Limited
Statement of financial position
Pan African Resources receivables
Pan African Resources PLC payables
Funding Company receivables
Funding Company payables
PAR Management Services receivables
PAR Management Services payables
Payables to PAR Gold
Pan African Resources Coal Holding receivables
Barberton Mines receivables
Evander Mines payables
30 June 2017
Statement of comprehensive income transactions
Dividends received from subsidiaries
Management fee
Inter-company finance charges
Gold purchases from Evander Gold Mines Limited
Cost of gold production income invoiced to
Evander Gold Mines Limited
Statement of financial 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 PAR Gold
Pan African Resources Coal Holding receivables
Barberton Mines receivables
Evander Gold Mining Limited receivables
Evander Gold Mining Proprietary Limited payables
–
579,039
–
–
–
(115,808)
3,607,147
–
–
1,795,020
(343,408)
–
–
–
–
72,546,560
–
–
72,028,690
–
517,870
–
–
–
–
(72,028,690)
–
134,371,643
(81,211,868)
–
4,447,338
–
–
–
–
(517,870)
–
(4,447,338)
–
4,387,649
(4,965,468)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
21,930,492
637,681
–
–
–
(92,522)
2,778,372
–
–
5,035,859
(654,122)
–
(1,360,000)
–
–
–
–
–
–
97,008,814
(18,222,482)
–
–
–
–
–
–
–
–
–
(69,102,616)
–
53,201,751
(1,360,343)
–
–
–
–
–
–
–
–
4,348,591
(9,056,072)
–
6,390,298
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
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 (note 21) for the nature of relationships of the related parties to the company.
Refer to directors' emoluments (note 35), for key management remuneration under related parties.
Inter-company loans have no specific repayment terms but do bear interest in relation to treasury functions provided by Funding Company.
210
–
–
–
–
–
–
(1,968,732)
(289,519)
(299,060)
(2,945,399)
(69,948,457)
69,948,457
69,255,898
(69,255,898)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(2,072,144)
(127,661,194)
(124)
(190,843)
9,178,772
(2,352,945)
(2,034,704)
(14,891,087)
14,891,087
(54,966,166)
54,965,093
1,073
–
(12,980,676)
(7,589,816)
(260,870)
121,604
(438,989)
(2,805,797)
(2,075,362)
28,225
(760,141)
(1,513,938)
(72,890,949)
72,890,949
72,169,256
(72,169,256)
(1,843,686)
(26,062,512)
8,580,398
5,284,837
(5,452,810)
(38,508,869)
8,656
(74)
(183,926)
109,187
1,251,156
(328,448)
(3,406,627)
(2,655,223)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(19,280)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
4,406
260
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
30,047
(30,047)
1,144
(56,909,561)
56,909,561
(1,144)
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018NOTES TO THE CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS continuedfor the year ended 30 June 2018
36. RELATED PARTY TRANSACTIONS
The group entered into the following inter-group transactions and held the following year-end balances:
30 June 2018
Statement of comprehensive income transactions
Dividends received from subsidiaries
Management fee
Inter-company finance charges
Gold purchases from Evander Gold Mines Limited
Cost of gold production income invoiced to
Evander Gold Mines Limited
Statement of financial position
Pan African Resources receivables
Pan African Resources PLC payables
Funding Company receivables
Funding Company payables
PAR Management Services receivables
PAR Management Services payables
Payables to PAR Gold
Pan African Resources Coal Holding receivables
Barberton Mines receivables
Evander Mines payables
30 June 2017
Statement of comprehensive income transactions
Dividends received from subsidiaries
Management fee
Inter-company finance charges
Gold purchases from Evander Gold Mines Limited
Cost of gold production income invoiced to
Evander Gold Mines Limited
Statement of financial 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 PAR Gold
Pan African Resources Coal Holding receivables
Barberton Mines receivables
Evander Gold Mining Limited receivables
Evander Gold Mining Proprietary Limited payables
Pan African
Funding
Management
Resources
Resources PLC
Company
Services
Coal Holding
GBP
GBP
GBP
GBP
PAR
Pan African
–
–
–
–
579,039
(115,808)
1,795,020
3,607,147
(343,408)
72,546,560
(72,028,690)
(517,870)
134,371,643
(4,447,338)
72,028,690
(81,211,868)
517,870
4,447,338
(4,965,468)
4,387,649
21,930,492
637,681
(92,522)
5,035,859
2,778,372
(654,122)
(1,360,000)
97,008,814
(69,102,616)
(18,222,482)
4,348,591
53,201,751
(9,056,072)
(1,360,343)
6,390,298
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
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 (note 21) for the nature of relationships of the related parties to the company.
Refer to directors' emoluments (note 35), for key management remuneration under related parties.
Inter-company loans have no specific repayment terms but do bear interest in relation to treasury functions provided by Funding Company.
Phoenix
Platinum
GBP
Uitkomst
Colliery
GBP
Barberton
Mines
GBP
Evander Gold
Mining
Proprietary
Limited1
GBP
Evander
Gold Mines
Limited1
GBP
Emerald
Panther
GBP
PAR Gold
GBP
K Company
GBP
Concrete
Rose
GBP
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(1,968,732)
(299,060)
–
–
(289,519)
(2,945,399)
(69,948,457)
–
–
–
69,948,457
–
69,255,898
(69,255,898)
–
–
–
–
–
–
–
–
–
–
–
–
(2,072,144)
–
(2,352,945)
–
–
–
(14,891,087)
–
–
–
(127,661,194)
–
(2,034,704)
–
–
–
–
(54,966,166)
–
–
–
–
–
–
–
–
–
54,965,093
–
–
(124)
–
–
–
–
–
14,891,087
1,073
–
–
–
9,178,772
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(260,870)
121,604
–
–
(1,843,686)
–
–
1,251,156
(328,448)
–
–
–
–
–
–
–
(438,989)
28,225
–
(12,980,676)
(2,805,797)
(760,141)
–
(7,589,816)
(2,075,362)
(1,513,938)
(72,890,949)
–
–
–
72,890,949
–
–
–
–
–
–
–
–
–
–
–
–
–
72,169,256
(72,169,256)
–
8,580,398
(5,452,810)
–
(3,406,627)
–
–
–
30,047
–
–
(26,062,512)
–
(38,508,869)
–
(2,655,223)
–
–
–
(30,047)
1,144
(56,909,561)
–
5,284,837
–
–
–
–
–
–
–
–
56,909,561
–
–
–
–
–
–
8,656
(74)
–
–
–
–
–
–
(1,144)
–
–
–
–
–
–
–
–
–
109,187
–
–
–
–
–
–
–
–
(19,280)
–
–
–
–
(190,843)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(183,926)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
4,406
–
260
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
211
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018ANNUAL FINANCIAL STATEMENTS
37. EVENTS AFTER THE REPORTING PERIOD
No material subsequent events were noted after the reporting period.
38. RECONCILIATION OF PROFIT BEFORE TAXATION TO CASH (USED IN)/GENERATED BY OPERATIONS
Profit before taxation from continuing operations
Loss before taxation from discontinued operations
Adjusted for:
Adjustments from continuing operations
Impairment from continuing operations
Equity and cash-settled share options costs
Net finance income – bank
Net finance income – rehabilitation trust fund
Net finance income – other
Net finance expense – bank
Net finance expense – SARS
Profit on disposal of property, plant, equipment
and mineral rights
Royalty costs
Deferred compensation
Deferred consideration provision
Fair value adjustment on financial instruments
Increase in provision for environmental rehabilitation
Profit on disposal of subsidiary
Fair value adjustment on rehabilitation funds
Non-mining depreciation and amortisation
Mining depreciation and amortisation
Gold loan amortisation
Profit on disposal of investment
Fair value adjustment on post-retirement benefits
Adjustments from discontinued operations
Impairment
Net finance income – rehabilitation fund
Net finance expense – other
Increase in provision for environmental rehabilitation
Royalty costs
Fair value adjustment on rehabilitation fund
Mining depreciation and amortisation
Fair value adjustment on post-retirement benefits
Consolidated
Separate
Year ended
30 June 2018
GBP
Year ended
30 June 2017
GBP
Year ended
30 June 2018
GBP
Year ended
30 June 2017
GBP
9,352,329
(129,149,818)
121,695,260
44,862,872
(26,204,529)
7,945,507
(1,061,755)
–
712,925
18,611,097
–
1,620,222
8,153,312
(240,502)
(581,688)
(484,309)
(424,682)
3,142,044
1,682
(874)
415,010
–
778,611
(230,025)
236,275
–
(18,537)
52,530
4,929,817
(1,542,272)
–
(5,649)
98,124,786
(497,240)
–
3,521,312
234,906
(10,030)
6,146,443
(5,660)
–
50,680
(244,985)
(11,511)
–
2,784,929
18,050
(22,251)
1,112,665
90,396
–
(5,488,407)
22,473
(5,385,915)
40,195
58,899
5,498,795
(3,191,991)
(222,571)
(6,139)
5,950,757
(35,416)
12,244
–
292,584
57,580
6,570,696
(6,250)
–
196,591
(89,883)
–
(178,323)
5,929
–
–
–
–
778,611
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
6,352,320
1,792,385
(51,496)
–
–
2,575
–
–
–
90,396
–
–
–
(6,343,387)
–
–
–
–
(222,571)
–
–
–
–
–
–
–
–
–
Operating cash flows before working capital changes
1,897,771
26,603,850
Working capital changes
Decrease/(increase) in inventories
(Increase)/decrease in trade and other receivables
Increase/(decrease) in trade and other payables
Other non-cash items
1,592,923
2,463,344
(1,104,762)
865,250
(630,909)
3,341,368
(648,603)
298,249
8,313,363
(4,621,641)
(348,830)
(805,554)
–
714
(769,642)
(36,626)
20,231,319
869,747
–
52,376
865,480
(48,109)
Cash generated by/(used in) operations
3,490,694
29,945,218
(1,154,384)
21,101,066
Income taxes paid
Royalties refund/(paid)
Settlement of cash-settled share option costs
Net finance costs/income
Net cash (used in)/generated from
operating activities before dividend
(1,804,255)
522,904
(955,405)
(4,454,313)
(6,324,864)
(1,678,474)
(3,299,545)
(2,141,151)
(12,729)
–
–
95,811
(57,232)
–
–
49,124
(3,200,375)
16,501,184
(1,071,302)
21,092,958
212
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018NOTES TO THE CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS continuedfor the year ended 30 June 2018 38. RECONCILIATION OF PROFIT BEFORE TAXATION TO CASH (USED IN)/GENERATED BY OPERATIONS
continued
Consolidated
Separate
Year ended
30 June 2018
GBP
Year ended
30 June 2017
GBP
Year ended
30 June 2018
GBP
Year ended
30 June 2017
GBP
Taxation paid during the year:
Taxation charge per the statement of comprehensive income
Taxation charge from discontinued operations
Less: Deferred taxation
Less: Deferred taxation from discontinued operations
Taxation payable/(receivable) at the beginning of the year
Taxation payable 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
Royalty costs charge for the year from discontinued operations
Foreign currency translation
Royalty (refunded)/paid during the year
(2,102,761)
(24,422,213)
3,680,656
24,379,234
1,534,916
(322,259)
338,777
252,821
1,804,255
(918,389)
(226,008)
415,010
234,906
(28,423)
(522,904)
4,203,148
(3,454,842)
4,416,686
–
5,164,992
205,941
322,259
631,671
6,324,863
(594,498)
918,389
1,112,665
292,585
(50,667)
1,678,474
(274,600)
–
274,600
–
–
(66,479)
75,137
4,071
12,729
–
–
–
–
–
–
(408,704)
–
408,704
–
–
(8,469)
66,479
(778)
57,232
–
–
–
–
–
–
Reconciliation of loans from subsidiaries
Opening balance
Repayments/(borrowings)
Restructuring non-cash items
Foreign currency translation
Closing balance
Reconciliation of loans to subsidiaries
Opening balance
(Borrowings)/repayments
Restructuring non-cash items
Foreign currency translation
Closing balance
39. ESOP TRANSACTIONS
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(13,873,891)
3,707,527
14,514,025
(3,829,791)
517,870
90,816,537
(3,055,445)
(14,511,287)
(1,221,115)
72,028,690
(7,038,314)
(4,410,628)
–
(2,424,949)
(13,873,891)
51,716,563
46,741,979
–
(7,642,005)
90,816,537
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 R99.5 million to Barberton Mines BEE
Company Proprietary Limited who are 100% held by the Barberton Mines BEE Trust.
The beneficiaries 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 financed by Barberton Mines against preference share capital issued by BEE Co for R99.5 million.
213
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018ANNUAL FINANCIAL STATEMENTS
39. ESOP TRANSACTIONS continued
Evander Mines ESOP transaction
On 1 July 2015 Evander Gold Mines entered into an agreement with the Evander Gold Mining BEE Company and the Evander Gold Mining
BEE Trust.
The agreement concluded Evander Gold Mines would issue 5% of its authorised share capital for R146 million to Evander Gold Mining BEE
Company which is 100% held by the Evander Gold Mining BEE Trust.
The beneficiaries of the BEE Trust are all the Evander Gold Mines employees of a Paterson Grading 'C' level and below.
The share issue was vendor financed by Evander Gold Mines against preference share capital issued by Evander Gold Mining BEE Company
for R146 million.
On 31 May 2018 Evander Mines, as per the retrenchment agreement signed, agreed to the closure of the ESOP entities.
Preference share capital funding arrangement terms:
• Real interest rate of 2% per annum
• Vesting period of the BEE scheme is 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.
The retention percentage applied to dividends for repayment are summarised as follows:
Percentage of dividends withheld for
payment of funding arrangement
Percentage of dividends accruing to
the BEE Trust
Total dividends
Year 1
%
Year 2
%
Year 3
%
Year 4
%
Year 5 to 10
%
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 of South Africa requirements of liquidity and solvency.
The transaction is classified under IFRS 2 as a cash-settled share option scheme (refer to note 30) and has been summarised as follows:
The ESOP cash-settled share option liability for the Barberton Mines’ gold operation was valued by independent actuaries at 30 June 2018.
The ESOP cash-settled share option liability for Evander Mines’ gold operations was not valued due to Evander Mines underground mining
operations having ceased and discontinued during the financial year (refer to note 14). An agreement was reached with the relevant labour
stakeholders to discontinue the scheme.
Pound Sterling
Barberton Mines
Evander Mines
30 June 2018
GBP
30 June 2017
GBP
30 June 2018
GBP
30 June 2017
GBP
105,366
237,535
(229,038)
493,341
(37,442)
569,762
123,812
313,555
(289,507)
(38,377)
(4,117)
105,366
7,701
–
–
(7,563)
(138)
–
157,331
194,611
(139,672)
(172,834)
(31,735)
7,701
(730,876)
(228,473)
7,563
(21,777)
Statement of financial position
ESOP cash-settled share options liability
Opening balance
Dividend accrued1
Dividend paid
IFRS 2 revaluation expense
Foreign currency translation reserve
Closing balance
Statement of comprehensive income
ESOP IFRS 2 expense
1 Relates to a trickle dividend after the repayment of the notional loan.
214
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018NOTES TO THE CONSOLIDATED AND SEPARATE ANNUAL FINANCIAL STATEMENTS continuedfor the year ended 30 June 2018
40. TREASURY CAPITAL RESERVE
On 7 June 2016, the group concluded the purchase of shares in PAR Gold representing 23.83% of its issued share capital. The accounting
effect of the transaction was a share buyback as the group acquired shares in a company that held an investment in the group's parent
company.
Funding Company, a wholly owned subsidiary of the group, acquired the PAR Gold shares and funded it as follows:
Share issue of Pan African Resources ordinary shares
Internally generated cash resources/funding facilities
Costs capitalised to the PAR Gold investment in Pan African Resources
Treasury capital reserve
The number of treasury shares eliminated on consolidation
On 30 May 2018, PAR Gold disposed of 130 million shares in Pan African Resources, as summarised below:
GBP
16,633,382
8,665,713
77,648
25,376,743
436,358,058
GBP
8,945,091
(9,787,028)
(841,937)
0.07
GBP
Number
25,376,743
(9,787,028)
15,589,715
436,358,058
(130,000,000)
306,358,058
Proceeds on sale of treasury shares
Treasury capital reserve book value disposed
Capital loss on sale of treasury shares
Proceeds per treasury share disposed
Treasury capital reserve reconciliation at year-end:
Opening balance
Disposal of treasury shares
Closing balance at year-end
41. SHARE OPTION RESERVE
The share option reserve consists of historical IFRS 2 charges relating to the equity-settled share option programme established by the
company on 1 September 2005 to specific employees, officers, directors and qualifying consultants as was approved by the board.
On 15 January 2018, the group concluded a BEE restructuring exercise with Concrete Rose as the group's new BEE entity (refer to
note 21). Concrete Rose is held 49.9% by Funding Company, and 50.1% by strategic BEE partners through a vendor-financed arrangement.
The nature of the restructuring transaction gives Concrete Rose a 22.11% ownership in SA HoldCo, which acquisition was financed by
means of a vendor-financing arrangement. The BEE entity’s ultimate shareholding in SA HoldCo will be determined by reference to the
value of SA HoldCo and the increase in the vendor loan on expiry of the scheme. On the effective date of the transaction the option was
valued at GBP440,385 (2017: GBP185,507). The incremental value disclosed arose due to an extension of the original BEE scheme’s term
from 31 December 2018 to 31 December 2021, and an increase in the trickle dividend from 5% to 10%.
Opening balance
Charge for the year
Consolidated
Separate
Year ended
30 June 2018
GBP
Year ended
30 June 2017
GBP
Year ended
30 June 2018
GBP
Year ended
30 June 2017
GBP
1,221,395
440,385
1,661,780
1,035,888
185,507
1,221,395
897,658
–
897,658
897,658
–
897,658
215
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018ANNUAL FINANCIAL STATEMENTS
HYDRAULIC MINING
DREDGING | HYDRAULICKING
There are two types of placer mining
1 HYDRAULIC MINING
This method found its origins in ancient Rome,
using water to excavate soft underground
deposits. Modern-day hydraulic mining came
about in the 1850s during the California
Gold Rush. While this method successfully
extracted gold-rich minerals, prevalent use led
to severe environmental consequences, such
as erosion and flooding. Hydraulic mining is
still used today in many third world countries,
but is largely banned for gold extraction in
developed regions.
Hydraulic mining is commonly used for weakly
cemented near-surface ore deposits. The high-
pressure water jet, or monitor, undercuts the
placer bank base, causing it to erode. This
high pressure caves the bank, disintegrates
the ground and washes the material to and
through sluice boxes situated downslope. The
gold settles behind a filter, while the lighter
waste material washes away.
Bucket-line dredges are
highly efficient and capable of
continuous excavation – mining,
processing and disposing tailings
in one constant stream.
Our bodies contain
roughly 0.2 milligrams
of gold, mostly in our
blood.
The majority of earth’s accessible precious metals
come from meteorites that struck the earth over
200 million years after it formed.
216
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018
SHAREHOLDERS’
AND OTHER
INFORMATION
2 DREDGE MINING
Dredge mining is a form of alluvial placer mining using a
floating dredge or barge-like vessel with either a number of
buckets to scoop gravel or a suctioning apparatus to vacuum
gravel from a water body.
This type of placer mining exploits loose deposits, such as
sand and gravels, to extract precious minerals relatively
efficiently and cost effectively.
Coarse material is screened and disposed of through the
back of the vessel, while the fine material passes through a
sequence of sluices to recover the gold.
There are two types of dredging excavation methods:
Dragline:
This method is limited to
shallow digging depths due to a
less-controllable bucket system
and reduced ability to reach
valuable ore at the bottom of
the water body.
Backhoe:
The digging reach of the backhoe
extends over two metres below
the surface and is low cost, with
superior mobility and excavation
ability.
The higher the gold carat rating, the greater the purity of gold.
AU
Being an excellent
electrical conductor,
gold is used in audio,
video and USB cables.
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018
217
SHAREHOLDERS’ ANALYSIS
for the year ended 30 June 2018
Register date:
Issued share capital: 2,234,687,537 shares
29 June 2018
SHAREHOLDER SPREAD
1 – 1,000 shares
1,001 – 10,000 shares
10,001 – 100,000 shares
100,001 – 1,000,000 shares
1,000,001 shares and over
Total
DISTRIBUTION OF SHAREHOLDERS
Banks
Brokers
Close corporations
Endowment funds
Individuals
Insurance companies
Investment companies
Medical aid schemes
Mutual funds
Nominees and trusts
Other corporations
Pension funds
Private companies
Public companies
Total
PUBLIC/NON-PUBLIC SHAREHOLDERS
Non-public shareholders
Director
Strategic holder (more than 10%)
Public shareholders
Total
Number of
shareholders
976
1,963
1,768
482
240
5,429
Number of
shareholders
281
16
44
27
4,321
42
1
6
127
245
47
168
91
13
5,429
Number of
shareholdings
5
4
1
5,424
5,429
BENEFICIAL SHAREHOLDERS HOLDING OF 3% OR MORE
Allan Gray Investment Management
PAR Gold
Coronation Fund Managers
Investec Asset Management
Public Investment Corporation (PIC)
River and Mercantile Asset Management
218
%
17.98
36.16
32.57
8.88
4.42
100.00
%
5.18
0.29
0.81
0.50
79.59
0.77
0.02
0.11
2.34
4.51
0.87
3.09
1.68
0.24
100.00
%
0.09
0.07
0.02
99.91
100.00
Number of
shares
355,316
9,504,242
59,481,238
158,354,099
2,006,992,642
2,234,687,537
Number of
shares
536,087,627
12,242,182
2,792,565
18,880,907
104,679,175
68,928,502
18,500
7,813,655
685,868,063
24,969,881
2,050,519
443,881,422
320,842,634
5,631,905
2,234,687,537
Number of
shares
310,334,183
3,976,125
306,358,058
1,924,353,354
2,234,687,537
Number of
shares
642,099,846
306,358,058
174,592,069
158,022,456
118,903,066
75,000,000
%
0.02
0.43
2.66
7.09
89.81
100.00
%
23.99
0.55
0.12
0.84
4.68
3.08
0.00
0.35
30.69
1.12
0.09
19.86
14.36
0.25
100.00
%
13.89
0.18
13.71
86.11
100.00
%
28.73
13.71
7.81
7.07
5.32
3.38
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018
NOTICE OF ANNUAL
GENERAL MEETING
Notice is hereby given that the 2018 annual general meeting (AGM)
of Pan African Resources PLC (the company or the group) will be
held at the offices of Fladgate LLP, 16 Great Queen Street, London
WC2B 5DG on Tuesday, 20 November 2018 at 11.00 (all times stated
are United Kingdom times unless otherwise stated) to consider and,
if thought fit, transact the following business:
11.
ORDINARY BUSINESS
1.
To receive and adopt the directors’ report, the audited
statement of accounts and auditors report for the year ended
30 June 2018.
2.
3.
4.
5.
6.
7.
8.
9.
To re-elect JAJ Loots as a director of the company, who retires
by rotation pursuant to the articles of association of the
company (articles of association).
To re-elect GP Louw as a director of the company, who retires
by rotation pursuant to the articles of association.
To re-elect HH Hickey as a member of the audit committee.
To re-elect KC Spencer as a member of the audit committee.
To re-elect TF Mosololi as a member of the audit committee.
To endorse the company’s remuneration policy as set out in
the remuneration report for the year ended 30 June 2018.
To endorse the company’s remuneration implementation
report as set out in the remuneration report for the year
ended 30 June 2018.
To re-appoint Deloitte LLP as auditor of the company and to
authorise the directors to determine their remuneration.
Brief CVs of the directors mentioned in resolutions 2 and 3 above are
contained on
page 101 of this integrated annual report.
SPECIAL BUSINESS
As special business, to consider and if thought fit, to pass the following
resolutions of which resolution 10 will be proposed as an ordinary
resolution and resolutions 11 and 12 will be proposed as special
resolutions:
10.
That the directors be and they are hereby generally and
unconditionally authorised pursuant to section 551 of the UK
Companies Act 2006 (the act) to allot equity securities (within
the meaning of section 560 of the act) up to an aggregate
nominal amount of GBP7,448,958.46, and this authority shall
be in substitution for any previous authority granted under
section 551 of the act and shall expire on the earlier of
31 December 2019 and the conclusion of the 2019 AGM of
the company to be held in 2019, save that the company may,
prior to such expiry, make an offer or agreement which would
or might require equity securities to be allotted after the expiry
of this authority and the directors may allot equity securities
pursuant to that offer or agreement as if this authority had
not expired; and this authority shall be in substitution for
any other authority to allot equity securities pursuant to
section 551 of the act, but shall be without prejudice to the
(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
continuing authority of the directors to allot equity securities
in pursuance of an offer or agreement made before the expiry
of the authority pursuant to which such offer or agreement
was made.
That, subject to and conditional upon resolution 10 above
being passed, the directors be and they are hereby empowered
pursuant to section 570 of the act to allot equity securities
(within the meaning of section 560 of the act) for cash pursuant
to the authority conferred by resolution 10 above and to allot
equity securities (including where such allotment constitutes
an allotment of equity securities by virtue of section 560(2) of
the act) as if section 561(1) of the act did not apply to such
allotment provided that this power shall be limited to:
a) the allotment of equity securities in connection with a rights
issue, open offer or other offer of equity securities open for
acceptance for a period fixed by the directors to holders
of equity securities on the register on a fixed record date
where the equity securities respectively attributable to the
interests of such holders are proportionate (as nearly as may
be practicable) to their respective holdings of such equity
securities or in accordance with the rights attached thereto
(but subject to such exclusions or other arrangements as the
directors may deem necessary or expedient in relation to
treasury shares, fractional entitlements or legal or practical
problems under the laws of, or the requirements of any
recognised body or any stock exchange in any territory or
by virtue of shares being represented by depositary receipts
or any other matter);
b) the allotment of equity securities (otherwise than pursuant
to paragraph (a) above) up to an aggregate nominal
amount of GBP2,234,687.54 and this power shall be
in substitution for all such powers previously given but
without prejudice to the continuing power of directors to
allot equity securities pursuant to an offer or agreement
made by the company before the date this resolution is
passed and unless previously renewed, varied or revoked
by the company in general meeting shall expire on the
earlier of 31 December 2019 and the conclusion of the
AGM of the company to be held in 2019.
That, in accordance with the JSE Listings Requirements, the
equity securities which are the subject of any issue for cash
pursuant to the authority conferred by resolution 10 will be
issued in accordance with the following requirements:
• They must be of a class already in issue or, where this is not
the case, must be limited to such securities or rights that are
convertible into a class already in issue
• Any such issue of shares shall be to 'public shareholders'
as defined by the JSE Listings Requirements and not to
'related parties'
• This authority shall only be valid until the earlier of
31 December 2019 and the conclusion of the 2019 AGM
• An announcement giving full details will be published at the
time of any issue of shares representing, on a cumulative
basis within the period of this authority, 5% or more of the
number of ordinary shares in issue prior to the issue
219
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018SHAREHOLDER’S AND OTHER INFORMATION
NOTICE OF ANNUAL GENERAL MEETING continued
• Securities which are the subject of a general issue for
cash may not exceed 10% of the company’s listed equity
securities as at the date of this notice of AGM seeking the
general issue for cash authority (i.e. 335,203,130 ordinary
shares), provided that:
–
any equity securities issued under this authority during
the period must be deducted from the number above
in the event of a sub-division or consolidation of issued
equity securities during the period contemplated above,
the existing authority must be adjusted accordingly to
represent the same allocation ratio
–
– the calculation of the listed equity securities is a factual
assessment of the listed equity securities as at the date
of notice of this AGM, excluding treasury shares
• Any such general issues are subject to South African
exchange control regulations and approval at that point in
time
In determining the price at which an issue of shares will
be made in terms of this authority, the maximum discount
permitted will be 10% of the weighted average traded
price on the JSE of ordinary shares measured over the
30 business days prior to the date that the price of issue
is determined or agreed between the company and the
party/ies subscribing for the shares.
•
That the company be generally and unconditionally authorised
for purposes of section 701 of the act to make market
purchases (as defined 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 value of ordinary shares which
may be purchased is GBP1,117,343.77 (representing
approximately 5% 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 1 pence
• the maximum price (excluding expenses) which may be
paid for such ordinary share does not exceed: (i) 5% above
the average closing price of such shares for the five business
days on the London Stock Exchange prior to the date of
purchase; and (ii) that stipulated by the EU Commission-
adopted Regulatory Technical Standards pursuant to
article 5(6) of the Market Abuse Regulation
• this authority shall expire on the earlier of 31 December
2019 and the conclusion of the 2019 AGM, 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 JSE
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
12.
220
–
–
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% above the weighted average market price at which
the company’s shares traded on the JSE over the five
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, confirming that the company and/or its
subsidiaries engaged in such repurchases have passed
solvency and liquidity tests and confirming that since
such tests were performed there have been no material
adverse changes to the financial position of the group
Such repurchases are not conducted during prohibited
periods as defined 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 integrated annual report, as follows:
• major shareholders on
• company share capital on
page 187.
page 218
DIRECTORS’ RESPONSIBILITY STATEMENT
The directors of the company, whose names are given on
page 133 of the group’s integrated annual report in which
this notice is 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 confirm that there has not been any
material change in the financial or trading position of the company
and its subsidiaries that has occurred since the end of the last financial
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 12 as well as by the 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, confirming that the company and its subsidiaries engaged
in such repurchases have passed the solvency and liquidity test and
confirming that since such tests were performed there have been no
material adverse changes to the financial position of the group.
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018
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 2018 audited annual financial 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% tranche(s) of its shares have been repurchased in terms of the
aforementioned general authority.
APPROVALS REQUIRED FOR RESOLUTIONS
The ordinary resolutions contained in this notice of AGM require the
approval of more than fifty 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-five 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
19 September 2018
Suite 31 Second Floor 107 Cheapside London
England EC2V 6DN
EXPLANATORY NOTES TO THE NOTICE OF AGM
1. 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
UK Companies Act 2006 to present to the meeting, the directors’
and auditor’s reports and the audited accounts for the year ended
30 June 2018. The report of the directors and the audited accounts
for the year ended 30 June 2018 have been approved by the directors
and the report of the auditor has been approved by the auditor, and
a copy of each of these documents may be found in the integrated
annual report and accounts of the company, for the year ended
30 June 2018.
2. Director re-election (resolutions 2 and 3)
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 office by rotation. Accordingly, JAJ Loots and GP Louw retire
by rotation and offer themselves for re-election under this provision.
Biographical details of all the directors for the year ended 30 June 2018
are set out on
page 101 of the integrated annual report and
accounts of the company.
3. Audit committee members re-election
(resolutions 4, 5 and 6)
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 2 and
3 above, to confirm 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
4.
as contained in the remuneration report
(resolution 7)
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
page 114 of the
integrated annual report for the year ended 30 June 2018, in terms of
King IV™ principles and the JSE Listings Requirements.
In the event that 25% or more of the votes are cast against the
resolution, the company undertakes to engage with shareholders as
to the reasons therefor, and undertakes to make recommendations
based on the feedback received.
221
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018SHAREHOLDER’S AND OTHER INFORMATION
NOTICE OF ANNUAL GENERAL MEETING continued
Endorsement of the remuneration
5.
implementation report (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 implementation report as set
page 122 of the integrated annual report for the year
out on
ended 30 June 2018, in terms of the King IV™ and the JSE Listings
Requirements.
In the event that 25% or more of the votes are cast against
resolution 8, the company undertakes to engage with shareholders as
to the reasons therefor, and undertakes to make recommendations
based on the feedback received.
6. 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 auditor of the
company and, in accordance with standard practice, gives authority to
the directors to determine their remuneration.
The audit committee recommends such re-appointment following its
review of the auditor and individual designated partners as required in
terms of paragraph 22.15 of the JSE Listings Requirements.
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 specified 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 specified in this resolution is one-third of
the company’s issued ordinary share capital.
resolution will be proposed as a special
8. Disapplication of pre-emption rights
(resolution 11)
This
resolution.
Resolution 11 enables the directors if they so wish to allot new shares
and other equity securities, or sell treasury shares, for cash (other than
in connection with an employee share scheme) without first offering
these shares to shareholders in proportion to their existing holdings
as company law requires. However, there may be circumstances when
it is in the interests of the company to be able to allot new equity
securities for cash other than on a pre-emptive basis.
The directors consider the authority in resolution 11 to be
appropriate in order to allow the company flexibility to finance
business opportunities or to conduct a pre-emptive offer or rights
issue without the need to comply with the strict requirements of the
statutory pre-emption provisions.
If the authority sought under resolution 11 is given, it will expire
at the same time as the allotment authority granted pursuant to
resolution 10 (i.e. the earlier of 31 December 2019 and the conclusion
of the 2019 AGM).
The directors have no present intention to exercise the authority
conferred by resolution 11.
resolution will be proposed as a special
9. Authority to repurchase shares
(resolution 12)
This
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 12 is for seeking general authority to
effect such purchases within the limits set out in this resolution.
Purchases pursuant to the proposed authority will 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 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 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 12, 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 flexibility 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, 11 and 12 will expire at the
earlier of 31 December 2019 and the conclusion of the 2019 AGM.
222
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018 Appointment of proxy using hard-copy
proxy form
8.
The notes to the proxy form explain how to direct your proxy
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 Link Asset Services, PXS, 34 Beckenham
Road, Beckenham, BR3 4ZF or Computershare Investor
Services Proprietary Limited, The Towers, 15 Bierman
Avenue, Rosebank, Johannesburg 2196, South Africa
(PO Box 61051, Marshalltown 2107, Johannesburg, South
Africa) no later than 11.00 on 16 November 2018.
In the case of a member which is a company, the proxy form
must be executed under its common seal or signed on its behalf
by an officer of the company or an attorney for the company.
Any power of attorney or any other authority under which the
proxy form is signed (or a duly certified copy of such power or
authority) must be included with the proxy form.
Appointment of proxy by joint members
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 first-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 Link Asset Services, PXS, 34 Beckenham
Road, Beckenham, BR3 4ZF or Computershare Investor Services
Proprietary Limited, The Towers, 15 Bierman Avenue, Rosebank,
Johannesburg 2196, South Africa (PO Box 61051, Marshalltown 2107,
Johannesburg, South Africa).
If you submit more than one valid proxy appointment, the
appointment received last before the latest time for the receipt of
proxies will take precedence.
NOTES
Entitlement to attend and vote
1.
In accordance with Regulation 41 of the Uncertificated Securities
Regulations 2001 (Uncertificated Securities Regulations), only
those members entered in the register of members of the
company as at close of business on 16 November 2018, 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 16 November 2018, 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.
3.
4.
5.
6.
7.
You can only appoint a proxy using the procedures set out in
these notes and the notes to the proxy form.
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 fit 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.
223
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018SHAREHOLDER’S AND OTHER INFORMATION
NOTICE OF ANNUAL GENERAL MEETING continued
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.
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 specifications of Euroclear UK and
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 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 16 November 2018 (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 provider(s) 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
provider(s) 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 Uncertificated Securities Regulations.
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 officer of the company or an
attorney for the company.
CREST
14.
Any power of attorney or any other authority under which the
revocation notice is signed (or a duly certified copy of such
power or authority) must be included with the revocation
notice.
15.
The revocation notice must be received by Link Asset Services
or Computershare Investor Services Proprietary Limited no
later than 11.00 on 16 November 2018. If you attempt to
revoke your proxy appointment but the revocation is received
after the time specified then, subject to the paragraph directly
below, your proxy appointment will remain valid.
Appointment of a proxy does not preclude you from attending
the AGM and voting in person. If you have appointed a proxy
and attend the AGM in person, your proxy appointment will
automatically be terminated.
Issued shares and total voting rights
12.
As at close of business on 16 October 2018, the company’s
issued share capital comprised 2,234,687,537 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
16 October 2018 was 2,234,687,537.
16.
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 office 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.
224
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018
UNITED KINGDOM
FORM OF PROXY
(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 certificated shareholders and South African own name dematerialised
shareholders only.
I/We, the undersigned, being a member of the above-named company, hereby appoint the chairman of the meeting or (see 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 PLC (the company) to be held at 11.00
on Tuesday, 20 November 2018 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 auditor thereon
2. To re-elect JAJ Loots as a director of the company
3. To re-elect GP Louw as a director of the company
4. To re-elect HH Hickey as a member of the audit committee
5. To re-elect KC Spencer as a member of the audit committee
6. To re-elect TF Mosololi as a member of the audit committee
7. To endorse the company’s remuneration policy
8. To endorse the company’s remuneration implementation report
9.
To re-appoint Deloitte LLP as auditor 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 the disapplication of pre-emption rights
12. 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 specified resolution.
Please note a ‘Vote withheld’ has no legal effect and will not be counted in the votes
‘For’ and ‘Against’.
** If you select ‘Discretionary’ or fail to select any of the given options, the proxy is
authorised to vote (or abstain from voting) at his or her discretion on the specified
resolution. The proxy is also authorised to vote (or abstain from voting) on any other
business, which may properly come before the meeting.
Print name:
(BLOCK CAPITALS)
Signature:
Address:
Dated this
day of
2018
Notes
1.
To appoint as a proxy a person other than the chairman of the meeting insert
the full name in the space provided. To appoint more than one proxy you
may photocopy this form. Please indicate the proxy holder’s name and the
number of shares in relation to which they are authorised to act as your proxy
(which, in aggregate, should not exceed the number of shares held by you).
Please also indicate if the proxy instruction is one of multiple instructions being
given. All forms must be signed and should be returned together in the same
envelope. A proxy need not be a member of the company.
This form is for use of shareholders only and will be used only in the event of a
poll being directed or demanded.
You may, if you wish, delete the words 'the chairman of the meeting' and
substitute the name(s) of your choice. Please initial such alteration.
To be effective, this form of proxy must be lodged at the company’s Registrars,
Link Asset Services, PXS, 34 Beckenham Road, Beckenham, BR3 4ZF or
Computershare Investor Services Proprietary Limited, The Towers, 15 Bierman
Avenue, Rosebank, Johannesburg 2196, South Africa not later than 48 hours
before the start of the meeting.
In the case of a corporation, the form must be executed under its common seal
or under the hand of an officer or attorney duly authorised in writing.
In the case of joint holders, the signature of any of them will suffice but the
names of all joint holders should be shown. The vote of the senior joint holder
who tenders a vote whether in person or by proxy, shall be accepted to the
exclusion of the votes of the other joint holders and for this purpose seniority
shall be determined by the order in which the names stand in the Register of
Members in respect of the joint holding.
Dematerialised shareholders in South Africa who are not own name
dematerialised shareholders and who wish to attend the AGM should instruct
their CSDP or broker to issue them with the necessary authority to attend
the meeting in person, in the manner stipulated in the custody agreement
governing the relationship between such shareholders and their CSDP or
broker. These instructions must be provided to the CSDP or broker by the
cut-off time and date advised by the CSDP or broker for instructions of this
nature. Dematerialised shareholders in South Africa who are not own name
dematerialised shareholders and who cannot attend but who wish to vote at
the AGM should provide their CSDP or broker with their voting instructions,
in the manner stipulated in the custody agreement governing the relationship
between such shareholders and their CSDP or broker. These instructions must
be provided to the CSDP or broker by the cut-off time and date advised by the
CSDP or broker for instructions of this nature.
Shares held in uncertificated 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.
2.
3.
4.
5.
6.
7.
8.
225
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018SHAREHOLDER’S AND OTHER INFORMATION Second fold
PXS 1
34 Beckenham Road
BECKENHAM
BR3 4ZF
Third fold and tuck in flap
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SOUTH AFRICA
FORM OF PROXY
(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 certificated shareholders and South African own name dematerialised
shareholders only.
I/We, the undersigned, being a member of the above-named company, hereby appoint the chairman of the meeting or (see 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 PLC (the company) to be held at the
offices of Fladgate LLP, 16 Great Queen Street, London WC2B 5DG at 11.00 on Tuesday, 20 November 2018 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 auditor thereon
2. To re-elect JAJ Loots as a director of the company
3. To re-elect GP Louw as a director of the company
4. To re-elect HH Hickey as a member of the audit committee
5. To re-elect KC Spencer as a member of the audit committee
6. To re-elect TF Mosololi as a member of the audit committee
7. To endorse the company’s remuneration policy
8. To endorse the company’s remuneration implementation report
9.
To re-appoint Deloitte LLP as auditor 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 the disapplication of pre-emption rights
12. 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 ‘Vote withheld’ option is to enable you to abstain on the specified resolution. Please
note a ‘Vote withheld’ has no legal effect and will not be counted in the votes ‘For’ and
‘Against’.
** If you select ‘Discretionary’ or fail to select any of the given options, the proxy is
authorised to vote (or abstain from voting) at his or her discretion on the specified
resolution. The proxy is also authorised to vote (or abstain from voting) on any other
business, which may properly come before the meeting.
Print name:
(BLOCK CAPITALS)
Signature:
Address:
Dated this
day of
2018
Notes
1.
To appoint as a proxy a person other than the chairman of the meeting insert
the full name in the space provided. To appoint more than one proxy you may
photocopy this form. Please indicate the proxy holder’s name and the number
of shares in relation to which they are authorised to act as your proxy (which,
in aggregate, should not exceed the number of shares held by you). Please also
indicate if the proxy instruction is one of multiple instructions being given. All
forms must be signed and should be returned together in the same envelope.
A proxy need not be a member of the company.
This form is for use of shareholders only and will be used only in the event of a
poll being directed or demanded.
You may, if you wish, delete the words 'the chairman of the meeting' and
substitute the name(s) of your choice. Please initial such alteration.
To be effective, this form of proxy must be lodged at the company’s Registrars,
Link Asset Services, PXS, 34 Beckenham Road, Beckenham, BR3 4TU or
Computershare Investor Services Proprietary Limited,The Towers, 15 Bierman
Avenue, Rosebank, Johannesburg 2196, South Africa not later than 48 hours
before the start of the meeting.
I n the case of a corporation, the form must be executed under its common seal
or under the hand of an officer or attorney duly authorised in writing.
In the case of joint holders, the signature of any of them will suffice but the
names of all joint holders should be shown. The vote of the senior joint holder
who tenders a vote whether in person or by proxy, shall be accepted to the
exclusion of the votes of the other joint holders and for this purpose seniority
shall be determined by the order in which the names stand in the Register of
Members in respect of the joint holding.
Dematerialised shareholders in South Africa who are not own name
dematerialised shareholders and who wish to attend the AGM should instruct
their CSDP or broker to issue them with the necessary authority to attend
the meeting in person, in the manner stipulated in the custody agreement
governing the relationship between such shareholders and their CSDP or
broker. These instructions must be provided to the CSDP or broker by the
cut-off time and date advised by the CSDP or broker for instructions of this
nature. Dematerialised shareholders in South Africa who are not own name
dematerialised shareholders and who cannot attend but who wish to vote at
the AGM should provide their CSDP or broker with their voting instructions,
in the manner stipulated in the custody agreement governing the relationship
between such shareholders and their CSDP or broker. These instructions must
be provided to the CSDP or broker by the cut-off time and date advised by the
CSDP or broker for instructions of this nature.
Shares held in uncertificated 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.
2.
3.
4.
5.
6.
7.
8.
227
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018SHAREHOLDER’S AND OTHER INFORMATION Second Fold
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POSTAGE WILL
POSTAGE WILL
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BE PAID BY THE
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NECESSARY
NECESSARY
IF POSTED IN
IF POSTED IN
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LICENCE NO. J 5563
LICENCE NO. J 5563
2107 MARSHALLTOWN
2107 MARSHALLTOWN
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172
Pan African Resources PLC Integrated Annual Report 2014
ALTERNATIVE PERFORMANCE MEASURES
SCOPE AND BOUNDARY
When assessing and discussing Pan African Resources’ reported
financial performance, financial position and cash flows, management
refers to APMs of historical or future financial performance, financial
position or cash flows that are not defined or specified under IFRS.
The APMs include financial APMs and non-financial APMs, as
described below:
PURPOSE OF APMs
The group uses APMs to improve the comparability of information
between reporting periods and reporting segments, either by
adjusting for uncontrollable or once-off factors which impact upon
IFRS measurements and disclosures, or by aggregating measurements
and disclosures, to aid the user of the integrated annual report in
understanding the activity taking place across the group. Their use is
driven by characteristics particularly visible in the mining sector:
Financial APMs: These financial measures are usually derived from
the financial statements, prepared in accordance with IFRS. Certain
financial measures cannot be directly derived from the financial
statements as they contain additional information, such as financial
information from earlier periods or profit estimates or projections.
The accounting policies applied when calculating APMs are, where
relevant and unless otherwise stated, the same as those disclosed
in the group’s consolidated financial statements for the year ended
30 June 2018.
Non-financial APMs: These measures incorporate certain non-
financial information which management believes is useful when
assessing the performance of the group.
APMs are not uniformly defined by all companies and may not be
comparable with APMs disclosures made by other companies, and
they exclude:
• measures defined or specified by applicable reporting framework
such as revenue, profit or loss or earnings per share
• physical or non-financial measures such as number of employees,
number of subscribers, revenue per unit measure (when
the revenue figures are extracted directly from the financial
statements) or social and environmental measures such as gas
emissions, breakdown of workforce by contract or geographical
location
information on major shareholdings, acquisition or disposal of own
shares and total number of voting rights
information to explain the compliance with the terms of an
agreement or legislative requirement such as lending covenants or
basis of calculating the director or executive remuneration.
•
•
APMs should be considered in addition to, and not as a substitute for
or as superior to, measures of financial performance, financial position
or cash flows reported in accordance with IFRS.
Earnings volatility: The sector is characterised by significant volatility
in earnings driven by movements in macro-economic factors,
primarily commodity prices and foreign exchange. This volatility is
outside the control of management and can mask underlying changes
in performance. As such, when comparing year-on-year performance,
management excludes certain non-recurring items to aid comparability
and then quantifies and isolates uncontrollable factors to improve
understanding of the controllable portion of variances.
Nature of investment: Investments in the sector are typically capital
intensive and occur over several years, requiring significant funding
before generating cash. These investments are often made through
debt and equity providers and the nature of the group’s ownership
interest affects how the financial results of these operations are
reflected in the group’s results, e.g. whether full consolidation
(subsidiaries), consolidation of the group’s attributable assets and
liabilities (joint operations) or equity accounted (associates and joint
ventures).
Portfolio complexity: At year-end the group’s operating portfolio
remains largely in commodities, mainly gold which accounts for 100%
of the group’s revenue at year-end. The cost, value of and return from
each saleable unit (e.g. tonne or ounce) therefore does not differ
materially between each operating business. This makes understanding
both the overall portfolio performance, and the relative performance
of each mining operation on a like-for-like basis, less challenging.
Consequently, APMs are used by the board and management for
planning and reporting. A subset is also used by management in
setting director and management remuneration. The measures are
also used in discussions with the investment analyst community and
credit rating agencies.
229
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018SHAREHOLDER’S AND OTHER INFORMATION ALTERNATIVE PERFORMANCE MEASURES continued
FINANCIAL APMs
Closest
equivalent
IFRS measure
Adjustments to reconcile primary statements
Rationale for adjustments
Gold cost of
production
• Care and maintenance costs which are
excluded from the calculation of cash costs
• Once-off capital (excluding the Elikhulu
capital expenditure)
•
Indicates and measures group’s ability to
fund once-off capital with internal cash flows
• Other related costs as defined by the
World Gold Council, including royalty
costs, community costs, sustaining and
development capital (excluding non-gold
operations)
• Taxation
• Mining depreciation and amortisation
• Net finance costs
•
Impairments
• Profit after taxation from discontinued
operations
• Profit on sale of investments
• Profit on sale of subsidiary
Profit after taxation adjusted for:
• Profit on disposal of investment
• Profit on disposal of subsidiary
• Adjustment on sale of asset held for sale
• Taxation on sale of treasury shares
• Profit on disposal of property, plant
and equipment
Impairment
•
• Shareholder return
• Not direct production costs attributable to
sold kilograms, therefore excluded from the
direct cash costs’ calculations
•
Indicates whether the group is generating
sufficient revenue to cover other indirect
production costs and sustaining capital which
is imperative for ongoing production
• Excludes the impact of non-recurring items
or certain accounting adjustments that can
mask underlying changes in performance
• Excludes the impact of non-recurring items
to reflect the true performance of the
business
•
Indicates to shareholders robustness of the
group’s financial position per share issued
• Summarises the group’s long-term interest-
bearing borrowings against available cash
resources
Interest-bearing
borrowings less
cash
• Revolving credit facility
• General banking facilities
• Gold loan
• Cash
Group APM
Performance
Cash costs
All-in sustaining
cash costs
Gold cost of
production
All-in costs
Adjusted EBITDA
Gold cost of
production
Profit after
taxation
Profit after
taxation
Headline earnings
and headline
earnings per
share
Headline earnings
per share from
continuing
operations
Group net asset
value
Financial position
Net debt
230
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018 FINANCIAL APMs PERFORMANCE
30 June 2018
USD million
30 June 2017
USD million
186.5
184.3
3.7
(1.5)
218.1
186.5
0.9
1.1
(0.1)
7.3
9.1
13.3
238.7
218.1
8.1
12.5
170.9
170.1
2.3
(1.5)
204.2
170.9
1.7
1.7
(0.2)
6.9
10.7
12.5
214.6
204.2
7.4
3.0
30 June 2018
30 June 2017
1,162
186.5
160,444
1,358
218.1
160,444
1,487
238.7
160,444
986
170.9
173,285
1,177
204.0
173,285
1,237
214.4
173,285
30 June 2018
GBP million
30 June 2017
GBP million
Cash costs
Gold cost of production
Realisation costs
Care and maintenance costs
All-in sustaining costs
Cash costs
Royalties
Community costs related to gold operations
By-product credits
Corporate general and administrative costs
Development capital (sustaining)
Maintenance capital expenditure (sustaining)
All-in costs
All-in sustaining costs
Capital expenditure (non-sustaining)
Voluntary severance pay (non-sustaining)
Metric
USD/oz
USD million
oz
USD/oz
USD million
oz
USD/oz
USD million
oz
Cash cost
Cash costs
Gold sold
All-in sustaining cost
All-in sustaining costs
Gold sold
All-in cost
All-in costs
Gold sold
Metric
ZAR/kg
ZAR million
kg
ZAR/kg
ZAR million
kg
ZAR/kg
ZAR million
kg
24.2
(93.3)
(2.1)
3.2
(1.5)
8.2
–
–
4.9
104.8
47.3
17.9
4.3
2.8
(0.3)
–
(5.4)
(0.2)
5.5
22.7
Adjusted EBITDA
(Loss)/profit after taxation
Taxation
Finance costs
Finance income
Impairments
Profit on disposal of subsidiary
Profit on disposal of investment
Mining depreciation and amortisation
Profit after taxation on discontinued operations
30 June 2017
R million
30 June 2018
R million
2,322.3
2,311.6
31.5
(20.8)
2,772.7
2,322.3
23.0
22.7
(3.3)
93.1
145.4
169.5
2,914.3
2,772.7
100.8
40.8
2,397.5
2,369.9
47.1
(19.5)
2,802.1
2,397.5
11.3
13.6
(1.9)
94.4
116.5
170.7
3,067.8
2,802.1
104.7
161.0
30 June 2017
30 June 2018
430,863
2,322.3
5,390
514,435
2,772.7
5,390
540,693
2,914.3
5,390
480,439
2,397.5
4,990
561,468
2,802.1
4,990
614,713
3,067.8
4,990
30 June 2017
R million
30 June 2018
R million
816.0
309.9
72.4
48.4
(4.4)
–
(91.3)
(4.6)
94.9
390.7
416.0
(1,556.9)
(36.3)
54.3
(25.7)
136.6
–
–
85.1
1,758.9
231
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018SHAREHOLDER’S AND OTHER INFORMATION
ALTERNATIVE PERFORMANCE MEASURES continued
HEADLINE EARNINGS AND HEADLINE EARNINGS PER SHARE
30 June 2018
GBP million
30 June 2017
GBP million
(93.3)
–
0.3
–
–
106.3
13.3
0.73
0.73
17.9
(0.2)
–
(5.4)
–
–
–
6.0
18.3
1.17
1.17
Basic earnings
Profit on disposal of investment
Taxation on profit on disposal of investment
Profit on disposal of subsidiary
Adjustment on sale of asset held for sale
Profit on disposal of property, plant and equipment
Taxation on profit on disposal of property, plant and equipment
Impairment
Headline earnings
Headline earnings per share
Diluted headline earnings per share
30 June 2017
R million
30 June 2018
R million
309.9
(4.6)
1.0
(91.3)
–
(0.4)
0.1
100.9
315.6
20.17
20.17
(1,556.9)
–
–
–
4.9
–
–
1,781.1
229.1
12.66
12.66
HEADLINE EARNINGS AND HEADLINE EARNINGS PER SHARE FROM CONTINUING OPERATIONS
30 June 2018
GBP million
30 June 2017
GBP million
30 June 2017
R million
30 June 2018
R million
11.5
–
–
–
–
8.2
19.7
1.08
1.08
40.6
(0.2)
–
(5.4)
–
–
–
35.0
2.24
2.24
Basic earnings
Profit on disposal of Investment
Taxation on profit on disposal of Investment
Profit on disposal of subsidiary
Profit on disposal of property, plant and equipment
Tax on profit on disposal of property, plant and equipment
Impairment
Headline earnings
Headline earnings per share
Diluted headline earnings per share
Group net asset value per share
Total shares issued at year-end
Treasury shares
Net asset value (R million)
FINANCIAL POSITION
30 June 2018
GBP million
30 June 2017
GBP million
89.8
47.9
42.6
–
(0.7)
4.1
11.9
–
1.6
(9.4)
232
Net debt
Revolving credit facility
Elikhulu term loan facility
Gold loan facility
Cash and cash equivalents
700.6
(4.6)
1.0
(91.3)
–
–
–
605.7
38.72
38.72
202.0
–
–
–
–
–
136.6
338.6
18.71
18.71
30 June 2017
Shares million
30 June 2018
Shares million
201.3
2,235.7
(436.4)
1,799.3
3,620.5
104.6
2,234.7
(306.4)
1,928.3
2,016.7
30 June 2017
R million
30 June 2018
R million
67.6
201.2
–
26.6
(160.2)
1,623.60
866.2
770.0
–
(12.6)
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018
NON-FINANCIAL (APMs)
Group APM
Category
Purpose
Gold sold
• Production
• Primary driver of group revenue
Historical
dividend yield
• Shareholder
return
• Highlights the group’s strength of constantly delivering to dividend policy and maintaining an
attractive dividend yield over its peers for the last five years of dividend declaration. In the 2013
financial year, no dividend was declared due to the acquisition of the Evander Gold Mines which
resulted in cash outflow of R1.3 billion
NON-FINANCIAL APM
Historical dividend yield
In excess of
Dividend yield 30 June 2018
Dividend yield 30 June 2017
Dividend yield 30 June 2016
Dividend yield 30 June 2015
Dividend yield 30 June 2014
30 June 2018
Shares million
4.0
4.0
5.0
5.1
6.3
5.6
233
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018SHAREHOLDER’S AND OTHER INFORMATION GLOSSARY
DEFINITION OF TERMS USED IN THIS REPORT
AGM
Aids
AIM
APMs
Barberton Mines
BBBEE
BEE
BIOX®
BMTT
the board
Brownfield project
BTRP
CIL
CIM
Co2e
Companies Act of South
African
Concrete Rose
COP
COR 046
CREST
CSDP
CSI
Deloitte
DMR
DRA Global
Elikhulu
Elikhulu term loan facility
EMP
EMTT
Eskom
ESOP
ETRP
EU
EUI
Evander Mines
Exco
FIFR
FRC
FTSE
Funding Company
GBP
GDP
GHG
GHG Protocol
GJ
GRI
GSSA
Annual general meeting
Acquired immune deficiency syndrome
Alternative Investment Market, the London Stock Exchange’s international market for smaller growing
companies
Alternative performance measures
Barberton Mines Proprietary Limited
Broad-based black economic empowerment
Black economic empowerment
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
Barberton Mines’ Transformation Trust
The board of directors of Pan African Resources, as set out on
pages 100 and 101
Project based on prior work or rebuilt from a previous one
Barberton Tailings Retreatment Plant, a gold recovery tailings plant owned by Barberton Mines, which
commenced production in FY2014
Carbon-in-leach
Canadian Institute of Mining
Carbon dioxide emissions
Companies Act 71 of 2008 (SA Companies Act)
Concrete Rose Proprietary Limited
Code of practice
Certificate of registration issued by the National Nuclear Regulator
UK-based central securities depository that holds UK and Irish securities and gilts
Central securities depository participant
Corporate social investment
Deloitte LLP and Deloitte & Touche
Department of Mineral Resources
A global engineering group delivering mining, mineral processing, energy water treatment and infrastructure services
Elikhulu Tailings Retreatment Plant in Mpumalanga province
Revolving credit facility of R1 billion and R1 billion term loan facility
Environmental Management Plan
Evander Mines’ Transformation Trust
Electricity Supply Commission, South African electricity supplier
Employee share ownership scheme
Evander Tailings Retreatment Plant commissioned in October 2015
European Union
Euroclear UK and Ireland Limited – the central securities depository for the UK and Ireland
Evander Gold Mines Limited and Evander Gold Mining Proprietary Limited
Executive committee of Pan African Resources
Fatal-injury frequency rate
UK Financial Reporting Council
The Financial Times Stock Exchange’s 100 Index
Pan African Resources Funding Company Proprietary Limited
British pound
Gross domestic product
Greenhouse gas
Greenhouse Gas Protocol
Gigajoule
Global Reporting Initiatives
Geological Society of South Africa
234
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018 DEFINITION OF TERMS USED IN THIS REPORT continued
g/t
HDSA
HIV
HODs
HR
IAS
IFRS
IIRC
ILO
ISO
IT
JSE
King IV™
km
Koz
KPIs
LED
LSE
LTIFR
Manco
MC Mining
MCF
Metorex
Mining Charter
MMR
Moz
MPRDA
MQA
MR&MR
MRC
MRM
Mt
NEMA
NIHL
Nomad
NUM
OEM
Opsco
PACOS
Pan African Resources
PAR Gold
PASABP
PAYE
PGE
PGM
Phoenix Platinum
POPI
Prescribed officers
Grams/tonne
Historically disadvantaged South African
Human immunodeficiency virus
Heads of departments
Human Resources
International Accounting Standards
International Financial Reporting Standards
International Integrated Reporting Council
International Labour Organisation
International Standards Organisation
Information technology
JSE Limited incorporating the Johannesburg Securities Exchange, the main bourse in South Africa
King IV™ Report on Corporate Governance for South Africa, 2016
Kilometres
Thousand ounces
Key performance indicators – a set of quantifiable measures that a company or industry uses to gauge or
compare performance in terms of meeting their strategic and operational goals
Local economic development
London Stock Exchange
Lost-time injury frequency rate
Management committee on operations
MC Mining Limited (previously known as Coal of Africa Limited)
Mine call factor
Metorex Limited
Charter to facilitate the sustainable transformation and development of the South African mining industry
Main Maiden Reef
Million ounces
Mineral and Petroleum Resources Development Act
Mining Qualifications Authority
Mineral Resources and Mineral Reserves Report
Main Reef Complex
Mineral Resource Management
Million tonnes
The National Environmental Management Act
Noise-induced hearing loss
Nominated adviser appointed in accordance with the London Stock Exchange’s AIM Rules for Companies
National Union of Mineworkers
Original equipment manufacturer
Operations committee of Pan African Resources
Pan African Corporate Option Scheme (new revised scheme for corporate senior managers, effective from
1 July 2018)
Holding company – Pan African Resources PLC
PAR Gold Proprietary Limited (previously Shanduka Gold Proprietary Limited)
Pan African Share Appreciation Bonus Plan (previous scheme for corporate senior managers)
Pay as you earn income taxation
Platinum group elements: platinum, palladium, rhodium and gold
Platinum group metals
Phoenix Platinum Mining Proprietary Limited, a subsidiary of Pan African Resources
Protection of Personal Information Act
A person is a prescribed officer of the company for all purposes of the 2008 Companies Act if that person:
• exercises general executive control over and management of the whole, or a significant portion, of the
business and activities of the company, or
• regularly participates to a material degree in the exercise of general executive control over and management
of the whole, or a significant portion, of the business and activities of the company
235
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018SHAREHOLDER’S AND OTHER INFORMATION GLOSSARY continued
DEFINITION OF TERMS USED IN THIS REPORT continued
PwC
Remchannel
Remco
RIFR
SA
SACNASP
SARS
SA Holdco
SAICA
SAMREC Code
PricewaterhouseCoopers Inc.
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
South Africa
South African Council for Natural Scientific Professions
South African Revenue Services
Pan African Resources SA Holdings Proprietary Limited
South African Institute of Chartered Accountants
South African Code for the Reporting of Exploration Results, Mineral Resources and Mineral Reserves,
2016 edition
Skills Development Levy
Safety, health, environment, quality and community
Social and labour plan
Standard operating procedures
Tonnes
Tuberculosis
Tailings storage facility
The financial year ended 30 June 2018
Pan African Resources PLC, listed on the LSE’s AIM and on the JSE in the Gold Mining sector
The financial year ended 30 June 2017
Pan African Resources’ 2018 integrated annual report
UK Corporate Governance Code, which sets out standards of good practice in relation to board leadership
Total recordable injury frequency rate
United Association of South Africa
Unemployment Insurance Fund
Uitkomst Colliery Proprietary Limited
United Kingdom
United Kingdom Corporate Governance Code
An act of the Parliament of the United Kingdom which forms the primary source of UK company law
United States dollar
15% value added tax in South Africa
Voluntary counselling and testing
South African rand
Swartkoppies Shaft at Sheba Mine
SDL
SHEQC
SLP
SOP
t
TB
TSF
the current year or the year
under review
the group or the company
or Pan African Resources
the previous year
the report
the UK Code
TRIFR
UASA
UIF
Uitkomst Colliery
UK
UK Code
UK Companies Act 2006
USD
VAT
VCT
ZAR or R
ZK
FREQUENTLY USED FINANCIAL TERMS
Adjusted EBITDA
Earnings before interest, taxation, depreciation and amortisation, impairments, discontinued operations and
profit/(loss) on disposal of investments
Capital expenditure
Contract for difference
Cash-generating unit
The consumer price index of South Africa, a primary indicator of South Africa’s inflation
Cost to company
Dividend per share
Earnings before interest, taxes, depreciation and amortisation
Earnings per share
Fair value through profit and loss
General banking facilities
Headline earnings per share
Internal rate of return
Johannesburg Inter-bank Acceptance Rate
Net asset value
Net present value
Other comprehensive income
Producer price inflation
Revolving credit facility
Short-term incentive
Weighted-average cost of capital
Capex
CFD
CGU
CPI
CTC
DPS
EBITDA
EPS
FVTPL
GBF
HEPS
IRR
JIBAR
NAV
NPV
OCI
PPI
RCF
STI
WACC
236
PAN AFRICAN RESOURCES INTEGRATED ANNUAL REPORT 2018 COMPANY INFORMATION
CORPORATE OFFICE
The Firs Office Building
2nd Floor, Office 204
Cnr. Cradock and Biermann Avenues
Rosebank, Johannesburg
South Africa
Office: +27 (0) 11 243 2900
Facsimile: +27 (0) 11 880 1240
REGISTERED OFFICE
Suite 31 Second Floor
107 Cheapside
London EC2V 6DN
United Kingdom
Office: +44 (0) 20 7796 8644
Facsimile: +44 (0) 20 7796 8645
DIRECTORS
Cobus Loots
Pan African Resources
Chief executive officer
Office: +27 (0) 11 243 2900
Deon Louw
Pan African Resources
Financial director
Office: +27 (0) 11 243 2900
COMPANY SECRETARY
Phil Dexter/Jane Kirton
St James’s Corporate Services Limited
Office: +44 (0) 20 7796 8644
JSE SPONSOR
Sholto Simpson
One Capital
Office: +27 (0) 11 550 5009
NOMINATED ADVISER
AND JOINT BROKER
John Prior/Paul Gillam
Numis Securities Limited
Office: +44 (0) 20 7260 1000
JOINT BROKERS
Ross Allister/James Bavister/David Mckeown
Peel Hunt LLP
Office: +44 (0) 20 7418 8900
Jeffrey Couch/Thomas Rider
BMO Capital Markets Limited
Office: +44 (0) 20 7236 1010
PUBLIC AND INVESTOR
RELATIONS SA
Julian Gwillim
Aprio Strategic Communications
Office: +27 (0) 11 880 0037
PUBLIC AND INVESTOR
RELATIONS UK
Bobby Morse
Buchanan
Office: +44 (0) 20 7466 5000
SHAREHOLDERS’ DIARY
Financial year-end
30 June 2018
Preliminary annual results announcement
19 September 2018
Annual report posted
Annual general meeting
Interim results announcement
31 October 2018
20 November 2018
20 February 2019
FORWARD-LOOKING
STATEMENTS
Statements in this report that address exploration
activities, mining potential and
future plans
and objectives of Pan African Resources are
forward-looking statements and forward-looking
information that involve various risks, assumptions
and uncertainties and are not statements of fact.
The directors and management of Pan African
Resources believe
the expectations
that
expressed in such forward-looking statements
or forward-looking information are based on
reasonable assumptions, expectations, estimates
and projections. However, these statements
should not be construed as being guarantees or
warranties (whether expressed or implied) of
future performance.
There can be no assurance that such statements
will prove to be accurate and actual values, results
and future events could differ materially from
those anticipated in these statements. Important
factors that could cause actual results to differ
materially from statements expressed in this
report include, among others:
• the actual results of exploration activities
• technical analysis
• the lack of availability to Pan African Resources
of necessary capital on acceptable terms
• general economic, business and financial
market conditions
industry trends
• political risks
•
• competition
• changes in government regulations
• delays in obtaining governmental approvals
•
• currency fluctuations
• changes in business strategy or development
interest rate fluctuations
plans and other risks.
Although Pan African Resources has attempted to
identify important factors that could cause actual
results to differ materially, there may be other
factors that cause results not to be as anticipated,
estimated or intended. Pan African Resources is
not obliged to publicly update any forward-looking
statements included in this report, or revise any
changes in events, conditions or circumstances on
which any such statements are based, occurring
after the publication date of this report, other
than as required by regulation.
www.panafricanresources.com
STRATEGIC REPORT:BUSINESS AND STRATEGIC OVERVIEW